The development of a system of European regional purchasing power parities

This paper discusses ways in which a system of Purchasing Power Parities defined at the NUTS-2 regional disaggregation could be developed, and what the implications could be for EU policy, particularly the evaluation of Structural Funds and the conclusions made thus far about regional convergence and development. Currently regional GDP in current prices is deflated using national purchasing power indices, mostly only derived from surveys undertaken in the capital cities of the Member States. For some Member States, the national PPP are corrected for price differences within the country, using spatial correction factors for individual price surveys, given these factors are provided by the countries. Clearly, therefore, for the majority of the countries, these estimates of regional GDP do not take any account of significant differences in cost of living within countries. This paper draws on the preliminary results of a research project being undertaken for Eurostat to examine options for deriving a system of regional prices. Much research has already been published at the level of international prices, partly through the International Comparison Programme (ICP), but little work has been carried out on inter-regional differences. The paper reviews briefly the theoretical and empirical literature on national PPPs. It then discusses key conceptual issues, including the problem of the difference between expenditure-based measures (used for national PPPs) versus the output-based procedure used to estimate regional GDP. A review of what data currently exists to inform estimates, particularly the detailed tables of consumer price indices (CPI), is followed by proposals for how a system of regional PPPs might be developed. This paper concludes with an examination of the potential implications of the work, how it could affect regional policy in the future and conclusions already made about regional development. Some stylised examples are used to show how adopting regional versus national prices could affect the results.

RHOMOLO: A Dynamic General Equilibrium Modelling Approach to the Evaluation of the EU's Regional Policies

This paper describes some of the features of a new dynamic general equilibrium framework (RHOMOLO) being developed at the European Commission (JRC-IPTS, together with DG REGIO) for evaluating EU Cohesion Policy. The design of the model reflects the objectives of Cohesion Policy, and a broader understanding of impact analysis which goes beyond pure economic effects and also considers environmental and social indicators. The model has both regional and sectoral dimensions – regionally, the aim is for complete NUTS2 (NUTS1 for Germany) coverage of the EU27, while the potential sector coverage is 23 – all of which leads to very large modelling dimensions and presents challenges in terms of data availability. The model is constructed using the concept of Dynamic Spatial Computable General Equilibrium (DSCGE), which ensures Walrasian equilibrium in a sequence of model solutions over time, and also incorporates elements of New Economic Geography (NEG) in the way it captures the forces of economic agglomeration and dispersion.

The development of a system of European regional purchasing power parities

This paper discusses ways in which a system of Purchasing Power Parities defined at the NUTS-2 regional disaggregation could be developed, and what the implications could be for EU policy, particularly the evaluation of Structural Funds and the conclusions made thus far about regional convergence and development. Currently regional GDP in current prices is deflated using national purchasing power indices, mostly only derived from surveys undertaken in the capital cities of the Member States. For some Member States, the national PPP are corrected for price differences within the country, using spatial correction factors for individual price surveys, given these factors are provided by the countries. Clearly, therefore, for the majority of the countries, these estimates of regional GDP do not take any account of significant differences in cost of living within countries. This paper draws on the preliminary results of a research project being undertaken for Eurostat to examine options for deriving a system of regional prices. Much research has already been published at the level of international prices, partly through the International Comparison Programme (ICP), but little work has been carried out on inter-regional differences. The paper reviews briefly the theoretical and empirical literature on national PPPs. It then discusses key conceptual issues, including the problem of the difference between expenditure-based measures (used for national PPPs) versus the output-based procedure used to estimate regional GDP. A review of what data currently exists to inform estimates, particularly the detailed tables of consumer price indices (CPI), is followed by proposals for how a system of regional PPPs might be developed. This paper concludes with an examination of the potential implications of the work, how it could affect regional policy in the future and conclusions already made about regional development. Some stylised examples are used to show how adopting regional versus national prices could affect the results

RHOMOLO: A Dynamic General Equilibrium Modelling Approach to the Evaluation of the EU's Regional Policies

This paper describes some of the features of a new dynamic general equilibrium framework (RHOMOLO) being developed at the European Commission (JRC-IPTS, together with DG REGIO) for evaluating EU Cohesion Policy. The design of the model reflects the objectives of Cohesion Policy, and a broader understanding of impact analysis which goes beyond pure economic effects and also considers environmental and social indicators. The model has both regional and sectoral dimensions - regionally, the aim is for complete NUTS2 (NUTS1 for Germany) coverage of the EU27, while the potential sector coverage is 23 - all of which leads to very large modelling dimensions and presents challenges in terms of data availability. The model is constructed using the concept of Dynamic Spatial Computable General Equilibrium (DSCGE), which ensures Walrasian equilibrium in a sequence of model solutions over time, and also incorporates elements of New Economic Geography (NEG) in the way it captures the forces of economic agglomeration and dispersion

