The level of external debt always plays a significant role in judging a country’s overall economic well-being. A general accepted threshold regarding its impact is that for levels of external debt in excess of 90 percent of GDP, growth rates decrease by roughly half. External debt, the part of total debt of a country owed to creditors overseas, is always denominated in foreign currencies. Thus to thoroughly analyze the implications of external debt level on an economy, we must relate it to the currency regime in force. Indeed countries choose to adopt various currency regimes from fixed to flexible exchange rate and hybrid models in between. The goal of this research is to draw the linkage between external debt/GDP and changes in currency regimes. I constructed historical data set on total gross external debt for 1970-2010 for 44 countries that have experienced periods with external debt/GDP above the threshold. Moreover, I gathered data over the same period documenting the corresponding exchange rate regimes to find whether there is a relation between an external debt crisis and a change in the exchange rate regime, which is very likely. The next question is to find out the direction of the causality: does a debt crisis trigger a change in the exchange rate or vice versa. I am using Granger causality test, a statistical hypothesis test, to determine whether one time series is more successful in forecasting the other; I anticipate the results to show positive correlations in either direction. These results could be useful to understand the close relation between the level of external debt of a country and its exchange rate arrangement. For policy makers, these results could be taken in consideration when selecting tools for implementing monetary policies, the efficiency of which is highly dependent on the exchange rate arrangement.

In Economics, increasing energy prices is considered as a main factor contributing to the improvement of energy efficiency. China has experienced a constant increase in both energy prices and energy efficiency since the energy price reforms in the early 1990s. The question of interest is whether the impact of energy prices on energy efficiency was asymmetric before and after the energy price reforms. Energy intensity, defined as units of energy consumption per unit of GDP, is used to quantify energy efficiency. In this study, I assess the impact of changes in energy prices on aggregate energy intensity in China between 1985 and 2010, and identify the asymmetric impact of energy prices on energy intensity prior to and after the energy price reforms of the early 1990s. I used time series data to estimate energy price elasticity for aggregate energy, and compared the values of elasticity before and after the energy price deregulations. Empirical results showed that: the own-price elasticity of aggregate energy was negative over the periods both prior to and after 1994, implying that an increase of aggregate energy prices led to a decrease in aggregate energy intensity. The impact of energy prices on aggregate energy intensity was asymmetric over two periods, prior to 1994 and after 1994. The magnitude of own-price elasticity of aggregate energy was larger after 1994 than before that date, indicating the price effects on energy intensity strengthened after the energy price reforms. Although raising energy prices seems to be an effective policy tool to improve energy efficiency, other implications, such as social instability, should also be considered.

Explaining regional differences in real wages has long been a subject of interest to economists. A substantial body of econometric literature offers various explanations for such differences, ranging from labor market characteristics such as unionization to local amenities such as crime levels and average commute times. Another possibility is that labor market wages compensate for constraints placed on the time of residents in a given region. In particular, if the lifestyle in a certain area requires a greater amount of time devoted to non-market labor activities (things such as grocery shopping which are neither leisure nor a labor market job) then perhaps wages must be higher in those areas in order for residents to accept the constraints placed on their time by living there. This paper tests that hypothesis using an econometric method known as hedonic wage-amenity modeling which has become standard in regional amenity valuation literature. Detailed time-use data recently made available by the Bureau of Labor Statistics is aggregated for regional patterns and analyzed against local wages and cost of living for a possible relationship.

This paper applies the theory of real options to study the dynamics of input substitution in the uranium enrichment industry. Enrichment is a process whereby natural uranium is separated into a stream rich in the fissile isotope U²³⁵, which is used as nuclear fuel, and another “tails” stream with a low U²³⁵ content, or a low “tails assay.” As more separative work energy is used in the process relative to a given amount of natural uranium feed, the resulting tails assay falls and the amount of fuel produced rises. A well-known formula asserts that a cost-minimizing enricher will choose a given level of inputs based only on the relative price of enrichment and uranium, but I show that the standard formula ignores the potential value of holding the leftover tails for further enrichment if that relative price of uranium rises. The theory of real options, a subfield of finance, shows that this decades-old formula is incorrect. I quantify the value of the option to enrich if the relative price of uranium should rise. I then use a numerical method to calculate a new optimal ratio of separative work to uranium that takes into account the price volatility of the relative price of the inputs, and I find that the option-adjusted optimal input ratio uses significantly less separative work, leaving richer tails, than the standard formula under realistic assumptions of price ratio volatility.

Manipulation of inflation reports is a rarely known tool that policymakers use to generate temporary growth and more revenue than they would with an explicit monetary expansion. The Argentine government has intervened in its Statistic Department since early 2007. Several private estimates and scholarly studies have shown that the real inflation rate is in fact between two or three times the officially reported inflation rate. However, the current studies have only produced price indexes from December 2007 to present, which does not include the crucial period when the manipulation in inflation reports was first implemented. In this project, I will create an alternative price index from January 2006 to January 2009, which will bridge the gap from when the Argentine Statistic Department was still respectable to when its was widely known of misreporting inflation rate. I will assess the validity of my index by comparison with the published studies for 2008, the year that already has an alternative price index. From my index, I will be able to determine an accurate date when the misreporting inflation date started, and by also having the data for that crucial period, I will contribute to the study on the cost of misreporting inflation. I will be using the monthly average prices of 60 representative goods to construct an alternative price index comparable to the officially reported one. This valuable dataset includes the publications of the Consumer Action League and receipt records in a supermarket’s archives. Both database are rare to find because the Argentine government started to censor and punish domestic independent studies on inflation with heavy fines beginning on 2011. The preliminary results show that the manipulation of reported inflation started in February 2007.

Complexity of today’s financial markets and its services demand high degree of financial knowledge than ever before from individuals in order to make prudent financial decision. Early studies have shown that financial illiteracy is widespread and that those who are financially illiterate display both poor borrowing and saving behavior. Using household data from HRS (Health and Retirement Study), I test the hypothesis that financial literacy is a strong determinant of accumulation of wealth. That is, those who possess greater financial knowledge accumulate more wealth than those who have low or no financial knowledge. Moreover, I extend the analysis in an attempt to answer what drives individuals to acquire financial knowledge. My first hypothesis is that poor living circumstances at young age make individuals become more aware of the importance of finance: hence, it is a driver of financial knowledge. My second hypothesis is that past experiences (loss of portfolio value from recession and poor health) play a role. Data on several components of wealth, financial literacy, and past information were compiled and will be used to run regression to answer underlying questions. Finally, I explain what it means to be financially literate. The purpose of this analysis is to stress the importance of being financially literate and that finance class should be part of school’s core curriculum. This will better prepare our descendents for far more complex financial markets that lie ahead.