Bayesian estimation of an extended local scale stochastic volatility model

A new version of the local scale model of Shephard (1994) is presented. Its features are identically distributed evolution equation disturbances, the incorporation of in-the-mean effects, and the incorporation of variance regressors. A Bayesian posterior simulator and a new simulation smoother are presented. The model is applied to publicly available daily exchange rate and asset return series, and is compared with t-GARCH and Lognormal stochastic volatility formulations using Bayes factors.     

Global Income Divergence, Trade, and Industrialization: The Geography of Growth Take-Offs

This article formalizesthe theoretical interconnections among four post–industrialrevolution phenomena—the industrialization and growth take-offof rich northern nations, massive global income divergence, andrapid trade expansion. In stages-of-growth model, the four phenomenaare jointly endogenous and are triggered by falling trade costs.In the first growth stage (with high trade costs) industry isdispersed internationally, and growth is low. In the second (mediumtrade costs), the North industrializes rapidly, growth take-off,and the South diverges. In the third (low trade costs), highgrowth and global divergence become self-sustaining. In the fourthstage, when the cases of ``trading' ideas decreases, the Southquickly industrializes and converges.     

Geo-Logics of Power: Disaster Capitalism,Himalayan Materialities,and the Geopolitical Economy of Reconstruction in Post-Earthquake Nepal

ABSTRACT

The 2015 earthquakes in Nepal killed more than 9,000 people, displaced millions of people and deeply affected the economy. The earthquakes and reconstructions processes also transformed Nepal into a complex terrain of geoeconomic accumulation and geopolitical manoeuvring, including major international capital flows, the promulgation of a new constitution, an economic blockade by India and the expansion of trade corridors with China. Building on critiques of ‘disaster capitalism’, we propose and mobilize the concept of ‘geo-logics of power’ to draw further attention to the materialities of geopolitical and geoeconomic processes shaping reconstruction in post-earthquake Nepal. Focusing on two trans-Himalayan corridors connecting Nepal and China, we argue that the Nepal experienced a particular form of disaster capitalism: one in which the geo-logics of power – including trans-Himalayan discourses, practices, and materialities – came to shape political and economic transformations of a country long portrayed as a ‘buffer’ state between Indian and China. More broadly, we suggest that geo-logics of power result from a combination of geopolitical and geoeconomic power dynamics informed by geological formations and associated socio-natural processes.     

The Incentives for North-South Transfer of Climate-Mitigation Technologies with Trade in Polluting Goods

The need to transfer climate mitigation technologies towards the developing world has been acknowledged since the beginning of climate negotiations. Little progress has however been made, as shown by Article 10 of the Paris Agreement. One reason is that these technologies could become vital assets to compete on global markets. This paper presents a partial equilibrium model with two regions, the North and the South, and imperfect competition in the international polluting goods market, to analyze the North’s incentives to accept technology transfer. Results crucially depend on the existence of environmental cooperation. When both northern and southern governments set emission quotas non-cooperatively, inducing fewer global emissions is a necessary, but not sufficient condition for the North to accept the transfer. In contrast, when governments set quotas cooperatively, the North has no incentive to share its technology either before or after the agreement. Technology transfer commitments may be included in the agreement, but with no effect on global emissions and global surplus. The only impacts are distributional, technology transfers and side payments may be substitute instruments.     

Takeover deterrents and cross partial ownership: The case of golden shares

We analyse takeovers in an industry with bilateral capital‐linked firms in cross partial ownership (CPO). Before merger, CPO reduces the profitability of involved firms, confirming the “outsider effect.” However, the impact of CPO upon merger profitability is two‐sided in a Cournot setting. CPO, by cointegrating profits, increases output collusion leading to anticompetitive effects with facilitated mergers in most cases. Nonetheless, a protective threshold exists for which CPO arrangements can reduce the incentives for hostile takeovers. This has potentially significant regulatory implications. An illustrative example showcases the potential relevance of CPO as a defence against hostile takeovers across different industries.     

