The linkage between life insurer spread behaviour and credit swap transaction: policyholder protection analysis

ABSTRACT

The paper develops a contingent claim model to evaluate the equity of a life insurer when the insurer could act as a protection buyer or a protection seller in a credit swap transaction market. The investment market and the life insurance market faced by the insurer are assumed to be imperfectly competitive in order to capture the insurer’s asset-leading or liability-reducing spread behaviour. This paper complements the insurance literature by analysing how the effects of credit swap transactions on insurer spread behaviour and policyholder protection, and how they might differ across various degrees of capital regulation, premature default risk, and profit-sharing participation. Our findings offer some useful insights for achieving the stability of the insurance system.     

Does support from government help firms survive? Evidence on financial and political assistance in China, 1998–2007

ABSTRACT

Using the National Bureau of Statistics data set over the period 1998–2007, this article examines the dual roles of financial assistance and strong political links on firm survival in China by applying a semi-parametric duration model. We find that generally either financial assistance or strong political links had a positive effect on the likelihood of firm survival. Furthermore, if firms received both types of support from government, their survival rate was around two times as high compared to only receiving a single support. The likelihood of survival depended on the amount of assistance a firm received. We also find firm ownership impacts on its survival pattern. Lastly, China joining the World Trade Organisation (WTO) coincided with (cet. par.) higher firm failure, especially with regard to state-owned firms; however, this period also saw the authorities targeting political and financial help on the ‘better’ firms (especially SOEs) with characteristics likely to increase their chance of survival.     

Pharmacoeconomic analysis of paricalcitol and calcitriol in the treatment of secondary hyperparathyroidism in haemodialysis: impact of hospitalisations and survival

Summary

The objective of this study was to evaluate the cost effectiveness of paricalcitol injection compared with calcitriol injection when used to reduce parathyroid hormone levels in patients undergoing haemodialysis. A decision tree was developed to model the 1-year costs and outcomes of therapy for secondary hyperparathyroidism from a US government payer's perspective (2005 US$). Probabilities of hospitalisations and survival with paricalcitol and calcitriol were obtained from published observational studies.

When only drug costs and survival were considered, the incremental cost effectiveness of paricalcitol over calcitriol was $9,900 per life saved. When utilities were included, the incremental cost-effectiveness ratio for paricalcitol compared with calcitriol was $13,200 per quality-adjusted life year. When both drug and hospitalisation costs were included in a cost analysis, paricalcitol treatment was cost saving compared with calcitriol, and when hospitalisation costs were included in both the cost-effectiveness analysis and cost-utility analysis paricalcitol demonstrated first-order dominance, cost savings and cost effectiveness.

This decision analysis demonstrated that paricalcitol injection is both cost effective and cost saving compared with calcitriol injection.     

Doing Away with the Sovereign: Neoliberalism and the Promotion of Market Discipline in European Economic Governance

ABSTRACT

This article proposes a critical reading of market discipline and its limitations as a mechanism in European economic governance. Consistent with neoliberal beliefs about market-based governance, the Economic and Monetary Union (EMU) is premised on the functioning of the government bond market as a fiscal-policy discipliner. However, the operation of market discipline requires that neither governments nor their private creditors can rely on an authority to bail them out. It, therefore, precludes the kinds of intervention by Eurozone’s supranational institutions witnessed during the euro crisis. In the post-crisis context, efforts to strengthen market discipline continue to be frustrated by the growing reliance of financial institutions on government bond markets as well as the European Central Bank’s (ECB) active participation in those markets. Having undermined the credibility of the market as an autonomous and apolitical mechanism of discipline, European economic governance struggles to come to terms with the rise of a supranational ‘economic sovereign’ in the Eurozone.     

An Analysis of a Rules-based Approach to Disciplining Export Credits in Agriculture

ABSTRACT

This paper examines the comparative static effects of rules-based disciplines for government supported export credit arrangements. The arrangements provide traders in the country offering the guarantees more favourable borrowing conditions. This may provide an advantage relative to rival exporters since the supported trader may offer better financial terms to importers. Rules that discipline implicit interest rate subsidies are appropriate when an importing country does not face liquidity constraints when borrowing. However, these rules may not be appropriate with liquidity constraints because of the potential for additionality and benefits for all exporting countries. Rules on benchmarks for insurance premiums are always appropriate because insurance subsidies unambiguously have the potential to distort markets.     

