Do Households Have Rational Expectations on Future Consumption? Evidence from the Finnish Consumer Survey

Ever since its initial introduction some fifty years ago, the rational expectations paradigm has dominated the way economic theory handles uncertainty. The main assertion made by John F. Muth (1961), seen by many as the father of the paradigm, is that expectations of rational economic agents should essentially be equal to the predictions of relevant economic theory, since rational agents should use information available to them in an optimal way. This assumption often has important consequences on the results and interpretations of the models where it is applied. Although the rational expectations assumption can be applied to virtually any economic theory, the focus in this thesis is on macroeconomic theories of consumption, especially the Rational Expectations–Permanent Income Hypothesis proposed by Robert E. Hall in 1978. The much-debated theory suggests that, assuming that agents have rational expectations on their future income, consumption decisions should follow a random walk, and the best forecast of future consumption level is the current consumption level. Then, changes in consumption are unforecastable. This thesis constructs an empirical test for the Rational Expectations–Permanent Income Hypothesis using Finnish Consumer Survey data as well as various Finnish macroeconomic data. The data sample covers the years 1995–2010. Consumer survey data may be interpreted to directly represent household expectations, which makes it an interesting tool for this particular test. The variable to be predicted is the growth of total household consumption expenditure. The main empirical result is that the Consumer Confidence Index (CCI), a balance figure computed from the most important consumer survey responses, does have statistically significant predictive power over the change in total consumption expenditure. The history of consumption expenditure growth itself, however, fails to predict its own future values. This indicates that the CCI contains some information that the history of consumption decisions does not, and that the consumption decisions are not optimal in the theoretical context. However, when conditioned on various macroeconomic variables, the CCI loses its predictive ability. This finding suggests that the index is merely a (partial) summary of macroeconomic information, and does not contain any significant private information on consumption intentions of households not directly deductible from the objective economic variables. In conclusion, the Rational Expectations–Permanent Income Hypothesis is strongly rejected by the empirical results in this thesis. This result is in accordance with most earlier studies conducted on the topic.

Stand growth and management scenarios for Paraserianthes falcataria smallholder plantations in Indonesia

Paraserianthes falcataria is a very fast growing, light wood tree species, that has recently gained wide interest in Indonesia for industrial wood processing. At the moment the P. falcataria plantations managed by smallholders are lacking predefined management programmes for commercial wood production. The general objective of this study was to model the growth and yield of Paraserianthes falcataria stands managed by smallholders in Ciamis, West Java, Indonesia and to develop management scenarios for different production objectives. In total 106 circular sample plots with over 2300 P. falcataria trees were assessed on smallholder plantation inventory. In addition, information on market prices of P. falcataria wood was collected through rapid appraisals among industries. A tree growth model based on Chapman-Richards function was developed on three different site qualities and the stand management scenarios were developed under three management objectives: (1) low initial stand density with low intensity stand management, (2) high initial stand density with medium intensity of intervention, (3) high initial stand density and strong intensity of silvicultural interventions, repeated more than once. In general, the 9 recommended scenarios have rotation ages varying from 4 to 12 years, planting densities from 4x4 meters (625 trees ha-1) to 3x2 meters (1666 trees ha-1) and thinnings at intensities of removing 30 to 60 % of the standing trees. The highest annual income would be generated on high-quality with a scenario with initial planting density 3x2 m (1666 trees ha-1) one thinning at intensity of removing 55 % of the standing trees at the age of 2 years and clear cut at the age of 4 years.

Climatic adaptation of Norway spruce (Picea abies (L.) Karsten) in Finland based on male flowering phenology.

Anthesis was studied at the canopy level in 10 Norway spruce stands from 9 localities in Finland from 1963 to 1974. Distributions of pollen catches were compared to the normal Gaussian distribution. The basis for the timing studies was the 50 per cent point of the anthesis-fitted normal distribution. Development up to this point was given in calendar days, in degree days (>5 °C) and in period units. The count of each parameter began on March 19 (included). Male flowering in Norway spruce stands was found to have more annual variation in quantity than in Scots pine stands studied earlier. Anthesis in spruce in northern Finland occurred at a later date than in the south. The heat sums needed for anthesis varied latitudinally less in spruce than in pine. The variation of pollen catches in spruce increased towards north-west as in the case of Scots pine. In the unprocessed data, calendar days were found to be the most accurate forecast of anthesis in Norway spruce both for a single year and for the majority of cases of stand averages over several years. Locally, the period unit could be a more accurate parameter for the stand average. However, on a calendar day basis, when annual deviations between expected and measured heat sums were converted to days, period units were narrowly superior to days. The geographical correlations respect to timing of flowering, calculated against distances measured along simulated post-glacial migration routes, were stronger than purely latitudinal correlations. Effects of the reinvasion of Norway spruce into Finland are thus still visible in spruce populations just as they were in Scots pine populations. The proportion of the average annual heat sum needed for spruce anthesis grew rapidly north of a latitude of ca. 63° and the heat sum needed for anthesis decreased only slighty towards the timberline. In light of flowering phenology, it seems probable that the northwesterly third of Finnish Norway spruce populations are incompletely adapted to the prevailing cold climate. A moderate warming of the climate would therefore be beneficial for Norway spruce. This accords roughly with the adaptive situation in Scots pine.

