RAPID GROWTH IN CHINA AND THE ASIAN ECONOMIES: SOME STYLISED FREE‐MARKET POLICY INFERENCES

The focus of this article is on the rapid growth of the Chinese economy and its ongoing interaction with the rest of Asia. It concludes that rapid growth in both Asia and China has resulted from free‐market‐oriented neoclassical economic policies and principles. Owing to its economy's size, its openness and the briskness of its GDP growth, China has influenced economies across the globe as well as the more proximate regional economy.     

Asymmetric Information, Bargaining, and International Mergers

The formation of international mergers is examined in the presence of two kinds of asymmetric information, one when a local firm has private information on market size and the other when a foreign firm has private information on its technology. In each situation, parametric configurations are identified under which a merger offer may or may not be made. It also examines the kind of offer and the probability of its acceptance. The likelihood of a merger beingformed is also related to the basic market size, demand uncertainty, and cost uncertainty. Welfare effects of tax/subsidy policies by the host country are also analyzed.     

Basel II: Correlation Related Issues

Basel II aims to aggressively improve on Basel I, and is projected to capitalize on the technological advancements that have permeated the financial industry since Basel I. This paper examines the correlation issues that arise, and provides recommendations on implementation as we move forward. We provide the following results: (1) We demonstrate that fixing asset value correlations by regulators without a specification of business unit granularity and aggregation impacts franchise risk. (2) Loss distributions for credit risk are more sensitive to correlation assumptions that those for market risk; arbitrary, inaccurate correlation specifications can cause large errors in capital requirements. (3) Current regulations do not recognize that credit losses depend on four distinct correlations, not just one. (4) Recovery rates may be determined uniformly across banks. (5) Tail risk comes from LGD correlations and non-Gaussian risks. (6) The 1-year VaR horizon causes distortions especially when regimes and pro-cyclicality are involved. (7) We recommend a quantitative measure for implementing market discipline, the third pillar of the Basel II accord. Therefore, this paper highlights many issues that may be addressed using the tools banks already employ for internal risk management.     

eInformation: A Clinical Study of Investor Discussion and Sentiment

We examine the information flow for four stocks over seven months to trace the relationship between on-line discussion, news activity, and stock price movements. On-line discussions support numerous unsubstantiated rumors, substantial on-point exchanges, and quick dissemination of imminent and recently released information. Applying language-processing routines to message board postings and news, we create sentiment and disagreement measures or "eInformation." We analyze the determinants of sentiment and disagreement, and trace links between news, eInformation, and stock returns. This intensive clinical study of on-line discussions suggests mechanisms individual investors and groups can use to analyze and digest company information.     

China and India： An Era of Escalating Economic Interaction

I. Historic Cultural and Economic Relations China and India are both ancient civilizations, with histories stretching over 5000 years. Their mutual relations are also ancient. China and India have long-term intellectual and cultural ties, which historically fell in the domain of religious scholars. These strong ties date back to the first century AD when Buddhism spread from India to China. The history of Buddhism chronicles detailed accounts of religious and cultural bonds between the t…     

Testing a Hazard Model for the Housing Market in New Orleans

A bstract .   The article presents a search-theoretic approach to investigate the relationship between probability of a sale and market duration in the housing market. Using a hazard model to study duration dependence, the article, on the basis of data from New Orleans, provides empirical evidence that houses do exhibit duration dependence.     

Endogenous trading bloc formation in a North-South global economy

Abstract .  The majority of the trading blocs to date are between similar countries, rather than between developed and developing countries. This paper provides a rationale for why trading blocs among similar countries may arise as an equilibrium phenomenon. It develops a model of an asymmetric world economy in which there are at least four countries. The countries are differentiated with respect to their market size and they choose their trading partners. In the coalition-proof Nash equilibrium, either there is global free trade or free trade areas are formed among similar countries.     

The impact of internet exchanges on business-to-business distribution

The authors review an incumbent business-to-business distributor of electronic components faced with the entry of more than 50 Internet-based competitors and offer an explanation for why the distributor prevailed. Underlying the explanation is an assertion that the appropriate unit of analysis is the buyer-distributor-seller triad, not the buyer-seller dyad. In the case examined, the channel activities were interrelated such that when each party calculated the costs and benefits of the activities that occurred within this three-way relationship, they outweighed the net gains from disintermediation or Internet intermediation. Particular conditions favoring the status quo included existing activities for sharing customer identification information between the distributor and the seller, a high proportion of negotiated distributor-customer contracts, and new entrants’ reliance on open technologies. While no claims are made about the generalizability of this explanation beyond the case studied, the authors believe their assertion and hypotheses may have broader applicability. Das Narayandas is associate professor of business administration at the Harvard Business School. Mary Caravella is a doctoral student in marketing at the Harvard Business School. John Deighton is the Harold M. Brierley Professor of Business Administration at the Harvard Business School.