Asymmetric price adjustment in the small

Analyses of a large retail scanner price data set reveal a new and surprising regularity - small price increases occur more frequently than small price decreases for price changes of up to 10¢. That is, we find asymmetric price adjustment “in the small.” Furthermore, it turns out that inflation offers only a partial explanation for the finding. Indeed, substantial proportion of the asymmetry remains unexplained, even after accounting for the inflation. For example, the asymmetry holds also after excluding periods of inflation from the data, and even for products whose price had not increased. The findings hold for different aggregate and disaggregate measures of inflation and also after allowing for lagged price adjustments.     

Characteristics and Information Value of Credit Watches

We analyze credit watch and rating actions to better understand the role of credit watches in the credit rating process. We find that watch actions are more frequently prompted by specific, publicly known events than are rating actions. The likelihood that a watch action precedes a rating action varies systematically with proxies for investor demand for credit quality information and the adverse consequences of issuing a rating change prematurely. Credit watches occur more often in response to deterioration in credit quality, and issuers make concerted efforts to address the concerns that prompted down watches. Down watches are less likely than up watches to indicate the direction of the subsequent rating change. Watch announcements are associated with abnormal stock returns, indicating that credit watch actions are significant information events. Our results suggest that credit watches are informative and facilitate the stability of ratings by allowing firms to correct deficiencies and prevent downgrades.     

A cross-country comparison of the demand for labour in Europe

A Cross-Country Comparison of the Demand for Labour in Europe.-This paper investigates structural differences in the demand for labour in France, Germany, and the UK. It finds substantial differences in the sensitivity of the demand for labour to international product demand and factor prices in all three countries. In particular, it reacts to domestic factor prices in Germany but international cost competitiveness in France and the UK; it depends upon European-wide product demand in France and Germany and a wider measure of product demand in the UK. The authors attribute these differences to product market conditions and institutional factors rather than to differences in the production technology.     

Cornering the Japanese market

Carol Sage, Training Director of the Sheraton Center, New York City, presents an account of a training initiative in a New York City convention hotel — aimed at improving relations with Japanese guests, with a view to increasing the hotel's share of the Japanese tourist market. Training in cross-cultural awareness improved staff services for Japanese visitors, to such an extent, that the Japanese market share of the hotel has already increased.     

Full information estimation and stochastic simulation of models with rational expectations

A computationally feasible method for the full information maximum-likelihood estimation of models with rational expectations is described in this paper. The stochastic simulation of such models is also described. The methods discussed in this paper should open the way for many more tests of the rational expectations hypothesis within macroeconomic models.     

Short reviews

FOUR SHORT REVIEWS ON THE THEME OF MARKETS AND JOBS

Leedale, M. 1988: Working Paper No. 108 — Intervention and the East London Clothing Industry. Oxford Polytechnic School of Planning, £4.00 plus 85p p. & p.

Lemaitre, J. (ed) 1988: Long Term Unemployment: Which Way Out? Brussels: Elise Publications, 10/Ecus/BF440 + BF50 postage.

Stewart A. 1968: Planning Homes and Jobs: The Sheffield Report Sheffield City Council, £10.00 including postage.

Association of County Councils, Association of District Councils, Association of Metropolitan Authorities. Stimulating Local Enterprise, the local authority role. £5.50 including postage.

Anglo German Foundation and Otto-Blume-lnstitut fur Sozialforschung und Gesellschafts politik, 1988, Local Labour Market Policies in Britain and Germany, London: Anglo-German Foundation for the Study of Industrial Society. 17 Bloomsbury Square. London WC1A 1LP, £4.50.

Watson, J. (ed), 1989: An Introduction to Political Economy & Planning: Four Interesting Essays, Anglia Higher Education College.

Report for the Commission of Bishop's Council of Diocese of Birmingham, 1988: Faith in the City of Birmingham. Exeter. Paternoster Press, £3.50.