China＇s credit card debt continues to expand

Credit card debt at least six months overdue in China rose 126.5 percent year on year in the first three quarters of 2009 to RMB 7.43 billion （US$1.09 billion）, the People＇s Bank of China, the central bank, said on November 30.     

Britain's best kept secret? An analysis of the credit union as an alternative source of credit

At any time, the significance of a new device which facilitates saving and borrowing and encourages the prudent management of credit and debt is clear. Given the present credit market, in which certain categories of borrowers either cannot purchase credit or can only do so on disadvantageous terms, then the importance of such an alternative only increases. The credit union is such a device. It has an established and proven record of success in many countries but, outside of Northern Ireland, credit unions are in their infancy in the United Kingdom. This article examines the possibilities credit unions afford, against the background of the increasing problem of debt in the United Kingdom. We contend that credit unions can afford a partial solution to the debt problem, but that attention should also be placed on their limitations.     

Credit lender–borrower relationship in the credit card market – Implications for credit risk management strategy and relationship marketing

Lehman Brothers filed for bankruptcy in 2008, precipitating the international financial crisis. Many questioned the banks’ risk-taking credit system. Understanding credit risk and how the credit system functions may provide knowledge on managing credit, to avoid another such international crisis. We study the credit card field and present a pricing decision model for managing credit risk. Recent credit lenders’ portfolio re-pricing practices call for immediate attention to the credit lender–borrower relationship and relationship marketing. A literature review and recent phenomena in the credit card industry reveal that the lenders’ re-pricing strategy negatively affects the credit lender–borrower relationship and relationship marketing. Thus, we introduce a pricing decision model incorporating the lenders’ re-pricing strategy and the credit lender–borrower relationship. Further, we discuss the implications of, and the role of marketing in, credit risk management and the implications of relationship marketing for credit lenders in foreign markets, including the US market.     

The effect of credit card versus mobile payment on convenience and consumers’ willingness to pay

Extant literature on payment methods has focused on comparing cash and credit cards and emphasized the lower pain of paying (i.e., fewer negative consequences) for the latter. This finding, in turn, explains why consumers express higher willingness to pay (WTP) when paying with credit cards. The current study introduces mobile technology as a new payment method to this literature. Specifically, it highlights convenience as a positive driver of increased WTP for mobile payment. However, for consumers to perceive mobile payment as convenient, a personal adoption (enabled through an existing system in the respective country market) is necessary. A set of three studies across several country markets tests these assumptions empirically. Convenience emerges as a new mediator between mobile payment and increased WTP, contingent on personal adoption. These findings thus extend extant literature on the mechanisms consumers use with different payment methods, and they offer differentiated recommendations regarding payment channels for country managers.     

What drives Indian consumer credit card loyalty? The perspective of involvement in reward programmes

This study, from the customer involvement perspective, looks at the impact of reward point programmes on the purchasing behaviour of Indian credit card users. A total of 125 valid responses were collected using an online survey of Indian credit card users. The study found that customers’ involvement is not only low, but also does not affect their loyalty (frequency of card use and usage expenditure). As for redemption behaviour, usage frequency and numbers of credit cards showed significantly positive effects. This study has important implications for both scholars and credit card issuers. Consumers’ responses towards loyalty programmes need more evidence from developing markets and companies should dedicate more resources to understand the involvement process of their targets, as well as the design of programmes.     

Is the Border Effect an Artefact of Geographical Aggregation?

The existence of a large border effect is considered as one of the main puzzles of international macroeconomics. We show that the border effect is, to a large extent, an artefact of geographical concentration. To do so, we combine international flows with intra‐national flows data characterised by a high geographical grid. At this fine grid, intra‐national flows are highly localised and dropping sharply with distance. The use of a small geographical unit of reference to measure intra‐national bilateral trade flows allows to estimating correctly the negative impact of distance on shipments. When we use sector disaggregated export flows of 50 Spanish provinces in years 2000 and 2005 split into inter‐provincial and inter‐national flows, we find that the border effect is reduced substantially and even becomes statistically not different from zero in some estimations.     

