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The effects of endogenously generated information on decision making is studied within three economic institutions. A non-market institution, (voluntary contributions for the provision of a public good), and a market institution, (sealed bid auctions), which both have been extensively studied as non dynamic institutions were used to examine the effects of dynamically generated information. A third institution, the double auction, which has been studied as a dynamic institution, was used to develop prototype methodology for the simulation and estimation of decision strategies with dynamic environments. Experimental results are presented showing the effects of allowing real time revisions of voluntary contributions for the provision of a public good. Four public good payoff functions are examined, each of which generates specific equilibria. Evidence of increased provision of the public good is demonstrated for: (i) the case in which revisions are limited to increases and a provision point exists, and also (ii) the case in which there is a high initial marginal return from the public good. An experimental investigation of sequential first and second price sealed bid auctions is conducted examining the effects of known capacity constraints on bidding behavior. Results are presented and compared to a Nash equilibrium model developed by Robert Weber. These naturally occurring inter-auction limitations are shown to significantly affect revenue generation capabilities of sealed bid auctions. Bidding and price behavior is presented and is found to be inconsistent with the model. A methodology is proposed as a means for attempting to identify and estimate strategies utilized by participants within dynamic institutions. The methodology was used on the double auction. Computer automata are used to examine the contracting behavior of a variety of decision rules. Simulations of the decision model are run using parameters common to past experiments. The resulting contracts are compared to corresponding experiment contracts and are found to follow similar patterns. Two double auction experiments, each with ten subjects were used to generate actual contracting data. The parameters of the proposed decision model are estimated from data on the individual decisions of the subjects.

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Econometric models are often made up of assumptions that never truly match reality. One of the most challenged requirements is that the coefficients of econometric models remain constant over time, in the sense that it is assumed that the future will be similar to the past. If the assumption of constant coefficients is not satisfied, any conclusions reached from normal (constant coefficient) models will be biased. Another, very closely related, contested assumption is that the functional form (usually linear) of a model remains unchanged over time. The theory of linearity has long been the centre of all econometric model-building. According to Teräsvirta (1994), if linear estimates were not successful in practice, they would have been forsaken long ago, and this has certainly not been the case. Quite the opposite has been experienced: some very influential ideas based on the linear relationships between variables, like cointegration analysis, have been established. Nonetheless, there are definite situations in which linear models are unable to grasp the underlying economic theory of the data accurately. In developing economies like the South African economy, the notion of constant coefficients and the assumption of linearity are far-fetched because these economies are frequently characterized by changes in both the economic policy and the economic structure. It is thus important to see these changes in developing economies as providing valuable information for econometric modelling. Incorporating these changes into models will provide not only better forecasts, but also better information for policy analyses. This study addresses the problem of non-linearity by applying smooth transition autoregressive (STAR) specifications to an existing simultaneous macroeconomic model of the South African economy. The results support the view that non-linear models provide better forecasts than linear specifications of equations. / Dr. I. Botha

Although various theoretical and applied papers have appeared in the field of Varying Coefficient (VC) modelling, little is available in the literature on inflation. The aim of this thesis is to evaluate the performance of the VC model and to fill the gap in applications of the VC approach to inflation processes both in the UK and China. Statistical analyses suggest that the inflation processes are unstable for both countries and the instabilities are mainly associated with major economic and institutional changes. The State Space (SS) model, in conjunction with the Kalman Filter algorithm, is then introduced to simulate the structural change of inflation models in the two different types of economies. The performance of a number of existing constant coefficient inflation models in the UK and that of their VC alternatives are compared and the advantages of the VC approach are revealed. A general VC inflation model for the UK, that nests both the Keynesian and monetarist ideas and a VC inflation model based on the excess demand hypothesis for China are developed. These VC inflation models are considered to be more accurate and robust in inflation forecasting because they take account of structural instability in the inflation generating processes. The empirical analysis gives results broadly consistent with the VC models developed. This confirms the author's initial assumption that the VC inflation specification will be superior to its alternatives.

