Coordinating macroeconomic policy in a simple AK growth model

Modern theories of government finance stress the importance of an economy’s fiscal deficits in determining the course of monetary policy. Modern growth theory stresses the role of monetary factors in economic growth. This paper explores how these two are interrelated, using a simple AK growth model, one with money, reserve requirements, and government debt. We provide a comprehensive look at the coordination of macroeconomic policy and its effects on long-run growth under three alternative coordinating arrangements. We uncover some unconventional results regarding the relationship between growth and a number of policy variables; these rest squarely on the constraint of the coordination process.     

Why don't we observe improvements in consumption smoothing as countries get more financially integrated: Bridging theory and empirics

This study provides suggestive theoretical and empirical evidence that the productivity shock correlation between a country and the rest of the world may help explain why we do not observe more consumption smoothing as countries have become more financially liberalized.     

Modelling dynamic storage function in commodity markets: Theory and evidence

In this work, we derive a model to investigate the optimal storage policy in metal commodity markets. From an inter-temporal setting, we carry out a criterion driving the stockholding decisions based on Tobin's q rule in which marginal benefits from holding inventories can be compared with marginal storage costs.We estimate the model for the world copper market by taking into account both spot price and convenience yield equations. In our sample, the estimated models are statistically robust and economically coherent with the theory, even though the patterns of the inventory accumulation process show high sensitivity to the uncertainty about worldwide economic conditions.     

Testing for serial correlation and random effects in a two-way error component regression model

In this paper, we test the existence of serial correlation and random effects in a two-way error component regression model with panel data. Under moment conditions alone, we suggest several easily implemented tests based on the parameter estimators for artificial autoregressions modeled by the differences in residuals. Under the null hypotheses, the tests for serial correlation are two-sided and asymptotically chi-square distributed, whereas those for random effects are one-sided, and are asymptotically standard normally distributed variables. Moreover, these methods can also be used similarly to construct tests for both serial correlation and individual effects jointly, whether or not time effects are present. The proposed tests are able to detect local alternatives that are distinct from the null at the parametric rate. Monte Carlo simulations and real data applications are carried out for purposes of illustration.     

An empirical note about additive outliers and nonstationarity in Latin-American inflation series

This note shows the empirical dangers of the presence of large additive outliers when testing for unit roots using standard unit root statistics. Using recent proposed procedures applied to four Latin-American inflation series, I show that the unit root hypothesis cannot be rejected.Jel classification: C2, C3, C5I want to thank Pierre Perron for useful comments on a preliminary version of this paper. Helpful comments from an anonymous referee, and Yiagadeesen Samy are appreciated. I thank the Editor Baldev Raj for useful comments about the final structure of this paper. Finally, I also thank André Lucas for helpful suggestions concerning the use of his nice computer program Robust Inference Plus Estimation (RIPE).First revision received: August 2001/Final revision received: December 2002     

Questioning the empirical basis of the environmental Kuznets curve for CO2: New evidence from a panel stationarity test robust to multiple breaks and cross-dependence

This paper investigates the time series properties of per capita CO₂ emissions and per capita GDP levels for a sample of 86 countries over the period 1960-2000. For that purpose, we employ a state-of-the-art panel stationarity test which incorporates multiple shifts in level and slope, thereby controlling for cross-sectional dependence through bootstrap methods. Our analysis renders clear-cut evidence that per capita GDP levels are nonstationary for the world as a whole while per capita CO₂ is found to be regime-wise trend stationary. The analysis of country-groups shows that for Africa and Asia, per capita CO₂ is best described as nonstationary, while per capita GDP appears stationary around a broken trend. In addition, we find evidence of regime-wise trend stationarity in both variables for the country-groups consisting of America, Europe and Oceania. The results of our analysis carry important implications for the statistical modelling of the Environmental Kuznets curve for CO₂, since the differing order of integration in both variables for the world as a whole and for Africa and Asia calls into question the validity of panel cointegration techniques which assume that both variables are nonstationary and cointegrated with one another. Cointegration techniques would not be appropriate either for the case of America, Europe and Oceania which are characterised by per capita GDP and CO₂ emissions being stationary around a broken trend. Similar conclusions are reached when we analyse country-groups based on levels of development. Failure to properly characterise the time series properties of the data by not controlling for an unknown number of structural breaks and for cross-sectional dependence could be responsible for the fragility and lack of robustness surrounding the estimation of environmental Kuznets curves.     

