4,379 research outputs found

    Real currency appreciation in accession countries: Balassa-Samuelson and investment demand

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    The Balassa-Samuelson effect is usually seen as the prime explanation of the continuous real appreciation of central and east European (CEE) transition countries' currencies against their western counterparts. The response of a small country's real exchange rate to various shocks is derived in a simple model. It is shown that productivity shocks work not only through a Balassa-type supply channel but also through an investment demand channel. Therefore, empirical evidence apparently in favour of Balassa-Samuelson effects may require a re-interpretation. The model is estimated for a panel of CEE countries. The results are consistent with the model, plausibly explain the observed real appreciation and support the existence of the proposed investment demand channel. -- Die fortdauernde reale Aufwertung der Währungen mittel- und osteuropäischer Transformationsländer gegenüber den Währungen ihrer westlichen Partnerländer wird in der Regel vornehmlich auf den Balassa-Samuelson-Effekt zurückgeführt. Die Reaktion des realen Wechselkurses eines kleinen Landes auf verschiedene Schocks wird in einem einfachen Modell hergeleitet. Es wird gezeigt, dass Produktivitätsschocks ihre Wirkung nicht nur über einen angebotsseitigen Kanal im Sinne von Balassa und Samuelson sondern auch über einen Investitionskanal entfalten. Studien, die den Balassa-Samuelson-Effekt empirisch zu belegen scheinen, müssen deshalb möglicherweise neu interpretiert werden. Das Modell wird für ein Panel von mittel- und osteuropäischen Ländern geschätzt. Die Schätzergebnisse stehen mit dem Modell im Einklang, können die beobachtete reale Aufwertung plausibel erklären und deuten auf die Existenz des hergeleiteten Investitionskanals hin.real exchange rate,Balassa-Samuelson effect,transition economies,panel

    What can EMU countries' sovereign bond spreads tell us about market perceptions of default probabilities during the recent financial crisis?

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    This paper presents a new approach for analysing the recent development of EMU sovereign bond spreads. Based on a GARCH-in-mean model originally used in the exchange rate target zone literature, spreads are decomposed into a risk premium, an expected loss component and a liquidity premium. Time-varying default probabilities are derived. The results suggest that the rise in sovereign spreads during the recent financial crisis mainly reflects an increased expected loss component. In addition, the rescue of Bear Stearns in March 2008 seems to mark a change in market perceptions of sovereign bond risk. The government bonds of some countries lost their former role as a safe haven. While price competitiveness always helps to explain sovereign spreads, it increasingly moved into investors' focus as financial sector soundness weakened. --Sovereign bond spread,GARCH-in-mean,default probability

    A reappraisal of the evidence on PPP: a systematic investigation into MA roots in panel unit root tests and their implications

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    Panel unit root tests of real exchange rates – as opposed to univariate tests – usually reject non-stationarity. These tests, however, could be biased if the real exchange rate contained MA roots. Indeed, two independent arguments claim that the real exchange rate, being a sum of a stationary and a non-stationary component, is possibly an ARIMA (1, 1, 1) process. Monte Carlo simulations show, how systematic changes in the parameters of the components, of the test equation and of the correlation matrix affect the size of first and second generation panel unit root tests. Two components of the real exchange rate, the real exchange rate of a single good and a weighted sum of relative prices, are constructed from the data for a panel of countries. Computation of the relevant parameters reveals that panel unit root tests of the real exchange rate are severely oversized, usually much more so than simple ADF tests. Thus, the evidence for PPP from panel unit root tests may be merely due to extreme size biases. --panel unit root test,purchasing power parity,real exchange rate,Monte Carlo simulation

    Height-resolved Scaling Properties of Tropospheric Water Vapour based on Airborne Lidar Observations