This dissertation consists of three essays studying inference for incomplete economic models and its applications. In Chapter 1, I develop an asymptotic theory for strategic network formation models of complete information. Due to the presence of network externalities, the model predicts multiple pairwise stable equilibira. I provide an asymptotic theory that can be used to conduct robust inference when a single large network is observed but the researcher does not have a theory for the equilibirum selection mechanism. Using observable characteristics, my approach partitions the individuals into a number of groups (or clusters) and applies a central limit theorem for belief functions to a statistic averaged over the clusters. My asymptotic theory is robust to incompleteness in the sense that it does not require any additional assumption on the form of heterogeneity or dependence of the selection mechanism across clusters. Monte Carlo experiments are conducted to examine the performance of the method. Chapter 2 investigates the network structure of venture capital funds based on co-investments. The main empirical question is how do local externalities that are generated by network strucutres affect the likelihood that two venture capital funds co-invest in a start-up company. I use investment data from the VentureXpert database to generate a syndicated investment network of venture capital funds. The network structure is considered endogenously determined due to the (local) externalities from direct connections with other partners given a start-up company. The endogeneity is induced because the local externalities are correlated with other unobserved determinants of the link formation decision. The instrumental variable is proposed to solve this endogeneity. The key step in my approach is the construction of funds' consideration sets. The empirical results provide weak evidence on positive effects from the local externalities on the probability of co-investment. In Chapter 3 is joint with Hiroaki Kaido. We develop a framework for testing hypotheses on parameters in incomplete economic models. Examples include tests on the presence of strategic interactions in discrete games of complete information. Incomplete economic models make set-valued predictions and hence do not generate a unique likelihood. This prohibits the use of standard likelihood-ratio (LR) tests even for testing a simple null hypothesis against a simple alternative. We show that the model structure, however, implies the existence of a pair of distributions; one is consistent with the null hypothesis and is least favorable to the size control, and the other is consistent with the alternative hypothesis and is least favorable to power maximization. The ratio of this pair is shown to form a robust likelihood-ratio test that is optimal in the minimax sense. We also provide a large sample Gaussian approximation to the upper probability of this statistic, which renders the test computationally tractable. Finally, we consider testing hypotheses in the presence of nuisance parameters and propose a procedure that minimizes a certain risk function. / 2020-07-12T00:00:00Z

This study examines the effect of exchange rate changes on consumer prices in Nigeria by examining the magnitude and speed of exchange rate pass-through (ERPT) to consumer prices in Nigeria using quarterly time series data from 1986 to 2013. The study also examines the potential nonlinearities and asymmetries in the ERPT in Nigeria during the same period. The study used vector error correction model (VECM) and smooth transition autoregresive (STAR) model. The methodology employed, are free from some weaknesses of the previous empirical studies and contributed to the analysis of ERPT from a macroeconomic perspective. This study focuses on the macroeconomic perspective of the effect of ERPT which is more relevant for monetary policy. To design and implement an efficient monetary policy, theoritical and empirical knowledge of the ERPT to domestic consumer price is necessary. Similarly, the understanding of the level of ERPT to domestic consumer prices would offer more understanding of the international transmission of shocks and the efficiency of exchange rate policy measures on external adjustment. The study results show full and statistically significant ERPT in the long-run in Nigeria during the sample period. However, using linear model (VECM) the short-run estimate shows no significant ERPT in Nigeria. Whereas, the nonlinear STAR model shows significant ERPT even in the short-run in Nigeria. The results of the nonlinear model (STAR) show evidence of nonlinearities and asymmetries in the ERPT in Nigeria. The nonlinearities and asymmetries tend to be prevalent during periods of higher inflation and greater exchange movements when the changes in prices and exchange rates exceed certain thresholds. This study, therefore, confirms Taylor’s (2000) hypothesis that pass-through declines in low and stable inflation environment which create nonlinear ERPT. The result shows asymmetric ERPT to the direction of exchange rate change (appreciation or depreciation). The result also shows clear evidence of nonlinearity with respect to the size of the exchange rate change. This result is in line with the menu cost hypothesis where the importing firms do not transfer the exchange rate changes due to the cost of changing their menu. Therefore, the effect of the exchange rate changes on consumer price is minimal when the exchange rate changes are below the threshold level. The study also examined the output growth as a source of nonlinearities. However, the result does not show evidence of nonlinear ERPT due to the output level. The comparison of statistical test results of linear autoregressive (AR) and the nonlinear (STAR) model indicates that the nonlinear STAR model fits the data better than the linear AR model in all cases. The results of this study, therefore, show a significant impact of exchange rate changes on the domestic consumer price in both short run and long run. The asymmetric and nonlinear ERPT induced by the pricing behaviors of the importing firms also significantly influences the speed and magnitude of the ERPT to consumer prices in Nigeria.

