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We compare sparse and dense representations of predictive models in macroeconomics, microeconomics, and finance. To deal with a large number of possible predictors, we specify a prior that allows for both variable selection and shrinkage. The posterior distribution does not typically concentrate on a single sparse or dense model, but on a wide set of models. A clearer pattern of sparsity can only emerge when models of very low dimension are strongly favored a priori.

Ralf Kunze untersucht in diesem Buch die international sehr unterschiedlichen Definitionen, Methoden und einzubeziehenden Akteure für den Tagungsmarkt mit dem Ziel, ein universelles, transparentes sowie praktisch anwendbares Berechnungsschema für wirtschaftliche Effekte des Tagungsmarktes in Städten und Regionen zu entwickeln. Dafür nutzt er in diversen Berechnungsschritten verschiedene etablierte Methoden und erarbeitet darauf basierend eine für Deutschland optimale Methode zur vollständigen Erfassung der regionalen Effekte. Der Inhalt Akteure auf dem Tagungsmarkt Begriffsdiskussion zu ökonomischen Auswirkungen Die ökonomische Analyse in der Literatur Vergleich der Berechnungsmodelle Studien wirtschaftlicher Effekte Theoretische Entwicklung der Berechnung Die Zielgruppen Dozierende und Studierende der Wirtschaftswissenschaften, insbes. im Tourismus- und Eventbereich Verantwortliche für Kongress- und Tourismusmarketing; Entscheidungsträger auf dem Tagungsmarkt, in Convention Bureaus und im Eventmanagement

Analyzing the poverty and distributional impact of macro events requires understanding how shocks or policy changes on the macro level affect household income and consumption. It is clear that this poses a formidable task, which of course raises the question of the appropriate methodology to address such questions. This paper presents one possible approach: A sequential methodology that combines a macroeconomic model with a behavioral micro-simulation. We discuss the merits and shortcomings of this approach with a focus on developing country applications with a short to medium run time horizon. - This chapter is a re-print of: Lay, J. (2010). Sequential macro-micro modelling with behavioural microsimulations. International Journal of Microsimulation, 3(1), 24-34.

A standard approach to estimating structural parameters in life-cycle models imposes sufficient assumptions on the data to identify the "age profile" of outcomes, then chooses model parameters so that the model's age profile matches this empirical age profile. I show that this approach is both incorrect and unnecessary: incorrect, because it generally produces inconsistent estimators of the structural parameters, and unnecessary, because consistent estimators can be obtained under weaker assumptions. I derive an estimation method that avoids the problems of the standard approach. I illustrate the method's benefits analytically in a simple model of consumption inequality and numerically by reestimating the classic life-cycle consumption model of Gourinchas and Parker (2002).

We present a global sensitivity analysis that quantifies the impact of parameter uncertainty on model outcomes. Specifically, we propose Sobol’ indices to establish an importance ranking of parameters and univariate effects to determine the direction of the impact. Sobol’ indices are based on variance decomposition and are able to fully capture non-linearities and identify interactions between parameters. Univariate effects are computed as conditional expectations. We employ the state-of-the-art approach for global sensitivity analysis by constructing a polynomial chaos expansion of the model from a limited number of evaluations. Sobol’ indices and univariate effects are then calculated analytically from the polynomial coefficients. We apply this analysis to a standard real-business-cycle model and compare it to traditional local sensitivity analysis approaches., SSRN

This paper reviews the theory of foreign direct investment (FDI), focusing on an apparent conflict between theory and recent trends in the globalized world. The bulk of FDI is horizontal rather than vertical, but horizontal FDI is discouraged when trade costs fall. This seems to conflict with the experience of the 1990s, when trade liberalisation and technological change led to dramatic reductions in trade costs yet FDI grew much faster than trade. Two possible resolutions to this paradox are explored. First, horizontal FDI in trading blocs is encouraged by intra-bloc trade liberalisation, because foreign firms establish plants in one country as export platforms to serve the bloc as a whole. Second, cross-border mergers, which are quantitatively more important than greenfield FDI, are encouraged rather than discouraged by falling trade costs.

The report summarized the main contents that were presented at the Second WWWforEurope Feedback Conference, taking place on May 6th 2015 in Vienna. After 38 months of extensive work on essential questions for Europe’s future with a particular focus on laying the analytical basis for a socio-ecological transition the conference marked the end of the second phase, the policy formulation phase, of the project, as well as the beginning of the third phase, the synthesis phase. Moreover, it was dedicated to collect impulses for the project’s synthesis report, which represents the main output at the end of the project. For this purpose, external experts and stakeholder representatives from European/international institutions, social partners, NGOs and academia joined the conference and had the possibility to directly give feedback to outputs of the project. A collection of written statements provided by the stakeholders reflect how different research groups, partners and stakeholders approach the core issues of the project. Beside contributions of Karl Aiginger (project coordinator) and Catherine Mann (OECD), the report further includes five Area Chapters representing the results of the work of the five WWWforEurope Research Areas.

