The global credit boom: Challenges for macroeconomics and policy

The recent financial crisis has put the spotlight on the rapid rise in credit which preceded it. In this paper, we provide an empirical and theoretical analysis of the credit boom and the macroeconomic context in which it developed. We find that the boom was unusually long and associated with neither particularly strong growth nor rising inflation in the economies in which it took place. We show that this type of credit and financial cycle is hard to reconcile with existing economic theory and argue that, while the “global savings glut” may account for the cycle's initial phase, other factors – such as the conduct of monetary policy and perceptions of declining macroeconomic risk – were more important from the mid-2000s onwards. We conclude by identifying some of the challenges now facing macroeconomics and policy.     

Entrepreneurship: Cause and Consequence of Financial Optimism

Extant evidence that the self‐employed overestimate their returns by a greater margin than employees is consistent with two mutually inclusive possibilities. Self‐employment may foster optimism or intrinsic optimists may be drawn to self‐employment. Previous research is generally unable to disentangle these effects because of reliance on cross‐sectional data. Using longitudinal data, this paper finds that employees who will be self‐employed in the future overestimate their short‐term financial wellbeing by more than those who never become self‐employed. Optimism is higher still when self‐employed. These results suggest that the greater optimism of the self‐employed reflects both psychological disposition and environmental factors. By providing greater scope for optimism, self‐employment entices the intrinsically optimistic.     

Which International Institutions Promote International Trade?

This paper estimates the effect on international trade of three multilateral organizations intended to increase trade: (1) the World Trade Organization (WTO) and its predecessor the General Agreement on Tariffs and Trade (GATT); (2) the International Monetary Fund (IMF); and (3) the Organisation for Economic Co‐operation and Development (OECD) and its predecessor the Organisation for European Economic Co‐operation (OEEC). I use a standard “gravity” model of bilateral merchandise trade and a large panel dataset covering over 50 years and 175 countries. My results indicate that OECD membership has had a consistently large positive effect on trade, while accession to the GATT/WTO also increases trade.     

Management accounting,performance measurement and strategy in English local authorities

This paper analyses the results of an extensive survey of UK local government which explored the relationship between strategy, management accounting practices (MAPs), and performance measurement techniques (PMTs). The research investigated a resource-based view of strategic capabilities and Porter’s strategic typologies. PMTs and MAPs were shown to be associated with strategic capabilities. Strategic typologies, however, were found to be only weakly associated with the use of PMTs and MAPs.     

Pathways After Default: What Happens to Distressed Mortgage Borrowers and Their Homes?

We use a detailed dataset of seriously delinquent mortgages to examine the dynamic process of mortgage default—from initial delinquency and default to final resolution of the loan and disposition of the property. We estimate a two-stage competing risk hazard model to assess the factors associated with post-default outcomes, including whether a borrower receives a legal notice of foreclosure. In particular, we focus on a borrower’s ability to avoid a foreclosure auction by getting a modification, by refinancing the loan, or by selling the property. We find that the outcomes of the foreclosure process are significantly related to: loan characteristics including the borrower’s credit history, current loan-to-value and the presence of a junior lien; the borrower’s post-default payment behavior, including the borrower’s participation in foreclosure counseling; neighborhood characteristics such as foreclosure rates, recent house price depreciation and median income; and the borrower’s race and ethnicity.     

Technical innovation and 3.5 mobile phone generation: Lessons from Korea

In 1996, the Korean mobile communication market was the first in the world to commercialize the code division multiple access (CDMA). Since then, the voice-based mobile phone market has continued to grow and has now reached near saturation. Having recognized the potential of the mobile data service as a new source of profit, telecommunication operators are scrambling to evolve 3.5 generation (3.5G) technology in order to lead market competition. Recently, the Korean 3.5G mobile telecom market has faced stiff competition from CDMA-based EVDO Rev.A and global system for mobile telecommunications (GSM)-based high-speed downlink packet access (HSDPA). In addition, the world's first wireless LAN-based wireless broadband internet (WiBro) service was commercialized in June, 2006. This paper reviews the current status of the 3.5G technology and analyzes the service standardization strategies from the viewpoint of technological evolutions. This paper also suggests implications for Korea's specific circumstances where different mobile telecom technologies complement and compete with one another. Korea's experiences may serve as important lessons for other countries or operators who try to introduce the 3G and look beyond mobile telecom technologies.     

The antitrust implications of electronic business-to-business marketplaces

Electronic marketplaces (e-marketplaces) allow networks of buyers and sellers to conduct business online and to exchange information more efficiently using Internet technology. Despite the benefits that e-marketplaces potentially afford firms, concerns have been raised that these markets may damage competition and potentially violate antitrust laws. This study considers the antitrust legislation related to e-marketplaces and examines the possible antitrust concerns that they raise. Potentially anticompetitive features of e-marketplaces are examined and guidance for firm conduct when creating or participating in an e-marketplace is offered.     

Quantiles, expectiles and splines

A time-varying quantile can be fitted by formulating a time series model for the corresponding population quantile and iteratively applying a suitably modified state space signal extraction algorithm. It is shown that such quantiles satisfy the defining property of fixed quantiles in having the appropriate number of observations above and below. Like quantiles, time-varying expectiles can be estimated by a state space signal extraction algorithm and they satisfy properties that generalize the moment conditions associated with fixed expectiles. Because the state space form can handle irregularly spaced observations, the proposed algorithms can be adapted to provide a viable means of computing spline-based non-parametric quantile and expectile regressions.     

Theoretical foundations of sustainable economic welfare indicators — ISEW and political economy of the disembedded system

The conceptual foundations of the Index of Sustainable Economic Welfare (ISEW) are surveyed and critiqued. It is argued that the three underlying theories of community, psychic income, and social welfare economics supply certain theoretical foundations for the ISEW. The focal point of the theories is to evaluate the positives and negatives of economic growth, with the hope of achieving a practical measure of sustainable economic welfare. However, they are not as well developed as they should be: the three theories have partial, underdeveloped explanations of the benefits (services) and costs (disservices) generated in the system. The theoretical particulars of ISEW abstract from the workings of the capitalist system, because the ISEW advocates have not specified a society in the socioeconomic system which we currently have. Specifically, there is no underlying linked systems view of the disembedded economy — where the exchange economy tends to dominate other aspects of culture. Without a systematic understanding of the political economy of capitalism, the ISEW is potentially flawed in design. Therefore, there is a need to search for a critical approach to sustainable economic welfare. As a point of departure, it is better to have a political economy theory. The political economy of the disembedded system provides an alternative theoretical approach to ISEW.     

Can national infrastructure spending reduce local unemployment? Evidence from an Australian roads program

We examine the effect of a federally-funded local infrastructure spending program on local unemployment rates. To address the likely funding endogeneity problem, we exploit variation in spending due to pork-barreling, and find that higher government expenditure on roads substantially reduces local unemployment.