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IInflation and Globalisation: A Dynamic Factor Model with Stochastic Volatility
Get PDFNational inflation rates reflect domestic and international (regional and global) influences.
The relative importance of these components remains a controversial empirical issue. We
extend the literature on inflation co-movement by utilising a dynamic factor model with stochastic volatility to account for shifts in the variance of inflation and endogenously
determined regional groupings. We find that most of inflation variability is explained by
the country specific disturbance term. Nevertheless, the contribution of the global
component in explaining industrialised countries’ inflation rates has increased over time
Does Public Governance Always Matter? How Experience of Poor Institutional Quality Influences FDI to the South
Get PDFThis paper investigates whether the higher prevalence of South multinational enterprises
(MNEs) in risky developing countries may be explained by the experience that they have
acquired of poor institutional quality at home. We confirm the intuition provided by our analytical model by empirically showing that the positive impact of good public governance on foreign direct investment (FDI) in a given host country is moderated significantly, and even in some cases eliminated, when MNEs have been faced with poor institutional quality at home
Interest Rate Co-movements, Global Factors and the Long End of the Term Spread
Get PDFThe disconnect between rising short and low long interest rates has been a distinctive
feature of the 2000s. Both research and policy circles have argued that international
forces, such as global monetary policy (e.g. Rogoff, 2006); international business cycles
(e.g. Borio and Filardo, 2007); or a global savings glut (e.g Bernanke, 2005) may be
responsible. In this paper, we employ recent advances in panel data econometrics to
document the disconnect and link it explicitly to the existence of a global latent factor that dominates the long end of the term spread for the recent period; the saving glut story emerges as the most likely contender for the global factor
The Export Base Model with a Supply-Side Stimulus to the Export Sector
Get PDFPaper delivered at the Western Regional Science Association Annual Conference,
Sedona, Arizona, February, 2010.In the export-base model, the level of a region’s economic activity is underpinned by
the performance of its export sector (Daly, 1940; Dixon and Thirlwall, 1975; Kaldor,
1970; North, 1955). This theory is now almost universally represented as a primitive
version of the familiar Input-Output (IO) or Keynesian demand-driven approach,
where regional output is linked to regional exports through a rather mechanistic
multiplier process (Romanoff, 1974). Further, in a standard IO inter-regional
framework, the expansion of output in one region always generates positive impacts
on other regions. That is to say, there is always a positive spread, and no negative
backwash, effect.
However, these models typically embody no supply-side constraints. What is more,
the stimulus to the export sector is often thought to come through supply-side
improvements (North, 1955; McCombie, 1992). Whilst accepting that the
development of a healthy export base is generally central to promoting the growth of
the regional economy, the relationship is likely to be much more complex than is
usually thought. Also whilst an increase in regional exports typically increases
economic activity in the target region, the effect on other regions is less
straightforward (Myrdal, 1957).
In this paper we begin by using a single-region IO analysis of the operation of a
stylised export base model. The impact of a conventional increase in export demand is
compared to a situation in which increased competitiveness underpins the improved
export performance. This analysis is then extended through the use of an interregional
(Scotland–Rest of the UK) Computable General Equilibrium (CGE) model.