Structural decomposition analysis and input-output subsystems: Changes in CO2 emissions of Spanish service sectors (2000-2005)

The analysis of gas emissions by an input-output subsystem approach provides detailed insight into pollution generation in an economy. Structural decomposition analysis, on the other hand, identifies the factors behind the changes in key variables over time. Extending the input-output subsystem model to account for the changes in these variables reveals the channels by which environmental burdens are caused and transmitted throughout the production system. In this paper we propose a decomposition of the changes in the components of CO₂ emissions captured by an input-output subsystems representation. The empirical application is for the Spanish service sector, and the economic and environmental data are for years 2000 and 2005. Our results show that services increased their CO₂ emissions mainly because of a rise in the emissions generated by non-services to cover the final demand for services. The decomposed effects show a decrease in CO₂ emissions due to technological changes between 2000 and 2005 compensated by an increase in emissions caused by the rise in final demand of services. Finally, large asymmetries exist not only in the quantitative changes in the CO₂ emissions of the various services but also in the decomposed effects of these changes.     

Decomposing the decoupling of CO2 emissions and economic growth in Brazil

This paper examines the occurrence of a decoupling between the growth rates in economic activity and CO₂ emissions from energy consumption in Brazil from 2004 to 2009. This decoupling was highlighted when economic activity and CO₂ emissions moved in opposite directions in 2009. More generally, we observe several periods of relative decoupling in Brazil, but not to the extent witnessed in 2009. To identify the determinants of emissions change, we develop a decomposition model based on a log-mean Divisia index (LMDI) framework. The results indicate that the carbon intensity and energy mix are the main determinant of emissions reduction in Brazil between 2004 and 2009. Modifications in the economy structure are also associated to emission mitigation in the period. Such evidence demonstrates similarities with events of decoupling registered for the interval 1980-1994 in Brazil. Finds from Brazil differ from observations in other countries in which improvement in energy intensity has been the most common determinant of emissions reduction.     

Further results on monopolistic competition,markup pricing and the business cycle in Switzerland

This paper investigates how firms’ market power affects the price level. Based on a small macro-model it is shown empirically that firms have structural markup pricing power and take advantage of favourable business cycle fluctuations. To this aim, a multivariate time series model with double integrated variables is estimated. Thereby a model-based business cycle indicator can be derived. Its information content is confronted with survey data giving rise to what is going to be called semantic cross validation approach.

Prospective in Brazil: The power to build the future

This paper looks at prospective in Brazil for the past 30 years. The prospective approach and methods, with their myriad tools, were adopted by Brazilian governmental bodies and companies in a process of progressive maturation of concepts and models. They brought about major changes for the country and for the companies and governmental bodies in which they were adopted. The following examples stem from the application of the prospective process, with the participation of employees and the population. We chose to highlight results applicable to practical life and visible today: 1) the opening up of the Brazilian economy (BNDES, 1984-90); 2) the anticipation of the global warming issue (ELETRONORTE, 1987-1998); 3) the preparation of a monopolistic oil and gas company to work in a competitive environment (PETROBRAS, 1989-2010); 4) the creation of a highly successful strategic state plan (Minas Gerais state, 2002-2010, and 5) the drafting of a strategic municipal plan (Belo Horizonte Municipal Government, 2009).     

Net national emissions, CO2 taxation and the role of forestry

The concept of net national emissions suggests that accumulation of carbon in forestry should be taken into account when countries buy CO₂ permits or pay CO₂ taxes. The paper analyses the question of the correct tax/subsidy programme for giving proper incentives to forest owners and utilizers of wood. The analysis uses a dynamic general equilibrium model with productive capital and the stock of forests as state variables. It turns out that in a decentralized economy forest owners should be subsidized and CO₂ emissions should be taxed independently of whether they originates from wood or fossil fuels.     

p-Best response set and the robustness of equilibria to incomplete information

In this paper, we use p-best response sets—a set-valued extension of p-dominance—in order to provide a new sufficient condition for the robustness of equilibria to incomplete information: if there exists a set S which is a p-best response set with , and there exists a unique correlated equilibrium μ^* whose support is in S then μ^* is a robust Nash equilibrium.     

Industry specific effects in investment performance and valuation of firms

A necessary criterion for a performance measure in corporate governance is the degree to which it mirrors how well the management succeeds in maximizing firm value. Such a performance measure is marginal q which links changes in firm value to the investments undertaken by the management. Empirical studies of investment and performance based on marginal q have demonstrated the usefulness of this measure. Most research however, has mainly focused on long-term performance. This paper takes a short-term perspective and, based on the marginal q-theory, considers how firms’ market values change in the extreme stock price cycle of a stock market bubble. Using a data set of listed Swedish corporations we find an anomaly in form of a new industry specific effect that, in addition to investment, explains changes in firm value.

