Credit risk and sustainable debt: a model and estimations of why the Euro is stable in the long-run

Sustainable debt has become the key issue in rating of private as well as sovereign debtors. The problem of how to estimate sustainable debt has also been at the center of the debate over the Asian 1997–1998 financial crisis. If the external value of the currency depends on the external debt of a country, it is necessary to estimate the creditworthiness of the country. This paper studies credit risk and sustainable debt in the context of a dynamic model. For a dynamic growth model with an additional equation for the evolution of debt, we demonstrate of how to compute sustainable debt and creditworthiness. The model is estimated by employing time series data for the core countries of the Euro-area. The computations show that the Euro-area has large external assets. Using time series methods, the sustainability of external debt (assets) is estimated for those core countries of the Euro-area. Those estimations show that the Euro will be a stable currency in the long-run.     

Monetary and Fiscal Policy Interactions in the Euro Area

The problem of monetary and fiscal policy interactions is an important issue for the euro area, since the individual member states of the EMU are responsible for their fiscal policies but monetary policy is pursued by a single monetary authority, the ECB. This paper is concerned with empirical evidence on monetary and fiscal policy interactions in the euro area. We first explore fiscal regimes with a VAR model and find empirical evidence that a non-Ricardian fiscal policy has been pursued in both France and Germany. As an example, we then study how one member state of the EMU, namely, Italy, is responding to the common monetary policy with its fiscal policy and find that Italian fiscal policy seemed to be counteractive to the common monetary policy between 1979 and 1998. In order to study monetary and fiscal policy interactions in a more general way, we explore time-varying interactions by estimating a State-Space model with Markov-switching for some Euro-area countries. There appear to be some regime changes in monetary and fiscal policy interactions in France and Germany, but the interactions between the two policies are not strong. Moreover, the two policies have not been accommodative but counteractive to each other. Finally we explore forward-looking behavior in policy interactions and find that expectations do not seem to have played an important role in the policy designs.     

Building scenarios with Fuzzy Cognitive Maps: An exploratory study of solar energy

In scenario planning, causal mapping has long been used as a means to elicit the worldviews of multiple experts, facilitate discussion, and challenge and improve mental models. Large and complex causal maps, however, are difficult to analyze. This paper proposes a novel method for scenario building, based on Fuzzy Cognitive Maps, that combines intuitive, cognitive mapping techniques with formal, quantitative analysis. The proposed method helps scenario planners to integrate the qualitative and partial knowledge of multiple individuals and overcome information processing limitations. The feasibility of the proposed approach is investigated with two scenario studies on solar photovoltaic panels.     

Long waves in prices: new evidence from wavelet analysis

In this paper we apply wavelet analysis to study the dynamics of long-term movements in wholesale prices for the USA, the UK and France over the period 1791–2012. The application of wavelet analysis to long-term historical price series allows us to detect long waves in prices whose periodization is remarkably similar to those provided in the literature for the pre-World War II period. Moreover, we find evidence on the existence of long waves in prices also after World War II, a period in which long waves are generally difficult to detect because of the positive trend displayed by prices. The comparison between the long wave components extracted through wavelets and the Christiano–Fitzgerald band-pass filter suggests that wavelets provide a reliable and straightforward technique for analyzing long waves dynamics in time series exhibiting quite complex patterns such as historical data.     

Belohnen lohnt sich

Meritorisches Community Management aktiviert Online-Gemeinschaften. Virtual Communities geh?ren heute zur Beziehungswelt vieler Kunden. Sie zeichnen sich durch Authentizit?t aus und schaffen Mehrwerte, die zur Differenzierung von Unternehmen beitragen k?nnen. Wie aber lassen sich Communities aufbauen? Das Beispiel familymanager liefert hier interessante Einblicke. Mit einem meritorischen Community Management gelang es dem Familienportal, in kurzer Zeit eine gro?e und lebendige Community zu etablieren, die Werte für Kunden und Unternehmen zugleich schafft.     

