Monetary Policy Rules for a Small Open Economy

In this paper, the optimal choice of a monetary target is investigated for a small open economy that is subject to foreign monetary policy shocks. In contrast to large parts of the literature, pegging the exchange rate is never the best policy choice for the small open economy in our model. Instead, monetary targeting and, depending on the parameter combination, producer price index targeting come closest to the optimal policy rule in terms of welfare. Generally, the welfare performance of the simple targeting rules under consideration hinge critically on the degree of pass-through in the home economy and in the rest of the world.     

Internalizing intergenerational externalities by regionalization

The emission of long-lived pollutants and public debt policies are related by the joint problem of intergenerational externalities. This paper examines both phenomena from the local perspective, in a model with interregional household mobility. We conclude that local environmental agencies have incentives to internalize all intergenerational pollution externalities, provided all rents of immobile production factors, including waste emissions, are appropriated by the regions. Contrary to widespread belief, however, neutrality of local public debt is not guaranteed in general. Shifts in the intertemporal pattern of local taxes change the net wealth of local property owners if distortionary residence-based taxes are imposed to service the local debt.     

Collaborative innovation and policy support: the emergence of trilateral networks

ABSTRACT

The present article models the critical factors for a successful and evolutionarily stable National System of Innovation. We simulate a model, against the background of increasingly complex technologies, in a national process of agents’ interactions with social-dilemma characteristics. In particular, the articleinvestigates the emergence of a trilateral collaborative innovation alliance among ‘enterprise’, ‘university’ and ‘government’. We apply a tripartite evolutionary game with a replication process and explore the role and options of the public policy agent to support collaboration on innovation. We find that some policy mix, in particular, a combination of (1) public rewards for cooperation, (2) public punishment for non-cooperation and (3) settings of public cost controls and tax income from innovation, can promote broad and sustainable innovation alliances. For instance, threats of strong punishment, even with low public rewards for cooperation, may promote the formation of a collaborative innovation alliance. We run some sensitivity analyses of the results through parametric variation of two critical factors of the model, knowledge spillover and output elasticity of knowledge input. We find some qualifications for the velocity of the process.     

Fisheries Management Under Cyclical Population Dynamics

Cycles in environmental conditions (e.g., sea-surface temperature) directly impact fish growth. This paper extends the classical Gordon-Schaefer fishery model by replacing the constant growth rate with a cyclical growth rate. The optimal harvest rate is shown to fluctuate, but the cycle of the harvest rate lags the cycle of the biological growth function with the highest harvest rate occurring after biological conditions start to decline. Simulations contrast various fishing policies and illustrate the proclivity to crash a fishery if it is wrongfully managed as if there is a constant growth rate with i.i.d. environmental shocks. Finally, we show that small cyclical fluctuations in one species can result in large fluctuations in the optimal harvest rate of another species if the fish species are interlinked through predator-prey relationships.      

Budgetpolitische Eigenverantwortung bei rückläufiger Bevölkerungsentwicklung

Demographic change is a particular challenge for fiscal federalism, because the decline of population is expected to affect the various regions within a country unequally. Population growth and shrinkage co-exist, thus requiring both upward and downward adjustments in physical and social infrastructure. A recent report by the Scientific Advisory Board to the German Federal Ministry of Finance discusses the potential implications for the governance of budget policy. The present article reviews this report, which pleads in favour of tight budget constraints and clear-cut fiscal accountability at the local level. Rules have to be enforced which ensure the timely adjustment of local public expenditures to shrinking revenues. The state and federal levels have to protect themselves against the risk of having to bail out those local jurisdictions which have missed or delayed the necessary measures against growing deficits.