Investment in Africa's Manufacturing Sector: A Four Country Panel Data Analysis

Firm level data for the manufacturing sector in Africa, presented in this paper, shows very low levels of investment. The importance of profit effects on investment is investigated using a flexible accelerator, a specification based on the Euler equation and a simple generalisation of these specificiations. There are controls for firm fixed effects. It is shown that the profit effect is very similar for both the accelerator and Euler equation specifications. A comparison with other studies shows that, for small firms, the effect is much smaller in Africa than for other countries. Reasons for the relative insensitivity of investment to profits in African firms are suggested. For the most general specification tested there are no significant differences in the size of the profit effect across the four countries in the study.     

Budget surpluses and social security reform: U.S. fiscal policy issues in 1998

In 1997 the US President and Congress concluded an agreement that imposed caps on discretionary government spending and which was expected to balance the budget by the year 2002. Just one year later the tide has turned: the fiscal year 1998 resulted in a US budget surplus for the first time since 1969. This article discusses the causes for this surprising development and the link between budget surpluses and Social Security's finances. It also relates some recent proposals on how to preserve the budget surplus for Social Security to the sustainability of fiscal policy.     

The financing of R & D in some socialist countries of Eastern Europe

In the countries of Eastern Europe the financing of R & D represents a difficult problem in terms of economic scientific policy. In these countries it is not only a question of a simple apportionment of centrally-held financial means to subordinate institutions, but also one of supporting promising fields of science, protecting long-term and costly research programmes against risks and losses, and, above all, providing an incentive for R & D institutions to work out economically meaningful R & D results and translate them into economic practice. This last point is of particular importance in a system lacking a free market mechanism. A historical survey of the development of financing methods in the R & D field and of the numerous attempts to reform these methods will show the extent of the efforts made in Eastern Europe (whether successfully or not does not concern us here) to find an adequate solution to these problems.     

Changing interest rate responses to money announcements: 1977–1983

This paper investigates when and how the response of interest rates to money announcements changed in recent years. The response of both short and long rates rises in October 1979, but drops during 1981. During mid-1982, the response of long rates raises again, but without a change in the response of short rates. Despite a number of ex post explanations for these shifts, none of the major hypotheses of why interest rates respond to money announcements provides a complete ex ante explanation of these response shifts.     

Partnerships and the private recruitment industry

This article, based on a postal survey and qualitative interview‐based research, examines the relationship between major private recruitment bureaux and their clients in the UK, with particular attention to the recruitment and selection of temporary workers. The private recruitment industry is growing and large bureaux are seeking closer partnership arrangements with clients. Contracts for labour services are being developed on a 'preferred' supplier basis – similar in type to the approach taken for the purchase or supply of goods or components. However, formal preferred supplier contracts with temporary work bureaux were used by only a minority of clients, usually larger organisations or those having projects or workplaces with high volume demand. While such bureaux seek models of relational contracting or partnering, many clients prefer less fully engaged or 'semi‐distanced' relations facilitated by the informal dimensions of inter‐organisational contacts.     

Bringing Unemployed Back to Work: Effective Active Labor Market Policies

We present a theoretical analysis of different types of active labor market policies in the context of a search-matching model. We find that labor market training is effective in bringing down unemployment while public employment services and subsidized jobs are not effective at all. This theoretical finding is confirmed in an explorative empirical analysis using data from 20 OECD countries.     

Bilateral Search and Vertical Heterogeneity

Just like perfect (frictionless) matching models, a search model is proposed that is characterized by bilateral search and vertical heterogeneity. It allows for a generally specified utility function. The equilibrium allocation is unique and exists in iterated strict dominance. The model is robust with the perfect matching model as frictions disappear. Nonetheless, the equilibrium allocations are surprisingly odd. For multiplicatively separable preferences, the distributions are partitioned endogenously. And for a wide range of preferences, matching sets are naturally disconnected.     

Dutch Economic Growth in Comparative-Historical Perspective, 1500–2000

Our knowledge of nineteenth century Dutch economic performance has been greatly improved by recent research. However, the interpretation of long-run Dutch economic development requires a reexamination of the concepts and generalizations used by economists, which derive mostly from the study of other nations, especially Britain. This article proposes both a reassessment of Dutch economic performance in the very long run, and a reconsideration of the concept of modern economic growth.     

ARBITRAGE BOUNDS FOR PRICES OF WEIGHTED VARIANCE SWAPS

We develop a theory of robust pricing and hedging of a weighted variance swap given market prices for a finite number of co‐maturing put options. We assume the put option prices do not admit arbitrage and deduce no‐arbitrage bounds on the weighted variance swap along with super‐ and sub‐replicating strategies that enforce them. We find that market quotes for variance swaps are surprisingly close to the model‐free lower bounds we determine. We solve the problem by transforming it into an analogous question for a European option with a convex payoff. The lower bound becomes a problem in semi‐infinite linear programming which we solve in detail. The upper bound is explicit. We work in a model‐independent and probability‐free setup. In particular, we use and extend Föllmer's pathwise stochastic calculus. Appropriate notions of arbitrage and admissibility are introduced. This allows us to establish the usual hedging relation between the variance swap and the “log contract” and similar connections for weighted variance swaps. Our results take the form of a FTAP: we show that the absence of (weak) arbitrage is equivalent to the existence of a classical model which reproduces the observed prices via risk‐neutral expectations of discounted payoffs.