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.

An Empirical Assessment of Optimal Monetary Policy Delegation in the Euro Area

We estimate a New Keynesian DSGE model for the Euro area under alternative descriptions of monetary policy (discretion, commitment or a simple rule) after allowing for Markov switching in policy maker preferences and shock volatilities. This reveals that there have been several changes in Euro area policy making, with a strengthening of the anti-inflation stance in the early years of the ERM, which was then lost around the time of German reunification and only recovered following the turnoil in the ERM in 1992. The ECB does not appear to have been as conservative as aggregate Euro-area policy was under Bundesbank leadership, and its response to the financial crisis has been muted. The estimates also suggest that the most appropriate description of policy is that of discretion, with no evidence of commitment in the Euro-area. As a result although both ‘good luck’ and ‘good policy’ played a role in the moderation of inflation and output volatility in the Euro-area, the welfare gains would have been substantially higher had policy makers been able to commit. We consider a range of delegation schemes as devices to improve upon the discretionary outcome, and conclude that price level targeting would have achieved welfare levels close to those attained under commitment, even after accounting for the existence of the Zero Lower Bound on nominal interest rates.

An Empirical Assessment of Optimal Monetary Policy Delegation in the Euro Area

We estimate a New Keynesian DSGE model for the Euro area under alternative descriptions of monetary policy (discretion, commitment or a simple rule) after allowing for Markov switching in policy maker preferences and shock volatilities. This reveals that there have been several changes in Euro area policy making, with a strengthening of the anti-inflation stance in the early years of the ERM, which was then lost around the time of German reunification and only recovered following the turnoil in the ERM in 1992. The ECB does not appear to have been as conservative as aggregate Euro-area policy was under Bundesbank leadership, and its response to the financial crisis has been muted. The estimates also suggest that the most appropriate description of policy is that of discretion, with no evidence of commitment in the Euro-area. As a result although both ‘good luck’ and ‘good policy’ played a role in the moderation of inflation and output volatility in the Euro-area, the welfare gains would have been substantially higher had policy makers been able to commit. We consider a range of delegation schemes as devices to improve upon the discretionary outcome, and conclude that price level targeting would have achieved welfare levels close to those attained under commitment, even after accounting for the existence of the Zero Lower Bound on nominal interest rates.

A new look at the Heston characteristic function

A new expression for the characteristic function of log-spot in Heston model is presented. This expression more clearly exhibits its properties as an analytic characteristic function and allows us to compute the exact domain of the moment generating function. This result is then applied to the volatility smile at extreme strikes and to the control of the moments of spot. We also give a factorization of the moment generating function as product of Bessel type factors, and an approximating sequence to the law of log-spot is deduced.

The Monetary policy rules and the inflation process in open emerging

This paper has three objectives. First, it aims at revealing the logic of interest rate setting pursued by monetary authorities of 12 new EU members. Using estimation of an augmented Taylor rule, we find that this setting was not always consistent with the official monetary policy. Second, we seek to shed light on the inflation process of these countries. To this end, we carry out an estimation of an open economy Philips curve (PC). Our main finding is that inflation rates were not only driven by backward persistency but also held a forward-looking component. Finally, we assess the viability of existing monetary arrangements for price stability. The analysis of the conditional inflation variance obtained from GARCH estimation of PC is used for this purpose. We conclude that inflation targeting is preferable to an exchange rate peg because it allowed decreasing the inflation rate and anchored its volatility.

A test of long memory hypothesis based on self-similarity

This paper develops a new test of true versus spurious long memory, based on log-periodogram estimation of the long memory parameter using skip-sampled data. A correction factor is derived to overcome the bias in this estimator due to aliasing. The procedure is designed to be used in the context of a conventional test of significance of the long memory parameter, and composite test procedure described that has the properties of known asymptotic size and consistency. The test is implemented using the bootstrap, with the distribution under the null hypothesis being approximated using a dependent-sample bootstrap technique to approximate short-run dependence following fractional differencing. The properties of the test are investigated in a set of Monte Carlo experiments. The procedure is illustrated by applications to exchange rate volatility and dividend growth series.

