Wage-Price Dynamics and Deflation in Hong Kong

This paper provides empirical evidence on the dynamics of prices and wages in Hong Kong. The results imply that the deflation in Hong Kong since 1997 can be understood using a conventional macroeconomic framework wherein foreign influences constitute the basic underlying shocks, and adjustment processes in domestic wages and prices determine the details of the transmission mechanism. Our results indicate that the decline in local nominal prices owes much to declining prices of imported intermediate goods. The negative output gap and the increase in unemployment experienced during the deflation period also have their origin in foreign shocks, but the domestic wage adjustment process constitutes an important contributing factor.Deflation, wage-price dynamics, Hong Kong data.

Is There a Euro Effect on Trade? An Application of End-of-Sample Structural Break Tests for Panel Data

Whether trade has increased due to the Euro is a question at the heart of lively policy debates and academic research. We revisit the question with a new, more powerful econometric test for end-of-sample breaks to formally identify the timing and duration of the structural break implied by the ÒRose effectÓ on the Euro AreaÕs trade. We find a significant break in 1999Q1 when using a traditional gravity equa- tion, corroborating the general consensus in the literature. However, we find that this break is short lived. Furthermore, we show that the break can be explained both by the marked decrease in real interest rates across the Euro Area and by deepening European institutional integration.Gravity equation, International Trade, Common Currency, Structural break tests in panel data, Euro Area

Modelling Environmental Risk

As environmental issues have become increasingly important in economic research and policy for sustainable development, firms in the private sector have introduced environmental and social issues in conducting their business activities. Such behaviour is tracked by the Dow Jones Sustainable Indexes (DJSI) through financial market indexes that are derived from the Dow Jones Global Indexes. The sustainability activities of firms are assessed using criteria in three areas, namely economic, environmental and social. Risk (or uncertainty) is analysed empirically through the use of conditional volatility models of investment in sustainability-driven firms that are selected through the DJSI. The empirical analysis is based on financial econometric models to determine the underlying conditional volatility, with the estimates showing that there is strong evidence of volatility clustering, short and long run persistence of shocks to the index returns, and asymmetric leverage between positive and negative shocks to returns.Environmental sustainability index, environmental risk, conditional volatility, Dow Jones Sustainability Indexes, GARCH, GJR, persistence, shocks, asymmetry, moment condition, log-moment condition.

Stability Tests for Heterogeneous Panel Data

This paper proposes a new test for structural instability in heterogeneous panels. The test builds on the seminal work of Andrews (2003) originally developed for time series. It is robust to non-normal, heteroskedastic and serially correlated errors, and allows for the number of post break observations to be small. Importantly, the test considers the alternative of a break affecting only some - and not all - individuals of the panel. Under mild assumptions the test statistic is shown to be asymptotically normal, thanks to the additional cross sectional dimension of panel data. This greatly facilitates the calculation of critical values. Monte Carlo experiments show that the test has good size and power under a wide range of circumstances. The test is then applied to investigate the effect of the Euro on trade.Structural change, end-of-sample instability tests, heterogeneous panels, Monte Carlo, Euro effect on trade.

Stability tests for heterogeneous panel data

This paper proposes a new test for structural instability in heterogeneous panels. The test builds on the seminal work of Andrews (2003) originally developed for time series. It is robust to non-normal, heteroskedastic and serially correlated errors, and allows for the number of post break observations to be small. Importantly, the test considers the alternative of a break affecting only some - and not all - individuals of the panel. Under mild assumptions the test statistic is shown to be asymptotically normal, thanks to the additional cross sectional dimension of panel data. This greatly facilitates the calculation of critical values. Monte Carlo experiments show that the test has good size and power under a wide range of circumstances. The test is then applied to investigate the effect of the Euro on trade.structural change ; end-of-sample instability tests ; heterogeneous panels ; Monte Carlo ; Euro effect on trade

Stability tests for heterogeneous panel data

This paper proposes a new test for structural instability in heterogeneous panels. The test builds on the seminal work of Andrews (2003) originally developed for time series. It is robust to non-normal, heteroskedastic and serially correlated errors, and allows for the number of post break observations to be small. Importantly, the test considers the alternative of a break affecting only some - and not all - individuals of the panel. Under mild assumptions the test statistic is shown to be asymptotically normal, thanks to the additional cross sectional dimension of panel data. This greatly facilitates the calculation of critical values. Monte Carlo experiments show that the test has good size and power under a wide range of circumstances. The test is then applied to investigate the effect of the Euro on trade.Ce papier propose un nouveau test pour détecter des changements structurels en fin d'échantillon dans des panels hétérogènes. Le test se construit sur le travail de Andrews (2003) conçu à l'origine pour des données temporelles. Le test est robuste à des erreurs non normales, hétéroscédastiques et autocorrélées. De plus, il permet au nombre d'observations suivant le changement structurel d'être petit. Le test considère l'hypothèse alternative que le changement structurel affecte seulement certains individus. Malgré des suppositions générales, la statistique du test est distribuée telle une normale. Cette propriété facilite grandement le calcul de valeurs critiques. Des résultats d'expériences de type Monte Carlo démontrent les excellentes propriétés du test. Pour finir, l'utilisation du test est illustré dans une évaluation de l'impact de l'Euro sur le commerce européen