By responding to the warning voices about the failure of mainstream economics to provide policy advice to seemingly well-known problems as manifest in the ongoing economic crises, we put forward the proposition that the majority of deficiencies in this discipline results from two self-imposed restrictions. The first restriction refers to the limited scope in the perception of economic activities by focusing mainly on reproducible goods (including services) and a very few resources, as human capital and by production reproducible capital. The second restriction results from the interwoven relationships that describe economic structures and the coordinating mechanisms which operate on these structures by postulating market relationships that quite often turn out to be too simplistic or non-existing. We propose therefore two conceptual extensions. The first extension opens up the scope of economic activity both by introducing the functionalities of well-being and an extended list of stocks and flows of resources. The second extension separates the description of economic structures from the mechanisms that operate on them, which may be market or non-market based. Furthermore we will demonstrate how these extensions can be made operational in the context of analyzing the transition of energy systems.

This paper analyses long-term fiscal sustainability with a model which incorporates a number of feedback effects. When fiscal policy responds to ensure long-term sustainability, these feedback effects can potentially modify the intended outcomes by either enhancing or dampening the results of the policy interventions. The feedbacks include the effect on labour supply in response to changes in tax rates, changes in the country risk premium in response to higher public debt ratios, and endogenous changes in the rate of productivity growth and savings that respond to interest rates. A model of government revenue, expenditure and public debt which incorporates these feedbacks is used to simulate the outcome of a range of fiscal policy responses. In addition the effects of population ageing and productivity growth are explored.

We raise fundamental questions about macroeconomics relevant to escaping the financial and economic crisis and shifting to a sustainable economy. First, the feasibility of decoupling environmental pressure from aggregate income is considered. Decoupling as a single environmental strategy is found to be very risky. Next, three main arguments for economic growth are examined: growth as progress, growth to avoid economic instability, and growth to offset unemployment due to labour productivity improvements. For each, we offer orthodox, heterodox and new responses. Attention is paid to progress indicators, feedback mechanisms affecting business cycles, and strategies to limit unemployment without the need for growth. Besides offering an economy-wide angle, we discuss the role of housing and mortgage markets in economic cyclicality. Finally, interactions between real economic and financial-monetary spheres are studied. This includes money creation, capital allocation and trade-offs between efficiency and operating costs of financial systems. Throughout, environmental and transition implications are outlined.

In this paper we study the social, demographic and economic origins of social security. The data for the U.S. and for a cross section of countries make it clear that urbanization and industrialization are strongly associated with the rise of social insurance. We describe a model economy in which demographics, technology, and social security are linked together. We study an economy with two locations (sectors), the farm (agricultural) and the city (industrial). The decision to migrate from rural to urban locations is endogenous and linked to productivity differences between the two locations and survival probabilities. Furthermore, the level of social security is determined by majority voting. We show that a calibrated version of this economy is consistent with the historical transformation in the United States. Initially a majority of voters live on the farm and do not want to implement social security. Once a majority of the voters move to the city, the median voter prefers a positive social security tax. In the model social security emerges and is sustained over time as a political and economic equilibrium. Modeling the political economy of social security within a model of structural change leads to a rich economic environment in which the median voter is identified by both age and location.

Barbara Koller Zsfassung in dt. und engl. Sprache Graz, Univ., Masterarb., 2013

Science-based policy analysis becomes increasingly important in the globalised world. Complex economic and social structures need to be thoroughly analysed and direct and indirect effects of policy measures should be identified and, if possible, quantified. Economic policy modelling has a long tradition (Almon, 1991) and economic models have over the past decades become more detailed regarding the economic structure and more extensive regarding the non-economic aspects represented in these models. There exist detailed structural economic models for most OECD countries. For newly emerging economies and developing countries only few such models exist. A global database and model environment is provided by the GTAP project, which is frequently used to develop computable general equilibrium (CGE) models. These models use a unique database, which often is not compatible to datasets of national statistic offices. Still, there are countries for which no such structural economic models exist. The macro-economic PRESIMO model for Morocco for example does not include the industry structure of the Moroccan economy. However, analyses at the industry level are important when analysing the development of for example labour markets or energy demand. The economic opportunities from international projects such as DESERTEC (Concentrating Solar Power in the Saharan Region) could be evaluated identifying sectors, which benefit the most. Using the example of Morocco this paper outlines the prerequisites for developing structural economic models and shows application possibilities of these models for simulating the effects of policy measures.

Aphorisms that "Rising tides raise all boats" or that material advances of the rich eventually "Trickle Down" to the poor are really maxims regarding the nature of stochastic processes that underlay the income/wellbeing paths of groups of individuals. This paper looks at the implications for the empirical analysis of wellbeing of conventional assumptions regarding such processes which are employed by both micro and macro economists in modeling economic behavior. The implications of attributing different processes to different groups in society following the club convergence literature are also discussed. Various forms of poverty, inequality, polarization and income mobility structures are considered and much of the conventional wisdom afforded us by such aphorisms is questioned. To exemplify these ideas the results are applied to the distribution of GDP per capita in the continent of Africa.

