Limited asset market participation and the consumption-real exchange rate anomaly

Under efficient consumption risk sharing, as assumed in standard international business cycle models, a country's aggregate consumption rises relative to foreign consumption, when the country's real exchange rate depreciates. Yet, empirically, relative consumption and the real exchange rate are essentially uncorrelated. I show that this "consumption-real exchange rate anomaly" can be explained by a simple model in which a subset of households trade in complete financial markets, while the remaining households lead hand-to-mouth (HTM) lives. HTM behavior also generates greater volatility of the real exchange rate and of net exports, which likewise brings the model closer to the data.International economic integration ; Economic forecasting ; Financial markets ; Foreign exchange rates ; Consumption (Economics)

Why does Environmental Policy in Representative Democracies Tend to be Inadequate? A Preliminary Public Choice Analysis

There is a widespread consensus among the most important players in developed countries (voters, politicians, producers, traditional and green interest groups and bureaucracies) that a shift towards an eco-social market economy is essential for sustainable growth. Nevertheless, market-based instruments have not been implemented satisfactorily in environmental policy yet. To identify the reasons for this insufficient implementation in the past decade the Public Choice theory is used. The players’ behavior is analyzed in order to show that their incentives for implementing market-based instruments in environmental policy instead of command-and-control measures are surprisingly weak. Knowing the obstacles to implementing market-based instruments provides valuable insights into how to overcome them.public choice and environmental policies, sustainability, voters, government, interest groups, tradeable permits, green taxes

Navier-Stokes computation of compressible turbulent flows with a second order closure

The objective was the development of a complete second order closure for wall bounded flows, including all components of the dissipation rate tensor and a numerical solution procedure for the resulting system of equations. The main topics discussed are the closure of the pressure correlations and the viscous destruction terms in the dissipation rate equations and the numerical solution scheme based on a block-tridiagonal solver for the nine equations required for the prediction of plane or axisymmetric flows

Impact scores of invasive plants are biased by disregard of environmental co-variation and non-linearity

Prioritisation of high-impact species is becoming increasingly important for management of introduced species (‘neobiota’) because of their growing number of which, however, only a small fraction has substantial impacts. Impact scores for prioritising species may be affected by the type of effect model used. Recent studies have shown that environmental co-variation and non-linearity may be significant for effect models of biological invasions. Here, we test for differences in impact scores between simple and complex effect models of three invasive plant species (Heracleum mantegazzianum, Lupinus polyphyllus, Rosa rugosa). We investigated the effects of cover percentages of the invasive plants on species richness of invaded communities using both simple linear effect models (‘basic models’) and more complex linear or nonlinear models including environmental co-factors (‘full models’). Then, we calculated impact scores for each invasive species as the average reduction of species richness predicted by basic and full effect models. All three non-native species had negative effects on species richness, but the full effect models also indicated significant influence of habitat types. Heracleum mantegazzianum had uniform linear effects in all habitats, while effects of L. polyphyllus interacted strongly with habitat type, and R. rugosa showed a marked non-linear relationship. Impact scores were overestimated by basic effect models for H. mantegazzianum and R. rugosa due to disregard of habitat effects and non-linearity, respectively. In contrast, impact of L. polyphyllus was underestimated by the basic model that did not account for the strong interaction of invader cover and habitat type. We conclude that simple linear models will often yield inaccurate impact scores of non-native species. Hence, effect models should consider environmental co-variation and, if necessary, non-linearity of the effects of biological invasions on native ecosystems

International Portfolios with Supply, Demand and Redistributive Shocks

This paper explains three key stylized facts observed in industrialized countries: 1) portfolio holdings are biased towards local equity; 2) international portfolios are long in foreign currency assets and short in domestic currency; 3) the depreciation of a country's exchange rate is associated with a net external capital gain, i.e. with a positive wealth transfer from the rest of the world. We present a two-country, two-good model with trade in stocks and bonds, and three types of disturbances: shocks to endowments, to the relative demand for home vs. foreign goods, and to the distribution of income between labor and capital. With these shocks, optimal international portfolios are shown to be consistent with the stylized facts.

