Currency movements within and outside a currency union: The case of Germany and the euro area

In this paper, we analyse the volume of euro banknotes issued by Germany within the euro area with several seasonal methods. We draw a distinction between movements within Germany, circulation outside Germany but within the euro area and demand from non-euro-area countries. Our approach suggests that only about 20% of euro notes issued by Germany are used for transactions in Germany. The rest is hoarded (10%), circulates in other euro area countries (25%) or is held outside the euro area (45%).     

Industrielle Standortsfragen

Zusammenfassung Wie schon in der Einleitung bemerkt, gibt es sehr verschiedenartige mit dem Standort in Zusammenhang stehende Probleme. Die in der vorliegenden Arbeit behandelten beziehen sich durchwegs auf Monopolunternehmungen. Die Probleme der beiden ersten Abschnitte sind Standortsfragen nur im weiteren Sinne dieses Wortes, nicht Fragen nach dem Standort, sondern Fragen nach der Abhängigkeit der wirtschaftlichen Erscheinungen vom Standort. Es stellt sich dabei heraus, daß für einen Monopolisten, der nur die Erzeugung, nicht aber auch den Vertrieb eines Produktes monopolisiert, die gewöhnliche Monopoltheorie anwendbar bleibt; daß dagegen, wenn der Unternehmer auch den Handel mit seinem Produkt monopolisiert oder doch auf die Zwischenhandelspreise Einfluß nimmt (vergleiche den letzten Absatz in II), die Resultate dieser Theorie in gewisser Weise modifiziert werden. In III und IV sind Gleichungen angegeben, aus denen der für den Unternehmer günstigste Standort des Betriebes berechnet werden kann. Für den Fall III lehren die Gleichungen (6), daß für den Unternehmer derjenige Standort der günstigste ist, bei dem (für die nach I zu berechnenden Preis- und Absatzverhältnisse) die Summe aus Produktions- und Transportkosten ein Minimum ist. Das ist zwar plausibel, aber doch eines Beweises bedürftig und nicht etwa selbstverständlich, was daraus erhellen mag, daß im Falle IV dieses Prinzip keineswegs gilt. Aus den Gleichungen lassen sich verschiedene qualitative Aussagen über den Standort ablesen; z. B. aus (6), daß bei örtlich gleichen Produktionskosten der Standort sich gewissermaßen im Schwerpunkt des Konsums befindet, derart, daß die Transporte nach allen Richtungen möglichst gleichmäßig erfolgen; ebenso einige andere. Natürlich beinhalten die Gleichungen stets mehr als derartige Aussagen.     

Voluntary internalisations facing the threat of a pollution tax

This paper investigates how the threat of a pollution tax fosters voluntary arrangements under private information and how such arrangements (of the take-it-or-leave-it type) will look like. The objective is (i), to address a topical and policy relevant problem, and (ii), to highlight that the optimal contracts exhibit substantial variations, degrees of complexity and uncommon features. If the pollutee offers an arrangement (and this is the more likely and also more interesting case) the spectrum of solutions covers six different cases: 'no distortion at the top', 'no distortion at the bottom', 'no distortion in the interior' and a boundary solution (a pseudo contract of duplicating the tax outcome) applicable either in all instances of the agent's benefit or coupled with one of the conventional mechanisms. If the polluter offers a contract, the optimal incentive scheme is countervailing with the consequence that the signs of the payments are reversed, that the property of no distortion holds at both ends and that the polluter's best strategy is to duplicate the tax outcome if the actual damage is around the expected value. The government's threat encourages contracting and improves the allocation beyond what an actual intervention could achieve. This provides a potential role for governments in an otherwise Coasean framework. Received: 28 March 2003, Accepted: 10 October 2005 JEL Classification: D62, D82 Both authors acknowledge (exceptionally) helpful and detailed comments from an anonymous referee and suggestions from an associate editor of the journal.     

