Expectations Traps and Coordination Failures with Discretionary Policymaking

Discretionary policymakers cannot manage private-sector expectations and cannot coordinate the actions of future policymakers. As a consequence, expectations traps and coordination failures can occur and multiple equilibria can arise. To utilize the explanatory power of models with multiple equilibria it is first necessary to understand how an economy arrives to a particular equilibrium. In this paper we employ notions of learnability and self-enforceability to motivate and identify equilibria of particular interest. Central among these criteria are whether the equilibrium is learnable by private agents and jointly learnable by private agents and the policymaker. We use two New Keynesian policy models to identify the strategic interactions that give rise to multiple equilibria and to illustrate our methods for identifying equilibria of interest. Importantly, unless the Pareto-preferred equilibrium is learnable by private agents, we find little reason to expect coordination on that equilibrium.

Model Switching and Model Averaging in Time- Varying Parameter Regression Models

This paper investigates the usefulness of switching Gaussian state space models as a tool for implementing dynamic model selecting (DMS) or averaging (DMA) in time-varying parameter regression models. DMS methods allow for model switching, where a different model can be chosen at each point in time. Thus, they allow for the explanatory variables in the time-varying parameter regression model to change over time. DMA will carry out model averaging in a time-varying manner. We compare our exact approach to DMA/DMS to a popular existing procedure which relies on the use of forgetting factor approximations. In an application, we use DMS to select different predictors in an in ation forecasting application. We also compare different ways of implementing DMA/DMS and investigate whether they lead to similar results.

A Consistent Nonparametric Bootstrap Test of Exogeneity

This paper proposes a novel way of testing exogeneity of an explanatory variable without any parametric assumptions in the presence of a "conditional" instrumental variable. A testable implication is derived that if an explanatory variable is endogenous, the conditional distribution of the outcome given the endogenous variable is not independent of its instrumental variable(s). The test rejects the null hypothesis with probability one if the explanatory variable is endogenous and it detects alternatives converging to the null at a rate n..1=2:We propose a consistent nonparametric bootstrap test to implement this testable implication. We show that the proposed bootstrap test can be asymptotically justi.ed in the sense that it produces asymptotically correct size under the null of exogeneity, and it has unit power asymptotically. Our nonparametric test can be applied to the cases in which the outcome is generated by an additively non-separable structural relation or in which the outcome is discrete, which has not been studied in the literature.

An Empirical Examination of the R&D Boundaries of the Firm - A Problem-Solving Perspective

We consider, both theoretically and empirically, how different organization modes are aligned to govern the efficient solving of technological problems. The data set is a sample from the Chinese consumer electronics industry. Following mainly the problem solving perspective (PSP) within the knowledge based view (KBV), we develop and test several PSP and KBV hypotheses, in conjunction with competing transaction cost economics (TCE) alternatives, in an examination of the determinants of the R&D organization mode. The results show that a firm’s existing knowledge base is the single most important explanatory variable. Problem complexity and decomposability are also found to be important, consistent with the theoretical predictions of the PSP, but it is suggested that these two dimensions need to be treated as separate variables. TCE hypotheses also receive some support, but the estimation results seem more supportive of the PSP and the KBV than the TCE.

The Known Unknowns of Governance.

Empirical researchers interested in how governance shapes various aspects of economic development frequently use the Worldwide Governance indicators (WGI). These variables come in the form of an estimate along with a standard error reflecting the uncertainty of this estimate. Existing empirical work simply uses the estimates as an explanatory variable and discards the information provided by the standard errors. In this paper, we argue that the appropriate practice should be to take into account the uncertainty around the WGI estimates through the use of multiple imputation. We investigate the importance of our proposed approach by revisiting in three applications the results of recently published studies. These applications cover the impact of governance on (i) capital flows; (ii) international trade; (iii) income levels around the world. We generally find that the estimated effects of governance are highly sensitive to the use of multiple imputation. We also show that model misspecification is a concern for the results of our reference studies. We conclude that the effects of governance are hard to establish once we take into account uncertainty around both the WGI estimates and the correct model specification.

Debunking Mill’s “Fourth Fundamental Proposition on Capital”

J S Mill’s enigmatic "Fourth Proposition on Capital" has been brought to our notice by Steven Kates (2015). Kates takes a positive view of the proposition. Our focus is not, however, on Kates, but on the aforesaid proposition. The purpose of this paper is to demonstrate, via close examination of Mill’s explanatory examples, just how unsatisfactory are its foundations. We conclude that the doubters are justified: Mill’s Fourth Proposition is, demonstrably, a muddle.

Co-Movement, Spillovers and Excess Returns in Global Bond Markets

This paper investigates global term structure dynamics using a Bayesian hierarchical factor model augmented with macroeconomic fundamentals. More than half of the variation in bond yields of seven advanced economies is due to global co-movement, which is mainly attributed to shocks to non-fundamentals. Global fundamentals, especially global inflation, affect yields through a ‘policy channel’ and a ‘risk compensation channel’, but the effects through two channels are offset. This evidence explains the unsatisfactory performance of fundamentals-driven term structure models. Our approach delineates asymmetric spillovers in global bond markets connected to diverging monetary policies. The proposed model is robust as identified factors has significant explanatory power of excess returns. The finding that global inflation uncertainty is useful in explaining realized excess returns does not rule out regime changing as a source of non-fundamental fluctuations.

