Tyranny of kindness: Dismantling the welfare system to end poverty in America Theresa Funiciello

The Comment on Wrenn’s article “What is Heterodox Economics?” suggests that the inability of heterodox economists to define their field arises from an as yet unrecognized and different metaphysical foundation than that of orthodox economics.     

RISK PREMIUM EFFECTS ON IMPLIED VOLATILITY REGRESSIONS

This article provides new insights into the sources of bias of option implied volatility to forecast its physical counterpart. We argue that this bias can be attributed to volatility risk premium effects. The latter are found to depend on high‐order cumulants of the risk‐neutral density. These cumulants capture the risk‐averse behavior of investors in the stock and option markets for bearing the investment risk that is reflected in the deviations of the implied risk‐neutral distribution from the normal distribution. We show that the bias of implied volatility to forecast its corresponding physical measure can be eliminated when the implied volatility regressions are adjusted for risk premium effects. The latter are captured mainly by the third‐order risk‐neutral cumulant. We also show that a substantial reduction of higher order risk‐neutral cumulants biases to predict their corresponding physical cumulants is supported when adjustments for risk premium effects are made.     

Some asymptotic results of a non‐parametric conditional mode estimator for functional time‐series data

We consider the estimation of the conditional mode function when the covariates take values in some abstract function space. The main goal of this paper was to establish the almost complete convergence and the asymptotic normality of the kernel estimator of the conditional mode when the process is assumed to be strongly mixing and under the concentration property over the functional regressors. Some applications are given. This approach can be applied in time‐series analysis to the prediction and confidence band building. We illustrate our methodology by using El Nio data.     

Optimal currency shares in international reserves: The impact of the euro and the prospects for the dollar

Foreign exchange reserve accumulation has risen dramatically in recent years. The introduction of the euro, greater liquidity in other major currencies, and the rising current account deficits and external debt of the United States have increased the pressure on central banks to diversify away from the US dollar. A major portfolio shift would significantly affect exchange rates and the status of the dollar as the dominant international currency. We develop a dynamic mean-variance optimization framework with portfolio rebalancing costs to estimate optimal portfolio weights among the main international currencies. Making various assumptions on expected currency returns and the variance–covariance structure, we assess how the euro has changed this allocation. We then perform simulations for the optimal currency allocations of four large emerging market countries (Brazil, Russia, India and China), adding constraints that reflect a central bank's desire to hold a sizable portion of its portfolio in the currencies of its peg, its foreign debt and its international trade. Our main results are: (i) The optimizer can match the large share of the US dollar in reserves, when the dollar is the reference (risk-free) currency. (ii) The optimum portfolios show a much lower weight for the euro than is observed. This suggests that the euro may already enjoy an enhanced role as an international reserve currency (“punching above its weight”). (iii) Growth in issuance of euro-denominated securities, a rise in euro zone trade with key emerging markets, and increased use of the euro as a currency peg, would all work towards raising the optimal euro shares, with the last factor being quantitatively the most important. J. Japanese Int. Economies 20 (4) (2006) 508–547.     

The Growth Effects of National Patent Policies*

We construct a two‐country (innovative North and imitating South) model of product‐cycle trade, fully endogenous Schumpeterian growth, and national patent policies. A move towards harmonization based on stronger Southern intellectual property rights (IPR) protection accelerates the long‐run global rates of innovation and growth, reduces the North–South wage gap, and has an ambiguous effect on the rate of international technology transfer. Patent harmonization constitutes a suboptimal global‐growth policy. However, if the global economy is governed by a common patent policy regime, then stronger global IPR protection: (a) increases the rates of global innovation and growth; (b) accelerates the rate of international technology transfer; and (c) has no impact on the North–South wage gap.