Economic performance and “frontier” efficiency: A product life-cycle approach

We propose to introduce some economic performance variables of the firms and relate these with the corresponding frontier efficiency measures of 13 industries of the Belgian manufacturing sector in 1978. In order to find groups of similar firms by applying a cluster technique, we assume that this relationship is of a product life cycle nature.In the light of the product life cycle scheme itself and variations of it we can consider the possible explanatory variables of technical inefficiency in each group of firms as sources which intensify or slow-down the economic performance of the firm under consideration. Some cautious characterization of the top and bottom level clusters is formulated and linked to the efficiency issue.This paper was processed by N. R. Adam     

Risky public domestic debt composition in emerging economies

This paper explains why public domestic debt composition in emerging economies can be risky, namely in foreign currency, with a short maturity or indexed. It analyses empirically the determinants of these risk sources separately, developing a new large dataset compiled from national sources for 33 emerging economies over 1994–2006. The paper finds that economic size, the breadth of the domestic investor base, inflation and fiscal soundness are all associated with risky public domestic debt compositions, yet to an extent that varies considerably in terms of magnitude and significance across sources of risk. Only inflation impacts all types of risky debt, underscoring the overarching importance of monetary credibility to make domestic debt compositions in emerging economies safer. Given local bond markets' rapid development, monitoring risky public domestic debt compositions in emerging economies becomes increasingly relevant to global financial stability.     

Risk aversion,prudence and temperance: An experiment in gain and loss

We characterize the individual's attitude towards risk, prudence and temperance in the gain and loss domains. We analyze the links between the three features of preferences for a given domain and between domains for each feature of preferences. Consequently, the reflection effect, the mixed risk aversion and the risk apportionment, are key concepts of our study. We also display some determinants for risk aversion, prudence and temperance in each domain. To do this, we conducted a lab experiment with students eliciting risk aversion, prudence and temperance in the two domains, and collected information about each subject's characteristics.     

FINANCIAL SAFETY NETS

We study the optimal design of financial safety nets under limited private credit, asking whether and when it is optimal to restrict ex ante the set of investors that can receive public liquidity support. When the government lacks commitment, we show that the optimally designed safety net covers only a subset of investors. Compared to an economy where all investors are protected, this results in more liquid portfolios, better social insurance, and higher welfare. Our results can rationalize the prevalence of limited safety nets as well as the coexistence of traditional and shadow banks.     

Modelling risk premia in CO2 allowances spot and futures prices

This article analyzes the modelling of risk premia in CO₂ allowances spot and futures prices, valid for compliance under the EU Emissions Trading Scheme (EU ETS). Similarly to electricity markets, a salient characteristic of CO₂ allowances is that the theory of storage does not hold, as CO₂ allowances only exist on the balance sheets of companies regulated by the scheme. The main result features positive time-varying risk premia in CO₂ spot and futures prices, which are strictly higher for post-2012 contracts (€6–9/ton of CO₂) than for Phase II contracts (€0–6/ton of CO₂). Contrary to Benth et al.'s (2008) for electricity markets, a positive relationship between risk premia and time-to-maturity is found in the EU ETS. As for relative differences between CO₂ futures and spot prices, CO₂ futures traded between + 1% (December 2008 contract) and + 33% (December 2014 contract) above spot prices during February 2008–April 2009. Contrary to Bessembinder and Lemmon (2002) for the electricity market, a positive relationship between risk premia and the variance/skewness of CO₂ spot prices is found. The futures-spot bias to the EU ETS explains around 1–6% of the variance of CO₂ futures premia.     

Volatility equicorrelation: A cross-market perspective

This paper contains the first empirical application of the Dynamic Equicorrelation (DECO) model to a cross-market dataset composed of equities, bonds, foreign exchange rates and commodities during 1983–2013. The originality of our approach consists of examining the volatility equicorrelations, by updating the concept of ‘volatility surprise’. We document that the average volatility equicorrelation across markets is around 15%, while being time-varying with regime shifts before/after September 2005 and with a low mean-reversion level.     

Conjectural variations, symmetric equilibria and economic policy

In this paper, we consider conjectural variations in a simple static general equilibrium model under oligopolistic competition. The modeling of conjectures captures the role played by beliefs in a micro-founded model. So, the economy may have three kinds of symmetric general equilibria. Furthermore, these equilibria can be Pareto-ranked by the conjectural variation parameter. Finally, we consider the implementation of a tax on the strategic behaviors in case of balanced-budget rule. The comparative statics illustrates the idea according to which the effectiveness of the multiplier mechanism to mitigate the market distortions depends on the symmetric equilibrium considered. Therefore, the effect of the tax on the prices and economic activity depends on the degree of market power which is conjectured by the agents.     

Time-varying correlations in oil,gas and CO2 prices: an application using BEKK,CCC and DCC-MGARCH models

Previous literature has identified oil and gas prices as being the main drivers of CO₂ prices in a univariate Generalized Autoregressive Conditional Heteroscedasticity (GARCH) econometric framework (Alberola et al., 2008; Oberndorfer, 2009). By contrast, we argue in this article that the interrelationships between energy and emissions markets shall be modelled in a Vector Autoregressive (VAR) and Multivariate GARCH (MGARCH) framework, so as to reflect the dynamics of the correlations between the oil, gas and CO₂ variables overtime. Using the Baba–Engle–Kraft–Kroner (BEKK), Constant Conditional Correlation (CCC) and Dynamic Conditional Correlation MGARCH (DCC-MGARCH) models on daily data from April 2005 to December 2008, we highlight significant own-volatility, cross-volatility spillovers, and own persistent volatility effects for nearly all markets, indicating the presence of strong Autoregressive Conditional Heteroscedasticity (ARCH) and GARCH effects. Besides, we provide strong empirical evidence of time-varying correlations in the range of [?0.3;?0.3] between oil and gas, [?0.05;?0.05] between oil and CO₂, and [?0.2;?0.2] between gas and CO₂, that have not been considered by previous studies. These findings are of interest for traders and utilities in the energy sector, but also for a broader applied economics audience.     

Critical Geopolitics and the 1950s Bomber Gap

In this paper, I outline three main issues that divide classical and critical geopolitics and offer a critique of the latter. The three issues are (1) criticism, (2) the relative importance of discourses vs. materiality/political economy, and (3) the status of knowledge claims (universal or partial). Through this discussion I present my own view, whose central claim is that versions of critical geopolitics relying to a great extent on discursive analysis should pay more attention to political economic factors. True, most studies in critical geopolitics pay attention to the institutional affiliation of political elites, but very few discuss the workings of the political economic system within which policy is formulated. To illustrate my points empirically, I discuss the bomber gap of the 1950s; the gap refers to the alleged fall of the United States behind the Soviet Union in strategic bombers under Eisenhower, a scare that gave rise to influential discourses describing American military inferiority.