International Capital Flows in a World of Greater Financial Integration

International capital flows have increased dramatically since the 1980s, with much of the increase being due to trade in equity and debt markets. Such developments are often attributed to the increased integration of world financial markets. We present a model that allows us to examine how greater integration in world financial markets affects the structure of asset ownership and the behavior of international capital flows. Our model predicts that international capital flows are large (in absolute value) and very volatile during the early stages of financial integration when international asset trading is concentrated in bonds. As integration progresses and households gain access to world equity markets, the size and volatility of international bond flows fall dramatically but continue to exceed the size and volatility of international equity flows. We also find that variations in the equity risk premia account for almost all of the international portfolio flows in bonds and equities. We argue that both effects arise naturally as a result of increased risk sharing facilitated by greater financial integration. The paper also makes a methodological contribution to the literature on dynamic general equilibrium asset-pricing. We present a new technique for solving a dynamic general equilibrium model with production, portfolio choice and incomplete marketsPortfolio Choice; Financial Integration; Incomplete Markets

Financial Integration, Macroeconomic Volatility and Welfare

This paper studies the effects of financial integration on macroeconomic volatility and welfare. We examine a two-sector (tradable and nontradable), twocountry world economy with production in which both stocks and bonds are traded internationally, but markets are incomplete. The effects of integration are examined by comparing the equilibrium properties of the model under three financial configurations: autarky, low integration and high integration. The model predicts a non-monotonic relationship between the degree of financial integration and the volatility of several macroeconomic variables. Greater integration is initially associated with more volatile consumption and output, but as integration proceeds further volatility declines. We also find that while increased integration allows for significantly greater risk-sharing between countries, the improvement in welfare can be very small.Globalization; Incomplete Markets; Volatility; Welfare

International Capital Flows, Returns and World Financial Integration

International capital flows have increased dramatically since the 1980s, with much of the increase being due to trade in equity and debt markets. Such developments are often attributed to the increased integration of world financial markets. We present a model that allows us to examine how greater integration in world financial markets affects the behavior of international capital flows and financial returns. Our model predicts that international capital flows are large (in absolute value) and very volatile during the early stages of financial integration when international asset trading is concentrated in bonds. As integration progresses and households gain access to world equity markets, the size and volatility of international bond flows fall dramatically but continue to exceed the size and volatility of international equity flows. This is the natural outcome of greater risk sharing facilitated by increased integration. We find that the equilibrium flows in bonds and stocks are larger than their empirical counterparts, and are largely driven by variations in equity risk premia. The paper also makes a methodological contribution to the literature on dynamic general equilibrium asset-pricing. We implement a new technique for solving a dynamic general equilibrium model with production, portfolio choice and incomplete markets.

Solving General Equilibrium Models with Incomplete Markets and Many Assets

This paper presents a new numerical method for solving general equilibrium models with many assets. The method can be applied to models where there are heterogeneous agents, time-varying investment opportunity sets, and incomplete markets. It also can be used to study models where the equilibrium dynamics are non-stationary. We illustrate how the method is used by solving a one-- and two-sector versions of a two--country general equilibrium model with production. We check the accuracy of our method by comparing the numerical solution to the one-sector model against its known analytic properties. We then apply the method to the two-sector model where no analytic solution is available.

Percolation thresholds and fractal dimensions for square and cubic lattices with long-range correlated defects

We study long-range power-law correlated disorder on square and cubic lattices. In particular, we present high-precision results for the percolation thresholds and the fractal dimension of the largest clusters as function of the correlation strength. The correlations are generated using a discrete version of the Fourier filtering method. We consider two different metrics to set the length scales over which the correlations decay, showing that the percolation thresholds are highly sensitive to such system details. By contrast, we verify that the fractal dimension $d_{\rm f}$ is a universal quantity and unaffected by the choice of metric. We also show that for weak correlations, its value coincides with that for the uncorrelated system. In two dimensions we observe a clear increase of the fractal dimension with increasing correlation strength, approaching $d_{\rm f}\rightarrow 2$. The onset of this change does not seem to be determined by the extended Harris criterion.Comment: 12 pages, 8 figure

