Technical efficiency and the competitive behavior of hospitals

This paper examines whether the competitive behavior of hospitals influences the extent to which their productive efficiency deviates from best-practice standards. An index of technical inefficiency is constructed by means of Data Envelopment Analysis (DEA) for 189 acute-care hospitals in the State of Florida in 1989. A regression model is then specified that estimates the impact of competitive dynamics in local hospital markets over the period 1982–1988 on these 1989 DEA efficiency scores, controlling for a set uf internal and external constraints on managerial decision making. Among other things, the empirical analysis shows that these ratings are systematically accounted for by both the nature and vigor of hospital competition, with price leaders in highly competitive markets in particular shown to be more efficient. The public policy implications of these findings are discussed.     

Hedonic price and depreciation indexes for residential housing: A longitudinal approach

An equilibrium price relation is derived for price changes in durable goods capable of generating a hedonic, or quality-corrected, price index, and an index of depreciation. The structure proposed is applicable particularly to housing markets, where longitudinal, or repeat-sale data are readily available from assessment or real estate sources. The separation permits not only the construction of a true price index, but also allows tests of various functional forms for depreciation, notably the geometric function. As an application of the proposed structure, estimates are presented for single-family dwellings in surburban London, Ontario, 1967–1975.     

Asymmetric convergence in US financial credit default swap sector index markets

This study examines the asymmetric adjustments to the long-run equilibrium for credit default swap (CDS) sector indexes of three financial sectors – banking, financial services and insurance – in the presence of a threshold effect. The results of the momentum-threshold autoregression (M-TAR) models demonstrate that asymmetric cointegration exists for all pairs comprised of those three CDS indexes. The speeds of adjustment in the long-run are much higher in the case of adjustments from below the threshold than from above for all the pairs. The estimates of The MTAR-VEC models suggest that the dual CDS index return in each sector pair participates in the adjustment to equilibrium in the short- and long-run taken together. But in the long-run alone, only one of the two spreads in each pair participates. Policy implications are also provided.     

Credit default swaps and sovereign debt markets

This study investigates the link between the price discovery dynamics in sovereign credit default swaps (CDS) and bond markets and the degree of financial integration of emerging markets. Using CDS and sovereign bond spreads, the price discovery mechanism was tested using a vector error correction model. Financial integration is measured using news-based methods. We find that sovereign CDS and bond markets are co-integrated. In five out of seven sovereigns (71%), the bond market leads in price discovery by adjusting to new information regarding credit risk before CDS. In 29% of times, CDS markets are the source of price discovery. We also find a positive correlation of 0.67 between the degree of financial integration and the bond market information share. The evidence suggests that changes in sovereign credit risk and bond yields are significantly influenced by common external (global) factors, while country-specific factors play an insignificant role.     

A Linear Programming Model of the Consumer Price Index Food Component

A bstract A linear programming model is used to measure the rate of inflation in the food component of the consumer price index A diet model to minimize the cost of a diet subject to constraints on nutritive requirements, variety, pal-atabihty, and menu-function is constructed and the rates of increase in a strict minimum cost model and an expanded constraint model are measured for the period 1980-87 Consistent with the consumer utility literature, it is found that the current Laspeyres index approach to measuring the cost of living in fact provides an upper limit on true cost of living increases Results also show that the cost of maintaining a minimum level of subsistence increases more rapidly than the cost of a more palatable diet Finally, the results show that in fact there is very little room for substitution among food items within a reasonable diet model     

Bureaucracy, monopoly, and the demand for municipal services

A model of municipal budget allocation is constructed. It is assumed that municipalities elect mayors whose preferences reflect those of their constituents and that the bureaucrats heading the public agencies are private-wealth maximizers. Following Niskanen it is argued that bureaucrats exploit their mayors in order to maximize their salaries which implies that the price-elasticity for municipal services will be unitary. A price index is constructed, and the implication is tested on a sample of 81 U.S. cities over the period 1951–1973. The time-series estimates of price, population, and income elasticities are compared with those of Bergstrom and Goodman and Borcherding and Deacon.     

The Negative Effects of Inappropriate Price Stimulation; The Case of Senegal: Rice Price Increases to Encourage Production May Harm Families of Non-responsive Subsistence Farmers

Abstract . Some governments of developing economieshzve been encouraged to use pricing policy to stimulate increases in food production. It is not known whether all subsistence farmers in those countries operate in an economic, financial and technological environment in which they can respond positively to price increases. In this paper models were used to demonstrate two situations: one in which farmers responded to price stimulation and another where price increases were ineffective, costly and produced results inconsistent with national goals. Data from the Basse Casamance Region in Senegal were used to show that farmers were not responsive to price changes and were net purchasers of grains. The study concludes that unless farmers' supply curves were shifted to the right—that is, that they meet more of their own subsistence needs—recent Senegalese government rice price increases could be harmful to the farm family.     

