Organizational structure and earnings quality of private and public firms

Review of Accounting Studies - We examine how heterogeneity in organizational structure affects private firm earnings quality in the European Union. Organizational structure refers to whether the...     

A Markov–switching vector equilibrium correction model of the UK labour market

There is a wide literature on the dynamic adjustment of employment and its relationship with the business cycle. In this paper we present a statistical model that offers a congruent representation of part of the UK labour market since the mid 1960s. We use a cointegrated vector autoregressive Markov-switching model in which some parameters change according to the phase of the business cycle. Output, employment, labour supply and real earnings are found to have a common cyclical component. The long run dynamics are characterized by one cointegrating vector relating unemployment to trend-adjusted real wages and output. Despite there having been many changes affecting this sector of the UK economy, the Markov-switching vector-equilibrium-correction model with three regimes (representing recession, normal growth, and high growth) provides a good characterization of the sample data, and performs well relative to alternative linear and non-linear models. The results of an impulse-response analysis highlight the dangers of using VARs when the constancy of the estimated coefficients has not been established, and demonstrate the advantages of generating regime dependent responses. First Version Received: December 2000/Final Version Received: August 2001     

Regulatory and environmental effects on public transit efficiency: a mixed DEA-SFA approach

This paper assesses the impact of regulatory and environmental factors and statistical noise on the efficiency of public transit systems within a DEA-based framework. Using a panel of Italian companies, we implement a DEA-SFA mixed approach based on [H.O. Fried et al. (2002) Journal of Productivity Analysis, 17(1–2), 157–174] to decompose DEA inefficiency measures into three components: exogenous effects, managerial inefficiency and stochastic events. Besides providing evidence on the determinants of input-specific efficiency differentials across companies, the results point out that managerial skills play a minor role, and emphasize the relevance of regulatory policies aimed at replacing cost-plus subsidization with high-powered incentive contracts as well as improving environmental conditions of public transit networks.      

Sectoral Survey‐based Confidence Indicators for Europe*

We analyse a novel dataset of Business and Consumer Surveys, using dynamic factor techniques, to produce composite coincident indices (CCIs) at the sectoral level for the European countries and for Europe. Surveys are timely available, not subject to revision, and fully comparable across countries. Moreover, the substantial discrepancies in activity at the sectoral level justify the interest in sectoral disaggregation. Compared with the confidence indicators produced by the European Commission we show that factor‐based CCIs, using survey answers at a more disaggregate level, produce higher correlation with the reference series for the majority of sectors and countries.     

Time-varying persistence in US inflation

The persistence property of inflation is an important issue not only for economists, but especially for central banks, given that the degree of inflation persistence determines the extent to which central banks can control inflation. Further, not only is it the level of inflation persistence that is important in economic analyses, but also the question of whether the persistence varies over time, for instance, across business cycle phases, is equally pertinent, since assuming constant persistence across states of the economy is sure to lead to misguided policy decisions. Against this backdrop, we extend the literature on long-memory models of inflation persistence for the US economy over the monthly period of 1920:1–2014:5, by developing an autoregressive fractionally integrated moving-average-generalized autoregressive conditional heteroskedastic model with a time-varying memory coefficient which varies across expansions and recessions. In sum, we find that inflation persistence does vary across recessions and expansions, with it being significantly higher in the former than in the latter. As an aside, we also show that persistence of inflation volatility is higher during expansions than in recessions. Understandably, our results have important policy implications.     

Tax shocks with high and low uncertainty

We assess whether the effects of fiscal policy depend on the extent of uncertainty in the economy. Focusing on tax shocks, identified by the narrative series by Romer and Romer (American Economic Review, 2010, 100(3), 763‐801), and various measures of uncertainty, we use a Threshold VAR model to allow for dependence of the effects of the tax shocks on both the level of uncertainty and the sign of the shock. We find that the economy responds more positively to tax cuts during periods of low uncertainty, while, in response to tax increases, the response of main aggregates is more negative in more uncertain times. We argue that controlling for monetary policy in fiscal VARs is important to avoid omitted variable bias. We interpret our empirical evidence in light of existing theoretical contributions.     

The reliability of real-time estimates of the euro area output gap

This paper provides evidence on the reliability of euro area real-time output gap estimates. A genuine real-time data set for the euro area is used, including vintages of several sets of euro area output gap estimates available from 1999 to 2010. It turns out that real-time estimates of the output gap tend to be characterised by a high degree of uncertainty, much higher than that resulting from model and estimation uncertainty only. In particular, the evidence indicates that both the magnitude and the sign of the real-time estimates of the euro area output gap are very uncertain. The uncertainty is mostly due to parameter instability and model uncertainty, while data revisions seem to play a minor role. Some euro area real-time measures, based on multivariate components models and capacity utilisation, are relatively less uncertain, but do not appear to be fully reliable along some dimensions. To benchmark our results, we repeat the analysis for the US over the same sample. It turns out that US real-time estimates tend to be revised to a lesser extent than euro area estimates. However, euro area real-time output gap estimates tend to display a higher correlation with the final estimates and the sign of the level of US real-time estimates tends to be revised more often compared to the corresponding euro area estimates. In addition, the data revision component of the revision error is larger for US estimates than for the euro area. Overall, the unreliability in real-time of the US output gap measures detected in earlier studies is confirmed in the more recent period.     

The bargaining set of a large game

We study the equivalence between the Mas-Colell bargaining set and the core in the general context of TU games with a measurable space of players. In the first part of the paper, we study the problem without imposing any restriction on the class of games we consider. In the second part, we first introduce a new class of exact games, which we call thin games. For these games, we show not only that the Mas-Colell bargaining set is equal to the core, but also that it is the unique stable set in the sense of von Neumann and Morgenstern. We then study the relation between thin games, exact non-atomic market games and non-atomic convex games. Finally, by further developing “thinness” related ideas, we prove new equivalence results for a class of non-exact market games as well as a class of non-exact, non-market games.     

Interactive control in target cost management

This paper discusses target cost management (TCM) from the viewpoint of simultaneous engineering. Firstly, it shows empirically how simultaneous engineering is implemented in Japanese companies. Secondly, it formulates and then tests hypotheses on the influential power of managers involved in the process of target costing. Thirdly, it describes processes of interactive control directed at information and value sharing among managers that help explain why simultaneous engineering is working effectively in Japanese companies. It also formulates and tests hypotheses on information and value sharing among managers. Fourthly, it concludes that interactive control in TCM helps generate unique ideas for product development and cost reduction, and that Target Cost Management is a key subsystem of strategic cost management.