The role of the terms of trade in the trade channel of transmission of oil price shocks

This paper highlights the role of the terms of trade in the trade channel of propagation of oil price shocks both empirically and theoretically. Empirically, I show that oil price shocks have a large, persistent and statistically significant impact on the US terms of trade. Theoretically, I add oil in the model by Corsetti and Pesenti (2005) and analyse under what conditions the terms of trade plays a relevant role in the international transmission of oil price shocks. With nominal price rigidities and full exchange rate pass-through positive oil price shocks depreciate the currency of the oil importing country. The subsequent negative wealth effect adds to the recessive effect of the supply channel and may trongly reduce the consumption in the oil importing country economy. Without exchange rate pass-through oil shocks transmit to the economy only through the supply channel. The model suggests that a change in the exchange rate pass-through might contribute to explain the evidence of a weaker impact of oil price shocks on the macroeconomic activity in recent times.

Fiscal Policy and Economic Stability: Does PIGS stand for Procyclicality In Government Spending?

The Financial Crisis has hit particularly hard countries like Ireland or Spain. Procyclical fiscal policy has contributed to a boom-bust cycle that undermined fiscal positions and deepened current account deficits during the boom. We set up an RBC model of a small open economy, following Mendoza (1991), and introduce the effect of fiscal policy decisions that change over the cycle. We calibrate the model on data for Ireland, and simulate the effect of different spending policies in response to supply shocks. Procyclical fiscal policy distorts intertemporal allocation decisions. Temporary spending boosts in booms spur investment, and hence the need for external finance, and so generates very volatile cycles in investment and the current account. This economic instability is also harmful for the steady state level of output. Our model is able to replicate the relation between the degree of cyclicality of fiscal policy, and the volatility of consumption, investment and the current account observed in OECD countries.

The Stability of the Roommate Problem Revisited

The lack of stability in some matching problems suggests that alternative solution concepts to the core might be applied to find predictable matchings. We propose the absorbing sets as a solution for the class of roommate problems with strict preferences. This solution, which always exists, either gives the matchings in the core or predicts some other matchings when the core is empty. Furthermore, it satisfies an interesting property of outer stability. We also characterize the absorbing sets, determine their number and, in case of multiplicity, we find that they all share a similar structure.

An Approach to the stability of international environmental agreements: the absorbing sets solution

We study international environmental negotiations when agreements between countries can not be binding. A problem with this kind of negotiations is that countries have incentives for free-riding from such agreements. We develope a notion of equilibrium based on the assumption that countries can create and dissolve agreements in their seeking of a larger welfare. This approach leads to a larger degree of cooperation compared to models based on the internal-external stability approach.

Joan Robinson Was Almost Right: Output under Third-Degree Price Discrimination

In this paper, we show that in order for third-degree price discrimination to increase total output, the demands of the strong markets should be, as conjectured by Robinson (1933), more concave than the demands of the weak markets. By making the distinction between adjusted concavity of the inverse demand and adjusted concavity of the direct demand, we are able to state necessary conditions and sufficient conditions for third-degree price discrimination to increase total output.

Monopoly Price Discrimination and Demand Curvature

Published as an article in: American Economic Review, 2010, vol. 100, issue 4, pages 1601-15.

Another Look to the Price-Dividend Ratio: A Markov-Switching Approach

This paper analyzes the stationarity of this ratio in the context of a Markov-switching model à la Hamilton (1989) where an asymmetric speed of adjustment is introduced. This particular specification robustly supports a nonlinear reversion process and identifies two relevant episodes: the post-war period from the mid-50’s to the mid-70’s and the so called “90’s boom” period. A three-regime Markov-switching model displays the best regime identification and reveals that only the first part of the 90’s boom (1985-1995) and the post-war period are near-nonstationary states. Interestingly, the last part of the 90’s boom (1996-2000), characterized by a growing price-dividend ratio, is entirely attributed to a regime featuring a highly reverting process.

How much efficiency gains and price reductions for an efficiency defense? 'Quanto Basta'

Potential efficiency gains due to a merger can be used by competition authorities to judge upon proposed mergers. In a world where agents’ efforts, observable or unobservable, affect the success of a production cost reducing project that may be conducted as a stand-alone firm or in a merger, we characterize the merger decision and the type of errors a competition authority may make when it relies on an efficiency defense. In addition, we show that the occurrence of either type of errors is always smaller under the unobservable efforts assumption, than under the observable efforts one.

