Volatility and stock price indexes

The stochastic approach to index numbers has been successfully applied to the estimation of inflation, the world interest rate and international competitiveness.?One distinct advantage of this approach is that it provides the whole distribution of the index, not simply one value. In this article, we extend the stochastic approach to the estimation of a stock market index. We demonstrate how this approach can be used to identify ‘redundant stocks’ that do not contribute significantly to the overall index.?For index tracking purposes, these stocks can be safely excluded.     

The heterogeneity of carbon Kuznets curves for advanced countries: comparing homogeneous,heterogeneous and shrinkage/Bayesian estimators

We investigate Carbon Kuznets Curves (CKC) relationships for advanced countries grouped in policy relevant groups – North America and Oceania, South Europe, North Europe – by means of various homogeneous, heterogeneous and shrinkage/Bayesian panel estimators. We try to provide an answer to the question ‘how sensitive are the CKC estimates to changes in the level of parameters' heterogeneity?’. We do find that in coherence with their ‘policy and economic’ commitment to carbon reductions and environmental market-based instruments implementation, bell shapes are present only for northern EU, which leads the group of advanced countries. The other two lag behind. We show for the first time that CKC shapes are present if we net out Europe of the southern and less developed countries. This is coherent with the Kuznets paradigm. The negative side of the tale is that they characterize a bunch of few countries. Other advanced countries lag behind and are far from reaching a CKC dynamics. Heterogeneous and Bayesian estimators clearly show this, with the EU presenting turning points closely around $13?000 per capita Gross Domestic Product (GDP). Heterogeneous panel estimates also show that for lagging countries presumed bell shapes turn into linear relationships. The stability of outcomes across models is stronger when we compare heterogeneous rather than homogeneous models. If it is compared with other studies, our analysis highlights a relative lower variability across specifications.     

The hard shadow of the Greek economy: new estimates of the size of the underground economy and its fiscal impact

This article presents new estimates of the Greek underground economy and explores the link between the underground economy and aggregate debt. We show that the Greek underground economy has been underestimated heavily and has been on a rising trend again since Greece adopted the Euro. We also present evidence that the size of the underground economy is positively related to the debt-to-GDP ratio, implying that fighting the underground economy is also conducive to financial and macroeconomic stability. Our results suggest that for our sample of 11 EMU member countries, the loss of the inflation tax as an economic policy instrument had drastic consequences. While the underground economy did not have a statistically significant impact on aggregate debt before the introduction of the Euro, it has pushed up the debt-to-GDP ratio in our sample since.     

Interactions between real economic and financial sides of the US economy in a regime-switching environment

This objective of this study is to examine the linkages between real (economic) and financial variables in the United States in a regime-switching environment that accounts explicitly for high volatility in the stock market and high stress in financial markets. Since the linearity test shows that the linear model should be rejected, we employ the Markov-switching VECM to examine the same objective using the Bayesian Markov-chain Monte Carlo method. The regime-dependent impulse response function (RDIRF) highlights the increasing importance of the financial sector of the economy during stress periods. The responses and their fluctuations are significantly greater in the high-volatility regime than in the low-volatility regime.     

Review Essay

Sen's capability approach has a culturally specific side, with capabilities influenced by social structures and institutions. Although Sen acknowledges this, he expresses his theory in individualistic terms and makes little allowance for culture or social structure. The present paper draws from recent social theory to discuss how the capability approach could be developed to give an explicit treatment of cultural and structural matters. Capabilities depend not only on entitlements but on institutional roles and personal relations: these can be represented openly if capabilities are disaggregated into individual, social and structural capacities. The three layers interact, and a full analysis of capabilities should consider them all. A stratified method implies that raising entitlements will not on its own be enough to enhance capabilities and that cultural and structural changes will be needed.     

Book Reviews

The evaluative function of local public actors has been exacerbated in recent years with the individualisation of social policies. One of their tasks is to select the appropriate informational basis in order to assess welfare claimants. Amartya Sen's capability approach offers a theoretical and normative framework to analyse this evaluative function. In particular, it insists on the importance of “objectivating” people's preferences with reference to their capabilities. The weight that is to be attached to individual preferences in the course of public action can be a matter of controversy. Claimants “capability for voice”, we argue, should be developed. This capability refers to their effective possibility to express their concerns with regard to the choice of the informational basis. It is argued that local institutions prohibiting capability for voice will produce adaptive preferences, whereas procedural institutions promoting reflexive public evaluation and capability for voice will result in a fairer wording of individual preferences. At a situated level, the way to connect subjective and objective information when assessing people very much depends on the position of the evaluator. Several illustrations show that the fairness of evaluation, and its impact on the people's capability set, depend on this positional perspective.     

The Macroeconomic Consequences of Mixing Sunnis and Shias: A Bayesian Errors-in-Variables Approach

How damaging is the Sunni/Shia split to the economies of Islamic countries? Is it better to be one or the other? Or is it better to have an even balance between the two? Answering these questions is complicated by the fact that the data are often missing or imprecisely measured. We employ the technique of Bayesian data augmentation to circumvent these two problems, and find that properly controlling for these features in the data leads to drastically different conclusions than what is found using ordinary least squares. We find that there is nothing in the differential nature of Sunni or Shia Islam to make one more economically prosperous than the other. Nor do we find any support for the popular hypothesis that Sunnis and Shias cannot mix.     

Leaving EMU: a real options perspective

The real option implicit in a country's decision of whether to leave an existing monetary union when there is uncertainty over the future benefits of this move is examined. The theoretical model used is calibrated for the current Euro-12 area by proxying policymakers’ inflation preferences with unemployment rates and debt-to-GDP ratios. A robust group of countries is observed that would choose to remain within EMU consisting of Belgium, Finland, Greece and Italy; France and Spain loosely also belong to this core. Only Luxembourg would robustly want to leave EMU; Ireland and The Netherlands, however, complement that core closely.     

我国生产性服务业与制造业互动需求结构及发展态势

本研究采用投入产出法与比较分析方法,对典型国家(或地区)的生产性服务业与制造业的互动需求结构进行分析。研究发现,经济发展水平、服务业发展水平、生产性服务业性质、制造业性质四方面是影响生产性服务业与制造业需求结构的重要因素。本文从四要素发展特点总结了生产性服务业与制造业需求的国际发展态势,即随着经济发展水平与服务业发展水平的提高,生产性服务业由对制造业需求显著转为对自身需求显著,而生产性服务业内部由以非知识密集型服务业为主导逐步转向以知识密集型服务业为主导。结合我国现状,本文最后提出了推动我国两类产业互动发展的若干政策建议。     

The organisation for economic cooperation and development

The global financial and economic crisis has prompted some scholars to suggest that a fundamental regulatory shift away from neoliberalism will take place – both in general and in the field of EU competition regulation. This paper shows that so far no radical break with the neoliberal type of competition regulation is heaving into sight. It sets out to explain this from the vantage point of a critical political economy perspective, which identifies the circumstances under which a crisis can result in a regulatory paradigm shift. Contrasting the current situation with the shift in EC/EU competition regulation after the crisis in the 1970s, the paper argues that the preconditions for a fundamental shift in this issue area are not present this time around. Several reasons account for this: the current crisis has been construed by economic and political elites as a crisis within and not of neoliberal capitalism; the social power configuration underpinning the neoliberal order remains unaltered; no clear counter-project has surfaced; the European Commission has been (and remains) in a position to oppose radical changes; and finally, there are no signs of a wider paradigm shift in the EU's regulatory architecture.