No Man is an Island: the Inter-personal Determinants of Regional Well-Being in Europe

There is a strong need to complement the analysis of social well-being at the European regional level to supplement existing, predominantly economic analysis. This work extends the measurement of well-being across the EU-15 regions in several ways. First, we assess the determinants of well-being using a multilevel modelling approach using data at the national, regional and individual levels. Second, we have extended the model to account for the effects of social interactions within each group, as well as intrinsic socio-demographic indicators and higher-level exogenous contextual factors. Empirical findings support the idea that well-being is strongly dependent both on these general forms of social interactions and on more specific individual characteristics. We find that there is some evidence of greater regional effects relative to national effects, but individual well-being continues to be affected most by micro-level phenomena

Where is the Economics in Spatial Econometrics?

Spatial econometrics has been criticized by some economists because some model specifications have been driven by data-analytic considerations rather than having a firm foundation in economic theory. In particular this applies to the so-called W matrix, which is integral to the structure of endogenous and exogenous spatial lags, and to spatial error processes, and which are almost the sine qua non of spatial econometrics. Moreover it has been suggested that the significance of a spatially lagged dependent variable involving W may be misleading, since it may be simply picking up the e¤ects of omitted spatially dependent variables, incorrectly suggesting the existence of a spillover mechanism. In this paper we review the theoretical and empirical rationale for network dependence and spatial externalities as embodied in spatially lagged variables, arguing that failing to acknowledge their presence at least leads to biased inference, can be a cause of inconsistent estimation, and leads to an incorrect understanding of true causal processes.Spatial econometrics, endogenous spatial lag, exogenous spatial lag, spatially dependent errors, network dependence, externalities, the W matrix, panel data with spatial effects, multilevel models with spatial effects.

Habit Formation and Interest Rate Smoothing

Following a conjecture of Kozicki and Tinsley (2002) we generalise the habit formation model of consumption to allow for both a multiplicative utility function and a habit-aspiration function which is a geometrically weighted average of past consumption. The geometric form of the aspiration function addresses the recent concerns of Wendner (2002) who shows that a combination of a multiplicative utility function and an aspiration function that is an arithmetic weighted average of past consumption violates some important assumptions of utility theory. In addition, the geometric form allows us to derive an optimising model of the IS-PC form in which there is a greater degree of inertia in both inflation and output that arises from the role given to habit formation. Because the welfare function of the policymaker is that of the representative agent, and consumers dislike large changes in consumption relative to the level of consumption to which they aspire, the optimal (one-period) rule penalises changes in income and also responds sluggishly to shocks. This goes some way towards accounting for the common observation that the responses of output and inflation to shocks are drawn out, and the interest rate used for policy is persistent. We calibrate the model and find that we can replicate the persistence in interest rate setting by a monetary authority over and above that attributable to the persistence in inflation and the output gap.Habit formation; interest rate smoothing; AIM method.

Multilevel Modelling with Spatial Effects

In multilevel modelling, interest in modeling the nested structure of hierarchical data has been accompanied by increasing attention to di¤erent forms of spatial interactions across different levels of the hierarchy. Neglecting such interactions is likely to create problems of inference, which typically assumes independence. In this paper we review approaches to multilevel modelling with spatial e¤ects, and attempt to connect the two literatures, discussing the advantages and limitations of various approaches.Multilevel Modelling, Spatial E¤ects, Fixed E¤ects, Random E¤ects, IGLS, FGS2SLS.

On the Determinacy of Monetary Policy under Expectational Errors

Forward looking agents with expectational errors provide a problem for monetary policy. We show that under such conditions a standard interest rate rule may not achieve determinacy. We suggest a modification to the standard policy rule that guarantees determinacy in this setting, which involves the policy maker co-ordinating inflation dynamics by responding to each of past, current and expected inflation. We show that this solution maps directly into Woodford’s (2000) timeless perspective. We trace the responses in an artificial economy and illustrate the extent to which macroeconomic persistence is reduced following the adoption of this rule.Expectational Errors; Indeterminacy; Monetary Policy Rules.

Volatility, Growth and Labour Elasticity

We study the relationship between growth and variability in a DSGE model with nominal rigidities and growth driven by learning-by-doing. We show that this relationship may be positive or negative depending on the impulse source of fluctuations A key role is also played by the Frisch elasticity of labour supply and by institutional features of the labour market. Our general findings are that monetary shocks volatility will generally have a negative effect on growth, while the opposite tends to be true for fiscal and productivity shocks. These findings are somehow consistent with the existing empirical evidence: data show, in fact, a somewhat ambiguous relationship between output growth and real variability, but a generally negative relationship between output growth and nominal variability.Growth; Volatility; Monetary and Real Shocks; Labour Supply Elasticity; Second-Order Approximation Methods

Exchange Rate Monitoring Bands: Theory and Policy

Recent empirical research by Mark Taylor and coauthors has found evidence of hybrid dynamics for the real exchange rate. While there is a random walk near equilibrium, for real exchange rates some distance from equilibrium there is mean-reversion which increases with the degree of misalignment. An interesting question is whether this nonlinear mean-reversion is policy-induced. John Williamson (1998) for example, has proposed a "monitoring band" in which there is no intervention near equilibrium but there is substantial intervention triggered by exchange rate deviations outside a preset band. In this paper we develop a theoretical model for a stylised monitoring band to see whether it can generate patterns of nonlinear mean-reversion akin to those reported in empirical researchMonitoring Band, Non-linear Mean-Reversion, Near Random Walk Dynamics

Stabilisation Policy in a Model of Consumption, Housing Collateral and Bank Lending

We decompose aggregate consumption by modelling both savers and their links to collateral constrained borrowers through a bank which prices credit risk. Savers own both firms and the commercial bank while borrowers require loans from the commercial bank to effect their consumption plans. The bank lends at a premium over the interest rate on central bank money in proportion to the riskiness of assets, the demand for loans, the asset price and the quantity of housing collateral. We show that even though house price do not represent wealth, aggregate consumption is not independent of movements in house prices. We consider the case for employing macro-prudential policy jointly with monetary and fiscal policy in order to minimise losses for a representative household

Process Calculi Abstractions for Biology

Several approaches have been proposed to model biological systems by means of the formal techniques and tools available in computer science. To mention just a few of them, some representations are inspired by Petri Nets theory, and some other by stochastic processes. A most recent approach consists in interpreting the living entities as terms of process calculi where the behavior of the represented systems can be inferred by applying syntax-driven rules. A comprehensive picture of the state of the art of the process calculi approach to biological modeling is still missing. This paper goes in the direction of providing such a picture by presenting a comparative survey of the process calculi that have been used and proposed to describe the behavior of living entities. This is the preliminary version of a paper that was published in Algorithmic Bioprocesses. The original publication is available at http://www.springer.com/computer/foundations/book/978-3-540-88868-