Differences in the climatic adaptation of silver birch (Betula pendula) and downy birch (B. pubescens) in Finland based on male flowering phenology.

Male flowering was studied at the canopy level in 10 silver birch (Betula pendula Roth) stands from 8 localities and in 14 downy birch (B. pubescens Ehrh.) stands from 10 localities in Finland from 1963 to 1973. Distributions of cumulative pollen catches were compared to the normal Gaussian distribution. The basis for the timing of flowering was the 50 per cent point of the anthesis-fitted normal distribution. To eliminate effects of background pollen, only the central, normally distributed part of the cumulative distribution was used. Development up to the median point of the distribution was measured and tested in calendar days, in degree days (> 5 °C) and in period units. The count of each parameter began on and included March 19. Male flowering in silver birch occurred from late April to late June depending on latitude, and flowering in downy birch took place from early May to early July. The heat sums needed for male flowering varied in downy birch stands latitudinally but there was practically no latitudinal variation in heat sums needed for silver birch flowering. The amount of male flowering in stands of both birch species were found to have a large annual variation but without any clear periodicity. The between years pollen catch variation in stands of either birch species did not show any significant latitudinal correlation in contrast to Norway spruce stands. The period unit heat sum gave the most accurate forecast of the timing of flowering for 60 per cent of the silver birch stands and for 78.6 per cent of the for downy birch stands. Calendar days, however, gave the best forecast for silver birch in 25 per cent of the cases, while degree days gave the best forecast for downy birch in 21.4 per cent of the cases. Silver birch seems to have a local inclination for a more fixed flowering date compared to downy birch, which could mean a considerable photoperiodic influence on flowering time of silver birch. Silver birch and downy birch had different geographical correlations. Frequent hybridization of birch species occurs more often in northern Finland in than in more southern latitudes. The different timing in flowering caused increasing scatter in flowering times in the north, especially in the case of downy birch. The chance of simultaneous flowering of silver birch and downy birch so increased northwards due to a more variable climate and also higher altitudinal variations. Compared with conifers, the reproduction cycles of both birch species were found to be well protected from damage by frost.

A Triggering Mechanism for Enhanced Star-Formation in Colliding Galaxies

We propose a physical mechanism to explain the origin of the intense burst of massive-star formation seen in colliding/merging, gas-rich, field spiral galaxies. We explicitly take account of the different parameters for the two main mass components, H-2 and H I, of the interstellar medium within a galaxy and follow their consequent different evolution during a collision between two galaxies. We also note that, in a typical spiral galaxy-like our galaxy, the Giant Molecular Clouds (GMCs) are in a near-virial equilibrium and form the current sites of massive-star formation, but have a low star formation rate. We show that this star formation rate is increased following a collision between galaxies. During a typical collision between two field spiral galaxies, the H I clouds from the two galaxies undergo collisions at a relative velocity of approximately 300 km s-1. However, the GMCs, with their smaller volume filling factor, do not collide. The collisions among the H I clouds from the two galaxies lead to the formation of a hot, ionized, high-pressure remnant gas. The over-pressure due to this hot gas causes a radiative shock compression of the outer layers of a preexisting GMC in the overlapping wedge region. This makes these layers gravitationally unstable, thus triggering a burst of massive-star formation in the initially barely stable GMCs.The resulting value of the typical IR luminosity from the young, massive stars from a pair of colliding galaxies is estimated to be approximately 2 x 10(11) L., in agreement with the observed values. In our model, the massive-star formation occurs in situ in the overlapping regions of a pair of colliding galaxies. We can thus explain the origin of enhanced star formation over an extended, central area approximately several kiloparsecs in size, as seen in typical colliding galaxies, and also the origin of starbursts in extranuclear regions of disk overlap as seen in Arp 299 (NGC 3690/IC 694) and in Arp 244 (NGC 4038/39). Whether the IR emission from the central region or that from the surrounding extranuclear galactic disk dominates depends on the geometry and the epoch of the collision and on the initial radial gas distribution in the two galaxies. In general, the central starburst would be stronger than that in the disks, due to the higher preexisting gas densities in the central region. The burst of star formation is expected to last over a galactic gas disk crossing time approximately 4 x 10(7) yr. We can also explain the simultaneous existence of nearly normal CO galaxy luminosities and shocked H-2 gas, as seen in colliding field galaxies.This is a minimal model, in that the only necessary condition for it to work is that there should be a sufficient overlap between the spatial gas distributions of the colliding galaxy pair.

