Recent Research Outputs
J. P. Byrne and E. Ersoy (2020). “Endogenous Uncertainty in the Oil Market: A Bayesian Stochastic Volatility-in-Mean Analysis“, CEERP Working Paper Series.
Erkal Ersoy (2020). “The Crude Oil Market and US Economic Activity: Revisiting the Empirical Evidence“, CEERP Working Paper Series.
T. Bersvendsen and J. Ditzen (2020). “xthst: Testing for slope homogeneity in Stata“, CEERP Working Paper Series.
D. Kohns and A. Bhattarcherjee (2019). “Interpreting Big Data in the Macro Economy: A Bayesian Mixed Frequency Estimator“, CEERP Working Paper Series.
Y. Abdul-Salam and E. Phimister (2019). “Modelling the impact of market imperfections on farm household investment in stand-alone solar PV systems”, World Development, 116, pp. 66-76. DOI: 10.1016/j.worlddev.2018.12.007
Y. Abdul-Salam, C. Hawes, D. Roberts and M. Young (2018). “The economics of alternative crop production systems in the context of farmer participation in carbon trading markets”, Agroecology and Sustainable Food Systems. DOI: 10.1080/21683565.2018.1537986
Y. Abdul-Salam (2018). “A Stochastic Anaerobic Digestion Economic Assessment Tool (SADEAT)”, SoftwareX, 7, pp. 190-197. DOI: 10.1016/j.softx.2018.05.004
J. Ditzen (2018). “Estimating dynamic common-correlated effects in Stata“, The Stata Journal, 18(3), pp. 585-617.
L. Colen, P. Melo, Y. Abdul-Salam, D. Roberts, S. Mary and S. Paloma (2018) “Income elasticities for food, calories and nutrients across Africa; A meta-analysis”, Food Policy, 77, pp. 116-132. DOI: https://doi.org/10.1016/j.foodpol.2018.04.002
J. Curtis, D. McCoy, C. Aravena (2018). “Heating system upgrades: The role of knowledge, socio-demographics, building attributes and energy infrastructure”, Energy Policy, 120, pp. 183–196. DOI: 10.1016/j.enpol.2018.05.036
J. Byrne, M. Lorusso, Bing Xu (2018). “Oil Prices, Fundamentals and Expectations”, Energy Economics. 10.1016/j.eneco.2018.05.011
C. Aravena, W. G. Hutchinson, F. Carlsson, D. I. Matthews (2018). “Testing preference formation in learning design contingent valuation (LDCV) using advanced information and repetitive treatments”, Land Economics, 94(2), pp. 284-301. DOI: 10.3368/le.94.2.284
A. Carvalho (2018). “Efficiency spillovers in Bayesian stochastic frontier models: application to electricity distribution in New Zealand”, Spatial Economic Analysis, 13:2, pp. 171-190. DOI: 10.1080/17421772.2018.1444280
(2018). “Cross-country convergence in a general Lotka–Volterra model”, Spatial Economic Analysis, 13:2, pp. 191-211.
A. Carvalho (2018). “Energy efficiency in transition economies”, Economics of Transition. DOI: 10.1111/ecot.12152
M. Lorusso, L. Pieroni (2018). “Causes and consequences of oil price shocks on the UK economy”, Economic Modelling. 10.1016/j.econmod.2018.01.018
Y. Abdul-Salam (2017). “Anaerobic Digestion of feedstock grown on marginal land: Break-even electricity prices”, Energies, 10. DOI: 10.3390/en10091416
A. Carvalho (2017). “Drivers of reported electricity service satisfaction in transition economies”, Energy Policy, 107, pp. 151-157. DOI: 10.1016/j.enpol.2017.04.040
M. Lorusso, L. Pieroni (2017). “The effects of military and non-military government expenditures on private consumption”, Peace Research, 54:3, pp. 442-456. DOI: doi.org/10.1177/0022343316687017
G. Schuitema, L. Ryan, C. Aravena (2017). “The Consumer’s Role in Flexible Energy Systems: An Interdisciplinary Approach to Changing Consumers’ Behavior”, IEEE Power and Energy Magazine, 15(1), pp. 53-60. DOI: 10.1109/MPE.2016.2620658
CEERP Working Paper Series
Bersvendsen, T. and J. Ditzen (2020). xthst: Testing for slope homogeneity in Stata
This article introduces a new community contributed Stata command, xthst, to test for slope homogeneity in panels with a large number of observations over cross sectional units and time periods. The program implements such a test, the delta test (Pesaran and Yamagata 2008). Under its null, slope coefficients are homogeneous across cross-sectional units. Under the alternative, slope coefficients are heterogeneous in the cross-sectional dimension. xthst also includes two extensions. The first is a heteroskedasticity auto-correlation robust test on the lines of Blomquist and Westerlund (2013). The second extension is a cross-sectional dependence robust version. All tests are discussed and examples using a Solow growth model are presented. A Monte Carlo simulation shows that the size and the power behave as expected.