Is energy storage an economic opportunity for the eco-neighborhood?

In this article, we consider houses belonging to an eco-neighborhood in which inhabitants have the capacity to optimize dynamically the energy demand and the energy storage level so as to maximize their utility. The inhabitants’ preferences are characterized by their sensitivity toward comfort versus price, the optimal expected temperature in the house, thermal loss and heating efficiency of their house. At his level, the eco-neighborhood manager shares the resource produced by the eco-neighborhood according to two schemes: an equal allocation between the houses and a priority based one. The problem is modeled as a stochastic game and solved using stochastic dynamic programming. We simulate the energy consumption of the eco-neighborhood under various pricing mechanisms: flat rate, peak and off-peak hour, blue/white/red day, peak day clearing and a dynamic update of the price based on the consumption of the eco-neighborhood. We observe that economic incentives for houses to store energy depend deeply on the implemented pricing mechanism and on the homogeneity in the houses’ characteristics. Furthermore, when prices are based on the consumption of the eco-neighborhood, storage appears as a compensation for the errors made by the service provider in the prediction of the consumption of the eco-neighborhood.     

Can the HM-test be brought to an end?

A significant change seen in the new regulatory framework for communications markets regards issues of market delineation. Relevant markets according to the new regulatory framework should be defined in accordance with competition law methodology/principles, most notably the so-called Hypothetical Monopolist Test (HM-test). Our discussion points to the conceptual and practical difficulties associated with evaluating the effects of a 5–10% price increase on the costs and therefore on the profitability of a hypothetical monopolist. Applying our analysis to fixed retail voice telephony markets we show that, in the presence of scale economies, final results crucially depend on assumptions about the cost function, in particular the relation of variable to fixed costs and the resulting (competitive) margin. The latter, in turn, will depend on the time horizon that is deemed to be relevant for market delineation purposes. Overall quantitative techniques applied to carry out the HM-test rigorously on empirical grounds are highly sensible to those assumptions a priori even if one assumes that (empirical) estimates of elasticities can be derived reasonably.*The views expressed are those of the authors and do not represent those of RTR or TKK.     

Is the Australian wool futures market efficient as a predictor of spot prices?

Giles and Goss (1980) have suggested that, if a futures market provides a forward pricing function, then it is an efficient market. In this article a simple test for whether the Australian Wool Futures market is efficient is proposed. The test is based on applying cointegration techniques to test the Law of One Price over a three, six, nine, and twelve month spread of futures prices. We found that the futures market is efficient for up to a six-month spread, but no further into the future. Because futures market prices can be used to predict spot prices up to six months in advance, woolgrowers can use the futures price to assess when they market their clip, but not for longer-term production planning decisions. © 1999 John Wiley & Sons, Inc. Jrl Fut Mark 19: 565–582, 1999     

Is options trading informed? Evidence from credit rating change announcements

Using a sample of proactive credit rating changes, this study examines the information content of options trading before news events. Pre-event informed options trading predicts cumulative abnormal returns around credit rating change announcements. The predictability of options trading is more pronounced before announcements of more severe and surprising rating changes. Moreover, the information content of pre-event options trading is greater when the pre-event underlying stock market is less informational, when the options market is more liquid, and in the post–regulation fair disclosure period. Overall results are consistent with informed options trading before credit rating change announcements.     

Business and the Environment: Is There More to the Story?

Actions taken to improve the environment are frequently good for profits, but many executives, including economists, are not fully aware of just how good businesss environmental record is. As a result, they often have difficulty responding to critics. This article will present three major points: 1) the environment of the United States is much improved over the past several decades, and businesss pursuit of profits has been an important factor; 2) the publics information about business and the environment is poor; and 3) this faulty information fosters the impression that business is evading its responsibilities.JEL Classification Q50     

Is it up to the industrialised countries to finance the developing countries’ deficits?

Over the past decade the non-oil developing countries’ external debt has shown a more than threefold increase, a trend that may be expected to continue in the foreseeable future. In response to the recipient countries’ changing needs, private lending, their principal source of credit, will have to take different forms involving the creation of new multilateral facilities designed to place a bigger pool of long-term funds at the developing countries’ disposal.     

