What drives urban consumption in mainland china? The role of property price dynamics

This paper adds to the literature on wealth effects on consumption by disentangling house price effects on consumption for mainland China. In a stochastic modelling framework, the riskiness, rate of increase and persistence of house price movements have different implications for the consumption/housing ratio. We exploit the geographical variation in property prices by using a quarterly city-level panel dataset for the period 1998Q1 – 2009Q4 and rely on a panel error correction model. Overall, the results suggest a significant long run impact of property prices on consumption. They also broadly confirm the predictions from the theoretical model.

The Marginal Productivity Theory Of The Price Of Capital: An Historical Perspective On The Origins Of The Codswallop

Although it might have been expected that, by this point in time, the unacceptability of the marginal productivity theory of the return on capital would be universally agreed, that is evidently not the case. Popular textbooks still propound the dogma to the innocent. This note is presented in the hope that a succinct indication of the origins of the theory it will contribute to a more general appreciation of the unrealistic and illogical nature of this doctrine.

Still More On Why We Should Bury The Marginal Productivity Theory Of The Price Of Capital: A Supplementary Note

The purpose of this note is to supplement the author’s earlier remarks on the unsatisfactory nature of the neoclassical account of how the return on capital is determined. (See Strathclyde Discussion Paper 12-03: “The Marginal Productivity Theory of the Price of Capital: An Historical Perspective on the Origins of the Codswallop”). The point is made via a simple illustration that certain matters which are problematical in neoclassical terms are perfectly straightforward when viewed from a classical perspective. Basically, the marginalist model of the nature of an economic system is not fit for purpose in that it fails to comprehend the essential features of a surplus-producing economic system as distinct from one merely of exchange.

Aggregate and welfare effects of long run inflation risk under inflation and price-level targeting

This paper presents a DSGE model in which long run inflation risk matters for social welfare. Aggregate and welfare effects of long run inflation risk are assessed under two monetary regimes: inflation targeting (IT) and price-level targeting (PT). These effects differ because IT implies base-level drift in the price level, while PT makes the price level stationary around a target price path. Under IT, the welfare cost of long run inflation risk is equal to 0.35 percent of aggregate consumption. Under PT, where long run inflation risk is largely eliminated, it is lowered to only 0.01 per cent. There are welfare gains from PT because it raises average consumption for the young and lowers consumption risk substantially for the old. These results are strongly robust to changes in the PT target horizon and fairly robust to imperfect credibility, fiscal policy, and model calibration. While the distributional effects of an unexpected transition to PT are sizeable, they are short-lived and not welfare-reducing.

Indexed versus nominal government debt under inflation and price-level targeting

This paper presents a DSGE model in which long run inflation risk matters for social welfare. Optimal indexation of long-term government debt is studied under two monetary policy regimes: inflation targeting (IT) and price-level targeting (PT). Under IT, full indexation is optimal because long run inflation risk is substantial due to base-level drift, making indexed bonds a much better store of value than nominal bonds. Under PT, where long run inflation risk is largely eliminated, optimal indexation is substantially lower because nominal bonds become a better store of value relative to indexed bonds. These results are robust to the PT target horizon, imperfect credibility of PT and model calibration, but the assumption that indexation is lagged is crucial. From a policy perspective, a key finding is that accounting for optimal indexation has important welfare implications for comparisons of IT and PT.

Self-Fulfilling Price Cycles

This paper presents a model of a self-fulfilling price cycle in an asset market. Price oscillates deterministically even though the underlying environment is stationary. The mechanism that we uncover is driven by endogenous variation in the investment horizons of the different market participants, informed and uninformed. On even days, the price is high; on odd days it is low. On even days, informed traders are willing to jettison their good assets, knowing that they can buy them back the next day, when the price is low. The anticipated drop in price more than offsets any potential loss in dividend. Because of these asset sales, the informed build up their cash holdings. Understanding that the market is flooded with good assets, the uninformed traders are willing to pay a high price. But their investment horizon is longer than that of the informed traders: their intention is to hold the assets they purchase, not to resell. On odd days, the price is low because the uninformed recognise that the informed are using their cash holdings to cherry-pick good assets from the market. Now the uninformed, like the informed, are investing short-term. Rather than buy-and-hold as they do with assets purchased on even days, on odd days the uninformed are buying to sell. Notice that, at the root of the model, there lies a credit constraint. Although the informed are flush with cash on odd days, they are not deep pockets. On each cherry that they pick out of the market, they earn a high return: buying cheap, selling dear. However they don't have enough cash to strip the market of cherries and thereby bid the price up.