Manias,Panics and Crashes in Emerging Markets: An Empirical Investigation of the Post-2008 Crisis Period

ABSTRACT

Because of their economic importance, international bond markets are thought to be the likely location for the operation of financial market pressures on emerging market (EM) government policy. An important but unresolved debate that runs through the literature is the relative importance of domestic factors specific to the country receiving the capital flows (pull factors), versus push factors exogenous to the receiving country, in driving portfolio flows to EMs. Through extensive interviews with financial market participants, and analysis of the financial press between January 2008 and 2013, this paper argues that not only were market participants fully aware of the importance of push factors over the cycle, but that their perceptions of the domestic fundamentals themselves were influenced by these push factors. The paper provides evidence on the micro-foundations of investment decision making that make investors susceptible to influence by the push factors, and adds to a growing body of evidence that financial market borrowing costs are even less in the control of emerging market governments than previously assumed, because even when investors pay attention to domestic fundamentals, their assessments can be divorced from reality. This means that government efforts to attract foreign capital through implementing investors' preferred policies may be ultimately futile.     

US Fiscal Policy,Manufacturing Stagnation,and the Shift to Financialization in the Era of Globalization: An Econometric Analysis, 1973–2015

ABSTRACT

Financialization can be partially attributed to the decline in the US manufacturing profit rate since the 1970s. However, scholars have not reached a consensus regarding the factors responsible for stagnation in manufacturing. This paper employs an Auto-regressive Distributed Lag (ARDL) model to test the impact of both national defense and government consumption expenditure on manufacturing profitability in the United States from 1973, the onset of stagnation, to 2015. Its goal is two-fold: to determine whether stagnation is associated with a decline in Keynesian policies, and to examine the potential for state fiscal programs to reverse this trend and facilitate a shift of private investment away from the financial sector and into manufacturing. The paper finds that the impact of government consumption expenditure on the manufacturing profit rate is positive and significant in both the short-term and long-term (from 1973–2015 and 1973–1993), while the long-term impact becomes negative from 1983 to 2015, when the financial sector profit rate began its upward trend. This casts doubt on whether Keynesian fiscal policies could be employed to restore a healthy profit rate in the manufacturing sector and lower unemployment.     

金融消费者保护:市场失灵、政府介入与道德风险的防范

金融消费者保护成为次贷危机后金融改革的一个重要方面。文章认为,在金融交易中,金融消费者处于弱势地位,金融消费者需要保护。市场可以对消费者提供一定的保护,但是由于市场失灵,无法给金融消费者提供充分的保护,也无法从根本上解决金融消费者保护问题。金融消费者需要政府(管理部门)来提供保护,但是政府并不必然比市场聪明,也会出现监管失灵。监管者的专业知识要高于普通消费者,关键是要不断提高政府提供保护(监管者保护)的有效性,防止政府失灵。加强金融消费者保护的同时,必须防范道德风险和逆向选择。     

The fiscal consequences of public health investments in disease-modifying therapies for the treatment of multiple sclerosis in Sweden

Abstract

Background and aims: The economic consequences of multiple sclerosis (MS) are broader than those observed within the health system. The progressive nature suggests that people will not be able to live a normal productive life and will gradually require public benefits to maintain living standards. This study investigates the public economic impact of MS and how investments in disease-modifying therapies (DMTs) influence the lifetime costs to government attributed to changes in lifetime tax revenue and disability benefits based on improved health status linked to delayed disease progression.

Methods: Disease progression rates from previous MS Markov cohort models were applied to interferon beta-1a, peginterferon beta-1a, dimethyl fumarate, and natalizumab using a public economic framework. The established relationship between expanded disability status scale and work-force participation, annual earnings, and disability rates for each DMT were applied. Subsequently, we assessed the effect of DMTs on discounted governmental costs consisting of health service costs, social insurance and disability costs, and changes in lifetime tax revenues.

Results: Fiscal benefits attributed to informal care and community services savings for interferon beta-1a, peginterferon beta-1a, dimethyl fumarate, and natalizumab were SEK340,387, SEK486,837, SEK257,330, and SEK958,852 compared to placebo, respectively. Tax revenue gains linked to changes in lifetime productivity for interferon beta-1a, peginterferon beta-1a, dimethyl fumarate, and natalizumab were estimated to be SEK27,474, SEK39,659, SEK21,661, and SEK75,809, with combined fiscal benefits of cost savings and tax revenue increases of SEK410,039, SEK596,592, SEK326,939, and SEK1,208,023, respectively.

Conclusion: The analysis described here illustrates the broader public economic benefits for government attributed to changes in disease status. The lifetime social insurance transfer costs were highest in non-treated patients, and lower social insurance costs were demonstrated with DMTs. These findings suggest that focusing cost-effectiveness analysis only on health costs will likely underestimate the value of DMTs.     

Western Rules for Eastern Banking

The article outlines the most significant changes in the banking sector and traces its possible future path in Central and Eastern Europe (CEE) in the context of competing banking models. The main conclusion is that despite the transition the orientation of the banking sector will be towards the government sector (including the central bank). The new network of financial interrelations that emerged during transition is characterised by the banking sector's significant net defensive position and creditor passivity. Although CEE countries are developing their financial systems in line with a universal banking model the aggregate balance sheets of their banking sectors reveal a structure that is more in line with other proposed models. Financial relations between households, the corporate sector and the state sector intermediated by the banking sector reveal a severe retreat of banks from the corporate sector in favour of maintenance of government and central bank operations.     

