Do Fossil-Fuel Price Distortions Impact the Low-Carbon Transition in China’s Energy Intensive Industries?

Energy intensive industries (EIIs) in China are predominantly reliant on fossil fuels. Consequently, such high fossil fuel dependency has amplified carbon emission levels and blocked the low-carbon transition. It is inappropriate to discuss the solution of the dependency before investigating fossil-fuel price distortion and its impact on the industrial energy consumption. Therefore, this paper built a dynamic trans-log cost function model based on provincial panel data of China’s Ells between 2004 and 2016, to investigate inter-fuel substitution effects caused by own price elasticities and cross price elasticities, and analyzed the impact of fossil-fuel price distortions on low-carbon transition. The level of price distortions in coal, gasoline and diesel was evaluated, based on which the CO2 mitigation potentials in China’s EIIs were estimated. Results show that: 1) in each EII sector, the own price elasticities of all fuels were negative while the cross price elasticities among coal, oil and electricity were positive, suggesting substitution effect exists; 2) the average level of price distortions in coal, gasoline and diesel is 7.48, 11.1 and 32.19%, respectively, which means the prices of coal tend to be more market- oriented than the other two fuels; 3) removing coal price distortions can potentially reduce CO2 emissions in China’s EIIs by 905.78 million tons, while the effects of removing oil price distortions were uncertain, unless the substitution of coal for oil was restrained. Therefore, there is still much room for improvement in China’s fossil-fuel market reform. Possible policies are required to improve the production in EIIs and the low-carbon transition by adopting cleaner energy resources to substitute fossil-fuels.

Price distortions and municipal bonds premiums: evidence from Switzerland

This study examines the pricing of municipal bonds before and after a currency shock in Switzerland. Two approaches are used to decompose the municipal to treasuries bond spreads into liquidity, maturity, and default risk premiums. The first approach is the model of the cross-sectional instrumental variables, and the second approach is the model of the instrumental variables with panel data. This study examines the composition of spreads for both approaches, in three scenarios: before, throughout, and after the currency shock. The study performed Durbin-Wu-Hausman tests for each decisive model to verify endogeneity issues, including the Lagrangian Multiplier test, the Cragg-Donald Wald F statistic to confirm the relationship of instrumental and endogenous variables, and the structural break test (Bai-Perron test) to determine the existence of structural breaks in bond distortions. This study finds that the currency price distortions of the Swiss franc in January 2015 made long-run changes in the composition of the municipal bond spreads. This research contributes to the understanding of municipal bond pricing by showing that default risk accounts for a large portion of the municipal bond spread, while maturity risk plays a lesser role. According to our empirical findings, unexpected large currency price shocks may have long-term implications on the municipal bond spreads.

Mr. Hayek and the Classics: A Suggested Interpretation of the Business Cycle Theory in Prices and Production

This paper endeavors to develop a modern theoretical underpinning of Friedrich August von Hayek’s business-cycle theory as published during the Great Depression in his book Prices and Production. According to Hayek, economic cycles are caused by monetary shocks, which distort the relative-price schedule across economic sectors. Possible consequences of these price distortions, which are also called “Cantillon effects,” include malinvestment and an unsustainable production structure, which sooner or later has to be corrected by a recession. It turns out that this type of economic fluctuation can be condensed into a simple two-sector overlapping generations model.

Government Policy, Factor Market Distortion and Structural Transformation

<p>Demand-driven economic structural transformation is mainly realized through the Engel Effect, and different consumption has different income elasticity. This article attempts to explain the effects of taxation, technological progress and factor price distortions on economic structure by introducing government policies and capital labor price distortions into the multi-sectorial model. The results showed that the share of agricultural labor decrease when the tax rate decreased or technological progress occurred and the share of service labor increased when the non-homothetic of utility function was stronger. Similarly, the distortion of capital and labor factor prices will also affect the structural transformation, and the relationship between the two is opposite. When the distortion of manufacturing sector factor prices increases, the structural transformation will be accelerated. However, the structural transformation slows down as the distortion of factor prices in service industry increases.</p>

Market Risk Model agricolture portfolio value-at-risk

Thinking about this current extreme scenario of stock exchange observed in a world scenario perspective and the related choices for worldbank portfolio investments in Agricolture commodity, this study its based in an advanced economic observation and analisys of the Agricolture commodity in a scenario of portfolio diversification without have the market risk default. This study its based in an advanced financial strategy to define the market model composed of London stock exchange agricolture commodity observed first in a London scenario and second in a Europe scenario and finally in a world scenario. The authorities regulation and the requirements used to define , the mathematical point of view and to describe , the market value at risk point of view , have been standardized in this empirical market model. The commodity scenario observed and the empirical market model defined to observe the max price distortions of the agricolture commodity defined and defined to observe the porfolio value at risk , are in this market model well described and standardized. Authorities are interested in the empirical market model to observe the VaR data because they are interested in a bank’s ability to withstand extreme events. VaR is monitored and is sanctioned by regulators defined in the Basel accords. The observed price are used in a variable choice of number of data price observation of five price for week a data price observation of one prices for week and a data price observation of two price for week and further similar strategies .

The Influence of Factor Price Distortions on Economic Structure – Based on Time-Varying Elasticity Production Function Model

Based on the time-varying elasticity production function model, we calculate factor price distortions, and study their influence on the rationalization and optimization of industrial structure. We find that the impact coefficient of capital, and labor factor price distortions on the rationalization of industrial structure are −1.2087 and −0.3147 respectively. Additionally, the impact coefficients on the optimization of industrial structure are −0.2333 and −0.0718 respectively. These results demonstrate that capital and labor factor price distortions are significantly negative for the rationalization and optimization of industrial structure. Therefore, it is imperative to reduce factor price distortions, and support industrial structure upgrades to promote supply-side structural reform.