Explaining the effect of financial development on the quality of property rights

Empirical evidence suggests that financial development can catalyze property rights reforms. This paper offers a theory of financial markets to explain these facts defining the relationship. The explanation is based on a simple trade‐off between the costs and the benefits of securing property. Securing the right to property at a cost allows agents to post collateral against loans. However, the benefits of collateral vary according to the existing credit market conditions, which we take into account in the tradeoff between the costs and the benefits of securing property rights along the path of financial development to explain the conditions under which financial development can create incentives for better property rights institutions.     

“My Fifty Shoes Are All Different!” Exploring,Defining, and Characterizing Acquisitive Buying

Why does someone buy the tenth pair of black shoes or the fourteenth white t‐shirt? Typically, extreme buying is associated with negative feelings and consequences: issues of self‐control, guilt, and financial problems are common among compulsive, impulsive, excessive buying, fixated buying, and hoarding. However, through two studies, the authors describe “acquisitive buyers,” who exhibit an extreme yet controlled acquisition process for items in a chosen product category. In his/her mind, these items are minutely differentiated and enrich the inventory, and there is logical justification that every purchase enhances his/her preparedness for anticipated specific product use occasions. Materialism, positive perfectionism and variety‐seeking in a particular product category are some of the characteristics of these buyers. The studies also help distinguish acquisitive buying from other types of extreme buying and mainstream buying.     

The Demand for Money in Canada: A Cointegration Analysis

In this Paper, using the techniques in cointegration theory, we find strong support for the existence of a long-run equilibrium relationship among money demand variables in Canada. Additionally, when the conventional partial adjustment model (PAM) is compared to the two-stage error correction model (ECM), the latter approach is found to perform better, with M2+ showing better results than M2. Our results are also found to be in line with other studies from the U.K. and the U.S.A. These findings provide rationale for further in-depth studies on broader monetary aggregates to formulate sound monetary policy in Canada. [E41]     

Exploiting International Stock Market Correlations with Open-end International Mutual Funds

Investors can exploit the correlations between international stock markets by trading no-load, open-end, international mutual funds. These investors in effect cheat passive investors because they buy the mutual funds at their net asset values, which do not reflect information released during the US trading day. The strategy we examine yields an annual rate of return 800 basis points above the S&P500, over a period of almost eight years.     

Factors affecting households’ seafood purchasing decisions in Auckland,New Zealand: an empirical analysis

This paper uses the binary choice model to identify the factors that are significantly influencing the household purchase decisions of seafood products for home consumption in Auckland, New Zealand. It is found that ‘quality’ and ‘cooking easiness’ are the main product attributes that significantly influence households’ choices of seafood in Auckland. Also, the representative household has shown a strong preference for fresh and other alternative seafood products, including processed, smoked and canned, over frozen products. Retail outlets are found to be more attractive to the household purchasing seafood for home consumption. The New Zealand seafood industry may find this baseline study useful as a guide to developing future research structure on the domestic market.     

INDUSTRIAL LICENSING,BRIBERY AND ALLOCATION EFFICIENCY*

In less developed countries where an industrial licensing policy governs the entry of new firms, and when government officials awarding these licenses are corrupt, an incumbent firm may deter entry by bribing the official to deny the license. The paper demonstrates that such bribery can lead to the exclusion of more efficient firms from the market. This contradicts the established result that bribery does not affect allocation efficiency.     

Monetary equilibrium in an overlapping generations model with productive capital

Summary We study perfect foresight competitive equilibrium in an overlapping generations model with productive capital and a fixed nominal stock of money. We obtain almost-complete characterizations of (a) the existence of a monetary equilibrium from an arbitrary initial capital stock, and (b) the existence of anefficient monetary equilibrium from an arbitrary initial capital stock. When the initial capital stock is no larger than the golden rule stock, the necessary and sufficient condition for both (a) and (b) is the dynamic inefficiency (in the sense of Malinvaud) of the autarkic (or nonmonetary) equilibrium from the same initial stock. However, this condition, though necessary, isnot sufficient for the existence of a monetary equilibrium when the initial stock exceeds the golden rule stock (and still more conditions are needed for anefficient monetary equilibrium to exist). We provide characterizations for these cases, and as corollaries obtain examples in which (a) the nonmonetary equilibrium is inefficient but no monetary equilibrium exists, and (b) monetary equilibria exist but no efficient monetary equilibrium does.We are grateful to a co-editor and an anonymous referee for comments that greatly improved the exposition in the paper.     

The Comilla co-operative approach and the prospects for broad-based green revolution in Bangladesh

Observers have argued that, although Bangladesh has not yet experienced the Green Revolution in any real sense, the Comilla co-operative experiment has been fairly successful not only in the adoption but also in the equitable distribution of the benefits of the new agricultural technology, and that the spread of the Comilla-like diffusion programmes can be expected to yield similar results in other parts of Bangladesh. This paper contends that the Comilla experience does not lend support to such optimism.     

Stores

Summary There is scope and incentive for stores to endogenously arise in an exchange economy when agents possess different levels of bargaining power and coalition formation is costly. In the absence of stores, agents face a trading lottery where the expected outcome for an individual agent depends upon his relative bargaining strength. By setting appropriate, preannounced prices, a store can profitably offer relatively weak bargainers trading opportunities which they prefer to the trading lottery. While relatively weak bargainers are attracted to the store, relatively strong bargainers prefer the trading lottery to the store. Thus, the simultaneous existence of barter and mediated trade is explained.The work reported here was conceived while both authors were visiting the University of Southern California. We thank Martine Quinzii and two anonymous referees for helpful comments.     

Inflation, the credit market, and economic growth

This paper presents a model which predicts a negative, non-linearrelationship between the rate of inflation and rate of outputgrowth, as observed in many empirical studies. The model describesan economy in which credit market imperfections arise due toasymmetric information between lenders and borrowers. Withinthis environment, two types of lending regime are possible—arationing regime, where high and low risk borrowers are separatedby means of credit rationing, and a screening regime, whereseparation takes place through costly information acquisition.An increase in the inflation rate alters lenders' behaviourin such a way (by increasing the incidence of rationing or thelevel of costly screening, or by switching the lending regimefrom screening to rationing) that adverse growth effect of inflationis magnified. The analysis provides a basis for the empiricalfinding that growth effect of inflation may be strongest insome specific range of inflation.