Trade and quality: theoretical and empirical evidence for the euro zone

Since the contribution of Linder (1961) product quality is considered as a factor potentially boosting exports, especially for the most industrialized countries. However, being quality difficult to be measured, the macro-econometric studies on its role are not numerous and have not produced clear-cut results. In this paper we shed some light on the theoretical and empirical impact of product quality on the export performance of the EU-12 area. To avoid problems of mis-specification and endogeneity usual in the empirical literature on trade equations, we model exports as jointly endogenous with GDP, inflation and exchange rate. For this purpose we modify and enlarge a New Keynesian open economy model à la Clarida, Galì and Gertler (2001) to adapt it to a large open economy. Sign restrictions, based on theoretical impact multipliers, enable the identification of quality as one of the structural shocks of the corresponding Bayesian VAR, avoiding drawbacks connected to the choice of an incomplete, partial or biased proxy of the phenomenon. The empirical evidence shows that a quality upgrade might reinforce the EU competitiveness leading to an improvement of the current account, without any unfavourable effect on terms of trade.

Does the PPP need the UIP?

In this paper we focus on the post Bretton Woods period and analyze whether a PPP relationship is accepted by the data for Italy, United States and Germany. We adopt a multivariate system approach in which, initially, we test for cointegration and then we try to identify a cointegration space in which we have the PPP relationship (the Johansen approach). The studies that have adopted this approach have always rejected the PPP in favour of a long run relationship between the real exchange rate and the interest rate differential. On the contrary, our conclusions are in favour of the PPP for all the cases considered when we allow for a structural break in the data. We arrive to this conclusion, after having identified the cointegration space in two different ways: one in which we have the PPP as a cointegrated vector and one in which the real exchange rate plus the interest rate differential is a cointegrated vector. Adopting a dominance criterion we choose the former identification.

Building composite leading indexes in a dynamic factor model framework: a new proposal

One of the most problematic aspects in the work of policy makers and practitioners is having efficient forecasting tools combining two seemingly incompatible features: ease of use and completeness of the information set underlying the forecasts. Econometric literature provides different answers to these needs: Dynamic Factor Models (DFMs) optimally exploit the information coming from large datasets; composite leading indexes represent an immediate and flexible tool to anticipate the future evolution of a phenomenon. Curiously, the recent DFM literature has either ignored the construction of leading indexes or has made unsatisfactory choices as regards the criteria for aggregating the index components and the identification of factors that feed the index. This paper fills the gap and proposes a multi-step procedure for building composite leading indexes within a DFM framework. Once selected the target economic variable and estimated a DFM based on a large target-oriented dataset, we identify the common factor shocks through sign restrictions on the impact multipliers and simulate the structural form of the model. The Forecast Error Variance Decompositions obtained over a k steps-ahead simulation horizon define k sets of weights for aggregating factors (in a different way depending on the leading horizon) in order to get composite leading indexes. This procedure is used for a very preliminar empirical exercise aimed at forecasting crude nominal oil prices. The results seem to be encouraging and support the validity of the proposal: we generate a wide range of horizon-specific leading indexes with appreciable forecasting performances.

The speed of adjustment to PPP: is there any puzzle?

In this paper we address the Rogoff's (1996) puzzle on the exchange rate excess volatility and the slow convergence to PPP. We argue that the evidence in favour of the latter stylised fact could be biased by the adoption of unreliable measures of the speed of convergence. In fact, adopting persistence profiles no evidence is found in favour of the puzzle: for a set of nine bilateral cases we estimate a relatively fast speed of adjustment. Since the robustness of the inference made on the basis of the persistence profiles depends on the correct identification of the cointegration relationships, a particular attention is devoted to this problem. We identify the cointegration space by imposing two competing sets of overidentifying restrictions: the first one identifies the PPP, the second implies a cointegrating relationship between the real exchange rate and the interest rates. Adopting a dominance criterion we conclude in favour of PPP for most cases. Keywords: purchasing power parity, cointegration, persistence profiles. JEL: C32, F31, F41.

Modelling electricity prices: from the state of the art to a draft of a new proposal

In the last decades a liberalization of the electric market has started; prices are now determined on the basis of contracts on regular markets and their behaviour is mainly driven by usual supply and demand forces. A large body of literature has been developed in order to analyze and forecast their evolution: it includes works with different aims and methodologies depending on the temporal horizon being studied. In this survey we depict the actual state of the art focusing only on the recent papers oriented to the determination of trends in electricity spot prices and to the forecast of these prices in the short run. Structural methods of analysis, which result appropriate for the determination of forward and future values are left behind. Studies have been divided into three broad classes: Autoregressive models, Regime switching models, Volatility models. Six fundamental points arise: the peculiarities of electricity market, the complex statistical properties of prices, the lack of economic foundations of statistical models used for price analysis, the primacy of uniequational approaches, the crucial role played by demand and supply in prices determination, the lack of clearcut evidence in favour of a specific framework of analysis. To take into account the previous stylized issues, we propose the adoption of a methodological framework not yet used to model and forecast electricity prices: a time varying parameters Dynamic Factor Model (DFM). Such an eclectic approach, introduced in the late ‘70s for macroeconomic analysis, enables the identification of the unobservable dynamics of demand and supply driving electricity prices, the coexistence of short term and long term determinants, the creation of forecasts on future trends. Moreover, we have the possibility of simulating the impact that mismatches between demand and supply have over the price variable. This way it is possible to evaluate whether congestions in the network (eventually leading black out phenomena) trigger price reactions that can be considered as warning mechanisms.

