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This dissertation consists of four papers that investigate long-standing issues in international finance, macroeconomics and international macroeconomics. The common theme of the papers is the fact that each uses novel statistical methods to forecast or evaluate outcomes in international macroeconomics and macroeconomics. / The first two papers focus on the predictability of nominal exchange rates and the profitability of foreign exchange speculation. The first chapter of my dissertation investigates the predictability of nominal exchange rates. Prediction of the exchange rate has long interested economic researchers. A model able to accurately forecast exchange rate movements would have important implications for economic theory and market participants alike. However, it is a stylized fact that empirical models of the exchange rate cannot produce forecasts that are more accurate than those of a random walk---the well-known Meese-Rogoff puzzle. In this chapter, I apply the gradient boosting method due to Hastie, Tibshirani & Friedman (2000) to the problem of forecasting exchange rate movements for nine major currencies relative to the U.S. dollar. The method performs model selection and builds flexible, potentially non-linear models of the exchange rate. I find that the economic fundamentals I consider do contain predictive power at both short and long horizons. The key to successfully forecasting exchange rates is building the 'correct' forecasting model, because I find that model with the greatest explanatory power varies across currencies and across time for any individual currency. At short horizons the method I use is unable to select ex ante a model of the exchange rate that convincingly outperforms a random walk. However, when forecasting 12 months ahead, boosted models produce extremely accurate forecasts of the exchange rate, easily besting the random walk null. / Chapter two, written with Oscar Jorda and Alan M. Taylor, explores the profitability of currency speculation. We document the actions of a hypothetical trader who trades based on forecasts of nominal exchange rates coming from standard forecasting models. Although the efficient markets hypothesis implies that such a trade would yield zero profits on average, these actions would have delivered economically meaningful profits to the trader. That currency carry trades are on average profitable is well-known. The literature accounts for these profits by noting that realized returns exhibit conditional negative skewness, or by presuming that the profits compensate for some other risk. Yet when the trader uses our preferred model of the exchange rate, the ensuing profits exhibit little to no conditional skewness. Intriguingly, we also find that the profits are not compensation for risk, as the excess returns from the carry trade do not covary in a meaningful way with a broad set of conventional risk factors. / The final two papers of my thesis analyze the business cycle. The third chapter of my dissertation, written with Oscar Jorda, investigates the classification of economic activity in the U.S. into expansions and recessions. In the U.S., the Business Cycle Dating Committee (BCDC) of the NBER determines the peaks and troughs of the business cycle. But because there is no universally accepted definition of "recession," the true state of the economy is fundamentally unobservable and the problem of classifying economic data into the two phases of the business cycle is not a trivial undertaking. This chapter evaluates the classification skill of the BCDC relative to several state-of-the-art statistical methodologies designed to describe the unobservable state of the economy. The methods we use are novel to the economics literature and have the advantage of being completely non-parametric. In the final portion of the paper, we introduce a forecasting model to predict future states of the business cycle. / The final chapter of my dissertation, written with Fushing Hsieh, Shu-Chun Chen and Oscar Jorda, concerns business cycles outside of the U.S. The existence of an apolitical, unbiased committee dedicated to determining business cycle peaks and troughs is a luxury that American economists take for granted---only two other economies in the world have such a committee. In most countries, recessions are determined either by the popular press, who can use only rough rules-of-thumb, or by the government, so that such decisions are fraught with political influence. We classify international data into recessions and expansions for 22 OECD economies using a novel classification algorithm. The algorithm is completely non-parametric, a feature that is necessary to complete the analysis because the state-space of the problem makes standard classification methods unfeasible. The algorithm operates by recognizing intervals where economic activity is particularly intense, in the sense that the recurrence time between observations of extreme events (e.g., negative GDP growth) is shorter than would otherwise be expected. We apply the algorithm to monthly country-level data on industrial production, employment and GDP. The resulting binomial series are aggregated in order to produce novel chronologies of country-specific, regional, and global recessions.

