Strategic Trading and Welfare in a Dynamic Market

This paper studies a dynamic model of a financial market with N strategic agents. Agents receive random stock endowments at each period and trade to share dividend risk. Endowments are the only private information in the model. We find that agents trade slowly even when the time between trades goes to 0. In fact, welfare loss due to strategic behaviour increases as the time between trades decreases. In the limit when the time between trades goes to 0, welfare loss is of order 1/ N , and not 1/ N ² as in the static models of the double auctions literature. The model is very tractable and closed-form solutions are obtained in a special case.     

成本、价格与时间均衡的供应链控制方法研究

供应链管理的目的就是协调供应链企业采取各种方法与策略,使整个供应链取得最大的利润。分析了时间压缩与供应链成本的关系,构建了最优时间压缩点模型;分析了当企业考虑利润要素时最优时间压缩点应扩展为一个区间,并构建了成本、价格与时间的均衡模型,从而使供应链实现降低成本、压缩时间和利润最大化三者的结合并达到均衡,获得更大的竞争优势。     

Labor supply, child care, and welfare in Spanish households

This paper presents a household model in which both spouses work and care for their children, thereby obtaining a measure of household welfare. Applying this model to the Spanish case allows for drawing some basic conclusions. That is, the highest efficiency in caring for children is obtained when time is offered by the mother. Moreover, the time dedicated to child care by the father is considered as leisure time in a higher proportion than time dedicated by the mother. Also, a direct and strong relationship is detected between monetary income and welfare. Household welfare is greater when the children are older, and welfare increases when the father dedicates less time to work outside the home.The authors would like to thank the anonymous referees for their helpful comments and suggestions on an earlier version of this paper. The authors are also indebted to the Ministerio Español de Trabajo y Asuntos Sociales for its financial support.     

Forecasting economic activity by Bayesian bridge model averaging

This paper proposes the use of Bayesian model averaging (BMA) as an alternative tool to forecast GDP relative to simple bridge models and factor models. BMA is a computationally feasible method that allows us to explore the model space even in the presence of a large set of candidate predictors. We test the performance of BMA in now-casting by means of a recursive experiment for the euro area and the three largest countries. This method allows flexibility in selecting the information set month by month. We find that BMA-based forecasts produce smaller forecast errors than standard bridge model when forecasting GDP in Germany, France and Italy. At the same time, it also performs as well as medium-scale factor models when forecasting Eurozone GDP.     

Third‐degree price discrimination in the presence of congestion externality

This paper analyzes third‐degree price discrimination of a monopoly airline in the presence of congestion externality when all markets are served. The model features the business‐passenger and leisure‐passenger markets where business passengers exhibit a higher time valuation, and a less price‐elastic demand, than leisure passengers. Our main result is the identification of the time‐valuation effect of price discrimination, which can work in the opposite direction as the well‐known output effect on welfare. This time‐valuation effect clearly explains why discriminating prices can improve welfare even when this is associated with a reduction in aggregate output.     

A quantitative theory of social security without commitment

This paper investigates the determination of social security within a general equilibrium, overlapping-generations model where agents live for many periods, and replacement rates are determined through voting in each period by forward looking agents. The distinctive feature is the study of Markov equilibrium policy outcomes which do not rest on a commitment mechanism. Versions of the model are calibrated to the US economic, policy, and demographic conditions. Even in the absence of commitment, the policy preferences of tax-paying working-age voters sustain a positive level of retirement benefits. This follows because the current choices about social security will have, at the time when the current voters will retire, a positive impact on the political support for social security and on the returns to savings. On the other hand, the projected decline in the U.S. population growth rate causes the replacement rate and the tax rate to decline. This quantitative response without commitment differs from that in the case when policies are committed at time zero.     

Maximum likelihood estimation of time-varying parameters: an application to the Athens Stock Exchange index

The problem of maximum likelihood estimation of time-varying parameters is considered. A hierarchical approach is proposed that involves, first, the estimation of the model order and parameters when they are assumed time-invariant. Second, for each parameter, an autoregressive (AR) model, with constant coefficients, is developed. This allows the parameters to change over time. Finally, the estimates of the AR coefficients for each parameter are used as initial conditions to a time-varying model with AR coefficients, which are allowed to change over time subject to some regularity constraints. This approach is then applied to the Athens Stock Exchange index, where the dominant forces affecting this index are analysed.     

