Current Account Dynamics and the Terms of Trade: Harberger-Laursen-Metzler Two Generations Later

The current account dynamics is examined for a small open economy which is subject to exogenous changes in its static terms of trade and in world interest rates. The model used is one with overlapping finite-lived generations, which we argue gives rise to a more reasonable saving behaviour than previously used models with infinite lived consumers.In particular no restrictions on the rate of time preference is required.Anticipated and unanticipated, as well as temporary and permanent,terms of trade changes have very different effects. There is, however,a general tendency towards cycles in both savings and investment,which gives rise to cycles in the current account.The classic Harberger-Laursen-Metzler effect on saving of a terms of trade deterioration can have any sign for plausible parameter values,both for temporary and permanent disturbances.

Exchange Rate Variability And Asset Trade

In discussions about different international monetary arrangements it is often maintained that exchange rate variability has a negative influence on international trade and foreign investment. This paper addresses one specific aspect of this general issue, namely the effect of exchange rate variability on capital flows and international portfolio diversification. More precisely, we examine how different monetary policies -- and among those, policies that aim at stabilizing exchange rates -- determine the risk characteristics of nominal assets, and how these risk characteristics determine international portfolio composition and trade in assets, when international asset markets are incomplete.

Public Participant Geographical Information Systems: Participation on the road to social sustainability

In this bachelor thesis the discourse of PPGIS will be mapped out both theoretically and empirically. I argue that participation is fundamental for social sustainability and that the emerging Neogeography field motivates citizen participation even more. The thesis explores the traditional disempowering views of GIS as it transforms into a tool for equality and empowerment of marginalized groups. Four different cases of PPGIS is examined and analysed through the theoretical framework ending in a review of PPGIS experiences so far, arguing that for a PPGIS project to be considered part of the social sustainability goals the communication within projects has to work two-ways. Discussion is a fundamental part of PPGIS but is sometimes forgotten when projects turn into pure intelligence gathering. I also argue that projects should not be viewed as single entities but parts of the bigger picture, not seen as isolated events but as on-going processes

Time Consistency of Fiscal and Monetary Policy: A Solution

This paper demonstrates how time consistency of the Ramsey policy–the optimal fiscal and monetary policy under commitment–can be achieved. Each government should leave its successor with a unique maturity structure for the nominal and indexed debt, such that the marginal benefit of a surprise inflation exactly balances the marginal cost. Unlike in earlier papers on the topic, the result holds for quite a general Ramsey policy, including time varying polices with positive inflation and positive nominal interest rates. We compare our results with those in Persson, Persson, and Svensson (1987), Calvo and Obstfeld (1990), and Alvarez, Kehoe, and Neumeyer (2004).time consistency; Ramsey policy; surprise inflation

Debt, Cash Flow and Inflation Incentives: A Swedish Example

The fiscal gains from, and hence the political incentives to, an increase in inflation rate of ten percentage points may be substantial: with Swedish data from 1994, these gains would have been an annual real flow of 3-4 percent of GDP, or a capitalized value of nearly 100 percent of GDP. They would mainly have arisen from the nominalistic features of the tax and transfer systems rather than from the traditional sources: seignorage and real depreciation of the public debt. The welfare costs of such an inflation increase would have been even larger, however, and would thus have reduced net welfare. Possible institutional reforms, aimed at making the political costs of inflation more equal to the social costs, are presented and discussed

Laws as Assets: A Possible Solution to the Time Consistency Problem

This paper presents a new solution to the time-consistency problem that appears capable of enforcing ex ante policy in a variety of settings in which other enforcement mechanisms do not work. The solution involves formulating a law, institution, or agreement that specifies the optimal ex ante policy and that can be sold by successive old generations to successive young generations. Each young generation pays for the law through the payment of taxes. Both old and young generations have an economic incentive to obey the law. For the old generation that owns the law, breaking the law makes the law valueless, and the generation suffers a capital loss. For the young generation the economic advantage of purchasing the existing law exceeds its cost as well as the economic gain from setting up the law.

Experimental results, integrated model validation, and economic aspects of agrivoltaic systems at northern latitudes

Agrivoltaic systems, which allow the coexistence of crop and electricity production on the same land, are an integrated water-energy-food nexus solution that allows the simultaneous attainment of conflicting Sustainable Development Goals. This study aims to analyse experimental results on the responses of ley grass yield and quality to shadings in the first agrivoltaic system in Sweden. It also aims to validate an integrated modelling platform for assessing agrivoltaic systems' performances before installation. An economic analysis is carried out to compare the profitability of agrivoltaic versus conventional ground-mounted photovoltaic systems and, using a Monte Carlo Analysis, to identify the parameters that most affect the profitability. Despite the agrivoltaic systems' supporting structures and photovoltaic modules producing an average similar to 25% reduction in photosynthetically active radiation at ground level, no statistically significant difference was observed between the yield of the samples under the agrivoltaic system compared to the yield of the samples in the reference area. The agrivoltaic system attained land equivalent ratios of 1.27 and 1.39 in 2021 and 2022, respectively. The validation results of the integrated modelling platform show that the sub-model concerning the crop yield response to shading conditions tends to underestimate similar to 7% the actual average crop yield under the agrivoltaic system. The results of the economic analysis show that, from a net present value perspective, agrivoltaic systems have a profitability that is similar to 30 times higher than a conventional crop rotation in Sweden

International Borrowing and Time-Consistent Fiscal Policy

We discuss optimal fiscal policy in open economies, using an open-economy version of a model used in the recent work by Lucas and Stokey. An optimal allocation  smooths out the tax distortions associated with financing a given sequence of government consumption, and it also smooths out private consumption of goods and leisure by borrowing (lending) on the international capital market in periods with high (low) government consumption. The main question we ask is how the optimal policy can be made time-consistent, when usccessive governments reoptimize with respect to current and future tax rates, but most honor the government debt obligations. We show that this requires government debt of sufficiently rich maturity to be issued. First we treat a case with capital controls, where only the government can borrow and lend abroad. The there is a unique restructuring scheme for the domestic debt that is necessary to give succeeding governments incentives to continue following the optimal policy (here we interpret and extend Lucas and Stokey's results). For a small economy, this scheme is also sufficient for time-consistency, but in an economy large enough to affect its terms of trade, it is also necessary to follow a unique restructuring scheme for the government's (and the country's) foreign debt. When there are no capital controls, time-consistency is no longer a problem in a small economy. In a large economy, what matters is total government debt and total foreign debt (but not their composition), and again there are unique maturity structures necessary and sufficient for time-consistency. An interesting observation is that in the distorted world we consider, relaxing the capital controls actually deteriorates welfare

Resolving issues of scaling for gramian-based input–output pairing methods

A key problem in process control is to decide which inputs should control which outputs. There are multiple ways to solve this problem, among them using gramian-based measures, which include the Hankel interaction index array, the participation matrix and the (Formula presented.) method. The gramian-based measures, however, have issues with input and output scaling. Generally, this is resolved by scaling all inputs and outputs to have equal range. However, we demonstrate how this can result in an incorrect pairing and examine alternative methods of scaling the gramian-based measures, using either row or column sums or by utilising the Sinkhorn-Knopp algorithm. To systematically analyse the benefits of the scaling schemes, a multiple-input multiple-output model generator is used to test the different schemes on a large number of systems. This assessment shows considerable benefits to be gained from the alternative scaling of the gramian-based measures, especially when using the Sinkhorn-Knopp algorithm