Tourism and community resilience in the Anthropocene: accentuating temporal overtourism

Abstract

Global tourism growth is unprecedented. Consequently, this has elevated the sector as a key plank for economic development, and its utility is deeply embedded in political, economic and social-ecological discourse. Where the expansion of the sector leverages natural and cultural landscapes, this applies pressure to social and ecological underpinnings that if not reconciled, can become problematic. The way this plays out in Australia’s Shipwreck Coast and the wider Great Ocean Road region, especially the implications for community resilience, is the focus. Emphasis is placed on the vulnerability of peripheral coastal areas to development that withdraws from destination endowments, yet fails to provide commensurate economic yield as a suitable trade-off. This is obvious where tourism intensification has led to concerns about the breach of normative carrying capacities. Temporal overtourism driven by seasonal overcrowding is countenanced as emblematic of tourism in the Anthropocene where focus tends to be largely growth-oriented, with much less attention given to bolstering social-ecological resilience, especially community resilience. At stake is the resilience of regional areas and their communities, who in the absence of garnering commensurate economic returns from tourism expansion find themselves in social and ecological deficit.     

Mechanics of good trade execution in the framework of linear temporary market impact

We define the concept of good trade execution and we construct explicit adapted good trade execution strategies in the framework of linear temporary market impact. Good trade execution strategies are dynamic, in the sense that they react to the actual realisation of the traded asset price path over the trading period; this is paramount in volatile regimes, where price trajectories can considerably deviate from their expected value. Remarkably, however, the implementation of our strategies does not require the full specification of an SDE evolution for the traded asset price, making them robust across different models. Moreover, rather than minimising the expected trading cost, good trade execution strategies minimise trading costs in a pathwise sense, a point of view not yet considered in the literature. The mathematical apparatus for such a pathwise minimisation hinges on certain random Young differential equations that correspond to the Euler–Lagrange equations of the classical Calculus of Variations. These Young differential equations characterise our good trade execution strategies in terms of an initial value problem that allows for easy implementations.     

Stock Market Reaction to Monetary Policy: An Event Study Analysis of the Brazilian Case

This article examines the relationship between the monetary policy implemented by the Central Bank of Brazil and the stock market. We implement event study analysis and analyze the effect of the anticipated and unanticipated components of monetary policy decisions on the returns of the IBOVESPA index and 53 stocks. We find that monetary policy has a significant effect on the stock market, but is only responsible for a small proportion of market variation. The analysis at the sector level with expected returns identifies that the financial sector is the most affected by this policy, whereas with excess returns only industrial goods are significantly affected. Moreover, individual assets respond in a rather heterogeneous fashion to monetary policy; however, when we look at excess returns, we identify a reduction in the intensity and in the number of companies impacted by monetary policy. Finally, the monetary shock is explained by unanticipated variations in the unemployment rate, in the Industrial Production Index, in the General Market Price Index, and in the Broad Consumer Price Index.     

The effects of ambiguity on entrepreneurship

We incorporate ambiguity (Knightian uncertainty) into a classic model of entrepreneurship to analyze, among other things, its effects on the optimal level of business startups, the relation between total assets and the size of the entrepreneurial investment, the effects of increasing ambiguity on developing new ventures, and the decision to self‐select into entrepreneurship for an indifferent decision maker. We first show that, under the monotone‐likelihood ratio property, the introduction of ambiguity negatively affects the optimal entrepreneurial investment, something that is consistent with most experimental evidence about entrepreneurial choice under ambiguity. Then, we show that the classical explanations for the positive correlation between total assets and business startups based on decreasing absolute risk aversion preferences and prudent behavior can be challenged when ambiguity is incorporated into the analysis, and we provide the conditions that guarantee that the traditional comparative static result under risk is replicated under ambiguity. We also show that increases in ambiguity aversion reduce entrepreneurial activities. Finally, we discuss our results under alternative ways of modeling ambiguity.     

Central bank disclosure as a macroprudential tool for financial stability

The Basel Capital Accord (pillar 3) states that disclosure of information (transparency) is essential to financial stability. This study analyzes, through inflation reports, the disclosure of information from the Central Bank of Brazil concerning the credit market. We consider credit risk and capital buffers as measures of financial stability in this analysis. Furthermore, in order to measure the perception of the monetary authority on the credit market, we built two indices based on the central bank’s communication on credit development. We performed a panel data analysis based on a sample of 125 banks for the period from June 1999 to September 2014 (7000 observations). The findings suggest that central bank communication regarding expectations concerning the credit market contributes to financial stability. Therefore, this kind of communication of central banks (about credit development) may constitute an important macroprudential tool to improve financial stability.     

Economic freedom and public,non-market institutions: evidence from criminal prosecution

Economic freedom, which measures the protection of property and freedom to contract, is generally argued to capture the quality of a state’s institutions regarding market activity. As to be expected, numerous studies have found that economic freedom is associated with good economic outcomes. Additionally, much effort in public economics has worked to identify the features of quality non-market public institutions. No effort has been made to connect institutions that influence market activity and institutions that govern non-market activities. We take a first step. We employ a linear programming method for measuring relative efficiencies known as Data Envelopment Analysis. We apply this technique to information on the use of inputs to the production of the prosecution of crime across the thousands of local prosecutor offices in the U.S. We then compare state-level measurements of prosecution productivity with data on state-level economic freedom from the Economic Freedom of North America index. We show that there is a positive and statistically significant relationship between the two. Those states that develop institutions respecting economic freedom also tend to be the states that develop efficient publicly-provided services. The results are extended to complementary economic freedom measurements.     

Mergers with interfirm bundling: a case of pharmaceutical cocktails

Pharmaceutical cocktails often consist of two or more drugs produced by competing firms. The component drugs are often also sold as stand‐alone products. We analyze the effects of a merger between two pharmaceutical firms selling complements for colorectal cancer treatment. In this setting there are two merger effects: the standard upward pricing pressure due to firms internalizing the substitution between the stand‐alone products, and an additional effect where the firms internalize the impact of selling complements and reduce the price of the cocktail product. The net impact of a merger is a modest price increase, or even a price decrease.     

Implementing Fischer Black's Simple Discounting Rule

Corporate managers typically estimate the value of capital projects by discounting the project's expected future net cash flows at the cost of capital. The capital asset pricing model (CAPM) is generally used to estimate that cost. But, as anyone who has worked on the finance or business development staff of a public company can attest, there are major challenges in applying the CAPM, including largely unresolved questions about what constitutes the “market portfolio,” how to estimate market risk premiums, and how to estimate the betas of projects. In a short article published in Financial Management in 1988, Fischer Black proposed a valuation “discounting rule” that avoids all these problems—one that involves discounting a relatively certain (as opposed to an expected or average) level of operating cash flows at the risk-free rate. But Black's article does not address the question of how to calculate these “certainty equivalent” or “conditional” cash flows. In this article, the authors propose a way of implementing Black's rule that involves estimating the “conditional” cash flows in a three-step procedure:

• • Find a benchmark security that correlates with the project's cash flows;
• • Estimate the percentiles of the distribution in which the benchmark return equals the risk-free rate over different investment horizons;
• • Use information from corporate managers to assess the cash flows that define the same percentiles in the cash flow distributions.

As the authors point out, the virtue of Black's rule is that it shifts the focus of the analyst away from the assessment of discount factors and puts it squarely on the more challenging, and arguably more relevant, problem of estimating the project's cash flows.