A stochastic model for pure-jump diffusion (the compound renewal process) can be used as a zero-order approximation and as a phenomenological description of tick-by-tick price fluctuations. This leads to an exact and explicit general formula for the martingale price of a European call option. A complete derivation of this result is presented by means of elementary probabilistic tools.

In the aftermath of the global financial crisis, the state of macroeconomic modeling and the use of macroeconomic models in policy analysis has come under heavy criticism. Macroeconomists in academia and policy institutions have been blamed for relying too much on a particular class of macroeconomic models. This paper proposes a comparative approach to macroeconomic policy analysis that is open to competing modeling paradigms. Macroeconomic model comparison projects have helped produce some very influential insights such as the Taylor rule. However, they have been infrequent and costly, because they require the input of many teams of researchers and multiple meetings to obtain a limited set of comparative findings. This paper provides a new approach that enables individual researchers to conduct model comparisons easily, frequently, at low cost and on a large scale. Using this approach a model archive is built that includes many well-known empirically estimated models that may be used for quantitative analysis of monetary and fiscal stabilization policies. A computational platform is created that allows straightforward comparisons of models’ implications. Its application is illustrated by comparing different monetary and fiscal policies across selected models. Researchers can easily include new models in the data base and compare the effects of novel extensions to established benchmarks thereby fostering a comparative instead of insular approach to model development.

"In dieser Arbeit wird untersucht, ob Wettbewerb in den Wirtschaftswissenschaften existiert. Es besteht ein Monopol der heutigen neoklassischen Modellökonomik, was zu einer geringen Pluralität der wissenschaftlichen Ansätze und Perspektiven führt. Der wissenschaftliche Fortschritt wird behindert und das hat negative Folgen für die Wirtschaft und die Politik. Dies wird an Beispiele aus der Finanzkrise, bibliometrischen Ergebnisse und Fallbeispiele aus bundesdeutschen Hochschulen verdeutlicht. Als Fazit wird eine wissenschaftspolitische Intervention in die Volkswirtschaftslehre für mehr Pluralität gefordert: ein Code of Conduct für ÖkonomInnen, eine Quote für heterodoxe Lehrmeinungen und die Gründung eines Instituts für plurale Ökonomik in der Bundesrepublik."[Autorenreferat] Inhaltsverzeichnis: 1. Einleitung; 2. Pluralismus und das Monopol als Analysekategorien; 2.1 Pluralismus; 2.2 Wettbewerb als Entdeckungsverfahren; 2.3 Das Monopol; 3. Theoretische Erklärung des wissenschaftlichen Fortschritts; 4. Anzeichen für eine Monopolisierung der Wirtschaftswissenschaften; 4.1 Das Erklärungsmonopol und die Finanzkrise; 4.2 Unvollständige Wahrnehmungen der ökonomischen Literatur; 4.3 Die Abwicklung der heterodoxen Ökonomik in der Bundesrepublik; 4.4 Die Dominanz orthodoxer Lehrbücher; 5. Der Bedarf an wissenschaftspolitischer Intervention; 6. Fazit; Literatur

Integrated Assessment Models (IAMs) couple representations of the natural climate system with models of the global economy to capture interactions that are important for the evaluation of potential climate and energy policies. The U.S. federal government currently uses such models to derive the benefits of carbon mitigation policies through estimates of the social cost of carbon (SCC). To remain tractable these models often utilize highly simplified representations of complex natural, social, and economic systems. This makes IAMs susceptible to oversimplification by failing to capture key features of the underlying system that are important for policy analysis. In this paper we focus on one area in which these models appear to have fallen into such a trap. We consider three prominent IAMs, DICE, FUND, and PAGE, and examine the way in which these models represent the transient temperature response to increases in radiative forcing. We compare the highly simplified temperature response models in these IAMs to two upwelling diffusion energy balance models that better reflect the progressive uptake of heat by the deep ocean. We find that all three IAMs are unable to fully capture important characteristics in the temporal dynamics of temperature response, especially in the case of high equilibrium climate sensitivity. This has serious implications given that these models are often run with distributions for the equilibrium climate sensitivity that contain a positive probability for such states of the world. We find that all else equal the temperature response function utilized in the FUND model results in estimates of the expected SCC that are up to 25% lower than those derived with the more realistic climate models, while the functions used in DICE and PAGE lead to expected SCC estimates up to 40% and 50% higher, respectively.

