HOUSING DYNAMICS OVER THE BUSINESS CYCLE

Housing construction, measured by housing starts, leads GDP in a number of countries. Measured as residential investment, the lead is observed only in the United States and Canada; elsewhere, residential investment is coincident. Variants of existing theory, however, predict housing construction lagging GDP. In all countries in the sample, nominal interest rates are low ahead of GDP peaks. Introducing long‐term nominal mortgages, and an estimated process for nominal interest rates, into a standard model aligns the theory with observations on starts, as mortgages transmit nominal rates into real housing costs. Longer time to build makes residential investment cyclically coincident.     

The information content of a limit order book: The case of an FX market

In this paper we examine the question of whether knowledge of the information contained in a limit order book helps to provide economic value in a simple trading scheme. Given the greater information content of the order book, over simple price information, it might naturally be expected that the order book would dominate. Using Dollar Sterling tick data, we find that despite the in-sample statistical significance of variables describing the structure of the limit order book in explaining tick-by-tick returns, they do not consistently add significant economic value out-of-sample. We show this using a simple linear model to determine trading activity, as well as a model-free genetic algorithm based on price, order flow, and order book information. We also find that the profitability of all trading rules based on genetic algorithms dropped substantially in 2008 compared to 2003 data.     

International spillovers of ECB’s unconventional monetary policy: the effect on Central Europe

We examine how unconventional monetary policy of the European Central Bank (ECB) influences macroeconomic stability in three Central European economies. We estimate various panel vector autoregressions (PVARs) using monthly data from 2008 to 2014. Using the shadow policy rate and central bank assets as measures of unconventional policies, we find that output growth and inflation in Central Europe temporarily increase following an expansionary unconventional monetary policy shock by the ECB. Using both impulse responses and variance decompositions, we find that the effect of unconventional policies on output growth is much stronger than the effect on inflation.     

WTO negotiations on agriculture and the distributional impacts for US rice farm households

The policies of wealthy countries have proven the most difficult to reform in the WTO Doha Round negotiations. Considerable emphasis has been placed on developing country impacts, but a gap in the literature remains on the stakes for rich country farmers despite the large role these countries play in global agricultural protection. The research here considers the particular case of US rice households and their sensitivity to Japanese market access reform. Using an applied general equilibrium model with multiple farm households we highlight the distributional impacts among these producers. We argue that concessions to Japan on market access make domestic reforms in rice a difficult political sale in the US since the wealthiest producers bear the largest losses. Improving our understanding of the distributional impacts and political realities of the richest countries is critical to informing the negotiating process because the gains to the world’s poor can only be realized with creative policy redress in these rich nations.     

Structural change and global value chains in the EU

Manufacturing activity in the EU is increasingly concentrated in a Central European (CE) manufacturing core implying divergent paths of structural change across Member States. This ‘manufacturing divide’ within Europe coincides with deepening economic integration in general and the emergence of global value chains (GVCs) in particular. Focusing on the manufacturing sector this paper investigates the relationship between structural change and integration into GVCs in EU Member States over the period 1995–2011. The empirical findings suggest a non-linear relationship between the two phenomena: members of the CE manufacturing core benefit from participation in GVCs in terms of structural change towards manufacturing, whereas in other EU Member States GVC participation, if anything, accelerates the deindustrialisation process.     

Accounting for population exposure to vehicle-generated pollutants and environmental equity in the toll design problem

The emissions generated by motor vehicles remain a major source of air pollutants that affect public health and contribute to anthropogenic climate change. These negative externalities can be reduced, in part, with the implementation of environmentally oriented road pricing schemes, which can be designed using optimization-based approaches. In this paper, a toll design problem is proposed for determining toll locations and levels that minimize the expected human exposure to air pollutants and the related environmental inequalities, subject to constraints on pollutant concentration levels and implementation costs. The practical use of the proposed problem is hindered in most real-world applications by the computational costs associated with the evaluation of candidate solutions, as is common for network design problems. Furthermore, the problem cannot be expressed analytically given the multiple types of models (e.g., traffic assignment, emissions, air dispersion models) that would be required to evaluate a single design alternative. For these reasons, a derivative-free surrogate-based solution algorithm is proposed for mixed integer problems like the ones considered here. Numerical examples are used to illustrate possible applications of the proposed model and to test the performance of the surrogate-based algorithm. Relative to a joint simulated annealing-genetic algorithm heuristic and a genetic algorithm-based approach, the proposed algorithm found better solutions in fewer function evaluations.