An Analysis of the Stability and Growth Pact

We use a stylised model to analyse the Stability and Growth Pact for countries that have formed the European Monetary Union (EMU). In our model, shortsighted governments fail to internalise the consequences of their debt policies for the common inflation rate fully. Therefore, while governments have no incentive to sign a stability pact in the absence of a monetary union, they do so with monetary union to restrain this externality. With uncertainty, a monetary union combined with an appropriately designed pact will be strictly preferred to autonomy. With differences in initial conditions, conflicts of interest arise. We study the Nash bargaining solution.     

The German economy in the Autumn of 1993

The German economy in the Autumn of 1993     

A law of large numbers for large economies

Summary LetX(i),i[0; 1] be a collection of identically distributed and pairwise uncorrelated random variables with common finite mean and variance ². This paper shows the law of large numbers, i.e. the fact that ₀ ¹ X(i)di=. It does so by interpreting the integral as a Pettis-integral. Studying Riemann sums, the paper first provides a simple proof involving no more than the calculation of variances, and demonstrates, that the measurability problem pointed out by Judd (1985) is avoided by requiring convergence in mean square rather than convergence almost everywhere. We raise the issue of when a random continuum economy is a good abstraction for a large finite economy and give an example in which it is not.I am indebted to Hugo Hopenhayn. Furthermore I would like to thank Dilip Abreu, Glenn Donaldson, Ed Green, Ramon Marimon, Nabil Al-Najjar, Victor Rios-Rull, Timothy van Zandt and the editor for useful comments. The first version of this paper was written in 1987.     

Cultural heritage and destination management in the Mediterranean

The challenge for destination management and marketing based on cultural tourism becomes obvious with the example of the Mediterranean region. This area especially is abounding with different expressions of cultural heritage, with special consideration of architectural heritage. Nevertheless, it is difficult to open this cultural heritage in a way to satisfy the customers' expectations on the one hand, and on the other hand to facilitate cooperation between individual countries of the Mediterranean region, which are hindered by broad variations and strong local or regional identities. The article shows the necessity for professional integration of culture‐touristic products and services in the framework of destination management, taking into consideration the various levels of responsibility and identity on a national, regional, and local level, in order to create a basis for cooperation in the Mediterranean region. © 2000 John Wiley & Sons, Inc.     

The EMF uncertainty problem related to mobile phones: where do consumers place their trust?

This paper addresses the uncertainty problem, i.e. cases characterized by lack of knowledge or scientific uncertainty. In such situations, it can be hard for consumers to ‘voice’ or practise consumer power. One field characterized by the uncertainty problem is electromagnetic radiation. An explicit goal of this study has been to articulate Norwegian consumers' practices, attitudes and beliefs regarding electromagnetic radiation from mobile phones to public authorities and consumer policy makers. The study was based on 1000 telephone interviews collected in 2008. Today, experts disagree on the potential health effects of radiation from electromagnetic fields (EMF), as well as standards for safe limits of exposure to mobile phones, base stations and wireless telecommunication systems. In addition, complicated technology and extremely rapid product development and diffusion leave consumers' security considerations to their own beliefs and trust. Whether or not electromagnetic radiation from mobile phones constitutes a health hazard will not be addressed in this paper. Rather, it will focus on how consumers react to this situation of uncertainty. The material reveals four main ways in which consumers can solve what we have named the EMF uncertainty problem: the confident and comfortable way, the sceptical and cautious way, the responsible and good citizen way, and finally, the neglecting way. The paper also discusses the precautionary principle related to EMF. Who should be precautionary: the public authorities, the mobile phone industry or the consumers themselves? We believe that a consistent governmental precautionary policy in combination with consumers taking their own precautionary measures is a viable solution. In this way, all consumers would be addressed and aided when navigating this field of uncertainty.     

Estimating portfolio risk for tail risk protection strategies

We forecast portfolio risk for managing dynamic tail risk protection strategies, based on extreme value theory, expectile regression, copula‐GARCH and dynamic generalized autoregressive score models. Utilizing a loss function that overcomes the lack of elicitability for expected shortfall, we propose a novel expected shortfall (and value‐at‐risk) forecast combination approach, which dominates simple and sophisticated standalone models as well as a simple average combination approach in modeling the tail of the portfolio return distribution. While the associated dynamic risk targeting or portfolio insurance strategies provide effective downside protection, the latter strategies suffer less from inferior risk forecasts, given the defensive portfolio insurance mechanics.     

Location Matters: An Examination of Trading Profits

The electronic trading system Xetra of the German Security Exchange provides a unique data source on the equity trades of 756 professional traders located in 23 different cities and eight European countries. We explore informational asymmetries across the trader population: Traders located outside Germany in non-German-speaking cities show lower proprietary trading profit. Their underperformance is not only statistically significant, it is also of economically significant magnitude and occurs for the 11 largest German blue-chip stocks. We also examine whether a trader location in Frankfurt as the financial center, or local proximity of the trader to the corporate headquarters of the traded stock, or affiliation with a large financial institution results in superior trading performance. The data provide no evidence for a financial center advantage or of increasing institutional scale economies in proprietary trading. However, we find evidence for an information advantage due to corporate headquarters proximity for high-frequency (intraday) trading.     

Management buy-outs as an instrument of privatization in Eastern Europe

Privatizing government enterprises is one of the most difficult tasks in the transformation process taking place in the former socialist economies. What contribution do management buy-outs have to make in coping with that task?