Koreas Patterns of Trade

Imbs and Pauwels (2020) introduce a measure of openness based on indirect trade. This paper illustrates the differences in the Korean patterns of trade when openness is measured using conventional measures based on direct trade, and when it is measured using this measure of indirect trade, labeled Export Intensity (EI). According to EI, the Republic of Korea (Korea) has been following an upward trend in openness since 2000 and even after 2010. This stands in contrast with most other large trading countries, including China and Germany. We show this is a reflection of Koreas integration with a few partner economies, most notably China. Vertical integration is considerable between Korea and China, in manufacturing and in services alike. The extent of this integration would be invisible on the basis of conventional measures of openness

Towards the sequential assimilation of SAR-derived water stages into hydraulic models using the Particle Filter : proof of concept

With the onset of new satellite radar constellations (e.g. Sentinel-1) and advances in computational science (e.g. grid computing) enabling the supply and processing of multimission satellite data at a temporal frequency that is compatible with real-time flood forecasting requirements, this study presents a new concept for the sequential assimilation of Synthetic Aperture Radar (SAR)-derived water stages into coupled hydrologic-hydraulic models. The proposed methodology consists of adjusting storages and fluxes simulated by a coupled hydrologic-hydraulic model using a Particle Filterbased data assimilation scheme. Synthetic observations of water levels, representing satellite measurements, are assimilated into the coupled model in order to investigate the performance of the proposed assimilation scheme as a function of both accuracy and frequency of water level observations. The use of the Particle Filter provides flexibility regarding the form of the probability densities of both model simulations and remote sensing observations. We illustrate the potential of the proposed methodology using a twin experiment over a widely studied river reach located in the Grand-Duchy of Luxembourg. The study demonstrates that the Particle Filter algorithm leads to significant uncertainty reduction of water level and discharge at the time step of assimilation. However, updating the storages of the model only improves the model forecast over a very short time horizon. A more effective way of updating thus consists in adjusting both states and inputs. The proposed methodology, which consists in updating the biased forcing of the hydraulic model using information on model errors that is inferred from satellite observations, enables persistent model improvement. The present schedule of satellite radar missions is such that it is likely that there will be continuity for SAR-based operational water management services. This research contributes to evolve reactive flood management into systematic or quasi-systematic SAR-based flood monitoring services

Asymptotic Theory for Rotated Multivariate GARCH Models

In this paper, we derive the statistical properties of a two step approach to estimating multivariate GARCH rotated BEKK (RBEKK) models. By the denition of rotated BEKK, we estimate the unconditional covariance matrix in the rst step in order to rotate observed variables to have the identity matrix for its sample covariance matrix. In the second step, we estimate the remaining parameters via maximizing the quasi-likelihood function. For this two step quasi-maximum likelihood (2sQML) estimator, we show consistency and asymptotic normality under weak conditions. While second-order moments are needed for consistency of the estimated unconditional covariance matrix, the existence of nite sixth-order moments are required for convergence of the second-order derivatives of the quasi-log-likelihood function. We also show the relationship of the asymptotic distributions of the 2sQML estimator for the RBEKK model and the variance targeting (VT) QML estimator for the VT-BEKK model. Monte Carlo experiments show that the bias of the 2sQML estimator is negligible, and that the appropriateness of the diagonal specication depends on the closeness to either of the Diagonal BEKK and the Diagonal RBEKK models

Targeting IL-1β and IL-17A driven inflammation during influenza-induced exacerbations of chronic lung inflammation.

For patients with chronic lung diseases, such as chronic obstructive pulmonary disease (COPD), exacerbations are life-threatening events causing acute respiratory distress that can even lead to hospitalization and death. Although a great deal of effort has been put into research of exacerbations and potential treatment options, the exact underlying mechanisms are yet to be deciphered and no therapy that effectively targets the excessive inflammation is available. In this study, we report that interleukin-1β (IL-1β) and interleukin-17A (IL-17A) are key mediators of neutrophilic inflammation in influenza-induced exacerbations of chronic lung inflammation. Using a mouse model of disease, our data shows a role for IL-1β in mediating lung dysfunction, and in driving neutrophilic inflammation during the whole phase of viral infection. We further report a role for IL-17A as a mediator of IL-1β induced neutrophilia at early time points during influenza-induced exacerbations. Blocking of IL-17A or IL-1 resulted in a significant abrogation of neutrophil recruitment to the airways in the initial phase of infection or at the peak of viral replication, respectively. Therefore, IL-17A and IL-1β are potential targets for therapeutic treatment of viral exacerbations of chronic lung inflammation