Efficient Competition through Cheap Talk: Competing Auctions and Competitive Search without Ex Ante Price

We consider a frictional two-sided matching market in which one side uses public cheap talk announcements so as to attract the other side. We show that if the first-price auction is adopted as the trading protocol, then cheap talk can be perfectly informative, and the resulting market outcome is efficient, constrained only by search frictions. We also show that the performance of an alternative trading protocol in the cheap-talk environment depends on the level of price dispersion generated by the protocol: If a trading protocol compresses (spreads) the distribution of prices relative to the first-price auction, then an efficient fully revealing equilibrium always (never) exists. Our results identify the settings in which cheap talk can serve as an efficient competitive instrument, in the sense that the central insights from the literature on competing auctions and competitive search continue to hold unaltered even without ex ante price commitment.

Price Transmission and Effects of Exchange Rates on Domestic Commodity Prices via Offshore and Currency Hedging

The framework presents how trading in the foreign commodity futures market and the forward exchange market can affect the optimal spot positions of domestic commodity producers and traders. It generalizes the models of Kawai and Zilcha (1986) and Kofman and Viaene (1991) to allow both intermediate and final commodities to be traded in the international and futures markets, and the exporters/importers to face production shock, domestic factor costs and a random price. Applying mean-variance expected utility, we find that a rise in the expected exchange rate can raise both supply and demand for commodities and reduce domestic prices if the exchange rate elasticity of supply is greater than that of demand. Whether higher volatilities of exchange rate and foreign futures price can reduce the optimal spot position of domestic traders depends on the correlation between the exchange rate and the foreign futures price. Even though the forward exchange market is unbiased, and there is no correlation between commodity prices and exchange rates, the exchange rate can still affect domestic trading and prices through offshore hedging and international trade if the traders are interested in their profit in domestic currency. It illustrates how the world prices and foreign futures prices of commodities and their volatility can be transmitted to the domestic market as well as the dynamic relationship between intermediate and final goods prices. The equilibrium prices depends on trader behaviour i.e. who trades or does not trade in the foreign commodity futures and domestic forward currency markets. The empirical result applying a two-stage-least-squares approach to Thai rice and rubber prices supports the theoretical result.

Climate change effects on animal and plant phylogenetic diversity in southern Africa

Much attention has been paid to the effects of climate change on species' range reductions and extinctions. There is however surprisingly little information on how climate change driven threat may impact the tree of life and result in loss of phylogenetic diversity (PD). Some plant families and mammalian orders reveal nonrandom extinction patterns, but many other plant families do not. Do these discrepancies reflect different speciation histories and does climate induced extinction result in the same discrepancies among different groups? Answers to these questions require representative taxon sampling. Here, we combine phylogenetic analyses, species distribution modeling, and climate change projections on two of the largest plant families in the Cape Floristic Region (Proteaceae and Restionaceae), as well as the second most diverse mammalian order in Southern Africa (Chiroptera), and an herbivorous insect genus (Platypleura) in the family Cicadidae to answer this question. We model current and future species distributions to assess species threat levels over the next 70years, and then compare projected with random PD survival. Results for these animal and plant clades reveal congruence. PD losses are not significantly higher under predicted extinction than under random extinction simulations. So far the evidence suggests that focusing resources on climate threatened species alone may not result in disproportionate benefits for the preservation of evolutionary history.

Estimating the Price of ROCs

The UK government introduced the Renewable Obligation (RO), a system of tradable quotas, to encourage the installation of renewable electricity capacity. Each unit of generation from renewables created a renewable obligation certificate (ROC). Electricity generators must either; earn ROCs through their own production, purchase ROCs in the market or pay the buy-out price to comply with the quota set by the RO. A unique aspect of this regulation is that all entities holding ROCs receive a share of the buy-out fund (the sum of all compliance purchases using the buy-out price). This set-up ensures that the difference between the market price for ROCs and the buy-out price should equal the expected share of the buy-out fund, as regulated entities arbitrage these two compliance options. The expected share of the buy-out fund depends on whether enough renewable generation is available to meet the quota. This analysis tests whether variables associated with renewable generation or electricity demand are correlated with, and thus can help predict, the price of ROCs.