Mortgage Credit: Denmark’s Financial Capacity Building Regime

ABSTRACT

The integration of small states into the international financial system has constrained their ability to enact the traditional macroeconomic tools of fiscal and monetary policy. As systems of mortgage credit are tightly integrated into global capital markets and influence flows of capital between states, this paper uses Denmark as a case study to explore whether domestic mortgage sector reforms have been used to build financial capacity to compensate for the loss of economic policy autonomy. The results of this analysis suggest that the Danish government has actively used mortgage credit to meet three specific macroeconomic objectives since the 1980s: (1) mortgage credit was restricted in the 1980s to resolve Denmark's persistent balance of payments problem; (2) liberalisations of mortgage credit in the 1990s and 2000s allowed the Danish government to stimulate the economy via privatised/house-price Keynesianism and reduce their sovereign debt burden; and (3) mortgage credit has been used as a form of privatised monetary policy, allowing Denmark to break-free from the ‘iron-cage’ of the Mundell-Fleming trilemma. It is in these specific ways that the Danish government has used mortgage reforms to achieve macroeconomic policy autonomy and navigate economic challenges whilst adhering to the constraints of the international financial system.     

Tumor treating fields and maintenance temozolomide for newly-diagnosed glioblastoma: a cost-effectiveness study

Abstract

Purpose: The EF-14 trial demonstrated that adding tumor treating fields (TTFields) to maintenance temozolomide (TMZ) significantly extends progression-free survival (PFS) and overall survival (OS) for newly-diagnosed glioblastoma (GBM) patients. This study assessed the cost-effectiveness of TTFields and TMZ for newly-diagnosed GBM from the US healthcare system perspective.

Methods and materials: Outcomes for newly-diagnosed GBM patients were estimated over a lifetime horizon using an area under the curve model with three states: stable disease, progressive disease, or death. The survival model integrated the 5-year EF-14 trial results with long-term GBM epidemiology data and US background mortality rates. Adverse event rates were derived from the EF-14 trial data. Utility values to determine quality-adjusted life-years, adverse event costs, and supportive care costs were obtained from published literature. A 3% discount rate was applied to future costs and outcomes. One-way and probabilistic sensitivity analyses were performed to assess result uncertainty due to parameter variability.

Results: Treatment with TTFields and TMZ was estimated to result in a mean increase in survival of 1.25 life years (95% credible range [CR]?=?0.89–1.67) and 0.96 quality-adjusted life years (QALYs) (95% CR = 0.67–1.30) compared to treatment with TMZ alone. The incremental total cost was $188,637 (95% CR = $145,324–$225,330). The incremental cost-effectiveness ratio (ICER) was $150,452 per life year gained and $197,336 per QALY gained. The model was most sensitive to changes in the cost of TTFields treatment.

Conclusions: Adding TTFields to maintenance TMZ resulted in a substantial increase in the estimated mean lifetime survival and quality-adjusted survival for newly-diagnosed GBM patients. Treatment with TTFields can be considered cost-effective within the reported range of willingness-to-pay thresholds in the US.     

政府、企业与公众环保行为博弈分析

党的十七大明确提出将节约资源和保护环境作为国家的一项基本国策,其中也包括公众参与机制建设和"全民环保"的新理念.将公众置于社会大系统之中,其参与环保行为多是依赖政府设计的制度框架,与企业环保行为间博弈选择的结果.在政府不参与模型中,公众也不会自觉参与环保,企业更不会停止污染,必将导致"公地悲剧";而在政府参与模型中,政府的奖励与惩罚力度又会直接影响到公众参与的人数和参与成本,进而影响到企业环保行为的选择.由此提出制度设计方面的政策建议,以期推进更广泛程度的公众参与.     

The role of the government in financial sector development

This study examines the impact of two dimensions of the government, namely, size and quality, on two dimensions of the financial sector, size and efficiency, in a cross section of 71 economies. The study finds that increased quality of the government as measured by governance and legal origin positively influences both financial sector size and efficiency. The size of the government proxied by government expenditure and the government ownership of banks has a negative effect on financial sector efficiency, and a positive impact on financial sector size, particularly in the low income economies.     