In the introductory chapter it has been laid out, that knowledge as an input factor of production exhibits a strong influence on economic development. The increasing knowledge intensity in the globalised economy needs to focus on the determinants of the "knowledge based society". Two major determinants on which the "knowledge based society" and its economic analogon the "knowledge based economy" rely, are the creation and the diffusion of knowledge. The main motivation for this thesis stems exactly from the importance of knowledge and "knowledge diffusion" for the "knowledge based economy" and finally for the modern economic theory and empirics. The first two chapters after the introduction are direct applications from dynamic industrial organization. The first chapter deals with the question how knowledge transfer affects knowledge diffusion, whereas the second chapter tackles the relationship between firm size, innovation, market structure and learning. Until today, new economic geography applications, which cover knowledge diffusion topics are mainly empirically orientated and suffer from theoretical justification. We have a relative precise understanding about the grasp of knowledge diffusion but this aspect is not treated in regional growth literature. Thus, the first aim of the fourth chapter was to integrate the so called "folk theorem of spatial economics", which states that increasing returns to scale are essential for understanding the geographical distributions of economic activity, in a hybrid two sectoral regional growth model with an explicit focus on different grasps of knowledge diffusion. As mentioned above, the majority of economic applications treating knowledge diffusion topics is empirically based. In recent years, a new discipline, so called spatial econometrics, which can be labeled as a pendant to spatial economics, has emerged and has been established rather broadly in econometric society. Of course, this discipline is developing with respect to new estimation methods. Particularly, it seems that Bayesian methods are very attractive. Moreover, Bayesian methods do a great job within spatial econometrics, particularly when talking about spatial heterogeneity, which means that variances of observations are not constant over space, or outliers exist. The classic or frequentist methods today are not able to deal sufficiently with the phenomena of spatial heterogeneity. From this point it is rather astonishing, that most of spatial econometrics applications are still based only on the frequentist methods, despite their inherent limitations. Hence, the second aim of this chapter is to find out on the basis of a conducted cross section analysis, to what extent knowledge spillovers do contribute to regional growth. For this purpose it has been referred to German NUTS-2 regions. The final chapter alludes some revenues for further research, which are based on the previous chapters of this thesis. Im Einleitungskapitel wird darauf hingewiesen, dass Wissen als Produktionsfaktor einen entscheidenden Beitrag zum Wachstum und zur Entwicklung von Volkswirtschaften leistet. Sowohl die "Knowledge based Society", als auch die "Knowledge based Economy" wird hauptsächlich durch die Wissensentstehung und Wissensverbreitung determiniert. Die Motivation der Dissertation ist nun darin zu suchen, dass die Wissensdiffusion einen entscheidenden und mithin wichtigen Beitrag für die "Knowledge based Society" und für die moderne ökonomische Theorie und Empirie liefert. Die beiden ersten Kapitel nach der Einleitung sind thematisch an die Industrieökonomik angesiedelt. Das zweite Kapitel befasst sich mit der Frage, wie Wissenstransfer die Wissensdiffusion beeinflusst, wo hingegen das dritte Kapitel den Zusammenhang von Firmengröße, Innovation, Marktstruktur und Lernen untersucht. Bis heute ist die sog. "New Economy Geography" größtenteils empirisch ausgerichtet, wenn es darum geht, Wissensdiffusionselemente eingehend zu untersuchen. Wir haben eine relative gute Einschätzung darüber, welche Reichweite Wissen hat. Dieser Aspekt ist allerdings in der regionalen Wachstumstheorie weitgehend nicht berücksichtigt. Das vierte Kapitel beschäftigt sich daher zuerst damit, dass sog. "Folk Theorem of Spatial Economics", welches besagt, dass steigende Skalenerträge entscheidend sind, um ökonomische Aktivitäten und deren Konzentration im Raum zu erklären, im Rahmen eines hybriden, Zwei-Sektoren Wachstumsmodels zu diskutieren. Dieses regionale Wachstumsmodell kontrolliert darüber hinaus für unterschiedliche Reichweiten der Wissensdiffusion. Wie bereits zuvor erwähnt wurde, ist die Mehrzahl von ökonomischen Studien, welche die Wissensdiffusion zum Thema haben, empirisch ausgerichtet. In den letzten Jahren hat sich diesbezüglich eine neue Disziplin, die sog. räumliche Ökonometrie, welche als Pendant zur räumlichen Ökonomie gesehen werden kann, in der ökonometrischen Fachwelt etabliert. Diese, sich bis heute immer weiterentwickelnde Disziplin, wendet auch neue Schätzverfahren an. Insbesondere sog. Bayesianische Methoden haben sich hierbei als besonders beliebte Schätzverfahren herauskristallisiert. Diese Schätzverfahren eignen sich besonders gut, um für die sog. räumliche Heterogenität zu kontrollieren. Klassische Schätzverfahren sind hierbei weitaus weniger geeignet. Vor diesem Hintergrund beschäftigt sich das vierte Kapitel auch mit der Frage, welchen Beitrag sog. Wissensspillover zum Wachstum von Regionen beitragen. Zur Beantwortung der Frage wird auf deutsche NUTS-2 Regionen rekurriert. Dass die Arbeit schließende Kapitel weißt auf weitergehende Forschungsfelder hin, welche sich im Rahmen dieser Arbeit herausgebildet haben.

The current crisis and discussions, in the euro area in particular, show that sovereign debt crises/defaults are no longer restricted to developing economies. After crises in many Latin American countries, the literature on quantitative dynamic macro-models of sovereign default has been advancing. Current debate should take notice of the findings from this literature - an extensive overview of which has been provided in this paper. This paper also discusses the difficulties involved in, but also possibilities of, integrating this type of model in standard business cycle models (RBC and DSGE models). This is likely to be particularly helpful when using models to analyse upcoming issues in the euro area, such as a suitable (sovereign) insolvency law or the assumption of joint liability.

