The energy crisis and the third world

The economic implications of the latest upsurge of the oil prices for the whole world—and for the developing countries in particular—are such as to make a strategy of common responsibility of industrialized and developing countries more urgent than ever. Rainer Offergeld, Federal Minister for Economic Cooperation, elucidates his ideas about such a strategy.     

The Effect of Implicit Moral Attitudes on Managerial Decision-Making: An Implicit Social Cognition Approach

This article concerns itself with the relationship between implicit moral cognitions and decisions in the realm of business ethics. Traditionally, business ethics research emphasized the effects of overt or␣explicit attitudes on ethical decision-making and neglected intuitive or implicit attitudes. Therefore, based on an implicit social cognition approach it is important to␣know whether implicit moral attitudes may have a substantial impact on managerial ethical decision-making processes. To test this thesis, a study with 50 participants was conducted. In this study the participants were asked to work on a deliberative managerial ethical decision-making task, in which they had to decide on one of two options. Implicit moral attitudes towards the two options were measured using the implicit association test (IAT). A semantic differential scale was used to diagnose explicit moral attitudes towards the two options. Each step taken within the deliberative decision-making process, as well the decision itself, was assessed using a scoring model-based decision analysis and a decision-making questionnaire. The results of this study show that implicit moral attitude has a great influence on the deliberative ethical decision-making process. The derived conclusion is that complex and deliberative decision-making processes in the context of business ethics can be affected by implicit social cognitions such as implicit moral attitudes.     

The Determinants of GATS Commitment Coverage

This paper investigates hypotheses about the determinants of trade and investment liberalisation with a particular focus on the market access and national treatment commitments under the General Agreement on Trade in Services (GATS). We set up a database of these GATS commitments and use the ratio of all commitments listed by a country to the possible number of commitments as a measure of liberalisation of market access/national treatment. Our empirical analysis suggests that larger and ‘richer’ countries commit to more liberal regimes of market access and national treatment. This is surprising since economic theory predicts the largest welfare gains for low‐skilled abundant (skilled‐labour/physical‐capital‐scarce) economies. Also, our findings suggest that liberalisation is stronger among geographically close countries with strong ties in goods trade.     

Run length analysis of Shewhart charts applied to drifting processes under an integrative SPC/EPC model

Engineering Process Controllers (EPC) are frequently based on parametrized models. If process conditions change, the parameter estimates used by the controllers may become biased, and the quality characteristics will be affected. To detect such changes it is adequate to use Statistical Process Control (SPC) methods. The run length statistic is commonly used to describe the performance of an SPC chart. This paper develops approximations for the first two moments of the run length distribution of a one-sided Shewhart chart used to detect two types of process changes in a system that is regulated by a given EPC scheme: i) changes in the level parameter; ii) changes in the drift parameter. If the drift parameter shifts, it is further assumed that the form of the drift process changes from a linear trend under white noise (the in-control drift model) into a random walk with drift model. Two different approximations for the run length moments are presented and their accuracy is numerically analyzed. Received: August 1998     

Hedging Long-Term Forwards with Short-Term Futures: A Two-Regime Approach

In this paper we investigate Metallgesellschafts problem of hedging long-term forwards with short-term futures. Very different hedging strategies have been proposed in the literature. We attribute these differences to the underlying valuation approaches for oil futures and empirically compare five model-based hedging strategies. In particular, we consider a strategy which results from a two-regime pricing model. This continuous-time equilibrium model reflects the observation that prices of oil futures exhibit a very different behavior for low and high oil prices. Our empirical study shows that time diversification is the dominant effect for an effective hedging of long-term oil forwards with short-term futures. JEL classification G13, G30     

Lean Trees—A General Approach for Improving Performance of Lattice Models for Option Pricing

The well-known binomial and trinomial tree models for option pricing are examined from the point of view of numerical efficiency. Common lattices use a large part of time resources for calculations which are almost irrelevant for the solution. To avoid this waste of resources, the tree is reduced to a lean form which yields the same order of convergence, but with a reduction of numerical effort. In numerical tests it is shown that the proposed method leads to a significant improvement in real calculation time without loss of accuracy for a broad class of derivatives.     

Resistant decomposition of economic time series

The paper proposes two resistant methods for time series decomposition, i. e., methods that are insensitive to a few aberrant observations. One is based on running medians instead of the usual moving averages and is designed along the lines of SABL, a package developed shortly after Tukey's ideas were published. The other method uses structural time series models and adapts smoothing splines which are suitably robustified. The resistance of the two methods are studied by employing the concept of the breakdown point. Also resistance and efficiency are investigated by the means of a suitably chosen model.

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Zusammenfassung Es werden zwei resistente, d. h. gegen Ausreißer unempfindliche Methoden zur Zerlegung von Zeitreihen vorgestellt. Die erste benutzt gleitende Mediane anstelle der üblichen gleitenden Durchschnitte und vereinfacht das Verfahren SABL. SABL wurde als resistentes Zerlegungspaket kurz nach der Publikation von Tukeys Ideen zur explorativen Datenanalyse entwickelt. Die zweite Methode geht von strukturellen Zeitreihenmodellen aus und verwendet verallgemeinerte glättende Splines, die geeignet robustifiziert werden. Die Resistenzeigenschaften der beiden Verfahren werden anhand des Bruchpunkt-Konzeptes sowie auf der Basis eines Modells diskutiert. Zudem dient das Modell als Grundlage zur Einschätzung ihrer Effizienz.

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I am grateful to the referees for several helpful comments and suggestions.     

Ordinal Methodology in the Analysis of Likert Scales

Likert scales are widely used in survey studies for attitude measuring. In particular, the questionnaires propagated by the SERVQUAL approach are based on Likert scales. Though the problem of attitude suggests an ordinal interpretation of Likert scales, attitude survey data are often evaluated with techniques designed for cardinal measurements. The present paper discusses the interpretation of scales for attitude measuring and gives a survey of data analysis techniques under the proper ordinal understanding.     

Modelling the economic value of credit rating systems

In this paper we develop a model of the economic value of credit rating systems. Increasing international competition and changes in the regulatory framework driven by the Basel Committee on Banking Supervision (Basel II) called forth incentives for banks to improve their credit rating systems. An improvement of the statistical power of a rating system decreases the potential effects of adverse selection, and, combined with meeting several qualitative standards, decreases the amount of regulatory capital requirements. As a consequence, many banks have to make investment decisions where they have to consider the costs and the potential benefits of improving their rating systems. In our model the quality of a rating system depends on several parameters such as the accuracy of forecasting individual default probabilities and the rating class structure. We measure effects of adverse selection in a competitive one-period framework by parameterizing customer elasticity. Capital requirements are obtained by applying the current framework released by the Basel Committee on Banking Supervision. Results of a numerical analysis indicate that improving a rating system with low accuracy to medium accuracy can increase the annual rate of return on a portfolio by 30–40 bp. This effect is even stronger for banks operating in markets with high customer elasticity and high loss rates. Compared to the estimated implementation costs banks could have a strong incentive to invest in their rating systems. The potential of reduced capital requirements on the portfolio return is rather weak compared to the effect of adverse selection.