Technology flows, outsourcing and productivity:an analysis of UK trade and FDI

The literature on technology spillovers from trade and FDI is ambiguous in its findings. This may in part be because of the assumption in much of the work that trade and FDI flows are homogeneous in their determinants and thus in their effects. We develop a taxonomy of trade and FDI determinants based on R&D intensity and unit labour cost differentials, and test for the presence of spillovers from inward investment and imports on an extensive sample of UK manufacturing plants. We find that both trade and FDI have measurable spillover effects, but the sign and extent of these effects varies depending on the technological and factor cost differentials between the recipient and host economies. There is therefore an identifiable link between the determinants and effects of trade and FDI which the previous literature has not explored.

FDI horizontal and vertical effects on local firm technical efficiency

Differencing from previous studies on foreign direct investment (FDI) spillovers to domestic enterprises which mainly focus on productivity, in this paper we take a different perspective by analysing the impacts of FDI to technical efficiency of domestic firms. The paper goes beyond the current literature to shed some light on the spillover effects of FDI to technical efficiency of small and medium enterprises in a developing country. By exploiting a firm-level panel dataset and using SFA models following Battese and Coelli (1995), the paper is able to analyse horizontal spillovers through imitation and competition and labour mobility as well as vertical spillovers through backward and forward linkages on technical efficiency. The paper contributes to the understanding of potential effects on foreign invested enterprises on domestic economy in general and local enterprises performance in particular. Thus it importantly assists policy making by the government of developing countries, where FDI is believed to create technical spillovers on domestic enterprises.

Technology flows, outsourcing and productivity:an analysis of UK trade and FDI

The literature on technology spillovers from trade and FDI is ambiguous in its findings. This may in part be because of the assumption in much of the work that trade and FDI flows are homogeneous in their determinants and thus in their effects. We develop a taxonomy of trade and FDI determinants based on R&D intensity and unit labour cost differentials, and test for the presence of spillovers from inward investment and imports on an extensive sample of UK manufacturing plants. We find that both trade and FDI have measurable spillover effects, but the sign and extent of these effects varies depending on the technological and factor cost differentials between the recipient and host economies. There is therefore an identifiable link between the determinants and effects of trade and FDI which the previous literature has not explored.

Network density and R&D spillovers

This paper models how the structure and function of a network of firms affects their aggregate innovativeness. Each firm has the potential to innovate, either from in-house R&D or from innovation spillovers from neighboring firms. The nature of innovation spillovers depends upon network density, the commonality of knowledge between firms, and the learning capability of firms. Innovation spillovers are modelled in detail using ideas from organizational theory. Two main results emerge: (i) the marginal effect on innovativeness of spillover intensity is non-monotonic, and (ii) network density can affect innovativeness but only when there are heterogeneous firms.

NOx storage-reduction characteristics of Ba-based lean NOx trap catalysts subjected to simulated road aging

In order to study the effect of washcoat composition on lean NOx trap (LNT) aging characteristics, fully formulated monolithic LNT catalysts containing varying amounts of La-stabilized CeO2 (5 wt% La2O3) or CeO2-ZrO2 (Ce:Zr = 70:30) were subjected to accelerated aging on a bench reactor. Subsequent catalyst evaluation revealed that aging resulted in deterioration of the NOx storage, NOx release and NOx reduction functions, whereas the observation of lean phase NO2 slip for all of the aged catalysts indicated that LNT performance was not limited by the kinetics of NO oxidation. After aging, all of the catalysts showed increased selectivity to NH3 in the temperature range 250–450 °C. TEM, H2 chemisorption, XPS and elemental analysis data revealed two main changes which can explain the degradation in LNT performance. First, residual sulfur in the catalysts, present as BaSO4, decreased catalyst NOx storage capacity. Second, sintering of the precious metals in the washcoat was observed, which can be expected to decrease the rate of NOx reduction. Additionally, sintering is hypothesized to result in segregation of the precious metal and Ba phases, resulting in less efficient NOx spillover from Pt to Ba during NOx adsorption, as well as decreased rates of reductant spillover from Pt to Ba and reverse NOx spillover during catalyst regeneration. Spectacular improvement in LNT durability was observed for catalysts containing CeO2 or CeO2-ZrO2 relative to their non-ceria containing analog. This was attributed to (i) the ability of ceria to participate in NOx storage/reduction as a supplement to the main Ba NOx storage component; (ii) the fact that Pt and CeO2(-ZrO2) are not subject to phase segregation; and (iii) the ability of ceria to trap sulfur, resulting in decreased sulfur accumulation on the Ba component.

