The approximate solution of finite‐horizon discrete‐choice dynamic programming models

The estimation of finite‐horizon discrete‐choice dynamic programming (DCDP) models is computationally expensive. This limits their realism and impedes verification and validation efforts. Keane and Wolpin (Review of Economics and Statistics, 1994, 76(4), 648–672) propose an interpolation method that ameliorates the computational burden but introduces approximation error. I describe their approach in detail, successfully recompute their original quality diagnostics, and provide some additional insights that underscore the trade‐off between computation time and the accuracy of estimation results.     

The Home Bias in Equities and Distribution Costs

We show that incorporating distribution costs into a general equilibrium model of international portfolio choice helps to explain the home bias in international equity investment. Our model is able to replicate observed investment positions for a wide range of parameter values, even if agents have an incentive to hedge labor income risk by purchasing foreign equity. This is because the existence of a retail sector affects both the correlation of domestic returns with the domestic price level and the correlation between financial and non‐financial income.     

The effect of capital requirement regulation on the transmission of monetary policy: evidence from Austria

This paper analyzes the role of banks’ regulatory capitalization in the transmission of monetary policy. We use a confidential dataset for Austrian banks spanning from the first quarter of 1997 to the fourth quarter of 2003. We find evidence that Austrian banks react in an asymmetric way to monetary policy depending on their regulatory excess capitalization, i.e. low capitalized banks react more restrictively to a monetary tightening than their highly capitalized peers.

Candidate gene studies and the quest for the entrepreneurial gene

Candidate gene studies of human behavior are gaining interest in economics and entrepreneurship research. Performing and interpreting these studies is not straightforward because the selection of candidates influences the interpretation of the results. As an example, Nicolaou et al. (Small Bus Econ 36:151?C155, 2011) report a significant association between a common genetic variant in the DRD3 gene and the tendency to be an entrepreneur. We fail to replicate this finding using a much larger, independent dataset. In addition, we discuss the candidate gene approach and give suggestions to avoid the publication of false positives.     

Economic Openness and Fiscal Multipliers*

Recent empirical findings attribute a central role to the degree of economic openness to determine the size of the fiscal multiplier. See, for instance, Ilzetzki et al. (2013) [How big (small?) are fiscal multipliers? Journal of Monetary Economics, 60(2), 239–254]. However, traditional macroeconomic models have difficulties to account for this evidence. By introducing ‘deep-habit’ formation into a New Keynesian small open economy model, this paper provides a theoretical framework which is able to attest for the new empirical evidence. Deep habits give rise to counter-cyclical firm markups, which are crucial to generate effects of openness on the fiscal multiplier as found in the data. We study three dimensions of economic openness: exchange rate flexibility, trade openness, and capital mobility. In line with the empirical findings, we report a negative relationship between measures of economic openness and the fiscal multiplier.     

Improving Software Flexibility for Business Process Changes

In times of continuous change, companies need to adjust their business processes to gain sustainable competitive advantage. Resulting changes in the company’s IT currently require the involvement of developers from departments that are mostly not aligned with the business. These changes often result in high transaction and labor costs. The article presents a platform-based method to adjust business processes with the aim of increasing both efficiency and flexibility compared to current approaches. The core of our work is an evaluation against traditional component-based software development using a sound simulation model. Three real-world scenarios of business process change show that – despite a slight increase in transaction costs – our suggested method decreases labor costs while increasing operational flexibility.