Reaping the Fruits of Science: Comparing Exploitations of a Scientific Breakthrough in European Innovation Systems

This paper is an attempt to unpack the emergence and dynamics of science-based technologies in conceptual forms that allow us to understand better when and how the social and economic organization of search and problem-solving matters. The evolution over two decades of a specific science-based technology is mapped with data from its 192 patents. For the five European countries generating the majority of patents, we identify the host organizations of all 275 inventors involved in the R&D behind the patents. Using network analysis we then map the evolution of separate innovation systems and their structural and evolutionary characteristics. The best performing system combines a cumulative pattern with frequent and shifting connections to non-system R&D partners while maintaining a small core of almost omnipresent inventor-organizations. The role of multinational corporations in orchestrating innovation systems is apparent.     

Monetary policy news and exchange rate responses: Do only surprises matter?

We use data from the Federal Funds Futures market to show that exchange rates respond to only the surprise component of an actual US monetary policy change and we illustrate that failure to disentangle the surprise component from the actual monetary policy change can lead to an underestimation of the impact of monetary policy, or even to a false rejection of the hypothesis that monetary policy impacts exchange rates. Unlike the recent contributions to the literature on exchange rates and monetary policy news, our testing method avoids the imposition of assumptions regarding exchange rate market efficiency. We also add to the debate on how quickly exchange rates respond to news by showing that the exchange rates under study absorb monetary policy surprises within the same day as the news are announced.     

Optimal unemployment insurance in an estimated job search model with savings

This paper estimates a job search model with savings on Danish micro data that include observations on wealth and wages. Controlling for extensive observed and unobserved worker characteristics heterogeneity, the estimation relates observed unemployment spells to the model implied hazard rate for each worker. The model estimates are sensible and fit the data well. Optimal UI policy is determined in the estimated model as a trade-off between insurance provision and distortion of search incentives. The analysis emphasizes an important policy sensitivity to the interest rate and the importance of including transitional dynamics in the analysis.     

Research Strategies in Science-based Start-ups: Effects on Performance in Danish and Swedish Biotechnology

Although biotech start-ups fail or succeed based on their research, few attempts have been made to examine if and how they strategise in this core activity. Using a unique comprehensive dataset on Danish and Swedish biotech start-ups in drug discovery this paper adopts a Simonean approach to analysing the research strategies of small dedicated biotech firms (DBFs), focusing on three interrelated issues: (i) characterising the problem architectures addressed by different types of DBFs; (ii) testing and confirming that DBFs form requisite research strategies, by which we refer to problem-solving approaches developed as congruent responses to problem architectures; and (iii) testing and confirming that financial valuation of firms is driven by achievements conforming to requisite research strategies. These strategies, in turn, require a careful combination of multiple dimensions of research. The findings demonstrate that Schoonhoven's argument that 'strategy matters' is valid not only for the larger high-tech firms covered by her study, but also for small research-based start-ups operating at the very well-springs of knowledge where science directly interacts with technologies. Although more research is needed along these lines, these findings offer new implications for the understanding, management and financing of these firms.     

Combining long memory and level shifts in modelling and forecasting the volatility of asset returns

We propose a parametric state space model of asset return volatility with an accompanying estimation and forecasting framework that allows for ARFIMA dynamics, random level shifts and measurement errors. The Kalman filter is used to construct the state-augmented likelihood function and subsequently to generate forecasts, which are mean and path-corrected. We apply our model to eight daily volatility series constructed from both high-frequency and daily returns. Full sample parameter estimates reveal that random level shifts are present in all series. Genuine long memory is present in most high-frequency measures of volatility, whereas there is little remaining dynamics in the volatility measures constructed using daily returns. From extensive forecast evaluations, we find that our ARFIMA model with random level shifts consistently belongs to the 10% Model Confidence Set across a variety of forecast horizons, asset classes and volatility measures. The gains in forecast accuracy can be very pronounced, especially at longer horizons.     

One monetary policy and 18 central bankers: The European monetary policy as a game of strategic delegation

This paper employs a multi-country delegation monetary policy model and argues that a decision-making mechanism based on the median voter theorem where intensity of preferences cannot play a role does not capture important aspects of policy setting in the European Monetary Union. Replacing the median voter mechanism with a less restrictive “weighted mean mechanism”, it is shown that strategic delegation can lead to a surprising degree of central bank inflation aversion. This finding supports the “The Twin Sister Hypothesis” and the perception of the European Central Bank implementing the policy of the Bundesbank rather than a more inflationary monetary policy.     

Sorting by search intensity

In this paper, I characterize matching in an on-the-job search model with endogenous search intensity, heterogeneous workers and firms, and match surplus is shared between workers and firms through bargaining. I provide proof of existence and uniqueness of steady state equilibrium. Given equally efficient matched and unmatched search, the worker skill conditional distribution of firm productivity over matches is stochastically increasing (decreasing) in worker skill if the production function is supermodular (submodular). I also show that this strong notion of sorting does not obtain everywhere for the firm productivity conditional match distribution.     

Asymmetries and state dependence: The impact of macro surprises on intraday exchange rates

This paper investigates the possible asymmetric response of 5-min intraday JPY/USD exchange rates to macroeconomic news announcements during 1999–2006 when the Japanese money market interest rate was effectively zero. This period provides a unique institutional setting when interest rates may rise but not decline, thereby constraining both endogenous policy reactions to news and private market expectations. Asymmetric responses to news, to the extent that they are important in exchange rate markets as they are in equity markets, would seem particularly likely to be evident during this period. We consider several ways asymmetric responses may be manifested and linked to macroeconomic news during this unusual period. We assess whether the intraday exchange rate responds differently depending on whether the news is emanating from Japan or the US; we consider the state of the business cycle; and we distinguish between “good” and “bad” news.