THE TRANSMISSION OF MONETARY POLICY UNDER THE REPO SYSTEM IN SOUTH AFRICA: AN EMPIRICAL ANALYSIS♣

The study examines the influence of the repo rate on the interbank rate and analyses whether the transmission channels of interest rates have changed since the adjustment to the repo system in September 2001. The paper employs the Granger causality test using the ECM framework. The results suggest that the influence of the repo rate on the interbank rate was stronger before the adjustments to the system were made. The interbank rate and the repo rate were found to “reverse” roles in the period after the adjustments to the system. Our results show that the changes to the repo system in 2001 did not lead to the achievement of the intended transmission channel; instead it was found that the system in place before the changes were made was in fact already achieving the transmission path that the authorities hoped to accomplish by changing the system.     

International Technology Transfers and Competition*

This paper analyzes North–South technology transfers in a model of oligopolistic competition and spatial product differentiation. Two firms in the North supply a high‐tech good and a technically related low‐tech good. They decide about licensing the low‐tech good to suppliers in the South. With the license Southern firms get access to technology from the North, which enables them—with a certain probability—to enter the market for the high‐tech good. Northern firms may therefore license strategically to influence the competitive environment in the high‐tech market. In this setting, multiple equilibria with and without licensing may arise, and the resulting outcomes may be inefficient from the viewpoint of the Northern firms.     

Why costless auditing may reduce social welfare

We analyze a model where both a regulator and a firm may detect and stop bad projects. We show that full auditing by the regulator may be socially suboptimal even with zero auditing costs. The reason is that the firm's own auditing incentive may be crowded out when protected by limited liability. The optimal policy depends on the firm's wealth.     

Safety regulation and monitor liability

We propose a simple liability rule when several agents are jointly responsible for monitoring a risky economic activity or certifying its security. Examples are safety controls for drugs or technical systems, environmental liability, or air safety accidents. The agents have private knowledge of their monitoring or avoidance costs. We adopt a mechanism design approach to ensure optimal monitoring incentives. Our innovation is to focus on information that is available or can be proxied when harm has occurred and when typically regulators and/or courts deliberate over fines and damages. By contrast, earlier proposals require more estimations of hypothetical accident scenarios and their ex ante probabilities. We argue that our rule promises substantial savings in information costs for courts and regulators and excludes likely sources of errors. Received: 11 October 2000 / Accepted: 14 September 2001 We are grateful to Doug Bernheim, Lewis Kornhauser, Kai-Uwe Kühn and an anonymous referee for helpful comments and discussions, and to an associate editor in particular for very valuable suggestions. Financial support from the European Commission (TMR Grant ERBFMBICT 972827) and from Thyssen Foundation is gratefully acknowledged.     

REVENUE SHARING IN PROFESSIONAL SPORTS LEAGUES

We employ a model of n heterogenous profit-maximizing clubs to analyze the impact of revenue sharing in professional sports leagues on competitive balance. Revenues of each club depend on absolute quality, relative quality and on competitive balance itself so that our model captures much of the preceding literature as special cases. We show that revenue sharing always increases competitive balance if clubs differ only with respect to the impact of absolute quality on revenues. On the contrary, revenue sharing reduces competitive balance if only clubs' relative qualities play a role for revenues or if only two teams are considered.     

Values in Decision-Making Processes: Systematic Structures of J. Habermas and N. Luhmann for the Appreciation of Responsibility in Leadership

"Ethical Leadership" in modern multicultural corporations is first the consideration of different personal and cultural value systems in decision-making processes. Second, it is the assignment of responsibility either to individual or organisational causalities. The task of this study is to set the stage for a distinction between rational entities and the arbitrary preferences of individuals in economic decision making processes.Defining rational aspects of behaviour in economics will lead to the formal structures of organisational systems, which are independent of concrete but varying values. Luhmann's Theory of systems of communication describes the internal dynamic forces of economic communication processes in terms of formal structures. On the other hand Habermas' Theory of discourse integrates the previous relationship between individual subjectivity and rational behaviour. Habermas gives an indication of how to separate subjective values and meaning from rational arguments in rational communication processes. The translation of these theoretical structures into practical applications for decision making processes and decision taking acts links the ethical, or value-oriented, context precisely to both individual and organisational areas of responsibility.     

The limits of leverage

When trading incurs proportional costs, leverage can scale an asset's return only up to a maximum multiple, which is sensitive to its volatility and liquidity. In a model with one safe and one risky asset, with constant investment opportunities and proportional costs, we find strategies that maximize long‐term returns given average volatility. As leverage increases, rising rebalancing costs imply declining Sharpe ratios. Beyond a critical level, even returns decline. Holding the Sharpe ratio constant, higher asset volatility leads to superior returns through lower costs.     

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