Sectoral Analysis and Assessment of Geographical Concentration of EU Industries

The aim of this JRC-Seville commissioned study is to gain a deeper understanding of how the process of EU integration has affected patterns of industrial specialisation, geographic location and clustering across Europe and its regions. To carry out this study required a theoretical definition and assessment of the key terms (specialisation, concentration, and clustering); data collection (across time periods, Member States, regions and sectors); formulation and construction of relevant indicators; and assessment of their evolution and the role played by the Single Market.JRC.B.5-Circular Economy and Industrial Leadershi

Britain’s spatially unbalanced economy is both wasteful and unstable. The solution requires much more than small-scale measures

In the wake of the economic crisis and Great Recession, there has been much talk of spatial re-balancing the UK economy from South to North. The ‘re-balancing’ mantra is far from new, however; the British economy has long been skewed towards London and the surrounding South East region and. In a recent paper, Ron Martin, Ben Gardiner, Peter Sunley and Peter Tyler document how the degree of spatial imbalance in Britain’s economy is both real and has continued to widen. However, the various policy measures introduced over the past three years or so do not add up to a coherent and effective response. The solution to the problem will require addressing the fundamental constraints preventing the re-balancing of the United Kingdom – both sectorally and spatially

Memory-Controlled Diffusion

Memory effects require for their incorporation into random-walk models an extension of the conventional equations. The linear Fokker-Planck equation for the probability density $p(\vec r, t)$ is generalized to include non-linear and non-local spatial-temporal memory effects. The realization of the memory kernels are restricted due the conservation of the basic quantity $p$. A general criteria is given for the existence of stationary solutions. In case the memory kernel depends on $p$ polynomially the transport is prevented. Owing to the delay effects a finite amount of particles remains localized and the further transport is terminated. For diffusion with non-linear memory effects we find an exact solution in the long-time limit. Although the mean square displacement shows diffusive behavior, higher order cumulants exhibits differences to diffusion and they depend on the memory strength

Random walk in a two-dimensional self-affine random potential : properties of the anomalous diffusion phase at small external force

We consider the random walk of a particle in a two-dimensional self-affine random potential of Hurst exponent $H=1/2$ in the presence of an external force $F$. We present numerical results on the statistics of first-passage times that satisfy closed backward master equations. We find that there exists a zero-velocity phase in a finite region of the external force $0<F<F_c$, where the dynamics follows the anomalous diffusion law $ x(t) \sim \xi(F) \ t^{\mu(F)} $. The anomalous exponent$0<\mu(F)<1$and the correlation length$\xi(F)$vary continuously with$F$. In the limit of vanishing force$F \to 0$, we measure the following power-laws : the anomalous exponent vanishes as$\mu(F) \propto F^a$with$a \simeq 0.6$(instead of$a=1$in dimension$d=1$), and the correlation length diverges as$\xi(F) \propto F^{-\nu}$with$\nu \simeq 1.29$(instead of$\nu=2$in dimension$d=1$). Our main conclusion is thus that the dynamics renormalizes onto an effective directed trap model, where the traps are characterized by a typical length$\xi(F)$along the direction of the force, and by a typical barrier$1/\mu(F)$. The fact that these traps are 'smaller' in linear size and in depth than in dimension$d=1$, means that the particle uses the transverse direction to find lower barriers.Comment: 10 pages, 8 figures, v2=final versio

Extreme times for volatility processes

We present a detailed study on the mean first-passage time of volatility processes. We analyze the theoretical expressions based on the most common stochastic volatility models along with empirical results extracted from daily data of major financial indices. We find in all these data sets a very similar behavior that is far from being that of a simple Wiener process. It seems necessary to include a framework like the one provided by stochastic volatility models with a reverting force driving volatility toward its normal level to take into account memory and clustering effects in volatility dynamics. We also detect in data a very different behavior in the mean first-passage time depending whether the level is higher or lower than the normal level of volatility. For this reason, we discuss asymptotic approximations and confront them to empirical results with a good agreement, specially with the ExpOU model.Comment: 10, 6 colored figure