Can Price Incentive to Smuggle Explain the Contraction of the Cocoa Supply in Ghana?

From the early 1960s to the early 1980s, the officially recordedoutput of cocoa in Ghana declined by 60%. During the 1983–95Economic Recovery Programme, however, the official output ofcocoa doubled. Although these developments have inspired muchempirical research, most of the studies have been unable toexplain the medium-term persistence of cocoa output in remainingbelow its estimated capacity level. The paper argues that theprice incentive to smuggle can explain as much as one-half ofthe observed decline in official output from its trend and thesubsequent recovery. A co-integration analysis and a dynamicerror-correction model of cocoa supply support the analysis.     

The impact of product diversification strategy on the corporate performance of large Spanish firms

We analyze the impact of product diversification on performance. This topic has been discussed in the literature, and there is no consensus so far as to the significance or the direction of the impact. Performance is measured using Tobin's q for a sample of 103 large, non-financial Spanish firms (1992–1995). Diversification is measured by means of a categorical variable, as suggested by Varadarajan. The principal results indicate that the firms with intermediate levels of product diversification have the highest performance, while the firms with low and high levels of diversification show significantly lower performance, which performance is not significantly different between them.     

How Much State?

Professor Alec Nove (right), of the University of Glasgow, takes issue with the three 'capitalist' critics of his articles in Economic Affairs, January-March 1985: Israel Kirzner, Tim Congdon and Patrick Minford.     

Determinants of Leverage in Slovenian Blue-Chip Firms and Stock Performance Following Substantial Debt Increases

Hypotheses concerning capital structures are some of the most frequently tested in the financial literature. Authors usually discuss different incentives for the use of leverage. Their views can be broadly classified in two main groups. The proponents of the first argue that leverage increases the cash flow available to investors. With the use of debt a firm gains because it uses a cheaper component of capital and since it pays less tax thanks to advantageous debt tax shields. On the other hand, the proponents of the second group stress the importance of minimising transaction costs, and information asymmetry. They point to a pecking order of finance sources. In this article, I explain the most frequently stated drivers that provide incentives for the more extensive use of debt with a focus on an emerging market environment and test whether they are relevant to Slovenian blue-chip firms that emerged from the transition of the last decade.

The second part introduces the owners' point of view. I test whether raised debt levels in fact improve the long-term return to the stockholders of Slovenian firms. This should be expected because of the institution-led capital structure conservatism that firms practised in the past. Three methods are employed to test the relationship between increased levels of debt and long-term stock return. All of them offer a similar conclusion that the expected long-term performance of firms which significantly increased their leverage is no better than the long-term performance of firms that did not. The results are useful for other emerging capital markets in Europe where firms and investors faced similar circumstances tied to their socialist past and transition process.     

From inflation to exchange rate targeting: Estimating the stabilization effects for a small open economy

This paper attempts to estimate possible losses in macroeconomic stabilization due to a move from inflation to exchange rate targeting on the example of the Czech Republic. The authors use an estimated New Keynesian policy model, typical inflation and exchange rate targeting rules, and representative central bank loss functions to carry out these estimations. The authors find that for the Czech Republic, moving from the historically applied inflation targeting to optimized exchange rate targeting should not involve any significant losses in macroeconomic stabilization. However, the Czech National Bank could improve its stabilization outcomes while remaining an inflation targeter. This requires the Czech National Bank to respond more strongly to increasing expected future inflation and to be less concerned about an opening output gap when adjusting its policy rate. Moving then from such optimized inflation targeting to optimized exchange rate targeting can result in significant losses in economic stabilization in the magnitude of 0.4–2% points of GDP growth.     

Markets? Yes,but…

Liberal market economics is assailed in a spirited appraisal of its methodology and policy conclusions as seen by a noted critic. Professor Alec Nove, author of The Economics of Feasible Socialism , It shows how he regards market economists as moving from disregarded outcasts in the Keynesian heyday to the centre of the stage of economic thinking and teaching. Prominent offenders respond.     

Capitalist Ideology or Socialist Delusion?

In their book Socialism—The Grand Delusion Brian Crozier and Arthur Seldon presented arguments for the superiority of capitalism over socialism. Alec Nove, Emeritus Professor at the University of Glasgow, takes issue with their reasoning. Professor Nove agrees that the allocative efficiency of markets cannot be gainsaid. But he warns against applying arguments drawn from theories of perfect competition to the real world of uncertainty, mistakes, imperfect information and economic misjudgement. Brian Crozier responds that the evidence for the failure of socialism is irrefutable.     

A model of banknote discounts

Prior to 1863, state-chartered banks in the United States issued notes—dollar-denominated promises to pay specie to the bearer on demand. Although these notes circulated at par locally, they usually were quoted at a discount outside the local area. These discounts varied by both the location of the bank and the location where the discount was being quoted. Further, these discounts were asymmetric across locations, meaning that the discounts quoted in location A on the notes of banks in location B generally differed from the discounts quoted in location B on the notes of banks in location A. Also, discounts generally increased when banks suspended payments on their notes. In this paper we construct a random matching model to qualitatively match these facts about banknote discounts. To attempt to account for locational differences, the model has agents that come from two distinct locations. Each location also has bankers that can issue notes. Banknotes are accepted in exchange because banks are required to produce when a banknote is presented for redemption and their past actions are public information. Overall, the model delivers predictions consistent with the behavior of discounts.