International Capital Flows, Returns and World Financial Integration

International capital flows have increased dramatically since the 1980s, with much of the increase being due to trade in equity and debt markets. Such developments are often attributed to the increased integration of world financial markets. We present a model that allows us to examine how greater integration in world financial markets affects the behavior of international capital flows and financial returns. Our model predicts that international capital flows are large (in absolute value) and very volatile during the early stages of financial integration when international asset trading is concentrated in bonds. As integration progresses and households gain access to world equity markets, the size and volatility of international bond flows fall dramatically but continue to exceed the size and volatility of international equity flows. This is the natural outcome of greater risk sharing facilitated by increased integration. We find that the equilibrium flows in bonds and stocks are larger than their empirical counterparts, and are largely driven by variations in equity risk premia. The paper also makes a methodological contribution to the literature on dynamic general equilibrium asset-pricing. We implement a new technique for solving a dynamic general equilibrium model with production, portfolio choice and incomplete markets.Globalization; Portfolio Choice; Financial Integration; Incomplete Markets; Asset Prices.

Solving General Equilibrium Models with Incomplete Markets and Many Assets

This paper presents a new numerical method for solving general equilibrium models with many assets. The method can be applied to models where there are heterogeneous agents, time-varying investment opportunity sets, and incomplete markets. It also can be used to study models where the equilibrium dynamics are non-stationary. We illustrate how the method is used by solving a one— and two-sector versions of a two—country general equilibrium model with production. We check the accuracy of our method by comparing the numerical solution to the one-sector model against its known analytic properties. We then apply the method to the two-sector model where no analytic solution is available.Portfolio Choice; Perturbation Methods; Incomplete Markets; Asset Prices.

Sex classification using the human sacrum: Geometric morphometrics versus conventional approaches

The human pelvis shows marked sexual dimorphism that stems from the conflicting selective pressures of bipedal locomotion and parturition. The sacrum is thought to reflect this dimorphism as it makes up a significant portion of the pelvic girdle. However, reported sexual classification accuracies vary considerably depending on the method and reference sample (54%-98%). We aim to explore this inconsistency by quantifying sexual dimorphism and sex classification accuracies in a geographically heterogeneous sample by comparing 3D geometric morphometrics with the more commonly employed linear metric and qualitative assessments. Our sample included 164 modern humans from Africa, Europe, Asia, and America. The geometric morphometric analysis was based on 44 landmarks and 56 semilandmarks. Linear dimensions included sacral width, corpus depth and width, and the corresponding indices. The qualitative inspection relied on traditional macroscopic features such as proportions between the corpus of the first sacral vertebrae and the alae, and sagittal and coronal curvature of the sacrum. Classification accuracy was determined using linear discriminant function analysis for the entire sample and for the largest subsamples (i.e., Europeans and Africans). Male and female sacral shapes extensively overlapped in the geometric morphometric investigation, leading to a classification accuracy of 72%. Anteroposterior corpus depth was the most powerful discriminating linear parameter (83%), followed by the corpus-area index (78%). Qualitative inspection yielded lower accuracies (64–76%). Classification accuracy was higher for the Central European subsample and diminished with increasing geographical heterogeneity of the subgroups. Although the sacrum forms an integral part of the birth canal, our results suggest that its sex-related variation is surprisingly low. Morphological variation thus seems to be driven also by other factors, including body size, and sacrum shape is therefore likely under stronger biomechanical rather than obstetric selection

Analysis of residential rooftop photovoltaic diffusion in India through a Bass model approach

In this paper, the analysis of the diffusion of photovoltaic systems is performed using the Bass model. The historical data of installed rooftop photovoltaic is not enough for the model, as the installation of photovoltaic was almost non-existent, hence data of solar water heaters is utilized to calculate the parameters for the model. The trajectory of growth for solar water heaters in the market presents a congruence for the growth of solar photovoltaic due to inherent similarities in the technologies and its application. India was used as a case study of the application of this borrowing approach in a market where photovoltaic is also used to provide electricity to local communities. Data from solar water heater market in India were used and they indicate innovator parameters of 0.00105 and imitator parameters of 0.12219. The study is significant as it forecasts the diffusion of photovoltaic in the market, which is essential for achieving India\u27s Intended Nationally Determined Contributions goals and Renewable Energy targets. The results indicate that residential rooftop photovoltaic diffusion will tend to present a slower pace in India than in other markets if no additional policies are implemented to foster this market