Bayesian model averaging and identification of structural breaks in time series

Bayesian Model Averaging (BMA) is used for testing for multiple break points in univariate series using conjugate normal-gamma priors. This approach can test for the number of structural breaks and produce posterior probabilities for a break at each point in time. Results are averaged over specifications including: stationary; stationary around trend and unit root models, each containing different types and number of breaks and different lag lengths. The procedures are used to test for structural breaks on 14 annual macroeconomic series and 11 natural resource price series. The results indicate that there are structural breaks in all of the natural resource series and most of the macroeconomic series. Many of the series had multiple breaks. Our findings regarding the existence of unit roots, having allowed for structural breaks in the data, are largely consistent with previous work.

Calories, obesity and health in OECD countries

Theoretical models suggest that decisions about diet, weight and health status are endogenous within a utility maximization framework. In this article, we model these behavioural relationships in a fixed-effect panel setting using a simultaneous equation system, with a view to determining whether economic variables can explain the trends in calorie consumption, obesity and health in Organization for Economic Cooperation and Development (OECD) countries and the large differences among the countries. The empirical model shows that progress in medical treatment and health expenditure mitigates mortality from diet-related diseases, despite rising obesity rates. While the model accounts for endogeneity and serial correlation, results are affected by data limitations.

Sensitivity of GCM tropical middle atmosphere variability and climate to ozone and parametrized gravity wave changes

This paper describes the impact of changing the current imposed ozone climatology upon the tropical Quasi-Biennial Oscillation (QBO) in a high top climate configuration of the Met Office U.K. general circulation model. The aim is to help distinguish between QBO changes in chemistry climate models that result from temperature-ozone feedbacks and those that might be forced by differences in climatology between previously fixed and newly interactive ozone distributions. Different representations of zonal mean ozone climatology under present-day conditions are taken to represent the level of change expected between acceptable model realizations of the global ozone distribution and thus indicate whether more detailed investigation of such climatology issues might be required when assessing ozone feedbacks. Tropical stratospheric ozone concentrations are enhanced relative to the control climatology between 20–30 km, reduced from 30–40 km and enhanced above, impacting the model profile of clear-sky radiative heating, in particular warming the tropical stratosphere between 15–35 km. The outcome is consistent with a localized equilibrium response in the tropical stratosphere that generates increased upwelling between 100 and 4 hPa, sufficient to account for a 12 month increase of modeled mean QBO period. This response has implications for analysis of the tropical circulation in models with interactive ozone chemistry because it highlights the possibility that plausible changes in the ozone climatology could have a sizable impact upon the tropical upwelling and QBO period that ought to be distinguished from other dynamical responses such as ozone-temperature feedbacks.

Selection of funding schemes by a borrowing decision model: a Hong Kong case study

In financial decision-making, a number of mathematical models have been developed for financial management in construction. However, optimizing both qualitative and quantitative factors and the semi-structured nature of construction finance optimization problems are key challenges in solving construction finance decisions. The selection of funding schemes by a modified construction loan acquisition model is solved by an adaptive genetic algorithm (AGA) approach. The basic objectives of the model are to optimize the loan and to minimize the interest payments for all projects. Multiple projects being undertaken by a medium-size construction firm in Hong Kong were used as a real case study to demonstrate the application of the model to the borrowing decision problems. A compromise monthly borrowing schedule was finally achieved. The results indicate that Small and Medium Enterprise (SME) Loan Guarantee Scheme (SGS) was first identified as the source of external financing. Selection of sources of funding can then be made to avoid the possibility of financial problems in the firm by classifying qualitative factors into external, interactive and internal types and taking additional qualitative factors including sovereignty, credit ability and networking into consideration. Thus a more accurate, objective and reliable borrowing decision can be provided for the decision-maker to analyse the financial options.

Farm productivity and efficiency in rural Bangladesh: the role of education revisited

This article reassesses the debate over the role of education in farm production in Bangladesh using a large dataset on rice producing households from 141 villages. Average and stochastic production frontier functions are estimated to ascertain the effect of education on productivity and efficiency. A full set of proxies for farm education stock variables are incorporated to investigate the ‘internal’ as well as ‘external’ returns to education. The external effect is investigated in the context of rural neighbourhoods. Our analysis reveals that in addition to raising rice productivity and boosting potential output, household education significantly reduces production inefficiencies. However, we are unable to find any evidence of the externality benefit of schooling – neighbour's education does not matter in farm production. We discuss the implication of these findings for rural education programmes in Bangladesh.