Strategic Interactions and Contagion Effects under Monetary Unions

This paper applies game theory and a cost‐benefit analysis to study voluntary exits and contagion effects in countries joined to a monetary union. The paper looks at two non‐core or periphery countries of a large union and examines the role of structural asymmetries and strategic interactions as determinants of equilibrium outcomes, following both country‐specific and common shocks. The paper finds that under almost symmetry between countries, country‐specific shocks are never associated with multiple equilibria and, if large enough, can spread to other countries leading to contagion. By contrast, common shocks are seen to sustain multiple equilibria if almost‐symmetric countries are considered and to have implications similar to those found in the country‐specific case if large structural asymmetries are admitted.     

Asymmetric Reaction Functions for the Euro Area

This paper offers a preliminary evaluation of ECB conduct ofmonetary policy by estimating a fairly general reaction functionfor the euro area. The specification of the policy rule embodiesa number of nonlinearities which are shown to stem from asymmetricpreferences and a convex aggregate supply curve. Asymmetricpreferences allow, but do not require, policy-makers to weightdifferently positive and negative deviations of inflation andoutput from the reference values, and translate into an asymmetricreaction function. The empirical analysis on monthly euro-areaaggregated data over the last 5 years reveals that ECB monetarypolicy is effectively described by a nonlinear policy rule accordingto which output contractions have required a larger policy responsethan output expansions. Moreover, actual movements in the eurointerest rate closely resemble the simulated path that a Bundesbank-typeof behaviour would have implied.     

A dynamic model of R&D competition

This study considers a dynamic model of R&D competition in a situation of no uncertainty with identical firms in a perfect foresight. We are going to find out about the effects of firms' absorptive capacity on R&D strategies in the presence of technological spillovers. The conditions for the existence and uniqueness of a feedback–Nash equilibrium on firms' R&D expense will be also discussed. Numerical simulations will show as the introduction of the absorptive capacity reduces the impact of spillovers degree on firms' R&D strategies.     

Logarithmic quasi-homothetic preferences

We study a class of quasi-homothetic preferences, which result in demands that are logarithmic in own prices when these have a negligible impact on aggregate prices (as in monopolistic competition models). Thus marginal revenues are computationally friendly and well behaved.     

“Just Look the Other Way”: Job Seekers’ Reactions to the Irresponsibility of Market-Dominant Employers

Journal of Business Ethics - Past research on recruitment has shown that employer image predicts job seekers’ perceptions of organizational attractiveness. We contribute to this body of work...     

Heckscher–Ohlin and agglomeration

We argue that embedding endowment-based comparative advantage within a standard NEG framework helps solve the indeterminacy due to multiple equilibria and the ambiguity concerning the relation between integration and specialisation (monotonicity versus non-monotonicity) typical of the NEG literature. In particular, we show that if endowments are in the FPE set, the process of trade integration involves an overshooting of international specialisation and relative factor prices with respect to the free trade level determined by factor abundance. In contrast, if endowments are outside the FPE set, then, even in the presence of agglomeration forces, specialisation and factor prices are monotonically related to trade costs, as implied by the standard trade theory. We argue that the model can shed light on some puzzling stylised facts.     

The Link between Institutional and Economic Integration: Insights for Latin America from the European Experience

The European experience illustrates that institutional integration interacts with economic integration at the regional level. In this paper we ask how economic and institutional integration are linked and whether there is a causal link between the two. We present an original indicator of institutional integration and study how it developed vis-à-vis diverse measures of economic integration. In particular, we ask what insights can be drawn from the European process of regional integration, which started in the 1950s, for regional integration in Latin America today. We find that Latin America is currently less economically integrated not only than the European Union today, but for certain economic variables even than the European Union in the 1960s. A VAR analysis illustrates that the link between institutional and economic integration has worked both ways throughout the European experience. There is also evidence that stronger institutional integration has indeed led to deeper economic integration.     

Asymmetric Information in Fads Models

Fads models were introduced by Shiller (Am Econ Rev 71:421–436, 1981) and Summers (J Finance 41:591–601, 1986) as plausible alternatives to the efficient markets/constant expected returns assumptions. Under these models, logarithms of asset prices embody both a martingale component, with permanent shocks, and a stationary component, with temporary shocks. We study a continuous-time version of these models both from the point of view of informed agents, who observe both fundamental and market values, and from that of uninformed agents, who only observe market prices. We specify the asset price in the larger filtration of the informed agent, and then derive its decomposition in the smaller filtration of the uninformed agent using the Hitsuda representation of Gaussian processes. For uninformed agents we obtain a non-Markovian dynamics, which justifies the use of technical analysis in optimal trading strategies. For both types of agents, we solve the problem of maximization of expected logarithmic utility from terminal wealth, and obtain an explicit formula for the additional logarithmic utility of informed agents. Finally, we apply the decomposition result to the problem of testing the presence of fads from market data. An application to the NYSE-AMEX indices from the CRSP database shows that, if the fads component prevails, then the mean-reversion speed must be slow.     

Poverty Reducing Reforms and Subgroup Consumption Dominance Curves

One vexed question of anti-poverty strategies is that of setting a reasonable poverty line. To escape its specification, recent developments by Yitzhaki and Slemrod (1991 ) have introduced the correspondence between non-intersecting concentration curves and poverty reducing directions of reforms. Makdissi and Wodon (2002 ) have derived consumption dominance curves for any order of restricted stochastic dominance. In this paper, consumption dominance curves are extended to subgroups of population. Empirical evidence of the approach will be shown using the 1997 data from Belarus, considering public subsidies on rents and utilities, health care and public transport in six groups of population.