Because of economic growth and a strong increase in global energy demand the demand for fossil fuels and therefore also greenhouse gas emissions are increasing, although climate policy should lead to the opposite effect. The coal market is of special relevance as coal is available in many countries and often their first choice to meet energy demand. In this paper we assess possible interactions between climate policies and the global steam coal market. Possible market adjustments between demand centers through market effects are investigated with a numerical model of the global steam coal market until 2030: the COALMOD-World model. The COALMOD-World model is an equilibrium model that computes future trade flows, infrastructure investments and prices until 2030. We investigate three specific designs of climate policy: a unilateral European climate policy, an Indonesian export-limiting policy and a carbon capture and storage (CCS) fast-roll out policy in the broader context of climate policy and market constraints. We find that market adjustment effects in the coal market can have significant positive and negative impacts on the effectiveness of climate policies.

Am 5. März 2011 wurde in Beijing die 4. Plenarsitzung des 11. Nationalen Volkskongresses eröffnet. Ein Schwerpunkt der Tagung war die Diskussion und Verabschiedung des 12. Fünfjahresprogramms (2011-2015) für die soziale und wirtschaftliche Entwicklung Chinas. Kommentare zum Programmentwurf heben nahezu einhellig das angekündigte Umsteuern auf eine stärker qualitativ ausgerichtete "inklusive Entwicklung" hervor. Dabei übersehen sie, dass dieses Umsteuern bereits Kern des jetzt abgelaufenen 11. Programms (2006-2010) gewesen ist und nicht umgesetzt wurde. Fünfjahrespläne (FJP) sind in China keineswegs bedeutungslos geworden. Sie enthalten die wirtschafts- und sozialpolitischen Ziele der Führung, die diese in einem mehrjährigen Prozess gemeinsam mit den Verantwortlichen aus Provinzen und Ministerien erarbeitet und als Konsens festschreibt. Während viele der im 11. FJP genannten Einzelziele erreicht wurden, ist die Transformation des Entwicklungsmodells gescheitert. Weder die Ausweitung des Binnenkonsums noch die Steigerung der Innovationsfähigkeit der Unternehmen oder die Verringerung sozialer Disparitäten ist gelungen. Die wirtschaftliche Entwicklung bleibt "unausgeglichen, unkoordiniert und nicht nachhaltig". Die Gründe dafür sind vielfältig: So war sich die Führung schon bei der Formulierung des Programms offensichtlich nicht einig und setzte angesichts von Inflation und Wirtschaftskrise (wieder) stärker auf Wachstum und Stabilität. Auch hat sie bis heute nicht die Anreizsysteme für die lokalen Kader geändert, sodass diese auch weiterhin Wachstumskoalitionen mit der Wirtschaft bevorzugen. Ob der 12. FJP eine Änderung bringen wird, muss offen bleiben. Einerseits ist das Programm stringenter formuliert, andererseits sprechen bisherige Beurteilungen der im Jahr 2012 antretenden neuen Führung eher für ein "Team der Rivalen" als für einheitliches Handeln.

This paper proposes an explanation of the shifts in the volatility of exchange rate returns that relies on standard present value exchange rate models. Agents are uncertain about the true data generating model and deal with the model uncertainty by making inference on the models and their parameters - a mechanism I call model learning. I show how model learning may lead agents to focus excessively on a subset of fundamental variables. As a result, exchange rate volatility is mainly determined by the dynamics of this subset of fundamentals. As agents switch between models the nominal exchange rate volatility varies accordingly even though the underlying fundamentals processes remain time-invariant. I investigate the relevance of this result empirically within the Taylor-rule based exchange rate model applied to the British Pound/US Dollar exchange rate. The results suggest that the observed change in volatility was triggered by a shift between models.

ToTEM – the Bank of Canada’s principal projection and policy-analysis model for the Canadian economy – is extended to include inventories. In the model, firms accumulate inventories of finished goods for their role in facilitating the demand for goods. The model is successful in matching procyclical and volatile inventory investment behaviour. The authors show that the convex cost of stock adjustment is key to the model’s ability to match the inventory data quantitatively., Le modèle TOTEM – principal modèle utilisé par la Banque du Canada pour l’analyse de politiques et l’élaboration de projections concernant l’économie canadienne – est élargi de manière à inclure les stocks. Dans le modèle, les entreprises accroissent leurs stocks de produits finis en raison de l’effet favorable qu’exerce l’importance des stocks sur la demande de leurs produits. Le modèle rend bien compte de la procyclicité et de la volatilité du comportement des investissements en stocks. Les auteurs montrent que le coût d’ajustement convexe des stocks est déterminant dans la capacité du modèle de reproduire les données relatives aux stocks sur le plan quantitatif.

