Does Money Matter in Shaping Domestic Business Cycles? An International Investigation

We study the contribution of money to business‐cycle fluctuations in the United States, the United Kingdom, Japan, and the euro area using a small‐scale structural monetary business cycle model. Constrained likelihood‐based estimates of the parameters are provided and time instabilities analyzed. Real balances are statistically important for output and inflation fluctuations. Their contribution changes over time. Models giving money no role provide a distorted representation of the sources of cyclical fluctuations, of the transmission of shocks, and of the events of the last 40 years.     

Correlation Risk and Optimal Portfolio Choice

We develop a new framework for multivariate intertemporal portfolio choice that allows us to derive optimal portfolio implications for economies in which the degree of correlation across industries, countries, or asset classes is stochastic. Optimal portfolios include distinct hedging components against both stochastic volatility and correlation risk. We find that the hedging demand is typically larger than in univariate models, and it includes an economically significant covariance hedging component, which tends to increase with the persistence of variance–covariance shocks, the strength of leverage effects, the dimension of the investment opportunity set, and the presence of portfolio constraints.     

Investment Dynamics with Information Costs

Investment in physical capital at the microlevel is infrequent and large, or lumpy. The most common explanation for this is that firms face nonconvex physical adjustment costs. The model developed in this paper shows that information costs make investment lumpy at the microlevel, even in the absence of nonconvex adjustment costs. When collecting and processing information are costly, the firm optimally chooses to do it sporadically and to be inactive most of the time. This behavior results in infrequent and possibly large capital adjustments. The model fits plant‐level investment rate moments well, and it also matches some higher order moments of aggregate investment rates.     

External Constraints on Monetary Policy and the Financial Accelerator

We develop a small open economy macroeconomic model where financial conditions influence aggregate behavior. Our goal is to explore the connection between the exchange rate regime and financial distress. We first show that a calibrated version of the model captures well the behavior of the Korean economy during its financial crisis period of 1997–98. In particular, the model accounts for the sharp increase in lending rates and the large drop in output, employment, investment, and measured productivity. The financial market frictions play an important role, further, explaining roughly half the decline in overall economic activity. We then perform some counterfactual exercises to illustrate how the fixed exchange rate regime likely exacerbated the crisis by tying the hands of monetary policy.     

The Interaction between Capital Requirements and Monetary Policy

The interaction between capital requirements and monetary policy is assessed by means of simple rules in a dynamic general equilibrium model featuring a banking sector. In “normal” times, when economic dynamics are driven by supply shocks, an active use of capital requirements generates modest benefits in terms of volatility of the target variables compared to the case in which only the central bank carries out stabilization policies. The lack of cooperation between the two policymakers may result in excessive volatility of the monetary policy rate and capital requirements. The benefits of introducing capital requirements become sizeable when financial shocks, which affect the supply of loans, are important drivers of economic dynamics; the availability of capital requirements as a policy tool yields a significant gain in terms of macroeconomic stabilization, regardless of the type of interaction between monetary and capital requirements policies.     

Bank Quality,Judicial Efficiency,and Loan Repayment Delays in Italy

Italian firms delay payment to banks weakened by past loan losses. Exploiting Credit Register data, we fully absorb borrower fundamentals with firm-quarter effects. Identification therefore reflects firm choices to delay payment to some banks, depending on their health. This selective delay occurs more where legal enforcement of collateral recovery is slow. Poor enforcement encourages borrowers not to pay when the value of their bank relationship comes into doubt. Selective delays occur even by firms able to pay all lenders. Credit losses in Italy have thus been worsened by the combination of weak banks and weak legal enforcement.     

The Effect of Information on Willingness to Pay for Canned Tuna Fish with Different Corporate Social Responsibility (CSR) Certification: A Pilot Study

The objective of this study was to assess the role of information in consumers' willingness to pay (WTP) for food products with corporate social responsibility (CSR) certification. The item used for the experimental design was canned tuna fish, a product on the market that is already exhibiting various kinds of certification related to social and environmental attributes. Two different kinds of certifications were examined, namely Friend of the Sea, which involves environmental aspects, and SA8000, related to workers' rights and more general social attributes. We implemented experimental auctions, taking into account three information treatments. The initial findings show that the WTP for both CSR labels is higher than the WTP for tuna fish without any CSR certification. Nevertheless, the information provided on CSR certification did not change consumers' WTP among the certification schemes. Our findings could also serve to fine‐tune marketing strategies to consumer preferences and determine which CSR activities are worth undertaking.     

CORRUPTION AND ELECTIONS: AN EMPIRICAL STUDY FOR A CROSS-SECTION OF COUNTRIES

In this paper, we study whether voters are more likely to "vote out" a corrupt incumbent than to re-elect him. Specifically, we examine whether they retract their support from political candidates who they think are corrupt by looking at changes in an index of corruption perceptions between the current and the last elections. Our results suggest that corruption in public office is effectively punished by voters. Furthermore, our findings support the idea that both the political system and the democratic experience are important determinants of the voters' reaction and control of corruption; while voters in countries with parliamentary systems or with relatively low levels of democracy react negatively to an increase in corruption, no perceptible effect of this kind was found in countries with mature democracies, and the evidence is inconclusive in the case of countries with presidential systems.     

On the Existence of Minimax Martingale Measures

Embedding asset pricing in a utility maximization framework leads naturally to the concept of minimax martingale measures. We consider a market model where the price process is assumed to be an ^d‐semimartingale X and the set of trading strategies consists of all predictable, X‐integrable, ^d‐valued processes H for which the stochastic integral (H.X) is uniformly bounded from below. When the market is free of arbitrage, we show that a sufficient condition for the existence of the minimax measure is that the utility function u : → is concave and nondecreasing. We also show the equivalence between the no free lunch with vanishing risk condition, the existence of a separating measure, and a properly defined notion of viability.