Esscher transforms and the minimal entropy martingale measure for exponential Lévy models

In this paper we offer a systematic survey and comparison of the Esscher martingale transform for linear processes, the Esscher martingale transform for exponential processes, and the minimal entropy martingale measure for exponential Lévy models, and present some new results in order to give a complete characterization of those classes of measures. We illustrate the results with several concrete examples in detail.     

Dynamics of retail-bank branching in Antwerp (Belgium) 1991–2006: Evidence from micro-geographic data

We exploit a comprehensive new panel dataset on retailbank branch locations in 233 neighborhoods (local markets) in the metropolitan area of Antwerp to describe (i) how between 1991 and 2006 the patterns of bank presence, entry, exit and choice deeply evolve and (ii) whether and how changes in these “on the ground” patterns systematically diverge across Antwerp’s different, highly segregated neighborhoods. We show that over the 15-year period under study entry and exit dynamics substantially intensify, the level change in branch desert grows significantly, and bank choice markedly declines; and that between 1996 and 2001, these changes are robustly associated with the neighborhood average income. In doing so, we advance a new technique for generating spatial measures that both minimize the discretization bias and can be reliably linked to neighborhoods. We demonstrate that the resulting measures are indeed more precise than traditional count measures.     

Aiding Car Producers in the EU: Money in Search of a Strategy

This article investigates how the general principles of the Treaty have been applied to the car sector in the EU, where the soft law provisions are of particular interest. A detailed quantitative analysis from 1990 to 2008 highlights a reduction of aid over time. A shift from sectoral to “regional development” motives in granting aid to the sector is also observed in the last 10 years. However, sector specific aid is now less explicit but it remains important. Large amounts of public money are spent without a consistent strategy, reducing capacity in some cases, expanding it in others. The scarcity of public funds calls for a more focussed European policy for this industry.     

Modelling and Forecasting Fiscal Variables for the Euro Area*

In this paper, we assess the possibility of producing unbiased forecasts for fiscal variables in the Euro area by comparing a set of procedures that rely on different information sets and econometric techniques. In particular, we consider autoregressive moving average models, Vector autoregressions, small‐scale semistructural models at the national and Euro area level, institutional forecasts (Organization for Economic Co‐operation and Development), and pooling. Our small‐scale models are characterized by the joint modelling of fiscal and monetary policy using simple rules, combined with equations for the evolution of all the relevant fundamentals for the Maastricht Treaty and the Stability and Growth Pact. We rank models on the basis of their forecasting performance using the mean square and mean absolute error criteria at different horizons. Overall, simple time‐series methods and pooling work well and are able to deliver unbiased forecasts, or slightly upward‐biased forecast for the debt–GDP dynamics. This result is mostly due to the short sample available, the robustness of simple methods to structural breaks, and to the difficulty of modelling the joint behaviour of several variables in a period of substantial institutional and economic changes. A bootstrap experiment highlights that, even when the data are generated using the estimated small‐scale multi‐country model, simple time‐series models can produce more accurate forecasts, because of their parsimonious specification.     

Official Statistics,Globalization and World Democracy—A Challenge?

Official statistics is facing new challenges, both quantitatively and qualitatively. This requires, among other things, further input of statistical methods. The interaction with statistical research becomes crucial. Due to globalization, international organisations have to play a major role in the development of official statistics. The ISI should also play an important role in seeking to achieve a comprehensive approach to statistical science.     

Territories in action,territories for action: the territorial dimension of Italian local development policies