Einkommens- und anpassungsprobleme der landwirtschaft in der EuropÄischen wirtschaftsgemeinschaft

Summary Income and Adaptation Problems in Common-Market Agriculture. — Agricultural income within EEC can only be satisfactory if farms are large and if, at the same time, total agricultural production is reduced. Agricultural structure may in future take the following forms: (1) Family-run farms that have some additional business, (2) side-line farms alongside of which there are relatively few largescale processing-industry enterprises, (3) large-scale agricultural and stock-breeding farms resulting from enlargement, co-operation or fusion. The price level should allow farms that are capable of survival and enlargement to develop on their own means. At the same time, it should induce small farmers to give up agriculture. If the price level cannot fulfil these two postulates at the same time, the farms capable of surviving should be subsidized with a view to improving their structure. In EEC, Germany surrenders market shares to France because, in France, there are fewer possibilities of earning non-agricultural incomes. Therefore, agricultural production in France is still kept up, or even increased, while it is being reduced in the Federal Republic. This kind of adaptation of production, which is not dictated by the existing natural location advantages, must be considered faulty. It will have to be corrected by national measures until the respective production and income conditions have reached a certain measure of conformity.

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Résumé Problèmes de revenu et d’adaptation dans l’agriculture de la CEE. — Dans la CEE, le revenu agricole ne peut être satisfaisant que si les fermes sont assez grandes et que la production agricole totale est en même temps réduite. A l’avenir, la structure agricole pourra prendre les formes suivantes: 1. Fermes exploitées par des familles, qui possèdent en même temps des entreprises additionnelles, 2. fermes exploitées en occupation secondaire, à c?té desquelles il y a relativement peu de grandes entreprises de l’industrie de transformation, 3. grandes fermes à agriculture et élevage, qui résultent d’agrandissements, de coopérations ou de fusions. Le niveau des prix devrait permettre aux fermes vitales et capables d’être agrandies de se développer avec leurs propres moyens. Il devrait en même temps amener les petits paysans à abandonner l’agriculture. Si le niveau des prix n’arrive pas à remplir ces deux conditions en même temps, les fermes vitales devraient recevoir des subventions, qui leur permettraient de corriger leur structure. Dans la CEE, l’Allemagne abandonne une part du marché à la France, parce qu’en France il y a moins de possibilités de gagner un revenu accessoire non-agricole. C’est pourquoi la production agricole fran?aise est maintenue, et même augmentée, pendant que celle de la République Fédérale est réduite. Une telle adaptation de la production, qui n’est pas dictée par les avantages naturels de location, doit être regardée comme fautive. Elle devra être corrigée par des mesures nationales, jusqu’à ce que les conditions de production et de revenu auront atteint une certaine mesure de conformité.

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Resumen Problemas de ingreso y adaptación de la agricultura en la Comunidad Económica Europea. — El sector agricola en el Mercado Comiin sólo puede conseguir un nivel de ingresos adecuado a través de empresas mas grandes y eficientes y reduciendo al mismo tiempo la producción total. La base de la estructura agraria en el futuro podria ser: (i) Empresas familiares, que podrian ser suplementadas con empresas secundarias. (2) Empresas secundarias, aparte de las cuales existe un numéro relativamente reducido de empresas grandes dedicadas a la elaboraci?n de productos. (3) Ampliación, cooperación o concentración de empresas grandes dedicadas a la producción agrícola y ganadera. El nivel de precios tiene que ser tal que las empresas capaces de subsistir puedan desarrollarse por medios propios. Al mismo tiempo, este nivel de precios tiene que incentivar a las empresas peque?as a abandonar la producción. Si ambas condiciones no pueden realizarse simultáneamente, habría que conceder a las empresas capaces de subsistir subvenciones que ayuden a mejorar la estructura. En el Mercado Común se da el caso de que la agricultura alemana pierde posiciones en el mercado francés, lo que es debido al hecho de que en Francia los agricultures apenas tienen la posibilidad de conseguir ingresos fuera de la agricultura por lo que se mantiene el nivel de producción, e incluso se incrementa, mientras que en Alemania sucede lo contrario. Mientras que los ajustes de producción no se Orienten en las ventajas naturales de locación, el desarrollo marcha en una dirección equivocada. En esta situación y hasta que las condiciones de producción e ingresos se hayan igualado más o menos, cabe adoptar medidas nationales de compensación.

