Portuguese Economic Journal, 2014, Volume 13, Nº 3
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- The performance of deterministic and stochastic interest rate risk measures : Another Question of Dimensions?Publication . Oliveira, Luís; Nunes, João Pedro Vidal; Malcato, LuísThe efficiency of traditional and stochastic interest rate risk measures is compared under one-, two-, and three-factor no-arbitrage Gauss-Markov term structure models, and for different immunization periods. The empirical analysis, run on the German Treasury bond market from January 2000 to December 2010, suggests that: i) Stochastic interest rate risk measures provide better portfolio immunization than the Fisher-Weil duration; and ii) The superiority of the stochastic risk measures is more evident for multi-factor models and for longer investment horizons. These findings are supported by a first-order stochastic dominance analysis, and are robust against yield curve estimation errors.
- Heterogeneous consumption in OLG model with horizontal innovationsPublication . Belyakov, Anton O.; Haunschmied, Josef L.; Veliov, Vladimir M.The paper develops a general equilibrium endogenous growth model involving heterogeneous consumption by an age-structured population with uncertain but limited life span and balanced life-time budget without bequests. The heterogeneity is introduced via weights which the individuals attribute in their utility function to consumption of different goods depending on the vintage of the good. The goods are produced by monopolistically competitive firms and the variety of available goods/technologies is determined endogenously through R&D investments. A competitive bank sector provides financial resources for investments, secured by agents’ savings and future firms profits. The general equilibrium is characterized by a system of functional equations and is analytically or numerically determined for several particular weight functions. It is shown that the investments by agents alone may be insufficient to sustain growth, while additional investments provided by the bank sector may lead to growth. The resulting imbalance between agents’ assets and the total value of firms can grow unboundedly in the case of homogeneous consumption. The results exhibit the qualitative difference between the dynamics of the model with heterogeneous versus homogeneous consumption. In particular heterogeneous con- sumption (when old goods are discounted) reduces the additional investments by the financial sector so that the values of firms become balanced by the assets of agents in the long run.
- Obsolescence and productivityPublication . Rio, Fernando del; Sampayo, AntonioThe increase in the obsolescence of intangible capital caused by the adop- tion of new information technologies can play an important role in accounting for the productivity slowdown undergone by the US economy since 1974. To explore this hypothesis, we have developed a standard growth model with physical and intangi- ble capital in which technical progress is equipment–specific. We assume that the obsolescence of intangible capital increases when the equipment–specific techni- cal progress accelerates. The model is calibrated for the period 1957–1973 and the response of the economy to an increase in the rate of equipment–specific technical progress — as observed since 1974 — is simulated. We show that this setup can account for a large part of the post–1974 slowdown observed in productivity and in the Solow residual.