Optimal Intertemporal Consumption and Involuntary Memories of Consumption

Recent studies introduce the notion of treating autobiographical memories of past pleasurable experiences as assets and expanding the discounted utility model to include the utility of memories of past consumption. Recent studies in psychology have found that involuntary autobiographical memories are common in everyday life. This paper builds on these two strands in the literature by expanding the discounted utility model to include the utility of involuntary memories of past consumption. Optimal control theory is used to develop a continuous‐time optimal consumption model that takes into account the fact that consumption may generate involuntary memories that arrive at random times. The model is used in an in‐depth analysis of optimal consumption with memories. It is shown that memories shift consumption to earlier times. This effect gets weaker as the time horizon gets longer, and it vanishes entirely when the time horizon is infinite.     

Progressive taxation in sequential decisionmaking: Deterministic and stochastic analysis

This paper investigates the effect of progressive taxation on sequential decisionmaking. The decision is the archetypical problem of capital theory: determining the optimal cutting time for a tree that grows according to either a deterministic or stochastic process. For the deterministic model, the optimal cutting time is unaffected by proportional taxes, but decreases as taxes become more progressive. For the stochastic model, the major finding is that uncertainty can partially offset the inefficiency induced by progressive taxation; when this result holds the government benefits from increased uncertainty whereas the taxpayer is harmed. One noteworthy example of this is when the tree's growth is governed by Brownian motion.     

Airline Schedule Competition and the Entry Route Choices of Low‐Cost Carriers

This study investigates the entry route choices of low‐cost carriers (LCCs). A LCC considers whether to enter a spoke route or a rim route of a major carrier's hub‐spoke network. Under a Cournot schedule competition model, we demonstrate that rim entry is more profitable for LCCs if connecting passengers' hub‐through additional travel time cost is large, and spoke entry is more profitable if this time cost is small. Welfare analysis shows that rim entry is socially preferable when the time cost is large and that spoke entry is socially preferable when the time cost is small. In a certain range of time costs, however, LCCs choose spoke entry even though it is not socially preferable.     

Influence of time horizon and treatment patterns on cost-effectiveness measures: the case of allergen-specific immunotherapy with Grazax

Summary

This paper investigates the impact of treatment patterns on the cost effectiveness of GRAZAX® (grass allergen tablet) versus standard care in the management of allergic rhinoconjunctivitis in Sweden. Two Grazax treatment patterns are considered: seasonal and World Health Organization (WHO)-recommended specific immunotherapy (SIT). The results are derived from a clinical trial and two model-based analyses. In contrast to the seasonal-use model, the model for WHO-recommended SIT treatment extrapolates the cost of Grazax non-linearly. This is the main methodological distinction between the two analyses. Grazax is cost effective both for WHO-recommended SIT treatment and seasonal treatment, with WHO-recommended SIT treatment being the more cost effective when the time horizon is 6.3 years or more. The time horizon of the analysis becomes a key determinant of the cost effectiveness of Grazax when used as a WHO-recommended SIT treatment.     

ON THE USE OF PANEL DATA METHODS TO ESTIMATE RATIONAL ADDICTION MODELS

This paper reviews some of the econometrics problems faced when estimating a rational addiction model of Becker and Murphy using panel data. This is illustrated with three empirical applications. The first application looks at cigarette consumption using macro panel data on American states over time. The second application looks at liquor consumption using macro panel data on American states over time. The third application uses micro-panel data on Russian alcohol consumption.     

On the use of autocorrelation in forecasting: Discussion of Aucamp and Eckardt's article in vol. 21, no. 1 of this journal

This note discusses a recent article concerned with various measures of autocorrelation and their appropriateness as tools for making forecasts. It aims to put the record straight on several points, and also suggests an improved way of looking at sample autocorrelations, when the purpose is to identify a plausible model from time series data.     

