MONETARY POLICY WITH A WIDER INFORMATION SET: A BAYESIAN MODEL AVERAGING APPROACH

Monetary policy has been usually analyzed in the context of small macroeconomic models where central banks are allowed to exploit a limited amount of information. Under these frameworks, researchers typically derive the optimality of aggressive monetary rules, contrasting with the observed policy conservatism and interest rate smoothing. This paper allows the central bank to exploit a wider information set, while taking into account the associated model uncertainty, by employing Bayesian model averaging with Markov chain model composition. In this enriched environment, we derive the optimality of smoother and more cautious policy rates, together with clear gains in macroeconomic efficiency.     

Public Investment in Transportation Infrastructure and Economic Performance in Portugal

In this paper, we use a VAR approach to investigate the effects of public investment in transportation infrastructures on private investment, employment, and output in Portugal. Estimation results suggest that public investment crowds in private investment and employment, and has a strong positive effect on output. We estimate that one euro in public investment increases output in the long‐term by 9.5 euros, which corresponds to a rate of return of 15.9%. These figures imply that there are strong long‐term budgetary benefits from public investment in the form of increased future tax revenues. A closer look at the effects of different types of public investment uncovers the same general patterns. These results are very important from a public policy perspective. They suggest that the strategy followed by the Portuguese authorities of investing in public infrastructures is justified, both from a long‐term development perspective and a long‐term public budgetary perspective.     

The potential for underinvestment in internet security: implications for regulatory policy

With the continuing growth of the use of the Internet for business purposes, the consequences of a possible cyber attack that could create a large scale outage of long time duration becomes a more and more serious economic issue. In this paper, we construct a game-theoretic model that addresses the economic motivations for investment in added Internet security and makes a case for a possible market failure in the form of underinvestment in the provision of Internet security. This result relies on the fact that the social value derived from consumption (which is at least equal to a fraction of the surplus derived from e-commerce) greatly exceeds the revenue at stake associated with the telecommunications companies’ and ISP’s security levels. If the ratio of social value to revenue at stake to Internet providers continues to grow, the likelihood of underinvestment in security becomes higher and some form of regulation may become necessary. We discuss the difficulties associated with designing and enforcing a regulatory scheme based upon mandatory security standards.      

Income Diversification and Bank Performance: Evidence from Italian Banks

Using annual data from Italian banks, we study the link between non-interest revenues and profitability. We find that income diversification increases risk-adjusted returns. Our results provide econometric evidence consistent with current studies on EU banks, but do not support findings on the U.S. experience. In our view, the differences depend primarily on the relative importance of local banks: we find that the relation is stronger at large banks. In addition, we find that there are limits to diversification gains as banks get larger. Small banks can make gains from increasing non-interest income, but only when they have very little non-interest income share to start with. The source of non-interest income is less important than its level.

THE CAUSAL LINK BETWEEN FINANCIAL INCENTIVES AND WEIGHT LOSS: AN EVIDENCE‐BASED SURVEY OF THE LITERATURE

Obesity and overweight are linked to diseases that cost society a significant amount of resources. While behavior modification can reduce the problem, instigating such lifestyle changes is an uneasy task. One potential way to reduce the problem is through the use of financial incentives. In this survey, we review the available evidence, properly emphasizing studies that credibly yield meaningful estimates of the effect of financial incentives on weight loss. We find that the scientific literature on the subject has not yet satisfactorily settled whether such a mechanism is effective at eliciting the desired behavioral and health outcomes. We therefore advocate a rigorous large‐scale randomized experiment to provide reliable estimates of the effect.     

Takings, litigation, and just compensation

A constitutional right to just compensation for governmental takings implies a right to a judicial review of the adequacy of the compensation. Thus, a property owner, subjected to a takings action, can threaten to litigate if he considers compensation insufficient. This paper uses a theoretic settlement-litigation analysis to demonstrate how the litigation threat influences the size of the compensation. In addition, it revises the theoretical explanation for earlier empirical findings that certain classes of property owners often receive more than market value for their property. It is also shown that the just compensation mechanism cannot guarantee efficient takings. Extending the basic model to regulatory takings, this paper demonstrates that recent changes in the judicial doctrine of when a regulation has gone too far and demands compensation has strengthened the litigation threat of property owners. It explains why political decisionmakers are moving toward settlements with terms which are increasingly defined by legislation.     

Family-centered goals,family board representation,and debt financing

Small Business Economics - This study investigates the effect of both family-centered goals and family board representation (family member representation on the board of directors) on family firm...     

Plastic Money Diffusion and Usage: An Empirical Analysis on Italian Households

This paper tries to contribute to the empirical literature on the European consumers’ plastic money payment habits, using the Bank of Italy data over the 1993–2008 period. In line with other evidence on this topic, mainly focused on the US economy, we find that age, education, non‐durable consumptions, regional variation and income are strong predictors of plastic money possession and use in Italy. We also find that households with a higher indebtedness level have a higher propensity to hold credit cards. Furthermore, we find that technological improvements, observed in the last 15 years, do not significantly affect the marginal probabilities to hold and use plastic money conditioned to the main socio‐demographic factors.     

Charisma,paternalism, and business leadership in Latin America

If populist politics reveals a paradigm, in countries where populist politics are acceptable, effective paternalistic business leaders must offer unlimited protection in exchange for similarly unlimited allegiance from the workers. The reverse interview survey reported here suggests that, within knowledge‐based industries, the knowledgeable leader might override paternalistic considerations that nonetheless rule for the larger segment of Brazilian workers, who may shun the foreign‐appointed boss the most. Unfortunately, multinationals tend to expand abroad when they are mature businesses whose people‐oriented founders may be long gone. Their more technocratic successors are more likely to appoint the most despised leaders at subsidiaries. © 2010 Wiley Periodicals, Inc.