Forward Looking and Myopic Regional Computable General Equilibrium Models. How Significant is the Distinction?

We present a stylized intertemporal forward-looking model able that accommodates key regional economic features, an area where the literature is not well developed. The main difference, from the standard applications, is the role of saving and its implication for the balance of payments. Though maintaining dynamic forward-looking behaviour for agents, the rate of private saving is exogenously determined and so no neoclassical financial adjustment is needed. Also, we focus on the similarities and the differences between myopic and forward-looking models, highlighting the divergences among the main adjustment equations and the resulting simulation outcomes.

Forward-looking versus recursive-dynamic modeling in climate policy analysis: A comparison

This paper develops a multi-regional general equilibrium model for climate policy analysis based on the latest version of the MIT Emissions Prediction and Policy Analysis (EPPA) model. We develop two versions so that we can solve the model either as a fully inter-temporal optimization problem (forward-looking, perfect foresight) or recursively. The standard EPPA model on which these models are based is solved recursively, and it is necessary to simplify some aspects of it to make inter-temporal solution possible. The forward-looking capability allows one to better address economic and policy issues such as borrowing and banking of GHG allowances, efficiency implications of environmental tax recycling, endogenous depletion of fossil resources, international capital flows, and optimal emissions abatement paths among others. To evaluate the solution approaches, we benchmark each version to the same macroeconomic path, and then compare the behavior of the two versions under a climate policy that restricts greenhouse gas emissions. We find that the energy sector and CO(2) price behavior are similar in both versions (in the recursive version of the model we force the inter-temporal theoretical efficiency result that abatement through time should be allocated such that the CO(2) price rises at the interest rate.) The main difference that arises is that the macroeconomic costs are substantially lower in the forward-looking version of the model, since it allows consumption shifting as an additional avenue of adjustment to the policy. On the other hand, the simplifications required for solving the model as an optimization problem, such as dropping the full vintaging of the capital stock and fewer explicit technological options, likely have effects on the results. Moreover, inter-temporal optimization with perfect foresight poorly represents the real economy where agents face high levels of uncertainty that likely lead to higher costs than if they knew the future with certainty. We conclude that while the forward-looking model has value for some problems, the recursive model produces similar behavior in the energy sector and provides greater flexibility in the details of the system that can be represented. (C) 2009 Elsevier B.V. All rights reserved.

Detecting Improvised Explosive Devices Via Forward Looking Ground Penetrating Radar

Forward-looking ground penetrating radar shows promise for detection of improvised explosive devices in active war zones. Because of certain insurmountable physical limitations, post-processing algorithm development is the most popular research topic in this field. One such investigative avenue explores the worthiness of frequency analysis during data post-processing. Using the finite difference time domain numerical method, simulations are run to test both mine and clutter frequency response. Mines are found to respond strongest at low frequencies and cause periodic changes in ground penetrating radar frequency results. These results are called into question, however, when clutter, a phenomenon generally known to be random, is also found to cause periodic frequency effects. Possible causes, including simulation inaccuracy, are considered. Although the clutter models used are found to be inadequately random, specular reflections of differing periodicity are found to return from both the mine and the ground. The presence of these specular reflections offers a potential alternative method of determining a mine’s presence.

An analysis of US greenhouse gas cap-and-trade proposals using a forward-looking economic model

We develop a forward-looking version of the recursive dynamic MIT Emissions Prediction and Policy Analysis (EPPA) model, and apply it to examine the economic implications of proposals in the US Congress to limit greenhouse gas (GHG) emissions. We find that shocks in the consumption path are smoothed out in the forward-looking model and that the lifetime welfare cost of GHG policy is lower than in the recursive model, since the forward-looking model can fully optimize over time. The forward-looking model allows us to explore issues for which it is uniquely well suited, including revenue-recycling and early action crediting. We find capital tax recycling to be more welfare-cost reducing than labor tax recycling because of its long-term effect on economic growth. Also, there are substantial incentives for early action credits; however, when spread over the full horizon of the policy they do not have a substantial effect on lifetime welfare costs.

