Unit roots,interest rate spreads,and inflation forecasts

Recent research suggests that long-term interest rate spreads provide information that can be useful in forecasting inflation, but that the spread between the three-month and six-month Treasury bill rates appears to have little forecasting ability. This paper uses the concepts of unit roots and cointegration to examine the failure of the short-term T-bill spread to forecast inflation. The results suggest that the interest rate spread has little forecasting value because inflation and the interest rate spread exhibit distinctly different time-series properties.     

A QUANTIZATION TREE METHOD FOR PRICING AND HEDGING MULTIDIMENSIONAL AMERICAN OPTIONS

We present here the quantization method which is well-adapted for the pricing and hedging of American options on a basket of assets. Its purpose is to compute a large number of conditional expectations by projection of the diffusion on optimal grids designed to minimize the (square mean) projection error ( Graf and Luschgy 2000 ). An algorithm to compute such grids is described. We provide results concerning the orders of the approximation with respect to the regularity of the payoff function and the global size of the grids. Numerical tests are performed in dimensions 2, 4, 5, 6, 10 with American style exchange options. They show that theoretical orders are probably pessimistic.     

Economic and Social Security: The Role of the EU

This lecture addresses the issue of growing inequality of labour incomes in the EU. In this lecture, it is observed that through higher unemployment at downward rigid wages, the market position of low-skilled workers has deteriorated over the past quarter-century in Western Europe and that European countries have failed to develop an efficient instrument of income insurance on behalf of low-skilled workers. Wage subsidies are such an instrument. Furthermore, it is argued that labour market integration in an economic union like the EU entails externalities, resulting in underprovision of insurance and that coordination or matching grants could overcome this second inefficiency. On these empirical and theoretical grounds, this article proposes the organisation at EU level of a scheme of matching grants for low-skilled labour, whereby a share of national wage subsidies to low-skilled labour would be financed by the EU under suitable funding.     

An empirical model of the multi‐unit,sequential, clock auction

We construct a model of participation and bidding at multi‐unit, sequential, clock auctions when bidders have multi‐unit demand. We describe conditions sufficient to characterize a symmetric, perfect‐Bayesian equilibrium and then demonstrate that this equilibrium induces an efficient allocation. We propose an algorithm, based on the generalized Vickrey auction, to calculate the expected winning bid for each unit sold. This algorithm allows us to construct a simulation‐based estimator of the parameters for both the participation process and the distribution of latent valuations. We apply our method to data from 37 multi‐lot, sequential, English auctions of export permits for timber held in Russia. Copyright © 2006 John Wiley & Sons, Ltd.     

Federal mandates with local agenda setters

This paper investigates the effect of local monopoly agenda setting on federal standards. Federal standards specify a minimum (or maximum) point in policy space which can be raised (or lowered) by local option. Without local agenda setters, this creates incentives for nonmajoritarian outcomes, with a tendency for policies to be too high (low). Local agenda setters may have incentives to distort these outcomes even further. We demonstrate that federal standards can counterbalance the distortions of local agenda setters. We wish to thank LEESP, CNRS, and NSF for financial support. The paper has benefitted from helpful comments by Andy Postlewaite, Howard Rosenthal, Norman Schofield, and an anonymous referee.     

Variation in productive efficiency in French workers' cooperatives

In this study, we explore the distribution of productive efficiency among workers' cooperatives operating in each of four sectors of French manufacturing. We use stochastic frontier panel data techniques to estimate production relationships in each sector, and to decompose output variation into input variation, variation in the effects of two indicators of the degree of worker participation in management, variation in productive efficiency, and an unexplained residual. In all four sectors we find that conventionally measured capital and labor inputs make a significant contribution to productivity. In only one sector do participation indicators contribute significantly. Variation in productive efficiency contributes significantly in all four sectors.Earlier versions of this article were presented at the ORSA/TIMS Joint National Meeting in Philadelphia, PA, October 1990, and at the Allied Social Science Associations meetings in Washington, DC, December 1990. Helpful comments from discusants at both meetings, and from two good referees, are gratefuly acknowledged, as is financial support of AUPELF and the UNC University Research Council.