An empirical investigation of customer market analysis–a microfoundation for macroeconomics

The slow adjustment and stickiness of output prices is widely regarded as an important determinant of macroeconomic behaviour. Recently, a number of writers have argued that customer market analysis can provide a microfoundation for price stickiness. This paper develops the theory of a firm selling in a customer market and investigates the empirical implications of the theory. The model is shown to imply a particular pattern of behaviour between retail prices and wholesale prices. Data on retail and wholesale prices for the United States, the United Kingdom and Australia at various levels of aggregation is investigated and found to support the predictions of the customer market model. In the conclusion the macroeconomic implications of the empirical conslusions are drawn out.     

University–industry linkages and absorptive capacity: an empirical analysis of China's manufacturing industry

We analyze the contribution of universities to innovative performance in China's manufacturing sector. Our empirical analysis is based on a matched data set comprising about 20,000 large- and medium-sized companies aggregated at the three-digit industry level and information on university knowledge output for 31 provinces between 1998 and 2004. We show that universities’ impact on commercial innovation varies with the type of activity performed and is contingent on the manufacturing sector's investment in absorptive capacity. In addition, our results confirm organizational theory stating that there is a complementary relationship between capabilities to acquire and assimilate external knowledge on the one hand and the capacity to transform and exploit this knowledge on the other.     

Do equity index industry groups improve forecasts of inflation and production? A US analysis

This study develops a new financial market indicator, which may be a useful addition to analysing real activity in the US. By taking the ratio of the price return of equity industry groups of the S&P 500 over a benchmark industry group, in this case taken to be the Utilities industry group, an indicator is created which represents the price return performance specific to each individual industry. We then perform recursive pseudo out-of-sample bivariate forecasts of future changes in the Industrial Production Index (IPI) and the Consumer Price Index (CPI) at 3-month, 6-month and 12-month horizons using each of the indicators and compare results against an AR forecast. The results of the bivariate forecasts using a number of the indicators produce better forecasts of changes in the IPI and are also significant for causality, both for the full sample period and when tested recursively. Bivariate forecasts of changes to the CPI, however, do not improve upon the AR forecasts.     

The changing state–market condominium in East Asia: rethinking the political underpinnings of development

This article addresses the effects of inequality on the globalisation process. It is argued that the recent financial and economic crisis is a manifestation of a tendency of the aggregate demand to fall relatively to aggregate supply, generated by an asymmetric income distribution, which in turn both increases, and is reinforced by, the mobility of goods, capital and labour, in a process of cumulative causation. This process has not become manifest earlier due to counteracting tendencies generated by the financial system, that were disrupted during the crisis. It is also argued that mainstream economics does not have the adequate framework for explaining the crisis, and actually contributed to the crisis through its theories and policies. Hence an alternative economic framework is suggested for addressing the crisis, drawing upon the contributions of several heterodox economic traditions, especially post-Keynesianism.     

How deep is your love? A quantitative spatial analysis of the transatlantic trade partnership

This paper explores the quantitative effects of trade liberalization envisioned in a transatlantic trade and investment partnership (TTIP) between the United States and the European Union. We use a quantitative trade model that, in contrast to other works, features consumptive and productive uses of land and we allow for labor mobility and a spatial equilibrium. Our calibration draws mainly on the world input–output database (WIOD). The eventual outcome of the negotiations is uncertain. Tariffs in E.U.–U.S. trade are already very low, however, so that an agreement will have a major impact only by eliminating nontariff barriers. These are extremely hard to quantify. We address these uncertainties by considering a corridor of trade‐liberalization paths and by providing numerous robustness checks. Even with ambitious liberalization, real income gains within a TTIP are in the range of up to 0.46 percent for most countries. The effect on outside countries is typically negative, yet even smaller. Taking land into account scales down the welfare effects strongly. Interestingly, we find that all German counties derive unambiguous welfare gains even though the model allows for negative terms‐of‐trade effects. Our analysis also implies that in order to arrive at the same welfare gains as under a TTIP, a multilateral liberalization would have to be much more ambitious for the U.S. than for the E.U.     

