Deposit insurance and bank regulation in a monetary economy: a general equilibrium exposition

Summary. It is commonly argued that poorly designed banking system safety nets are largely to blame for the frequency and severity of modern banking crises. For example, underpriced deposit insurance and/or low reserve requirements are often viewed as factors that encourage risk-taking by banks. In this paper, we study the effects of three policy variables: deposit insurance premia, reserve requirements and the way in which the costs of bank bailouts are financed. We show that when deposit insurance premia are low, the monetization of bank bailout costs may not be more inflationary than financing these costs out of general revenue. This is because, while monetizing the costs increases the inflation tax rate, higher levels of general taxation reduce savings, deposits, bank reserves, and the inflation tax base. Increasing the inflation tax rate obviously raises inflation, but so does an erosion of the inflation tax base. We also find that low deposit insurance premia or low reserve requirements may not be associated with a high rate of bank failure.Received: 2 January 2002, Revised: 1 March 2003JEL Classification Numbers: D5, E5, G1.B. D. Smith: Sadly, our co-author, colleague and dear friend, Bruce D. Smith, died on July 9, 2002.     

FDI in space: Spatial autoregressive relationships in foreign direct investment

There are a number of theoretical reasons why foreign direct investment (FDI) into a host country may depend on the FDI in proximate countries. Such spatial interdependence has been largely ignored by the empirical FDI literature, with only a couple recent papers accounting for such issues in their estimation. This paper conducts a general examination of spatial interactions in empirical FDI models using data on US outbound FDI activity. We find that estimated relationships of traditional determinants of FDI are surprisingly robust to inclusion of terms to capture spatial interdependence, even though such interdependence is estimated to be significant. However, we find that both the traditional determinants of FDI and the estimated spatial interdependence are quite sensitive to the sample of countries one examines.     

Embedded economics: The irrelevance of Christian fictive domestic economy

When reading the New Testament, the modern historically-minded interpreter would do well to keep in view that early Christian traditions emerged in the advanced agrarian societies of the first-century, eastern Mediterranean. In these societies, kinship and political institutions, roles, and norms determined economic and religious institutional behavior. That is, religious and economic structures were always embedded in either the kin group or the political group. Hence, to understand the “economic” assumptions and behaviors described in the New Testament, the interpreter must develop scenarios that fit the document’s historical and social context; the alternative is a necessarily anachronistic and ethnocentric reading. This essay articulates some basic perspectives entailed in historically and culturally sensitive interpretations of Old Testament and New Testament passages dealing with “economics”. The methodology employed here is a broadly based “social scientific criticism,” focusing on reading theory and cultural anthropology.     

Ethical issues confronting travel agents

This article provides an overview of current and prospective ethical issues facing commercial (as opposed to leisure) travel agents. Industry wide ethical issues include conflicting pressures from suppliers and clients, competency requirements for agents and misleading advertising and sales claims (vaporware in industry jargon). Issues with travel suppliers include calculation and payment of commissions, fare loopholes, frequent flyer plans and the use and abuse of benefits directed to individual employees. Issues with corporate clients of travel agents include hidden preferred carriers or suppliers, client pressure to use fare loopholes and hidden relationships with corporate travel consultants. Future issues include protecting client privacy, free riding, and divergent international business practices. Thomas W. Dunfee is the Kolodny Professor of Social Responsibility at The Wharton School of the University of Pennsylvania. His current research interests focus on social contract theory and business ethics and on developing ethical standards for business transactions. He has published articles in the Business Ethics Quarterly,the Journal of Business Ethics,the Business and Professional Ethics Journal,and the Journal of Social Philosophyin addition to a variety of business and legal journals. He has consulted to a number of corporate clients and to several trade associations.Bruce M. Black is founder and president of McCord Travel Management. Since founding the company in 1980, he has led its growth to one of the 30 largest travel management firms in the United States, with annual sales of more than $100 million. Black is one of the inaugural members of the University of Illinois at Chicago Entrepreneurship Hall of Fame and is on the board of the International Theatre Festival of Chicago. He is also active in the exploration of a variety of industry related issues on behalf of the Super Regional Group of agencies.     

The Effects of NAFTA on Antidumping and Countervailing Duty Activity

Treatment of unfair trade laws has become an important topicin negotiations on preferential trading areas. Recent preferentialtrading areas involving the United States, one of the most significantusers of these laws, have established special binational disputesettlement panels to arbitrate disagreements. Using a paneldatabase of U.S. antidumping and countervailing duty activityfrom 1980 through 2000, the article examines whether the useof dispute settlement panels has reduced such activity betweenthe United States and its North American Free Trade Agreementpartners. The analysis finds little evidence for any effect,calling into question the effectiveness of dispute settlementpanels in reducing unfair trade law activity.     

Impacts of e-Commerce and Enhanced Information Endowments on Financial Services: A Quantitative Analysis of Transparency, Differential Pricing, and Disintermediation

Some implications of e-Commerce financial services firms are becoming clear. The web drives transparency, and increases the information endowment of all market participants. It is harder to manipulate customers' behavior, or to overcharge them. Transparency drives differential pricing. Not all customers can or should be charged the same prices. Transparency reduces the viability of cross-subsidies between customers can or between products. The differential pricing enabled by the web transforms distribution channels, and enables direct distribution and alternative forms of distribution. Some intermediateraries may be bypassed altogether, while others may rapidly lose their best, most profitable, and previously most loyal customers.     

The future of bioregional planning in the Southern Appalachian Man and the Biosphere region

This paper assesses the current status and future prospects for bioregional planning in the Southern Appalachian Man and the Biosphere (SAMAB) region in the United States. The SAMAB region is one of the most biodiverse temperate regions in the world. The region's environment is threatened by development, air and water pollution, and invasive species. Numerous institutions in the region have some responsibility for protecting the region's environment, including the National Park Service, the US Forest Service, the US Environmental Protection Agency, the US Fish and Wildlife Service, several states, hundreds of municipalities, and numerous active non-profit organizations. Twenty-seven people associated with bioregional planning were interviewed to gauge their opinions on the state of bioregional planning in the SAMAB region. Overall, the respondents do not believe that the totality of all those efforts comprises bioregional planning because the efforts are limited in scale and scope and somewhat uncoordinated. With respect to the future of the region, the respondents found it difficult to imagine the state of the region 50 and especially 200 years into the future. Additionally, almost all of their definitions of bioregional planning included a spatial dimension but none included a time dimension. Thus, one of our conclusions is that the future of bioregional planning in the region will be hampered by difficulties people responsible for environmental protection have in dealing with ‘the future’. Much effort needs to be expended to inculcate people in the region with the desire to anticipate problems long before they occur. Reactive responses, which characterize the majority of current efforts, are likely to be ‘too little, too late’.     

The Effects of Bilateral Tax Treaties on U.S. FDI Activity

The effects of bilateral tax treaties on FDI activity have been unexplored, despite significant ongoing activities by countries to negotiate and ratify these treaties. This paper estimates the impact of bilateral tax treaties using both U.S. inbound and outbound FDI over the period 1980–1999. Robust to a wide variety of alternative specifications, we find little evidence that bilateral tax treaties increase FDI activity, contrary to OECD-stated goals for such treaties.