A multi-purpose grammar generating a multi-scale integrated analysis of Laos

In this study we propose an application of the MuSIASEM approach which is used to provide an integrated analysis of Laos across different scales. With the term “integrated analysis across scales” we mean the generation of a series of packages of quantitative indicators, characterizing the performance of the socioeconomic activities performed in Laos when considering: (i) different hierarchical levels of organization (farming systems described at the level of household, rural villages, regions of Laos, the whole country level); and (ii) different dimensions of analysis (economic dimension, social dimension, ecological dimension, technical dimension). What is relevant in this application is that the information carried out by these different packages of indicators is integrated in a system of accounting which establishes interlinkages across these indicators. This is a essential feature to study sustainability trade-offs and to build more robust scenarios of possible changes. The multi-scale integrated representation presented in this study is based on secondary data (gathered in a three year EU project – SEAtrans and integrated by other available statistical sources) and it is integrated in GIS, when dealing with the spatial representation of Laos. However, even if we use data referring to Laos, the goal of this study is not that of providing useful information about a practical policy issue of Laos, but rather, to illustrate the possibility of using a multipurpose grammar to produce an integrated set of sustainability indicators at three different levels: (i) local; (ii) meso; (iii) macro level. The technical issue addressed is the simultaneous adoption of two multi-level matrices – one referring to a characterization of human activity over a set of different categories, and another referring to a characterization of land uses over the same set of categories. In this way, it becomes possible to explain the characteristics of Laos (an integrated set of indicators defining the performance of the whole country) in relation to the characteristics of the rural Laos and urban Laos. The characteristics of rural Laos, can be explained using the characteristics of three regions defined within Laos (Northern Laos, Central Laos and Southern Laos), which in turn can be defined (using an analogous package of indicators), starting from the characteristics of three main typologies of farming systems found in the regions.

The Political Economy of Resource Rent Distribution

I model the link between political regime and level of diversification following a windfall of natural resource revenues. The explanatory variables I make use of are the political support functions embedded within each type of regime and the disparate levels of discretion, openness, transparency, and accountability of government. I show that a democratic government seeks to maximize the long-term consumption path of the representative consumer, in order to maximize its chances of re-election, while an authoritarian government, in the absence of any electoral mechanism of accountability, seeks to buy off and entrench a group of special interests loyal to the government and potent enough to ensure its short-term survival. Essentially the contrast in the approaches towards resource rent distribution comes down to a variation in political weights on aggregate welfare and rentierist special interests endogenized by distinct political support functions.

Analyzing aggregate real exchange rate persistence through the lens of sectoral data

In this paper we analyze the persistence of aggregate real exchange rates (RERs) for a group of EU-15 countries by using sectoral data. The tight relation between aggregate and sectoral persistence recently investigated by Mayoral (2008) allows us to decompose aggregate RER persistence into the persistence of its different subcomponents. We show that the distribution of sectoral persistence is highly heterogeneous and very skewed to the right, and that a limited number of sectors are responsible for the high levels of persistence observed at the aggregate level. We use quantile regression to investigate whether the traditional theories proposed to account for the slow reversion to parity (lack of arbitrage due to nontradibilities or imperfect competition and price stickiness) are able to explain the behavior of the upper quantiles of sectoral persistence. We conclude that pricing to market in the intermediate goods sector together with price stickiness have more explanatory power than variables related to the tradability of the goods or their inputs.

(Optimal) Spatial Aggregation in the Determinants of Industrial Location

Empirical studies on the determinants of industrial location typically use variables measured at the available administrative level (municipalities, counties, etc.). However, this amounts to assuming that the effects these determinants may have on the location process do not extent beyond the geographical limits of the selected site. We address the validity of this assumption by comparing results from standard count data models with those obtained by calculating the geographical scope of the spatially varying explanatory variables using a wide range of distances and alternative spatial autocorrelation measures. Our results reject the usual practice of using administrative records as covariates without making some kind of spatial correction. Keywords: industrial location, count data models, spatial statistics JEL classification: C25, C52, R11, R30