Characterisation of heteromers and oligomers in the TNF family of ligands and receptors

TNF family ligands and receptors fulfill a number of functions, mainly in the immune system. For example, the ligands BAFF and APRIL control growth and survival of mature Β cells at various stages of differentiation. TNF family ligands usually form homotrimers, but heteromers have also been described for lymphotoxin α1β2 and for BAFF and APRIL. Interestingly, twenty BAFF homotrimers can assemble into virus-like particles coined BAFF 60-mer, which are superior to BAFF 3-mer regarding their ability to signal in primary Β cells. A screen was performed in 293T cells, by co-transfecting differently tagged ligands, to identify six novel heteromers. The specificity of these novel heteromers, however, did not correspond to that of orphan receptors in the TNFR family. Little is known about heteromers of BAFF and APRIL, in particular their receptor-binding specificity and their ability to signal. A method to produce and purify heteromers of defined stoechiometry was developed, and the resulting reagents were used to demonstrate that BAFF2APRIL, like BAFF, binds to all BAFF receptors - namely BAFFR, TACI and Β CM A -, while APRIL2BAFF and APRIL only binds to TACI and BCMA. Heteromers could signal via their cognate receptors, sometimes as potently and sometimes less potently than homomers, depending on the receptors. A promising system to measure the activity of single-chain homo- and heteromers in vivo was set up: it measures mature Β cell rescue upon administration of single-chain ligands into BAFF-ko mice. To tackle the question of the physiological importance of BAFF 60-mer, a point mutation that prevents assembly of mouse BAFF into 60-mer while retaining its ability to form trimers was identified. This mutation (E247K) was introduced by homologous recombination into mouse embryonic stem cells that are now being used to generate knock-in mice. Results obtained in this work will help to better understand the role of various BAFF and APRIL forms that are elevated in a several autoimmune diseases. - Les ligands et récepteurs de la famille du TNF joue un rôle prédominant dans le système immunitaire. Par exemple, les ligands BAFF et APRIL contrôlent la croissance et la survie des cellules Β matures à différents stades de différenciation. Ces ligands existent souvent sous forme d'homotrimères (3-mer), bien que des héteromères aient été décrits pour la lymphotoxine α1β2 et pour BAFF et APRIL. Dans le cas de BAFF, vingt trimères peuvent, telle une particule virale, s'assembler en 60-mer qui surpasse le 3-mer pour signaler dans des cellules Β primaires. Un crible effectué dans des cellules 293T, par co-transfection de ligands différemment marqués, a permis d'identifier six nouveaux heteromères dont la spécificité n'a, hélas, pas correspondu à celle d'un récepteur orphelin de la famille du TNFR. Les connaissances sur la spécificité de liaison aux récepteurs et la capacité à signaler des heteromères de BAFF et d'APRIL sont fragmentaires. Une méthode pour produire et purifier des heteromères "simple chaîne" de stoechiométrie déterminée a été mise au point, et les réactifs ainsi obtenus utilisés pour démontrer que BAFF2APRIL, comme BAFF, lie tous les récepteurs de BAFF - c'est-à-dire BAFFR, TACI et BCMA -, alors qu'APRIL2BAFF et APRIL ne lient que TACI et BCMA. Les héteromères peuvent transmettre des signaux, parfois aussi bien et parfois plus faiblement que les homomères, selon les récepteurs. Un système prometteur pour mesurer l'activité des ligands simple chaîne in vivo a été mis au point. Il mesure la réapparition de cellules Β matures dans des souris déficientes pour BAFF après administration des ligands. Pour s'attaquer à la question de l'importance physiologique du 60-mer de BAFF, ime mutation empêchant l'assemblage en 60-mer sans affecter la capacité à former des trimères a été identifiée. Cette mutation (E247K) a été introduite par recombinaison homologue dans des cellules souches embryonnaires de souris qui sont utilisées pour obtenir des souris déficientes en BAFF 60-mer. Les résultats de ces travaux contribueront à mieux cerner le rôle des différentes formes de BAFF et d'APRIL produites en excès dans plusieurs maladies auto-immunes.

Penalizing Cartels: The Case for Basing Penalties on Price Overcharge

In this paper we set out the welfare economics based case for imposing cartel penalties on the cartel overcharge rather than on the more conventional bases of revenue or profits (illegal gains). To do this we undertake a systematic comparison of a penalty based on the cartel overcharge with three other penalty regimes: fixed penalties; penalties based on revenue, and penalties based on profits. Our analysis is the first to compare these regimes in terms of their impact on both (i) the prices charged by those cartels that do form; and (ii) the number of stable cartels that form (deterrence). We show that the class of penalties based on profits is identical to the class of fixed penalties in all welfare-relevant respects. For the other three types of penalty we show that, for those cartels that do form, penalties based on the overcharge produce lower prices than those based on profit) while penalties based on revenue produce the highest prices. Further, in conjunction with the above result, our analysis of cartel stability (and thus deterrence), shows that penalties based on the overcharge out-perform those based on profits, which in turn out-perform those based on revenue in terms of their impact on each of the following welfare criteria: (a) average overcharge; (b) average consumer surplus; (c) average total welfare.