The notion of private information in a modern perspective: a reappraisal of Hayek's contribution

Hayek's critical attitude towards Walrasian modelling was based on informational considerations. In his view, a meaningful notion of equilbrium has to deal with the consistency of agents' plans which information is dispersed throughout the economy. He emphasized that only in this context could the role of market prices as aggregators of information be correctly analysed. Recent developments in general equilbrium theory with rational expectations have taken up the issue formally. In this paper, Haek's main ideas about the competiitive mechanism are compared with these recent results. It is argued that Hayek's notion of private information is different from that used in modern equilibrium theory, not only because of its dynamic content, as many critics observed ex post, as is usually in a general equilibrium framework. This issue of whether modern notions of private information, namel that used in conract theory, are good substitutes for Hayek' notion of personal knowledge is also examined in detail. From this analysis, it is possible to conclude that Hayek's notion of equilibrium neither entails Pareto optimality prperties nor full informational efficiency.     

The high-frequency response of exchange rates to monetary policy actions and statements

This paper investigates the impact of US monetary policy on the level and volatility of exchange rates using an event study with intraday data for five currencies (the US dollar exchange rate versus the euro, the Canadian dollar, the British pound, the Swiss franc, and the Japanese yen). I construct two indicators of news about monetary policy stemming separately from policy decisions and from balance of risk statements. Estimation results show that both policy decisions and communication have economically large and highly significant effects on the exchange rates, with the surprise component of statements accounting for most of the explainable variation in exchange rate returns in response to monetary policy. This paper also shows that exchange rates tend to absorb FOMC monetary surprises within 30-40 min from the announcement release.     

Evaluating the effect of monetary policy on unemployment with alternative inflation forecasts

This paper explores the role that inflation forecasts play in the uncertainty surrounding the estimated effects of alternative monetary rules on unemployment dynamics in the euro area and the US. We use the inflation forecasts of 8 competing models in a standard Bayesian VAR to analyse the size and the timing of these effects, as well as to quantify the uncertainty relative to the different inflation models under two rules. The results suggest that model uncertainty can be a serious issue and strengthen the case for a policy strategy that takes into account several sources of information. We find that combining inflation forecasts from many models not only yields more accurate forecasts than those of any specific model, but also reduces the uncertainty associated with the real effects of policy decisions. These results are in line with the model-combination approach that central banks already follow when conceiving their strategy.     

Labor market intermediaries make the world smaller

This paper uses network analysis to study how employment intermediaries have influenced inter-firm worker mobility in a region of Italy, in response to a 1997 reform that introduced temporary employment agencies. Worker reallocations from a matched employer-employee dataset are mapped onto a directed graph where the vertices are firms and the links denote transfers of workers between firms. Temporary employment agencies significantly improve network integration and practicability, while rapidly increasing the control over mobility channels. The trade off inherent in intermediation activity is captured and discussed. The potential of network analysis as a tool for monitoring regional labor markets is highlighted.     

Firm size and the adoption of flexible automation

Data on the diffusion of flexible automation systems in the Italian metalworking industry are used to point out the role of size for the adoption of complex, systemic innovations. Plant and firm sizes turn out to be positively correlated to adoption rates. Moreover, adoption is more likely, ceteris paribus, in plants which are part of large industrial groups. This pattern applies in general, and is particularly remarkable for more advanced solutions. In this light, guidelines for industrial policies that focus on financial support, the diffusion of industrial standards, and the correction of asymmetries in the availability of know-how and skills are proposed.Financial support for this paper was provided by the Ministero della Pubblica Istruzione (MPI 40% research funds). Grants from the Fondazione Mauro and the CNR research project Tecnologie Meccaniche are also acknowledged. The research took advantage of the FLAUTO database, set up at the Laboratorio di Economia dei Processi di Automazione, MIP-Politecnico di Milano.     

The strategic role of quality in small size firms

It is often claimed that, especially in mature industries, European firms can compete against low-cost NICs firms only if they are able to implement quality based strategies. The emphasis on the strategic role of quality, however, often leads to underestimate the extent of organizational and economic efforts, needed to turn quality from a potential opportunity into a real advantage. The lack of a thorough comprehension of the requirements of a quality based strategy can question the effectiveness of the investments some firms plan to improve their quality level. These firms can in fact remain stuck in the middle, if they do not have enough resources to turn quality into a source of sustainable competitive advantage.This paper is aimed at a better comprehension of both benefits and costs of a quality based strategy, with regard to a specific class of firms, Small Size Firms (SSFs), where a strategic use of quality is more difficult. The paper is articulated into two parts. Part one discusses the main obstacles facing the adoption of a quality based strategy by SSFs. A dynamic model for the adoption of this strategy over time, aimed at minimizing the risks for SSFs, is also presented.Part two describes the results of an empirical research, aimed at verifying the viability of quality based strategies in an industry composed only by SSFs, the shoe-machinery industry. The empirical research supports the viability of the model presented in the first part of the paper.     

Consumption insurance and entrepreneurial risk: Evidence from Italian micro-data

Using cross-sectional data from the Bank of Italy's Survey on Household Income and Wealth, we make an attempt to assess the relevance of entrepreneurial risk, i.e., idiosyncratic risk borne by firm owners while running their operations. Our new testing procedure will show that progressively more articulated forms of entrepreneurship do not enjoy a larger degree of risk sharing and will suggest some links between a larger or smaller degree of consumption insurance and variables such as net wealth, asset holding, and net indebtedness. The opinions expressed in this paper are those of the authors and do not necessarily reflect the views of the corresponding institutions.     

Single factor models with Markovian spot interest rate: an analytical treatment

In the spirit of the Heath–Jarrow–Morton methodology, we provide an analytical characterization of bond prices within the context of single factor term structure models in which the spot rate follows a Markov process and the volatility structure of zero coupon bond returns is stochastic. Also, a perturbative analysis of the extended Cox–Ingersoll–Ross model is proposed. Received: 7 February 2001 / Accepted: 8 June 2002     

Expected Shortfall: A Natural Coherent Alternative to Value at Risk

We discuss the coherence properties of expected shortfall (ES) as a financial risk measure. This statistic arises in a natural way from the estimation of the 'average of the 100% worst losses' in a sample of returns to a portfolio. Here p is some fixed confidence level. We also compare several alternative representations of ES which turn out to be more appropriate for certain purposes
(J.E.L.: G20, C13, C14).