Sub-sovereign bond buyback: a way forward for debt-laden regions in austerity

ABSTRACT

Previous academic literature has criticised bond buyback as a ‘”boondoggle” benefiting a country’s creditors’—meaning that buybacks are a wasteful use of public money. This paper challenges the narrow financial–economic perspective behind that statement by adopting a broader socio-political framework that includes the potential benefits of buyback for citizens, not just financial market costs. In particular, buyback does not necessarily require a budget surplus via higher local taxes and/or increased austerity measures.     

Easter Island’s collapse: a tale of a population race

The Easter Island tragedy has become an allegory for ecological catastrophe and a warning for the future. In the economic literature the collapse is usually attributed to irrational or myopic behavior in the context of a fragile ecosystem. In this paper we propose an alternative story involving non-cooperative bargaining between clans to share the crop. Each clan’s bargaining power depends on its threat level when fighting a war. The biggest group has the highest probability of winning. A clan’s fertility is determined ex ante by each group. In the quest for greater bargaining power, each clan’s optimal size depends on that of the other clan, and a population race follows. This race may exhaust the natural resources and lead to the ultimate collapse of the society. In addition to well-known natural factors, the likelihood of a collapse turns out to be greater when the cost of war is low, the probability of succeeding in war is highly responsive to the number of fighters, and the marginal return to labor is high. We analyze whether these factors can account for the difference between Easter and Tikopia Islands. The paper also makes a methodological contribution in that it is the first fertility model to include strategic complementarities between groups’ fertility decisions.      

Is the Middle East an Optimum Currency Area? A Comparison of Costs and Benefits

This paper examines the macroeconomic costs and benefits of adopting a common currency for 13 Middle Eastern countries. Economic theory suggests that the main benefit is enhanced price stability, while the main cost is higher business-cycle volatility if the member country’s output is not sufficiently correlated with the area’s, as a whole. Using data from 1980–2005, the paper finds that the estimated cost and benefit measures exhibit substantial variability across the countries and are sometimes positively correlated. Moreover, focusing on the results for the last decade, it seems that many Middle Eastern countries (such as Bahrain, Kuwait, Libya, Oman, Qatar, Saudi Arabia, Syria and United Arab Emirates) have achieved remarkable convergence both in business-cycle synchronization and inflation outcomes.

Unravelling the design process of business models from linear to circular: An empirical investigation

In the last years, circular economy has represented one of the most-debated topics in management research. Although the understanding of this industrial paradigm has significantly improved over the last decade, a number of important research questions still remain unanswered. Among them, the design process of business model through which established firms evolve from being linear to circular deserves further investigation. Existing research still falls short to investigate how companies design the dimensions of value creation, value transfer, and value capture of their business models to launch circular products into the market. By leveraging a multiple case study analysis of four companies in the paper and beverage industries that have launched six circular products, the paper examines the process that these companies have followed to face the transition toward a circular business model. The paper contributes to the research field in the intersection between new product development and circular business models, by showing that the process toward a circular business model occurs along three major phases, that is, idea generation, product development, and commercialization. In each phase, companies implement peculiar managerial practices for launching circular products into the market, which typically address all the dimensions of the business model and follows a recurrent path over time.     

Over the ROC methodology: Productivity,economic size and firms’ export thresholds

We identify the minimum combinations of productivity and “economic size” that Italian manufacturing firms need to achieve in order to access international markets. These “export thresholds” are estimated by applying, for the first time in economics, the ROC (receiver operating characteristics) methodology. In this way, we detect a model‐based (rather than a subjectively determined) cut‐off that allows to identify exporters and nonexporters and provides a measure of each firm’s distance from the export threshold. This methodology also paves the way to investigate other determinants of thresholds, thus helping to design more effective policy interventions to reduce barriers to trade.     

A first look at online reputation on Airbnb,where every stay is above average

Marketing Letters - Judging by the millions of reviews left by guests on the Airbnb platform, this trusted community marketplace for accommodations is fulfilling its mission of matching travelers...     

What drives a donor? A machine learning-based approach for predicting responses of nonprofit direct marketing campaigns

Direct marketing campaigns are one of the main fundraising sources for nonprofit organizations and their effectiveness is crucial for the sustainability of the organizations. The response rate of these campaigns is the result of the complex interaction between several factors, such as the theme of the campaign, the month in which the campaign is launched, the history of past donations from the potential donor, as well as several other variables. This work, applied on relevant data gathered from the World Wide Fund for Nature Italian marketing department, undertakes different data mining approaches in order to predict future donors and non-donors, thus allowing for optimization in the target selection for future campaigns, reducing its overall costs. The main challenge of this research is the presence of thoroughly imbalanced classes, given the low percentage of responses per total items sent. Different techniques that tackle this problem have been applied. Their effectiveness in avoiding a biased classification, which is normally tilted in favor of the most populated class, will be highlighted. Finally, this work shows and compares the classification results obtained with the combination of sampling techniques and Decision Trees, ensemble methods, and Artificial Neural Networks. The testing approach follows a walk-forward validation procedure, which simulates a production environment and reveals the ability to accurately classify each future campaign.     

Long-run Effective Demand in the US Economy: An Empirical Test of the Sraffian Supermultiplier Model

The Sraffian supermultiplier is a model of demand-led growth that stresses the importance of the autonomous components of aggregate demand (exports, public spending and autonomous consumption). This article tests empirically some major implications of the model employing macroeconomic data for the United States. In particular, we study the long-run relation between autonomous demand and output through cointegration analysis. The results suggest that autonomous demand and output are cointegrated and that autonomous demand exerts a long-run effect on output. There is also some evidence of simultaneous causality, especially in the short-run. Movements in autonomous demand and in the investment share are also found to be positively related, with Granger-causality going from Z to I/Y.     

Distribution of wealth and incomplete markets: Theory and empirical evidence

This paper analyses the equilibrium distribution of wealth in an economy where firms’ productivities are subject to idiosyncratic shocks, returns on factors are determined in competitive markets, households have linear consumption functions and government imposes taxes on capital and labour incomes and equally redistributes the collected resources to households. The equilibrium distribution of wealth is explicitly calculated and its shape crucially depends on market incompleteness. With incomplete markets it follows a Paretian law in the top tail and the Pareto exponent depends on the saving rate, on the net return on capital, on the growth rate of population, and on portfolio diversification. The characteristics of the labour market crucially affects the bottom tail, but not the upper tail of the distribution of wealth in the case of completely decentralized labour market. The analysis also suggests a positive relationship between growth and wealth inequality. The theoretical predictions find a corroboration in the empirical evidence of United States in the period 1989-2004.     

Optimal Portfolio Choice Under Decision‐Based Model Combinations

We propose a density combination approach featuring combination weights that depend on the past forecast performance of the individual models entering the combination through a utility‐based objective function. We apply this model combination scheme to forecast stock returns, both at the aggregate level and by industry, and investigate its forecasting performance relative to a host of existing combination methods, both within the class of linear and time‐varying coefficients, stochastic volatility models. Overall, we find that our combination scheme produces markedly more accurate predictions than the existing alternatives, both in terms of statistical and economic measures of out‐of‐sample predictability. Copyright © 2016 John Wiley & Sons, Ltd.