Unemployment as an Adverse Trigger Event for Mortgage Default

The Journal of Real Estate Finance and Economics - There is limited evidence of the role of household-level adverse trigger events in driving mortgage default, and the evidence based on proxies,...     

Flypaper Effect and Sluggishness: Evidence from Regional Health Expenditure in Italy

In Italy, public expenditure reduction is achieved through a revision of social security and health care programs. In particular, public health expenditure control has been implemented through a reform that imposes more stringent budget rules to local governments and a considerable reduction in grants-in-aid from the central government. This paper investigates empirically whether the response to this decrease in categorical lump-sum grants from the central to local governments results in an asymmetric response to intergovernmental grants. Hard budget and soft budget constraint hypotheses are estimated by using a sample of cross-sectional and time observations covering the 20 Italian regions over the period 1989–1993. The main finding is the existence of a standard and a super flypaper effect in both models. The introduction of the soft-budget constraint hypothesis results in a stronger effect of grants and a lower response of own resources which shows that local governments prefer to incur some deficit instead of reducing health care expenditure.     

Leveraging on systemic learning to manage the early phases of product innovation projects

A number of studies have pointed out the importance of the early phases of new product development projects. In fact, these phases (addressed in the literature with different names, such as pre-project activities, concept generation, product planning, idea generation, investigation, product definition) are concerned with a number of critical decisions that have great impact on the performance of product development. Any fault occurring in these early phases in understanding the market needs, in choosing the product architecture and technology and in defining the product specifications would eventually deteriorate the innovation process, since adjustments in later stages imply reworks that are costly and time consuming. Although the relevance of early project phases has been empirically verified in the literature, the mechanisms that allow these phases to be properly managed are still largely unexplored. This paper investigates the articulated and coherent set of methods, organizational mechanisms and behavioural patterns that successful companies adopt to manage concept generation and product planning. Inferences are based on a field research concerning 19 in-depth case studies of Italian and Swedish companies in the vehicles, helicopters and white goods industries. The paper supports findings of other studies concerning the importance of teamworking and communication. However, teamworking emerges as a necessary, but not a sufficient mechanism. Systemic learning from past experiences is the real keystone toward an effective management of the early phases of product development processes.     

Discretionary monetary policy and the zero lower bound on nominal interest rates

Ignoring the existence of the zero lower bound on nominal interest rates one considerably understates the value of monetary commitment in New Keynesian models. A stochastic forward-looking model with an occasionally binding lower bound, calibrated to the U.S. economy, suggests that low values for the natural rate of interest lead to sizeable output losses and deflation under discretionary monetary policy. The fall in output and deflation are much larger than in the case with policy commitment and do not show up at all if the model abstracts from the existence of the lower bound. The welfare losses of discretionary policy increase even further when inflation is partly determined by lagged inflation in the Phillips curve. These results emerge because private sector expectations and the discretionary policy response to these expectations reinforce each other and cause the lower bound to be reached much earlier than under commitment.     

Managing supply chain resilience to pursue business and environmental strategies

Resilience has become a crucial topic in the field of strategic management as it requires companies to design resilient business models to tackle managerial and environmental disruptions of individual firms and supply chains. However, extant research still lacks deep insights into how companies design and manage supply chains according to the resilience principles. With this premise, this paper aims at conducting a state of the art review on supply chain resilience (SCR) considering 125 relevant papers collected from Scopus and Web of Science academic search engine. Starting from the results of the literature review, this study proposes a systemic framework of SCR assessment and contributes to improve the understanding of the impact of different empirically tested constructs on the development of the resilience concept. Further, the findings are summarized in several areas including barriers in developing resilience, metrics to measure the resilience performance, and effective strategies to foster the SCR. Finally, this study outlines promising future research directions for scholars and practitioners.     

High involvement work practices and firm performance

During the past two decades the chain of three links organizational strategy – human resources practices – organizational performance has been deeply analysed. However, the mediator role of organizational structure in the first link of this chain remains relatively uninvestigated. In this article we analyse a model of relationships among organizational strategy, organizational structure, human resources practices, and organizational performance. Through a structural equation methodology applied to a sample of 183 Spanish companies, we will try to confirm that organizations with differentiation strategies are more likely to implement high involvement work practices. As a novelty we will introduce organizational structure as a mediator of this relationship. For that we will use the construct control mechanisms (centralization, formalization and socialization). Further, we will analyse the effect on firm performance of these proposed relationships among differentiation strategy, control mechanisms and high involvement work practices.     

The Italian hedge funds industry: An empirical analysis of performance and persistence

This study analyses Italian hedge funds performance and persistence. The peculiarity of the Italian hedge fund industry is that 95% of the hedge funds are funds of hedge funds (FoHF), whereas only 5% of them employ other investment styles. Using monthly data on FoHF provided by MondoHedge, we examine the impact of both market variables and funds’ own characteristics on funds performance using panel data. We find that the European, the Japanese and the emerging markets equity markets, and the commodity market have a positive impact on Italian FoHF performances, while the US Bond Market negatively affects them. Moreover, we find performance fees and notice days to have a negative impact on funds performances. Finally, we test the presence of performance persistence. Employing two different nonparametric methods, we find that funds performances are persistent on a monthly and quarterly basis, while the regression-based parametric method provides evidence of persistence only on a monthly basis.     

The Role of Bank and Corporate Balance Sheets on Early Warning Systems of Currency Crises—An Empirical Study

This study analyzes the role of bank and corporate balance sheets on early warning systems (EWS) of currency crises. Using firm-level data on debt structure, leverage, liquidity, and profitability, this study presents estimations of EWS for a panel of emerging markets. Using calibration experiments, we assess the performance of alternative EWS specifications in a comprehensive range of crisis-probability cut-offs?. These models supplement EWS based on traditional macroeconomic indicators, improving forecasting performance substantially. The results support the third-generation models of currency crises and can assist policymakers on the design of surveillance strategies tailored for heterogeneous levels of risk tolerance and country specificities.     

Liquidity Crises and Corporate Cash Holdings in Chile

This paper addresses the heterogonous effects of adverse liquidity shocks on corporate cash holdings in an emerging market. We use a large panel dataset with quarterly financial information for Chilean firms during the period 1996–2009. We find three main results. First, liquidity crises have had a negative and economically significant effect on cash holdings, but mainly for small firms; medium‐sized and large firms have not been affected by liquidity crises. Second, liquidity crises reduce the ability of firms to adjust to optimal cash holdings. Finally, medium‐sized firms are less able to adjust cash holdings compared to small and large firms.     

International deflation risks under alternative macroeconomic policies

We use a version of the Global Projection Model covering the United States, Euro area and Japan to assess options for dealing with the looming risk of international deflation. The zero floor to interest rates constrains monetary policy. Confidence intervals, derived from stochastic simulations, indicate ranges of uncertainty. The results suggest a high probability of a declining price level for a couple of quarters in 2009. Suitable policy adaptations reduce the risk that this might turn into a prolonged, global deflation. These include: a price level path target for monetary policy, which would respond to previous, as well as expected, shortfalls from the desired inflation rate; a more stimulative fiscal policy; and an increase in the long-run target for inflation.