The Division problem with voluntary participation

The division problem consists of allocating a given amount of an homogeneous and perfectly divisible good among a group of agents with single-peaked preferences on the set of their potential shares. A rule proposes a vector of shares for each division problem. The literature has implicitly assumed that agents will find acceptable any share they are assigned to. In this paper we consider the division problem when agents' participation is voluntary. Each agent has an idiosyncratic interval of acceptable shares where his preferences are single-peaked. A rule has to propose to each agent either to not participate or an acceptable share because otherwise he would opt out and this would require to reassign some of the remaining agents' shares. We study a subclass of efficient and consistent rules and characterize extensions of the uniform rule that deal explicitly with agents' voluntary participation.

Oil price shocks and labor market fluctuations

We examine the impact of real oil price shocks on labor market flows in the U.S. We first use smooth transition regression (STR) models to investigate to what extent oil prices can be considered as a driving force of labor market fluctuations. Then we develop and calibrate a modified version of Pissarides' (2000) model with energy costs, which we simulate in response to shocks mimicking the behavior of the actual oil price shocks. We find that (i) these shocks are an important driving force of job market flows; (ii) the job finding probability is the main transmission mechanism of such shocks; and (iii) they bring a new amplification mechanism for the volatility and should thus be seen as complementary of labor productivity shocks. Overall we conclude that shocks in oil prices cannot be neglected in explaining cyclical labor adjustments in the U.S.

Investor protection and income inequality: risk sharing vs risk taking

This paper studies the relationship between investor protection, entrepreneurial risk taking and income inequality. In the presence of market frictions, better protection makes investors more willing to take on entrepreneurial risk when lending to firms, thereby improving the degree of risk sharing between financiers and entrepreneurs. On the other hand, by increasing risk sharing, investor protection also induces more firms to undertake risky projects. By increasing entrepreneurial risk taking, it raises income dispersion. By reducing the risk faced by entrepreneurs, it reduces income volatility. As a result, investor protection raises income inequality to the extent that it fosters risk taking, while it reduces it for a given level of risk taking. Empirical evidence from a panel of forty-five countries spanning the period 1976-2000 supports the predictions of the model.

Stability and change in party preferences.

This article analyses stability and volatility of party preferences using data from the Swiss Household-Panel (SHP), which, for the first time, allow studying transitions and stability of voters over several years in Switzerland. Analyses cover the years 1999- 2007 and systematically distinguish changes between party blocks and changes within party blocks. The first part looks at different patterns of change, which show relatively high volatility. The second part tests several theories on causes of such changes applying a multinomial random-effects model. Results show that party preferences stabilise with their duration and with age and that the electoral cycle, political sophistication, socio-structural predispositions, the household-context as well as party size and the number of parties each explain part of electoral volatility. Different results for withinand between party-block changes underlie the importance of that differentiation.

Quantiles of the Realized Stock-Bond Correlation

Abstract: We scrutinize the realized stock-bond correlation based upon high frequency returns. We use quantile regressions to pin down the systematic variation of the extreme tails over their economic determinants. The correlation dependence behaves differently when the correlation is large negative and large positive. The important explanatory variables at the extreme low quantile are the short rate, the yield spread, and the volatility index. At the extreme high quantile the bond market liquidity is also important. The empirical fi…ndings are only partially robust to using less precise measures of the stock-bond correlation. The results are not caused by the recent …financial crisis. Keywords: Extreme returns; Financial crisis; Realized stock-bond correlation; Quantile regressions; VIX. JEL Classifi…cations: C22; G01; G11; G12

Conservation genetics and population monitoring of the Alpine Salamander (Salamandra Atra) :

