Comparing Alternative Predictors Based on Large‐Panel Factor Models

This article compares the predictive ability of the factor models of Stock and Watson (2002a) and Forni, Hallin, Lippi and Reichlin (2005) using a ‘large’ panel of macroeconomic variables of the United States. We propose a nesting procedure of comparison that clarifies and partially overturns the results of similar exercises in the literature. Our main conclusion is that with the dataset at hand the two methods have a similar performance and produce highly collinear forecasts.     

Corporate social responsibility,profits and welfare with managerial firms

This paper analyses the equilibrium outcomes in a duopoly market where firms follow corporate social responsibility (CSR) behaviours under managerial delegation. It is shown that in the subgame perfect Nash equilibrium of the game, both firms emerge as CSR-type, and the firms’ profitability (resp. the welfare of consumers and society) are beneficiated (resp. harmed) by the CSR behaviour. This result is in sharp contrast with the conventional result (established under non-managerial firms) that the higher the CSR sensitivity to consumer surplus, the lower (resp. higher) the firms’ profitability (resp. the consumer surplus and social welfare).     

The symbolic politics of delegation: macroprudential policy and independent regulatory authorities

This paper investigates the motivations that led policy-makers to delegate macroprudential authorities to newly created independent systemic regulatory authorities (SRAs). Three case studies are examined: the US Financial Stability Oversight Council, the European Systemic Risk Board and the UK’s Financial Policy Committee. Policy-makers’ motivations are captured by examining the specific institutional features of the newly created SRAs and by tracing the legislative debates that surrounded their creation. The findings of this empirical analysis call into question several of the conventional claims that are used to justify delegation to technocratic agencies from the functionalist and ideational scholarship. Given the limitations of the explanations based on efficiency considerations and socialisation of welfare losses, this paper suggests that the delegation of powers to SRAs was ultimately motivated by what is referred to as the ‘logic of symbolic politics.’ It is argued that the main motivation that emerges from the legislative debates for delegating this important task is that the SRAs provided a quick institutional ‘fix’ to signal to the public that in the wake of the international crisis of 2007–2009, policy-makers were redressing regulatory mistakes made prior to and during the crisis that had caused a severe deterioration of public’s wealth.     

Dealing with heterogeneity in ordinal responses

Quality & Quantity - In sample surveys where people are asked to express their personal opinions it is conceivable to register a high level of indecision among respondents and this circumstance...     

Earnings Reported under IFRS Improve the Prediction of Future Cash Flows? Evidence from European Banks

This paper examines the relative costs and benefits of International Financial Reporting Standards (IFRS) adoption in the European Union by testing the ability of earnings computed under IFRS to predict future cash flows. The study considers the contribution of net income, comprehensive income and other comprehensive income to the usefulness of earnings to predict cash flows, and it compares IFRS with domestic Generally Accepted Accounting Principles (GAAP). Evidence from a sample of Continental European banks shows that IFRS improve the ability of net income to predict future cash flows. Comprehensive income, too, provides relevant information to predict future cash flows, although with a measurement error which is higher than that in net income for greater lags of time. In our interpretation, these findings are consistent with unrealised gains and losses recognised in other comprehensive income being more transitory and volatile in nature. Overall, our results are relevant to academics and standard setters debating the merits of IFRS adoption and to those who use financial statements and adopt reported earnings to form expectations about future cash flows.     

Manager‐Union Bargaining Agenda Under Monopoly and with Network Effects

This paper investigates the bargaining agenda selection in a unionised monopoly with managerial delegation (MD). In contrast to the conventional wisdom, monopoly profits with MD under sequential Efficient Bargaining (SEB) exceed those under Right‐to‐Manage (RTM), while the union can prefer RTM to SEB: paradoxically, a conflict of interests between the parties may still exist but for reversed choices of the agenda. Consumption externalities change the picture. The monopolist still prefers SEB; however, provided that network effects are sufficiently strong, the union prefers SEB even for a relatively low bargaining power. Thus, the parties endogenously choose the SEB agenda which is also Pareto‐superior. Copyright © 2016 John Wiley & Sons, Ltd.     

The early stages of reform in Polish manufacturingStructural adjustment, ownership and size

This paper argues that a significant adjustment process has taken place in Polish industry in the early stages of the market-oriented reforms. We analyse comprehensive data on two-digit and three-digit manufacturing industries, disaggregated by firm ownership and size. By focusing on a decomposition of labour productivity growth, we obtain results which suggest that structural determinants of the recovery have outweighed cyclical ones. With regard to firm ownership and economic performance, we find that the productive response of state enterprises has been markedly different from that of private firms, with the latter outperforming the former. Finally, our results indicate that size matters, at least among private firms, and our results provide mild evidence of increasing returns.
JEL classification: D21, E63, P21.     

A Martingale Characterization of Consumption Choices and Hedging Costs with Margin Requirements

This paper examines optimal consumption and investment choices and the cost of hedging contingent claims in the presence of margin requirements or, more generally, of nonlinear wealth dynamics and constraints on the portfolio policies. Existence of optimal policies is established using martingale and duality techniques under general assumptions on the securities' price process and the investor's preferences. As an illustration, explicit solutions are provided for an agent with ‘logarithmic’ utility. A PDE characterization of the cost of hedging a nonnegative path‐independent European contingent claim is also provided.     

Introduction to the special issue

Journal of Economic Interaction and Coordination -