Jesus Crespo Cuaresma

Forecasting electricity spot-prices using linear univariate time-series models

This paper studies the forecasting abilities of a battery of univariate models on hourly electricity spot prices, using data from the Leipzig Power Exchange. The specifications studied include autoregressive models, autoregressive-moving average models and unobserved component models. The results show that specifications, where each hour of the day is modelled separately present uniformly better forecasting properties than specifications for the whole time-series, and that the inclusion of simple probabilistic processes for the arrival of extreme price events can lead to improvements in the forecasting abilities of univariate models for electricity spot prices.

NATURAL DISASTERS AS CREATIVE DESTRUCTION? EVIDENCE FROM DEVELOPING COUNTRIES

Recent studies found a robust positive correlation between the frequency of natural disasters and the long-run economic growth after conditioning for other determinants. This result is interpreted as evidence that disasters provide opportunities to update the capital stock and adopt new technologies, thus acting as some type of Schumpeterian creative destruction. The results of cross-country and panel data regressions indicate that the degree of catastrophic risk tends to have a negative effect on the volume of knowledge spillovers between industrialized and developing countries. Only countries with relatively high levels of development benefit from capital upgrading through trade after a natural catastrophe.

The Demography of Educational Attainment and Economic Growth

Complementing primary education with secondary education in broad segments of the population is likely to give a strong boost to economic growth.

Growth, Convergence and EU Membership

The effect of European integration on long-term growth of the EU-15 member states is studied by means of panel data methods. The length of EU membership is found to have a significant positive effect on economic growth, which is relatively higher for poorer countries. While previous empirical studies tend not to find positive growth effects of regional integration, the present study suggests an asymmetric, convergence-stimulating impact of EU membership on long-term growth.

The Determinants of Economic Growth in European Regions

Crespo Cuaresma J., Doppelhofer G. and Feldkircher M. The determinants of economic growth in European regions, Regional Studies. This paper uses Bayesian model averaging (BMA) to find robust determinants of economic growth between 1995 and 2005 in a new data set of 255 European regions. It finds that income convergence between countries is dominated by the catching-up of regions in new member states in Central and Eastern Europe, whereas convergence within countries is driven by regions in old European Union member states. Regions containing capital cities are growing faster, particularly in Central and Eastern European countries, as do regions with a large share of workers with a higher education. The results are robust when allowing for spatial spillovers among European regions.

Nonlinearities in cross-country growth regressions: A Bayesian Averaging of Thresholds (BAT) approach

Abstract We propose a Bayesian Averaging of Thresholds (BAT) approach for assessing the existence and quantifying the effect of threshold effects in cross-country growth regressions in the presence of model uncertainty. The BAT method extends the Bayesian Averaging of Classical Estimates (BACE) approach proposed by Sala-i-Martin et al. (2004) by allowing for uncertainty over nonlinear threshold effects. We apply our method to a set of determinants of long-term economic growth in a cross-section of 88 countries. Our results suggest that when model uncertainty is taken into account there is no evidence for robust threshold effects caused by the Initial Income , measured by GDP per capita in 1960, but that the Number of Years an Economy Has Been Open is an important source of nonlinear effects on growth.

A non‐linear defence‐growth nexus? evidence from the US economy

The defense‐growth nexus is investigated empirically using time series data for the US and allowing the effect of defense spending on growth to be non‐linear. Using recently developed econometric methods involving threshold regressions, evidence of a level‐dependent effect of military expenditure on GDP growth is found: the positive externality effect of defense spending prevails for relatively lower levels of defense spending (with respect to the history of defense spending in the US) and reverts its influence for higher levels.

Forecasting Euro Exchange Rates: How Much Does Model Averaging Help?

We analyze the performance of Bayesian model averaged exchange rate forecasts for euro/US dollar, euro/Japanese yen, euro/Swiss franc and euro/ British pound rates using weights based on the out-of-sample predictive likelihood. The paper also presents a simple stratified sampling procedure in the spirit of Sala i Martin et alia (2004) to obtain model weights based on predictive accuracy. Our results indicate that accounting explicitly for model uncertainty when constructing predictions of euro exchange rates leads to improvements in predictive accuracy as measured by the mean square forecast error. While the forecasting error of the combined forecast tends to be systematically smaller than that of the individual model that would have been chosen based on predictive accuracy in a test sample, random walk forecasts cannot be beaten significantly in terms of squared forecast errors. Direction of change statistics, on the other hand, are significantly improved by Bayesian model averaging.

Is the Demographic Dividend an Education Dividend

The effect of changes in age structure on economic growth has been widely studied in the demography and population economics literature. The beneficial effect of changes in age structure after a decrease in fertility has become known as the “demographic dividend.” In this article, we reassess the empirical evidence on the associations among economic growth, changes in age structure, labor force participation, and educational attainment. Using a global panel of countries, we find that after the effect of human capital dynamics is controlled for, no evidence exists that changes in age structure affect labor productivity. Our results imply that improvements in educational attainment are the key to explaining productivity and income growth and that a substantial portion of the demographic dividend is an education dividend.

Guns Or Butter? Revisited: Robustness and Nonlinearity Issues in the Defense-Growth Nexus

The relationship between military expenditure and growth is studied taking into account potential nonlinearities and robustness issues in the specification of the econometric models used. Using cross-country growth regressions and the widely used Feder-Ram model, the partial correlation between defense and economic growth appears robust and significantly negative only for countries with a relatively low military expenditure ratio. While the externality effect appears positive in this subgroup of countries, the overall effect turns negative due to the size effect of the military sector.