Is there an optimal crawl?

This paper shows that optimal exchange rate policy can be defined in terms of either a long-run secular policy or a short-run stabilization policy. The rate of crawl which maximizes real per capita consumption is shown to often differ from the exchange rate movements produced under fixed or floating exchange rates. And the optimal program for dealing with short-run speculative capital flows will involve both discrete and gradual exchange rate changes. It is also argued that domestic monetary policy and exchange rate policy are not independent instruments.     

Does banking consolidation worsen firms’ access to credit? Evidence from the German economy

This paper deals with the question whether the ongoing process of banking consolidation, which can be observed all over the world, worsens SMEs’ access to credit. We focus in our empirical study on SMEs in Germany, a country where SMEs are the backbone of the economy. A negative trend in the provision with bank credit may thus adversely affect growth and employment. Based on a comprehensive dataset on German firms and banks we find—contrary to public fear—that the ongoing banking consolidation in Germany does not have a significant negative impact on the financing of German firms during the observation period from 1996 to 2002.     

How to reduce the default contagion risk of intercorporate credit guarantee networks? Evidence from China

This study uses data from 2011 to 2018 for Chinese small and medium-sized enterprises to construct a weighted directed network to investigate the topology of intercorporate credit guarantee networks. Moreover, based on the DebtRank algorithm, it develops a novel GuaranteeRank model that includes three factors to comprehensively examine default risk contagion and systemic risk in various scenarios. The results demonstrate that (1) credit guarantee network has the topological characteristics of “scale-free” and “small world”; (2) default contagion and systemic risk increase significantly when the macro-external shock and company's off-balance-sheet debt exceed certain threshold values, while continuous bank credit support can notably reduce the risk; (3) credit guarantee network is “robust yet fragile”, such that targeted shocks increase systemic risk much more than do random shocks; (4) in addition to the prevalent “too big to fail” and “too central to fail” phenomena, a “too connected with the central to fail” phenomenon is also identified for the first time. Therefore, this study provides an important reference for regulators and financial institutions to reduce the default contagion risk of intercorporate credit guarantee networks.     

Microcredit: an answer to the gender problem in funding?

Microfinance institutions (MFIs) target people excluded from the traditional banking system. By providing start-up capital to these under-financed individuals, they enable a greater number of women to start their own business, particularly in sectors where initial capital requirements are high. Our study follows a portfolio of 3,640 microcredit applicants in France over the 2000–2006 time period, identifying MFI client profiles and bringing to light gender differences in borrowers compared to a wider sample of entrepreneurs. This study shows that the male–female gap found amongst company creators is also maintained amongst the clienteles of MFIs. Empirical results also suggest that gender is a decisive factor regarding the amount of credit provided to borrowers when comparing with other factors in the borrower and firm profile. Thus to a certain extent, MFIs are found to reinforce gender inequalities in France.     

Is the Chinese Currency Substantially Misaligned to Warrant Further Appreciation?

This study provides quarterly estimates of the misalignment in the real effective exchange rate (REER) of Renminbi (RMB) for the period 1999–2008. Starting from a commonly used economic approach, the estimates are obtained from an extensive application of econometric techniques on a carefully constructed database that covers 22 economies that account for roughly 70 per cent of China’s total foreign trade. Our estimates demonstrate that the RMB underwent a period of undervalued misalignment during the early to mid‐2000s, if measured vis‐à‐vis the REER of a multilateral currency basket of the 22 economies, but the misalignment margin has disappeared since 2008. However, if the RMB is only evaluated by a subpanel dataset including only the United States and the Euroland, the resulting misalignment estimates are much more pronounced and withstand the recent recession. The difference between the full‐panel dataset and subpanel dataset estimates suggests that the current misalignment problem lies more with overvalued USD and euro rather than with an undervalued RMB. The finding thus refutes the claim that the current global trade imbalance could be resolved mainly by further and greater appreciation of the RMB.