Essays on international macroeconomics and conflict analysis

This dissertation addressed two broad problems in international macroeconomics and conflict analysis. The first problem in the first chapter looked at the behavior of exchange rate and its interaction with industry-level tradable goods prices for three countries, USA, UK and Japan. This question has important monetary policy implications. Here, I computed to what extent changes in exchange rate affected prices of consumer, producer, and export goods. I also studied the timing of these changes in these prices. My results, based on thirty-four industrial prices for USA, UK and Japan, supported the view that changes in exchange rates significantly affect prices of industrial and consumer goods. It also provided an insight to the underlying economic process that led to changes in relative prices. ^ In the second chapter, I explored the predictability of future inflation by incorporating shocks to exchange rates and clearly specified the transmission mechanisms that link exchange rates to industry-level consumer and producer prices. Employing a variety of linear and state-of-the-art nonlinear models, I also predicted growth rates of future prices. Comparing levels of inflation obtained from the above approaches showed superiority of the structural model incorporating the exchange rate pass-through effect. ^ The second broad issue addressed in the third chapter of the dissertation investigated the economic motives for conflict, manifested by rebellion and civil war for seventeen Latin American countries. Based on the analytical framework of Garfinkel, Skaperdas and Syropoulos (2004), I employed ordinal regressions and Markov switching for a panel of seventeen countries to identify trade and openness factors responsible for conflict occurrence and intensity. The results suggested that increased trade openness reduced high intensity domestic conflicts but overdependence on agricultural exports, along with a lack of income earning opportunities lead to more conflicts. Thereafter, using the Cox Proportional Hazard model I studied “conflict duration” and found that over-reliance on agricultural exports explained a major part of the length of conflicts in addition to various socio-political factors. ^

Essays on emissions trading markets

This dissertation is a collection of three economics essays on different aspects of carbon emission trading markets. The first essay analyzes the dynamic optimal emission control strategies of two nations. With a potential to become the largest buyer under the Kyoto Protocol, the US is assumed to be a monopsony, whereas with a large number of tradable permits on hand Russia is assumed to be a monopoly. Optimal costs of emission control programs are estimated for both the countries under four different market scenarios: non-cooperative no trade, US monopsony, Russia monopoly, and cooperative trading. The US monopsony scenario is found to be the most Pareto cost efficient. The Pareto efficient outcome, however, would require the US to make side payments to Russia, which will even out the differences in the cost savings from cooperative behavior. The second essay analyzes the price dynamics of the Chicago Climate Exchange (CCX), a voluntary emissions trading market. By examining the volatility in market returns using AR-GARCH and Markov switching models, the study associates the market price fluctuations with two different political regimes of the US government. Further, the study also identifies a high volatility in the returns few months before the market collapse. Three possible regulatory and market-based forces are identified as probable causes of market volatility and its ultimate collapse. Organizers of other voluntary markets in the US and worldwide may closely watch for these regime switching forces in order to overcome emission market crashes. The third essay compares excess skewness and kurtosis in carbon prices between CCX and EU ETS (European Union Emission Trading Scheme) Phase I and II markets, by examining the tail behavior when market expectations exceed the threshold level. Dynamic extreme value theory is used to find out the mean price exceedence of the threshold levels and estimate the risk loss. The calculated risk measures suggest that CCX and EU ETS Phase I are extremely immature markets for a risk investor, whereas EU ETS Phase II is a more stable market that could develop as a mature carbon market in future years.

Essays on Emissions Trading Markets

This dissertation is a collection of three economics essays on different aspects of carbon emission trading markets. The first essay analyzes the dynamic optimal emission control strategies of two nations. With a potential to become the largest buyer under the Kyoto Protocol, the US is assumed to be a monopsony, whereas with a large number of tradable permits on hand Russia is assumed to be a monopoly. Optimal costs of emission control programs are estimated for both the countries under four different market scenarios: non-cooperative no trade, US monopsony, Russia monopoly, and cooperative trading. The US monopsony scenario is found to be the most Pareto cost efficient. The Pareto efficient outcome, however, would require the US to make side payments to Russia, which will even out the differences in the cost savings from cooperative behavior. The second essay analyzes the price dynamics of the Chicago Climate Exchange (CCX), a voluntary emissions trading market. By examining the volatility in market returns using AR-GARCH and Markov switching models, the study associates the market price fluctuations with two different political regimes of the US government. Further, the study also identifies a high volatility in the returns few months before the market collapse. Three possible regulatory and market-based forces are identified as probable causes of market volatility and its ultimate collapse. Organizers of other voluntary markets in the US and worldwide may closely watch for these regime switching forces in order to overcome emission market crashes. The third essay compares excess skewness and kurtosis in carbon prices between CCX and EU ETS (European Union Emission Trading Scheme) Phase I and II markets, by examining the tail behavior when market expectations exceed the threshold level. Dynamic extreme value theory is used to find out the mean price exceedence of the threshold levels and estimate the risk loss. The calculated risk measures suggest that CCX and EU ETS Phase I are extremely immature markets for a risk investor, whereas EU ETS Phase II is a more stable market that could develop as a mature carbon market in future years.

