On the term structure of Interbank interest rates: Jump-diffusion processes and option pricing

In this paper we study the dynamic behavior of the term structureof Interbank interest rates and the pricing of options on interest ratesensitive securities. We posit a generalized single factor model withjumps to take into account external influences in the market. Daily datais used to test for jump effects. Qualitative examination of the linkagebetween Monetary Authorities' interventions and jumps are studied. Pricingresults suggests a systematic underpricing in bonds and call options ifthe jumps component is not included. However, the pricing of put optionson bonds presents indeterminacies.

Petrol consumption and redistributive effects of its taxation in Spain

The objective of this paper is to estimate a petrol consumption function for Spain and to evaluate the redistributive effects of petrol taxation. We use micro data from the Spanish Household Budget Survey of 1990/91 and model petrol consumption taking into account the effect that income changes may have on car ownership levels, as well as the differences that exist between expenditure and consumption. Our results show the importance that household structure, place of residence and income have on petrol consumption. We are able to compute income elasticities of petrol expenditure, both conditional and unconditional on the level of car ownership. Non-conditional elasticities, while always very close to unit values, are lower for higher income households and for those living in rural areas or small cities. When car ownership levels are taken into account, conditional elasticities are obtained that are around one half the value of the non- conditional ones, being fairly stable across income categories and city sizes. As regards the redistributive effects of petrol taxation, we observe that for the lowest income deciles the share of petrol expenditure increases with income, and thus the tax can be regarded as progressive. However, after a certain income level the tax proves to be regressive.

Climate change in the Atlantic Ocean since the 1940's and the effects on the global climate

En aquest projecte s’ha estudiat la relació entre els canvis en les temperatures superficials de l’Oceà Atlàntic i els canvis en la circulació atmosfèrica en el segle XX. Concretament s’han analitzat dos períodes de estudi: el primer des del 1940 al 1960 i el segon des del 1980 fins al 2000. S’ha posat especial interès en les anomalies en les temperatures superficials del mar en la regió tropical de l’Oceà Atlàntic i la possible interconnexió amb els canvis climàtics observats i predits. Per a la realització de l’estudi s’han dut a terme una sèrie d’experiments utilitzant el model climàtic elaborat a la universitat d’UCLA (UCLA‐AGCM model). Els resultats obtinguts han estat analitzats en forma de mapes i figures per a cada variable d’estudi. També s’ha fet una comparació entre els resultats obtinguts i altres trobats en altres treballs publicats sobre el mateix tema de recerca. Els resultats obtinguts són molt amplis i poden tenir diverses interpretacions. Tot i així algunes de les conclusions a les quals s’ha arribat són: les diferències més significatives per a les variables estudiades i trobades a partir dels resultats obtinguts del model per als dos períodes d’estudi són en els mesos d’hivern i a la zona dels tròpics; concretament a parts del nord de sud Amèrica i a parts del nord d’Àfrica. S’han trobat també canvis significatius en els patrons de precipitació sobre aquestes mateixes zones. També s’ha observant un moviment cap al nord de la zona d’interconvergència tropical i pot ser degut a l’anòmal gradient trobat a la zona equatorial en les temperatures superficial de l’Oceà. Tot i així per a una definitiva discussió i conclusions sobre els resultats dels experiments, seria necessari un estudi més ampli i profund.

Product differentiation, competitive pressure and the effects of innovation on the success and survivability of firms in oligopoly markets

In a recent paper Tishler and Milstein (2009) fi…nd that increased competition may increase aggregate R&D spending while market output decreases. Therefore, they obtain the surprising result that R&D spending is excessive when competition becomes intense. Their result is based on the standard linear demand function for differentiated products introduced by Bowley (1924) where decreased product differentiation is interpreted as more competitive pressure. In this paper I show that at an aggregate level this interpretation is problematic because equilibrium effects are dominated by a demand reduction effect. A slight modifi…cation of the standard demand function eliminates this effect. For the Tishler and Milstein (2009) setting it is shown that then increased competition increases both R&D spending and aggregate market output. Therefore, at least for consumers, more intense competition increases welfare. Journal of Economic Literature Classi…fication Numbers: D43, L1, O3. Keywords: Oligopoly markets, Product differentiation, Competitive pressure.

Fiscal foresight and the effects of government spending

We study the effects of government spending by using a structural, large dimensional, dynamic factor model. We find that the government spending shock is non-fundamental for the variables commonly used in the structural VAR literature, so that its impulse response functions cannot be consistently estimated by means of a VAR. Government spending raises both consumption and investment, with no evidence of crowding out. The impact multiplier is 1.7 and the long run multiplier is 0.6.