Intergenerational Altruism and the Environment

We construct an overlapping generations model of pollution externality in which individuals are altruistically linked to their offspring as in Barro (1974). It is shown that steady-state consumption may be a decreasing function of the intergenerational degree of altruism. Despite individuals' altruism, the competitive equilibrium is not optimal. We thus study the social optimum and show that it can be decentralized.
JEL classification: D 62; D 64; D 91     

Revisiting games of incomplete information with analogy-based expectations

This paper studies the effects of analogy-based expectations in static two-player games of incomplete information. Players are assumed to be boundedly rational in the way they forecast their opponent's state-contingent strategy: they bundle states into analogy classes and play best-responses to their opponent's average strategy in those analogy classes. We provide general properties of analogy-based expectation equilibria and apply the model to a variety of well known games. We characterize conditions on the analogy partitions for successful coordination in coordination games under incomplete information [Rubinstein, A., 1989. The electronic mail game: Strategic behavior under ‘almost common knowledge’. Amer. Econ. Rev. 79, 385–391], we show how analogy grouping of the receiver may facilitate information transmission in Crawford and Sobel's cheap talk games [Crawford, V.P., Sobel, J., 1982. Strategic information transmission. Econometrica 50, 1431–1451], and we show how analogy grouping may give rise to betting in zero-sum betting games such as those studied to illustrate the no trade theorem.     

Buy or wait,that is the option: the buyer's option in sequential laboratory auctions

We report results from an experiment on two‐unit sequential auctions with and without a buyer's option (which allows the winner of the first auction to buy the second unit). The four main auction institutions are studied. Observed bidding behavior is close to Nash equilibrium bidding in the auctions for the second unit, but not in the auctions for the first unit. Despite these deviations, the buyer's option is correctly used in most cases. The revenue ranking of the four auctions is the same as in single‐unit experiments. Successive prices are declining when the buyer's option is available.     

Covered arbitrage margin and transaction costs

Zusammenfassung Gedeckte Arbitragemarge und Transaktionskosten. — Dieser Aufsatz untersucht die Rolle der Transaktionskosten bei der Erkl?rung der beobachteten Abweichungen von der gedeckten Zinsparit?t zwischen den amerika-nischen und britischen Schatzwechseln im Rahmen des gegenw?rtigen Systems be-grenzt floatender Wechselkurse. Nach einer kritischen Betrachtung der von Frenkel und Levich erarbeiteten Methode, die relevanten Transaktionskosten zu sch?tzen, wird eine alternative Methode vorgeschlagen, wobei deren Hinweis aufgenommen wird, die Informationen zu nutzen, die sich aus den Abweichungen von der Dreiecks-oder geographischen Wechselkursarbitrage ergeben. Die so ermittelten Sch?tzungen gehen in eine Regressionsanalyse ein, aus der sich ergibt, da die Transaktionskosten eine signifikante Auswirkung auf die gedeckte Arbitragemarge haben, obwohl sie deren Umfang in dem untersuchten Fall nicht voll erkl?ren.

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Résumé La marge d’arbitrage à couvert et les frais de transaction. — Cet article explore le r?le des frais de transaction comme facteur explicatif pour les déviations observées de la parité d’intérêt couverte entre bons du Trésor du Royaume Uni et des Etats-Unis sous le régime actuel des taux de change flottants dirigés. Après une revue critique de la méthode suggérée par Frenkel et Levich pour estimer les frais de transaction d’importance nous proposons une méthode alternative en exploitant de plus leur suggestion d’utiliser l’information donnée par les déviations d’arbitrage triangulaire ou géographique sur les taux de change. Puis nous procédons à utiliser nos estimations dans une analyse de régression qui nous mène à la conclusion que les frais de transaction ont un effet signifiant sur la marge d’arbitrage à couvert bien qu’ils ne l’expliquent pas complètement dans le cas analysé.

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Resumen Márgen de arbitraje cubierto y costos de transaction. — En estel artículo se investiga el rol de los costos de transactión como explicatión para las desviaciones observadas de la tasa de interés de paridad cubierta entre valores del Reino Unido y los EEUU bajo el régimen presente de tasas de cambio flotantes manejadas. Después de una revisión crítica del método desarrollado por Frenkel y Levich para estimar los costos de transacción relevantes, proponemos un método alternativo explotando más aún la sugerencia de usar la información provista por las desviaciones del arbitraje triangular o geográfico sobre las tasas de cambio. Entonces procedemos a usar nuestras estimaciones en un análisis de regresión que nos lleva a la conclusion, que lós costos de transacción tienen un efecto significativo sobre el márgen de arbitraje cubierto, a pesar de que ellas no dan cuenta totalmente de su tama?o en el caso bajo análisis.