Macroeconomic adjustment programmes in the euro area: an overall assessment

Since the start of EMU (Economic and Monetary Union), the euro area, and more broadly the global economy, experienced an unprecedented credit boom. The expansion of credit was particularly strong in Greece, Ireland, Portugal and Cyprus and all of them subsequently needed official financial support. In each of the four programmes, financial assistance has been provided and promised against the commitment of each country to fulfil certain economic policy conditions contained in the macroeconomic adjustment programme. In general, a macroeconomic adjustment is a process driven by policies but also by changes in private spending behaviour (consumption, imports, investment) and improvement in competitiveness that countries are required to undertake after a large shock. In the case of the four countries, the shock emerged as a consequence of an excessive accumulation of imbalances in different parts of the economy: in the public sector in Greece, in the housing and banking sectors in Ireland, external imbalances in Portugal and in the banking sector in Cyprus. The paper looks at the feasibility of the fiscal adjustment comparing the macroeconomic conditions in the four countries and emphasising the role of the fiscal multipliers in the process. It also assesses the fall in the output in a comparative framework, stressing the role played by the different components of demand either in amplifying the effect of the fiscal consolidation or in offsetting it. In addition, it considers formulation of the programmes as well as their implementation with most attention devoted to reforms aiming at improving competitiveness, growth and employment in the framework of a cross-country approach.     

Preference erosion and the developing countries exports to the EU: a dynamic panel gravity approach

The erosion of preferences due to multilateral tariff reductions is a long-standing concern for many developing countries. This paper focuses on the erosion of the preferences granted by the EU in the rice industry. Since 2004 there has been a sharp decrease in border protection for the EU rice industry. Because the EU grants trade preferences to a considerable number of rice exporting developing countries, the reform implied preference erosion as well. By addressing the impact of preference erosion on developing countries rice exports to the EU, this paper contributes two original insights to the literature: first, by proposing a new empirical approach to compute the preference margin when tariff rate quotas are in force which is based on the assumption of the existence of fixed costs and economies of scale in international trade; second, by estimating the trade elasticities of preferences by means of a dynamic panel gravity equation to deal with the issues of endogeneity of preferences and persistency in bilateral trade flows. The results show that the way preference margins are calculated matters significantly when assessing the existence and extent of their erosion and the values of trade elasticities. Finally, the estimations highlight the fact that the impact of preferences is still very strong for some of the countries concerned.     

Corporate social responsibility and earnings forecasting unbiasedness

We investigate the relationship between corporate social responsibility (CSR) and I/B/E/S analysts’ earnings per share (EPS) forecasts using a large sample of US firms for 1992–2011. Based on literature findings, we decompose the CSR effect into four factors: accounting opacity, corporate governance, stakeholder risk, and overinvestment. We find that all of them significantly affect both the absolute forecast error on EPS and its standard deviation controlling for forecast horizon; number of analysts and forecasts; and year, industry, and broker house effects. Consistently with our ex ante hypotheses, overinvestment, stakeholder risk, and accounting opacity have a positive effect, increasing both dependent variables, while corporate governance quality has a negative effect. A crucial aspect of our findings is that high CSR quality in terms of the four factors (i.e., accounting transparency, high corporate governance quality, stakeholder risk mitigation, and absence of overinvestment) contributes to making earnings forecasts unbiased as unbiasedness is generally met in the subsample of the Top CSR quality companies and markedly violated in the subsample of the Bottom CSR companies. We also document that overinvestment and stakeholder risk are sufficient to produce this effect.     

Complementary currencies: what role should they be playing in local and regional government?

The current climate of fiscal austerity has seen a resurgence in ‘complementary currencies’ as local and regional governments look for ways to use under-utilized assets, maintain employment and avoid local economic decline. The authors explore how local and regional governments can facilitate complementary currencies to reduce the impact of external economic shocks and enable their economies to continue to function in the face of austerity. They recommend that localities consider participating in existing complementary currency ‘circles’.     

Taxation and parental time allocation under different assumptions on altruism

This paper examines the effects of labor income taxation on parental time allocation in an OLG model in which child care arrangements, that is the combination of parental and non-parental time, matter for human capital accumulation. We show that the sign of the impact of labor income taxation on parental time with children and on growth critically depends on the assumption on the altruistic motives behind the choice of devoting time to children.     

Targeting in advertising markets: implications for offline versus online media

We develop a model with many advertisers (products) and many advertising markets (media). Each advertiser sells to a different segment of consumers, and each medium is targeting a different audience. We characterize the competitive equilibrium in the advertising markets and evaluate the implications of targeting. An increase in targeting leads to an increase in the total number of consumer‐product matches, and hence in the social value of advertising. Yet, targeting also increases the concentration of firms advertising in each market. Surprisingly, we then find that the equilibrium price of advertisements is first increasing, then decreasing, in the targeting capacity. We trace out the implications of targeting for competing media. We distinguish offline and online media by their targeting ability: low versus high. As consumers’ relative exposure to online media increases, the revenues of offline media decrease, even though the price of advertising might increase.     

Optimal exercise of American put options near maturity: A new economic perspective

Review of Derivatives Research - The critical price $$S^{*}\left( t\right) $$ of an American put option is the underlying stock price level that triggers its immediate optimal exercise. We provide...     

Customer satisfaction and dissatisfaction in retail banking: Exploring the asymmetric impact of attribute performances

The paper presents the results of an extensive study on the determinants of customer satisfaction for a retail bank. In doing so, it uses a revised version of the traditional analyses based on derived measures of attribute importance. The need for a revised methodology is prompted by the insights of the two- and three-factor theories of customer satisfaction, such as Kano's framework. Indeed, the evidence from 5000 customers of a prominent Italian bank confirms a non-linear and asymmetric relationship between attribute performances and overall customer satisfaction. The results from both a traditional and our revised approach are compared. While this approach can be applied across different industries, it should not be assumed that the numerical results presented in the paper apply to contexts with substantially different underlying characteristics. General trends and implications for banking services are reported in the conclusions.     

A Theoretical Perspective on Multilateral Agreements on Investment*

Why do we observe some developing countries objecting to the prospect of a Multilateral Agreement on Investment (MAI), even though they have been keen to liberalize investment in preferential agreements in recent years? In this paper, we analyze the issue of MAI implementation and assess the welfare consequences of such kind of agreements. In our model, participation to MAI involves a tradeoff between less rent extraction from multinational firms (MNEs) and more abundant FDI inflows. At equilibrium, either all countries enter MAI, or all countries stay out, or only some of them enter. Coordination problems may induce multiple equilibria: the three types of equilibria may coexist. So, the implementation of MAI may depend not only on structural factors but also on the general “political climate.” When all countries join MAI, world welfare is maximized because this minimizes the hold‐up problem faced by MNEs and stimulates investment. However, in an asymmetric world, welfare gains are not guaranteed for all countries.     

The Adoption of ICT among SMEs: Evidence from an Italian Survey

In this paper, we carry out an econometric analysis on the adoption and effective use of Information and Communication Technologies (ICTs) among a sample of Italian SMEs. An important result is that, in order to understand the main factors that drive SMEs to the adoption of ICTs, it is useful to divide the available technologies according to a taxonomy based on their typical function. Along with general-use ICTs (e-mail and Internet access), we identify two groups of technologies (labelled production-integrating and market-oriented ICTs) the use of which is associated with different firm characteristics. In both cases, however, the availability of highly educated workers turns out to be a key factor. Policy implications are also discussed.