We introduce heterogeneity into a monetary policy committee by allowing the degree of model uncertainty to differ across members. It is shown that in this framework the stage at which members reach consensus matters. An aggregation protocol under which members only average policy deemed optimal from each member's point of view leads to more volatility compared to an alternative protocol in which members agree on a common worst-case scenario from which optimal policy is then derived. The reason is that inflation, output and the interest rate are convex functions of each member's idiosyncratic degree of model uncertainty. If the degree of model uncertainty becomes more heterogenous, inflation volatility falls due to more vigorous stabilization policy. The degree of heterogeneity across members is therefore an important determinant of macroeconomic volatility. Interestingly, the implications for the committee design under a min-max approach to model uncertainty are identical to those derived from a Bayesian approach.

Inventory investment is an important component of the Canadian business cycle. Despite its small average size – less than 1 per cent of output – it exhibits volatile procyclical fluctuations, accounting for almost one-third of output variance. Procyclicality of inventories is somewhat smaller than that of sales, resulting in a counter-cyclical aggregate inventory-sales ratio. These salient inventory facts are matched in a partialequilibrium version of Kryvtsov and Midrigan’s (2010) model in which firms hold stocks of goods to buffer against stockouts. In booms, firms boost their inventories to avoid stocking out due to the rise in demand. The model combines the real marginal cost estimated by ToTEM with the convex cost of adjusting inventories to match the dynamics of the inventory-sales ratio in the data., Les investissements en stocks forment un volet important du cycle économique au Canada. Malgré leur taille généralement modeste – ceux-ci représentent moins de 1 % de la production –, ils fluctuent fortement de façon procyclique et expliquent presque le tiers de la variance de la production. Les stocks ont un degré de procyclicité un peu moins marqué que les ventes, si bien que le ratio global des stocks aux ventes affiche un caractère contracyclique. Les auteurs reproduisent ces faits saillants dans une variante à équilibre partiel du modèle de Kryvtsov et Midrigan (2010), où des entreprises gardent des marchandises en réserve pour se prémunir contre les ruptures de stocks. En périodes d’expansion, ces firmes augmentent leurs stocks afin de ne pas subir de ruptures de stocks à cause de l’accroissement de la demande. Pour restituer la dynamique du ratio stocks/ventes illustrée dans les données, le modèle associe le coût marginal réel estimé par TOTEM et le coût d’ajustement convexe des stocks.

Bodo Fink Zsfassung in dt. und engl. Sprache Graz, Univ., Diss., 2010 OeBB

The goal of this paper is to examine the shape of the Laffer curve quantitatively in a simple neoclassical growth model calibrated to the US as well as to the EU-15 economy. We show that the US and the EU-15 area are located on the left side of their labor and capital tax Laffer curves, but the EU-15 economy being much closer to the slippery slopes than the US. Our results indicate that since 1975 the EU-15 area has moved considerably closer to the peaks of their Laffer curves. We find that the slope of the Laffer curve in the EU-15 economy is much flatter than in the US which documents a much higher degree of distortions in the EU-15 area. A dynamic scoring analysis shows that more than one half of a labor tax cut and more than four fifth of a capital tax cut are self-financing in the EU-15 economy.

The Bank of Canada Global Economy Model (BoC-GEM) is used to examine the effect of various types of discretionary fiscal policies on different regions of the globe. The BoC-GEM is a microfounded dynamic stochastic general-equilibrium global model with six regions, multiple sectors, and international linkages. The authors use the model to assess four main fiscal policy concerns: (i) how the effect of an isolated local fiscal stimulus differs from one jointly implemented in all regions; (ii) which regions are most likely to gain from joint fiscal stimuli, and why; (iii) how the impact of fiscal stimulus can differ conditional on how it is implemented, its timing and duration, and its magnitude relative to that of other regions; and (iv) how the impact of fiscal policy is affected by the inability of monetary policy to push nominal interest rates below zero. The authors use their results to gauge the potential effect of fiscal policy initiatives of the G-20 countries in 2009 and 2010., Les auteurs utilisent BOC-GEM, le modèle de l'économie mondiale de la Banque du Canada, pour examiner les effets de diverses politiques budgétaires discrétionnaires sur les différentes régions du monde. BOC-GEM est un modèle d'équilibre général dynamique stochastique qui repose sur des fondements microéconomiques; il compte six blocs régionaux et plusieurs secteurs et intègre des liens internationaux. Les auteurs concentrent leur analyse sur quatre aspects. Ils cherchent à établir : 1) en quoi les retombées de mesures de relance budgétaire purement internes diffèrent de celles de mesures concertées dans l'ensemble des régions; 2) quelles régions sont les plus susceptibles de bénéficier de mesures coordonnées et pourquoi; 3) à quel point les effets d'un programme de relance peuvent dépendre du mode et du moment de sa mise en oeuvre, de sa durée et de son importance par rapport à celle des programmes appliqués ailleurs; 4) si l'incapacité des autorités monétaires à abaisser les taux d'intérêt nominaux au-dessous de zéro modifie les effets de la politique budgétaire. Les auteurs se fondent sur leurs résultats pour évaluer l'incidence potentielle des mesures de relance budgétaire adoptées par les pays du G20 en 2009 et 2010.

