Shadow Financial Regulatory Committee statements

Shadow Financial Regulatory Committee statements     

Economic Comparison of Alternative Tillage Systems under Risk.

Stochastic dominance efficiency criteria are used to rank the net farm return distributions for four different tillage systems under six different farm scenarios. Pairwise comparisons of tillage systems are carried over incremental upper and lower risk-aversion coefficient (RAC) bounds identified for each farm scenario, based on the size and spread of the outcome distributions to identify regions where dominance may switch between tillage systems. Ridge-till systems are generally the dominant tillage system for all farm scenarios considered. No-till systems on clay loam soils are more dominant in the risk-preferring range and less dominant in the risk-averse range, which relates to the relatively larger range of net return values and smaller mean net return values generated by this tillage system. Conversely, the moldboard plow and chisel plow systems are more dominant in risk-aversion intervals and less dominant in the risk-preferring intervals for clay loam soils. In sandy soil scenarios, the ridge-till and no-till systems are dominant over the two fall tillage systems for all farm sizes, indicating that these tillage systems are more competitive with conventional tillage systems in lighter soil type situations. A sensitivity analysis between moldboard plow and no-till systems indicates that no-till would dominate in risk-preferring intervals, and an increase in no-till net farm returns of 16 per acre would change dominance in favor of no-till in risk-averse interval space. On a utilisé les critères d'efficacitéà dominance stochastique pour classer les divers niveaux de recettes agricoles nettes dans quatre systèmes différents de travail du sol, selon six scénarios d'exploitation. Des comparaisons en paires des systèmes de travail ont été faites en regard de tranches croissantes des limites supérieures et inférieures du coefficient d'aversion du risque (CER), établies pour chaque scénario d'après l'importance et l'étendue des distributions du rendement, dans le but d'identifier les régions où la dominance serait susceptible de passer d'un système de travail à l'autre. Le système de travail sur billons était en général le système dominant dans tous les scénarios d'exploitation examinés. La culture sans travail du sol sur loam argileux était plus dominante dans les intervalles d'acceptation du resque et moins dominante dans les intervalles d'aversion du resque, cequi s'explique au fait que ce système de travail donne lieu à une fourchette relativement plus large, mais aussi à une moyenne plus faible du revenu net. À l'inverse, le labour à la charrue classique et au chisel dominait davantage dans les intervalles d'aversion du risque. Dans les sols sableux, le travail sur billons et la culture sans labour l'emportaient sur les deux autres régimes dans toutes les tailles d'exploitation, ce qui porte à croire que, dans les sols plus légers, ces régimes sont plus concurrentiels avec les systèmes classiques. L'analyse de sensibilité entre le labour à la charrue et les systèmes sans travail du sol montre que ces derniers dominent dans les intervalles d'acceptation du risque et qu'un accroissement du revenu agricole net de 16 /acre ferait glisser la dominance vers les intervalles d'aversion du risque.     

WARRANT PRICING USING OBSERVABLE VARIABLES

The classical warrant pricing formula requires knowledge of the firm value and of the firm‐value process variance. When warrants are outstanding, the firm value itself is a function of the warrant price. Firm value and firm‐value variance are then unobservable variables. I develop an algorithm for pricing warrants using stock prices, an observable variable, and stock return variance. The method also enables estimation of firm‐value variance. A proof of existence of the solution is provided.     

Sterilization of short-term capital inflows—through lower interest rates?

Reductions in international interest rates are a major cause of capital flows to emerging economies. Increases in domestic interest rates are a frequent policy response to the resulting price increases. This is often unsuccessful. The paper suggests a theoretical explanation based on distinctive features of emerging financial markets, including imperfect asset substitutability and imperfect capital mobility for some sectors of the economy. It concludes that the appropriate policy response to capital inflows may be lower interest rates.     

Cooperative and noncooperative protection against transferable and filterable externalities

Given self-protection from an undesirable environmental externality, we examine, under several conditions, the efficiency properties of cooperative and noncooperative behavior. We demonstrate that if self-protection can transfer the externality to another agent, then noncooperative behavior will lead to overprotection. If self-protection filters or dilutes the externality, then noncooperation leads to underprotection. In addition, overprotection will worsen if an agent with more relative power is allowed a first-mover advantage or if the damage function is elastic and transferability is uncertain. Finally, a reduction in uncertainty about transferability will accentuate overprotection if the damage function is inelastic. Our results suggest that coordination of protection activities among agents will enhance the overall gains from environmental policy in the European Single Internal Market of 1992. Coordination minimizes the costs of environmental protection, thereby reducing the public credibility of its foes.     

Marketing norms: The influence of personal moral philosophies and organizational ethical culture

This study develops a scale, using the American Marketing Association’s code of ethics, to measure the marketing-related norms of marketing practitioners. The scale has five dimensions: 1) price and distribution, 2) information and contracts, 3) product and promotion, 4) obligation and disclosure, and 5) general honesty and integrity. The relative influence of personal moral philosophies and organizational ethical climate on the norms of marketers was also examined in this study. He received his Ph.D. in marketing from Texas Tech University. His work has previously appeared in theJournal of Macromarketing, Journal of Business Ethics, Research in Marketing, Business and Professional Ethics Journal, andJournal of the Academy of Marketing Science, as well as various other journals and proceedings. His research has been accepted for publication in theJournal of Pharmaceutical Marketing and Management and theJournal of Business Ethics, and has been published in various national and regional proceedings. His research interests include marketing ethics, health care marketing, international marketing, and direct marketing. He received his Ph.D. in marketing from the University of Mississippi. His work has previously appeared in theJournal of Macromarketing, Journal of Business Ethics, Business and Professional Ethics Journal, Journal of Public Policy and Marketing, andJournal of the Academy of Marketing Science, as well as other journals and proceedings.     

Empirical testing of alternative price spread models in the South African maize market

Reduced-form price spread models have been recently utilized by Wohlgenant and Mullen, and Thompson and Lyon to evaluate the economic factors affecting the marketing margins for agricultural products. Drawing on Gardner, Heien, Buse and Brandow, Waugh, Tomek and Robinson, and others they specify alternative retail-farm price spread models and attempt to determine which best fit the data in the context of underlying theoretical rationale. This paper continues in the spirit of Wohlgenant and Mullen, and Thompson and Lyon by evaluating alternative specifications of the retail-farm price spread for white maize in South Africa. However, several important differences do remain. Wohlgenant and Mullen analyzed the price spread for beef using annual data, while Thompson and Lyon modeled the price spread for oranges using weekly data. The time period under consideration can be expected to affect the choice of model because fixed markup rules that might be evident using a short-run period of analysis (e.g., Thompson and Lyon) become untenable over the long run with underlying supply and demand shifts. In this paper, monthly data, which may be interpreted as an intermediate-run period, are used along with dichotomous supply-demand shifters. In addition, Brorsen et. al. have shown that price uncertainty affects the price spread in the marketing channels of agricultural commodities. Thus, the analysis in this paper extends the framework of Wohlgenant and Mullen, and Thompson and Lyon to include measures of price risk. Finally, like Brorsen et. al. this study pertains to the grain market, while Wohlgenant and Mullen, and Thompson and Lyon studied the marketing margin for non-storable commodities.