Kohns, D. and A. Bhattarcherjee (2019). Interpreting Big Data in the Macro Economy: A Bayesian Mixed Frequency Estimator
More and more are Big Data sources, such as Google Trends, being used to augment nowcast models. An often neglected issue within the previous literature, which is especially pertinent to policy environments, is the interpretability of the Big Data source included in the model. We provide a Bayesian modeling framework which is able to handle all usual econometric issues involved in combining Big Data with traditional macroeconomic time series such as mixed frequency and ragged edges, while remaining computationally simple and allowing for a high degree of interpretability. In our model, we explicitly account for the possibility that the Big Data and macroeconomic data set included have different degrees
of sparsity. We test our methodology by investigating whether Google trends in real time increase nowcast fit of US real GDP growth compared to traditional macroeconomic time series. We find that search terms improve performance of both point forecast accuracy as well as forecast density calibration not only before official information is released but also
later into GDP reference quarters. Our transparent methodology shows that the increased fit stems from search terms acting as early warning signals to large turning points in GDP.
The United Kingdom (UK) and the European Union (EU) engage in significant natural gas trade through the Internal Energy Market (IEM). As the UK exits from the EU however, it is likely to also exit from the IEM given the seemingly intractable positions of both parties. Exit of the UK from the IEM would likely cause an increase in natural gas trade costs between the two. The increased trade costs result from a number of channels including (1) loss in trade efficiency arising from loss of EU financing previously aimed at improving efficiencies in trade between the two; (2) loss in trade efficiency arising from loss in the sophistication of financial instruments that are linked to the UK’s membership of the EU and the IEM; (3) rising costs of doing business in the UK for many EU energy companies due to the effects of possible regulatory divergence between the UK and the EU; etc. We use a spatial equilibrium model to examine the trade flow, price and welfare implications of these cost effects on global natural gas trade, with a focus on the UK and the EU. We find that cost increases in the UK-EU natural gas trade links would result significant trade flow changes, with the UK and the EU reducing overall exports and increasing internal trade. As a result, there would be significant underutilisation of existing pipelines linking both parties. The Republic of Ireland would also form a significant number of new trade links to compensate for its reduction in imports from the UK. Total welfare losses in the UK and the EU are in the order of $479million and $602million respectively, which is equivalent to about 3.69% and 0.59% of the total value of natural gas trade for the respective parties in 2017. In the UK, the producer welfare loss is significantly higher, highlighting the vulnerability of the UK natural gas industry to cost increases in trade with the EU.
This paper describes how to estimate long run effects in a large heterogeneous panel data model with cross sectional dependence in Stata using the user written command xtdcce2. It builds on Chudik et al. (2016) and explains how to estimate models using the CS-DL and CS-ARDL estimator. In addition it includes a method how to estimate an error correction model.
Byrne, J.P. , Lorusso, M. and Xu, B. (2017) Oil Prices and Informational Frictions: The Time-Varying Impact of Fundamentals and Expectations
This paper accounts for informational frictions when modelling the time-varying relationship between crude oil prices, traditional fundamentals and expectations. Informational frictions force a wedge between oil prices and supply and/or demand shocks, especially during periods of elevated risk aversion and uncertainty. In such a context expectations can be a key driver of oil price movements. We utilize a variety of proxies for forward-looking expectations, including business confidence, consumer confidence and leading indicators. In addition, our paper implements a time-varying parameter approach to account empirically for time-varying informational frictions. Our results illustrate firstly that oil supply shocks played an important role in both the 1970’s and coinciding with the recent shale oil boom. Secondly, demand had a positive impact upon oil prices, especially from the mid-2000’s. Finally, we provide evidence that oil prices respond strongly to expectations but the source of the shock matter: business leaders’ expectations are positively related, while markets’ expectations are not strongly linked to oil prices.