The Skill of ECMWF Medium-Range Forecasts during the Year of Tropical Convection 2008

This study uses the European Centre for Medium-Range Weather Forecasts (ECMWF) model-generated high-resolution 10-day-long predictions for the Year of Tropical Convection (YOTC) 2008. Precipitation forecast skills of the model over the tropics are evaluated against the Tropical Rainfall Measuring Mission (TRMM) estimates. It has been shown that the model was able to capture the monthly to seasonal mean features of tropical convection reasonably. Northward propagation of convective bands over the Bay of Bengal was also forecasted realistically up to 5 days in advance, including the onset phase of the monsoon during the first half of June 2008. However, large errors exist in the daily datasets especially for longer lead times over smaller domains. For shorter lead times (less than 4-5 days), forecast errors are much smaller over the oceans than over land. Moreover, the rate of increase of errors with lead time is rapid over the oceans and is confined to the regions where observed precipitation shows large day-to-day variability. It has been shown that this rapid growth of errors over the oceans is related to the spatial pattern of near-surface air temperature. This is probably due to the one-way air-sea interaction in the atmosphere-only model used for forecasting. While the prescribed surface temperature over the oceans remain realistic at shorter lead times, the pattern and hence the gradient of the surface temperature is not altered with change in atmospheric parameters at longer lead times. It has also been shown that the ECMWF model had considerable difficulties in forecasting very low and very heavy intensity of precipitation over South Asia. The model has too few grids with ``zero'' precipitation and heavy (>40 mm day(-1)) precipitation. On the other hand, drizzle-like precipitation is too frequent in the model compared to that in the TRMM datasets. Further analysis shows that a major source of error in the ECMWF precipitation forecasts is the diurnal cycle over the South Asian monsoon region. The peak intensity of precipitation in the model forecasts over land (ocean) appear about 6 (9) h earlier than that in the observations. Moreover, the amplitude of the diurnal cycle is much higher in the model forecasts compared to that in the TRMM estimates. It has been seen that the phase error of the diurnal cycle increases with forecast lead time. The error in monthly mean 3-hourly precipitation forecasts is about 2-4 times of the error in the daily mean datasets. Thus, effort should be given to improve the phase and amplitude forecast of the diurnal cycle of precipitation from the model.

Leachability of trace elements from two stabilized low lime Indian fly ashes

Fly ash is a waste by-product obtained from the burning of coal by thermal power plants for generating electricity. When bulk quantities are involved, in order to arrest the fugitive dust, it is stored wet rather than dry. Fly ash contains trace concentrations of heavy metals and other substances in sufficient quantities to be able to leach out over a period of time. In this study an attempt was made to study the leachabilities of a few selected trace metals: Cd, Cu, Cr, Mn, Pb and Zn from two different types of class F fly ashes. Emphasis is also laid on developing an alternative in order to arrest the relative leachabilities of heavy metals after amending them with suitable additives. A standard laboratory leaching test for combustion residues has been employed to study the leachabilities of these trace elements as a function of liquid to solid ratio and pH. The leachability tests were conducted on powdered fly ash samples before and after amending them suitably with the matrices lime and gypsum; they were compacted to their respective proctor densities and cured for periods of 28 and 180 days. A marked reduction in the relative leachabilities of the trace elements was observed to be present at the end of 28 days. These relative leachability values further reduced marginally when tests were performed at the end of 180 days.