Chan Chi-Ho. / Thesis (M.Phil.)--Chinese University of Hong Kong, 2004. / Includes bibliographical references (leaves 68-69). / Abstracts in English and Chinese. / Chapter 1 --- Introduction --- p.1 / Chapter 1.1 --- Integration and Fractional Integration --- p.1 / Chapter 1.2 --- Classical and Fractional Cointegration --- p.3 / Chapter 1.3 --- Residual-Based Test for Cointegration --- p.6 / Chapter 1.4 --- The Fractional Dickey-Fuller Test --- p.9 / Chapter 2 --- Preliminary Limit Theorems --- p.12 / Chapter 2.1 --- Limit Theorem for 0 ≤d < 0.5 --- p.14 / Chapter 2.2 --- Limit Theorem for 0.5 < d ≤1 --- p.23 / Chapter 3 --- The Asymptotics of the Residual-Based FDF --- p.26 / Chapter 3.1 --- Asymptotics for OLS-FDF --- p.30 / Chapter 3.2 --- Asymptotics for CO-FDF --- p.36 / Chapter 4 --- Finite Sample Experiment --- p.41 / Chapter 4.1 --- Empirical Size --- p.43 / Chapter 4.2 --- Empirical Power with Known d1 --- p.48 / Chapter 4.3 --- Empirical Power with Estimated d1 --- p.55 / Chapter 4.4 --- The Augmented Fractional Dickey-Fuller --- p.60 / Chapter 5 --- Conclusions --- p.66 / Reference --- p.68

Since energy price changes have been studies by much literature, this thesis tries to discuss it through the elasticity of substitution. More importantly, this thesis finds that the substitution effect itself cannot completely interpret the phenomenon of energy price changes. This is based on the results of the estimation of the AES, the MES and the CES, as well as some previous studies' results of negative substitution elasticities. This thesis adopts VECM, ADL and panel data as methodologies. Different data is also colelcted and analyzed. Most of the AES estimates are negative and the CES estimation shows many negative elasticities as well. The estimated elasticities from the MES and the Panel dta CES are positive. Out positive elasticities from the MES may are consistent with the previous literature that finds the MES estimation method is better than AES. The negative elasticities of susbtitution as the substitution effects are usually followed by income effects. Based on literature view, if income effects are involved in the energy price changes between energy exporting and importing countries, it may lead to new policy making and application. In addition, there are some other findings: (1) an application approach is used to test the cointegration when variables include I(0), I(1) and share variables. This approach is different from Pesaran, Shin and Smith's (2001) ARDL method which is involved I(0) and I(1) variables. However, in the application, the data being used covers share variables. Share variables sum to unity so they have collinearity. New procedures (ADL) are adopted to solve the problem of collinearity in econometric application. This then allows to analyze I(0), I(1) and share variables together in the model. This is one of our contributions in econometric VECM application. (2) By the literature review in Chapter 4, it's found that the elasticities of substitution vary from economies. Since some economies do not share free flow of capital, labor or energy, their substitution elasticities cannot be estimated as a whole. The different sustitution elasticities in each country show that, when selecting the data, we may refer to a region or a country with a common free flow market for capital, labor and energy. (3) Different data is used in the application. Previous literature uses the data of the UK or other countries to analyze the Allen's elasticity of substitution (AES), or the US data in the period different from that in this study, or uses the familiar data but in technology forecasting. Importantly, the empirical analysis uses the US data to test the Allen's elasticity of substitution (AES) and the constant elasticity of substitution (CES), in order to explore negative estimates of the substitution elasticity.