Estimation of semiparametric stochastic frontiers under shape constraints with application to pollution generating technologies

A number of studies have explored the semi- and nonparametric estimation of stochastic frontier models by using kernel regression or other nonparametric smoothing techniques. In contrast to popular deterministic nonparametric estimators, these approaches do not allow one to impose any shape constraints (or regularity conditions) on the frontier function. On the other hand, as many of the previous techniques are based on the nonparametric estimation of the frontier function, the convergence rate of frontier estimators can be sensitive to the number of inputs, which is generally known as “the curse of dimensionality” problem. This paper proposes a new semiparametric approach for stochastic frontier estimation that avoids the curse of dimensionality and allows one to impose shape constraints on the frontier function. Our approach is based on the singleindex model and applies both single-index estimation techniques and shape-constrained nonparametric least squares. In addition to production frontier and technical efficiency estimation, we show how the technique can be used to estimate pollution generating technologies. The new approach is illustrated by an empirical application to the environmental adjusted performance evaluation of U.S. coal-fired electric power plants.stochastic frontier analysis (SFA), nonparametric least squares, single-index model, sliced inverse regression, monotone rank correlation estimator, environmental efficiency

Adjustment of the US current account deficit

We present a two country DGE model and estimate it using Bayesian techniques and euro area and US quarterly data for 1977–2004. In analysing the current accounts we find that a lower US rate of time preference or a higher dollar risk premium could render the deficit sustainable, but that these could push the interest rate to the zero bound. Secondly, we find that fiscal policy is not sufficiently effective to improve the current account although the zero bound is not hit.current account; zero bound; policy coordination

Eco-Efficiency Analysis of Consumer Durables Using Absolute Shadow Prices

We develop a method for eco-efficiency analysis of consumer durables by utilizing Data Envelopment Analysis (DEA). In contrast to previous product efficiency studies, we consider the measurement problem from the perspective of a policy maker. The novel innovation of the paper is to measure efficiency in terms of absolute shadow prices that are optimized endogenously within the model to maximize efficiency of the good. Thus, the efficiency measure has a direct economic interpretation as a monetary loss due to inefficiency, expressed in some currency unit. The advantages as well as technical differences between the proposed approach and the traditional production-side methods are discussed in detail. We illustrate the approach by an application to eco-efficiency evaluation of Sport Utility Vehicles.Activity Analysis, Data Envelopment Analysis (DEA), Environmental efficiency, Product evaluation, Sport Utility Vehicles (SUVs)

The Pass-Through of Exchange Rate Changes to Import Prices

In this paper we analyze the empirical relevance of exchange rate pass-through for Finland, Sweden and Denmark during the period 1980–1994. Further, we attempt to determine if there has been a structural change in the pass-through relationship in the1990s. We find that about half the changes in exchange rates and world prices are passed through to import prices within one year, and three-quarters of such changes are passed through to import prices in two years. Moreover, there are no major differences among countries. Parameter constancy tests indicate the possibility of a structural change where the pass-through has slowed in recent years. Possible explanations of this are that the exchange rate regime has changed and competition has increased.exchange rate pass-through; import prices; structural change