Recent empirical work finds a negative correlation between product market regulation and aggregate employment. We examine the effect of product market regulations on hours worked in a benchmark aggregate model of time allocation as well as in a standard dynamic model of entry and exit. We find that product market regulations affect time devoted to market work in effectively the same fashion that taxes on labor income or consumption do. In particular, if product market regulations are to affect aggregate market work in this model, the key driving force is the size of income transfers associated with the regulation relative to labor income, and the key propagation mechanism is the labor supply elasticity. We show in a two-sector model that industry-level analysis is of little help in assessing the aggregate effects of product market regulation.

How do individuals shape societies? How do societies shape individuals? This paper develops a framework for studying the connections between micro and macro phenomena. The framework builds on two ingredients widely used in social science - population and variable. Starting with the simplest case of one population and one variable, we systematically introduce additional variables and additional populations. This approach enables simple and natural introduction and exposition of such operations as pooling, matching, regression, hierarchical and multilevel modeling, calculating summary measures, finding the distribution of a function of random variables, and choosing between two or more distributions. To illustrate the procedures we draw on problems from a variety of topical domains in social science, including an extended illustration focused on residential racial segregation. Three useful features of the framework are: First, similarities in the mathematical structure underlying distinct substantive questions, spanning different levels of aggregation and different substantive domains, become apparent. Second, links between distinct methodological procedures and operations become apparent. Third, the framework has a potential for growth, as new models and operations become incorporated into the framework.

Understanding the way in which knowledge is technically produced and transferred, and how its diffusion path can be characterized is of fundamental importance for the performance of an economy. Although this fact seems to be plausible ex ante, the relevant literature so far has paid less attention investigating the microeconomic link between knowledge transfer and knowledge diffusion in a comprehensive approach. The aim of this paper is to highlight the link between knowledge transfer, knowledge diffusion and network effects in a stochastic environment, because the adoption decision of new knowledge should be treated as a stochastic event. For this reason, a new knowledge diffusion model in the line of Bass (1969) has been put forward, which integrates knowledge diffusion and knowledge transfer. The advantage of the proposed model is twofold. From a theoretical point of view, not only the so-called unimodal diffusion phenomena can be modelled, but also bimodal diffusion phenomena can be obtained. From an empirical point of view, the model which incorporates heteroscedastic errors and mean reverting behaviour can be theoretically estimated directly within a standard SUR context.

In this paper we investigate the comparative properties of empirically-estimated monetary models of the U.S. economy. We make use of a new data base of models designed for such investigations. We focus on three representative models: the Christiano, Eichenbaum, Evans (2005) model, the Smets and Wouters (2007) model, and the Taylor (1993a) model. Although the three models differ in terms of structure, estimation method, sample period, and data vintage, we find surprisingly similar economic impacts of unanticipated changes in the federal funds rate. However, the optimal monetary policy responses to other sources of economic fluctuations are widely different in the different models. We show that simple optimal policy rules that respond to the growth rate of output and smooth the interest rate are not robust. In contrast, policy rules with no interest rate smoothing and no response to the growth rate, as distinct from the level, of output are more robust. Robustness can be improved further by optimizing rules with respect to the average loss across the three models.

The financial crisis of 2007-09 began as a local problem in the mortgage finance market in the United States and Europe but, within months, escalated into a general global financial crisis, resulting in collapsing investment not just in developed nations but also in Shanghai, Rio and Mumbai, and has led to a general recession worldwide. The paper builds a rational-expectations, microeconomic model of why the local crisis escalated into a general freeze in credit flows. It then isolates two very different kinds of interventions needed to restore the economy back to health, arguing that government stimulus policy has not had enough impact because a failure to understand the need for the dual intervention.

Daniela Pfeiffer Graz, Univ., Dipl.-Arb., 2009

The Global Integrated Sustainability Model (GISMO), developed at the Netherlands Environmental Assessment Agency (PBL), is a platform for analysing the complexity of sustainable development and human well-being with regards to the three sustainability domains: People, Planet, and Profit (PPP). The economic structure of the GISMO1.0 model is the International Futures model, developed at the University of Denver. To better address price behaviour in the model, the Computable General Equilibrium (CGE) model DART, developed by the Kiel Institute for the World Economy, was included in the GISMO framework and integrated with the International Futures model. The DART model is tuned to the needs of the GISMO project, and is further referred to as DART-PBL. This report provides an overview of the main changes and additions to the original DART model. The changes and additions include: 1) region and sector aggregation compatible with the GISMO framework; 2) human capital accumulation based on demographics, educational attainment and health level to better address human well-being; 3) introduction of a Linear Expenditure System to distinguish between basic and luxury consumption; 4) adjusted savings to take into account different saving patterns of a changing population structure; 5) heterogenic land prices linked with the IMAGE framework to address land scarcity and environmental impacts; and 6) partial labour mobility between agricultural and non-agricultural sectors, to assess changes in income distribution.