Strategic prospective for the implementation of employment policies in the Azores

This article explains how a far-off autonomous region of Portugal lying 2700 km from Brussels decided to approach its future, notably labor. The government in the Azores applied strategic prospective, and two of its methods, MICMAC and MACTOR,¹ at three key moments in the implementation of employment policies. While providing background on Azorean public policy and the broader European context, the author describes three cases, which deal primarily with education, qualifications and mobility. Interestingly, the results of decisions made on the basis of the prospective exercises can already be measured. This underscores the real efficiency of the policies adopted and the importance of the European policies of mobility, notably within the scope of Eurodyssey, a program of professional mobility of the Assembly of European Regions, that is now led by the Azores.     

Division and Combination of Labor in Aristotle's Biological Writings

In this paper, I explore the way in which Aristotle seems to appeal to certain principles of economics—most notably, the division and combination of labor—in describing and attempting to explain certain biological phenomena. I use examples recently employed in the bioeconomics literature and discuss how Aristotle uses similar examples in similar ways.     

Determinants of renewable energy adoption in China and India: a comparative analysis

This article examines the dynamic relationships among output, carbon emission and renewable energy generation of India and China during the period 1972 to 2011 using a multivariate vector error correction model (VECM). The results for India reveal unidirectional short-run causality from carbon emission to renewable energy generation and from renewable energy generation to output, whereas in the long run, the variables have bidirectional causality. Causalities in China give a rather different scenario, with a short-run unidirectional causality from output to renewable energy and from carbon emission to renewable energy generation. In the long run, for China, unidirectional causality is found from output to renewable energy generation, while bidirectional causality is found between carbon emission and renewable energy generation.     

Decomposition of energy-related CO2 emission over 1991-2006 in China

This paper presents a decomposition analysis of energy-related CO₂ emission in China for the period 1991-2006 divided into three equal time intervals. The complete decomposition method developed by Sun is used to analyze the nature of the four factors: CO₂ intensity, energy intensity, structural changes and economic activity. The results show that economic activity has the largest positive effect in CO₂ emission changes in all the major economic sectors and China has achieved a considerable decrease in CO₂ emission mainly due to the improved energy intensity. However, the impact of CO₂ intensity and structural changes is relatively small. Structural changes only exhibit positive effect to the CO₂ mitigation in agricultural sector, and CO₂ intensity also contributes to the decrease of CO₂ emission in transportation sector. Moreover, a formula about CO₂ mitigation is presented in this paper, which shows that China has made a significant contribution to reducing global CO₂ emission.     

Investigating regional house price convergence in the United States: Evidence from a pair-wise approach

In this paper we examine long-run house price convergence across US states using a novel econometric approach advocated by Pesaran (2007) and Pesaran et al. (2009). Our empirical modelling strategy employs a probabilistic test statistic for convergence based on the percentage of unit root rejections among all state house price differentials. Using a sieve bootstrap procedure, we construct confidence intervals and find evidence in favour of convergence. We also conclude that speed of adjustment towards long-run equilibrium is inversely related to distance.     

Input-output subsystems and pollution: An application to the service sector and CO2 emissions in Spain

The analysis of input-output subsystems provides a useful tool for studying the productive structure of the different sectors of an economy. In this paper we develop this analysis to the study of the CO₂ emissions associated to the group of branches of the service sector. The decomposition of the total production of the services subsystem allows us to decompose the CO₂ emissions into five different components (own, demand volume, feed-back, internal and spill over components). From the results obtained, we can highlight the different roles played by the different branches of services. Transport activities are the services with the highest level of the direct emissions generated in the production of the sector. These activities are required by the other sectors of the economy to a greater degree than they are for their own final demand. Therefore, the production sold to other sectors causes more emissions than its own final demand. However, in the case of other service activities, direct and indirect emissions related to final demand are much more important, due to the strong pull effect of service activities on other activities of the economy. In this respect, Wholesale and retail trade, Hotels and restaurants, Real estate, renting and business activities, and Public administration services should be highlighted. These services receive scarce attention in the design of policies aimed at reducing emissions, but are notably responsible for the major increase in emissions experienced in recent years.     

Sex and environmental policy in the U.S. House of Representatives

Using LCV score data, we find that female legislators favor stricter environmental policies than do their male counterparts. Moreover, gender-corrected estimates suggest that voters do not push environmental policy towards the middle, but rather select the ideologically closest candidate.