Stability of the factorial structure of metabolic syndrome from childhood to adolescence : a 6-year follow-up study

Background: Metabolic syndrome (MS) is a clustering of cardiometabolic risk factors that is considered a predictor of cardiovascular disease, type 2 diabetes and mortality. There is no consistent evidence on whether the MS construct works in the same way in different populations and at different stages in life. Methods: We used confirmatory factor analysis to examine if a single-factor-model including waist circumference, triglycerides/HDL-c, insulin and mean arterial pressure underlies metabolic syndrome from the childhood to adolescence in a 6-years follow-up study in 174 Swedish and 460 Estonian children aged 9 years at baseline. Indeed, we analyze the tracking of a previously validated MS index over this 6-years period. Results: The estimates of goodness-of-fit for the single-factor-model underlying MS were acceptable both in children and adolescents. The construct stability of a new model including the differences from baseline to the end of the follow-up in the components of the proposed model displayed good fit indexes for the change, supporting the hypothesis of a single factor underlying MS component trends. Conclusions: A single-factor-model underlying MS is stable across the puberty in both Estonian and Swedish young people. The MS index tracks acceptably from childhood to adolescence.

Can the change in the composition of the US GDP explain the Great Moderation? A test via oil price shocks

The paper investigates whether the growing GDP share of the services sector can contribute to explain the great moderation in the US. We identify and analyze three oil price shocks and use a SVAR analysis to measure their economic impact on the US economy at both the aggregate and the sectoral level. We find mixed support for the explanation of the great moderation in terms of shrinking oil shock volatilities and observe that increases (decreases) in oil shock volatilities are contrasted by a weakening (strengthening) in their transmission mechanism. Across sectors, services are the least affected by any oil shock. As the contribution of services to the GDP volatility increases over time, we conclude that a composition effect contributed to moderate the conditional volatility to oil shocks of the US GDP.

Stability and Limit Oscillations of a Control Event-Based Sampling Criterion

This paper investigates the presence of limit oscillations in an adaptive sampling system. The basic sampling criterion operates in the sense that each next sampling occurs when the absolute difference of the signal amplitude with respect to its currently sampled signal equalizes a prescribed threshold amplitude. The sampling criterion is extended involving a prescribed set of amplitudes. The limit oscillations might be interpreted through the equivalence of the adaptive sampling and hold device with a nonlinear one consisting of a relay with multiple hysteresis whose parameterization is, in general, dependent on the initial conditions of the dynamic system. The performed study is performed on the time domain.

Stability of Switched Feedback Time-Varying Dynamic Systems Based on the Properties of the Gap Metric for Operators

The stabilization of dynamic switched control systems is focused on and based on an operator-based formulation. It is assumed that the controlled object and the controller are described by sequences of closed operator pairs (L, C) on a Hilbert space H of the input and output spaces and it is related to the existence of the inverse of the resulting input-output operator being admissible and bounded. The technical mechanism addressed to get the results is the appropriate use of the fact that closed operators being sufficiently close to bounded operators, in terms of the gap metric, are also bounded. That philosophy is followed for the operators describing the input-output relations in switched feedback control systems so as to guarantee the closed-loop stabilization.

Forward-looking Pairwise Stability in Networks with Externalities

We consider cooperation situations where players have network relations. Networks evolve according to a stationary transition probability matrix and at each moment in time players receive payoffs from a stationary allocation rule. Players discount the future by a common factor. The pair formed by an allocation rule and a transition probability matrix is called a forward-looking network formation scheme if, first, the probability that a link is created is positive if the discounted, expected gains to its two participants are positive, and if, second, the probability that a link is eliminated is positive if the discounted, expected gains to at least one of its two participants are positive. The main result is the existence, for all discount factors and all value functions, of a forward-looking network formation scheme. Furthermore, we can always nd a forward-looking network formation scheme such that (i) the allocation rule is component balanced and (ii) the transition probabilities increase in the di erence in payo s for the corresponding players responsible for the transition. We use this dynamic solution concept to explore the tension between e ciency and stability.

Seasonal Stability Tests in gretl. An Application to International Tourism Data

The seasonal stability tests of Canova & Hansen (1995) (CH) provide a method complementary to that of Hylleberg et al. (1990) for testing for seasonal unit roots. But the distribution of the CH tests are unknown in small samples. We present a method to numerically compute critical values and P-values for the CH tests for any sample size and any seasonal periodicity. In fact this method is applicable to the types of seasonality which are commonly in use, but also to any other.

Monopoly price discrimination with constant elasticity demand

This paper presents new results on the welfare e¤ects of third-degree price discrimination under constant elasticity demand. We show that when both the share of the strong market under uniform pricing and the elasticity di¤erence between markets are high enough,then price discrimination not only can increase social welfare but also consumer surplus.