Future of the Clean Development Mechanism in Tackling Climate Change

Using a theoretical framework, we explain the impact of the Clean Development Mechanism (CDM) on emissions in Annex I and non-Annex I countries. We show that on one hand, emissions in the non-Annex I country decline because of abatement sponsored by the Annex I country under the CDM; on the other hand, emissions may increase because (i) the Annex I country increases emissions in its own country, and (ii) the non-Annex I country crowds out the bene ts from the CDM projects by increasing its domestic emissions. For the CDM to be e¤ective in reducing global emissions, we show that partial Certi ed Emissions Reduction credits should be given to the Annex I country that sponsors CDM projects in the non-Annex I country. We also suggest that the CDM Executive Board should not allow the CDM projects to be hosted by non-Annex I countries that are too conscious about their emission levels.

The Impact of Population Ageing on the Labour Market: Evidence from Overlapping Generations Computable General Equilibrium (OLG-CGE) Model of Scotland

This paper presents a dynamic Overlapping Generations Computable General Equilibrium (OLG-CGE) model of Scotland. The model is used to examine the impact of population ageing on the labour market. More specifically, it is used to evaluate the effects of labour force decline and labour force ageing on key macro-economic variables. The second effect is assumed to operate through age-specific productivity and labour force participation. In the analysis, particular attention is paid to how population ageing impinges on the government expenditure constraint. The basic structure of the model follows in the Auerbach and Kotlikoff tradition. However, the model takes into consideration directly age-specific mortality. This is analogous to “building in” a cohort-component population projection structure to the model, which allows more complex and more realistic demographic scenarios to be considered.

The past, present and future of central banking

The financial crisis, on the one hand, and the recourse to ‘unconventional’ monetary policy, on the other, have given a sharp jolt to perceptions of the role and status of central banks. In this paper we start with a brief ‘contrarian’ history of central banks since the second world war, which presents the Great Moderation and the restricted focus on inflation targeting as a temporary aberration from the norm. We then discuss how recent developments in fiscal and monetary policy have affected the role and status of central banks, notably their relationships with governments, before considering the environment central banks will face in the near and middle future and how they will have to change to address it.

The Impact of Population Ageing on the Labour Market: Evidence from Overlapping Generations Computable General Equilibrium (OLG-CGE) Model of Scotland

This paper presents a dynamic Overlapping Generations Computable General Equilibrium (OLG-CGE) model of Scotland. The model is used to examine the impact of population ageing on the labour market. More specifically, it is used to evaluate the effects of labour force decline and labour force ageing on key macro-economic variables. The second effect is assumed to operate through age-specific productivity and labour force participation. In the analysis, particular attention is paid to how population ageing impinges on the government expenditure constraint. The basic structure of the model follows in the Auerbach and Kotlikoff tradition. However, the model takes into consideration directly age-specific mortality. This is analogous to “building in” a cohort-component population projection structure to the model, which allows more complex and more realistic demographic scenarios to be considered.

The Inflation Risk Premium on Government Debt in an Overlapping Generations Model

This paper presents a general equilibrium model in which nominal government debt pays an inflation risk premium. The model predicts that the inflation risk premium will be higher in economies which are exposed to unanticipated inflation through nominal asset holdings. In particular, the inflation risk premium is higher when government debt is primarily nominal, steady-state inflation is low, and when cash and nominal debt account for a large fraction of consumers' retirement portfolios. These channels do not appear to have been highlighted in previous models or tested empirically. Numerical results suggest that the inflation risk premium is comparable in magnitude to standard representative agent models. These findings have implications for management of government debt, since the inflation risk premium makes it more costly for governments to borrow using nominal rather than indexed debt. Simulations of an extended model with Epstein-Zin preferences suggest that increasing the share of indexed debt would enable governments to permanently lower taxes by an amount that is quantitatively non-trivial.

Genuine savings and future well-being in Germany, 1850-2000

Genuine Savings (GS), also known as ‘net adjusted savings’, is a composite indicator of the sustainability of economic development. Genuine Savings reflects year-on-year changes in the total wealth or capital of a country, including net investment in produced capita, investment in human capital, depletion of natural resources, and damage caused by pollution. A negative Genuine Savings rate suggests that the stock of national wealth is declining and that future utility must be less than current utility, indicating that economic development is non-sustainable (Hamilton and Clemens, 1999). We make use of data over a 150 year period to examine the relationship between Genuine Savings and a number of indicators of well-being over time, and compare the relative changes in human, produced, and components of natural capital over the period. Overall, we find that the magnitude of genuine savings is positively related to changes in future consumption, with some evidence of a cointegrating relationship. However, the relationships between genuine savings and infant mortality or average heights are less clear.