SUMMARYIn the context of the biodiversity crisis, amphibians are experiencing the most severe worldwide decline of all vertebrates and are in urgent need of better management. Efficient conservation strategies rely on sound knowledge of the species biology and of the genetic and demographic processes that might impair their welfare. Nonetheless, these processes are poorly understood in amphibians. Delineating population boundaries remains consequently problematic for these species, while it is of critical importance to define adequate management units for conservation. In this study, our attention focused on the alpine salamander (Salamandra atra), a species that deserves much interest in terms of both conservation biology and evolution. This endemic alpine species shows peculiar life-history traits (viviparity, reduced activity period, slow maturation) and has a slow population turnover, which might be problematic for its persistence in a changing environment. Due to its elusive behaviour (individuals spend most of their time underground and are unavailable for sampling), dynamic processes of gene and individuals were poorly understood for that species. Consequently, its conservation status could hardly be reliably assessed. Similarly the fire salamander (Salamandra salamandra) also poses special challenges for conservation, as no clear demarcation of geographical populations exists and dispersal patterns are poorly known. Through a phylogeographic analysis, we first studied the evolutionary history of the alpine salamander to better document the distribution of the genetic diversity along its geographical range. This study highlighted the presence of multiple divergent lineages in Italy together with a clear genetic divergence between populations from Northern and Dinaric Alps. These signs of cryptic genetic differentiation, which are not accounted for by the current taxonomy of the species, should not be neglected for further definition of conservation units. In addition, our data supported glacial survival of the species in northern peripheral glacial réfugia and nunataks, a pattern rarely documented for long-lived species. Then, we evaluated the level of gene flow between populations at the local scale and tested for asymmetries in male versus female dispersal using both field-based (mark-recapture) and genetic approaches. This study revealed high level of gene flow between populations, which stems mainly from male dispersal. This corroborated the idea that salamanders are much better dispersers than hitherto thought and provided a well- supported example of male-biased dispersal in amphibians. In a third step, based on a mark- recapture survey, we addressed the problem of sampling unavailability in alpine salamanders and evaluated its impact on two monitoring methods. We showed that about three quarters of individuals were unavailable for sampling during sampling sessions, a proportion that can vary with climatic conditions. If not taken into account, these complexities would result in false assumptions on population trends and misdirect conservation efforts. Finally, regarding the daunting task of delineating management units, our attention was drawn on the fire salamander. We conducted a local population genetic study that revealed high levels of gene flow among sampling sites. Management units for this species should consequently be large. Interestingly, despite the presence of several landscape features often reported to act as barriers, genetic breaks occurred at unexpected places. This suggests that landscape features may rather have idiosyncratic effects on population structure. In conclusion, this work brought new insights on both genetic and demographic processes occurring in salamanders. The results suggest that some biological paradigms should be taken with caution when particular species are in focus. Species- specific studies remain thus fundamental for a better understanding of species evolution and conservation, particularly in the context of current global changes.RESUMEDans le contexte de la crise de la biodiversité actuelle, les amphibiens subissent le déclin le plus important de tous les vertébrés et ont urgemment besoin d'une meilleure protection. L'établissement de stratégies de conservation efficaces repose sur des connaissances solides de la biologie des espèces et des processus génétiques et démographiques pouvant menacer leur survie. Ces processus sont néanmoins encore peu étudiés chez les amphibiens.Dans cette étude, notre attention s'est portée sur la salamandre noire (Salamandra atra), une espèce endémique des Alpes dont les traits d'histoire de vie atypiques (viviparité, phase d'activité réduite, lent turnover des populations) pourraient la rendre très vulnérable face aux changements environnementaux. Par ailleurs, en raison de son comportement cryptique (les individus passent la plupart de leur temps sous terre) la dynamique des gènes et des individus est mal comprise chez cette espèce. Il est donc difficile d'évaluer son statut de conservation de manière fiable. La salamandre tachetée {Salamandra salamandra), pour qui il n'existe aucune démarcation géographique apparente des populations, pose également des problèmes en termes de gestion. Dans un premier temps, nous avons étudié l'histoire évolutive de la salamandre noire afin de mieux décrire la distribution de sa diversité génétique au sein de son aire géographique. Cela a permis de mettre en évidence la présence de multiples lignées en Italie, ainsi qu'une nette divergence entre les populations du nord des Alpes et des Alpes dinariques. Ces résultats seront à prendre en compte lorsqu'il s'agira de définir des unités de conservation pour cette espèce. D'autre part, nos données soutiennent l'hypothèse d'une survie glaciaire dans des refuges nordiques périglaciaires ou dans des nunataks, fait rarement documenté pour une espèce longévive. Nous avons ensuite évalué la différentiation génétique des populations à l'échelle locale, ce qui a révélé d'important flux de gènes, ainsi qu'une asymétrie de dispersion en faveur des mâles. Ces résultats corroborent l'idée que les amphibiens dispersent mieux que ce que l'on pensait, et fournissent un exemple robuste de dispersion biaisée en faveur des mâles chez les amphibiens. Nous avons ensuite abordé le problème de Γ inaccessibilité des individus à la capture. Nous avons montré qu'environ trois quarts des individus sont inaccessibles lors des échantillonnages, une proportion qui peut varier en fonction des conditions climatiques. Ignoré, ce processus pourrait entraîner une mauvaise interprétation des fluctuations de populations ainsi qu'une mauvaise allocation des efforts de conservation. Concernant la définition d'unités de gestion pour la salamandre tachetée, nous avons pu mettre en évidence un flux de gènes important entre les sites échantillonnés. Les unités de gestion pour cette espèce devraient donc être étendues. Etonnamment, malgré la présence de nombreuses barrières potentielles au flux de gènes, les démarcations génétiques sont apparues à des endroits inattendus. En conclusion, ce travail a apporté une meilleure compréhension des processus génétiques et démographiques en action chez les salamandres. Les résultats suggèrent que certains paradigmes biologiques devraient être considérés avec précaution quand il s'agit de les appliquer à des espèces particulières. Les études spécifiques demeurent donc fondamentales pour une meilleure compréhension de l'évolution des espèces et leur conservation, tout particulièrement dans le contexte des changements globaux actuels.