Identifying the true nature of price discovery and cross-market informational flow in the investment grade CDS and equity markets

We examine the comparative efficiency of systematic investment grade credit default swap (CDS) and equity markets using a time-varying coefficient vector autoregression. This modeling framework enables a view of cross-market informational flow along each point in the time-period under investigation by taking into account parameter instability. We obtain smoothing estimates of parameters capturing such flow between CDS and equity markets using daily data from 2004 to 2019, and measure the strength of flow via relative predictive gains. In contrast to prior studies, we find a two-way interactive effect in which certain types of information are captured more efficiently in prices by each market. We also find that the time-varying coefficient vector autoregression results in superior forecasting gains relative to models not accounting for price discovery. These results have implications for systematic investors, arbitrageurs and stakeholders who monitor systematic markets for their informational content.     

Spillovers among CDS indexes in the US financial sector

By employing the robust cross-correlation function approach proposed by Hong (2001), and conducting pre-tests for structural breaks in the variances as well as removing the causality-in-mean effects in the causality-in-variance tests, we investigate volatility and mean transmissions between the credit default swaps (CDS) indexes of three US financial sectors. We use daily series on five-year banking, insurance, and financial services sector CDS indexes at the sector level from January 2004 to December 2011. We find evidence of significant causality-in-mean effects running from the banking sector to the insurance and financial services sector CDS indexes and from the financial services to the insurance sector CDS indexes, suggesting the leading role of the banking and financial services sectors in terms of price discovery. Moreover, we find significant causality-in-variance effects from the financial services sector CDS index to that of the banking sector, implying the existence of information transmission and contagion from the former, the least regulated of the three. The implications of these findings on traders and policymakers are also provided.     

European Regional Development Fund and pro-environmental behaviour. The case of Italian separate waste collection

The purpose of this paper is to analyse the impact of European Regional Development Fund (ERDF) regulations over two programming periods (2000–2006 and 2007–2013) in terms of separate waste collection rates of Italian regions. We analyse longitudinal data for 20 NUTS-2 Italian regions over two EU policy cycles (2000–2006 and 2007–2013), by means of a Difference-in-differences estimation method. The estimates suggest that ERDF regulations in both programming periods had no relevant impact on the achievement of cohesion policy goals for separate collection at the regional level. Subsequently, we analyse data for 103 NUTS-3 Italian provinces over 2000–2013 by means of two statistical tools: The Theil index (TI), and the Moran index (MI), and find that proximity effects at provincial scale cause positive social contagion of pro-environmental attitudes toward separate collection. Our results make a case for the relevance of ‘cultural’ policy measures fostering environmentally responsible attitudes as a possible pre-condition for effective implementation of ERDF-funded separate collection projects in low-performing regions.     

How can big data enhance the timeliness of official statistics?: The case of the U.S. consumer price index

The daily consumer price index (CPI) produced by the Billion Prices Project (BPP CPI) offers a glimpse of the direction taken by consumer price inflation in real time. This is in contrast to the official U.S. CPI, which is compiled monthly and released with an average of a three-week delay following the end of the reference month. A recent body of research contended that the movements of online prices are representative of those of offline retail prices, making the BPP CPI a natural candidate for accurately improving the timeliness of the official CPI. We assess the predictive content of the BPP CPI using a variety of MIDAS models that accommodate data sampled at different frequencies. These models generate estimates that remain robust to the variety of time periods considered and, by the standard of the existing literature, contribute to a significant upgrade in the forecast accuracy of official consumer price inflation figures. The paper then sketches the broad implications of BPP CPI for the consumer price statistics maintained by national statistics offices and discusses how the proposed improvement in the timeliness of the official CPI fits in this perspective.     

Transparency of Retail Energy Pricing: Evidence from the US Natural Gas Industry

We test and cannot reject the hypothesis that retail pricing of natural gas is transparent for commercial and residential customers served by regulated local distribution companies in the United States. The periods of adjustment to a wholesale price change are 1.54 months for the commercial price and 1.69 months for the residential price. These findings support the view that regulated local distribution companies quickly adjust retail prices to fully capture any change in the wholesale natural gas price. Copyright © 2013 John Wiley & Sons, Ltd.     

Price support and spreads in the IPO aftermarket: An empirical microstructure study

Using the inventory components of spreads as a measure of inventory holding-risk, we test the hypothesis of Hanley et al. [Hanley, K. W., Kumar, A., & Seguin, P. J. (1993). Price stabilization in the market for new issues. Journal of Financial Economics, 34, 177–197] that price supports reduce market makers’ inventory holding-risk in the aftermarket of initial public offerings (IPOs). We find that both spreads and their inventory components are significantly smaller in the earlier periods of the IPO aftermarket than those in the later periods. More importantly, the inventory components of spreads are significantly smaller for stocks without over-allotment options (OAOs) exercised, and for stocks with lower or negative initial returns which are more likely to have price supports. The results are consistent with the price support hypothesis.     