Asimakopoulos, S. , Lorusso, M. and Pieroni, L. (2016) Can Public Spending Boost Private Consumption?
This paper analyses the effects on private consumption from an increase in productive and unproductive public spending. A new Keynesian model incorporating price and wage rigidities, monetary policy and various fiscal rules is developed and estimated, using Bayesian techniques, to capture the key cyclical characteristics of the US economy. We find that price and wage rigidities along with a positive shock to the part of public spending that is productive are sufficient to boost private consumption. Moreover, we show that this initial positive reaction of private consumption is adequate to create a positive present value consumption multiplier for more than five years. Finally, we show that our main results remain robust to changes in the monetary rule and the various methods of deficit financing.
Carvalho, A. (2016) Energy Efficiency in Transition Economies: A Stochastic Frontier Approach
The paper outlines and estimates a measure of underlying efficiency in electricity consumption for an unbalanced panel of 28 transition economies and 5 Western European OECD countries in the period 1994-2007, by estimating a Bayesian Generalized True Random Effects (GTRE) stochastic frontier model that estimates both persistent and transient inefficiency. The properties of alternative GTRE estimation methods in small samples are explored to guide the estimation strategy. The paper analyses the behaviour of underlying efficiency in electricity consumption in these economies after accounting for time-invariant technological differences. After outlining the specific characteristics of the transition economies and their heterogeneous structural economic changes, an aggregate electricity demand function is estimated to obtain efficiency scores that give new insights for transition economies than a simple analysis of energy intensity. There is some evidence of convergence between the CIS countries and a block of Eastern European and selected OECD countries, although other country groups do not follow this tendency, such as the Balkans.
Carvalho, A. (2016) Delays in Connecting Firms to Electricity: What Matters?
This paper discusses institutional factors that influence delays in connecting businesses to electricity across the world. These delays lead to significant economic consequences at the early stages of commercial operations of a newly established firm. The level of economic development of a country can influence this indicator, but there are also conflicting results as quality of institutions increase, in a duality of increasing regulation and control of corruption. Aggregate national level data from World Bank Enterprise Surveys Project, Worldwide Governance Indicators and World Development Indicators is used to estimate and quantify these effects in a broad sample of 141 countries across the world. Panel data techniques are implemented to explore the fact that there are multiple surveys conducted over time, particularly in transition economies (mostly FSU economies). Analysis is mainly focused on this sub-sample of transition economies. There is clear evidence of a positive effect of increased control of corruption and the negative effect of increasing regulation, likely to be associated with extra steps to establish a connection. The latter result is also confirmed by alternative measures of regulation in the power sector in transition economies. There is no evidence that interconnected advances in several dimensions of governance leads to positive outcomes in this context.
Lorusso, M. and Pieroni, L. (2015) Causes and Consequences of Oil Price Shocks on the UK Economy (PDF)
In this paper, we assess the impact of oil price fluctuations on the UK economy. We use an empirical strategy which allows us to decompose oil price changes from the underlying source of the shock. Our results show that, since the mid-1970s, oil price movements have been mainly associated with shocks to oil demand rather than oil supply. We also find that the consequences of oil price changes on UK macroeconomic aggregates depend on the different types of oil shocks. While increases in global real economic activity do not depress the UK economy in the short run, shortfalls in crude oil supply cause an immediate fall in GDP growth. In addition, since monetary policy depends on the nature of the shock hitting the oil market, domestic inflation increases following a rise in the real oil price. Finally, our results also show that in response to oil price increases, the government deficit decreases.
Since the end of the Soviet Union, the power sector in the countries resulting from its disintegration has evolved from a context of central planning towards independent regulation. There is great heterogeneity in reform progress in transition countries, with consequences to service quality and prices in utilities and also the view the population has of such services. This paper conducts an overview of the modern power sector in transition economies and analyses drivers of reported household satisfaction with the quality of electricity services in 27 countries using cross-sectional survey data from the EBRD Life in Transition Survey II, in a context of improving regulatory and infrastructural frameworks, using an ordinal random effects model with a probit link function. Key drivers of reported satisfaction are the uses of electricity within the household and some characteristics such as age, economic conditions and general life satisfaction. However, there is no evidence of the effect of power sector reform on the opinion of households. This points that the general life experience in transition can be the key driver of how households feel about utilities, as reform brings conflicting effects that stem from increasing cost sustainability, competition, transparency and quality of the service.