INTEGRATED ASSESSMENT MODELLING

integrated assessment

Financial deepening and economic growth

The core of Shapley-Shubik games and general equilibrium models with a Venn diagram is applied for a theory on the role of real finance in economic growth among advanced economies. Then the dynamic computable general equilibrium (DCGE) models for Germany, France, UK, Japan and USA are constructed to assess the validity of the over financing hypothesis that reappeared after the financial crisis of 2008. Actual financial deepening ratios observed in the non-consolidated balance sheet of the OECD exceeded by factors of 3.5, 2.4, 5.1, 11.6 and 4.8 to the optimal financial deepening ratios implied by DCGE models respectively in these countries because of excessive leveraging and bubbles up to 19 times of GDP which were responsible for this great recession. Containing such massive fluctuations for macroeconomic stability and growth in these economies is not possible in conventional fiscal and monetary policy models and requires a DCGE analysis like this along with adoption of separating equilibria strategy in line of Miller-Stiglitz-Roth mechanisms to avoid asymmetric information problems in process of financial intermediation so that the gap between actual and optimal ratios of financial deepening remain as small as possible

CURRENT ISSUES AFFECTING TRADE AND TRADE POLICY: AN ANNOTATED LITERATURE REVIEW

This review provides a base of literature describing current issues and research on the impacts of lobalization and the industrialization of agriculture and recent approaches to analyze and model agricultural trade and trade policies. Three key factors of the survey are differentiated goods, global economic integration and international supply chain linkages. The review covers 182 publications, which are presented alphabetically by author with a brief annotation describing how it relates to the above criteria. The articles are also indexed by keyword. A brief summary highlights the documented literature and includes a series of issues for future discussion and research.International Relations/Trade,

Performing an Environmental Tax Reform in a Regional Economy. A Computable General Equilibrium Approach

We use a Computable General Equilibrium model to simulate the effects of an Environmental Tax Reform in a regional economy (Andalusia, Spain). The reform involves imposing a tax on CO2 or SO2 emissions and reducing either the Income Tax or the payroll tax of employers to Social Security, and eventually keeping public deficit unchanged. This approach enables us to test the so-called double dividend hypothesis, which states that this kind of reform is likely to improve both environmental and non-environmental welfare. In the economy under analysis, an employment double dividend arises when the payroll tax is reduced and, if CO2 emissions are selected as environmental target, a (limited) strong double could also be obtained. No double dividend appears when Income Tax is reduced to compensate the environmental tax.environmental tax reform, computable general equilibrium, double dividend.

Empirical models, rules, and optimization

This paper considers supply decisions by firms in a dynamic setting with adjustment costs and compares the behavior of an optimal control model to that of a rule-based system which relaxes the assumption that agents are explicit optimizers. In our approach, the economic agent uses believably simple rules in coping with complex situations. We estimate rules using an artificially generated sample obtained by running repeated simulations of a dynamic optimal control model of a firm's hiring/firing decisions. We show that (i) agents using heuristics can behave as if they were seeking rationally to maximize their dynamic returns; (ii) the approach requires fewer behavioral assumptions relative to dynamic optimization and the assumptions made are based on economically intuitive theoretical results linking rule adoption to uncertainty; (iii) the approach delineates the domain of applicability of maximization hypotheses and describes the behavior of agents in situations of economic disequilibrium. The approach adopted uses concepts from fuzzy control theory. An agent, instead of optimizing, follows Fuzzy Associative Memory (FAM) rules which, given input and output data, can be estimated and used to approximate any non-linear dynamic process. Empirical results indicate that the fuzzy rule-based system performs extremely well in approximating optimal dynamic behavior in situations with limited noise.Decision-making. ,econometric models ,TMD ,

Exploring the Environmental Kuznets Hypothesis. Theoretical and Econometric Problems

Focussing on the prime example of CO2 emissions, we discuss several important theoretical and econometric problems that arise when studying environmental Kuznets curves (EKCs). The dominant theoretical approach is given by integrated assessment modelling, which consists of economic models that are combined with environmental impact models. We critically evaluate the aggregation, model dynamics and calibration aspects and their implications for the validity of the results. We then turn to a discussion of several important econometric problems that go almost unnoticed in the literature. The most fundamental problems relate to nonlinear transformations of nonstationary regressors and, in a nonstationary panel context, to neglected cross–sectional dependence. We discuss the implications of these two major and some minor problems that arise in the econometric analysis of Kuznets curves. Our discussion shows that EKC modelling as performed to date is subject to major drawbacks at both the theoretical and the econometric level.Carbon Kuznets curve, Integrated assessment models, Regressions with integrated variables, Nonstationary panels

Does the Kyoto Protocol Agreement matters? An environmental efficiency analysis

This paper uses both conditional and unconditional Data Envelopment Analysis (DEA) models in order to determine different environmental efficiency levels for a sample of 110 countries in 2007. In order to capture the effect of countries compliance with the Kyoto Protocol Agreement (KPA), we condition the years since a country has signed the agreement until 2007. Particularly, various DEA models have been applied alongside with bootstrap techniques in order to determine the effect of Kyoto protocol agreement on countries’ environmental efficiencies. The study illustrates how the recent developments in efficiency analysis and statistical inference can be applied when evaluating environmental performance issues. The results indicate that the first six years after countries signed the Kyoto protocol agreement have a positive effect on their environmental efficiencies. However after that period it appears that countries avoid complying with the actions imposed by the agreement which in turn has an immediate negative effect on their environmental efficiencies.Environmental efficiency; Kyoto protocol agreement; Conditional full frontiers; Statistical inference; DEA

Energy Regulation, Roll Call Votes and Regional Resources: Evidence from Russia

This paper investigates the relative impact of regional energy production on the legislative choices of Russian Duma deputies on energy regulation between 1994 and 2003. We apply Poole’s optimal classification method of roll call votes using an ordered probit model to explain energy law reform in the first decade of Russia’s democratic transition. Our goal is to analyze the relative importance of home energy on deputies’ behavior, controlling for other factors such as party affiliation, electoral mandate, committee membership and socio-demographic parameters. We observe that energy resource factors have a considerable effect on deputies’ voting behavior. On the other hand, we concurrently find that regional economic preferences are constrained by the public policy priorities of the federal center that continue to set the tone in energy law reform in post-Soviet Russia.Energy Regulation, Energy Roll Law Reform, Energy Resources, Roll Call Votes, Legislative Politics, State Duma, Russia

Trade-Induced Changes in Economic Inequality: Assessment Issues and Policy Implications for Developing Countries

The starting point of this paper is given by country situations where trade liberalization is expected to be poverty and inequality alleviating in the long run while inducing a short run increase in poverty or in inequality. The question we ask is what are the distributive aspects of trade which are worth documenting to better help governments integrate trade policies within a global policy framework so as to enhance growth and reduce poverty and inequality. The method followed is a literature review, organized according to salient issues given by the three acceptations of fairness implied by the inclusion of the “Development” objective in the world trade liberalization agenda. A “pro-development” trade liberalization agenda should correct past unfairness in trade regime, which raises the broad issue of country level ex post assessment. It should equally reduce poverty, which point toward household level ex ante assessment. Last, because development is basically a dynamic process, the distributive-dynamic effects of trade liberalization are also considered. A synthesis of our ten main results concludes the paper.international trade, Income distribution, Poverty