Regional Integration and Economic Growth

The rapid economic growth of developing countries that openedtheir markets to free international trade during the past twodecades has stimulated a large empirical and theoretical literatureon the impact of trade on growth. This literature concludesthat free trade and growth were positively correlated duringthe 1970s and 1980s. However, most studies focus on nondiscriminatoryopenness. Does regional integration matter for economic growth?Do regional trade agreements have any impact on growth? This article presents empirical evidence that countries withopen, large, and more developed neighboring economies grow fasterthan those with closed, smaller, and less developed neighboringeconomies. The results are robust to different specificationsof the empirical model and different definitions of openness,suggesting that small economies should grow faster when theyform regional trade agreements with large and more developedeconomies. However, testing for the impact of five regionaltrade agreements during the 1970s and 1980s finds that noneled to faster growth. The main reason seems to be that mostof these agreements were among small, closed, and developingeconomies.     

Credibilistic risk aversion

In the probabilistic risk aversion approach, risks are presumed as random variables with known probability distributions. However, in some practical cases, for example, due to the absence of historical data, the inherent uncertain characteristic of risks or different subject judgements from the decision-makers, risks may be hard or not appropriate to be estimated with probability distributions. Therefore, the traditional probabilistic risk aversion theory is ineffective. Thus, in order to deal with these cases, we suggest measuring these kinds of risks as fuzzy variables, and accordingly to present an alternative risk aversion approach by employing credibility theory. In the present paper, first, the definition of credibilistic risk premium proposed by Georgescu and Kinnunen [Fuzzy Inf. Eng., 2013, 5, 399–416] is revised by taking the initial wealth into consideration, and then a general method to compute the credibilistic risk premium is provided. Secondly, regarding the risks represented with the commonly used LR fuzzy intervals, a simple calculation formula of the local credibilistic risk premium is put forward. Finally, in a global sense, several equivalent propositions for comparative risk aversion under the credibility measurement are provided. Illustrated examples are presented to show the applicability of the theoretical findings.     

Positive feedback trading and long-term volatility links: evidence from real estate markets of USA,Be/Lux and Switzerland

This article investigates the positive feedback trading strategies in the real estate markets of USA, Belgium/Luxembourg (Be/Lux) and Switzerland, linking these strategies with long-term volatility. The results are in favour of a positive feedback trading strategy which negatively influences investors' risk-return position on real estate markets.     

Monetary policy and efficiency in over‐the‐counter financial trade

We develop a monetary model that incorporates over‐the‐counter (OTC) asset trade. After agents have made their money holding decisions, they receive an idiosyncratic shock that affects their valuation for consumption and, hence, for the unique liquid asset, namely money. Subsequently, agents can choose whether they want to enter the OTC market in order to sell assets and thus boost their liquidity or to buy assets and thus provide liquidity to other agents. In our model, inflation affects not only the money holding decisions of agents, as is standard in monetary theory, but also the entry decision of these agents in the financial market. We use our framework to study the effect of inflation on welfare, asset prices and OTC trade volume. In contrast to most monetary models, which predict a negative relationship between inflation and welfare, we find that inflation can be welfare improving within a certain range, because it mitigates a search externality that agents impose on one another when they make their OTC market entry decision. Also, an increase in the holding cost of money will lead to a decrease in asset prices, a regularity that is well documented in the data and often considered anomalous.     

Fiscal adjustments and asset price changes

This paper examines the links between asset price movements and fiscal adjustments. Our findings suggest that higher asset prices improve fiscal balances and contribute to sustained consolidation. This refers in particular to real equity and real residential property prices. We find evidence that revenue windfalls due to higher residential, commercial property and equity prices can be sustained, thus, improving revenue and primary balances. There is evidence of a positive association of some asset prices changes with expenditure adjustments. Fiscal adjustments and in particular sharp spending cuts are more likely to be successful if undertaken in periods of dire budgetary and economic conditions.     

Improvement of a Bio-Economic Mathematical Programming Model in the Case of On-Farm Source Inputs and Outputs

We present a two-step process for solving nonlinear farm activity models inside a linear framework under the assumption that market prices approximate the shadow prices of the model’s constraints. In the event of market imperfections or missing prices (for example non-marketed outputs), the previous assumption is not justified and the derived solution is not optimal. To circumvent this problem and to avoid nonlinear algorithms that may prove unwieldy for large models, we propose an iterative computation method, based on the re-estimation of shadow prices in each step until a converging solution is found. The method is applied to the bio-economic model AROPAj, which consists of a number of linear programming (LP) farm sub-models representing different farming systems across the European Union. For most of LPs producing non-marketed outputs a converging solution is obtained in two iterations, while the remaining LPs lead to periodic solutions of very low amplitude.

     

Urban guerrilla activities in Greece

Logistic fits are made to the populations of attacks by urban guerrilla groups in Greece under the assumption that these organizations grow like species. The analysis is mainly based on data that cover the attacks of the two major urban guerrilla groups, Revolutionary Organization November 17 (17N) and Revolutionary Popular Struggle (ELA). We conclude that urban guerrilla activities in Greece may have been triggered into existence by the military junta but probably had their roots deeper into the earlier political system in Greece that repressed leftist movements. Our analysis shows that the life cycle of political violence in Greece had already been completed when the police finally began cracking down on the 17N, which takes away same of the shine from the police's achievement.     

Co-ordinated environmental regulation: controlling non-point nitrate pollution while maintaining river flows

Environmental policy often addresses multiple targets, yet much economic analysis of pollution control is based on a single-target objective. In this paper, we present an analysis of policies to control non-point source nitrate pollution in the presence of minimum river flow restrictions. A non-linear bio-physical economic optimisation model of an intensively cultivated Scottish agricultural catchment was constructed. The presence of minimum river flow controls in the catchment was found to reduce nitrogen pollution. However, by themselves, river flow controls were found not to be a cost effective means to reduce non-point pollution. We quantify the improved social welfare from coordinating the environmental regulation of river flows and pollution, and determine the conditions under which such coordination is beneficial. The paper also investigates whether the benefits of such coordination can be sustained under wetter (winter) weather conditions implied by current climate change predictions.     

The Euro Area Crisis: Politics over Economics

This paper explores the dominant role of politics in decisions made by euro area governments during the crisis. Decisions that appear to have been driven by local political considerations to the detriment of the euro area as a whole are discussed. The domination of politics over economics has led to crisis mismanagement. The underlying cause of tension is identified as a misalignment of political incentives. Member state governments tend to defend their own interests in a noncooperative manner. This has magnified the costs of the crisis and has resulted in an unbalanced and divisive incidence of the costs across the euro area. The example of Cyprus is discussed, where political decisions resulted in a transfer of about half of 2013 GDP from the island to cover losses elsewhere. In the absence of a federal government, no institution can adequately defend the interests of the euro area as a whole. European institutions appear weak and incapable of defending European principles and the proper functioning of the euro. Political reform is needed to sustain the euro but this is unlikely to pass the political feasibility test with the current governments of Europe.