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    Two-dimensional vertical water vapour cross sections of the free troposphere between altitudes of 2 and 10 km, measured by nadir-viewing airborne differential-absorption lidar with high spatial resolution, were analyzed using structure functions up to the fifth order. We found scale invariance, i.e. a power-law dependency of structure function on length scale, for scales between 5 and 100 km, for the horizontal time series of water vapour mixing ratio. In contrast to one-dimensional in situ measurements, the two-dimensional water vapor lidar observations allow height-resolved analyses of power-law scaling exponents at a vertical resolution of 200 m. The data reveal significantly different scaling properties above and below an air-mass boundary. They stem from three very dissimilar aircraft campaigns: COPS/ETReC over middle and southern Europe in summer 2007, T-PARC around Japan mostly over sea in late summer 2008, and T-IPY around Spitsbergen over sea in winter 2008. After discarding flight segments with low lidar signals or large data gaps, and after averaging horizontally to a resolution of between 1 and 5 km to obtain a high signal to noise ratio, structure functions were computed for 20 flights at various heights, adding up to a length of more than 300,000 km. The power-law scaling exponents of the structure functions do not show significant latitudinal, seasonal or land/sea dependency, but they do differ between air masses influenced by moist convection and air masses aloft, not influenced. A classification of the horizontal water vapour time series into two groups according to whether the series occurred above or below the level of nearby convective cloud tops could be performed by detecting the cloud top height from the lidar backscatter signal in the corresponding flight segment. We found that the scaling exponents can be divided into two groups depending on the respective air mass: The smoothness of the time series, expressed by the first-order scaling exponent, varies from less than 0.5 in the low-level convectively influenced air masses to values greater than 0.5 and most frequently near 0.6 in the higher-level air above the convective cloud tops. The time series’ intermittency, expressed by the variation of the scaling exponent with increasing order, is larger in convectively influenced air masses. These differences in variability strongly suggest that convection provides a source of moisture variability on small scales. Our results show that the high horizontal and vertical resolution of lidar observations allows a characterisation of the scale dependency of the water vapour field at scales close to and smaller than the smallest resolved scales in modern weather and climate models. This provides both a reference for validation of high resolution models and a basis for the design of stochastic or pdf-based parameterisations of clouds and convection

    TEST: A Tropic, Embodied, and Situated Theory of Cognition

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    TEST is a novel taxonomy of knowledge representations based on three distinct hierarchically organized representational features: Tropism, Embodiment, and Situatedness. Tropic representational features reflect constraints of the physical world on the agent’s ability to form, reactivate, and enrich embodied (i.e., resulting from the agent’s bodily constraints) conceptual representations embedded in situated contexts. The proposed hierarchy entails that representations can, in principle, have tropic features without necessarily having situated and/or embodied features. On the other hand, representations that are situated and/or embodied are likely to be simultaneously tropic. Hence while we propose tropism as the most general term, the hierarchical relationship between embodiment and situatedness is more on a par, such that the dominance of one component over the other relies on the distinction between offline storage vs. online generation as well as on representation-specific properties

    The Global Effects of Subglobal Climate Policies

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    Individual countries are in the process of legislating responses to the challenges posed by climate change. The prospect of rising carbon prices raises concerns in these nations about the effects on the competitiveness of their own energy-intensive industries and the potential for carbon leakage, particularly leakage to emerging economies that lack comparable regulation. In response, certain developed countries are proposing controversial trade-related measures and allowance allocation designs to complement their climate policies. Missing from much of the debate on trade-related measures is a broader understanding of how climate policies implemented unilaterally (or subglobally) affect all countries in the global trading system. Arguably, the largest impacts are from the targeted carbon pricing itself, which generates macroeconomic effects, terms-of-trade changes, and shifts in global energy demand and prices; it also changes the relative prices of certain energy-intensive goods. This paper studies how climate policies implemented in certain major economies (the European Union and the United States) affect the global distribution of economic and environmental outcomes, and how these outcomes may be altered by complementary policies aimed at addressing carbon leakage.cap-and-trade, emissions leakage, border carbon adjustments, output-based allocation, general equilibrium model

    Cost-Effective Unilateral Climate Policy Design: Size Matters

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    Given the bleak prospects for a global agreement on coordinated policies to mitigate climate change, political pressure is increasing among industrialized countries for unilateral abatement. A major challenge thereby is the appropriate response to the threat of emissions leakage. Border carbon adjustments and output-based allocation of emissions allowances can increase effectiveness of unilateral action but introduce distortions of their own. We assess the relative attractiveness of these anti-leakage measures as a function of the abatement coalition size. We first develop a partial equilibrium analytical framework to gain generic insights on how these instruments affect emissions within and outside the coalition. We then employ a large-scale computable general equilibrium model of international trade and energy use to assess the cost-effectiveness of alternative anti-leakage strategies as the coalition evolves toward global coverage. We find that full border adjustments rank first in global cost-effectiveness, followed by import tariffs and then output-based rebates. The differences across anti-leakage measures and the overall appeal of such measures decline with the size of the abatement coalition. In terms of cost incidence, the abatement coalition prefers border carbon adjustments over output-based rebates; the opposite holds true for countries outside the coalition.emissions leakage, border carbon adjustments, output-based allocation

    Deterministic coupling of a single silicon-vacancy color center to a photonic crystal cavity in diamond

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    Deterministic coupling of single solid-state emitters to nanocavities is the key for integrated quantum information devices. We here fabricate a photonic crystal cavity around a preselected single silicon-vacancy color center in diamond and demonstrate modification of the emitters internal population dynamics and radiative quantum efficiency. The controlled, room-temperature cavity coupling gives rise to a resonant Purcell enhancement of the zero-phonon transition by a factor of 19, coming along with a 2.5-fold reduction of the emitter's lifetime
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