Going Multinational under Exchange Rate Uncertainty

Published as an article in: Journal of International Money and Finance, 2010, vol. 29, issue 6, pages 1171-1191.

Economic Effects of Global Warming under Stock Growth Uncertainty: The European Sardine Fishery

Global warming of the oceans is expected to alter the environmental conditions that determine the growth of a fishery resource. Most climate change studies are based on models and scenarios that focus on economic growth, or they concentrate on simulating the potential losses or cost to fisheries due to climate change. However, analysis that addresses model optimization problems to better understand of the complex dynamics of climate change and marine ecosystems is still lacking. In this paper a simple algorithm to compute transitional dynamics in order to quantify the effect of climate change on the European sardine fishery is presented. The model results indicate that global warming will not necessarily lead to a monotonic decrease in the expected biomass levels. Our results show that if the resource is exploited optimally then in the short run, increases in the surface temperature of the fishery ground are compatible with higher expected biomass and economic profit.

A Note on Risk Acceptance, Bankruptcy Avoidance and Riskiness Measures

In this work we clarify the relationships between riskiness, risk acceptance and bankruptcy avoidance. We distinguish between the restriction on the current wealth required to make a gamble acceptable to the decision maker and the restriction on the current wealth required to guarantee no bankruptcy if a gamble is accepted. We focus on the measure of riskiness proposed by Foster and Hart.

Income Taxation and Growth in an OLG Economy: Does Aggregate Uncertainty Play any Role?

We analyze the effects of capital income taxation on long-run growth in a stochastic, two-period overlapping generations economy. Endogenous growth is driven by a positive externality of physical capital in the production sector that makes firms exhibit an aggregate technology in equilibrium. We distinguish between capital income and labor income, and between attitudes towards risk and intertemporal substitution of consumption. We show necessary and sufficient conditions such that i) increments in the capital income taxation lead to higher equilibrium growth rates, and ii) the effect of changes in the capital income tax rate on the equilibrium growth may be of opposite signs in stochastic and in deterministic economies. Such a sign reversal is shown to be more likely depending on i) how the intertemporal elasticity of substitution compares to one, and ii) the size of second- period labor supply. Numerical simulations show that for reasonable values of the intertemporal elasticity of substitution, a sign reversal shows up only for implausibly high values of the second- period’s labor supply. The conclusion is that deterministic OLG economies are a good approximation of the effect of taxes on the equilibrium growth rate as in Smith (1996).

Valuing Expansions of the Electricity Transmission Network under Uncertainty: The Binodal Case

Transmission investments are currently needed to meet an increasing electricity demand, to address security of supply concerns, and to reach carbon-emissions targets. A key issue when assessing the benefits from an expanded grid concerns the valuation of the uncertain cash flows that result from the expansion. We propose a valuation model that accommodates both physical and economic uncertainties following the Real Options approach. It combines optimization techniques with Monte Carlo simulation. We illustrate the use of our model in a simplified, two-node grid and assess the decision whether to invest or not in a particular upgrade. The generation mix includes coal-and natural gas-fired stations that operate under carbon constraints. The underlying parameters are estimated from observed market data.

Optimal Investment in Energy Efficiency under Uncertainty

41 p.

Is inbreeding avoidance driving female mate choice in Verreaux's sifaka lemurs?

Females of different species might exert female mate choice for different reasons, one of them the aim of avoiding inbreeding. In this study I examine the implication of inbreeding avoidance as a mechanism driving female mate choice in Verreaux’s sifaka lemurs (Propithecus verreauxi). In fact, in this species females are dominant and appear to be able to choose certain males to mate with, while observations indicate that rank, body size, canine size and proportions of fights won are not factors influencing female mate choice. So I hypothesized that females mate choice is driven by inbreeding avoidance in Verreaux’s sifaka lemurs. Tissue and fecal samples were collected in the Kirindy Mitea National Park in western Madagascar as a source of DNA. Parentage was assigned for a sample of the population and relatedness coefficients between dams and sires were estimated and compared to those of between random female and male pairs, dams and other candidate sires within the population and within the groups were the offspring were conceived. I found that there were no significant differences in none of the comparisons which means that Verreaux’s sifaka females do not mate more with males that are more distantly related to them. I concluded that inbreeding avoidance does not appear to be the main force driving female mate choice in Verreaux’s sifaka lemurs and I addressed explanations for these findings. With this study I contribute to our knowledge of female mate choice in lemurs.

Elements of Decision under Uncertainty with Applications

This work presents the basic elements for the analysis of decision under uncertainty: Expected Utility Theory and its citicisms and risk aversion and its measurement. The concepts of certainty equivalent, risk premium, absolute risk aversion and relative risk aversion, and the "more risk averse than" relation are discussed. The work is completed with several applications of decision making under uncertainty to different economic problems: investment in risky assets and portfolio selection, risk sharing, investment to reduce risk, insurance, taxes and income underreporting, deposit insurance and the value of information.

Spin squeezing, macrorealism and the heisenberg uncertainty principle

169 p.