The introduction of a basic income: a fruitful chance or an insidious trap for the italian labour market? An econometric analysis of the italian case.

This paper explores the potential effects of the introduction of a basic income on the italian labour market. This policy measure is fully defined by three steps: a growth of the public expenditure (a), a reduction of the unemployment benefits (b1) and a growth of the fiscal pressure (b2). After estimating a theoretical macro-model, the impulse response functions of the employment and the labour force to respect to (a), (b1) and (b2) shocks are calculated. Results show that the basic income does not seem to produce any crowding out effect on the labour market in the long run. On the contrary, the final effect is a growth both of employment and participation. In the medium run the size of this effect is depending on the combination of (b1) and (b2) adopted in order to counterbalance the starting expenditure growth occurred in step (a).

Filling the Jurisprudential Gap: “Regular and Established Place of Business” After In Re Cray, Inc.

Since the nineteenth century, specific venue rules for patent infringement suits have existed in federal law. The current version of the “Patent Venue Statute” is codified in 28 U.S.C. § 1400(b), which provides that “[a]ny civil action for patent infringement may be brought in the judicial district where the defendant resides, or where the defendant has committed acts of infringement and has a regular and established place of business.” Over time, the reach of this statute has changed in relation to where a corporation “resides” in the specific context of the statute. These changes have come when courts interpret the relationship between the Patent Venue Statute and amendments to the “General Venue Statute.” In TC Heartland, LLC v. Kraft Goods Grp. Brands, LLC, the Supreme Court yet again changed our understanding of the relationship between the General Venue Statute and the Patent Venue Statute, upending over thirty years of precedent by holding that the narrower Patent Venue Statute jurisprudence, not the General Venue Statute, determines the meaning of the word “resides.” However, the TC Heartland Court provided no guidance on how to apply the second portion of this once-extinct rule of civil procedure. This Note aims to provide some of that missing guidance necessary to determine which precedent remains good law, which case law has been expressly or implicitly overruled, and how the Court of Appeals for the Federal Circuit (Federal Circuit) and federal district courts are likely to rule in novel factual situations moving forward. The determinative issue in the vast majority of patent venue decisions is whether the defendant has a “regular and established place of business” in the federal judicial district where a plaintiff brings suit. Venue is important to litigants because the local rules of each district court can vary drastically, and these rules influence the length of the proceeding, the jury pool, the cost of litigation, and the likelihood of success. In In re Cray, Inc., the Federal Circuit articulated a new legal test for applying the Patent Venue Statute to different factual scenarios to answer whether there is a regular and established place of business in a plaintiff’s desired judicial district. In Cray, a defendant’s sales employee conducted some business activities from his home in the Eastern District of Texas. In holding that there was no regular and established place of business—thereby making venue improper—the Federal Circuit recited three elements necessary to satisfy the regular and established place of business requirement: (1) there must be a “fixed, physical location,” (2) the location must be a “regular and established place of business,” and (3) the location must be “of the defendant.” These requirements overruled the four-factor test Judge Gilstrap articulated in the proceeding below in the Eastern District of Texas. Since the alleged facts did not establish that the defendant had any ownership or possessory interest in the employee’s residence, the physical location in the district did not belong to the defendant, and the third requirement was not met. This Note argues that the Federal Circuit’s interpretation of the Patent Venue Statute is consistent with Congress’s original purpose for enacting it, which was to narrow the scope of venue when compared to general venue requirements. Where Cray conflicts with prior case law, it conflicts only to the extent that there was already a conflict in the precedent with this original purpose. And in most decisions after Cray, district courts have resolved the conflict on the side of a narrower reading that would find venue improper. In other words, federal district court cases applying Cray’s legal test have similarly erred on the side of a narrow reading. Even though there will surely be much more case law on this topic, Cray provides a roadmap for the factual scenarios likely to trigger a venue challenge worth litigating, and thus require a court’s analysis

Increasing trap stiffness with position clamping in holographic optical tweezers

We present a holographic optical tweezers system capable of position clamping multiple particles. Moving an optical trap in response to the trapped object's motion is a powerful technique for optical control and force measurement. We have now realised this experimentally using a Boulder Nonlinear Systems Spatial Light Modulator (SLM) with a refresh rate of 203Hz. We obtain a reduction of 44% in the variance of the bead's position, corresponding to an increase in effective trap stiffness of 77%. This reduction relies on the generation of holograms at high speed. We present software capable of calculating holograms in under 1ms using a graphics processor unit. © 2009 Optical Society of America