An examination of the effects of government purchases in an open economy

This paper examines the effects of permanent and transitory changes in government purchases in the context of a model of a small open economy that produces and consumes both traded and nontraded goods. The model incorporates an equilibrium interpretation of the business cycle that emphasizes the responsiveness of agents to intertemporal relative price changes. It is demonstrated that transitory increases in government purchases lead to an appreciation of the real exchange rate and an ambiguous change (although a likely worsening) in the current account, while permanent increases have an ambiguous impact on the real exchange rate and no effect on the current account. When agents do not know whether a given increase in government purchases is permanent or transitory the effect is a weighted average of these separate effects. The weights depend on the relative variances of the transitory and permanent components of government purchases. © 1985.

Carbon mitigation costs for the commercial building sector: Discrete-continuous choice analysis of multifuel energy demand

We estimate a carbon mitigation cost curve for the U.S. commercial sector based on econometric estimation of the responsiveness of fuel demand and equipment choices to energy price changes. The model econometrically estimates fuel demand conditional on fuel choice, which is characterized by a multinomial logit model. Separate estimation of end uses (e.g., heating, cooking) using the U.S. Commercial Buildings Energy Consumption Survey allows for exceptionally detailed estimation of price responsiveness disaggregated by end use and fuel type. We then construct aggregate long-run elasticities, by fuel type, through a series of simulations; own-price elasticities range from -0.9 for district heat services to -2.9 for fuel oil. The simulations form the basis of a marginal cost curve for carbon mitigation, which suggests that a price of $20 per ton of carbon would result in an 8% reduction in commercial carbon emissions, and a price of $100 per ton would result in a 28% reduction. © 2008 Elsevier B.V. All rights reserved.

The induced innovation hypothesis and energy-saving technological change

We develop a methodology for testing Hicks's induced innovation hypothesis by estimating a product-characteristics model of energy-using consumer durables, augmenting the hypothesis to allow for the influence of government regulations. For the products we explored, the evidence suggests that (i) the rate of overall innovation was independent of energy prices and regulations; (ii) the direction of innovation was responsive to energy price changes for some products but not for others; (iii) energy price changes induced changes in the subset of technically feasible models that were offered for sale; (iv) this responsiveness increased substantially during the period after energy-efficiency product labeling was required; and (v) nonetheless, a sizable portion of efficiency improvements were autonomous.

Measuring Tail Risks at High Frequency

I develop a new methodology for measuring tail risks using the cross section of bid-ask spreads. Market makers embed tail risk information into spreads because (1) they lose to arbitrageurs when changes to asset values exceed the cost of liquidity and (2) underlying price movements and potential costs are linear in factor loadings. Using this insight, simple cross-sectional regressions relating spreads and trading volume to factor betas can recover tail risks in real time for priced or non-priced return factors. The methodology disentangles financial and aggregate market risks during the 2007-2008 Financial Crisis; anticipates jump risks associated with Federal Open Market Committee announcements; and quantifies a sharp, temporary increase in market tail risk before and throughout the 2010 Flash Crash. The recovered time series of implied market risks also aligns closely with both realized market jumps and the VIX.

Changes in Brain Resting-state Functional Connectivity Associated with Peripheral Nerve Block: A Pilot Study.

BACKGROUND: Limited information exists on the effects of temporary functional deafferentation (TFD) on brain activity after peripheral nerve block (PNB) in healthy humans. Increasingly, resting-state functional connectivity (RSFC) is being used to study brain activity and organization. The purpose of this study was to test the hypothesis that TFD through PNB will influence changes in RSFC plasticity in central sensorimotor functional brain networks in healthy human participants. METHODS: The authors achieved TFD using a supraclavicular PNB model with 10 healthy human participants undergoing functional connectivity magnetic resonance imaging before PNB, during active PNB, and during PNB recovery. RSFC differences among study conditions were determined by multiple-comparison-corrected (false discovery rate-corrected P value less than 0.05) random-effects, between-condition, and seed-to-voxel analyses using the left and right manual motor regions. RESULTS: The results of this pilot study demonstrated disruption of interhemispheric left-to-right manual motor region RSFC (e.g., mean Fisher-transformed z [effect size] at pre-PNB 1.05 vs. 0.55 during PNB) but preservation of intrahemispheric RSFC of these regions during PNB. Additionally, there was increased RSFC between the left motor region of interest (PNB-affected area) and bilateral higher order visual cortex regions after clinical PNB resolution (e.g., Fisher z between left motor region of interest and right and left lingual gyrus regions during PNB, -0.1 and -0.6 vs. 0.22 and 0.18 after PNB resolution, respectively). CONCLUSIONS: This pilot study provides evidence that PNB has features consistent with other models of deafferentation, making it a potentially useful approach to investigate brain plasticity. The findings provide insight into RSFC of sensorimotor functional brain networks during PNB and PNB recovery and support modulation of the sensory-motor integration feedback loop as a mechanism for explaining the behavioral correlates of peripherally induced TFD through PNB.