Regime shifts and uncertainty in pollution control

Regime Shifts, Environmental Signals, Uncertainty, and Policy Choice

Structural Uncertainty and Optimal Pollution Control

We relax the economic literature’s usual assumption that the structural relationship between emissions and ambient levels of pollution is known with certainty. We find that uncertainty over this relationship can manifest as a unique form of multiplicative uncertainty in the marginal damages from emissions. We show how the optimal stringency of environmental regulation depends on this structural...

Regime Shifts in Nonlinear Stochastic Optimal Control Problems∗

We develop a method of obtaining an asymptotic series of the value function of a stochastic optimal control problem over an unbounded domain with a finite number of irregularity points. These are points of non-differentiability of the value function of the corresponding deterministic problem. We apply singular perturbation methods to obtain the solution approximation in regions of regularity an...

Regime Shifts and Volatility Spillovers

A standard capital asset pricing model is extended to allow for stochastic shifts in the volatility of the news process. This model is then estimated on bivariate stock market data to separate two exogenous news processes – a world and a domestic. The results indicate that the influence of the world news process on the Swedish stock market has increased significantly over the period 1970-1995. ...

Macroeconomic Regimes and Regime Shifts