Finance and international business cycles

Business cycles are more correlated among countries that have similar financial structures. We first document this empirical regularity using OECD data, and then build a two-country DSGE model with financial frictions that replicates it. Alternative monetary policy regimes and parameter values are explored. Output co-movements increase when the countries involved are linked by a credible exchange rate peg and when they open up to trade; they decrease when their financial openness increases. The model also accounts for a number of stylized facts of international business cycles, such as the positive international correlation of output, investment and employment.     

A dynamic approach to voluntary environmental contributions in tourism

In an evolutionary game-theoretical model of tourism firms that use an endogenous natural Common Pool Resource (CPR) we show that stable equilibria with voluntary environmental initiatives may coexist with other equilibria where voluntary abatement is absent. The basins of attraction of the equilibria are identified and a bifurcation analysis is carried out producing two results with policy implications. First, there is a highly non-linear relationship between the cost of abatement required to be green and the share of green firms. Second, increases in the number of the CPR's users will ultimately dissipate the incentives to make abatement beyond regulation.     

Impact of training on improving service quality in small provincial restaurants

The objective of this study was to show how the training of service employees contributes to enhancing the customer’s service experience in the context of small, family-owned provincial restaurants. This type of restaurant is particularly relevant to the regional employment and economy in Mexico’s countryside. However, as the human resources that are available are generally limited, training becomes relevant to develop proper service skills and customer orientation. The effectiveness of training in the improvement of service quality was evident after the comparison of measures of service quality and perceived price before and after service-employees completed the training.     

Urban Housing in Mainland China: A New Chapter

Based on the results of field work conducted during 1997 and 1998 in Beijing, Shanghi, Tianjin, Guangzhou and Ningbo, this paper sets out a modest agenda. It briefly reviews China's urban housing initiatives to date, then questions whether these form part of a coherent and comprehensive housing strategy. While focusing on issues rather than data; it ends by stressing that planning without adequate facts is problematic. The authors have not aimed to provide a detailed account of China's housing reform history, since this is documented extensively in numerous research studies. The spotlight is on questions that still need to be answered, rather than on the more ambitious task of prescribing a blueprint for simultaneously resolving all the issues at hand.     

A conditionally heteroskedastic independent factor model with an application to financial stock returns

We propose a new conditionally heteroskedastic factor model, the GICA-GARCH model, which combines independent component analysis (ICA) and multivariate GARCH (MGARCH) models. This model assumes that the data are generated by a set of underlying independent components (ICs) that capture the co-movements among the observations, which are assumed to be conditionally heteroskedastic. The GICA-GARCH model separates the estimation of the ICs from their fitting with a univariate ARMA-GARCH model. Here, we will use two ICA approaches to find the ICs: the first estimates the components, maximizing their non-Gaussianity, while the second exploits the temporal structure of the data. After estimating and identifying the common ICs, we fit a univariate GARCH model to each of them in order to estimate their univariate conditional variances. The GICA-GARCH model then provides a new framework for modelling the multivariate conditional heteroskedasticity in which we can explain and forecast the conditional covariances of the observations by modelling the univariate conditional variances of a few common ICs. We report some simulation experiments to show the ability of ICA to discover leading factors in a multivariate vector of financial data. Finally, we present an empirical application to the Madrid stock market, where we evaluate the forecasting performances of the GICA-GARCH and two additional factor GARCH models: the orthogonal GARCH and the conditionally uncorrelated components GARCH.     

The need for combining IEA and IE tools: The potential effects of a global ban on PVC on climate change

Over the last decades the concepts of Integrated Environmental Assessment (IEA) and Industrial Ecology (IE), both claiming to provide analyses and solutions for sustainability issues, have been developed separately as they emerged in response to questions from different policy-fields. In both fields, specific tools are used to support national and international environmental policy. The focus of IEA and IE tools, however, is different. IEA tools focus on one or a limited number of specific environmental issues. They often model the chain environmental processes with high spatial (and temporal) resolution, but have a low resolution for the material structure of the economy and only partly take into account indirect effects that occur via physical and socio-economic linkages. IE tools take into account all environmental issues related to a specific substance or product. They have a high resolution for the material structure of the economy and take into account indirect effects that occur via physical linkages, however, their environmental modelling is very limited. Both IE and IEA tools have proven to be very useful and neither is superior to the other. However, a combination of both can provide additional information that can be used for more effective policy making. We use the case of a hypothetical world-wide ban on PVC to show that a measure that is not directly related to climate change could still have significant climate effects. This indirect effect is a result of the linkages of material flows in society. We show that IEA tools are not well suited to include these types of effects and that IE tools can fill this gap partially. What is really needed is a broader systems perspective that takes into account the full range of possible side-effects of environmental policy measures.