The Interest Rate Risk Exposure of Financial Intermediaries: A Review of the Theory and Empirical Evidence

The paper surveys current and previous research on financial institutions' interest rate risk exposure. The implications of such exposure are discussed and motivating insights are emphasized. Various theoretical frameworks and models are presented. For each one an overview of the studies and any relationship to each other is provided. In a cross‐industry analysis, other idiosyncratic risk factors are considered and their importance is delineated. A number of empirical relations are established. More specifically, there is an inverse relationship between interest rate changes and common stock returns of financial institutions. The intermediaries' apparent yield sensitivity is mainly attributed to the duration gap inherent in their balance sheet structure. Furthermore, the aforesaid equity sensitivity due to other possible dynamics such as dividend yield, unanticipated inflation and regulatory lags is also considered. Changes in economic regimes have altered volatility in market yields with a subsequent effect, positive or negative, on financial intermediaries' equity returns. The issue of the risk‐return compensation is further analyzed, and findings suggest that the interest rate risk is priced by capital markets. Finally, a few other issues are identified as avenues for future research.     

LOCAL TAXATION IN SOUTH AFRICA

"We are most of us profoundly uninterested in municipal affairs." Maud.
T his paper questions the rationale of the South African system of local taxation. It is argued that our system has too narrow a tax base-fixed property-to supply the needs of the modern city; that property taxation is iniquitous in its effects upon taxpayers; and that today it is being applied to finance categories of expenditure for which a tax on property was never intended. Some new thinking is required to devise a system that would supply a closer link between financial requirements and ability to pay.     

NAFTA and the Realignment of Textile and Apparel Trade: Trade Creation or Trade Diversion?*

A modified version of the partial‐equilibrium gravity model, originally proposed by Fukao et al. (2003 ), is employed to investigate the changing pattern of US textile trade. We use US Bilateral Manufacturing Imports and Exports data for 1989–2001 to assess the impact of labor wages, tariffs, and exchange rates on the composition of US textile imports before and after the creation of NAFTA. The analysis is performed at the SIC two‐digit industry level and the more disaggregated four‐digit sector level. We find little evidence of trade diversion in textiles frequently attributed to NAFTA, while trade creation is clearly present. Furthermore, lower wages in some textile‐exporting countries (e.g. countries in Asia) do not appear to significantly increase these countries' shares of US textile imports at the expense of other trading partners. However, variations in currency exchange rates and tariffs have substantial effects on the composition of US imports.     

Reconsideration of Economic Views of a Classical Empire and a Nation-State During the Mercantilist Ages

While the main aim of the economic policies of European nation-states was to use the power of the state to promote trade and economic growth and to build up national industries and manufacture, the Ottoman Empire continued to follow its provisionist, fiscalist, and traditional economic policies of land expansion in the early modern period. In Western Europe, this experience gave birth to a new class that gradually improved its trade ability and expanding industries and markets under a capitalist system. The Ottoman imperial policy was mostly concerned about the continuity of strong central authority and land expansion, which never meant improving the industry or trade concerns. Instead, the economic policies of the Ottomans were subsistence of the people, provisioning the major population centers, collection of taxes, and maintaining freedom of trade. The balance and stability in society explain the priority for the Ottomans in the economy. However, commercialization and profit explain the priority for the Dutch nation in the economy. This article elaborates the economic views of the Dutch Republic and the Ottoman Empire in the mercantilist ages.     

Paradigms and Novelty in Economics: The History of Economic Thought as a Source of Enlightenment

Over time, economics has experienced paradigm shifts, and there is every reason to think this will continue. In economics, as in the development of technological knowledge, paradigms do not emerge from nowhere, but build on precursors, possibly from other fields. Our understanding of current economic thinking can be enhanced by paying greater attention to the role of paradigms and by using concepts such as myth, plot structure, and cultural endowment, which are typically given greater attention by literary analysts than by economists, to study paradigms. Here we argue that together these can help us better understand how ideas from other times and fields may be combined with our own to generate better research and publications, and that a greater awareness of the history of economics may well be an excellent vehicle for enhancing that understanding.     

The Impact of American Politics on Perceptions of Women's Golfing Abilities

We examine the relationship between political environments and perceptions of women's physical abilities. Using a sample of 496 golf courses located in the United States, we find a significant relationship between state political affiliations, ratings of senators and congressional representatives on a liberal to conservative continuum, and perceptions of gendered physical abilities. Institutional theory is presented as an explanation for the regional variation in perceptions of women's golfing abilities. Implications and results are discussed. Suggestions for further research are presented.     

2. A New Framework for Macroeconomics

Most forms of macroeconomics today, whether Keynesian or monetarist, presuppose that problems of economic instability can be treated as errors in financial management. Neither fiscal nor monetary policy recognizes the existence of systemic faults in the real economy that result in overinvestment in durable capital that turns over slowly, in contrast to forms of capital that interact more frequently with land and labor. Only by removing serious distortions in microeconomic relations can macroeconomic problems be resolved. The current global economic crisis exemplifies the limitations of policies that ignore distortions in the rate of turnover of investment capital.     

Henry George Under the Microscope: Comments on "Henry George's Political Critics"

The annual supplement of the AJES for 2008 titled Henry George: Political Ideologue, Social Philosopher, and Economic Theorist had as its first and longest essay "Henry George's Political Critics" by Professor Michael Hudson. It offered a multitude of criticisms, most of which Prof. Hudson seemed to agree with. All purported to be criticisms of George as a political strategist, though some seem more to originate from Hudson's disagreement with theoretical positions George was bound to take. The purpose of this short paper is to show that Professor Hudson's long article fails to do what it seems intended to do. That is, it fails to show that trade unionists and especially socialists were "natural allies" of the Georgist movement, that it was George's fault that that they were not, and that George "allied" his movement irrevocably to "capital," rejecting its "natural allies."