Core allocations and the dimension of the cone of efficiency price vectors

Let (R₁,…,R_k) be an arbitrary partition of the grand coalition in an atomless exchange economy with k “large enough.” We prove that an optimal allocation x belongs to the core if and only if x cannot be improved upon by any coalition that includes at least one of the R_i's. K is “large enough” if k ? r + 1, where r is the linear dimension of the cone P of the efficiency price vectors for x. Recall that it is always true that r ? n, when n is the number of commodities in the market, and that under differentiability and interiority r = 1; thus k can be chosen to be 2 (i.e., for any coalition R, an allocation x belongs to the core of the market if and only if x is not blocked by any coalition that either contains R or contains its complement).     

Supportability and anonymous equity

W. W. Sharkey and L. G. Telser (J. Econom. Theory18 (1978), 23–37) feel that invulnerability of a natural monopoly to the threat of competitive entry is well reflected in the concept of supportability. G. R. Faulhaber and S. B. Levinson (Amer. Econom. Rev.71 (1981), 1083–1091) point out that supportability is necessary for the achievability of anonymous equity, i.e., absence of consumer subsidies in public enterprise pricing. This paper reconciles supportability with market clearance and shows that supportability is sufficient for the achievability of anonymous equity.     

Capital as a commitment: Strategic investment to deter mobility

This paper analyzes how an early entrant in a market can exploit its head start by strategic investment. The analysis is based on Spence's paper, Investment strategy and growth in a new market, (Bell J. Econ., 10 (1979), 1–19). We frist study the investment game in the no-discounting case, which embodies the key features of mobility deterrence. We establish the existence of a set of perfect equilibria and suggest that one particular equilibrium is most reasonable. This equilibrium, also valid with discounting, involves the follower firm being forever deterred from investing to its steady-state reaction curve, in contrast to Spence's proposed solution.     

Can labour market institutions explain high unemployment rates in the new EU member states?

This article studies the question whether labour market institutions can explain the large differences in unemployment rates in the new member states. It investigates several labour market institutions and concludes that they are on average no more rigid in the new member states than in the old ones. However, there is a lot of heterogeneity both in terms of institutions and unemployment rates. The impact of labour market institutions on performance is empirically examined for a panel of European countries. These results are used to assess to what extent labour market institutions are responsible for the diverse unemployment experiences in the new member states. Labour market institutions can explain only a small part of these differences. Other causes of unemployment seem to be more important.

The impact of the two-tier plan/market system in chinese industry

There has been a great expansion in the role of the market mechanism in the distribution of industrial goods in China since the late 1970s. A two-tier system, whereby part of total production of each good is allocated by various kinds of directive plans, part by markets, has emerged. It is argued that the two-tier system has resulted in the demise of the direct role of mandatory planning in the allocation of industrial goods, and that the inherent dynamic tendencies of the system are leading to a continual increase in the share of the market over time. J. Comp. Econ., September 1987, 11(3), pp. 295–308. The World Bank, Washington, D.C. 20433.     

Localized innovation, localized diffusion and the environment: an analysis of reductions of CO2 emissions by passenger cars

We investigate technological change with regard to CO₂ emissions by passenger cars, using a Free Disposal Hull methodology to estimate technological frontiers. We have a sample of cars available in the UK market in the period 2000–2007. Our results show that the rates of technological change (frontier movement) and diffusion (distance to frontier at the car brand level) differ substantially between segments of the car market. We conclude that successful policies should be aimed at the diffusion of best-practice technology, and take account of the different potential for further progress between different segments of the market (e.g. diesel vs. gasoline engines and small vs. large engines).

Corporate social responsibility and the ‘game of catallaxy’: the perspective of constitutional economics

The paper examines the issue of corporate social responsibility (CSR) from the perspective of constitutional economics, focusing on the distinction between a political community’s constitutional choice of the rules of the “market game,” and the market players’ sub-constitutional choice of strategies within these rules. Three versions of CSR-demands are identified and discussed, a “soft,” a “hard”, and a “radical” version. The soft version is concerned with the issue of how “socially responsible” corporations ought to play the market game within existing rules. The hard version is about how the rules of the market ought to be changed in order to induce “socially responsible” corporate behavior. And the radical version questions the compatibility of CSR and the logic of the market game, calling in effect for adopting some alternative economic regime.