Methods and applications for improving parameter prediction models for stand structures in Finland

This thesis report attempts to improve the models for predicting forest stand structure for practical use, e.g. forest management planning (FMP) purposes in Finland. Comparisons were made between Weibull and Johnson s SB distribution and alternative regression estimation methods. Data used for preliminary studies was local but the final models were based on representative data. Models were validated mainly in terms of bias and RMSE in the main stand characteristics (e.g. volume) using independent data. The bivariate SBB distribution model was used to mimic realistic variations in tree dimensions by including within-diameter-class height variation. Using the traditional method, diameter distribution with the expected height resulted in reduced height variation, whereas the alternative bivariate method utilized the error-term of the height model. The lack of models for FMP was covered to some extent by the models for peatland and juvenile stands. The validation of these models showed that the more sophisticated regression estimation methods provided slightly improved accuracy. A flexible prediction and application for stand structure consisted of seemingly unrelated regression models for eight stand characteristics, the parameters of three optional distributions and Näslund s height curve. The cross-model covariance structure was used for linear prediction application, in which the expected values of the models were calibrated with the known stand characteristics. This provided a framework to validate the optional distributions and the optional set of stand characteristics. Height distribution is recommended for the earliest state of stands because of its continuous feature. From the mean height of about 4 m, Weibull dbh-frequency distribution is recommended in young stands if the input variables consist of arithmetic stand characteristics. In advanced stands, basal area-dbh distribution models are recommended. Näslund s height curve proved useful. Some efficient transformations of stand characteristics are introduced, e.g. the shape index, which combined the basal area, the stem number and the median diameter. Shape index enabled SB model for peatland stands to detect large variation in stand densities. This model also demonstrated reasonable behaviour for stands in mineral soils.

Optical and magnetic properties of the exact PPP states of biphenyl

The low-lying singlets and triplets of biphenyl are obtained exactly within the PPP model using the diagrammatic valence bond method. The energy gaps within the singlet manifold as well as the lowest singlet-triplet gap are found to be in good agreement with experimental results. The two weak absorptions between 4·1 and 4·2 eV reported experimentally are attributed to the two states lying below the optical gap that become weakly allowed on breaking electron-hole and inversion symmetries. The observed blue shift of the spectral lines, attributed to a change in dihedral angle, on going from crystalline to solution to vapour phase is also well reproduced within the PPP model. The bond orders show that the ground singlet state is benzenoidal while the dipole excited state as well as the lowest triplet state are quinonoidal and planar. Comparison with the experimental spin densities and the fine structure constants D and E in the triplet state point to slightly weaker correlations than assumed by the PPP model. The introduction of a 1-8 bond to mimic poly(paraphenylene)s gives an optical gap that is in good agreement with experiment.

Towards Understanding Powder Behavior Via Simulation

The aim of this study was to investigate powder and tablet behavior at the level of mechanical interactions between single particles. Various aspects of powder packing, mixing, compression, and bond formation were examined with the aid of computer simulations. The packing and mixing simulations were based on spring forces interacting between particles. Packing and breakage simulations included systems in which permanent bonds were formed and broken between particles, based on their interaction strengths. During the process, a new simulation environment based on Newtonian mechanics and elementary interactions between the particles was created, and a new method for evaluating mixing was developed. Powder behavior is a complicated process, and many of its aspects are still unclear. Powders as a whole exhibit some aspects of solids and others of liquids. Therefore, their physics is far from clear. However, using relatively simple models based on particle-particle interaction, many powder properties could be replicated during this work. Simulated packing densities were similar to values reported in the literature. The method developed for describing powder mixing correlated well with previous methods. The new method can be applied to determine mixing in completely homogeneous materials, without dividing them into different components. As such, it can describe the efficiency of the mixing method, regardless of the powder's initial setup. The mixing efficiency at different vibrations was examined, and we found that certain combinations of amplitude, direction, and frequencies resulted in better mixing while using less energy. Simulations using exponential force potentials between particles were able to explain the elementary compression behavior of tablets, and create force distributions that were similar to the pressure distributions reported in the literature. Tablet-breaking simulations resulted in breaking strengths that were similar to measured tablet breaking strengths. In general, many aspects of powder behavior can be explained with mechanical interactions at the particle level, and single particle properties can be reliably linked to powder behavior with accurate simulations.

QCD with dynamical Wilson fermions. II

We present results for the QCD spectrum and the matrix elements of scalar and axial-vector densities at β=6/g2=5.4, 5.5, 5.6. The lattice update was done using the hybrid Monte Carlo algorithm to include two flavors of dynamical Wilson fermions. We have explored quark masses in the range ms≤mq≤3ms. The results for the spectrum are similar to quenched simulations and mass ratios are consistent with phenomenological heavy-quark models. The results for matrix elements of the scalar density show that the contribution of sea quarks is comparable to that of the valence quarks. This has important implications for the pion-nucleon σ term.