Remittances from individuals not residing in the home significantly affect recipient households' behavior. Using data from the Jamaican Survey of Living Conditions and the Jamaican Labor Force Survey for years 2001-2007, this dissertation aims to explore some of the most significant effects of remittances, namely effects on labor market participation and household expenditures. Jamaica's proximity to the United States and Canada coupled with Jamaica's diaspora of educated individuals shapes an economy largely dependent on remittances. The country, therefore, provides an interesting and exciting case study for examining the effects of remittances. / In the first essay, we investigate whether remittances alter the labor market behavior of married women (or those in long-term relationships) in remittance-receiving households located in Jamaica. As is often the case in labor supply studies, it is important to identify key variables that are likely endogenous in the model. For purposes of this research, endogenous variables include remittances, the wife's education, and wages. We instrument both when predicting labor market participation and hours worked. Unlike other studies which find the income effect of remittances on household behavior results in increased leisure, we find that after instrumenting for remittances, the outside income has no significant effect on the supply of labor, either in terms of hours worked or participation. / The second paper assesses the extent that remittances alter the consumption pattern of recipient households in Jamaica. Classical theory predicts that total income and not income sources affects household consumption decisions, but developments in behavioral economics suggest the contrary. The disaggregation of both income streams and consumption expenditures as reported in the Jamaica Survey of Living Conditions provide us with unique insight into household behavior and in particular, spending on items such as food, schooling, and vices. Using Engel curve estimation and the two-part fractional response models, we find that the source of the income significantly affects the shares of income spent in specific consumption categories. Recipients, for example, generally spend larger shares of their income on schooling and home production and less at the grocery store. These findings suggest important implications should government look to tax or restrict the flow of remittances.

The question of whether IP incentivizes innovation is a long debated one in the literature on economics of innovation and technological change. The first chapter explores this fundamental question in an emerging market context, applying a 'private returns to R&D framework' to the Indian bio-pharmaceutical industry. In a fundamental policy shift, India agreed to introduce product patents for pharmaceuticals when it signed the WTO TRIPS treaty in 19951.1 This policy came into effect through enabling legislation in 2000 and final implementation in 2005. Using this policy shift as the setting for a natural experiment, the paper estimates its impact by using data on a panel of 315 Indian pharmaceutical firms drawn from the years 1990 to 2005. Private returns of a firm are measured using a hedonic stock market valuation of the tangible total assets (A) and intangible inventive assets (K). The findings indicate an economic and statistically significant increase in private returns to inventive activity. However, this effect appears to he highly concentrated in the most technologically progressive Indian firms. Subsequent investigations through firm-level field case studies, patent data analysis and discussions with industry experts reveal that IP apart, economic liberalization in India since 1991 and the Hatch-Waxman Act in the United States have had accompanying effects in guiding the evolution of the industry. / During the period of our analysis, a substantial number of Indian bio-pharmaceutical firms became export intensive, with enhanced access to Western markets. This came about aided by a rationalized currency regime through an economic reforms process in India. The 2nd chapter explores how export destinations and firm capabilities influence the extent of learning by exporting (LBE) in Indian pharmaceutical firms that exported to a variety of both advanced and emerging destinations between 1994 and 2007. Departing from previous studies the paper explores if exports result in other gain besides improvements in technical efficiency. We find that LBE is not restricted to technical efficiency gains alone but also reduces costs of production. Furthermore, exporters also gain access to other types of knowledge that improves R&D efficiency and the rate of new product introductions. Interestingly these gains are more especially when firms export to high income destinations (as evidenced from higher gains when firms export to US rather than non-US destinations). Finally, results also indicate that the gains are higher for more capable firms. / The third chapter connects the rise of the Indian bio-pharmaceutical producers to the global value chain in the pharmaceutical industry. Specifically, it explores the welfare effects of early generic entry in the United States during the period 1997 and 2008. This is the period during which, with increasing frequency, generic drug manufacturers in the United States (many from Israeli, India, North America, or European Union) have been able to challenge the monopoly status of patent-protected drugs even before the patents expire. The legal foundation for these challenges is found in Paragraph IV of the Hatch-Waxman Act. If successful, these Paragraph IV challenges generally lead to large market share losses for incumbents and sharp declines in average market prices. The 3rd chapter estimates, for the first time, the welfare effects of accelerated generic entry via these challenges. Using aggregate brand level sales data between 1997 and 2008 for hypertension drugs in the U.S. we estimate demand using a nested logit model in order to back out cumulated consumer surplus, which we find to be approximately $270 billion. We then undertake a counterfactual analysis, removing the stream of Paragraph IV facilitated generic products, finding a corresponding cumulated consumer surplus of $177 billion. This implies that gains flowing to consumers as a result of this regulator mechanism amount to around $92 billion or about $130 per consumer in this market. These gains come at the expense to producers who lose, approximately, $14 billion. This suggests that net short-term social gains stands at around $78 billion. We also demonstrate significant cross-molecular substitution within the market and discuss the possible appropriation of consumer rents by the insurance industry. The findings from the 3rd chapter have implications related to innovation policy as it pertains to pharmaceutical markets around the world. (Abstract shortened by UMI.) / 1World trade Organization's Trade Related Intellectual Property Agreement.