Forecasts of the managed futures market – an empirical analysis

Alternative investments, including managed futures, are primarily intended for institutional investors and for very wealthy individual investors. It therefore seems logical to assume, that the increase of wealth on a global scale can be a factor impacting the value of transactions in individual segments of the alternative-investment market. The purpose of this article is to indicate the factors affecting growth of managed futures transactions. Another research goal is to answer the question: Does the increase of wealth on a global scale affect the value of the managed futures transactions? The article will also present short-term forecasts of the transactions on the managed futures market for the years 2015–2017. The forecasts which will be constructed are meant to present possible scenarios of the market’s further development. Evolution of the alternative investment segment leads to development of those categories, which fulfil the expectations of market participants and meet the requirement and expiration of the remaining investments which do not attract investors and are no longer accepted by them.     

Does vertical separation reduce cost? An empirical analysis of the rail industry in European and East Asian OECD Countries

The main purpose of this study is to analyze structural separation policies, especially vertical (i.e. operation-infrastructure) and horizontal (i.e. passenger-freight service) separation. Using the total cost function of a railway organization, we evaluate whether or not vertical separation and/or horizontal separation can reduce costs. For this analysis, we selected 30 railway organizations in 23 European and East Asian OECD countries over 14?years, from 1994 to 2007. Our findings show that horizontal separation reduces railway cost. As for vertical separation, effects change according to the train density of a railway organization. With lower train density, vertical separation tends to reduce cost, while with higher train density vertical separation increases cost.     

The market power of OPEC 1973–2001

We apply a multi-equation dynamic econometric model on monthly data to test if the behaviour of OPEC as a whole or different sub-groups of the cartel is consistent with the characteristics of dominant producers on the world crude oil market in the period 1973–2001. Our results indicate that the producers outside OPEC can be described as competitive producers, taking the oil price as given and maximizing profits. The OPEC members do not fit the behaviour of price-taking producers. Our findings of low residual demand price elasticities for OPEC underpin the potential market power of the producer group, and are in line with the results in some recent energy studies. On the other hand, our findings indicate that neither OPEC nor different sub-groups of the cartel can be characterized as a dominant producer in the period 1973–1994. However, we find that the characteristics of a dominant producer to some extent fit OPEC-Core as from 1994. Thus, although OPEC clearly has affected the market price, the producer group has not behaved as a pure profit-maximizing dominant producer.     

The music industry ＆ its consumers： A potential divorce through technology and shifting market linkages？

A large market exists of online users who desire online video and music content. However, recent developments have shown that some industries, such as music and videos are not fully utilising the market benefits that disruptive technologies can bring to organisations despite the change of value drivers. According to Christensen et al （2004）, and based on RPV theory, organisations may decide not to pursue disruptive innovative ideas for a variety of reasons, such as their values are set in another direction, processes do not support the new technology and resources may become under-utilised or even obsolete. Trying to pursue partly aggressive strategies, partly defence or avoidance strategies, it is suggested that the music industry has missed to reengineer its business so far. At the same time, music consumers have found various peer-to-peer models to execute their own avoidance strategies, i.e., avoiding to buy music but to share it. Various consumption platforms for music, such as, pandora, hulu or spotify, emerged, which themselves show significant innovative power. As scholars＇ research tested, innovation has two beams, technology and market linkages. While the technological part is inevitably developing further, the music industry erects legal barriers to bloc those sites by applying the presently unclear DRM, since the new ways of music consumption threaten their established ways of content distribution. At the same time, barriers are placed that those consumers being online specialists find ways to circumvent them. The proposition is that by the salient marketing concept of CRM such behaviour increases the pressure on incumbents since risking market linkages with their customers. This paper will contrast technology and market linkages, discussing how online innovations may alter the status quo of the music industry, especially its record business. Research provides evidence that technological implications are supporting a sustainable shift of consumers＇ behaviour and the ways, by which consumers are able to overcome the legal and technological barriers for accessing P2P sites despite industrial prevention. It is suggested that there is further significance this paper addresses, since what affects the music industry today, will likely have an impact on the movie, games, software and other industries in the near future： Disruption of existing resources, processes and values and threatening market linkages by redefined ways of content distribution.     

