Speculation Under the Random Walk Hypothesis

Under the random walk hypothesis this paper derives simple decision rules for owning and selling a stock. Two scenarios are considered, first, a 'blue chip' security with low volatility (as measured by the variance of stock price changes per time interval)paying a fixed dividend a and, second, a stock of high volatility and no dividends with a (low)price at which it can be sold back to the company.     

Courts and contract enforcement in transition agriculture: theory and evidence from Poland

The paper investigates theoretically and empirically the role of courts for contract enforcement in transition agriculture. In a survey of 306 Polish farmers conducted in 1999, only 38.5% respondents reported to believe that they could use courts to enforce contracts with their most important customer. Furthermore, those who believed the legal system could be used would accept significant financial losses before taking action. We develop a theoretical model, based on the costs and benefits of court enforcement, which captures the boundary between contracts to be regarded as 'enforceable' and 'not-enforceable' and, simultaneously, the threshold of taking legal action. The empirical analysis strongly supports our model: (1) the farmers' responses can be explained by cost-benefit calculations regarding the use of courts, (2) the legal 'enforceability' of contracts depends not only on the efficiency of the legal system but also on the attributes of the transaction, the contracts and the relationship between buyer and seller and (3) the threshold of taking legal action is significantly influenced by indirect costs of court enforcement, such as the disruption of a valuable business relationship, and by the availability of alternative enforcement mechanisms.     

Government activity and economic growth – one size fits All?

This study investigates the role of government activity in economic growth, arguing that economic systems are important and that, therefore, one size of government does not fit all countries. Taking a panel of 111 countries over the years from 1971 to 2010, we consider clusters of economic systems as predicted by an extended Varieties of Capitalism (VoC) approach. The empirical growth impact of government activity is positive but u-shaped and depends on both the quality of institutions and the institutional setting. For the polar cases of liberal economies and Scandinavian coordinated market economies, the potential growth impact is quite similar and superior to other clusters of countries. However, the maximum growth effect is realized for above-average levels of government activity in the Scandinavian countries, while this would be detrimental to growth in liberal countries. Hence, high levels of government activity are consistent with growth but only in economic systems consistently rooted in a high level of government activity.     

A note on estimating the static effects of the GSP

COnclusion It is apparent that two adjustments to the BM methodology are warranted. Firstly, explicit attention to the change in consumption in the donor country, (dC), mustbe given. Secondly, the value of imports as well as donor production must be in purchasers prices rather than fob values. Finally, when consideration is given to both biases, TC continues to be much larger than TD, a conclusion that BM had also drawn.     

The dollar-euro exchange rate and macroeconomic fundamentals: a time-varying coefficient approach

This paper investigates the temporal stability of the relationship between the Deutschmark/US dollar exchange rate and macroeconomic fundamentals. We use monthly data from 1975:01 to 2007:12. Applying a novel time-varying coefficient estimation approach, we come up with some interesting properties of our empirical model. Firstly, there is no stable long-run equilibrium relationship among fundamentals and exchange rates, since the breakdown of Bretton Woods. Secondly, there are no recurring regimes, i.e. across different regimes, either the coefficient values for the same fundamentals differ or the significance differs. Thirdly, there is no regime into which no fundamentals enter. Fourthly, the deviations resulting from the stepwise cointegrating relationship act as a significant error-correction mechanism. In other words, we are able to show that fundamentals play an important role in determining the exchange rate, but their impact differs significantly across different subperiods.     

The cross-country importance of global sentiments—evidence for smaller EU countries

This paper examines the importance of the economic sentiments of some macroeconomic key variables in Estonia, Slovenia and Latvia. We analyze the importance of domestic as well as foreign sentiments with respect to these economies against the background of their accession to the European Monetary Union. For this purpose, we develop and apply a framework which is based on a restricted autoregressive model. We focus on two issues: firstly, we investigate the relationship between domestic stock prices, income and sentiments; and, secondly, we take external effects stemming from EMU and US share prices and sentiments into account. Our results show that European sentiments are important for income and domestic sentiments. Furthermore, we are able to establish linkages between global share prices and domestic income. From a more general perspective, we find a significant positive influence stemming from (domestic) share prices on sentiments in Estonia and Latvia, and also find evidence for an inverse relationship in Latvia.     

Governing farmland conversion: Comparing China with the Netherlands and Germany

Farmland conversion has become an increasing concern in China and other parts of the world, including Europe and the USA. Be it for environmental or food security reasons, questions arise concerning how urbanization should be governed, i.e. what rules and regulations could enhance the efficiency and sustainability of land use. Taking a first step toward answering such questions, this paper describes different governance structures for farmland conversion in the Netherlands, Germany, and China. Secondly, it compares five identified differences between these countries in the realms of land property, land use planning, the role of the market, the role of government, and the performance of governance structures. The purpose of this paper is to develop an approach for comparing governance structures for land conversion that: (a) offers some opportunities for exchange of experience between the three countries and (b) provides a framework for further research on governance structures in farmland conversion.     

Antecedents and Consequences of Consumers' Response to Health Information Complexity

This study develops and empirically tests a model for understanding food consumers' health information seeking behaviour. Data were collected from 504 food consumers using a nationally representative consumer panel. The obtained Lisrel results suggest that consumers' product-specific health information seeking is positively affected by general food involvement and by usability of product-specific health information. Moreover, product-specific health information seeking and product-specific health information complexity are both positively related to post-purchase health-related dissonance. This link between information complexity and post-purchase dissonance has implications for marketers of food products since our results suggest that consumers might avoid purchasing the same food item again if post-purchase dissonance is experienced.