Average-cost Pricing, Increasing Returns, and Optimal Output: Comparing Home and Market Production

We employ a model with both market production and home production to show that, ignoring administrative costs and indirect effects (such as rent-seeking), even if both the home and the market sectors have the condition of increasing returns and there are no pre-existing taxes, it is still efficient to tax the home sector to finance a subsidy on the market sector to offset the under-production of the latter due to the failure of price-taking consumers to take account of the effects of higher consumption in reducing the average costs and hence prices, through increasing returns or the publicness nature of fixed costs. Within market production, it is efficient to subsidise more the sector with a higher fixed cost, a lower elasticity of substitution between goods (higher value of diversity), and a lower degree of importance in preference, which all increase the degree of increasing returns.     

Boosting diffusion indices

In forecasting and regression analysis, it is often necessary to select predictors from a large feasible set. When the predictors have no natural ordering, an exhaustive evaluation of all possible combinations of the predictors can be computationally costly. This paper considers ‘boosting’ as a methodology of selecting the predictors in factor‐augmented autoregressions. As some of the predictors are being estimated, we propose a stopping rule for boosting to prevent the model from being overfitted with estimated predictors. We also consider two ways of handling lags of variables: a componentwise approach and a block‐wise approach. The best forecasting method will necessarily depend on the data‐generating process. Simulations show that for each data type there is one form of boosting that performs quite well. When applied to four key economic variables, some form of boosting is found to outperform the standard factor‐augmented forecasts and is far superior to an autoregressive forecast. Copyright © 2009 John Wiley & Sons, Ltd.     

Normality test for multivariate conditional heteroskedastic dynamic regression models

In this paper, we study the Jarque-Bera test for the normality of the innovations of multivariate GARCH models. It is shown that the test is distribution free and its limiting null distribution is a chi-square distribution.     

A Note on the Selection of Time Series Models

We consider issues related to the order of an autoregression selected using information criteria. We study the sensitivity of the estimated order to (i) whether the effective number of observations is held fixed when estimating models of different order, (ii) whether the estimate of the variance is adjusted for degrees of freedom, and (iii) how the penalty for overfitting is defined in relation to the total sample size. Simulations show that the lag length selected by both the Akaike and the Schwarz information criteria are sensitive to these parameters in finite samples. The methods that give the most precise estimates are those that hold the effective sample size fixed across models to be compared. Theoretical considerations reveal that this is indeed necessary for valid model comparisons. Guides to robust model selection are provided.     

FDI and Industrial Restructuring in Post‐WTO Greater PRD: Implications on Regional Growth in China

This paper aims at studying the investment flows in the Greater Pearl River Delta region (Hong Kong‐PRD) in China and its impacts on industrial restructuring at the firm‐level using a business survey with the Hong Kong‐PRD entity acted as a core‐periphery economy. The critical effects of gravity distance on transaction costs in the determination of investment flows are examined statistically by a gravity model by incorporating a hypothetical infrastructural construction project. Survey findings show that the evolution of the cross‐border operations at the main core has directed the outward FDI flows and the subsequent industrial structural adjustments of the core‐periphery economy. This paper has presented a typical illustrative case for further studies of investment flows and its impacts upon industrial adjustments and performance in other regions in China especially after the WTO accession. Its implication on regional economic growth is also discussed.     

Price dynamics in refined petroleum spot and futures markets

This article characterizes the spot and futures price dynamics of two important physical commodities, gasoline and heating oil. Using a non-linear error correction model with time-varying volatility, we demonstrate many new results. Specifically, the convergence of spot and futures prices is asymmetric, non-linear, and volatility inducing. Moreover, spreads between spot and futures prices explain virtually all spot return volatility innovations for these two commodities, and spot returns are more volatile when spot prices exceed futures prices than when the reverse is true. Furthermore, there are volatility spillovers from futures to spot markets (but not the reverse), futures volatility shocks are more persistent than spot volatility shocks, and the convergence of spot and futures prices is asymmetric and non-linear. These results have important implications. In particular, since the theory of storage implies that spreasd vary with fundamental supply and demand factors, the strong relation between spreads and volatility suggests that these fundamentals — rather than trading induced noise — are the primary determinants of spot price volatility. The volatility spillovers, differences in volatility persistence, and lead-lag relations are consistent with the view that the futures market is the primary locus of informed trading in refined petroleum product markets. Finally, our finding that error correction processes may be non-linear, asymmetric, and volatility inducing suggests that traditional approaches to the study of time series dynamics of variables that follow a common stochastic trend that ignore these complexities may be mis-specified.     

衰落信道中的DS/CDMA系统盲差分自适应接收机

在本文中，我们针对标准MMSE自适应接收机在频率非选择性衰落信道中的相位滑动和失锁问题，提出了一种无需进行训练和信道参数估计的盲差分自适应接收机。为自适应地实现该接收机，我们同时提出了一种基于正交分解的盲平均随机梯度（Orthogonal Decomposition-based Blind Aver-aged stochastic Gradient，简称ODBAG）算法。仿真结果表明，这种以ODBAG算法实现的盲差分自适应接收机在瑞利（Rayleigh）衰落信道中，误码率性能比传统匹配滤波器（Matched Filter，简写为MF）接收机有显著的提高，并接近改进的MMSE自适应接收机的性能。     

Optimal Environmental Charges/Taxes: Easy to Estimate and Surplus-yielding

The estimation of the optimal charges/taxes on environmental disruption and the financing of the spending on the abatement of environmental disruption are important practical problems. This paper shows that, for most cases where some abatement is desirable, both the estimation and the financing problems may be easily solved. It is desirable to charge disruption (at least) at the marginal cost of abatement (which is easier to estimate than the marginal damage of disruption) and such a charge will normally yield total revenue in excess of the amount of abatement spending.     

The older the more valuable: Divergence between utility and dollar values of life as one ages

While the utility value of life may decrease monotonically with age, the dollar value may increase dramatically until a fairly old age (by ten-fold to age 60 for one plausible set of parameters). Crucial for this result is a high enough real rate of interest (e.g. 4–5%) which makes accumulation desirable, leading to a lower marginal utility of money when one gets older, explaining the divergence. This divergence raises perplexing questions as to which value of life should be used and whether the old should be taxed and the young subsidized.I am grateful to Ross Parish for stimulation and to Keith McLaren and an anonymous referee for helpful comments.