Voluntary disclosure of forward-looking earnings forecasts in Australia

This study examines the voluntary disclosure of future earnings information in annual reports for Australian listed companies. We find that most Australian companies in our sample do not provide quantitative earnings, forecasts in their annual reports, although more than half of the sample do disclose forward-looking information relating to earnings, without specifically disclosing point estimates for the future. These companies mostly supply qualitative information with a positive bias, while the remainder of the sample discloses no forward-looking information relating to earnings. Our findings also suggest that larger companies with less volatile earnings tend to provide more future earnings information than smaller companies with relatively volatile earnings.

Pitfalls in the modeling of forward-looking price setting and investment decisions

The present paper makes progress in explaining the role of capital for inflation and output dynamics. We followWoodford (2003, Ch. 5) in assuming Calvo pricing combined with a convex capital adjustment cost at the firm level. Our main result is that capital accumulation affects inflation dynamics primarily through its impact on the marginal cost. This mechanism is much simpler than the one implied by the analysis in Woodford's text. The reason is that his analysis suffers from a conceptual mistake, as we show. The latter obscures the economic mechanism through which capital affects inflation and output dynamics in the Calvo model, as discussed in Woodford (2004).

Forward Looking Banking Stress in EMU Countries

Based on contingent claims analysis, CCA, this paper tries to estimate the systemic risk build-up in the European Economic and Monetary Union, EMU countries using a market based measure distance-to-default, DtD. It analyzes the individual and aggregated series for a comprehensive set of banks in each eurozone country over the period 2004-Q4 to 2013-Q2. Given the structural differences in financial sector and banking regulations at national level, the indices provide a useful indicator for monitoring country specific banking vulnerability and stress. We find that average DtD indicators are intuitive, forward-looking and timely risk indicators. The underlying trend, fluctuations and correlations among indices help us analyze the interdependence while cross-sectional differences in DtD prior to crisis suggest banking sector fragility in peripheral EMU countries.

Fourier-based registration for robust forward-looking sonar mosaicing in low-visibility underwater environments

Vehicle operations in underwater environments are often compromised by poor visibility conditions. For instance, the perception range of optical devices is heavily constrained in turbid waters, thus complicating navigation and mapping tasks in environments such as harbors, bays, or rivers. A new generation of high-definition forward-looking sonars providing acoustic imagery at high frame rates has recently emerged as a promising alternative for working under these challenging conditions. However, the characteristics of the sonar data introduce difficulties in image registration, a key step in mosaicing and motion estimation applications. In this work, we propose the use of a Fourier-based registration technique capable of handling the low resolution, noise, and artifacts associated with sonar image formation. When compared to a state-of-the art region-based technique, our approach shows superior performance in the alignment of both consecutive and nonconsecutive views as well as higher robustness in featureless environments. The method is used to compute pose constraints between sonar frames that, integrated inside a global alignment framework, enable the rendering of consistent acoustic mosaics with high detail and increased resolution. An extensive experimental section is reported showing results in relevant field applications, such as ship hull inspection and harbor mapping

Electricity derivatives pricing with forward-looking information

In order to increase overall transparency on key operational information, power transmission system operators publish an increasing amount of fundamental data, including forecasts of electricity demand and available capacity. We employ a fundamental model for electricity prices which lends itself well to integrating such forecasts, while retaining ease of implementation and tractability to allow for analytic derivatives pricing formulae. In an extensive futures pricing study, the pricing performance of our model is shown to further improve based on the inclusion of electricity demand and capacity forecasts, thus confirming the general importance of forward-looking information for electricity derivatives pricing. However, we also find that the usefulness of integrating forecast data into the pricing approach is primarily limited to those periods during which electricity prices are highly sensitive to demand or available capacity, whereas the impact is less visible when fuel prices are the primary underlying driver to prices instead.

Forward looking lessons in U. S. history, up-to-date,

1927 ed. revised.

Credit risk & forward price models

Doutoramento em Gestão

Constant interest rate projections without the curse of indeterminacy

Constant interest rate (CIR) projections are often criticized on the grounds that they are inconsistent with the existence of a unique equilibrium in a variety of forward-looking models. This note shows howto construct CIR projections that are not subject to that criticism, using a standard New Keynesian model as a reference framework.