Asset Quality Misrepresentation by Financial Intermediaries: Evidence from the RMBS Market

We document that contractual disclosures by intermediaries during the sale of mortgages contained false information about the borrower's housing equity in 7–14% of loans. The rate of misrepresented loan default was 70% higher than for similar loans. These misrepresentations likely occurred late in the intermediation and exist among securities sold by all reputable intermediaries. Investors—including large institutions—holding securities with misrepresented collateral suffered severe losses due to loan defaults, price declines, and ratings downgrades. Pools with misrepresentations were not issued at a discount. Misrepresentation on another easy‐to‐quantify dimension shows that these effects are a conservative lower bound.     

Inter-local relations and trans-scaling through finance in Poland

Inter-local cooperation is difficult to measure. In Poland, however, the data-set concerning financial transfers between local government budgets (one of the most popular quantitative measures of cooperation) has never been described in scientific literature. This paper aims at contributing to fill this gap. On the basis of the budget expenditures of all Polish local governments, we applied two research methods: OLS regression and Heckman two-stage regression. The results show that the decision whether to get into cooperation, and the decision on the extent of involvement are driven by different factors.     

Hybrid approach with an expert system and a genetic algorithm to production management in the supply net

A new approach to solving production management problems in the supply net is proposed. An expert system designed to help companies in medium-term and short-term production planning is discussed. The proposed expert system considers alternative process plans for a job and outsourcing, when a bottleneck exists in the machine. The proposed hybrid system uses the output of the expert system as the input of the genetic algorithm. The output of the genetic algorithm is a near optimal schedule. The proposed method does not require any unrealistic assumptions. It can be used to solve highly complicated and non-linear functions of a realistic problem. Copyright © 2007 John Wiley & Sons, Ltd.     

Dynamic CEO Compensation

We study optimal compensation in a dynamic framework where the CEO consumes in multiple periods, can undo the contract by privately saving, and can temporarily inflate earnings. We obtain a simple closed‐form contract that yields clear predictions for how the level and performance sensitivity of pay vary over time and across firms. The contract can be implemented by escrowing the CEO's pay into a “Dynamic Incentive Account” that comprises cash and the firm's equity. The account features state‐dependent rebalancing to ensure its equity proportion is always sufficient to induce effort, and time‐dependent vesting to deter short‐termism.     

Network effects and preference heterogeneity in the case of mobile telecommunications markets

This paper demonstrates how revealed- and stated-preference analyses can be used for modeling network effects in the field of mobile telecommunications. The aim of this study was to verify if network effects may still play a role in the Polish mobile telecommunications market, measure their strength, identify their sources and variability across consumers by accounting for consumers' observable and unobservable preference heterogeneity, evaluate their monetary value to consumers, and finally, to verify if the marginal utility associated with network effects is constant. The analysis of consumers' revealed choices (currently used mobile telephone operator) allowed the identification of major differences between customer bases of incumbent and new entrant operators, and insight into the business strategies adopted in the presence of asymmetric regulation of mobile termination rates. The second part of the study—the analysis of the consumers' stated choices (made in carefully prepared and designed hypothetical choice situations, known as the choice experiments) made it possible to directly model consumers' utility functions and, in this way, investigate the nature of network effects in mobile telecommunications markets. From the results, the presence of strong network effects, which are related to the ratio of consumers' social network group using the same operator, and to the magnitude of on-net price discounts, is confirmed. These network effects can be disaggregated to pecuniary and non-pecuniary effects. Through the utilization of the random parameters multinomial logit model, consumers' observable and unobservable preference heterogeneity can be accounted for, which proved a scientifically revealing and potentially policy-relevant approach. The results might be of a particular interest to other researchers aiming at modeling consumers' preferences as well as to mobile telephone operators and regulatory authorities—it is shown that capacity for vigorous price competition between mobile operators is limited by non-price factors, which affect subscriber's choices, especially in the presence of asymmetric mobile termination rates.     

Marketing Dynamics and Management Excellence: The Sources of Successful Internationalization of a Food Processing Company from a Transition Economy (Case: MASPEX—Poland)

The article presents a case story of the fall and rise of the food industry in Poland's transition economy, illustrated with the example of one of its most successful companies. The author distinguishes 3 stages of the economic transition of Poland: Stage 1, in which the Polish food processing industry collapsed, faced with fierce foreign competition after the implementation of a strategy of liberalization and privatization; Stage 2 (since the late 1990s), when young, dynamic, and relatively well-educated Polish entrepreneurs and managers not only started to regain the local market but also began international expansion, intensifying exports, primarily to EU markets; Stage 3, during which the internationalization took the form of foreign direct investment outward into the former neighboring socialist/communist countries.

The MASPEX Group provides an excellent example of successful revival and expansion achieved thanks to the company's dynamic marketing strategy, executed by a young, dynamic, and highly professional management team.     

Capital Inflows and the U.S. Housing Boom

We estimate an open‐economy vector autoregressive (VAR) model to study the effect of capital‐inflow shocks on the U.S. housing market. We look at different external shocks that generate capital inflows to the U.S., in particular “saving‐glut” shocks and foreign monetary‐policy expansions. The shocks are identified with theoretically robust sign restrictions derived from an open‐economy dynamic stochastic general equilibrium (DSGE) model. Our findings suggest that capital inflows that result from “saving‐glut” shocks have a positive and persistent effect on real house prices and real residential investment.     

Bayesian Evaluation of DSGE Models with Financial Frictions

We evaluate two most popular approaches to implementing financial frictions into DSGE models: the Bernanke, Gertler, and Gilchrist ( 1999 ) setup, where frictions affect the price of loans, and the Kiyotaki and Moore ( 1997 ) model, where they concern the quantity of loans. We take both models to the data and check how well they fit it on several margins. Overall, comparing the models favors the Bernanke, Gertler, and Gilchrist framework. However, even this model does not make a clear improvement over the New Keynesian benchmark in terms of marginal likelihood and similarity of impulse responses to those obtained from a VAR.