What is the long run growth rate of the East Asian Tigers?

New panel data estimates for the four East Asian Tigers show that the contribution of Total Factor Productivity (TFP) to growth is much higher than past estimates. An extended production function with learning by doing implies that TFP is about 3.5% and these countries will grow at this rate in the long-run.     

Leaving the market or reducing the coverage? A model-based experimental analysis of the demand for insurance

This study develops a theoretical, and experimental analysis addressing the issue of premium variations on the demand for insurance. Accounting for risk attitudes, our contribution disentangles the decision to buy insurance from the conditional demand (the non-null demand for insurance). Partially validating our theoretical predictions, our experimental results show that, when it has an effect, a non-massive increase in the premium (either in the unit price or the fixed cost) exclusively results in an exit from the insurance market (the risk lovers first, then the risk averters). Moreover, our study highlights a key feature of risk-seeking agents' behavior; they exhibit behavior consistent with gambling and opportunism rather than a lack of interest in insurance.     

Can cross-listing relax financial frictions in trade and equity holdings? A sector-level analysis

Previous studies have documented the positive mutual relationship between bilateral aggregate goods trade and asset holdings. This article examines whether financial frictions play an important role in this mutual relationship. Instrumental variable Poisson pseudo maximum likelihood (IV-PPML) estimation method is applied to a new panel of data on US imports and foreign equity holdings in 20 manufacturing sectors from 43 countries over the period 2001–2007. The results confirm the significantly positive relationship between goods trade and equity holdings, and show that financial frictions are an important factor causing this positive correlation. In addition, we find that equity cross-listings in the US stock markets provide external funds to relax financial frictions and promote goods trade. This impact varies with different measures of financial frictions in developing and developed countries.     

Art in Africa: Hedonic price analysis of the South African fine art auction market, 2009–2014

Real asset markets are characterized by illiquidity and heterogeneous assets, presenting challenges to price estimators. Use of a new dataset of 7,553 auction fine art lots brought to market in South Africa, for 2009–14, allows us to examine the full sales hedonic price estimator over a wide set of characteristics. Results validate full sale hedonic pricing: Identities of artists, medium and genre, dating characteristics, and physical characteristics of artwork are significant. External validity of hedonic pricing is supported by out-of-sample price prediction for 40 individual artists. Auction house catalogue presentation of art work also proves correlated with realized auction prices. Art as an asset finds support: art prices move countercyclically with GDP and domestic equity markets, pro-cyclically with off-shore equity markets, implying a risk diversification role. JEL Codes: D1, L8. Keywords: hedonic price equation, art market, South Africa Word Count: 9467 (including all Tables, Figures, References).     

How pervasive is the effect of culture on stock market linkages? Evidence across regions and economic cycles

We conduct a comprehensive study on the effect of culture on stock market linkages. With data on 25 national stock markets, a quantile regression model is used to estimate the determinants of market linkages using culture variable/s such as language, religion and Hofstede’s cultural dimensions while controlling for distance, economic and legal variables. Further, we test whether these effects hold across regions and if changes are detected during periods of market crisis. We also test if market liquidity, an indicator of market efficiency, diminishes the impact of culture on market linkages. The main conclusion is that culture preferences shape investor choices, which affects integration between stock markets. The equity markets with similar cultural traits tend to increase market linkages; however, we observe differences across regions. Furthermore, liquidity and economic uncertainty fail to have an impact on the significance of culture variable/s as determinants of market linkages.     

How Would an Appreciation of the Renminbi and Other East Asian Currencies Affect China's Exports?