In simulation, different exogenous demand and supply side disturbances are calibrated
so as to generate the same long-run expansion in Scottish manufacturing exports. The subsequent specific evolutions of regional GDP and employment in both Scotland and the rest of the UK (RUK) are then tracked.The research is partly funded by the ESRC Climate Change Leadership Fellowship,
Grant reference RES-066-27-002
Monetary Policy and Heterogeneous Expectations
Get PDFThis paper studies the implications for monetary policy of heterogeneous
expectations in a New Keynesian model. The assumption of rational expectations
is replaced with parsimonious forecasting models where agents select between
predictors that are underparameterized. In a Misspecification Equilibrium
agents only select the best-performing statistical models. We demonstrate that, even
when monetary policy rules satisfy the Taylor principle by adjusting nominal interest rates more than one for one with inflation, there may exist equilibria with
Intrinsic Heterogeneity. Under certain conditions, there may exist multiple
misspecification equilibria. We show that these findings have important implications
for business cycle dynamics and for the design of monetary policy
Longitudinal analysis of income-related health inequality: welfare foundations and alternative measures
Get PDFThis paper elaborates the approach to the longitudinal analysis of income-related health inequalities first proposed in Allanson, Gerdtham and Petrie (2010). In particular, the paper establishes the normative basis of their mobility indices by embedding their decomposition of
the change in the health concentration index within a broader analysis of the change in
“health achievement” or wellbeing. The paper further shows that their decomposition
procedure can also be used to analyse the change in a range of other commonly-used incomerelated health inequality measures, including the generalised concentration index and the relative inequality index. We illustrate our work by extending their investigation of mobility in the General Health Questionnaire measure of psychological well-being over the first nine waves of the British Household Panel Survey from 1991 to 1999
Corruption and the Military in Politics: Theory and Evidence from around the World
Get PDFRecent theoretical developments and case study evidence suggests a relationship
between the military in politics and corruption. This study contributes to this literature by analyzing theoretically and empirically the role of the military in politics and corruption for the first time. By drawing on a cross sectional and panel data set covering a large
number of countries, over the period 1984-2007, and using a variety of econometric
methods substantial empirical support is found for a positive relationship between the
military in politics and corruption. In sum, our results reveal that a one standard deviation increase in the military in politics leads to a 0.22 unit increase in corruption index. This relationship is shown to be robust to a variety of specification changes, different econometric techniques, different sample sizes, alternative corruption indices and the exclusion of outliers. This study suggests that the explanatory power of the military in
politics is at least as important as the conventionally accepted causes of corruption, such as economic development
Microstructure Order Flow: Statistical and Economic Evaluation of Nonlinear Forecasts
Get PDFIn this paper we propose a novel empirical extension of the standard market
microstructure order flow model. The main idea is that heterogeneity of beliefs in
the foreign exchange market can cause model instability and such instability has
not been fully accounted for in the existing empirical literature. We investigate
this issue using two di¤erent data sets and focusing on out- of-sample forecasts.
Forecasting power is measured using standard statistical tests and, additionally,
using an alternative approach based on measuring the economic value of forecasts
after building a portfolio of assets. We nd there is a substantial economic value on
conditioning on the proposed models
Economic Principles and Determination of Infrastructure Third Party Tariffs in the UK Continental Shelf (UKCS)
Get PDFNORTH SEA STUDY OCCASIONAL PAPER
No. 11
Factors Affecting Audit Quality in the 2007 UK Regulatory Environment: Perceptions of Chief Financial Officers, Audit Committee Chairs and Audit Engagement Partners
Get PDFIn line with global changes, the UK regulatory regime for audit and corporate governance has changed significantly since the Enron scandal, with an increased role for audit committees and independent inspection of audit firms. UK listed company chief financial officers (CFOs), audit committee chairs (ACCs) and audit partners (APs) were surveyed in 2007 to obtain views on the impact of 36 economic and regulatory factors on audit quality. 498 usable responses were received, representing a response rate of 36%. All groups rated various audit committee interactions with auditors among the factors most enhancing audit quality. Exploratory factor analysis reduces the 36 factors to nine uncorrelated dimensions. In order of extraction, these are: economic risk; audit committee activities; risk of regulatory action; audit firm ethics; economic independence of auditor; audit partner rotation; risk of client loss; audit firm size; and, lastly, International Standards on Auditing (ISAs) and audit inspection. In addition to the activities of the audit committee, risk factors for the auditor (both economic and certain regulatory risks) are believed to most enhance audit quality. However, ISAs and the audit inspection regime, aspects of the ‘standards-surveillance compliance’ regulatory system, are viewed as less effective. Respondents commented that aspects of the changed regime are largely process and compliance driven, with high costs for limited benefits, supporting psychological bias regulation theory that claims there is overconfidence that a useful regulatory intervention exists