A Markov chain location-allocation meta-model for hurricane relief

An emergency is a deviation from a planned course of events that endangers people, properties, or the environment. It can be described as an unexpected event that causes economic damage, destruction, and human suffering. When a disaster happens, Emergency Managers are expected to have a response plan to most likely disaster scenarios. Unlike earthquakes and terrorist attacks, a hurricane response plan can be activated ahead of time, since a hurricane is predicted at least five days before it makes landfall. This research looked into the logistics aspects of the problem, in an attempt to develop a hurricane relief distribution network model. We addressed the problem of how to efficiently and effectively deliver basic relief goods to victims of a hurricane disaster. Specifically, where to preposition State Staging Areas (SSA), which Points of Distributions (PODs) to activate, and the allocation of commodities to each POD. Previous research has addressed several of these issues, but not with the incorporation of the random behavior of the hurricane's intensity and path. This research presents a stochastic meta-model that deals with the location of SSAs and the allocation of commodities. The novelty of the model is that it treats the strength and path of the hurricane as stochastic processes, and models them as Discrete Markov Chains. The demand is also treated as stochastic parameter because it depends on the stochastic behavior of the hurricane. However, for the meta-model, the demand is an input that is determined using Hazards United States (HAZUS), a software developed by the Federal Emergency Management Agency (FEMA) that estimates losses due to hurricanes and floods. A solution heuristic has been developed based on simulated annealing. Since the meta-model is a multi-objective problem, the heuristic is a multi-objective simulated annealing (MOSA), in which the initial solution and the cooling rate were determined via a Design of Experiments. The experiment showed that the initial temperature (T0) is irrelevant, but temperature reduction (δ) must be very gradual. Assessment of the meta-model indicates that the Markov Chains performed as well or better than forecasts made by the National Hurricane Center (NHC). Tests of the MOSA showed that it provides solutions in an efficient manner. Thus, an illustrative example shows that the meta-model is practical.

Switching patterns and steady-state analysis of grid-connected and stand-alone single-stage boost-inverters for PV applications

Renewable or sustainable energy (SE) sources have attracted the attention of many countries because the power generated is environmentally friendly, and the sources are not subject to the instability of price and availability. This dissertation presents new trends in the DC-AC converters (inverters) used in renewable energy sources, particularly for photovoltaic (PV) energy systems. A review of the existing technologies is performed for both single-phase and three-phase systems, and the pros and cons of the best candidates are investigated. In many modern energy conversion systems, a DC voltage, which is provided from a SE source or energy storage device, must be boosted and converted to an AC voltage with a fixed amplitude and frequency. A novel switching pattern based on the concept of the conventional space-vector pulse-width-modulated (SVPWM) technique is developed for single-stage, boost-inverters using the topology of current source inverters (CSI). The six main switching states, and two zeros, with three switches conducting at any given instant in conventional SVPWM techniques are modified herein into three charging states and six discharging states with only two switches conducting at any given instant. The charging states are necessary in order to boost the DC input voltage. It is demonstrated that the CSI topology in conjunction with the developed switching pattern is capable of providing the required residential AC voltage from a low DC voltage of one PV panel at its rated power for both linear and nonlinear loads. In a micro-grid, the active and reactive power control and consequently voltage regulation is one of the main requirements. Therefore, the capability of the single-stage boost-inverter in controlling the active power and providing the reactive power is investigated. It is demonstrated that the injected active and reactive power can be independently controlled through two modulation indices introduced in the proposed switching algorithm. The system is capable of injecting a desirable level of reactive power, while the maximum power point tracking (MPPT) dictates the desirable active power. The developed switching pattern is experimentally verified through a laboratory scaled three-phase 200W boost-inverter for both grid-connected and stand-alone cases and the results are presented.

Switching Patterns and Steady-State Analysis of Grid-Connected and Stand-Alone Single-Stage Boost-Inverters for PV Applications

Renewable or sustainable energy (SE) sources have attracted the attention of many countries because the power generated is environmentally friendly, and the sources are not subject to the instability of price and availability. This dissertation presents new trends in the DC-AC converters (inverters) used in renewable energy sources, particularly for photovoltaic (PV) energy systems. A review of the existing technologies is performed for both single-phase and three-phase systems, and the pros and cons of the best candidates are investigated. In many modern energy conversion systems, a DC voltage, which is provided from a SE source or energy storage device, must be boosted and converted to an AC voltage with a fixed amplitude and frequency. A novel switching pattern based on the concept of the conventional space-vector pulse-width-modulated (SVPWM) technique is developed for single-stage, boost-inverters using the topology of current source inverters (CSI). The six main switching states, and two zeros, with three switches conducting at any given instant in conventional SVPWM techniques are modified herein into three charging states and six discharging states with only two switches conducting at any given instant. The charging states are necessary in order to boost the DC input voltage. It is demonstrated that the CSI topology in conjunction with the developed switching pattern is capable of providing the required residential AC voltage from a low DC voltage of one PV panel at its rated power for both linear and nonlinear loads. In a micro-grid, the active and reactive power control and consequently voltage regulation is one of the main requirements. Therefore, the capability of the single-stage boost-inverter in controlling the active power and providing the reactive power is investigated. It is demonstrated that the injected active and reactive power can be independently controlled through two modulation indices introduced in the proposed switching algorithm. The system is capable of injecting a desirable level of reactive power, while the maximum power point tracking (MPPT) dictates the desirable active power. The developed switching pattern is experimentally verified through a laboratory scaled three-phase 200W boost-inverter for both grid-connected and stand-alone cases and the results are presented.