Joint Implementation: Strategic Reactions and Possible Remedies

This paper investigates the promising proposal of Joint Implementation (JI) to mitigate greenhouse gas emissions. This was ultimately the only concrete outcome of the Conference on Climate Change in Berlin, albeit restricted to a pilot phase. The basic idea, given the public's awareness of global warming, sounds economically plausible: The industrialized countries, the only ones required to stabilize and lower carbon emissions, can search for cheaper reductions of greenhouse gas emissions in developing countries and economies in transition. However, this proposal leads to strategic reactions by developing countries reinforced by the fact that this cheating coincides with the interest of the industrialized country. In short, this proposal will lead to cheating (given asymmetric information) and will thus produce largely faked reductions in emissions. On the constructive side, an efficient mechanism retaining the spirit of JI is derived, which deters strategic reactions. This differs from a usual principal-agent problem through an additional hierarchical layer: a global authority (e.g. the Conference of Parties on Climate Change), an industrialized country and a developing country. The unavoidable loss that is even associated with an optimal scheme due to strategic, behavioural reality (the first best optimum is unattainable, except at the top) leads, of course, to much less glamorous predictions in emission reductions. Moreover, the implicit subsidization scheme focuses and favours on already 'efficient' partners.     

Banking and Debt Crises in Europe: The Dangerous Liaisons?

The potential mutation of the Sub-Prime banking crisis into a sovereign debt one in Euro area countries is investigated. After reviewing the criteria used to measure the debt vulnerability, the balance sheet approach is presented in order to illustrate the potential connections between these two types of crises. A graphical analysis yields evidence that at the end 2009 the probability of observing a Euro area country defaulting is less likely than six month before. Nevertheless, the serious threats, which concern Greece and Ireland, do not permit us to exclude the occurrence of a contagious, or self-fulfilling, sovereign debt or currency crises in Euro area in the future.     

On Optimal Social Investment in the Sciences and Humanities

This essay examines the optimization of public, non-profit investment in the natural and social sciences and humanities, given that the individual project outcomes are spread over time and are uncertain. The more distant the results, the greater is the uncertainty, as measured by the success-or-failure variance. Diversification into many simultaneous projects reduces but does not eliminate this risk. By contrast, in a deterministic, no-risk model, there is no way to optimize undertakings in pure science other than to accept social or political consensus. The commonly-used planners’ discount rate of zero is shown in the Appendix to have the additional property of leading to the Golden Rule.     

Disinflationary booms?

This paper shows that announced credible disinflations under inflation targeting lead to a boom in a standard New Keynesian model (i.e. a disinflationary boom). This finding is robust with respect to various parameterizations and disinflationary experiments. Thus, it differs from previous findings about disinflationary booms under monetary targeting.     

Exploring the distribution of direct payments of the Common Agricultural Policy

Direct payments are the most important expenditure of the Common Agricultural Policy (CAP). They are mostly spent on decoupled direct payments which are intended to be allocatively neutral. Increasing volumes of such transfers imply that distributive aspects of CAP expenditures become more important. This article looks at this issue by calculating various measures of concentration based on statistics on recipients of direct payments in EU27 in the period from 2000 to 2010. The findings are evaluated in the context of the objectives of the CAP and the reform proposals of the EU Commission from October 2011. It seems that country specific factors determine the concentration of direct payments and its change over time.     

Cointegration Testing in Panels with Common Factors*

Panel unit‐root and no‐cointegration tests that rely on cross‐sectional independence of the panel unit experience severe size distortions when this assumption is violated, as has, for example, been shown by Banerjee, Marcellino and Osbat [Econometrics Journal (2004), Vol. 7, pp. 322–340; Empirical Economics (2005), Vol. 30, pp. 77–91] via Monte Carlo simulations. Several studies have recently addressed this issue for panel unit‐root tests using a common factor structure to model the cross‐sectional dependence, but not much work has been done yet for panel no‐cointegration tests. This paper proposes a model for panel no‐cointegration using an unobserved common factor structure, following the study by Bai and Ng [Econometrica (2004), Vol. 72, pp. 1127–1177] for panel unit roots. We distinguish two important cases: (i) the case when the non‐stationarity in the data is driven by a reduced number of common stochastic trends, and (ii) the case where we have common and idiosyncratic stochastic trends present in the data. We discuss the homogeneity restrictions on the cointegrating vectors resulting from the presence of common factor cointegration. Furthermore, we study the asymptotic behaviour of some existing residual‐based panel no‐cointegration tests, as suggested by Kao [Journal of Econometrics (1999), Vol. 90, pp. 1–44] and Pedroni [Econometric Theory (2004a), Vol. 20, pp. 597–625]. Under the data‐generating processes (DGP) used, the test statistics are no longer asymptotically normal, and convergence occurs at rate T rather than as for independent panels. We then examine the possibilities of testing for various forms of no‐cointegration by extracting the common factors and individual components from the observed data directly and then testing for no‐cointegration using residual‐based panel tests applied to the defactored data.