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Riassunto Problemi di reddito e di adattamento dell’agricoltura nella Comunità Economica Europea. — Un reddito sufficiente dell’agricoltura può essere raggiunto nella CEE soltanto per mezzo di aziende più grandi ed efficienti e riducendo nello stesso tempo la produzione totale. Basi della futura struttura agraria possono essere: (1) Aziende ruralifamiliari che siano integrate con imprese collaterali a scopo di lucro. (2) Aziende collaterali a scopo di lucro accanto alle quali ci siano relativamente poche grandi imprese della produzione di trasformazione organizzate in maniera industriale e (3) grandi aziende agricole con produzione vegetale ed animale sorte mediante aumento, collaborazione o fusioni. Il livello dei prezzi deve rendere possibile uno sviluppo con forze proprie alle aziende capaci di esistere e di aumentare. Si devono stimolare, però, contemporaneamente le piccole aziende a ritirarsi dall’agricoltura. Per quanto il livello dei prezzi non possa appagare ambedue queste condizioni contemporaneamente,alle aziende capaci di esistere devono essere pagate sovvenzioni con effetto di miglioramento della struttura. Nella CEE l’agricoltura tedesca lascia alla Francia quote di partecipazione al mercato perchè lì le possibilità di reddito fuori dell’agricoltura sono sfavorevoli. La produzione è perciò 1ì ancora mantenuta o ingrandita mentre nella Repubblica Federale essa è già ridotta. Un tale adattamento della produzione non orientato a naturali vantaggi di ubicazione è da considerarsi uno sviluppo sbagliato a cui si potrebbe rimediare con misure di compensazione nazionali fino a che i rapporti di produzione e reddito abbiano raggiunto una certa armonia.

     

Asset pricing with loss aversion

The use of standard preferences for asset pricing has not been very successful in matching asset price characteristics, such as the risk-free interest rate, equity premium and the Sharpe ratio, to time series data. Behavioral finance has recently proposed more realistic preferences such as those with loss aversion. Research is starting to explore the implications of behaviorally founded preferences for asset price characteristics. Encouraged by some studies of Benartzi and Thaler [1995. Myopic loss aversion and the equity premium puzzle. The Quarterly Journal of Economics 110 (1), 73–92] and Barberis et al. [2001. Prospect theory and asset prices. Quarterly Journal of Economics CXVI (1), 1–53] we study asset pricing with loss aversion in a production economy. Here, we employ a stochastic growth model and use a stochastic version of a dynamic programming method with an adaptive grid scheme to compute the above mentioned asset price characteristics of a model with loss aversion in preferences. As our results show using loss aversion we get considerably better results than one usually obtains from pure consumption-based asset pricing models including the habit formation variant.     

Are Men Always Picked Over Women? The Effects of Employment Equity Directives on Selection Decisions

This study replicates and extends previous work by Oppenheimer and Wiesner [1990, Sex discrimination: Who is hired and do employment equity statements make a difference? Proceedings of the 11th Annual Conference of the Administrative Sciences Association of Canada, Personnel and Human Resources Division], and examined the effects of minority qualifications on hiring decisions, the effects of employment equity directives when minority candidates are less qualified and the effects of different types and strengths of employment equity directives on hiring decisions. The results indicate that when employment equity is in place, people are increasingly more likely to hire underrepresented group members, to the extent that they are more qualified. Men appear to be treated in a positively biased manner, and are more likely to be hired when they are less qualified. Women are less likely to be hired when they are under-qualified, and in the absence of employment equity directives or when there is a suggestion that women are underrepresented. Moreover, when␣employment equity directives are strengthened, there appears to be a subtle backlash for women but not for men. Eddy S. Ng is an assistant professor at Trent University. He was on faculty at California State Polytechnic University, Pomona in 2006–2007. Willi H. Wiesner is an associate professor at the DeGroote School of Business, McMaster University.     

Information,innovation and diffusion of technology

The paper presents an infinite horizon model of innovation and diffusion incorporating features from recent advances in evolutionary economics. A stochastic variant is explored which posits that technological knowledge is costly to obtain, requiring resource expenditure. There are heterogeneous agents: optimizing as well as non-optimizing agents. The optimizing agents incur an innovation cost. The return from inventive investment is random. The non-optimizing agents, operating existing technologies, behave solely adaptively. Cross-effects between those two types of agents give rise to the multiple equilibria, path-dependence, diversity of diffusion processes and a coexistence of different technologies. Some policy conclusions are drawn in the last section.