The World Is Not Enough! Small Open Economies and Regional Dependence

In this paper, we explicitly introduce regional factors into a global dynamic factor model. We combine new open economy factor models (emphasizing global shocks) with the recent findings of regional importance in the business cycle synchronization literature. The analysis is applied to a large panel of domestic data for four small open economies. We find that global and regional shocks explain roughly 30 and 20 percent, respectively, of the business cycle variation in all countries. While global shocks have most impact on trade variables, regional shocks explain a relatively large share of the variation in cost variables.     

Symmetric and asymmetric committees

This paper studies the assignment of decision makers to two committees that make decisions by a simple majority rule. There is an even number of decision makers at each of the various skill levels and each committee has an odd number of members. Surprisingly, even with the symmetric assumptions in the spirit of Condorcet, a symmetric composition of committees is not always optimal. In other words, decision makers with different skill levels should not generally be evenly divided among the committees. However, in the special case of only two skill levels, it is optimal to compose the committees evenly.     

Subjective food-risk judgements in tourists

Sources of risk in contemporary tourism vary over a long array of phenomena ranging from the risk of terror attacks to risks related to food and consumption. Currently, alleged food-risk sources such as Creutzfeldt–Jacobs Disease (CJD; commonly known as “Mad Cow Disease”), Salmonella, Scrapie disease and even genetically modified food are salient in mass media.In the present study, we addressed the pervasiveness of tourists’ judgements of such food-related risks. As part of a larger study, some 1880 individual tourists (from 48 different nations) answered a questionnaire pertaining to food-risk issues. Based on the logics of the availability heuristic, we expected that food risks would be judged to be lower in one's own home country than abroad. We also expected that people would rate various sources for food risk differently when rating food risks at home and abroad.The results indicate that risks linked to food are indeed perceived to be higher abroad than at home, regardless of where the respondents’ homes are, although attributions of risk to the various risk sources seem to vary between at home and abroad. The results also show a significant, but moderate correlation between travel experience and food-risk judgements abroad and at home. The results also indicate cultural differences in risk judgements concerning food.     

Factors Influencing Successful Brand Extensions

Organisations frequently follow brand extension strategies. This paper investigates the impact of category similarity, brand reputation, perceived risk and consumer innovativeness on the success of brand extensions in FMCG, durable goods and services sectors. A set of hypotheses were developed and tested in a study amongst 701 consumers. The findings show that extensions into categories more similar to the original brand tend to be more readily accepted. Likewise, the reputation of the original brand is an important factor influencing the success of the extension. These findings are consistent across FMCG, durable goods and services brands. However, perceived risk about the extension category was only found to enhance acceptability of extensions for durable goods and services brands. Innovative consumers are more positively disposed towards service brand extensions than FMCG and durable goods brand extensions.     

Adjustment Costs,Inventories and Output

This paper analyzes the optimal adjustment strategy of an inventory‐holding firm facing price‐ and quantity‐adjustment costs in an inflationary environment. The model nests both the original menu‐cost model that allows production to be costlessly adjusted, and the later model that includes price‐ and quantity‐adjustment costs, but rules out inventory holdings. It is shown that the firm's optimal adjustment strategy may involve stockouts. At low inflation rates, output is inversely related to the inflation rate, and the length of time demand is satisfied increases with the demand elasticity but decreases with the storage cost and the real interest rate.     

Forecasting inflation with an uncertain output gap

The output gap is a crucial concept in the monetary policy framework, indicating demand pressure that generates inflation. However, its definition and estimation raise a number of theoretical and empirical questions. This paper evaluates a series of univariate and multivariate methods for extracting the output gap in Norway, and compares their value added in predicting inflation. We find that models including the output gap have better predictive power than models based on alternative indicators, and they forecast significantly better than simple benchmark models. Furthermore multivariate measures of the output gap perform better than the univariate gaps. Comments from two anonymous referees, Q. Farooq Akram, Tommy Sveen, Ken West, Fredrik Wulfsberg and seminar participants in Norges Bank are gratefully acknowledged. All mistakes remain our own. The views expressed are those of the authors and do not necessarily represent those of Norges Bank.     

A graphic representation of the Nash and Lindahl equilibria in an economy with a public good

In an economy with a public good the noncooperative Nash equilibrium and the cooperative Lindahl equilibrium are represented graphically. The Nash equilibrium is shown to be non-optimal, while the Lindahl equilibrium is shown to be optimal. Simple stability analyses are undertaken. Finally, the two equilibria are compared. It appears that more public good will be allocated in the Lindahl than in the Nash equilibrium, and that in a sufficiently large economy a transition from a Nash to a Lindahl equilibrium will be advantageous for everyone.