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    <title>EconStor Collection: Bonn Econ Discussion Papers, Bonn Graduate School of Economics (BGSE), Universität Bonn</title>
    <link>http://hdl.handle.net/10419/195</link>
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      <title>Making a Weak Instrument Set Stronger: Factor-Based Estimation of the Taylor Rule</title>
      <link>http://hdl.handle.net/10419/74649</link>
      <description>Title: Making a Weak Instrument Set Stronger: Factor-Based Estimation of the Taylor Rule
&lt;br/&gt;
&lt;br/&gt;Authors: Mirza, Harun; Storjohann, Lidia
&lt;br/&gt;
&lt;br/&gt;Abstract: The problem of weak identification has recently attracted attention in the analysis of structural macroeconomic models. Using robust methods can result in large confidence sets making inference difficult. We overcome this problem in the analysis of a forward-looking Taylor rule by seeking stronger instruments. We suggest exploiting information from a large macroeconomic data set by generating factors and using them as additional instruments. This approach results in a stronger instrument set and hence smaller weak-identification robust confidence sets. It allows us to conclude that there has been a shift in monetary policy from the pre-Volcker regime to the Volcker-Greenspan tenure.</description>
      <pubDate>Fri, 29 Oct 2010 22:58:59 GMT</pubDate>
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    <item>
      <title>Optimal Seedings in Elimination Tournaments Revisited</title>
      <link>http://hdl.handle.net/10419/74648</link>
      <description>Title: Optimal Seedings in Elimination Tournaments Revisited
&lt;br/&gt;
&lt;br/&gt;Authors: Kräkel, Matthias
&lt;br/&gt;
&lt;br/&gt;Abstract: The paper addresses the problem of optimally matching heterogeneous players in a two-stage two-type Lazear-Rosen tournament in which the semifinal losers are eliminated. The organizer of the tournament can either choose two homogeneous semifinals - one between two strong players and the other one between two weak players - or two heterogeneous semifinals, each between one strong and one weak player. I identify conditions under which the organizer is strictly better off from two homogeneous semifinals if he wants to maximize total expected effort and the strong players' win probability. This finding is contrary to both the typical procedure used in real sporting contests and previous results based on all-pay auctions and the Tullock contest. Hence, my findings point out that the optimal design of elimination tournaments crucially depends on the underlying contest-success technology.</description>
      <pubDate>Fri, 29 Oct 2010 22:58:59 GMT</pubDate>
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    <item>
      <title>The Effect of Secondary Markets on Equity-Linked Life Insurance with Surrender Guarantees</title>
      <link>http://hdl.handle.net/10419/74647</link>
      <description>Title: The Effect of Secondary Markets on Equity-Linked Life Insurance with Surrender Guarantees
&lt;br/&gt;
&lt;br/&gt;Authors: Hilpert, Christian; Li, Jing; Szimayer, Alexander
&lt;br/&gt;
&lt;br/&gt;Abstract: We study the effect of secondary markets on equity-linked life insurance contracts with surrender guarantees. The policyholders are assumed to be boundedly rational in giving up their contracts, and a proportion of policyholders will access the secondary markets instead of surrendering the contracts to the insurance company. We formulate the valuation problems from both the insurance company's and the policyholders' perspectives and characterize the contract values by deriving the respective pricing PDEs. Comparative statics are derived indicating the effect of the level of the policyholder's rationality and secondary market characteristics such as accessibility and competition on the contract values. The pricing PDEs are solved numerically via the Crank-Nicolson scheme to study the implication of the inclusion of a secondary market. We show that a secondary market generally increases the risk borne by the insurance company and the policyholders profit from the secondary market only when the secondary market is sufficiently competitive. Furthermore, we derive the necessary condition for the existence of a fair contract in this context and study the effect of the secondary market on fair contract design.</description>
      <pubDate>Fri, 29 Oct 2010 22:58:59 GMT</pubDate>
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      <title>Public Debt Tipping Point Studies Ingnore How Exchange Rate Changes May Create A Financial Meltdowns</title>
      <link>http://hdl.handle.net/10419/74646</link>
      <description>Title: Public Debt Tipping Point Studies Ingnore How Exchange Rate Changes May Create A Financial Meltdowns
&lt;br/&gt;
&lt;br/&gt;Authors: Pope, Robin; Selten, Reinhard
&lt;br/&gt;
&lt;br/&gt;Abstract: In studies concluding that public debt may hamper GDP, the debt tipping effects are estimated as if there were a single world currency. This means that such studies ignore the likely biggest cause of changes in growth rates, namely damage from exchange rate liquidity shocks because we do not live in the fairyland of a single world currency. The conclusions of these studies are accordingly invalid. They deflect attention from a prime danger, namely an exchange-rate-precipitated global meltdown &amp;#x0096; a danger of the repetition of 80 years ago. These studies are misleading in other respects too. Their estimates of growth determinants conflate the differential growth effects of government expenditures with those of tax concessions and uncollected taxes as contributors to government debt. The conflation entices adherents to see all increases in government debt as arising from excessive expenditures, so that in the current Greek-euro crisis, Greece's real problem, namely tax evasion, is missed, and harmful policies of austerity and depreciation, are proposed that leave the real problem of tax evasion unaddressed. Debt tipping point studies also fail to allow for the increase in wastefulness of private production. This is despite the fact that over the last 40 years, there have been private activities, including key segments of the financial and the pharmaceutical industries, whose expansion has damaged overall health and growth. The upshot is misdirected policy analysis and advice. Policy should instead be directed to adequate employment-generating fiscal stimulus in a global downturn, to extracting from the well-to-do adequate taxes, to averting further damage from exchange rate liquidity shock by creating a single world money, and to ensuring that for profit activities in the pharmaceutical and financial industries are adequately regulated, and where this is infeasible, shut down and replaced with fiscally stimulated productive activities.</description>
      <pubDate>Fri, 29 Oct 2010 22:58:59 GMT</pubDate>
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