Non-market valuation of forest goods and services: Good practice guidelines

The European COST Action E45 on European Forest Externalities (EUROFOREX) participants developed a set of good practice guidelines for the non-market valuation of forests, elaborating on stated and revealed preference methodologies, as well as benefit transfer and meta-analytical procedures. This article presents a summary of the guidelines.     

Euro vs Dollar: An Improbable Threat

Ever since the setting up of the EMU, many scholars have argued that the Euro will take its place alongside the dollar and perhaps even replace it as international money. The theory behind this point of view is represented by search-theoretic models. The fundamental shortcoming of the traditional version of these models is that they fail to make a distinction between different types of money, in particular between commodity money and fiduciary money. In the international context a fiduciary money can be accepted only when a political exchange is possible between a leading country which has an interest in producing trust in the future value of its currency and other countries which attach no importance to the relative gains the issuing country acquires by exploiting the privilege of seigniorage. The Bretton Woods system and the dollar standard, although based on fiduciary monies, have worked thanks to the institutional framework maintained by the United States and accepted by other countries. Unlike the United States, the euro area is not in a position to exercise any form of political leadership on the international scene. As things stand the euro does not represent a threat to the dollar and it is bound to remain a regional money.     

A Backward Induction Experiment

This paper reports experiments with one-stage and two-stage alternating-offers bargaining games. Payoff-interdependent preferences have been suggested as an explanation for experimental results that are commonly inconsistent with players' maximizing their monetary payoffs and performing backward induction calculations. We examine whether, given payoff-interdependent preferences, players respect backward induction. To do this, we break backward induction into its components, subgame consistency and truncation consistency. We examine each by comparing the outcomes of two-stage bargaining games with one-stage games with varying rejection payoffs. We find and characterize systematic violations of both subgame and truncation consistency. Journal of Economic Literature Classification Numbers: C70, C78.     

Positional learning with noise

We propose (and test experimentally) a model of observational learning in which players have social preferences. To this end, we design an experiment–based on a classic parlor game known as the Chinos Game–in which we vary (by way of an exogenous iid stochastic process) the probability of getting the prize in the event of a correct guess. By this design, we are able to estimate more efficiently players’ sensitivity to difference in payoffs (and how this sensitivity affects information decoding along the sequence). We also condition our estimates upon additional information on subjects’ socio-demographics, risk attitudes and cognitive reflection by way of a questionnaire that we collect at the end of each session.     

A search model for Joint Implementation

The aim of this paper is to present a search model in the field of environmental economics, where so-called clean and dirty producers enter the trading market, both looking for a partner with whom to exchange the goods they are endowed with. The model derived in this paper is rather simple. Nevertheless, it is able to produce a series of interesting results and useful insights, and is conveniently used here as a framework to explain the functioning of Joint Implementation programs for polluting emissions＇ reduction.     

Price rigidity, the mark–up, and the dynamics of the current account

The degree of competition affects the current account response to nominal shocks. The mechanism hinges on the relationship between the mark–up and the degree of real rigidity of prices. In a model with intermediate goods, the degree of real rigidity increases in the mark–up. A weaker response of prices to nominal shocks strengthens the 'expenditure switching' effect of the devaluation to the benefit of the current account. We analyse the relationship between the mark–up and the real rigidity in a simple closed economy model and show numerically how the mark–up can affect the response of the current account to monetary shocks in an open economy. JEL Classification: F32, E32
Rigidité des prix, marges bénéficiaires et la dynamique du compte courant. Ce mémoire montre que le degré de concurrence affecte la réaction du compte courant aux chocs nominaux. Le mécanisme dépend de la relation entre la marge beńéficiaire et le degré de rigidité réelle des prix. Dans un modèle qui prend en compte les biens intermédiaires, le degré de rigidité réelle des prix s'accroît avec la marge bénéficiaire. Une réponse plus faible des prix aux chocs nominaux renforce l'effet de « déplacement de la dépense >> de la dévaluation au bénéfice du compte courant. On analyse d'abord la relation entre la marge bénéficiaire et la rigidité réelle des prix dans un modèle simple d'économie fermée. On montre ensuite en chiffres comment la marge bénéficiaire peut affecter la réaction du compte courant aux chocs monétaires.     

Growth at the EU periphery: the next enlargement

In 2004, 75 million people are scheduled to become EU citizens, making this the largest round of expansion of the Western European club to date. Of the 10 new entrants, 8 are former socialist economies, for which membership in the EU represents the coronation of an effort began with the fall of the Berlin wall in 1989. Based on their recent economic performance, the Central and Eastern European countries appear to be well on their way to successfully integrate in the Western European club, while the Baltic Republics still lag behind. The gap between the two groups emerges when we consider the adjustment of the production structure, the composition of trade and FDI flows, and income distribution. The evidence we review appears to support the role of institutional quality to facilitate integration in the world market and overall economic performance.     

Calibrating spatial models of trade

Empirical spatial models of trade that are based on a mathematical programming specification often exhibit a large discrepancy between the equilibrium solution and the observed demand, supply and levels of trade flows among countries. This discrepancy may be due to several causes. Assuming, however, that a trade model is not misspecified – in the sense that behavior of the economic agents involved in the specific commodity markets has been included in the study and that the relevant policy instruments have been properly taken into account – the cause of discrepancy may be traced either to imprecision of unit transaction costs or to imprecision in the measurement of the demand and supply functions' parameters, or both. Policy assessments based on this type of imprecise models are distorted. This paper presents a methodology for calibrating mathematical programming spatial trade models of increasing complexity, from the one-commodity case to a multi-commodity model with asymmetric slope matrices of demand and supply functions. The proposed calibration procedure identifies corrections of imperfectly measured parameters. The calibrated models generate solutions that exactly reproduce quantities produced and consumed in all countries, as well as trade flows among all pairs of countries, observed in a given base year. Such models may then serve as a springboard for assessing the impact of various policy changes on economic agents in the countries under study.