Current changes in territorial organization are interpreted by focusing on two main aspects that are different yet closely interrelated. The first aspect concerns relationships between unfolding processes of territorial redefinition and changes imposed by globalization processes and by European integration, and by the loss of centrality and of part of the power of nation‐state government. The second aspect concerns the change in forms and procedures of collective action in urban and territorial policies, recognizing, in particular, the consolidation — including in practices — of forms of partnership, inter‐institutional cooperation, strategic planning and governance. Within this general context, this article aims to present and discuss changes, both ongoing and recent, by (1) presenting the changes that are emerging in the framework of Italian urban and territorial policies; and (2) discussing critically, with reference to the Italian case, the relationship between change in the idea of local territories and change in urban and territorial policies. Our aim is to verify whether, within what limits and from what point of view, the innovations introduced in the Italian context may be interpreted as changes that are moving towards more place‐focused forms of urban and territorial governance. On interprète les évolutions actuelles de l'organisation territoriale à travers deux aspects dominants, différents quoique étroitement liés. Le premier concerne les relations entre les processus d'explication de la redéfinition territoriale et les changements imposés par les processus de mondialisation et l'intégration européenne, et par la disparition de la centralité et d'une partie de la puissance gouvernementale de l'Énation. Le second porte sur la transformation des formes et procédures d'action collective dans les politiques publiques urbaines et territoriales, celles‐ci reconnaissant notamment la fusion — y compris dans les pratiques — de formes de partenariat, coopération inter‐institutions, planification stratégique et gouvernance. Dans ce contexte général, l'article cherche à exposer et étudier les évolutions actuelles et récentes, d'une part en présentant les changements qui apparaissent dans le cadre des politiques urbaines et territoriales italiennes, d'autre part en abordant de façon critique, par rapport au cas italien, le lien entre un changement d'idée sur les territoires locaux et une transformation des politiques urbaines et territoriales. Il s'agit de vérifier si les innovations introduites dans le contexte italien peuvent s'interpréter comme des changements tendant à des formes de gouvernance urbaine et territoriale plus soucieuses des lieux, et ce dans quelle mesure et de quel point de vue.     

Investment sharing in broadband networks

This paper presents a model of competition between an incumbent firm and an Other Licensed Operator (OLO) in the broadband market, where the incumbent has an investment option to build a Next Generation network (NGN) and it can do so by making an investment sharing agreement with the OLO, or alone. Two different kinds of investment sharing contractual forms are analyzed, a basic investment sharing, where no side-payment is given for the use of the NGN between co-investors, and joint-venture, where a side-payment is set by the co-investing firms. Results show that investment sharing can potentially be beneficial in terms of competition and investments, but the number of firms involved matters and so does the choice of the NGN access price, for insiders and outsiders of the agreement. Even when the presence of firms outside of the agreement force insiders to compete more fiercely, there might be a concern with the potential exclusion of the outsiders from the NGN.     

Broadband investment and regulation: A literature review

Investment in broadband communications and its infrastructures (the so-called Next Generation Networks) is receiving extraordinary attention from policy makers all over the world, due to the significant impact of high-speed Internet access on the whole economy and society. However, even before the recent financial crises, a dramatic downward trend in telecommunications investment has occurred, mainly due – at least according to incumbent operators – to excessively intrusive regulatory intervention. The typical conflict between regulation, competition and investment emerges. It is therefore important, for both future research and regulatory and practitioners’ references, to review the specialized but growing branch of the literature on this interesting and policy-relevant issue. The purpose of this paper is therefore to survey the relevant theoretical and empirical literature on the relationship between regulation, at both retail and wholesale level, and investment in telecoms infrastructures. The picture that emerges is not conclusive, and further research is still needed, both theoretically and empirically, to better understand the real impact of regulatory incentives on investments.     

SHACKLE AND MODERN DECISION THEORY

The paper discusses the role of George L.S. Shackle in fostering an unconventional approach to individual decision making. Up until the early 1970s Shackle was the single critic of the probabilistic approach to decision making who proposed an alternative formal corpus for dealing with uncertainty. The main aim of the paper is to analyse Shackle's non‐probabilistic conceptualization of individual decisions under uncertainty from a specific viewpoint, namely that of a possible connection between his theory and one of the most interesting recent approaches to decision under uncertainty, the so‐called non‐additive probability approach of Gilboa and Schmeidler. The paper shows that these developments in modern decision theory take Shackle's issue seriously and confirm that the reliance of strict Bayesian theory on probabilistic judgements based on point‐probability estimates, a reliance that Shackle intended to oppose, is untenable. Non‐additive decision theory also provides a usage of non‐additive probability distributions in choice that is an alternative to Shackle's approach of using a qualitative notion of probability, such as potential surprise.