Hayek’s monetary theory and policy: A note on alleged inconsistency

Challenging the dominant view, we claim that Hayek’s monetary views did not significantly change over his lifetime. The prevalent perception of early Hayek as a money stream stabilizer and late Hayek as a price level stabilizer is attributable to an unjustified normative interpretation of Hayek’s positive analysis. We argue that in his contributions to monetary theory, Hayek took the goals of monetary policy as exogenously given and analysed the efficiency of different means of achieving them. Hayek’s allegedly inconsistent transformation from a critic to an advocate of price level stabilization is explained by a change of issues under his focus, rather than by a change in his positive views. We also claim that Hayek was always aware that every practical monetary policy involves difficult trade-offs and that he was therefore reluctant to impose his own value judgments on what people should strive for.     

The regional distribution of foreign investment in Russia

This article conducts a plant‐level study of the factors affecting foreign direct investment (FDI) inflow to a large opening economy endowed with specific factor advantages. We conclude that the distribution of FDI in Russian regions depends on market access and can be most notably described by the knowledge‐capital framework. Factor endowments built by natural resources are more successful in explaining the location decisions of export–platform affiliates. The impact of natural resources depends on how the availability of these resources is measured. The results reject the crowding out effects of resource FDI and prove co‐location mode, when service investments are attracted to resource‐rich regions. Labour cost advantages better explain the preferences of non‐trading service affiliates.     

Credit reallocation

A growing empirical literature finds that the allocation of credit across firms is as important as its total volume for economic performance. This paper investigates the process through which credit is reallocated across US businesses employing the methodology developed by Davis and Haltiwanger (1992) for the analysis of job reallocation. We find that credit reallocation is intense, highly volatile and moderately procyclical and that it primarily occurs across firms similar in size, industry or location. The results suggest that microeconomic heterogeneity can play a key role in the interaction between the credit market and the aggregate economy.     

Agent based model of a simple economy

This article proposes a model of a simple economy based on a set of agent-based modeling principles. The model is based on the ??trust game?? formulated by Berg et?al. (Games Econ Behav 10:122?C142, 1995), and anticipates a random matching of partners taking in to account adaptive agent behavior. Simulation in the NetLogo programming environment, using profile distributions obtained from empirical studies, has shown the most successful agents to posses low parameters of trust in the role of Sender and high parameters of trustworthiness in the role of Receiver.     

Including cost income ratio into utility function as a way of dealing with ‘exploding’ implicit prices in mixed logit models

The estimates of mean WTP are typically of main interest in non-market valuation studies. In the case of mixed logit models the distribution of WTP for an attribute is derived from the distribution of the ratio of individual coefficients. Since the cost coefficient enters the denominator, its distribution plays a major role in the distribution of WTP. A standard practice in analysing the data from choice experiments is to assume the cost coefficient is fixed, which implies that there is no heterogeneity in price sensitivity. The three most commonly given reasons for this are: (i) the distribution of the marginal willingness-to-pay for an attribute is then simply the distribution of that attribute's coefficient; (ii) in this way analysts wish to restrict the price variable to be non-positive for all individuals; and (iii) analysts avoid assuming log-normal cost because it is often found to produce behaviourally implausible estimates. Constraining a price coefficient to be fixed can however have serious consequences, i.e. a constant price coefficient implies that the standard deviations of unobserved utility is the same for all observations which can lead to biased results. Respondents are also likely to vary in price sensitivities, thus ignoring this variation can lead to erroneous interpretation and conclusions. In this paper we demonstrate a choice experiment exercise in which specifying a log-normal cost results in implausibly large WTP, however, adding into the utility function the cost income ratio prevents implicit prices from ‘exploding’.     

When Production and Consumption Meet: Cultural Contradictions and the Enchanting Myth of Customer Sovereignty

ABSTRACT The central cultural contradiction of capitalism, argued Bell some 25 years ago, was the existence of rationalized, disciplined production alongside free and hedonistic consumption. This paper argues that this thesis, although overstated, has resonance within contemporary capitalism. The paper then considers the question of how this contradiction is managed when production and consumption meet directly within the service interaction. On the production-side rationalization is joined by customer-orientation, and on the consumption-side management promotes consumption of the enchanting myth of sovereignty. Here the customer is meant to experience a sense of being sovereign. At the same time the space is created for the customer to be, potentially, substantively directed and influenced to follow the requirements that flow from the rationalized elements of production. Key aspects of the service interaction, including the menu and its presentation, the display of empathy and aesthetic labour, and the use of naming within the service interaction, are analysed in terms of the promotion of the enchanting myth of sovereignty. Consumption, however, is a fragile process, and remains, to an important degree, 'unmanageable'. The analysis, therefore, also examines how the promotion of the enchanting myth of sovereignty systematically creates the conditions for the myth's negation.     

A MULTIFACTOR GAUSS MARKOV IMPLEMENTATION OF HEATH, JARROW, AND MORTON

Working within the Heath-Jarrow-Morton framework and using the theory of stochastic equations in infinite dimensions, a useful multifactor Gauss-Markov model for the movement of the whole of the yield curve is derived. Swaptions are priced. They are hedged by eliminating random terms between the semimartingale representations of the swaption and hedging instruments. Hedging efficiency is analyzed. the model is fitted to the swap/cap strips in Australia. Computation times on a 20-MHz laptop computer are acceptable.     

Die Risikoübernahme von Versicherungsunternehmen: Eine empirische Analyse für Deutschland und Großbritannien

In this paper we analyze the risk resulting from an insurer’s investment policy. For this a hypothetical asset return rate is defined, based on which the German and British insurance market is analyzed. The study design allows an investigation of the investment risk in different countries or for different lines of business. The aim of the analysis is to detect general market trends in the investment policy and an analysis of effects of important changes over time on the investment risk of insurers. The questions analyzed in this paper are also of particular relevance beyond the background of current reform proposal for insurance regulation in Europe in the field of risk management and capital adequacy (Solvency II).