Identification of individual demands from market data under uncertainty

We show that, even under incomplete markets, the equilibrium manifold identifies individual demands everywhere in their domains. Under partial observation of the manifold, we determine maximal subsets of the domains on which identification holds. For this, we assume conditions of smoothness, interiority and regularity. It is crucial that there be date-zero consumption. As a by-product, we develop some duality theory under incomplete markets

The Third Moment in Law and Development Theory and the Emergence of a New Critical Practice

The study of the relationship between law and economic development goes back at least to the nineteenth century. It is a question that attracted the attention of classical thinkers like Marx and Weber. And there were some early efforts to craft policy in this area; for example, under the Raj, some English Utilitarians tried to put Jeremy Bentham’s ideas about law and economic progress into practice in India. But it was only after World War II that systematic and organized efforts to reform legal systems became part of the practice of international development agencies. Initially, development agencies turned to law as an instrument for state policy aimed at generating economic growth. Starting in the 1980s, interest in the role of law in economic development grew, but it was an interest in law more as a framework for market activity than as an instrument of state power. This book argues that, starting in the mid-1990s, development practitioners approached law in a fundamentally new way – as a correction for market failures and as a constitutive part of “development” itself. As a result, “the rule of law” has become significant not only as a tool of development policy, but as an objective for development policy in its own right. This book charts the history of this growing interest in the legal field, explores the shifting rationales behind development policy initiatives, and explores in detail the newest – and most surprising – of these rationales. To do that, we trace the history of a body of ideas about law and economic development that have been employed not just by academics but also by development practitioners responsible for allocating funds and designing projects. In this introduction, we refer to that body of ideas as law and development doctrine. Although this doctrine has academic roots in economic and legal theory, it is a practical working tool of development agencies

Backward error analysis for multisymplectic discretizations of Hamiltonian PDEs

Several recently developed multisymplectic schemes for Hamiltonian PDEs have been shown to preserve associated local conservation laws and constraints very well in long time numerical simulations. Backward error analysis for PDEs, or the method of modified equations, is a useful technique for studying the qualitative behavior of a discretization and provides insight into the preservation properties of the scheme. In this paper we initiate a backward error analysis for PDE discretizations, in particular of multisymplectic box schemes for the nonlinear Schrodinger equation. We show that the associated modified differential equations are also multisymplectic and derive the modified conservation laws which are satisfied to higher order by the numerical solution. Higher order preservation of the modified local conservation laws is verified numerically.Comment: 12 pages, 6 figures, accepted Math. and Comp. Simul., May 200

Identification of preferences from market data

We offer a new proof that the equilibrium manifold (under complete markets) identifies individual demands globally. Moreover, under observation of only a subset of the equilibrium manifold, we find domains on which aggregate and individual demands are identifiable. Our argument avoids the assumption of Balasko (2004) requiring the observation of the complete manifold

Testing for Asymmetries in the Preferences of the Euro-Area Monetary Policymaker

This paper tests for asymmetries in the preferences of the Euro-Area monetary policymaker with 1995:I-2004:III data from the last update of the ECB's Area-wide database. Following the relevant literature, we distinguish between three types of asymmetry: precautionary demand for expansions, precautionary demand for price stability and interest rate smoothing asymmetry. Based on the joint GMM estimation of the Euler equation of optimal policy and the AS-AD structure of the macroeconomy, we find evidence of precautionary demand for price stability in the preferences revealed by the monetary policymaker. This type of asymmetry is consistent with the ECB’s definition of price stability and with the priority of credibility-building by a recently created monetary authority.Central Bank Preferences, Asymmetry, Euro Area, Optimal Control, GMM.

Macroeconomic Volatility Trade-off and Monetary Policy Regime in the Euro Area

This research uncovers a well-defined monetary policy regime starting in 1986 in the aggregate Euro Area. Both alternative solution-estimation methods employed - optimal control cum GMM, and dynamic programming cum FIML - identify a regime of strict inflation targeting with interest rate smoothing. The unemployment gap, properly estimated as quasi real-time information, is a relevant element in the information set of the monetary authority, despite not being included in its preferences. The emergence of the regime relates to the improvement of the volatility trade-off between inflation and unemployment gap since the mid-80s. Additional improving factors have been milder supply shocks and better ability of policymakers to set the interest rate closer to optimum.Monetary Policy Regime, Euro Area, Optimal Control, Dynamic Programming, GMM, FIML.