Confidence intervals for half-life deviations from purchasing power parity

Existing point estimates of half-life deviations from purchasing power parity (PPP), around 3-5 years, suggest that the speed of convergence is extremely slow. This article assesses the degree of uncertainty around these point estimates by using local-to-unity asymptotic theory to construct confidence intervals that are robust to high persistence in small samples. The empirical evidence suggests that the lower bound of the confidence interval is between four and eight quarters for most currencies, which is not inconsistent with traditional price-stickiness explanations. However, the upper bounds are infinity for all currencies, so we cannot provide conclusive evidence in favor of PPP either. © 2005 American Statistical Association.

Information relaxations and duality in stochastic dynamic programs

We describe a general technique for determining upper bounds on maximal values (or lower bounds on minimal costs) in stochastic dynamic programs. In this approach, we relax the nonanticipativity constraints that require decisions to depend only on the information available at the time a decision is made and impose a "penalty" that punishes violations of nonanticipativity. In applications, the hope is that this relaxed version of the problem will be simpler to solve than the original dynamic program. The upper bounds provided by this dual approach complement lower bounds on values that may be found by simulating with heuristic policies. We describe the theory underlying this dual approach and establish weak duality, strong duality, and complementary slackness results that are analogous to the duality results of linear programming. We also study properties of good penalties. Finally, we demonstrate the use of this dual approach in an adaptive inventory control problem with an unknown and changing demand distribution and in valuing options with stochastic volatilities and interest rates. These are complex problems of significant practical interest that are quite difficult to solve to optimality. In these examples, our dual approach requires relatively little additional computation and leads to tight bounds on the optimal values. © 2010 INFORMS.

The empirical analysis of cigarette tax avoidance and illicit trade in Vietnam, 1998-2010.

Illicit trade carries the potential to magnify existing tobacco-related health care costs through increased availability of untaxed and inexpensive cigarettes. What is known with respect to the magnitude of illicit trade for Vietnam is produced primarily by the industry, and methodologies are typically opaque. Independent assessment of the illicit cigarette trade in Vietnam is vital to tobacco control policy. This paper measures the magnitude of illicit cigarette trade for Vietnam between 1998 and 2010 using two methods, discrepancies between legitimate domestic cigarette sales and domestic tobacco consumption estimated from surveys, and trade discrepancies as recorded by Vietnam and trade partners. The results indicate that Vietnam likely experienced net smuggling in during the period studied. With the inclusion of adjustments for survey respondent under-reporting, inward illicit trade likely occurred in three of the four years for which surveys were available. Discrepancies in trade records indicate that the value of smuggled cigarettes into Vietnam ranges from $100 million to $300 million between 2000 and 2010 and that these cigarettes primarily originate in Singapore, Hong Kong, Macao, Malaysia, and Australia. Notable differences in trends over time exist between the two methods, but by comparison, the industry estimates consistently place the magnitude of illicit trade at the upper bounds of what this study shows. The unavailability of annual, survey-based estimates of consumption may obscure the true, annual trend over time. Second, as surveys changed over time, estimates relying on them may be inconsistent with one another. Finally, these two methods measure different components of illicit trade, specifically consumption of illicit cigarettes regardless of origin and smuggling of cigarettes into a particular market. However, absent a gold standard, comparisons of different approaches to illicit trade measurement serve efforts to refine and improve measurement approaches and estimates.

Dietary inference from upper and lower molar morphology in platyrrhine primates.

The correlation between diet and dental topography is of importance to paleontologists seeking to diagnose ecological adaptations in extinct taxa. Although the subject is well represented in the literature, few studies directly compare methods or evaluate dietary signals conveyed by both upper and lower molars. Here, we address this gap in our knowledge by comparing the efficacy of three measures of functional morphology for classifying an ecologically diverse sample of thirteen medium- to large-bodied platyrrhines by diet category (e.g., folivore, frugivore, hard object feeder). We used Shearing Quotient (SQ), an index derived from linear measurements of molar cutting edges and two indices of crown surface topography, Occlusal Relief (OR) and Relief Index (RFI). Using SQ, OR, and RFI, individuals were then classified by dietary category using Discriminate Function Analysis. Both upper and lower molar variables produce high classification rates in assigning individuals to diet categories, but lower molars are consistently more successful. SQs yield the highest classification rates. RFI and OR generally perform above chance. Upper molar RFI has a success rate below the level of chance. Adding molar length enhances the discriminatory power for all variables. We conclude that upper molar SQs are useful for dietary reconstruction, especially when combined with body size information. Additionally, we find that among our sample of platyrrhines, SQ remains the strongest predictor of diet, while RFI is less useful at signaling dietary differences in absence of body size information. The study demonstrates new ways for inferring the diets of extinct platyrrhine primates when both upper and lower molars are available, or, for taxa known only from upper molars. The techniques are useful in reconstructing diet in stem representatives of anthropoid clade, who share key aspects of molar morphology with extant platyrrhines.