An econometric analysis of the effects of market liberalization on price dynamics and price volatility

The paper investigates price dynamics under market liberalization, with a focus on the effects of lowering price floors. We analyze price dynamics by specifying and estimating a dynamic Tobit model under time-varying volatility, where the market price is censored by a government-set support price. The model is applied to the U.S. butter market over the last three decades. The econometric results show how the price support program affects both expected prices and the volatility of prices. It is found that the censoring effects of a price support program can be significant and large even if the price support is set relatively low.

Efficiency of the Warsaw Stock Exchange: Analysis of Selected Properties

The Warsaw Stock Exchange (WSE) has been operating in present form for 15 years. WSE is regarded as an “emerging market”. We can observe that it is still developing (in order to become “developed market”). The level of development is often analyzed with reference to the efficiency of the market. We can say that the capital market is efficient if the prices at the market fully reflect all available information. The aim of the presented research is to analyze the current situation at the Warsaw Stock Exchange. Particularly we investigate the weak form of efficiency using selected statistical tests. The research is based on actual data concerning daily observations of shares at the Warsaw Stock Exchange transformed to the logarithmic rates of return, considering the period 2000–2006 and subperiods: the bear market, stagnation and the bull market.

Econometric estimation of PCAIDS models

This paper presents a version of the proportionally calibrated almost ideal demand system (PCAIDS) model, useful for merger simulations, which can be econometrically estimated using price data for two firms in a market. PCAIDS is therefore seen as a set of restrictions to be imposed in an econometric estimation, and not only as a pure calibration method. The proposed model is applied to a database of the Argentine gasoline market, and its results are compared to the ones obtained with other alternative specifications.

Measures of technical efficiency

Färe and Lovell (J. Econom. Theory19 (1978), 150–162) suggest four properties that a measure of technical efficiency should satisfy; the commonly employed Debreu-Farrell measure fails three of them. Necessary and sufficient conditions for a measure to satisfy the four conditions are provided and recently proposed measures are analyzed in the light of this result. Also, it is argued that the Debreu-Farrell measure has several desirable properties when one takes account of (1) (perhaps unknown) market prices and the relationship between technical and economic efficiency and (2) its characterization as a measure of economic efficiency using the shadow prices implicit in the production technology.     

Order aggressiveness and order book dynamics

In this paper, we study the determinants of order aggressiveness and traders’ order submission strategy in an open limit order book market. Applying an order classification scheme, we model the most aggressive market orders, limit orders as well as cancellations on both sides of the market employing a six-dimensional autoregressive conditional intensity model. Using order book data from the Australian Stock Exchange, we find that market depth, the queued volume, the bid-ask spread, recent volatility, as well as recent changes in both the order flow and the price play an important role in explaining the determinants of order aggressiveness. Overall, our empirical results broadly confirm theoretical predictions on limit order book trading. However, we also find evidence for behavior that can be attributed to particular liquidity and volatility effects.

The role of the financial sector in economic development: the Malaysian case

In this paper, we empirically examine the finance-economic development relations for the case of Malaysia. Using a battery of time series econometric techniques, we document robust evidence suggesting favorable output effects of financial market development. Likewise, there are consistent results showing the adverse real effects of financial volatility. The results of the development of financial intermediaries, however, are fragile. Moreover, the development of the financial markets hinges crucially on macro-economic performance and financial stability of the country. However, the process of financial market development is likely to be accompanied by financial volatility, leaving Malaysia with the trade-off between financial development and financial volatility. Lastly, we obtain limited evidence indicating the complementarity between financial market and banking sector developments.

A new approach to bad news effects on volatility: the multiple-sign-volume sensitive regime EGARCH model (MSV-EGARCH)

In this paper, using daily data for six major international stock market indexes and a modified EGARCH specification, the links between stock market returns, volatility and trading volume are investigated in a new nonlinear conditional variance framework with multiple regimes and volume effects. Volatility forecast comparisons, using the Harvey-Newbold test for multiple forecasts encompassing, seem to demonstrate that the MSV-EGARCH complex threshold structure is able to correctly fit GARCH-type dynamics of the series under study and dominates competing standard asymmetric models in several of the considered stock indexes.