Bid-ask spread dynamics in foreign exchange markets

The aim of this paper is to examine the short term dynamics of foreign exchange rate spreads. Using a vector autoregressive model (VAR) we show that most of the variation in the spread comes from the long run dependencies between past and future spreads rather than being caused by changes in inventory, adverse selection, cost of carry or order processing costs. We apply the Integrated Cumulative Sum of Squares (ICSS) algorithm of Inclan and Tiao (1994) to discover how often spread volatility changes. We find that spread volatility shifts are relatively uncommon and shifts in one currency spread tend not to spillover to other currency spreads. © 2013.

Modelling stock volatilities during financial crises:a time varying coefficient approach

We examine how the most prevalent stochastic properties of key financial time series have been affected during the recent financial crises. In particular we focus on changes associated with the remarkable economic events of the last two decades in the volatility dynamics, including the underlying volatility persistence and volatility spillover structure. Using daily data from several key stock market indices, the results of our bivariate GARCH models show the existence of time varying correlations as well as time varying shock and volatility spillovers between the returns of FTSE and DAX, and those of NIKKEI and Hang Seng, which became more prominent during the recent financial crisis. Our theoretical considerations on the time varying model which provides the platform upon which we integrate our multifaceted empirical approaches are also of independent interest. In particular, we provide the general solution for time varying asymmetric GARCH specifications, which is a long standing research topic. This enables us to characterize these models by deriving, first, their multistep ahead predictors, second, the first two time varying unconditional moments, and third, their covariance structure.

The external dimension of EU justice and home affairs after the Lisbon Treaty::analysing the dynamics of expansion and diversification

The article introduces a research framework for analysing the external dimension of EU Justice and Home Affairs after the Lisbon Treaty. The dynamics of expansion and diversification, discernable for both the EU policy-making and the scholarly work dedicated to it, are at the centre of the article and constitute a common reference point for the present Special Issue. These dynamics have been triggered through deliberate decisions of involved policy-makers as well as through unintended spillover effects from other policy areas and/or decisions. The article also engages with the theoretically informed literature on the subject, which struggles with the definition of what this dimension actually constitutes, as well as how to best capture the practices of this field.We take stock of the scholarly debates by comparing the diverse approaches and discussing how much they complement each other and/or present different dimensions of a single ‘policy universe’.

Stabilization of catalyst particles against sintering on oxide supports with high oxygen ion lability exemplified by Ir-catalyzed decomposition of N2O

Iridium nanoparticles deposited on a variety of surfaces exhibited thermal sintering characteristics that were very strongly correlated with the lability of lattice oxygen in the supporting oxide materials. Specifically, the higher the lability of oxygen ions in the support, the greater the resistance of the nanoparticles to sintering in an oxidative environment. Thus with γ-Al2O3 as the support, rapid and extensive sintering occurred. In striking contrast, when supported on gadolinia-ceria and alumina-ceria-zirconia composite, the Ir nanoparticles underwent negligible sintering. In keeping with this trend, the behavior found with yttria-stabilized zirconia was an intermediate between the two extremes. This resistance, or lack of resistance, to sintering is considered in terms of oxygen spillover from support to nanoparticles and discussed with respect to the alternative mechanisms of Ostwald ripening versus nanoparticle diffusion. Activity towards the decomposition of N2O, a reaction that displays pronounced sensitivity to catalyst particle size (large particles more active than small particles), was used to confirm that catalytic behavior was consistent with the independently measured sintering characteristics. It was found that the nanoparticle active phase was Ir oxide, which is metallic, possibly present as a capping layer. Moreover, observed turnover frequencies indicated that catalyst-support interactions were important in the cases of the sinter-resistant systems, an effect that may itself be linked to the phenomena that gave rise to materials with a strong resistance to nanoparticle sintering.

