Do price limits hurt the market?

Under an artificial stock market composed of bounded-rational and heterogeneous traders, this paper examines whether or not price limits generate the negative effects on the market. Through testing the volatility spillover hypothesis, the delayed price discovery hypothesis, and the trading interference hypothesis, we find that no evidence of volatility spillover is observed. However, the phenomena of delayed price discovery and trading interference indeed exist, and their significance depends on the level of the price limits.     

Time-frequency co-movements between bank credit supply and economic growth in an emerging market: Does the bank ownership structure matter?

This study aims to shed some light on the causal link between bank credit supply and economic growth in Turkey for the banks with the different ownership structures between 1993Q4 and 2017Q3. Wavelet coherence test is used to obtain this objective and to answer the following questions: (i) does bank credit supply lead to economic growth in Turkey and vice versa, and (ii) does the bank ownership matters in this linkage? The findings from wavelet coherence reveal that between 1993 and 2003 in the short and medium term, economic growth leads credit supply but in the long run there is feedback causality between credit supply and economic growth for only public and private banks. However, in the long-run between 1993 and 2003 economic growth leads credit supply in the foreign banks in Turkey. Between 2004 and 2017, there is feedback causality between credit supply and economic growth. Moreover, our findings suggest that bank ownership affects the strength of the linkage between credit supply and economic growth in Turkey especially in the short and medium terms. More specially, within the three types of bank ownership, the findings imply that the strongest correlation among the variables is for the private banks while the weakest one is for foreign banks.     

When should a firm set its selling price to cope with gray market trade?

This study investigates the problem of timing for firms that must cope with gray market in setting its prices by applying an observable delay game. We consider a case in which a multinational firm sells a product in two countries, and a parallel importer buys the product in one country and resells it in the other country. We show that the multinational firm never sets its price at the same time when the parallel importer sets in equilibrium, and that the multinational firm's optimal timing depends on the degree of variation in consumer preferences for product quality.     

Do policymakers need to cool the UK housing market?

The combination of government schemes and a recovery in the wider economy underpinned a robust pickup in housing transactions and house prices through 2013. But there is no evidence of a housing bubble across most of the country. Across the majority of regions prices are still below previous peaks in nominal terms and much lower still in real terms. Meanwhile measures of affordability and indebtedness are in a much better state than they were prior to the financial crisis. The exception is London, where supply shortages and strong demand have pushed both the price‐to‐income ratio and average income multiple back to previous highs. An improving macroeconomic backdrop and ongoing support from Help to Buy should ensure that demand continues to strengthen, supporting further growth in transactions. There has been a strong supply response over the past nine months and this should continue, which will help to keep a lid on price growth. Divergent macroeconomic prospects across the regions will lead to a wide variation in house price growth, with London expected to lead the way. We do not see a case for changing the terms of Help to Buy, particularly given that the most likely source of a bubble is London, where the impact of Help to Buy is likely to be small. In our view, the average income multiple is crucial and macro prudential tools should be used if it continues to rise above previous peaks in any regions. The most likely cause of a bubble at the national level would be an inadequate supply response. Alongside its policies to support demand, the government should implement a series of measures aimed at increasing supply, including planning reform, and it could also consider using its low borrowing costs to fund public sector house building.     

Does transparency of central banks communication affect credit market? Empirical evidence for advanced and emerging markets

This study examines the effect of the transparency of central banks communication on credit market. In particular, this study investigates how central banks’ effort to provide more detailed information about their objectives regarding the price stability (monetary policy transparency) and financial stability (financial stability transparency) policies are able to mitigate information asymmetry on credit market, through the net interest margin charged by the banks to engage in financial intermediation (credit spread). The findings denote central bank transparency is able to reduce the credit spread. Additionally, the evidence suggests the effect of central bank transparency on the credit spread is greater in emerging markets, where there is less information available on credit market. In brief, transparency in central banks communication is an important tool to mitigate the information asymmetry in the credit market.     

Predictable returns and asset allocation: Should a skeptical investor time the market?

We investigate optimal portfolio choice for an investor who is skeptical about the degree to which excess returns are predictable. Skepticism is modeled as an informative prior over the R²$R^2$ of the predictive regression. We find that the evidence is sufficient to convince even an investor with a highly skeptical prior to vary his portfolio on the basis of the dividend-price ratio and the yield spread. The resulting weights are less volatile and deliver superior out-of-sample performance as compared to the weights implied by an entirely model-based or data-based view.     

