Safehavenness of currencies

This study assesses the ‘safehavenness’ of a number of currencies with a view to providing a better understanding of how capital flow tends to react to a sharp increase in global risk aversion in turbulent times. It focuses on how the currencies are perceived by international investors or, more specifically, whether they are seen as safe-haven or risky currencies. To assess the safehavenness of the currency, we use risk reversal, which is the price difference between the call and put options of a currency, as it reflects how disproportionately market participants are willing to pay to hedge against its appreciation or depreciation. The relationship between the risk reversal of the currency and global risk aversion is estimated by means of parametric and non-parametric regressions that allow us to capture currency behaviour in times of extreme adversity, that is, the tail risk. Our empirical results found the Japanese yen and, to a lesser extent, the Hong Kong dollar to be the only safe havens under stressful conditions among the 34 currencies vis-à-vis the US dollar.     

Value‐Added Per Share (VAPS): A Value‐Relevant Corporate Performance Metric

The authors introduce Value Added Per Share (VAPS) as a value‐relevant metric that is intended to complement earnings per share (EPS) in helping corporate managers and analysts understand and overcome the limitations of GAAP‐based reporting. VAPS discounts a firm's past and projected cash flows at its “cost of capital,” allowing companies to avoid the subjective accounting accrual process and other practices that often make EPS misleading. A company's VAPS is calculated in three main steps: (1) estimate the change in the capitalized value of after‐tax operating cash flow by taking the net change (plus or minus) of the firm's operating cash flow after taxes and dividing that number by the firm's cost of capital; (2) subtract total investment expenditures; and (3) divide by the number of shares outstanding. By capitalizing the change in after‐tax operating cash flow, one finds the net change in a firm's current operations value. By subtracting investment expenditures from that change in current operations value, the analyst gets a clearer picture of the benefit to shareholders net of the funds used to create that benefit. Consistent with basic theory, VAPS is positive when a company earns a return at least equal to its cost of capital and negative otherwise. Because of their fundamental differences, EPS and VAPS are likely to send different signals, and VAPS is expected to provide greater insight into stock price changes. The authors provide the findings of statistical tests showing the superior explanatory power of VAPS and recommend that companies publish statements of VAPS along with standard GAAP results, especially since the former can be readily calculated using the available income statement, balance sheet, and cash flow statement data.     

¿Cómo afecta la desreglamentación a la productividad laboral? Análisis con datos de panel de 20 países de la OCDE (1960–2004)

Mediante regresiones exhaustivas con datos de panel de 20 países de la OCDE (1960–2004) los autores observan que la desreglamentación ralentiza el crecimiento salarial y disminuye la participación salarial en la renta nacional, y ello reduce significativamente el crecimiento de la productividad laboral, lo cual no se explica por la entrada en el mercado de trabajadores de baja productividad, como mantiene la OCDE. El despido flexible y una rotación laboral mayor obstaculizarán la acumulación de conocimientos en las empresas debilitando el proceso de rutinización de la innovación. El análisis no valida las leyes de Baumol y de Verdoorn en este contexto.     

The Demography of Business Closings

This study shows that establishment dissolution declines with age and that age at dissolution differs for broad industry and geography groups, establishment affiliation status, and establishment size. These findings, largely confirming results presented elsewhere, are drawn from age-specific dissolution ratios and establishment life tables calculated for select establishment sub-populations. The paper uses Bureau of the Census Standard Statistical Establishment List datasets, a census of establishments with employment for the United States for the 1987 and 1988 years.     

Economic growth and the employer of last resort: A simple model of flexicurity capitalism

This paper presents a model of economic growth with unemployment due to labor market rigidities. The economy consists of a firm that maximizes profits, of a government and of two types of households that maximize inter-temporal utility. One household supplies skilled labor at the first labor market, the other household supplies simple labor at the second labor market. The government in the economy raises taxes and uses its revenues to employ labor receiving unemployment benefits, to finance transfers to the household in the second labor market and to finance public spending. We analyze both the version with exogenous growth as well as an endogenous growth variant, where growth is made endogenous by assuming positive externalities of capital. The exogenous growth model is characterized by global determinacy while it is locally indeterminate. The endogenous growth model can be globally indeterminate with the high balanced growth path being locally indeterminate and the low balanced growth path being locally determinate. We also study how taxation and how the speed of the wage adjustment affect the economy.     

Overview of Reserving Practices for Substandard Life Policies

Abstract

This paper reviews the various industry practices, both past and current, for determining statutory reserves for substandard life insurance policies This review begins with single-life policies but also considers the application of single-life practice to joint-life policies The increased popularity of joint-life policies has taken place without much discussion in the technical journals of how to handle such issues as reserves on substandard business. This paper is intended to provoke such a discussion and to provide a framework for it.     

Hierarchical Bayesian modeling of the space‐time diffusion patterns of cholera epidemic in Kumasi,Ghana

This study analyses the joint effects of the two transmission routes of cholera on the space‐time diffusion dynamics. Statistical models are developed and presented to investigate the transmission network routes of cholera diffusion. A hierarchical Bayesian modelling approach is employed for a joint analysis of nonlinear effects of continuous covariates, spatially structured variation, and unstructured heterogeneity. Proximity to primary case locations and population density serve as continuous covariates. Reference to communities is modelled as a spatial effect. The study applied to the Kumasi area in Ghana shows that communities proximal to primary case locations are infected relatively early during the epidemics, with more remote communities infected at later dates. Similarly, more populous communities are infected relatively early and less populous communities at later dates. The rate of infection increases almost linearly with population density. A non systematic relation occurs between the rate of infection and proximity to primary case locations. It is discussed how these findings could serve as significant information to help health planners and policy makers in making effective decisions to limit cholera epidemics.     

DUAL LABOR MARKETS AND THE IMPACT OF MINIMUM WAGES ON ATYPICAL EMPLOYMENT

We present a growth model that contains minimum wages as one important element of a flexicurity economy where we allow for heterogeneous labor and for real wage rigidities. We show that the wage‐setting process, in its reference to the reservation wage of the first labor market, is crucial as regards stability of the economy and persistent or explosive oscillations may occur, in particular when the influence of the reservation wage on wage formation in the first labor market becomes too strong. Further, minimum wages can alleviate the negative consequences of economic downturns and help stabilize the economy.