The calculation of dynamic ecological footprint on the basis of the dynamic input-output model

The Leontief input-output model is widely used to determine the ecological footprint of consumption in a region or a country. It is able to capture spillover environmental effects along the supply change, thus its popularity is increasing in ecology related economic research. These studies are static and the dynamic investigations are neglected. The dynamic Leontief model makes it possible to involve the capital and inventory investment in the footprint calculation that projects future growth of GDP and environmental impacts. We show a new calculation method to determine the effect of capital accumulation on ecological footprint. Keywords: Dynamic Leontief model, Dynamic ecological footprint, Environmental management, Allocation method

Debt Restructuring in the Euro Area: a Necessary but Manageable Evil?

There are two possible responses to the Greek debt crisis: ‘Plan A’, continued official lending, for as long as needed, with possible voluntary private sector involvement, and ‘Plan B’, coercive preemptive or post-default restructuring with significant face value reduction in privately-held debt. Both options have risks, but it is necessary to move to Plan B sooner or later. The impact on Greece could be mitigated by foreign bank ownership and proper liquidity support measures. The direct spillover impact on the rest of the euro area seems small. But there is the risk of contagion, which is a serious concern. There is a cautious case for delaying somewhat Plan B in order to prepare for it.

On the fundamentals of research and development (R&D) spillovers in competitive markets

Rivals may voluntarily share Research and Development (R&D) results even in the absence of any binding agreements or collusion. In a model where rival firms engage in non-cooperative independent R&D process, we used optimization and game theory analysis to study the equilibrium strategy of the firms. Our work showed that, while minimal spillover is always equilibrium, there may be another equilibrium where firms may reciprocally choose high, sometimes perfect, spillover rates. The incentive for sharing R&D output is based on firms' expectations of learning from their rivals' R&D progress in the future. This leads to strategic complementarities between the firms' choices of spillover rates and thus policy implication follows. ^ Public research agencies can contribute more to social welfare by providing research as public goods. In a non-cooperative public-private research relationship where parallel R&D is conducted, by making its R&D results accessible, the public research agency can stimulate private spillovers, even if there exists rivalry among the private firms who can benefit from such spillovers. ^

Structure of international cooperation in trade, investment and environment

This dissertation analyzes the obstacles against further cooperation in international economic relations. The first essay explains the gradual nature of trade liberalization. I show that existence of asymmetric information between governments provides a sufficient reason for gradualism to exist. Governments prefer starting small to reduce the cost of partner’s betrayal when there is sufficient degree of information asymmetry regarding the partner’s type. Learning about partner’s incentive structure enhances expectations, encouraging governments to increase their current level of cooperation. Specifically, the uninformed government’s subjective belief for the trading partner being good is improved as the partner acts cooperatively. This updated belief, in turn, lowers the subjective probability of future betrayal, enabling further progress in cooperation. The second essay analyzes the relationship between two countries facing two policy dilemmas in an environment with two way goods and capital flows. When issues are independent and countries are symmetric, signing separate agreements for tariffs (Free Trade Agreements-FTA) and for taxes (Tax Treaties-TT) provides the identical level of enforcement as signing a linked agreement. However, linkage can still improve the joint welfare by transferring the slack enforcement power in a case of asymmetric issues or countries. I report non-results in two cases where the policy issues are interconnected due to technological spillover effect of FDI. Moreover, I show that linking the agreements actually reduces enforcement when agreements are linked under a limited punishment rule and policy variables are strategic substitutes. The third essay investigates the welfare/enforcement consequences of linking trade and environmental agreements. In the standard literature, linking the agreements generate non-trivial results only when there is structural relation between the issues. I focus on institutional design of the linkage and show that even if environmental aspects of international trade are negligible linking the agreements might still have some interesting welfare implications under current GATT Rules. Specifically, when traded goods are substitutes in consumption, linking the environmental agreement with trade agreement under the Withdrawal of Equivalent Concession Rule (Article XXVIII) will reduce the enforcement. However, enforcement in environmental issue increases when the same rule is implemented in the absence of linkage.