This paper investigates the optimal monetary policy response to a shock to collateral when policymakers act under discretion and face model uncertainty. The analysis is based on a New Keynesian model where banks supply loans to transaction constrained consumers. Our results confirm the literature on model uncertainty with respect to a cost-push shock. Insuring against model misspecification leads to a more aggressive policy response. The same is true for a shock to collateral. A preference for robustness leads to a more aggressive policy. Increasing the weight attached to interest rate smoothing raises the degree of aggressiveness. Our results indicate that a preference for robustness crucially depends on the way different types of disturbances affect the economy: in the case of a shock to collateral the policymaker does not need to be as much worried about model misspecification as in the case of a conventional cost-push shock.

We survey the literature on social networks by putting together the economics, sociological and physics/applied mathematics approaches, showing their similarities and differences. We expose, in particular, the two main ways of modeling network formation. While the physics/applied mathematics approach is capable of reproducing most observed networks, it does not explain why they emerge. On the contrary, the economics approach is very precise in explaining why networks emerge but does a poor job in matching real-world networks. We also analyze behaviors on networks, which take networks as given and focus on the impact of their structure on individuals' outcomes. Using a game-theoretical framework, we then compare the results with those obtained in sociology.

Many contemporary theoretic studies of trade over geography reduce to an ex- amination of constant-elasticity reactions to changes in iceberg trade costs. These impacts are readily analyzed in simple constant-returns models based on the Arm- ington (1969) assumption of regionally differentiated goods. Following the line of reasoning suggested by Arkolakis et al. (2008) one can reach the surprising conclu- sion that industrial organization does not matter. In the present paper, we show that this finding is fragile, and with a minor elaboration of their model, the rich industrial-organization features of the popular Melitz (2003) model do, in fact, gen- erate important differences for trade and welfare., Economics Working Paper Series, 09/119

The economics profession appears to have been unaware of the long build-up to the current worldwide financial crisis and to have significantly underestimated its dimensions once it started to unfold. In our view, this lack of understanding is due to a misallocation of research efforts in economics. We trace the deeper roots of this failure to the profession's insistence on constructing models that, by design, disregard the key elements driving outcomes in real-world markets. The economics profession has failed in communicating the limitations, weaknesses, and even dangers of its preferred models to the public. This state of affairs makes clear the need for a major reorientation of focus in the research economists undertake, as well as for the establishment of an ethical code that would ask economists to understand and communicate the limitations and potential misuses of their models.

We provide the description and illustrative results of the World Gas Model, a multi-period complementarity model for the global natural gas market. Market players include producers, traders, pipeline and storage operators, LNG liquefiers and regasifiers as well as marketers. The model data set contains more than 80 countries and regions and covers 98% of world wide natural gas production and consumption. We also include a detailed representation of cross-border natural gas pipelines and constraints imposed by long-term contracts in the LNG market. The Base Case results of our numerical simulations show that the rush for LNG observed in the past years will not be sustained throughout 2030 and that Europe will continue to rely on pipeline gas for a large share of its imports and consumption.

This paper asks the question: Why has the ?general-to-specific? cointegrated VAR approach as developed in Europe had only limited success in the US as a tool for doing empirical macroeconomics, where what might be called a ?theory comes first? approach dominates? The reason this paper highlights is the incompatibility of the European approach with the US focus on the journal publication metric for advancement. Specifically, the European ?general-to specific? cointegrated VAR approach requires researcher judgment to be part of the analysis, and the US focus on a journal publication metric discourages such research methods. The US ?theory comes first? approach fits much better with the journal publication metric.

Examples of simple economic theory models are analyzed as restrictions on the Cointegrated VAR (CVAR). This establishes a correspondence between basic economic concepts and the econometric concepts of the CVAR: The economic relations correspond to cointegrating vectors and exogeneity in the economic model implies the econometric concept of strong exogeneity for â. The economic equilibrium corresponds to the so-called long-run value (Johansen 2005), the comparative statics are captured by the long-run impact matrix, C; and the exogenous variables are the common trends. Also, the adjustment parameters of the CVAR are shown to be interpretable in terms of expectations formation, market clearing, nominal rigidities, etc. The general-partial equilibrium distinction is also discussed.

Ziel des Beitrages ist es, die neueren Erkenntnisse der Neurobiologie zum Entscheidungsverhalten von Menschen für die Entwicklung eines idealtypischen Ablaufplans ökonomischer Entscheidungsvorgänge einzusetzen, indem die Logik deutlich gemacht wird, die den Aufbau des menschlichen Gehirns bestimmt. Ein solcher Ablaufplan kann dazu beitragen, ökonomische Modelle realitätsnäher als bisher formulieren zu können, und ökonomische Modelle, die bisher eher getrennt voneinander gesehen wurden, als Teil eines größeren Ganzen einzuordnen. Es zeigt sich, dass wesentliche Komponenten einiger viel verwendeter Mo-delle der Ökonomik Parallelen in der neurobiologischen und physiologischen Arbeitsweise des Gehirns finden. Dies kann einen Beitrag dazu leisten, Modelle zielgerichteter als bisher zur Lösung ökonomischer Probleme einzusetzen.