Navier-Stokes computation of compressible turbulent flows with a second order closure, part 1

A second order closure turbulence model for compressible flows is developed and implemented in a 2D Reynolds-averaged Navier-Stokes solver. From the beginning where a kappa-epsilon turbulence model was implemented in the bidiagonal implicit method of MACCORMACK (referred to as the MAC3 code) to the final stage of implementing a full second order closure in the efficient line Gauss-Seidel algorithm, numerous work was done, individually and collectively. Besides the collaboration itself, the final product of this work is a second order closure derived from the Launder, Reece, and Rodi model to account for near wall effects, which has been called FRAME model, which stands for FRench-AMerican-Effort. During the reporting period, two different problems were worked out. The first was to provide Ames researchers with a reliable compressible boundary layer code including a wide collection of turbulence models for quick testing of new terms, both in two equations and in second order closure (LRR and FRAME). The second topic was to complete the implementation of the FRAME model in the MAC5 code. The work related to these two different contributions is reported. dilatation in presence of stron shocks. This work, which has been conducted during a work at the Center for Turbulence Research with Zeman aimed also to cros-check earlier assumptions by Rubesin and Vandromme

Real-time on-board obstacle avoidance for UAVs based on embedded stereo vision

In order to improve usability and safety, modern unmanned aerial vehicles (UAVs) are equipped with sensors to monitor the environment, such as laser-scanners and cameras. One important aspect in this monitoring process is to detect obstacles in the flight path in order to avoid collisions. Since a large number of consumer UAVs suffer from tight weight and power constraints, our work focuses on obstacle avoidance based on a lightweight stereo camera setup. We use disparity maps, which are computed from the camera images, to locate obstacles and to automatically steer the UAV around them. For disparity map computation we optimize the well-known semi-global matching (SGM) approach for the deployment on an embedded FPGA. The disparity maps are then converted into simpler representations, the so called U-/V-Maps, which are used for obstacle detection. Obstacle avoidance is based on a reactive approach which finds the shortest path around the obstacles as soon as they have a critical distance to the UAV. One of the fundamental goals of our work was the reduction of development costs by closing the gap between application development and hardware optimization. Hence, we aimed at using high-level synthesis (HLS) for porting our algorithms, which are written in C/C++, to the embedded FPGA. We evaluated our implementation of the disparity estimation on the KITTI Stereo 2015 benchmark. The integrity of the overall realtime reactive obstacle avoidance algorithm has been evaluated by using Hardware-in-the-Loop testing in conjunction with two flight simulators.Comment: Accepted in the International Archives of the Photogrammetry, Remote Sensing and Spatial Information Scienc

International portfolios, capital accumulation and foreign assets dynamics

Despite the liberalization of capital flows among OECD countries, equity home bias remains sizable. We depart from the two familiar explanations of equity home bias: transaction costs that impede international diversification, and terms of trade responses to supply shocks that provide risk sharing, so that there is little incentive to hold diversified portfolios. We show that the interaction of the following ingredients generates a realistic equity home bias: capital accumulation, shocks to the efficiency of physical investment, as well as international trade in stocks and bonds. In our model, domestic stocks are used to hedge fluctuations in local wage income. Terms of trade risk is hedged using bonds denominated in local goods and in foreign goods. In contrast to related models, the low level of international diversification does not depend on strongly countercyclical terms of trade. The model also reproduces the cyclical dynamics of foreign asset positions and of international capital flows.International finance ; Financial markets ; Capital movements

Global banking and international business cycles

This paper incorporates a global bank into a two-country business-cycle model. The bank collects deposits from households and makes loans to entrepreneurs, in both countries. It has to finance a fraction of loans using equity. We investigate how such a bank capital requirement affects the international transmission of productivity and loan default shocks. Three findings emerge. First, the bank's capital requirement has little effect on the international transmission of productivity shocks. Second, the contribution of loan default shocks to business cycle fluctuations is negligible under normal economic conditions. Third, an exceptionally large loan loss originating in one country induces a sizeable and simultaneous decline in economic activity in both countries. This is particularly noteworthy, as the 2007–09 global financial crisis was characterized by large credit losses in the US and a simultaneous sharp output reduction in the U.S. and the euro Area. Our results thus suggest that global banks may have played an important role in the international transmission of the crisis.Equity ; Bank capital ; Productivity ; Default (Finance) ; Loans