Estimation of sea surface temperatures and salinity of ODP Site 177-1089 (Appendix A)

ODP Site 1089 is optimally located in order to monitor the occurrence of maxima in Agulhas heat and salt spillage from the Indian to the Atlantic Ocean. Radiolarian-based paleotemperature transfer functions allowed to reconstruct the climatic history for the last 450 kyr at this location. A warm sea surface temperature anomaly during Marine Isotope Stage (MIS) 10 was recognized and traced to other oceanic records along the surface branch of the global thermohaline (THC) circulation system, and is particularly marked at locations where a strong interaction between oceanic and atmospheric overturning cells and fronts occurs. This anomaly is absent in the Vostok ice core deuterium, and in oceanic records from the Antarctic Zone. However, it is present in the deuterium excess record from the Vostok ice core, interpreted as reflecting the temperature at the moisture source site for the snow precipitated at Vostok Station. As atmospheric models predict a subtropical Indian source for such moisture, this provides the necessary teleconnection between East Antarctica and ODP Site 1089, as the subtropical Indian is also the source area of the Agulhas Current, the main climate agent at our study location. The presence of the MIS 10 anomaly in the delta13C foraminiferal records from the same core supports its connection to oceanic mechanisms, linking stronger Agulhas spillover intensity to increased productivity in the study area. We suggest, in analogy to modern oceanographic observations, this to be a consequence of a shallow nutricline, induced by eddy mixing and baroclinic tide generation, which are in turn connected to the flow geometry, and intensity, of the Agulhas Current as it flows past the Agulhas Bank. We interpret the intensified inflow of Agulhas Current to the South Atlantic as responding to the switch between lower and higher amplitude in the insolation forcing in the Agulhas Current source area. This would result in higher SSTs in the Cape Basin during the glacial MIS 10, due to the release into the South Atlantic of the heat previously accumulating in the subtropical and equatorial Indian and Pacific Ocean. If our explanation for the MIS 10 anomaly in terms of an insolation variability switch is correct, we might expect that a future Agulhas SSST anomaly event will further delay the onset of next glacial age. In fact, the insolation forcing conditions for the Holocene (the current interglacial) are very similar to those present during MIS 11 (the interglacial preceding MIS 10), as both periods are characterized by a low insolation variability for the Agulhas Current source area. Natural climatic variability will force the Earth system in the same direction as the anthropogenic global warming trend, and will thus lead to even warmer than expected global temperatures in the near future.

Realized Matrix-Exponential Stochastic Volatility with Asymmetry, Long Memory and Spillovers

The paper develops a novel realized matrix-exponential stochastic volatility model of multivariate returns and realized covariances that incorporates asymmetry and long memory (hereafter the RMESV-ALM model). The matrix exponential transformation guarantees the positivedefiniteness of the dynamic covariance matrix. The contribution of the paper ties in with Robert Basmann’s seminal work in terms of the estimation of highly non-linear model specifications (“Causality tests and observationally equivalent representations of econometric models”, Journal of Econometrics, 1988, 39(1-2), 69–104), especially for developing tests for leverage and spillover effects in the covariance dynamics. Efficient importance sampling is used to maximize the likelihood function of RMESV-ALM, and the finite sample properties of the quasi-maximum likelihood estimator of the parameters are analysed. Using high frequency data for three US financial assets, the new model is estimated and evaluated. The forecasting performance of the new model is compared with a novel dynamic realized matrix-exponential conditional covariance model. The volatility and co-volatility spillovers are examined via the news impact curves and the impulse response functions from returns to volatility and co-volatility.