China's global current account surplus equaled 9% of Chinese GDP in 2006 and 11% of GDP in 2007. Many argue that a renminbi appreciation would help to rebalance China's trade. Using a panel dataset including China's exports to 33 countries we find that a 10% renminbi (RMB) appreciation would reduce ordinary exports by 12% and processed exports by less than 4%. A 10% appreciation of all other East Asian currencies would reduce processed exports by 6%. A 10% appreciation throughout the region would reduce processed exports by 10%. Since ordinary exports tend to be simple, labor-intensive goods while processed exports are sophisticated, capital-intensive goods, a generalized appreciation in East Asia would generate more expenditure-switching towards US and European goods and contribute more to resolving global imbalances than an appreciation of the RMB or of other Asian currencies alone.     

Does clean air matter in developing countries' megacities? A hedonic price analysis of the Jakarta housing market, Indonesia

Despite numerous hedonic studies on the value of clean air in developed countries, the lack of similar studies in less developed countries has raised the question as to whether clean air also matters in developing countries' megacities. As an attempt to fill this gap, we apply a hedonic property value analysis, the method commonly used to infer the value of clean air in developed countries, using the combination of data on housing rental prices and their characteristics from the Indonesian Family Life Survey, and data of the ambient level of six different pollutants in Jakarta, Indonesia. The result indicates that, in the cases of lead, total hydro carbon (THC), and SO₂, air pollutants have a negative association with property value; i.e., housing rental price. The relationship is at 5% level of significance for lead and 10% level for THC and SO₂. This paper estimates that per family value of clean air in Jakarta ranges from US$28 to US$85 per μg/m³.     

Dynamic analysis of bribery firms’ environmental tax evasion in an emissions trading market

Using an R&D-based growth model with dual regulation, we analyse how environmental policies influence pollution, corruption, a growth rate, and welfare. Considering that polluting firms bribe bureaucrats to evade paying environmental tax, we find that a stricter environmental tax leads to a decrease in growth rate via a decrease in the permit rent as well as an increase in pollution and corruption per firm and results in worsening households’ welfare and in improving the bureaucrats’ welfare. Thus, tax evasion with corruption improves households’ welfare and worsens the bureaucrats’ welfare. Our findings imply that tax evasion under dual regulation improves social welfare.     

What drives intermediation costs? A case of tennis betting market

We demonstrate that there is a considerable variation in bookmaker margins across matches, time and bookmakers. Our results imply that using match, tournament and players’ characteristics explains the variations in margins hence, they can be helpful in managing intermediation cost in a market of state-contingent assets: fixed-odds betting markets. We also provide evidence that bookmakers protect themselves by increasing odds on the favourite player, thus attracting more bettors to the favourite player, while deterring bettors from betting on the underdog by reducing the odds. By that process, bookmakers are possibly sacrificing a portion of their margin.     

The distribution of income in Sri Lanka in 1969–1970 and 1980–1981: A decomposition analysis

In 1977 the Sri Lankan government implemented a comprehensive policy of economic liberalization, removing many government controls on the economy and providing incentives for both foreign and domestic investment. The previous policies were often justified as necessary to maintain an equitable distribution of income. Income data from 1969–1970 and 1980–1981 surveys indicate that inequality has increased, but these data are shown to be unreliable for drawing conclusions on changes in the distribution of income. Expenditure data from the same surveys indicate that inequality has declined in the 1970's, both in the economy as a whole and within all sectors and ethnic groups.     

A three-objective social welfare function for cost–benefit analysis

This article applies quantile regression to assess the factors that influence the risk of incurring high trading costs. Using data on the equity trades of the world's second largest pension fund in the first quarter of 2002, we show that trade timing, momentum, volatility and the type of broker intermediation are the major determinants of the risk of incurring high trading costs. Such risk is increased substantially by either high or low momentum and by strong volatility. Moreover, agency trades are substantially more risky in terms of trading costs than similar principal trades. Finally, we show that the quantile regression model succeeds well in forecasting future trading costs.