Misallocation of capital in a model of endogenous financial intermediation and insurance

In this paper we analyze productivity and welfare losses from capital misallocation in a general equilibrium model of occupational choice and endogenous financial intermediation. We study the effects of borrowing and lending, insurance, and risk sharing on the optimal allocation of resources. We find that financial markets together with general equilibrium effects have large impact on entrepreneurs' entry and firm-size decisions. Efficiency gains are increasing in the quality of financial markets, particularly in their ability to alleviate a financing constraint by providing insurance against idiosyncratic risk.

Smooth Transition Patterns in the Realized Stock- Bond Correlation

Abstract: We analyze the realized stock-bond correlation. Gradual transitions between negative and positive stock-bond correlation is accommodated by the smooth transition regression (STR) model. The changes in regime are de…ned by economic and …financial transition variables. Both in sample and out-of- sample results document that STR models with multiple transition variables outperform STR models with a single transition variable. The most important transition variables are the short rate, the yield spread, and the VIX volatility index. Keywords: realized correlation; smooth transition regressions; stock-bond correlation; VIX index JEL Classifi…cations: C22; G11; G12; G17

The effects of uncertainty about countries' compliance with the Stability and Growth Pact

The Stability and Growth Pact (SGP) was established to govern discretionary fiscal policy in the European Monetary Union. This article studies the effects created when there is uncertainty about the members’ commitment to respecting the established deficit limits in the SGP. We will show that, even if countries respect the SGP deficit ceiling, the presence of uncertainty about their compliance will bring about higher volatility in key economic variables, which could, in turn, affect unemployment and growth negatively. This finding shows that it is important to reduce uncertainty about the members’ commitment towards the SGP. Keywords: fiscal policy rules, monetary union, Stability and Growth Pact, uncertainty, commitment. JEL No.: E63, F55, H62, H87