The anticipated and concurring effects of the EMU: exchange rate volatility, institutions and growth

Reduced exchange rate volatility and higher and less heterogeneous quality of institutional rules and macroeconomic policies are two of the main (anticipated and concurring) effects expected from a currency union.In this paper, we measure the magnitude of these two effects for the Eurozone countries looking at real effective exchange rates (REER) and at different indicators of quality of institutional rules and macroeconomic policies (QIRMP). We find that the first effect is much stronger than the second when we compare relative changes for Eurozone countries and the rest of the world in the relevant period.We further evaluate the impact of both effects on economic growth on a larger sample of countries. Our findings show that both have significant impact on levels (more robust) and on rates of growth (weaker) of per capita GDP.     

Using technology to improve the management of development impacts on biodiversity

The mitigation hierarchy (MH) is a prominent tool to help businesses achieve no net loss or net gain outcomes for biodiversity. Technological innovations offer benefits for business biodiversity management, yet the range and continued evolution of technologies creates a complex landscape that can be difficult to navigate. Using literature review, online surveys, and semi-structured interviews, we assess technologies that can improve application of the MH. We identify six categories (mobile survey, fixed survey, remote sensing, blockchain, data analysis, and enabling technologies) with high feasibility and/or relevance to (i) aid direct implementation of mitigation measures and (ii) enhance biodiversity surveys and monitoring, which feed into the design of interventions including avoidance and minimization measures. At the interface between development and biodiversity impacts, opportunities lie in businesses investing in technologies, capitalizing on synergies between technology groups, collaborating with conservation organizations to enhance institutional capacity, and developing practical solutions suited for widespread use.     

Cross-country differences in monetary policy execution and money market rates’ volatility

Volatility patterns in overnight interest rates display differences across industrial countries that existing models—designed to replicate the features of individual countries’ markets—cannot account for. This paper presents an equilibrium model of the overnight interbank market that matches cross-country differences in patterns in interest volatility by incorporating differences in how central banks manage liquidity in response to shocks. Our model is consistent with central banks’ practice of rationing access to marginal facilities when the objective of stabilizing short-term interest rates conflicts with another high-frequency objective, such as an exchange rate target.     

The Role of Informational and Congruence Clues in Advertisement for an Ethnic Restaurant

This study analyzes the effect of informational clues and Chef-Cuisine congruence, and their relation to advertisements for a Japanese restaurant. Two experiments were conducted with 171 consumers. Findings supported the following: Congruence between a Japanese restaurant and Japanese Chef results in higher approval ratings than the combination of Japanese restaurant with Brazilian Chef. However, if the advertisement states that the restaurant has won an award, then Chef-restaurant congruence is no longer an important factor in consumers’ evaluations.     

Endogenous market structures and antitrust policy

I revisit the post-Chicago approach to antitrust issues examining markets whose structure is endogenous. The usual analysis of oligopolies with strategic interactions and an exogenous number of firms is extended to the case of endogenous entry, which determines the degree of market power. The role of predation is evaluated within a generalization of the contestability theory to strategic interactions. Endogenous entry requires a revision of our understanding of the role of incumbents in pricing, producing in the presence of network externalities, bundling products, price discriminating, and delegating to retailers through vertical restraints: when entry is endogenous, leaders adopt aggressive strategies typically without exclusionary purposes and without reducing welfare. Endogenous entry has also implications for the analysis of mergers, that take place only if they create enough cost efficiencies and do not harm consumers, beneficial concentration, technology transfers, and cartels. The spirit of the policy recommendations of the Chicago school is broadly supported by our analysis.     

A model of market making with heterogeneous speculators

I introduce an optimizing monopolistic market maker in an otherwise standard setting à la Brock and Hommes (J Econ Dyn Control 22(8–9):1235–1274, 1998) (BH98). The market maker sets the price of a zero-yielding asset taking advantage of her knowledge of speculators’ demand, manages her inventory of the asset and eventually earns profits from trading. The resulting dynamic behavior is qualitatively identical to the one described in BH98, showing that the results of the latter are independent from the institutional framework of the market. At the same time, I show that the market maker has conflicting effects. She acts as a stabilizer when she allows for market imbalances, while she acts as a destabilizer when she manages aggressively her inventories and when she trades, especially if she acts as fundamentalist or if she is a strong extrapolator. Indeed the more stable institutional framework is one in which the market makers are inventory neutral and doesn’t trade but, even in this case, the typical complex behavior of BH98 occurs.

     

INFORMATION IN THE YIELD CURVE: A MACRO‐FINANCE APPROACH

We use a macro‐finance model, incorporating macroeconomic and financial factors, to study the term premium in the US bond market. Estimating the model using Bayesian techniques, we find that a single factor explains most of the variation in bond risk premiums. Furthermore, the model‐implied risk premiums account for up to 40% of the variability of one‐ and two‐year excess returns. Using the model to decompose yield spreads into an expectations and a term premium component, we find that, although this decomposition does not seem important to forecast economic activity, it is crucial to forecast inflation for most forecasting horizons. Copyright © 2012 John Wiley & Sons, Ltd.