Welfare and excess volatility of exchange rates

We study the properties of a GEI model with nominal assets, outside money (injected into the economy as in Magill and Quinzii (J Math Econ 21:301–342, 1992)), and multiple currencies. We analyze the existence of monetary equilibria and the structure of the equilibrium set under two different assumptions on the determination of the exchange rates. If currencies are perfect substitutes, equilibrium allocations are indeterminate and, generically, sunspot equilibria exist. Generically, given a nonsunspot equilibrium, there are Pareto improving (and Pareto worsening) sunspot equilibria associated with an increase in the volatility of the future exchange rates. We interpret this property as showing that, in general, there is no clear-cut effect on welfare of the excess volatility of exchange rates, even when due to purely extrinsic phenomena.     

Prices versus quantities: environmental regulation and imperfect competition

By exercising market power, a firm will distort the production, and therefore the emissions decisions, of all firms in the market. This paper examines how the welfare implications of strategic behavior depend on how pollution is regulated. Under an emissions tax, aggregate emissions do not affect the marginal cost of polluting. In contrast, the price of tradable permits is endogenous. I show when this feedback effect increases strategic firms’ output. Relative to a tax, tradable permits may improve welfare in a market with imperfect competition. As an application, I model strategic and competitive behavior of wholesalers in a Mid-Atlantic electricity market. Simulations suggest that exercising market power decreased emissions locally, thereby substantially reducing the regional tradable permit price. Furthermore, I find that had regulators opted to use a tax instead of permits, the deadweight loss from imperfect competition would have been even greater.     

The irrelevance of normative considerations for founding an Austrian law and economics: Reply to Marciano

In a comment on my paper, ??An Austrian approach to law and economics, with special reference to superstition?? (Leeson 2012), Marciano contends that Posnerian foundations ??may be problematic for an Austrian approach to law and economics??. In this reply I argue that the differences between Posner and Austrians that Marciano uses as the basis for his contention are normative. If, as Austrians claim, Austrian economics is purely positive, those differences are irrelevant to the appropriate foundations for an Austrian law and economics. They pose no problem for a Posnerian founding.     

Interpartner Legitimacy in the Alliance Development Process*

abstract We propose a framework to understand interpartner legitimacy in strategic alliances. Interpartner legitimacy is the mutual acknowledgment by the alliance partners that their actions are proper in the developmental processes of the alliance. We argue that interpartner legitimacy is needed for cooperation to achieve alliance objectives. We propose three types of interpartner legitimacy – pragmatic, moral, and cognitive legitimacy – and discuss the dynamics of these three types in the formation, operation, and outcome stages of alliance development. Further, we discuss the salience of interpartner legitimacy in different alliance types. Finally, we derive propositions for further research, and discuss strategies that alliance managers can adopt to develop interpartner legitimacy.     

Conditioning as disintegration

Conditional probability distributions seem to have a bad reputation when it comes to rigorous treatment of conditioning. Technical arguments are published as manipulations of Radon–Nikodym derivatives, although we all secretly perform heuristic calculations using elementary definitions of conditional probabilities. In print, measurability and averaging properties substitute for intuitive ideas about random variables behaving like constants given particular conditioning information.
One way to engage in rigorous, guilt-free manipulation of conditional distributions is to treat them as disintegrating measures—families of probability measures concentrating on the level sets of a conditioning statistic. In this paper we present a little theory and a range of examples—from EM algorithms and the Neyman factorization, through Bayes theory and marginalization paradoxes—to suggest that disintegrations have both intuitive appeal and the rigor needed for many problems in mathematical statistics.     

On estimating the reliability after sequentially estimating the mean: The exponential case

Sequential estimation problems for the mean parameter of an exponential distribution has received much attention over the years. Purely sequential and accelerated sequential estimators and their asymptotic second-order characteristics have been laid out in the existing literature, both for minimum risk point as well as bounded length confidence interval estimation of the mean parameter. Having obtained a data set from such sequentially designed experiments, the paper investigates estimation problems for the associatedreliability function. Second-order approximations are provided for the bias and mean squared error of the proposed estimator of the reliability function, first under a general setup. An ad hoc bias-corrected version is also introduced. Then, the proposed estimator is investigated further under some specific sequential sampling strategies, already available in the literature. In the end, simulation results are presented for comparing the proposed estimators of the reliability function for moderate sample sizes and various sequential sampling strategies.     

Unlocking the potential of advanced manufacturing technologies

This research examines whether investments in advanced manufacturing technologies (AMTs) such as flexible manufacturing systems (FMS), computer aided design (CAD), computer aided manufacturing (CAM), robotics, etc., are more likely to lead to improved performance if they are supported by improvements in the manufacturing infrastructure of the company. This question is evaluated using data gathered from 202 manufacturing plants chosen from industries generally considered to have relatively high investments in technology.Multiple item scales are developed and adapted from sources in the literature to measure investments in technology, infrastructure, and the performance of the plant. Evidence supporting the reliability and validity of these scales is provided. Hierarchical regression is used to analyze the relationship between technology, infrastructure, and performance. The results suggest that there is an important interaction between the adoption of advanced manufacturing technologies and investments in infrastructure. Firms that invest in both AMTs and infrastructure perform better than firms which only invest in one or the other. Separate analyses on sub-samples of firms with the highest and lowest investments in AMTs show that infrastructural investments have a stronger relationship with performance in the high investment group. Thus, the data indicate that infrastructural investments provide a key to unlocking the potential of advanced manufacturing technologies.     

Market efficiency and cointegration: Some evidence in Pacific-Basin black exchange markets

This paper investigates the efficiency of the black exchange markets in Indonesia, Malaysia, the Philippines, South Korea, Taiwan, and Thailand. The study applies unit root and cointegration tests to examine black exchange market efficiency of Pacific-Basin countries. The generating process of black exchange rates appears to be a random walk. This is consistent with Gupta (1981) and other foreign exchange rate unit root test studies. Johansen cointegration tests are performed for these black exchange markets together with Japan and Singapore. The results suggest that there is at least one unit root among the black market exchange rates. Hence, black exchange markets are not collectively efficient.     

Economic Growth,Productivity Gains and Foreign Capital: A Comment

Journal of Quantitative Economics -