CONSTRUCTING OPTIMAL DENSITY FORECASTS FROM POINT FORECAST COMBINATIONS

Decision makers often observe point forecasts of the same variable computed, for instance, by commercial banks, IMF and the World Bank, but the econometric models used by such institutions are frequently unknown. This paper shows how to use the information available on point forecasts to compute optimal density forecasts. Our idea builds upon the combination of point forecasts under general loss functions and unknown forecast error distributions. We use real‐time data to forecast the density of US inflation. The results indicate that the proposed method materially improves the real‐time accuracy of density forecasts vis‐à‐vis those from the (unknown) individual econometric models. Copyright © 2013 John Wiley & Sons, Ltd.     

Reducing Brazilian greenhouse gas emissions: scenario simulations of targets and policies

This paper aims to evaluate the economic impacts of greenhouse gas emission reduction on the Brazilian economy. To this end, we developed an integrated input–output linear programming model for 2009 using the Supply and Use Tables and emissions data of the Brazilian Ministry of Science and Technology and Innovation. We simulated emissions targets for various potential scenarios in which the adopted policy design took account of sectoral composition in terms of emissions and available production technology. The results were directly affected by the high level of livestock emissions, counterbalancing this sector’s economic importance for Brazil. In the short term, sectoral emissions targets associated with taxation policy or emission permits could be developed in order to create private incentives to mitigate emissions. In this sense, the results also show that different sectoral targets may be able to balance environmental benefits with the possible economic losses incurred by such policies.     

Narrow Replication of Fisman and Miguel's (2007a) ‘Corruption,Norms, and Legal Enforcement: Evidence from Diplomatic Parking Tickets’

This note provides a narrow replication of Fisman and Miguel's (Journal of Political Economy, 2007a; 115 (6): 1020–1048) original findings about estimating negative binomial count models to study corruption practices among United Nations diplomats. We present estimates based on zero‐inflated count models, given the possible presence of excessive zero counts in the dependent variable of the main specifications. Our results confirm Fisman and Miguel's original findings. However, they also suggest the importance of considering distinct generating processes for zero outcomes. We cannot reject hypotheses favoring the use of zero‐inflated negative binomial models over its simpler versions in this context. Copyright © 2016 John Wiley & Sons, Ltd.     

Determining the utility functions of criteria used in the evaluation of real estate

This article presents an application of the UTA method and its variant UTA-CR to determining utility functions for the multicriteria evaluation of residential real estate. Data for the city of Volta Redonda, Brazil, were used in this study. Unlike UTA, UTA-CR makes use of the decision agents’ preferences in relation to a set of criteria to determine a ranking of the alternatives. It was concluded that UTA-CR manages to obtain utility functions closer to the preferences of the decision agents as compared to these that result from the use of UTA. This demonstrates an important advantage of UTA-CR over UTA.     

Social interactions,product differentiation and discontinuity of demand

We propose a discrete choice model of socially interacting consumers choosing between two product variants. The model shows that the discontinuity of demand as well as the demand polarization proposed by Becker (1991), A Note on Restaurant Pricing and Other Examples of Social Influences on Price, depend crucially on the heterogeneity of consumers’ preferences and on the level of product differentiation. When the two products are sufficiently similar, it turns out that the market is shared asymmetrically as suggested by Becker (1991). By contrast, when the products are different and the preferences of the consumers are sufficiently heterogeneous, the market is shared symmetrically as in Hotelling’s (1929) model.     

Critical Success Factors of Brazilian Business Incubators

The main purpose of this study is to determine the Critical Success Factors (CSF) of Brazilian business incubator management and understand how they are structured. These factors are essential to improve the performance of these Brazilian businesses and to strengthening the Brazilian entrepreneurial ecosystem. The strategy used was survey, and the data obtained were analyzed using the statistical technique of Exploratory Factor Analysis. The validated CSF were grouped into seven constructs. Thus far, the literature does not present any article within the scope proposed here. Additionally, the statistical technique used here is applied for the first time in this theme.     

Inequality and the Phases of Capitalism

We live in a capitalist world characterized by economic inequality. Inequality is a real curse, but it does not have to always increase. In different phases of capitalism, it may be increasing, constant, or decreasing, depending on the dominant type of technical progress (capital-using, capital-neutral, or capital-saving), on the organizational capacity of the workers, on the competition from other countries with lower wages, and on the prevailing degree of democracy. But distribution faces an economic constraint: the expected profit rate must remain attractive to business entrepreneurs. From the mid-twentieth century, we would expect technological progress to change from neutral to capital-saving, which would allow wages to increase at a faster rate than productivity. Indeed, this happened in the Golden Years of capitalism, but such progress stalled in the succeeding neoliberal years, dominated as they were by a class coalition of rentier capitalists and financiers.     

The value of switching inputs in a biodiesel production plant

There has been a growing concern in recent years about the quality of the environment and dependence on fossil fuels to supply the world's energy needs, which has created an interest in the development of renewable and less polluting energy sources. One of these alternatives is the biodiesel fuel, which has many advantages over the fossil based diesel, or petro diesel. In this paper we use the real options approach to determine the value of the managerial flexibility embedded in a biodiesel plant that has the option to switch inputs among two different grain commodities. Our results indicate that the option to choose inputs has significant value if we assume that future prices follow stochastic processes such as Geometric Brownian Motion and Mean Reversion Models, and can be sufficient to recommend the use of input commodities that would not be optimal under traditional valuation methods. We also show that the choice of model and parameters has a significant impact on the valuation of this class of projects.     

Further investigation of the uncertain trend in US GDP

The presence of deterministic or stochastic trend in US GDP has been a continuing debate in the literature of macroeconomics. Ben-David and Papell (1995 Ben-David, D and Papell, DH. 1995. The great wars, the great crash, and steady growth: some new evidence about an old stylized. Journal of Monetary Economics, 36: 453–75. [Crossref], [Web of Science ®] , [Google Scholar]) found evidence in favour of trend stationarity using the secular sample of Maddison (1991 Maddison, A. 1991. Dynamics Forces in Capitalist Development: A Long-Run Comparative View, Oxford: Oxford University Press.  [Google Scholar]). More recently, Murray and Nelson (2000 Murray, CJ and Nelson, CR. 2000. The uncertain trend in U.S. GDP. Journal of Monetary Economics, 46: 79–95. [Crossref], [Web of Science ®] , [Google Scholar]) correctly criticized this finding arguing that the Maddision data are plagued with additive outliers (AO), which bias inference towards stationarity. Hence, they propose to set the secular sample aside and conduct inference using a more homogeneous but shorter time-span post-WWII sample. In this article we re-visit the Maddison data by employing a test that is robust against AO's. Our results suggest the US GDP can be modelled as trend stationary process     

Non-monotonic pricing kernel and an extended class of mixture of distributions for option pricing

We derive closed form European option pricing formulae under the general equilibrium framework for underlying assets that have an \(N\) -mixture of transformed normal distributions. The component distributions need not belong to the same class but must all be transformed normal. An important implication of our results is that the mixture of distributions is consistent with a “what appears to be abnormal” non-monotonic (asset specific) pricing kernel for the S&P 500 and that the representative agent has a “logical” monotonic decreasing marginal utility. We show that a mixture of two lognormal distributions is sufficient to produce this result and also implied volatility smiles of a wide variety of shapes.