Sustainable Growth: A Circular Economy Perspective

Abstract:

Since the Brundtland Report was released in 1987, research on sustainable development has become an urgent issue of common concern. To meet the present consumption without compromising the needs of future generations, it is essential for society to practice the “don’t waste waste” principle and to promote sustainable growth. As this article illustrates, sustainable growth can be understood as an institutional arrangement of regenerating circular GDP in a sustainable manner. In the circular economy system, sustainable growth is not only theoretically feasible, but also looks very promising. To promote sustainable consumption and investment, a certain degree of institutional planning (i.e., a process of progressive institutional change) initiated by a community or a government is necessary. Sustainable growth is, in essence, a dynamic process of mutually-interacting socioeconomic activities of learning and training in sustainability issues, and this requires great effort as well as the active participation of people from all walks of life.     

The State Budget Compilation Process in Russia: Institutional Framework and Practice

This article clarifies the institutional framework and practice of the state budget compilation process in Russia, taking the 2001 federal budget as an example. The budget was the first one compiled under the new national financial system, including the Budget Code of the Russian Federation, which came into force in January 2000. The Budget Code is greatly superior to the preceding one, in the socialist era, which regulated Russia's financial activities during the initial phase of the transition period. Under the new legal system the 2001 budget was drafted by the Ministry of Finance, approved by the government, submitted to the Federal Assembly, discussed at the State Duma and finally approved by the Federation Council. A detailed analysis of this process shows that a certain order is emerging in the budget compilation process due to the comparatively amicable relationship between the government and the Federal Assembly and because of the establishment of the new legal system, including the Budget Code. The new financial system, however, has many problems, indicating that Russia will not be able to accomplish institutional changes in this field all at once.     

The social budget policy process in Russia at a time of crisis

ABSTRACT

This article examines the process of Russian social budget formation during 2015–2016, a period marked by a significant reduction in state revenues due to changes in Russia’s economic and international environment. Participants in the budget process included the president, prime minister, the financial–economic and social blocs of government, and experts outside the government. An important concern associated with the social sphere was maintaining political popularity. Budget formation in this area occurred via bureaucratic bargaining, with the president intervening only on the most salient issues. Examples of policy elaboration including indexation of major benefits and the freezing of pension contributions are considered.     

Political uncertainty and labour investment efficiency

ABSTRACT

We examine the impact of political uncertainty on the labour investment efficiency (LIE) of a firm. Using a sample of Chinese firms, we test the market discipline and managerial entrenchment hypotheses. Our findings suggest that political uncertainty adversely affects LIE. The results are consistent with the managerial entrenchment hypothesis. That is, firms hire more labour in a period of increased information asymmetry due to the political uncertainty, which deteriorates LIE. Our findings are robust to a battery of alternative measures of LIE and estimation methods. We conduct several additional analyses and document that the adverse impact of political uncertainty is stronger when the newly appointed government official is older, the firm is state-owned, the firm belongs to a politically sensitive industry or the firm operates in locations with stringent labour protection. By contrast, when the firm locates in a region with weak Chinese government intervention or after President Xi Jinping’s anti-corruption campaign, the adverse impact of political uncertainty on LIE is less pronounced. Last, we document that after hiring more labour, firms receive tangible and intangible benefits in terms of receiving more loans, collect more government subsidies, and able to re-establish some political connection but at the cost of lower performance.     

Estimating the public economic consequences of introducing varenicline smoking cessation therapy in South Korea using a fiscal analytic framework

Background and aims: Smoking gives rise to many cross-sectorial public costs and benefits for government. Costs arise from increased healthcare spending and work-related social benefits, while smoking itself provides significant revenue for government from tobacco taxes. To better understand the public economic impact of smoking and smoking cessation therapies, this study developed a government perspective framework for assessing smoking-attributable morbidity and mortality and associated public costs. This framework includes changes in lifetime tax revenue and health costs, as well as changes in tobacco tax revenue, from fewer smokers.

Methods: A modified generational accounting framework was developed to assess relationships between smoking-attributable morbidity and mortality and public economic consequences of smoking, including lifetime tax revenue gains/losses, government social transfers, and health spending. Based on the current prevalence of smoking in South Korean males, a cohort model was developed for smokers, former-smokers, and never-smokers. The model simulated the lifetime discounted fiscal transfers for different age cohorts in 5 year age bands, and the return on investment (ROI) from smoking cessation therapy.

Results: Former smokers are estimated to generate higher lifetime earnings and direct tax revenues and lower lifetime healthcare costs due to the reduction of smoking-attributable mortality and morbidity compared to smokers, even after accounting for reduced tobacco taxes paid. Based on the costs of public investments in varenicline, this study estimated a ROI from 1.4–1.7, depending on treatment age, with higher ROI in younger cohorts, with an average ROI of 1.6 for those aged less than 65.

Conclusions: This analysis suggests that reductions in smoking can generate positive public economic benefits for government, even after accounting for lost tobacco tax revenues. The results described here are likely applicable to countries having similar underlying smoking prevalence, comparable taxation rates, and social benefit protection provided to individuals with smoking-related conditions.