The Feldstein–Horioka puzzle in Latin American and Caribbean countries: a panel cointegration analysis

In this paper, the recently developed panel unit root and the Pedroni cointegration tests are applied to empirically examine the validity of the Feldstein–Horioka puzzle (F–H puzzle) for a heterogeneous panel of 14 Latin American and five Caribbean countries over the period, 1960–2002. The findings indicate that in these countries, the long-run solvency condition is maintained. Finally, employing the Pedroni panel group FM-OLS estimator (2000, 2001), it is found that the statistically significant estimated savings-retention coefficient for the panel is relatively small indicating that the F–H Puzzle is not valid and thus implying the prevalence of a moderate degree of capital mobility.

An application of nonparametric volatility estimators to option pricing

We discuss the impact of volatility estimates from high frequency data on derivative pricing. The principal purpose is to estimate the diffusion coefficient of an Itô process using a nonparametric Nadaraya–Watson kernel approach based on selective estimators of spot volatility proposed in the econometric literature, which are based on high frequency data. The accuracy of different spot volatility estimates is measured in terms of how accurately they can reproduce market option prices. To this aim, we fit a diffusion model to S&P 500 data, and successively, we use the calibrated model to price European call options written on the S&P 500 index. The estimation results are compared to well-known parametric alternatives available in the literature. Empirical results not only show that using intra-day data rather than daily provides better volatility estimates and hence smaller pricing errors, but also highlight that the choice of the spot volatility estimator has effective impact on pricing.     

The Eisner Puzzle,the Unemployment Threshold and the Range of Equilibria

Using a two-regime model of the inflation-unemployment process for US data 1960:2 to 2000:2, this paper finds strong evidence to support the Eisner puzzle, which occurs when the short-run Phillips curve (SRPC) is flatter at low rates of unemployment than at higher rates. The puzzling aspect of this pattern is the expectation of excess demand to become apparent at very low rates of unemployment causing the SRPC to be steep rather than fairly flat. We show the puzzle can be resolved by estimating a three-regime model which reveals a steep SRPC at very low rates of unemployment. The estimates of the three regime model also reveal a horizontal SRPC at intermediate rates of unemployment, implying the existence of a range of equilibrium rates of unemployment at those intermediate rates.

Fiscal consolidation with high growth: A policy simulation model for India

In this paper a fiscal consolidation program for India has been presented based on a policy simulation model that enables us to examine the macroeconomic implications of alternative fiscal strategies, given certain assumptions about other macro policy choices and relevant exogenous factors. The model is then used to estimate the outcomes resulting from a possible strategy of fiscal consolidation in the base case. The exercise shows that it is possible to have fiscal consolidation while at the same time maintaining high GDP growth of around 8% or so. The strategy is to gradually bring down the revenue deficit to zero by 2014–15, while allowing a combined fiscal deficit for centre plus states of about 6% of GDP. This provides the space for substantial government capital expenditure, which translates to a significant public investment program. This in turn leads to high overall investment directly and indirectly, via the crowding in effect on private investment, which drives the high GDP growth. The exercise has also tested the robustness of this strategy under two alternative scenarios of higher and lower advanced country growth compared to the base case.     

CIVIL WAR EXPOSURE AND VIOLENCE

In recent years scholars have begun to focus on the consequences of individuals' exposure to civil war, including its severe health and psychological consequences. Our innovation is to move beyond the survey methodology that is widespread in this literature to analyze the actual behavior of individuals with varying degrees of exposure to civil war in a common institutional setting. We exploit the presence of thousands of international soccer (football) players with different exposures to civil conflict in the European professional leagues, and find a strong relationship between the extent of civil conflict in a player's home country and his propensity to behave violently on the soccer field, as measured by yellow and red cards. This link is robust to region fixed effects, country characteristics (e.g. rule of law, per capita income), player characteristics (e.g. age, field position, quality), outliers, and team fixed effects. Reinforcing our claim that we isolate the effect of civil war exposure rather than simple rule breaking or something else entirely, there is no meaningful correlation between our measure of exposure to civil war and soccer performance measures not closely related to violent conduct. The result is also robust to controlling for civil wars before a player's birth, suggesting that it is not driven by factors from the distant historical past.     

Cycle and Trend in Models of the Range of Equilibria

This paper investigates the potential of models of the range of equilibria to yield a pattern of equilibrium rates of unemployment that is consistent with the observed mix of cycle with no trend in the rate of unemployment. To do this the paper considers a model in which wages are determined by a group of unionised insiders bargaining with an employer. In the model the supply of labour is endogenous. Specifications of the utility function are found which are consistent with the mix of cycle and no trend in the rate of unemployment. Of these it is concluded that loss aversion in the evaluation of wage relativities is a crucial ingredient for models of the range of equilibria.     

Outcomes from use of an evidence-based practice guideline

The aim of evidence-based guidelines is primarily to improve patient outcomes without adding to the existing cost of care because both payers and policymakers want to identify health care costs that do not result in benefit to the patient. The purpose of the reported project was to generate a practice guideline for the treatment of uncomplicated acute cystitis in a female population, to determine the extent to which the guideline would be used by providers and to measure the cost and quality of outcomes from its use. A retrospective chart review was used to gather pre-guideline practice and cost data. Measurements included the type, frequency, and duration of antibiotic therapy and the use of urine cultures and both complications and routine followup visits. The implementation of an outpatient practice guideline resulted in a significant change in antibiotic prescribing and a trend toward a change in ordering cultures and clinic followup. There was also a significant decrease in treatment costs.     

A New Approach to Gravity Anomaly Separation: Differential Markov Random Field (DMRF)

In this paper the authors introduce a novel approach to stochastic image processing, denoted as Differential Markov Random Field (DMRF), which has been applied to gravity anomaly separation problems. The advantages of the method are that it introduces only little distortion into the shape of the original image and that it is not affected significantly by factors such as the overlap power spectra of regional and residual fields. Testing of the proposed meth using synthetic examples gave excellent results.     

Rates of Return to Schooling in China

This study uses data from a 1988 survey of Chinese individuals to estimate rates of return to schooling in China. The Mincer-type rate of return to schooling was estimated at 4.02 percent in the rural areas and 3.29 percent in the urban areas; these are fairly low estimates compared with similar estimates in other countries. The rate of return to schooling for females was significantly higher than that for males in urban areas. In addition, members of the Communist Party in urban areas had significantly lower returns to schooling compared with non-members.     

Suspending disbelief: Influencing engagement in scenarios of forest futures

Scenario analysis is an approach to long-term planning that informs decision-making in contexts of highly uncertain future conditions. Scenario-based studies are rapidly growing in popularity, yet many aspects of the method are not fully understood. Participants' willingness to suspend disbelief in possible futures is an integral component of scenario-based studies, essential for considering alternative future scenarios, yet little is known about the factors that affect it. Participation in a scenario project does not necessarily imply willingness or ability to suspend disbelief; participants may not suspend disbelief simply upon request. However, the scenario literature says little about the aspects of scenario-based studies that influence suspension of disbelief.This article explores the factors that influenced the suspension of disbelief in one scenario exercise about the future of Canada's forests. Participants differed in their abilities to suspend disbelief in the scenarios in part because of their past experiences and expertise in particular areas, and their assessments of probable and desired future outcomes. Elements of the project design and implementation influenced participants' abilities to engage the scenarios. The results have implications for those interested in using scenarios for helping people and communities envision possible - and sustainable - futures.