Structure of Relativistic States

QCD factorization in the Bjorken limit allows to separate the long-distance physics from the hard subprocess. At leading twist, only one parton in each hadron is coherent with the hard subprocess. Higher twist effects increase as one of the active partons carries most of the longitudinal momentum of the hadron, x -> 1. In the Drell-Yan process \pi N -> \mu^- mu^+ + X, the polarization of the virtual photon is observed to change to longitudinal when the photon carries x_F > 0.6 of the pion. I define and study the Berger-Brodsky limit of Q^2 -> \infty with Q^2(1-x) fixed. A new kind of factorization holds in the Drell-Yan process in this limit, in which both pion valence quarks are coherent with the hard subprocess, the virtual photon is longitudinal rather than transverse, and the cross section is proportional to a multiparton distribution. Generalized parton distributions contain information on the longitudinal momentum and transverse position densities of partons in a hadron. Transverse charge densities are Fourier transforms of the electromagnetic form factors. I discuss the application of these methods to the QED electron, studying the form factors, charge densities and spin distributions of the leading order |e\gamma> Fock state in impact parameter and longitudinal momentum space. I show how the transverse shape of any virtual photon induced process, \gamma^*(q)+i -> f, may be measured. Qualitative arguments concerning the size of such transitions have been previously made in the literature, but without a precise analysis. Properly defined, the amplitudes and the cross section in impact parameter space provide information on the transverse shape of the transition process.

Monetary policy rules and estimated reaction functions for the European Central Bank

This thesis studies the interest-rate policy of the ECB by estimating monetary policy rules using real-time data and central bank forecasts. The aim of the estimations is to try to characterize a decade of common monetary policy and to look at how different models perform at this task.The estimated rules include: contemporary Taylor rules, forward-looking Taylor rules, nonlinearrules and forecast-based rules. The nonlinear models allow for the possibility of zone-like preferences and an asymmetric response to key variables. The models therefore encompass the most popular sub-group of simple models used for policy analysis as well as the more unusual non-linear approach. In addition to the empirical work, this thesis also contains a more general discussion of monetary policy rules mostly from a New Keynesian perspective. This discussion includes an overview of some notable related studies, optimal policy, policy gradualism and several other related subjects. The regression estimations are performed with either least squares or the generalized method of moments depending on the requirements of the estimations. The estimations use data from both the Euro Area Real-Time Database and the central bank forecasts published in ECB Monthly Bulletins. These data sources represent some of the best data that is available for this kind of analysis. The main results of this thesis are that forward-looking behavior appears highly prevalent, but that standard forward-looking Taylor rules offer only ambivalent results with regard to inflation. Nonlinear models are shown to work, but on the other hand do not have a strong rationale over a simpler linear formulation. However, the forecasts appear to be highly useful in characterizing policy and may offer the most accurate depiction of a predominantly forward-looking central bank. In particular the inflation response appears much stronger while the output response becomes highly forward-looking as well.

Real-time multipurpose reservoir operation: a case study / Exploitation en temps reacuteel d'un reservoir agrave buts multiples: eacutetude d'un cas

A real-time operational methodology has been developed for multipurpose reservoir operation for irrigation and hydropower generation with application to the Bhadra reservoir system in the state of Karnataka, India. The methodology consists of three phases of computer modelling. In the first phase, the optimal release policy for a given initial storage and inflow is determined using a stochastic dynamic programming (SDP) model. Streamflow forecasting using an adaptive AutoRegressive Integrated Moving Average (ARIMA) model constitutes the second phase. A real-time simulation model is developed in the third phase using the forecast inflows of phase 2 and the operating policy of phase 1. A comparison of the optimal monthly real-time operation with the historical operation demonstrates the relevance, applicability and the relative advantage of the proposed methodology.

Padé approach to potential transients: Part 1. Electron transfer without and with coupling to first-order homogeneous reactions at planar electrodes

Potential transients are obtained by using “Padé approximants” (an accurate approximation procedure valid globally — not just perturbatively) for all amplitudes of concentration polarization and current densities. This is done for several mechanistic schemes under constant current conditions. We invert the non-linear current-potential relationship in the form (using the Lagrange or the Ramanujan method) of power series appropriate to the two extremes, namely near reversible and near irreversible. Transforming both into the Pad́e expressions, we construct the potential-time profile by retaining whichever is the more accurate of the two. The effectiveness of this method is demonstrated through illustrations which include couplings of homogeneous chemical reactions to the electron-transfer step.