Are rules and boundaries sufficient to limit harmful central bank discretion? Lessons from Europe

Marvin Goodfriend׳s (2014) insightful, informative and provocative work explains concisely and convincingly why the Fed needs rules and boundaries. This paper reviews the broader institutional design problem regarding the effectiveness of the central bank in practice and confirms the need for rules and boundaries. The framework proposed for improving the Fed incorporates key elements that have already been adopted in the European Union. The case of ELA provision by the ECB and the Central Bank of Cyprus to Marfin-Laiki Bank during the crisis, however, suggests that the existence of rules and boundaries may not be enough to limit harmful discretion. During a crisis, novel interpretations of the legal authority of the central bank may be introduced to create a grey area that might be exploited to justify harmful discretionary decisions even in the presence of rules and boundaries. This raises the question how to ensure that rules and boundaries are respected in practice.     

Do UK charities have a lot to learn?

This article discusses the key findings of some recent research carried out into the application of market segmentation in the UK charity sector. 410 of the top performing charities (as ranked by income from voluntary donations) were surveyed to profile their major donor groups. Respondents were also asked to indicate how this data was used for fund-raising purposes both in terms of new donor recruitment and existing donor development. The findings show that with the exception of a very few large organizations, the UK charity sector still has much room for improving the sophistication of its fund-raising techniques.     

Fixed margin price undercutting: An adequate entry strategy in a market with switching costs?

Purpose We try to determine the best strategy for entering a market with switching costs that is initially served by a monopolistic incumbent. Findings We show that an offer to undercut the incumbent by a fixed margin (FM) dominates traditional entry with a binding price offer (BO) as this conditional pricing strategy restrains the ability of the incumbent to block entry by limit pricing. Combining FM with a price ceiling (PC) insures customers against future price increases and turns out to be optimal for markets with elastic demand as long as cost uncertainty is not an issue. Conclusion Using a more elaborate entry strategy may facilitate entry in markets with switching costs. However, as these strategies may decrease welfare, they should be closely monitored by antitrust authorities.     

Do house price developments spillover across euro area countries? Evidence from a global VAR

This paper empirically assesses the prospects for house price spillovers in the euro area, where co-movement in house prices across countries may be particularly relevant given a general trend with monetary union toward increasing linkages in trade, financial markets, and general economic conditions. A global VAR is estimated for three housing demand variables (real house prices, real per capita income, and the cost of borrowing, captured by a real long-term interest rate) on the basis of quarterly data for 7 euro area countries (Belgium, Germany, Ireland, Spain, France, Italy and the Netherlands), which together comprise nearly 90% of euro area GDP, over the period 1971–2009. The results suggest limited house price spillovers in the euro area, albeit with evidence of some overshooting in the first year after the shock, followed by a long run aggregate euro area impact of country-specific changes in real house prices related in part to the country’s economic weight. This contrasts with the impacts of a shock to domestic long-term interest rates, causing a permanent shift in house prices after 2–3 years. Underlying this aggregate development are rather heterogeneous house price spillovers at the country level, with a strong importance for weights – either economic or geographic – in governing their general magnitude. More generally, the impact of financing costs on house prices appears to have grown though time.     

Listen to the market: Do its complexity and signals make companies more innovative?

This paper analyzes four modes of innovation that differ in their scope of newness (innovation generation and adoption) and in their degree of change (radical and incremental). Building a theoretical model based on the market orientation (MO) and contingency theory literature and using a sample of innovative firms, we find that MO positively influences the numbers of incremental generation and adoption of innovations. We also find that environmental complexity moderates the relationship between MO and radical and incremental innovation generation and the number of incremental innovation adoption. That is, we have found that highly complex environments enhance the introduction of radical and incremental internally generated innovations and harm the adoption of incremental innovation for market-oriented firms. These findings add to the innovation and MO literatures. Our results also have important implications for both the commercial activities and R&D policies of firms.     

Can social media lead to labor market discrimination? Evidence from a field experiment

In this paper, we investigate the role of social media as a source of information for recruiters to discriminate applicants. We set up a field experiment over a 12‐month period, involving more than 800 applications from two fictitious applicants which differed in their perceived origins, which is an information available only from their Facebook profiles. During the experiment, an unexpected change in the Facebook layout reduced the salience of the information available on social media profiles. Before this change, a significant 41.7% gap between the two applicants callback rates highlights that personal online profiles are used by recruiters as a source of information to discriminate against applicants of foreign origin. After the layout change that mitigates our signal, the difference in callback rates fades away. This result suggests that the screening conducted by the employers does not go beyond the main pages of profiles. It also illustrates that design choices made by online platforms may have important consequences on the extent of discrimination.     

