The anatomy of fragile states in Sub‐Saharan Africa: Understanding the interrelationship between fragility and indicators of wellbeing

According to most classifications, Sub‐Saharan Africa is the region of the world with the highest presence of fragile states. In this paper we examine the relationship between fragility and poverty, suggesting that countries may become trapped in a vicious circle of fragility and low levels of wellbeing. We consider fragility as a continuum and begin by reviewing available measures. These show the high presence of fragility in Sub‐Saharan Africa and allow the more fragile countries to be identified. There is seen to be a strong association between fragility, poor growth performance, and lower wellbeing in Sub‐Saharan Africa. Building on the strong evidence for the two‐way relationship between economic growth and poverty, we present an analysis of how the vicious circle linking poorer welfare outcomes and fragility may be able to be broken. We argue that building successful institutions is key here, and this can be enabled by specific policy interventions that are both poverty reducing and productive.     

In which financial markets do mutual fund theorems hold true?

The mutual fund theorem (MFT) is considered in a general semimartingale financial market S with a finite time horizon T, where agents maximize expected utility of terminal wealth. The main results are:

Competition between Exchanges: Euronext versus Xetra

Exchanges in Europe are in a process of consolidation. After the failure of the proposed merger between Deutsche Börse and Euronext, these two groups are likely to become the nuclei for further mergers and co‐operation with currently independent exchanges. A decision for one of the groups entails a decision for the respective trading platform. Against that background we evaluate the attractiveness of the two dominant continental European trading systems. Though both are anonymous electronic limit order books, there are important differences in the trading protocols. We use a matched‐sample approach to compare execution costs in Euronext Paris and Xetra. We find that both quoted and effective spreads are lower in Xetra. The differences are more pronounced for less liquid stocks. When decomposing the spread we find no systematic differences in the adverse selection component. Realised spreads, on the other hand, are significantly higher in Euronext. Neither differences in the number of liquidity provision agreements nor differences in the minimum tick size or in the degree of domestic competition for order flow explain the different spread levels. We thus conclude that Xetra is the more efficient trading system.     

EEG 2017 — Mehr Markt bei der Erneuerbare-Energien-Förderung?

Within four years now, the German Renewable Energy Resources Act (EEG) has been amended in 2016 for the third time. The main point of the current reform is the extension of bidding schemes to determine the remuneration of renewable power generation. The articles analyses whether or not the expected decrease in costs and improvement of deployment control could ever occur, and considers the critique of thwarting the energy transition and jeopardising the diversity of actors involved in the industry.     

Dividend Stickiness,Debt Covenants,and Earnings Management

Consistent with the notion that dividends are very sticky, Daniel, Denis, and Naveen ( 2008 ) report evidence that firms manage earnings upward when pre‐managed earnings are expected to fall short of dividend payments. However, we find that this evidence is not robust when controlling for firms' tendency to manage earnings upward to avoid reporting earnings declines; only firms with high leverage exhibit a statistically weak tendency to manage earnings to close deficits of pre‐managed earnings relative to dividends. We further report that the decision to cut dividends depends on whether reported earnings fall short of past dividends, but not on earnings management that eliminates a shortfall in pre‐managed earnings relative to dividend payments. Overall, our evidence suggests that firms that face dividend constraints are more likely to cut dividends than to manage earnings to avoid dividend cuts.     

Markup cyclicality and input factor adjustments

This paper investigates the existence of markups and their cyclical behaviour at the industry sector level. Markups are given as a price-cost relation that is estimated from a dynamic, structural model of the firm. The firms face costly adjustment of labour and potential financial constraints. The model is tested on a panel of firm- and plant-level data from Norwegian manufacturing industries. The results indicate a frequent presence of moderate pro-cyclical markups. Labour adjustment costs are present in four out of seven sectors but small in magnitude. The results are related to the role played by unions in a setting with high union density.     

Consumption-related emotions over time: Fit between prediction and experience

Consumers base many decisions on affective forecasts, i.e., predictions about future emotions. These predictions, however, are susceptible to systematic biases. The present paper examines the accuracy of predicting emotional change in the consumer context. The goals of the study were to examine whether predictions of a change in consumption-related emotions fit actual experienced change and whether original predictions are remembered correctly. A two-wave longitudinal survey with 86 consumers in Austria and the UK showed that consumers who had bought shoes overestimated the decrease of positive consumption-related emotions over time. Results indicate that the intuitive theory of adaptation is related to the prediction bias. Moreover, participants misremembered original predictions as more consistent with actual experienced emotions. This hindsight bias hinders consumers from learning from previous prediction errors.