Simultaneous estimation of indirect and interaction effects using structural equation models

Interaction effects are usually modeled by means of moderated regression analysis. Structural equation models with non-linear constraints make it possible to estimate interaction effects while correcting formeasurement error. From the various specifications, Jöreskog and Yang's(1996, 1998), likely the most parsimonious, has been chosen and further simplified. Up to now, only direct effects have been specified, thus wasting much of the capability of the structural equation approach. This paper presents and discusses an extension of Jöreskog and Yang's specification that can handle direct, indirect and interaction effects simultaneously. The model is illustrated by a study of the effects of an interactive style of use of budgets on both company innovation and performance

Admission Control for TCP Flows Using Packet Classes and Edge-to-edge Measurements of Aggregates

TCP flows from applications such as the web or ftp are well supported by a Guaranteed Minimum Throughput Service (GMTS), which provides a minimum network throughput to the flow and, if possible, an extra throughput. We propose a scheme for a GMTS using Admission Control (AC) that is able to provide different minimum throughput to different users and that is suitable for "standard" TCP flows. Moreover, we consider a multidomain scenario where the scheme is used in one of the domains, and we propose some mechanisms for the interconnection with neighbor domains. The whole scheme uses a small set of packet classes in a core-stateless network where each class has a different discarding priority in queues assigned to it. The AC method involves only edge nodes and uses a special probing packet flow (marked as the highest discarding priority class) that is sent continuously from ingress to egress through a path. The available throughput in the path is obtained at the egress using measurements of flow aggregates, and then it is sent back to the ingress. At the ingress each flow is detected using an implicit way and then it is admission controlled. If it is accepted, it receives the GMTS and its packets are marked as the lowest discarding priority classes; otherwise, it receives a best-effort service. The scheme is evaluated through simulation in a simple "bottleneck" topology using different traffic loads consisting of "standard" TCP flows that carry files of varying sizes

Ecological Footprint Inequality across countries: the role of environment intensity, income and interaction effects

Recently, White (2007) analysed the international inequalities in Ecological Footprints per capita (EF hereafter) based on a two-factor decomposition of an index from the Atkinson family (Atkinson (1970)). Specifically, this paper evaluated the separate role of environment intensity (EF/GDP) and average income as explanatory factors for these global inequalities. However, in addition to other comments on their appeal, this decomposition suffers from the serious limitation of the omission of the role exerted by probable factorial correlation (York et al. (2005)). This paper proposes, by way of an alternative, a decomposition of a conceptually similar index like Theil’s (Theil, 1967) which, in effect, permits clear decomposition in terms of the role of both factors plus an inter-factor correlation, in line with Duro and Padilla (2006). This decomposition might, in turn, be extended to group inequality components (Shorrocks, 1980), an analysis that cannot be conducted in the case of the Atkinson indices. The proposed methodology is implemented empirically with the aim of analysing the international inequalities in EF per capita for the 1980-2007 period and, amongst other results, we find that, indeed, the interactive component explains, to a significant extent, the apparent pattern of stability observed in overall international inequalities.

Economic and environmental effects of the CO2 taxation: an input-output analysis for Spain

CO2 emissions induced by human activities are the major cause of climate change; hence, strong environmental policy that limits the growing dependence on fossil fuel is indispensable. Tradable permits and environmental taxes are the usual tools used in CO2 reduction strategies. Such economic tools provide incentives to polluting industries to reduce their emissions through market signals. The aim of this work is to investigate the direct and indirect effects of an environmental tax on Spanish products and services. We apply an environmentally extended input-output (EIO) model to identify CO2 emission intensities of products and services and, accordingly, we estimate the tax proportional to these intensities. The short-term price effects are analyzed using an input-output price model. The effect of tax introduction on consumption prices and its influence on consumers’ welfare are determined. We also quantify the environmental impacts of such taxation in terms of the reduction in CO2 emissions. The results, based on the Spanish economy for the year 2007, show that sectors with relatively poor environmental profile are subjected to high environmental tax rates. And consequently, applying a CO2 tax on these sectors, increases production prices and induces a slight increase in consumer price index and a decrease in private welfare. The revenue from the tax could be used to counter balance the negative effects on social welfare and also to stimulate the increase of renewable energy shares in the most impacting sectors. Finally, our analysis highlights that the environmental and economic goals cannot be met at the same time with the environmental taxation and this shows the necessity of finding other (complementary or alternative) measures to ensure both the economic and ecological efficiencies. Keywords: CO2 emissions; environmental tax; input-output model, effects of environmental taxation.