What׳s news in News? A cautionary note on using a variance decomposition to assess the quantitative importance of news shocks

This paper points out a conceptual difficulty in using a variance decomposition to assess the quantitative importance of news shocks. A variance decomposition will attribute to news shocks movements in endogenous variables driven both by news about future exogenous fundamentals that has yet to materialize (what I call “pure news”) as well as movements driven by realized changes in fundamentals that were anticipated in the past (what I call “realized news”). I present a stylized model in which news about yet unrealized changes in fundamentals is irrelevant for output dynamics, but in which a variance decomposition may nevertheless attribute a large share of the variance of output to news shocks. I then revisit the quantitative importance of news in the model of Schmitt-Grohe and Uribe (2012). In their model news shocks account for 40 percent of the variance of output growth, but this is mostly driven by realized news.     

Do TFP and the relative price of investment share a common I(1) component?

Results from cointegration tests clearly suggest that TFP and the relative price of investment (RPI) are not cointegrated. Evidence on the alternative possibility that they may nonetheless contain a common I(1) component generating long-horizon co-variation between them crucially depends on the fact that (i) structural breaks are, or are not allowed for, and (ii) the precise nature and timing of such breaks. Not allowing for breaks, evidence points towards the presence of a common component inducing positive long-horizon covariation, which is compatible with the notion that the technology transforming consumption goods into investment goods is non-linear, and the RPI is also impacted upon by neutral shocks. Allowing for breaks, evidence suggests that long-horizon covariation is either nil or negative.Assuming, for illustrative purposes, that the two series contain a common component inducing negative long-horizon covariation, evidence based on structural VARs shows that this common shock (i) plays an important role in macroeconomic fluctuations, explaining sizeable fractions of the forecast error variance of main macro series, and (ii) generates ‘disinflationary booms’, characterized by transitory increases in hours, and decreases in inflation.     

Do NPM-Type Reforms Lead to a Cultural Revolution Within Public Sector Organizations?

Abstract

Agencification and granting public sector organizations managerial autonomy in particular is believed to change organizational cultures, away from traditional compliance- and detail-oriented bureaucratic cultures and towards organizational cultures which are more oriented towards external customers. There is however very little empirical information on the relationship between managerial autonomy and organizational culture. Using a unique data set on public agencies in Flanders, we not only test how managerial autonomy affects the strength of a customer-oriented culture within public sectors but also examine whether this culture becomes dominant over traditional public administration culture. Analysis shows that managerial autonomy positively affects a customer-oriented culture; however, it does not make it a dominant culture.     

Why is it a man’s world,after all? Women on bank boards in India

Employing information on all publicly listed Indian banks covering the period 2003–2012, the study explores whether gender diversity impacts bank behaviour. The evidence suggests that the value addition to banks from the induction of women on their boards of directors is not compelling, although executive women directors enhance bank stability. Looking across ownership, the evidence suggests that gender diversity in state-owned banks enhances stability, but at the cost of lower profitability.     

Do Business Executives Give More to Their Alma Mater? Longitudinal Evidence from a Large University

The novel contribution of this research is the examination of the gift‐giving patterns of alumni business executives of a large urban public university. Our results reinforce the earlier findings that male alumni in Greek social organizations gave more to their alma mater. New insights unique to this study are that alumni with the higher‐order executive job titles are more charitable. Further, the number of known other gift‐giving alumni and friends seems to positively impact giving. The national athletic championship wins are also significant positive drivers of alumni giving in the championship year, as well as in the succeeding nonchampionship year.     

How do suppliers strategise in relation to a customer’s supply network initiative?

The purpose of this article is twofold: firstly, to conceptualise and discuss how suppliers strategise in relation to supply network initiatives taken by their customers in the construction industry, and secondly, to discuss the buying firm’s view on the strategies pursued by their suppliers. Based on the analysis and discussion, we suggest that suppliers can strategise in relation to a focal supply network initiative by using six different connecting modes: (A) start-up relationships and processes, which can support the focal initiative; (B) intensify relationships and processes, which already give some support to the focal initiative; (C) continue with relationships and processes, which support the focal initiative; (D) weaken relationships and processes, which do not support the focal initiative; (E) end relationships and processes, which do not support the focal initiative and (F) continue with relationships and processes, which preserve non-supporting elements of the focal initiative. Furthermore, the suppliers can choose different strategising profiles. Based on the six modes, we can draw profiles, which show how much each supplier would emphasise each respective mode. In addition, we suggest that the buying firm identify the different strategising profiles of its suppliers, and handle the individual profiles of the suppliers, as well as the mix of profiles in the supply network.     

Do efforts to reduce the supply of illicit drugs increase turf war violence? a theoretical analysis

This paper models illicit drug dealers as territorial monopolists. The model shows that an increase in efforts to reduce the supply of illicit drugs decreases a dealer’s expected monopoly returns over drug turf. Consequently, efforts to acquire drug turf through violence are reduced. This research was funded by a Cameron School of Business Summer Research Grant at the University of North Carolina at Wilmington.