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Credit Rating Agency Downgrades and the Eurozone Sovereign Debt Crises

This paper studies the reaction of the Euro's value against major currencies to sovereign rating announcements from Moody's, S&P and Fitch CRAs during the Eurozone debt crisis in 2010–2012 based on event study methodology combined with GARCH models. We also analyze how the yields of French, Italian, German and Spanish government long-term bonds were affected by CRA announcements. Our results reveal ...

Extreme Weather Events and Child Height: Evidence from Mongolia

We provide new evidence on the impact of one severe weather event on child height in Mongolia. While previous studies mostly focus on rainfall shocks in tropical or dry climate areas, our focus is on the extremely harsh winter that hit Mongolia in 2009–10. The severe winter—locally referred to as a dzud—caused catastrophic damage and resulted in the death of 10.3 million livestock. Our analysis identifies ...

The Self-Medication Hypothesis: Evidence from Terrorism and Cigarette Accessibility

We use single equation and system instrumental variable models to explore if individuals smoke during times of stress (the motivation effect) and if they are successful in self-medicating short-term stress (the self-medication effect). Short-term stress is a powerful motivator of smoking, and the decision to smoke could trigger biological feedback that immediately reduces short-term stress. We use ...

Bubble Thy Neighbour: Portfolio Effects and Externalities from Capital Controls

We use changes in Brazil's tax on capital inflows from 2006 to 2013 to test for direct portfolio effects and externalities from capital controls on investor portfolios. We find that an increase in Brazil's tax on foreign investment in bonds causes fund managers to significantly decrease their portfolio allocations to Brazil in both bonds and equities. Fund managers simultaneously increase allocations ...

Risks in Global Natural Gas Markets: Investment, Hedging and Trade

Recent supply security concerns in Europe have revived interest into the natural gas market. We investigate infrastructure investment and trade in an imperfect market structure for various possible risks for both supply and demand. We focus on three possible scenarios in a stochastic global gas market model: (i) transit of Russian gas via Ukraine that may be disrupted from 2020 on; (ii) natural gas ...

On the Emissions–Inequality and Emissions–Welfare Trade-Offs in Energy Taxation: Evidence on the German Car Fuels Tax

By using estimates from a Demographically-Scaled Quadratic Almost Ideal Demand System (DQUAIDS), we investigate how the German car fuels tax changes the private households’ CO2 emissions, living standards, and post-tax income distribution. Our results show that the tax implies a trade-off between the aim to reduce emissions and vertical equity, which refers to the idea that people with a greater ability ...

Too Much of a Good Thing? A Theory of Short-Term Debt as a Sorting Device

This paper shows that the liquidity risk associated with short-term debt financing can be used to sort insolvent firms out of financial markets when their solvency risk is private information. Notwithstanding this sorting role of short-term debt, unregulated financial firms tend to choose an inefficiently short debt maturity structure. This inefficiency arises for two reasons. First, by issuing more ...

The Effectiveness of a Strategic Reserve in the Presence of a High Portfolio Share of Renewable Energy Sources

To ensure sufficient investment in electricity generation capacity, mechanisms such as strategic reserves are being considered or already implemented. We analyze the effectiveness of a strategic reserve in the presence of a growing portfolio share of renewable energy sources (RES) with EMLab-Generation, an agent-based electricity market model. A strategic reserve can stabilize investment, but within ...

The Economics of the EU ETS Market Stability Reserve: Introduction

Short-Run Fuel Price Responses: At the Pump and on the Road

We provide evidence that motorists respond to short-run fluctuations in fuel prices at the gas pump and not on the road. Employing variants of censored panel regression to control for censoring of the dependent variable, we find that the fuel price has a negative impact on the quantity of fuel purchased, but no consistently significant impact on the subsequent distance driven until the next refill. ...