On delayed technological shifts

When a new technology capable of superseding an existing one appears, we sometimes observe the so-called sailing-ship effect, which consists of the old technology's improvements in response to the emergence of the new one. This helps explain why the old technology does not disappear quickly. However, some more aspects contribute to slowing down the process of substitution of the new for the old technology, such as users’ reluctance to switch to the new one, the degree of diffusion of the old technology, and other forces. In this work, we provide a formal model which takes into account both the technical improvements of the old technology as well as the other forces, where the latter are synthesised in what we define as a memory effect.     

Estimating the tourism induced environmental Kuznets curve in France

Abstract

France has retained its position as the world’s favourite tourism destination. Accounting for around 83 million visitors and 4.2% of the total employment, the tourism sector in France contributes to nearly 9% of the total GDP. However, as reported by the World Tourism Organization, road and air travel related to tourism activities account for approximately 10% of the total CO₂ emissions in the atmosphere, thereby contributing to severe air pollution. Thus, initiatives are necessary to prevent environmental damage that could have a corresponding detrimental effect on the tourism industry itself and slow down the country’s economic growth. This study utilises a vector error correction model (VECM) to investigate the relationship between polluting emissions, GDP levels, and tourism flows in France to test the validity of the environmental Kuznets curve (EKC) hypothesis for the period 1995–2014. Additionally, based on a joint analysis of long-run parameters and causality links, appropriate policy strategies are proposed to promote robust and sustainable long-run economic growth.     

Trend inflation as a workers’ discipline device

The paper shows that a monetary policy regime that allows for a positive inflation rate disciplines monopolistic wages setters if these, when setting contracts, internalize the consequences of their choices for economic outcomes over the life of the contract. We also show that discretionary monetary policy has real effects when wage setters are non atomistic, whereas commitment to a positive inflation rate is effective irrespective of the degree of labor market centralization. Finally, the model may explain the different unemployment dynamics in Europe and in the United States, following the 1980 disinflationary episode. Our approach suggests that disinflation induced an adverse effect on the labor market wedge and that such effect was stronger in Europe, due to the particular importance of large wage setters.     

What to show on the wine labels: a hedonic analysis of price drivers of Sicilian wines

Unlike previous literature, we construct a hedonic model of wine price that incorporates all the main categories of variables simultaneously to enable a better evaluation of their importance on wine price formation. A comprehensive model has the advantage of providing more reliable estimates of the attributes' implicit prices thereby facilitating firms' pricing and improving effectiveness of wine production and marketing decisions. We utilize two different datasets of Sicilian wines collecting data from influential wine guides. Our results suggest that wine price strongly depends on objective features such as vintage, alcoholic content, geographical origin, grape variety, producer size and cellaring potential. In addition, use of containers like tonneaux and barrique positively affects prices, whereas use of concrete containers has a negative influence. No univocal indications emerge with regard to the effect of the type of company, type of viticulture and firm age. As for sensorial characteristics, our analysis provides novel evidence of the importance of olfactory variables such as aroma intensity and the presence of particular smells in the wine. Finally, current guides’ grades and firm reputation play a crucial role in determining wine prices as well.     

Monetary and Fiscal Policy Design in the EMU: An Overview

The interaction of monetary and fiscal policies is a crucial issue in a highly integrated economic area such as the European Union. This paper analyzes the design of monetary and fiscal policies in the EMU. To do so, the paper starts with an overview of the most important aspects. Next, it analyzes monetary and fiscal policy interaction in a stylized model of a monetary union, in which monetary and fiscal policy design is modeled as a dynamic stabilization game. Macroeconomic policy making and adjustment are studied under alternative forms of cooperation and in both symmetric and asymmetric settings.     

Backtesting Derivative Portfolios with Filtered Historical Simulation (FHS)

Filtered historical simulation provides the general framework to our backtests of portfolios of derivative securities held by a large sample of financial institutions. We allow for stochastic volatility and exchange rates. Correlations are preserved implicitly by our simulation procedure. Options are repriced at each node. Overall results support the adequacy of our framework, but our VaR numbers are too high for swap portfolios at long horizons and too low for options and futures portfolios at short horizons.     

Inflation targeting rules and welfare in an asymmetric currency area

This paper studies the effect on monetary policy of differing degrees of competition and differing degrees of nominal rigidity between the members of a monetary union. In particular, we assess the welfare loss brought about by the use of a simple interest rate rule that does not take into account such structural differences. Our results show that, ceteris paribus, to maximize welfare the central bank should react more strongly to inflation pressure generated by the more competitive economies. Our work extends the results of Benigno [Benigno, P., 2004. Optimal monetary policy in a currency area. Journal of International Economics 63, 293-320] by showing that, if the degree of competition differs between countries, the optimal rule could involve placing a greater weight on the more “flexible” countries. Our study suggests that the size of the welfare losses generated by failure to take account of these asymmetries depends crucially on the actual combination of the various asymmetries. As a consequence, we show that, if the optimal weights are chosen under incomplete information regarding the extent and type of asymmetries, the resulting level of welfare could be lower than that produced by the symmetric rule.     

Methods of privatization and economic growth in transition economies1

We examine how different methods of privatization might have affected growth in transition economies. Using several econometric specifications, including fixed effects and GMM, we estimate a cross‐country panel growth model for 1990–2003. We find only voucher privatization to have been significantly associated with faster growth. Moreover, neither private sector development per se nor capital market development exercised a significant influence. We speculate that voucher privatization may have been effective because of the speed with which links between firms and the state were severed.     

Exploring Nonlinearities in Path Models

In causal analysis, path models are an appropriate tool for studying relationships between social phenomena. However, they assume linear linkages between variables, and hence they are not always suitable for describing the complexity and richness of relationships in social phenomena. The aim of this work is to propose an exploratory graphical method to evaluate if the phenomena under analysis are actually characterized by non-linear linkages. In particular, the method is well suited to discovering interactions between the observed variables in path models. The proposed approach, which does not depend on any hypothesis on the error distribution, is based on a series of plots that can be easily interpreted and drawn using standard statistical software. As an additional feature, the plots – which we call joint effect plots – support qualitative interpretation of the non-linear linkages after the path model has been specified. Finally, the proposed method is applied within a case study. Non-linearities are explored in a casual model aiming to find the determinants of remittances of a group of Tunisian migrants in Italy.