结构性通货膨胀的一个基本理论分析框架——基于状态空间时变参数模型的实证

以实体经济的部门瓶颈制约模型、货币视角的资产市场均衡模型为基础构建了一个结构性通货膨胀理论分析框架,并利用状态空间时变参数模型计量方法进行了实证检验。结果显示,农业部门瓶颈制约明显,产品供给弹性低,当需求短期内增加,农业劳动力、农产品价格上涨的结构性通货膨胀特征明显;同时,当货币流动性出现过剩,充足的流动性会将结构性通货膨胀推向更高水平,国内货币流动性、外汇储备则起到推波助澜的作用。     

Reserve modelling and the aggregation of risks using time varying copula models

This paper is concerned with the appropriate claim reserving modelling and aggregation of risks in the insurance sector. In fact, literature review provided some methods to evaluate the total amount of reserves and solvency capital of different lines of business. However, these models were derived under the independent losses assumption. Thus, the total amount of reserves and capital may be inaccurate when losses are dependent, as it is the case in practice. In this paper, a novel model is proposed aiming to handle temporal dependence, both between a line of business claim's amounts and between the two lines of business claims. Generalized Autoregressive Conditional Sinistrality model is used to analyze the evolution in time of dependence and time varying copula functions are proposed to aggregate risks. To achieve such purpose, a simulation study, highlighting the impact on reserves and Solvency Capital Requirement, is performed. Results revealed that a diversification effect could be gained on the Solvency Capital when considering time varying dependence structures.     

技术增长率的部门差异和经济增长率的“驼峰形”变化

迄今的长期经济增长历史表明,经济增长速度具有"驼峰形"特征,即中等收入时增长速度快,人均收入水平高时次之,收入水平低时最慢。经济增长的历史同时表明,增长速度快的时期几乎都伴随着经济结构剧烈变化。本文试图在新古典理论框架内,构建经济增长模型来解释驼峰形特征以及促成它的经济结构变化。数值实验表明,模型结果合理地解释"驼峰形"的经济事实,而且与Kaldor事实和Kuznetz事实同时相容。     

Business Cycle Synchronization in the Proposed East African Monetary Union: An Unobserved Component Approach

This paper uses the business cycle synchronization criteria of the theory of optimum currency area (OCA) to examine the feasibility of the East African Community (EAC) as a monetary union. We also investigate whether the degree of business cycle synchronization has increased after the 1999 EAC Treaty. We use an unobserved component model to measure business cycle synchronization as the proportion of structural shocks that are common across different countries, and a time‐varying parameter model to examine the dynamics of synchronization over time. We find that although the degree of synchronization has increased since 2000 when the EAC Treaty came into force, the proportion of shocks that is common across different countries is still small implying weak synchronization. This evidence casts doubt on the feasibility of a monetary union for the EAC as scheduled by 2012.     

Determinants of inward investment in the UK,a panel analysis

This paper develops an inter-industry model of inward investment, using a fixed effects approach. This demonstrates that when inward investment is investigated in such a framework, previous findings, relating to the specification of measures of location advantage and ownership advantages no longer hold. This also shows that there are some industries that have attracted significant inward investment over time, and continue to do so, while others are noticeably less successful. Reasons for this, and potential policy measures are briefly discussed.     

Product innovation,signaling, and endogenous regulatory delay

This paper examines the determinants of the timing of a monopolistic firm’s product innovation and regulatory approval, and proposes a signaling model with endogenous regulatory delay. Regulatory delay exerts a multiplier effect on total time to market, because when the firm expects the regulator to take longer to grant approval, the firm delays its product introduction. The firm can time its innovation to communicate its private information about the marginal cost of delay to the regulator. Successful signaling in the separating equilibrium leads the regulator to reduce regulatory delay. The implications of the model are consistent with data on innovation and regulatory delay in telecommunications markets in a few Midwest states in the US.      

The effects of the international-domestic interest rate gap on US output

This paper examines how the relationships linking money to real output are altered when an international-domestic interest rate gap is included in the model. The results indicate that both the international-domestic interest rate gap and term structure exert a statistically significant effect on real economic activity. In addition, fluctuations in these variables contain significant information about future changes in real output. An interesting finding is that while the term structure dominates the international-domestic interest rate gap when estimating the entire time period, 1970:1–1996:4, the international-domestic interest rate gap clearly dominates in the more recent time period, 1985:1–1996:4.