Hyperesthésie et apaisement: aspects historiques et psychologiques

L'auteur fait une synthèse des contributions, actuelles ou passées, décrivant la tendance chez un individu à exacerber ses sensations (hyperesthésie), agréables ou douloureuses, y compris les éprouvés émotionnels. Il met l'accent sur l'effet antagoniste ou inhibiteur que les sensations peuvent avoir les unes sur les autres. Puisque l'angoisse implique, elle aussi, une dimension sensorielle, il insiste sur le but paradoxal d'apaisement et donc défensif qui peut motiver la recherche de sensations, en se référant à la notion de « procédé autocalmant » développée par l'école psychosomatique de Paris.¦Ce travail se divise en deux parties consacrées respectivement à l'enfant et à l'adulte, elles-mêmes déclinées sur deux versants, l'un « normal » et l'autre pathologique. Il y est question :¦- des comportements de l'enfant susceptibles d'être produits pour les sensations apaisantes qu'ils procurent : succion, ingestion d'aliments, balancement, masturbation, etc.¦- des auto-agressions dans certains troubles du développement de l'enfant et de l'adolescent¦- de l'hypersensibilité ou émotivité dans les typologies du tempérament ou du caractère proposées dans l'histoire; de la passion également, envisagée comme un embrasement lui aussi potentiellement défensif¦- de deux parmi les troubles de l'adulte qui ont le plus été décrits en termes d'hyperesthésie, à savoir l'hystérie et la manie.¦Il s'agit d'un travail théorique, qui intègre des aspects historiques, et qui peut servir de base à des explorations cliniques ou des recherches plus spécifiques.¦The author presents a summary of past and recent publications describing the disposition in the individual to exacerbate sensations (hyperesthesia), whether pleasurable or painful, including emotional experiences. He emphasizes the possible opposing or inhibiting action these sensations can have between them.¦As anxiety also implies a sensory dimension, the author underlines the paradoxically alleviating, and hence defensive purpose driving the pursuit of sensations, by reference to the notion of self-soothing procedures (procédés auto-calmants), conceptualized by the Paris Psychosomatic School.¦This work is divided into two parts focusing on childhood and adulthood respectively, each in its turn concentrating on both the « normal » and pathological aspects. Topics covered include:¦- behaviours that children may engage in for the soothing effects they produce ; sucking, consumption of food, rocking, masturbation, etc.¦- self-harm in some cases of developmental disorders in children and adolescents¦- hypersensibility and emotivity as described in historical temperament and character types ; passion, also regarded as another defensive excitement.¦- two of the most commonly described disorders of hyperesthesia in adults, namely hysteria and mania.¦This thesis constitutes a research of a theoretical nature. It integrates historical aspects, which can be used as a basis for clinical exploration or further more specific research.

Cultural competency of health-care providers in a Swiss University Hospital: self-assessed cross-cultural skillfulness in a cross-sectional study.

BACKGROUND: As the diversity of the European population evolves, measuring providers' skillfulness in cross-cultural care and understanding what contextual factors may influence this is increasingly necessary. Given limited information about differences in cultural competency by provider role, we compared cross-cultural skillfulness between physicians and nurses working at a Swiss university hospital. METHODS: A survey on cross-cultural care was mailed in November 2010 to front-line providers in Lausanne, Switzerland. This questionnaire included some questions from the previously validated Cross-Cultural Care Survey. We compared physicians' and nurses' mean composite scores and proportion of "3-good/4-very good" responses, for nine perceived skillfulness items (4-point Likert-scale) using the validated tool. We used linear regression to examine how provider role (physician vs. nurse) was associated with composite skillfulness scores, adjusting for demographics (gender, non-French dominant language), workplace (time at institution, work-unit "sensitized" to cultural-care), reported cultural-competence training, and cross-cultural care problem-awareness. RESULTS: Of 885 questionnaires, 368 (41.2%) returned the survey: 124 (33.6%) physicians and 244 (66.4%) nurses, reflecting institutional distribution of providers. Physicians had better mean composite scores for perceived skillfulness than nurses (2.7 vs. 2.5, p < 0.005), and significantly higher proportion of "good/very good" responses for 4/9 items. After adjusting for explanatory variables, physicians remained more likely to have higher skillfulness (β = 0.13, p = 0.05). Among all, higher skillfulness was associated with perception/awareness of problems in the following areas: inadequate cross-cultural training (β = 0.14, p = 0.01) and lack of practical experience caring for diverse populations (β = 0.11, p = 0.04). In stratified analyses among physicians alone, having French as a dominant language (β = -0.34, p < 0.005) was negatively correlated with skillfulness. CONCLUSIONS: Overall, there is much room for cultural competency improvement among providers. These results support the need for cross-cultural skills training with an inter-professional focus on nurses, education that attunes provider awareness to the local issues in cross-cultural care, and increased diversity efforts in the work force, particularly among physicians.

The New Institutions of Transatlantic Aviation

This article focuses on the institutions of transatlantic aviation since 1945, and aims at extracting from this historical process topical policy implications. Using the methodology of an analytic narrative, we describe and explain the creation of the international cartel institutions in the 1940s, their operation throughout the 1950s and 60s, their increasing vulnerability in the 1970s, and then the progressive liberalization of the whole system. Our analytic narrative has a natural end, marked by the signing of an Open Skies Agreement between the US and the EU in 2007. We place particular explanatory power on (a) the progressive liberalization of the US domestic market, and (b) the active role of the European Commission in Europe. More specifically, we explain these developments using two frameworks. First, a “political limit pricing” model, which seemed promising, then failed, and then seemed promising again because it failed. Second, a strategic bargaining model inspired by Susanne Schmidt’s analysis of how the European Commission uses the threat of infringement proceedings to force member governments into line and obtain the sole negotiating power in transatlantic aviation.