Information transmission between sovereign debt CDS and other financial factors ⿿ The case of Latin America

This paper extends previous research by investigating the intertemporal causality relationships between daily Latin America sovereign credit default swap (CDS) returns and other financial sovereign debt spread determinants. The empirical results indicate that information in sovereign CDS can both lead and lag these financial determinants. Specifically, country financial variables, including exchange rates and lending spreads, and global financial variables including 10-U.S. Treasury yields, VIX and TED spreads, are important determinants for future sovereign CDS price movements. The findings provide investment implications for international financial markets.     

Are the profitability and investment factors valid ICAPM risk factors? Pre-1963 evidence

We empirically evaluate whether the profitability and investment factors from Novy-Marx (2013) and Fama and French (2015, 2018) are compatible with Merton’s (1973) intertemporal CAPM (ICAPM) framework in the pre-1963 period. We show that: (i) the covariance risk price estimates of the profitability factors are positive and statistically significant, which indicates that they have explanatory power with respect to the cross-section of stock returns; (ii) the investment factors carry insignificant covariance risk prices and are therefore not valid ICAPM risk factors; and (iii) the profitability factors forecast the first moment of the aggregate stock return and economic activity with the correct sign, which is consistent with their positive covariance risk price estimates and satisfies the sign restrictions associated with the ICAPM.     

Scanner data, time aggregation and the construction of price indexes

We examine the impact of time aggregation on price change estimates for 19 supermarket item categories using scanner data. Time aggregation choices lead to a difference in price change estimates for chained indexes which ranged from 0.28% to 29.73% for a superlative index and an incredible 14.88%-46,463.71% for a non-superlative index. Traditional index number theory appears to break down with weekly data, even for superlative indexes. Monthly and (in some cases) quarterly time aggregation were insufficient to eliminate downward drift in superlative indexes. To eliminate drift, a novel adaptation of a multilateral index number method is proposed.     

Forecasting ultimate resource recovery

This paper considers Hubbert's model for forecasting ultimate resource recovery and its extensions by Kaufmann (1991, Resources and Energy 13, 111–127) and Cleveland and Kaufmann (1991, Energy Journal 12, 17–46). The emphasis of the paper is on econometric and forecasting issues, and it discusses alternative methods of estimating Hubbert's model. Using data on oil production in the U.S. lower 48 states, the paper reports the results of estimating the various specifications of the model and its extensions by the maximum-likelihood method, and provides the implied estimates for ultimate resource recovery and their associated standard errors. When economic factors are taken into account the estimates of ultimate resource recovery become state-dependent, and we find that in this case the estimates are higher than those obtained from the various specifications of Hubbert's original model. Although the accuracy of the estimates of ultimate recoverable reserves cannot be evaluated before oil reserves are actually exhausted, we examine how the various models estimated over the periods 1926–1985 and 1948–1985 perform in predicting oil production over the 1986–1990 period.     

The fiscal behavior of municipal governments: 1905–1930

This report discusses a new set of annual U. S. municipal expenditure estimates. These estimates deal with the 1905–1930 period. While these expenditures are seen to be influenced by urbanization and price inflation, it is clear that real per capita spending rose substantially during the period. The distribution of municipal spending between current and capital accounts is seen to be associated with relative price change. A model of the structure of budget decisions—emphasizing an incremental budgeting format—is developed. Estimates of the structural parameters suggest that this model adequately represents the data; and that municipal decision makers responded in a regular and rational fashion to shifts in relative prices and nominal sources of funds.     

Bubble-like housing boom–bust cycles: Evidence from the predictive power of households’ expectations

This study examines the role of households’ expectations in predicting the housing boom–bust cycles in the United States. It incorporates two nonlinear features of housing price dynamics: a threshold co-movement between households’ expectations and housing price growth and a structural break in their interrelation. It uses the monthly good-time-to-buy (GTTB) index as a proxy for households’ expectations about the U.S. housing market, and employs the structural break threshold vector autoregression (SBTVAR) to specify breakpoints in housing market dynamics during the recent decades. The findings indicate that shifts in interactions between households’ expectations and housing price growth are synchronous with the recent housing boom–bust cycles. The SBTVAR framework outperforms other models as it captures more of the housing market's unique dynamic characteristics. The GTTB index, which governs expectation regime-switching patterns, is able to signal the recent housing bust three periods in advance.     

Analyzing credit risk transmission to the nonfinancial sector in Europe: A network approach

We use a factor model and elastic net shrinkage to model a high-dimensional network of European credit default swap (CDS) spreads. Our empirical approach allows us to assess the joint transmission of bank and sovereign risk to the nonfinancial corporate sector. Our findings identify a sectoral clustering in the CDS network, where financial institutions are in the center and nonfinancial entities as well as sovereigns are grouped around the financial center. The network has a geographical component reflected in different patterns of real-sector risk transmission across countries. Our framework also provides dynamic estimates of risk transmission, a useful tool for systemic risk monitoring.