Explorations of electric-current system in solar active regions .1. Empirical inferences of the current flows

In this paper we explore techniques to identify sources of electric current systems and their channels of flow in solar active regions. Measured photospheric vector magnetic fields (VMF) together with high-resolution white-light and H filtergrams provide the data base to derive the current systems in the photosphere and chromosphere. Simple mathematical constructions of fields and currents are also adopted to understand these data. As an example, the techniques are then applied to infer current systems in AR 2372 in early April 1980. The main results are: (i) In unipolar sunspots the current density may reach values of 103 CGSE, and the Lorentz force on it can accelerate the Evershed flow, (ii) Spots exhibiting significant spiral pattrn in the penumbral filaments are the sources of vertical major currents at the photospheric surface, (iii) Magnetic neutral lines where the transverse field was strongly sheared were channels along which strong current system flows, (iv) The inferred current systems produced oppositely-flowing currents in the area of the delta configuration that was the site of flaring in AR 2372.

The Impact of Regulation on Pricing Behavior in the Spanish Electricity Market

In this paper we measure the impact of regulatory measures which affected the Spanish electricity wholesale market in the period 2002-2005. Our approach is based on the fact that regulation changes firms' incentives and therefore their market behavior. In the absence of any regulation firms would choose profit- maximizing prices on their residual demands so that the observed gap between optimal and actual prices provides a measure of the effect of regulation. Our results indicate that regulation has decreased wholesale prices considerably, but became less effective at the end of the sample period which explains the change of regulatory regime introduced in 2006.

Does the Term Spread play a role in the FED's reaction function? An Empirical Investigation

Using US data for the period 1967:5-2002:4, this paper empirically investigates the performance of a Fed’s reaction function (FRF) that (i) allows for the presence of switching regimes, (ii) considers the long-short term spread in addition to the typical variables, (iii) uses an alternative monthly indicator of general economic activity suggested by Stock and Watson (1999), and (iv) considers interest rate smoothing. The estimation results show the existence of three switching regimes, two characterized by low volatility and the remaining regime by high volatility. Moreover, the scale of the responses of the Federal funds rate to movements in the rate of inflation and the economic activity index depends on the regime. The estimation results also show robust empirical evidence that the importance of the term spread in the FRF has increased over the sample period and the FRF has been more stable during the term of office of Chairman Greenspan than in the pre-Greenspan period.

Smiling under stochastic volatility

This paper studies the behavior of the implied volatility function (smile) when the true distribution of the underlying asset is consistent with the stochastic volatility model proposed by Heston (1993). The main result of the paper is to extend previous results applicable to the smile as a whole to alternative degrees of moneyness. The conditions under which the implied volatility function changes whenever there is a change in the parameters associated with Hestons stochastic volatility model for a given degree of moneyness are given.

Markov Switching Risk Premium and the term structure of interest rates. Empirical evidence from US post-war interest rates

This paper considers the basic present value model of interest rates under rational expectations with two additional features. First, following McCallum (1994), the model assumes a policy reaction function where changes in the short-term interest rate are determined by the long-short spread. Second, the short-term interest rate and the risk premium processes are characterized by a Markov regime-switching model. Using US post-war interest rate data, this paper finds evidence that a two-regime switching model fits the data better than the basic model. The estimation results also show the presence of two alternative states displaying quite different features.

Is there a Phillips Curve in the US and the EU15 Countries? An empirical investigation

This paper studies the comovement between output and inflation in the EU15 countries. Following den Haan (2000), I use the correlations of VAR forecast errors at different horizons in order to analyze the output-inflation relationship. The empirical results show that eight countries display a significant positive comovement between output and inflation. Moreover, the empirical evidence suggests that a Phillips curve phenomenom is more likely to be detected in countries where inflation is more stable.

The role of the term spread in an augmented Taylor rule: An empirical investigation

Using US data for the period 1967:5-2002:4, this paper empirically investigates the performance of an augmented version of the Taylor rule (ATR) that (i) allows for the presence of switching regimes, (ii) considers the long-short term spread in addition to the typical variables, (iii) uses an alternative monthly indicator of general economic activity suggested by Stock and Watson (1999), and (iv) considers interest rate smoothing. The estimation results show the existence of switching regimes, one characterized by low volatility and the other by high volatility. Moreover, the scale of the responses of the Federal funds rate to movements in the term spread, inflation and the economic activity index depend on the regime. The estimation results also show robust empirical evidence that the ATR has been more stable during the term of office of Chairman Greenspan than in the pre-Greenspan period. However, a closer look at the Greenspan period shows the existence of two alternative regimes and that the response of the Fed funds rate to inflation has not been significant during this period once the term spread is considered.