THE BEHAVIOR OF U.S. PUBLIC DEBT AND DEFICITS DURING THE GLOBAL FINANCIAL CRISIS

In this paper we test the sustainability of U.S. public debt for the period 1916–2012 by analyzing how the primary surplus to gross domestic product (GDP) responds to changes in the debt to GDP ratio in a time‐varying parameter model. Further, we determine the stationarity property of the debt/GDP ratio while accommodating possible breaks in the data caused by wars and economic crisis under both the null and alternative hypotheses of an endogenous unit root test. The results show that the U.S. public debt was sustainable until 2005 when the primary surplus to GDP reacted negatively to the debt/income ratio. This is further exacerbated during the global financial crisis when primary surpluses continued to fall with increased debt, thus jeopardizing the sustainability of fiscal policy. While the stationarity test shows that the U.S. fiscal debt/GDP ratio is sustainable, it fails to highlight the risk that its debt policy has been becoming unsustainable in recent years. (JEL H62, E62, C2)     

Supply Chain Management and Retailer Performance: Emerging Trends, Issues, and Implications for Research and Practice

In an environment with increasing competition and a growing need for operational efficiencies and customer orientation, retailers are looking beyond their organizational boundaries to develop and leverage the resources and capabilities of their supply chain partners to create superior value and competitive advantages in the marketplace. In this article, the authors discuss how three recent trends—global sourcing practices, multichannel routes to market, and relationship-based innovation—are transforming the retail landscape and leading to a variety of performance improvements with regard to brand image, reputation, sales and profits, innovation, and relationships. For each of these major trends, this article highlights key issues, identifies relevant literature, and offers propositions for further research.     

Discretionary and transactional human resource practices and employee outcomes: The role of perceived organizational support

Utilizing perceived organizational support (POS) as the mechanism linking HR practices to employee behaviors in the workplace, we examine a broad set of HR practices in order to understand the relative importance of each HR practice (i.e., those that explain incremental variance over other practices) in influencing employee behaviors. We differentiate between discretionary and transactional HR practices to test the discretionary investment requisite of POS theory. The results show that of the eight discretionary practices, only participation and decision making directly influenced the extra‐role behaviors that employees exhibit, and only training and development directly impacted the customer‐oriented behaviors. Furthermore, one of the transactional HR practices was found to have a direct effect on organizational citizenship behavior. Our findings indicate that the performance management process, promotional opportunities, participation, and involvement in decision making affect how employees behave toward the customer and the extra‐role behaviors they exhibit. Furthermore, this occurs through the view employees develop of the organization as a place to work. That is, these four HR practices demonstrate to employees that they are valued, and, in turn, this feeling of being appreciated impacts their commitment to delivering high‐quality service to the customer and going beyond their job responsibilities. Implications for research and practice are discussed. © 2012 Wiley Periodicals, Inc.     

A model of the U.S. food system: What are the determinants of the state vulnerabilities to production shocks and supply chain disruptions?

We adapt a Ricardian general equilibrium model to the setting of U.S. domestic agri-food trade to assess states’ vulnerability to adverse production shocks and supply chain disruptions. To this end, we analyze how domestic crop supply chains depend on fundamental state-level comparative advantages—which reflect underlying differences in states’ cost-adjusted productivity levels—and thereby illustrate the capacity of states to adapt to and mitigate the impacts of such disruptions to the U.S. agricultural sector. Based on the theoretical framework and our estimates of the model's structural parameters obtained using data on U.S. production, consumption, and domestic trade in crops, we undertake simulations to characterize the welfare implications of counterfactual scenarios depicting disruptions to (1) states’ agricultural productive capacity, and (2) interstate supply linkages. Our results emphasize that the distributional impacts of domestic supply chain disruptions hinge on individual states’ agricultural productive capacities, and that the ability of states to mitigate the impacts of adverse production shocks through trade relies on the degree to which states are able to substitute local production shortfalls by sourcing crops from other states.     

Cause‐related events: fulfilling the objectives of social partnerships

• Cause‐related events are growing in frequency and popularity. These events enable corporates and not‐for‐profit organisations to collaborate for mutual benefit, within the strategic framework of a social partnership. However, while anecdotal evidence indicates that millions of dollars are invested in events, less is known about how the strategic objectives of social partnerships are achieved via cause‐related events. We present the findings of an ethnographic study of two social partnerships and contribute insights into how and why events help them achieve their strategic objectives. Case analysis data reveals that the fit between events and partnerships; the people, teams, and relationships; and collaboration of resources all contribute to generating competitive advantage and value. We discuss the managerial implications for those collaborating to organise a cause‐related event.

Copyright © 2016 John Wiley & Sons, Ltd.     

Modelling and forecasting short-term interest rate volatility: A semiparametric approach

This paper employs a semiparametric procedure to estimate the diffusion process of short-term interest rates. The Monte Carlo study shows that the semiparametric approach produces more accurate volatility estimates than models that accommodate asymmetry, level effect and serial dependence in the conditional variance. Moreover, the semiparametric approach yields robust volatility estimates even if the short rate drift function and the underlying innovation distribution are misspecified. Empirical investigation with the U.S. three-month Treasury bill rates suggests that the semiparametric procedure produces superior in-sample and out-of-sample forecast of short rate changes volatility compared with the widely used single-factor diffusion models. This forecast improvement has implications for pricing interest rate derivatives.     

A re-examination of Libor rigging: a time-varying cointegration perspective

Using a time-varying cointegration framework, this paper examines the alleged manipulation of the London interbank offered rate (Libor) during the 2007–2009 financial crisis. Bank quotes are found to be poor indicators of their financing costs in the crisis period. The aberration in the estimated values of the cointegrating and error correction parameters governing the long-run equilibrium relationship between bank quotes and the final Libor suggests banks were submitting lower quotes. Further analysis which controls for an individual bank’s credit risk, market wide credit and liquidity risks, and a common market factor, demonstrate possible evidence of Libor rigging during the crisis period.     

The effects of agglomeration on tax competition: evidence from a two-regime spatial panel model on French data

This article studies how agglomeration economies affect tax competition between local jurisdictions. We develop a theoretical model with two main testable predictions: in a setting where agglomeration forces lessen the responsiveness of capital to tax, high-regime agglomeration jurisdictions should adopt a rent-taxing behavior, and they should react less to their neighbors’ tax policies. The panel dataset spans the period from 1995 to 2007 and focuses on the local business taxes set at the French mid-subnational jurisdiction level of départements. First, instrumental variables estimates indicate that attractive jurisdictions capture a significant part of firms’ agglomeration rent by levying higher tax rates. An increase by 1% of the localization economies indicator (a specialization index) leads to increasing the business tax rate by 0.43%. Second, local tax setting behaviors are characterized by a mimetic behavior, with best response functions that slope upwards. We propose a two-agglomeration-regime spatial lag model to estimate through ML the relationship between tax competition and attractiveness. Our main result shows that both are linked and tax mimicry is less pronounced if a jurisdiction is agglomerated. Specifically, in response to a decrease in the tax rate of neighboring local governments by 1%, local governments with strong agglomeration economies reduce their tax rate by 0.4% against 0.6% for local government characterized by a low-agglomeration regime. We show that the classical one-size-fits-all-case of a single regime of agglomeration suffers from a 40% downward bias for low-agglomeration jurisdictions. We draw the link to policy praxis by discussing the optimal design of equalization schemes.