Technological innovation and real investment booms and busts

We investigate why new, high-risk technologies can attract excessive and often unprofitable investment. We develop an equilibrium model in which rational, risk-averse agents overinvest in a risky technology, possibly to the point that its expected return is negative. Overinvestment results from relative wealth concerns which arise endogenously from the imperfect tradability of future endowments. Competition over future consumption leads to an indirect utility for wealth with “keeping up with the Joneses” properties that can induce herding. Because overinvestment increases with the risk of the technology, our model can explain why new, risky technological innovations may promote investment bubbles.     

Telecommuting: The employee's perspective

Available telecommunication technology enables the substitution of commuting by “telecommuting”, or working at home, for a wide range of white collar occupations. Research on the potential of this phenomenon along with some ongoing experiments point at an array of social and personal benefits that may be realized by this working arrangement. An assessment of the possible implications of work-at-home on the individual employee indicate that the burden on him or her may be greater than the benefits accrued and, therefore, the journey to work may be a more desirable act than traditionally perceived by transportation planners. This paper focuses on two aspects of the work-at-home arrangement. Previous research on the sociology of work as well as preliminary empirical results indicate that 1) social interaction at work and 2) the need to separate home and work roles are important elements for the individual worker. The fact that work-at-home will affect these attributes, is likely to discourage wide-scale transition to this arrangement, despite the availability of the technology. Most research published to date on the subject is qualitative in nature, as only little empirical evidence is available. The objective of this paper is to stress, based on a wide literature review, the need for a thorough behavioral evaluation of the available technology to provide a sound basis for decision making on implementation of the technology.     

Natural Disasters and Firms in Vietnam

We investigate the consequences of natural disasters on operating firms in Vietnam, and find evidence of adverse effects of disasters on retail sales accompanied by increases in firm investment of very similar magnitude. There are important spatial differences, with the post‐disaster increase in investment unique to the largest cities and provinces with large urban concentrations. We find that more remote rural areas, especially in the North, experience declines in firm sales without the mitigating boost to investment in the disasters’ aftermath. The decline in firms’ sales does not appear to be associated with declines in household incomes in those regions.     

Foreign banks in Japan: A study of a Japanese deregulation process

The deregulation of foreign banks in Japan, although corresponding in broad outline to world-wide trends, has diverged substantially in many particulars from patterns seen elsewhere. It has tended to be excruciatingly slow and piecemeal and to have been of minimal benefit to foreign banks. A review of this process leads to the conclusion that these characteristics result from organisational and political-bureaucratic factors inherent to the Japanese style of government which is, in turn, partially a reflection of Japanese culture. Although these non-economic factors have influenced the specific pattern of change, its overall direction appears to have been consistent with the broader national interest.The authors wish to acknowledge financial support from the Social Science and Humanities Research Council of Canada, the Florsheimer Center for Policy Studies, and the Krueger Center for Financial Research.     

Monetary Policy in the Aftermath of Currency Crises: The Case of Asia

The paper evaluates monetary policy and its relationship with the exchange rate in the five Asian crisis countries. The findings are compared with previous currency crises in recent history. It is found that there is no evidence of overly tight monetary policy in the Asian crisis countries in 1997 and early 1998. There is also no evidence that high interest rates led to weaker exchange rates. The usual tradeoff between inflation and output when raising interest rates suggested the need for a softer monetary policy in the crisis countries to combat recession. However, in some countries, corporate balance sheet considerations suggested the need to reverse overly depreciated currencies through firmer monetary policy.     

Prizes for basic research: Human capital,economic might and the shadow of history

We study the distribution of basic scientific research across countries and time, and explain the process that resulted in the United States becoming the undisputed leader in basic research. Our study is based on the records of scientific awards, and on the data of global economic trends. We investigate the degree to which scale/threshold effects account for the number of prizes won. We constructed a stylized model, predicting a non-linear relationship with lagged relative GDP as an important explanatory variable of a country’s share of prizes. Our empirical research findings find support for these predictions and the presence of a “winner-takes-all” effect.      

A network approach to modeling the multi-echelon spare-part inventory system with backorders and interval-valued demand

A multi-echelon inventory system implies the existence of a hierarchy of stocking locations, and the dependence and interaction between them. We consider a multi-echelon, spare-part inventory management problem with outsourcing and backordering. The problem is characterized by deterministic repair time/cost, and supply and demand that lie within prescribed intervals and that vary over time. The objective is to minimize the total inventory and transportation costs. We develop a network model for problem analysis and present a network flow algorithm for solving the problem. We prove that the Wagner-Whitin property, known for the lot-sizing problem, can be extended to the spare-part inventory management problem under study.     

Macroeconomic effects of IMF-sponsored programs in Latin America: output costs, program recidivism and the vicious cycle of failed stabilizations

We investigate the effects of IMF stabilization programs, and the reasons behind the unusually high IMF activity and relatively low program completion rates in Latin America. We base our tests on a panel, and distinguish between IMF program approvals and completion. We find that Latin America has higher output costs of IMF programs (especially when completed), no improvement in the current account, and a much higher likelihood of program failure and recidivism than other regions. The common finding that entering into an IMF-supported program incurs real short-run costs on the economy is entirely driven by the experiences in Latin America.     

Credit Risk Research: Review and Agenda

This article provides a comprehensive review of scholarly research on credit risk measurement during the last 57 years applying bibliometric citation analysis and elaborates an agenda for future research. The bibliography is compiled using the Institute for Scientific Information (ISI) Web of Science (WOS) database and includes all articles with citations over the period 1960–2016. Specifically, the review is carried out using 1695 articles across 72 countries published in 442 journals by 2928 authors. The findings suggest that credit risk research is multifaceted and can be classified into six streams: (1) defaultable security pricing, (2) default intensity modeling, (3) comparative analysis of credit models, (4) comparative analysis of credit markets, (5) credit default swap (CDS) pricing, and (6) loan loss provisions. The article contributes through synthesizing and identifying existing as well as emerging research streams.     

Capital controls in Brazil – Stemming a tide with a signal?

Controls on capital inflows have been experiencing a renaissance since 2008, with several prominent emerging markets implementing them in recent years. We focus on Brazil, which instituted five changes in its capital account regime in 2008–2011. Using the synthetic control method, we construct counterfactuals (i.e., Brazil with no policy change) for each of these changes. We find no evidence that any tightening of controls was effective in reducing the magnitudes of capital inflows, but we observe some modest and short-lived success in preventing further declines in inflows when the capital controls were relaxed. We hypothesize that price-based capital controls’ only perceptible effect is to be found in the content of the signal they broadcast regarding the government’s larger intentions and sensibilities. In the case of Brazil, its left-of-center government’s willingness to remove controls was perceived as a noteworthy indication that the government was not as hostile to the international financial markets as many expected it to be.