Liberalisation,competition and ownership in the presence of vertical relations

This contribution analyses a market with an upstream bottleneck monopoly and a downstream activity that may either be vertically integrated or separated. Separation always reduces the consumer surplus, and the total surplus unless there are large cost reductions. Downstream competition from a public or private network monopoly would crowd out other firms, also when public ownership is associated with more modest objectives than welfare-maximisation. A market is therefore less likely to remain a mixed oligopoly than without vertical relations. However, private firms would survive in a moderately welfare-improving mixed oligopoly with cross-subsidisation and access charges equal to marginal costs.

What drives idiosyncratic volatility over time?

We document the patterns of market-wide and firm-specific volatility in the Portuguese stock market over the 1991–2005 period and test several explanations for the behavior of firm-level idiosyncratic volatility. Unlike previous studies we find no evidence of a statistically significant rise in firm-specific volatility. On the contrary, the ratio of firm-specific risk to total risk slightly decreases. We show that this result stems from new listings of large privatized companies that display lower firm-specific risk. Our findings are consistent with the idea that changes in idiosyncratic volatility are related to changes in the composition of the market.

The behavior of the exchange rate in the genetic algorithm with agents having long memory

This paper studies the behavior of the exchange rate in Kareken and Wallace (1981)'s model under the genetic algorithm adaptation with agents having long memory. The simulation results show that, if agents have full memory, the average portfolio fraction will converge, and the initial equilibrium that it converges to is history dependent. Under the lasting evolutionary pressure of the noise trader, the market will eventually drift from one equilibrium to another, and asymptotically will converge to the neighborhood of an equilibrium with agents putting their savings equally into two currencies. If the agents do not have full memory, the foreign exchange market will show periodic crisis. Before and after a market crises, the average portfolio fraction will converge to different stationary equilibria. A mean difference equation of the average portfolio fraction is also given to describe the dynamics of the model.

Dividend-Driven Trading Strategies: Evidence from the Warsaw Stock Exchange

This study presents an analysis of dividend-driven trading strategies based on dividend yield growth effects in the Polish stock market in the years 1994–2004. Results indicate that the dividend yield growth portfolios were capable of beating the market in the entire sample period. Their performance, however, was not consistent over time and the highest returns were obtained during final years. Empirical findings based on the analysis of different types of portfolios demonstrate the importance of dividends as a source of significant fundamental information items from stock market companies. At the same time, they show that a dividend investment strategy for the Polish stock market is most successful when the selection of stocks for the dividend yield growth portfolios is subject to further restrictions, most notably concerning company size.

Financial markets and the post-crisis scenario

Starting from August 2007, the FED intervened by injecting liquidity in the inter-banking market and reducing interest rates. Day after day, the financial markets register negative trends and rallies. This is not due to events which are particularly related to the market itself. This appeared in the days when there were government interventions, when everybody expected a positive sign in the financial market but a negative sign occurred. Sometimes, this is due to the intensity of actions taken by the governments. The markets always expect appropriate interventions (in terms of intensity). Looking at these market reactions (in unexpected signs) after each government action, we can suppose that policy makers underestimate the intensity of this crisis. The capacity of making enforcement on the system should avoid underlining the side of governance rules which will never be precise. Being able to count on an active control of the market dealers, broadly speaking is a way of giving active confidence to individual/institutional agents who decide the allocations of saving in the financial market. There is no such confidence at the moment, if one focuses only on the definitions of new rules. If one starts from existing rules and does continuous monitoring so that they are applied adequately at crucial moments, then one could reduce the possibility of facing new exceeding volatilities of banking securities in the stock market. This work is focused on understanding how governance as well as central banks’ policy impact on the crisis, as well as possible future scenarios.

The willingness to migrate in the CEECs evidence from the Czech Republic

Given the low levels of migration in the CEEC found in the literature, this paper raises the issue of who is willing to migrate in these countries. Using data on the willingness to migrate in the Czech Republic we show that variables measuring regional labour market conditions and amenities contribute little to explaining willingness to migrate, but that personal and household characteristics are more important. The least willing to migrate are the family-house owners, the less educated and the elderly as well as persons residing in regions with above-average unemployment rates. Improving the efficiency of the housing market and focusing on the problems of peripheral regions should thus be primary foci of a policy aimed at improving labour-market adjustment through migration. These policies are, however, unlikely to yield rapid results, since the willingness to migrate of all subgroups analysed (except for the less educated) reacts only weakly to regional labour market incentives and amenities.