A general-equilibrium model of a traditional Soviet-type economy

This paper presents an abstract, static model of a traditional Soviet-type economy, in which there are three kinds of agents (planners, firms, and consumers). A quantity-oriented incentive system for managers is described, as is a planners' allocation mechanism. There are technology-determined prices for producer goods and market prices for labor and consumer goods, which are sold by retail stores from which the planners collect a turnover tax. There are also profit and income taxes. A consumer-market equilibrium is shown to exist for each plan, and the results of simulations using fixed-point computation techniques are discussed. J. Comp. Econ., June 1977, 1(2), pp. 147–165. International Monetary Fund, Washington, D.C.     

Advertising and Deep Autonomy

Concerns about advertising take one of two forms. Some people are worried that advertising threatens autonomous choice. Others are worried not about autonomy but about the values spread by advertising as a powerful institution. I suggest that this bifurcation stems from misunderstanding autonomy. When one turns from autonomous choice to autonomy of persons, or what is often glossed as self-rule, then one has reason to think that advertising poses a moral problem of a sort so far unrecognized. I diagnose this problem using Charles Taylor's work on "strong evaluation". This problem turns out to have political ramifications that have been only dimly recognized in business ethics circles.     

On the Use of Portfolio Risk Models and Capital Requirements in Emerging Markets: The Case of Argentina

A portfolio-based model (CreditRisk+ of Credit Suisse FirstBoston) and recent Central Bank of Argentina credit bureau dataare used to estimate whether current capital and provisioningregulations match actual risks. Arguing that provisions shouldcover expected losses and that capital requirements should coverpotential losses beyond expected losses subject to some statisticallevel of tolerance, the article assesses how well actual capitaland provisioning requirements match the estimated requirementsgiven by the model. Actual provisioning requirements were foundto be close to implied levels of expected losses. The estimateof potential losses was found to be highly sensitive to theassumptions of the model, especially the parameter relatingthe volatility of a loan's rate of default to its mean value.This volatility parameter cannot be estimated accurately withthe credit bureau data because of the short time span covered,so proxy data were used to estimate it, and two values aroundthat estimate were tried. The difficulty of estimating thiscritical parameter implies that the results should only be regardedas suggestive. Moreover, the methodology only seeks to estimatecredit risk and not interest rate risk or exchange rate risk,nor does it fully take into account the indirect effects ofinterest rates and exchange rates on credit risk. As recentevents in Argentina have demonstrated, estimating credit riskalong these lines should be thought of as just one tool in attemptingto assess the appropriate level of bank provisions and capital.     

Recovering Risky Technologies Using the Almost Ideal Demand System: An Application to U.S. Banking

We present and estimate a model that shifts the focus of modeling production from the traditional assumptions of profit maximization and cost minimization to a more general assumption of managerial utility maximization that can incorporate risk incentives into the analysis of production and recover value-maximizing technologies. We implement the model using the almost ideal demand system. In addition, we use the model to measure efficiency in a more general way that can incorporate a concern for the market value of firms assets and equity and identify value-maximizing firms. This shift in focus bridges the gap between the risk incentives literature in banking that ignores the microeconomics of production and the production literature that ignores the relationship between production decisions and risk. Our estimation of the model for a sample of U.S. commercial banks illustrates that results obtained from our generalized model can differ significantly from those obtained from the standard profit-maximization model, which ignores risk.     

The determinants of the price impact of block trades: further evidence

This article extends previous literature which examines the determinants of the price impact of block trades on the Australian Stock Exchange. As previous literature suggests that liquidity exhibits intraday patterns, we introduce time of day dummy variables to explore time dependencies in price impact. Following theoretical developments in previous literature, the explanatory power of the bid–ask spread, a lagged cumulative stock return variable and a refined measure of market returns are also examined. The model estimated explains approximately 29 per cent of the variation in price impact. Block trades executed in the first hour of trading experience the greatest price impact, while market conditions, lagged stock returns and bid–ask spreads are positively related to price impact. The bid–ask spread provides most of the explanatory power. This suggests that liquidity is the main driver of price impact.     

Booms, Busts, and Fraud

Firms sometimes commit fraud by altering publicly reported informationto be more favorable, and investors can monitor firms to obtainmore accurate information. We study equilibrium fraud and monitoringdecisions. Fraud is most likely to occur in relatively goodtimes, and the link between fraud and good times becomes strongeras monitoring costs decrease. Nevertheless, improving businessconditions may sometimes diminish fraud. We provide an explanationfor why fraud peaks towards the end of a boom and is then revealedin the ensuing bust. We also show that fraud can increase iffirms make more information available to the public.     

Let chaos reign,then rein in chaos—repeatedly: managing strategic dynamics for corporate longevity

Combining longitudinal field research and executive experience, we propose that corporate longevity depends on matching cycles of autonomous and induced strategy processes to different forms of strategic dynamics, and that the role of alert strategic leadership is to appropriately balance the induced and autonomous processes throughout these cycles. We also propose that such strategic leadership is the means through which leadership style exerts its influence on corporate longevity. Our findings can be related to organizational research on structural inertia, learning and adaptation, as well as to formal theories of complex adaptive systems. They also contribute to resolving the seeming contradiction between a study of corporations that attributes exceptional long‐term success to leadership style, and the more common proposition that strategy is the determinant of long‐term performance. Copyright © 2007 John Wiley & Sons, Ltd.     

Impact of telephone and satellite earth station installations on GDP : A model for rural areas of LDCs

Presents a method for estimating the impact on national development of installation of telecommunication facilities in rural areas of developing countries. A methodology developed by Hardy is applied to three groups of developing countries and a hypothetical rural region to estimate the impact on GDP per thin route satellite earth station installed over a ten year period. A logarithmic relationship between telephone density and impact on GDP per earth station is found, so that the impact per earth station increases with lower telephone densities. The model can be used to estimate the impact on national GDP of telephone installations and/or thin route earth stations in regions of low telephone density.     

Multimarket trading and liquidity: a transaction data analysis of Canada–US interlistings

We use transaction data for Toronto Stock Exchange (TSE) listed stocks to examine the impact on trading costs of the decision to interlist on a US exchange. We measure trading costs using both ‘posted’ bid-ask spreads and ‘effective’ bid-ask spreads that measure actual transaction prices relative to standing bid-ask quotes. After controlling for price level, trade size and trading volume effects, we find that overall posted and effective spreads in the domestic (TSE) market decrease subsequent to the interlisting. However, the decrease in trading costs is concentrated in those TSE stocks that experience a significant shift of total trading volume (TSE and US) to the US exchange after listing. We interpret this result in the context of theories of multimarket trading as a competitive response by TSE market makers to the additional presence of US market makers.     

Diffusion with distinction: The diffusion of household durables in the UK

Futures researchers have long been interested in studies that investigate the diffusion of innovations among consumers. Often this is simply as a basis for extrapolating future trends in access to technologies. But also this literature has been particularly useful in providing frameworks for understanding the processes by which new commodities come into circulation and spread across populations of adopters. In this paper we seek to deepen the analysis. We argue that many studies have oversimplified the issues by treating populations of potential adopters as being homogeneous. This, we believe, is inadequate for understanding the diffusion of products in consumer markets. Drawing on debates from cultural studies and the sociology of consumption, as well as emerging theories from evolutionary economics, and analysing household survey data, we show that there are discernible social groups that adopt products at different rates. These differential rates of adoption are attributable to the existence of groups with different tastes, and not simply a question of different income groups.