In the first part of this study we develop and analyze two mathematical models that incorporate a time changing demand for electricity and uncertainty of input prices. The first model highlights the shortcomings in assuming a constant plant utilization under uncertainty of input prices and the effects of such assumption on the optimal investment in electricity generating capacity in a simple two period model. The second model presents sufficient restrictions to the optimal investment in electricity generating capacity problem to allow for a recursive solution. The necessary restrictions are extremely limiting to the extend that we found a solution for very simple scenarios. In our opinion, the problem is better handled in a case by case basis rather than under a general dynamic framework. Following the spirit of our conclusions of the first part of our study, in the second part we provide a methodology to simulate long-term natural gas prices, we analyze the investment prospects of nuclear and natural gas generating capacity in Mexico and provide a constraint approach for the optimal generation of hydroelectric plants in the Mexican hydroelectric system. These three problems belong to the solution of the optimal investment in electricity generating capacity in Mexico. To simulate the uncertainty of natural gas prices, we assume that natural gas prices are the sum of two stochastic processes: short-term and long-term variability. We characterize the short-term variability of natural gas prices using an Exponential General Autoregressive Conditional Heteroskedastic (EGARCH) model. The uncertainty of the long-term variability of natural gas prices is based on the long-term natural gas prices scenarios of the National Energy Modeling System of the Energy Information Administration. Equipped with a methodology to simulate long-term natural gas prices, we investigate the investment prospects of nuclear and natural gas generating capacity in Mexico using the levelized cost methodology. Finally, we derive an algorithmic solution for a constraint version of the optimal generation of hydroelectric plants, then we provide a guide for its application to the Mexican hydroelectric system.

A New Look at Oligopoly| Implicit Collusion Through Portfolio Diversification

Thesis (Ph.D.)--Indiana University, Dept. of Economics, 2009. / Title from PDF t.p. (viewed on Feb. 4, 2010). Source: Dissertation Abstracts International, Volume: 70-04, Section: A, page: 1367. Adviser: Gerhard Glomm.

Thesis (Ph.D.)--Indiana University, Dept. of Telecommunications, 2009. / Title from PDF t.p. (viewed on Feb. 8, 2010). Source: Dissertation Abstracts International, Volume: 70-05, Section: A, page: 1464. Adviser: David Waterman.

Thesis (Ph.D.)--Indiana University, Dept. of Economics, 2009. / Title from PDF t.p. (viewed on Feb. 8, 2010). Source: Dissertation Abstracts International, Volume: 70-05, Section: A, page: 1733. Adviser: Hugh E.M. Kelley.

This dissertation examines the opportunities and constraints surrounding the production and commercialization of bacanora, which is analyzed as an economic alternative for Sonora, in the context of a new legal and economic environment that forces farmers to become competitive and efficient. It integrates many topics related to the knowledge of Agave angustifolia and other Agavaceae and the study of several distillates from agaves, contributing to the emergence and development of the bacanora industry in Sonora, Mexico. The economy of small-scale bacanora producers in the sierras is analyzed. Cost and return estimates for the activity show the relative profitability of bacanora making. Subsequent analyses of marketing strategies indicate that serrana producers have potential in bacanora production by adopting or adapting different technologies and marketing schemes. The new institutional frame will increase competition among producers, which in turn will put greater pressures on agave populations. Therefore, more research on domestication of agave is required to find sustainable solutions to avoid overexplcitation of the resource. The major outlet for increased bacanora production is the international market, especially the United States. However, regional and national markets might provide an important group of consumers, as derived from the study of the tequila and mescal industries.