Ecological Footprint Inequality across countries: the role of environment intensity, income and interaction effects

Recently, White (2007) analysed the international inequalities in Ecological Footprints per capita (EF hereafter) based on a two-factor decomposition of an index from the Atkinson family (Atkinson (1970)). Specifically, this paper evaluated the separate role of environment intensity (EF/GDP) and average income as explanatory factors for these global inequalities. However, in addition to other comments on their appeal, this decomposition suffers from the serious limitation of the omission of the role exerted by probable factorial correlation (York et al. (2005)). This paper proposes, by way of an alternative, a decomposition of a conceptually similar index like Theil’s (Theil, 1967) which, in effect, permits clear decomposition in terms of the role of both factors plus an inter-factor correlation, in line with Duro and Padilla (2006). This decomposition might, in turn, be extended to group inequality components (Shorrocks, 1980), an analysis that cannot be conducted in the case of the Atkinson indices. The proposed methodology is implemented empirically with the aim of analysing the international inequalities in EF per capita for the 1980-2007 period and, amongst other results, we find that, indeed, the interactive component explains, to a significant extent, the apparent pattern of stability observed in overall international inequalities. Key words: ecological footprint; international environmental distribution; inequality decomposition

Signalling and Productivity Effects of Overeducation: Is It Really a Waste of Resources?

Overeducation raises concerns that governments may be overinvesting in education. To inform the debate, this paper studies the impact of overeducation on productivity. We advance the literature by considering that returns to overeducation may be due both to productivity and signalling effects. To disentangle both effects, we apply Wolpin’s (1977) methodology and compare the rates of return of screened (employed) and unscreened (selfemployed) workers. To overcome well-known endogeneity problems due to unobserved heterogeneity, we estimate a panel with individual and employment-status fixed effects. Our results show that signalling effects are relevant and that overeducation does not carry a productivity penalty. Keywords: Overeducation, signalling model, human capital model, unobserved heterogeneity. JEL classification: I20, J24, J31.

Fiscal foresight, forecast revisions and the effects of government spending in the open economy

This paper investigates the effects of government spending on the real exchange rate and the trade balance in the US using a new VAR identification procedure based on spending forecast revisions. I find that the real exchange rate appreciates and the trade balance deteriorates after a government spending shock, although the effects are quantitatively small. The findings broadly match the theoretical predictions of the standard Mundell-Fleming model and differ substantially from those existing in literature. Differences are attributable to the fact that, because of fiscal foresight, the government spending is non-fundamental for the variables typically used in open economy VARs. Here, on the contrary, the estimated shock is fundamental.

Occupational sex-composition and earnings : individual and social effects

This paper investigates the micro and macro-level factors affecting the empirical association between occupational sex-composition and individual earnings. This is done in two analytical steps using data from the second round of the European Social Survey. In a first step, country-fixed-effects regressions are used to test the extent to which job-specialization, gender attitudes and the relative supply of domestic work can account for the impact of occupational sex-composition on earnings. In accordance with previous research, it is found that all these micro-level variables have a significant effect on the analyzed association, yet only job-specialization can explain it away by itself. In a second analytical step, macro-level interactions are tested under the hypothesis that defamilialization policies reduce the pay-offs of sphere specialization by sex, generating incentives for all types of women to invest in the labor market. Empirical results suggest that gender attitudes and the relative supply of housework are much more loosely associated to earning in social-democratic and former communist societies than in conservative or liberal regimes. This finding is interpreted as consistent with the defamilialization hypothesis.

Sovereign Risk, Anonymous Markets, and the Effects of Globalization

The goal of this paper is to study the e¤ects of globalization on the workings of financial markets. We adopt a "technological" view of globalization, which consists of an exogenous reduction in the cost of shipping goods across di¤erent regions of the world. We model financial markets where agents anonymously trade securities issued by every other agent in the world. In the absence of frictions, we show how globalization creates trade opportunities among residents of different regions of the world, thereby raising welfare. In the presence of sovereign risk, however, there emerge two crucial interactions between trade among residents within a region and trade among residents of di¤erent regions. First, the more residents within a region trade with each other, the more they can trade with residents of other regions. Second, the possibility of trade with residents of other regions sometimes leads a government to not enforce payments by its residents, destroying trade opportunities among residents within the region. The net effect on welfare of this process of creation and destruction of trade opportunities is ambiguous. We argue that there are no policies governments can take to avoid the negative effects of globalization on trade among domestic residents. In a dynamic extension, we analyze how our results are a¤ected by reputational considerations.

Portfolio choice and the effects of liquidity

This paper shows how to introduce liquidity into the well known mean-variance framework of portfolio selection. Either by estimating mean-variance liquidity constrained frontiers or directly estimating optimal portfolios for alternative levels of risk aversion and preference for liquidity, we obtain strong effects of liquidity on optimal portfolio selection. In particular, portfolio performance, measured by the Sharpe ratio relative to the tangency portfolio, varies significantly with liquidity. Moreover, although mean-variance performance becomes clearly worse, the levels of liquidity onoptimal portfolios obtained when there is a positive preference for liquidity are much lower than on those optimal portfolios where investors show no sign of preference for liquidity.