Intertemporal preference parameters for some European monetary union countries

In the European Monetary Union, the estimation and analysis of preference parameters in its members is of special interest because possible differences could help us to understand why a common monetary policy could have different effects on the different economies involved. In this article, we have focused our attention on the elasticity of intertemporal substitution, one of the key preference parameters in intertemporal macroeconomic models. Several studies have shown a possible underestimation of such elasticity for different countries. It is common practice to estimate the parameter using only nondurable goods and services consumption data, without referring to the flow of services generated by durable consumption. This is only admissible if the intratemporal utility can be separated among the different consumption components. Our first objective is, therefore, to test the assumption of intratemporal separability for a selection of European countries (Germany, Spain and France), and then to analyse the effect of durable consumption on the estimated values of the intertemporal elasticity of substitution of these countries, our ultimate goal. Knowledge of such elasticity will enable us to characterise how saving in these economies reacts to variations in the real interest rate.     

Testing purchasing power parity in a multivariate cointegrating framework

This paper examines a bilateral PPP(Purchasing power parity) relationship between Australia and the 11 major trading countries by means of two alternative econometric techniques-a multivariate cointegrating framework and a band-spectral regression. It is acknowledged that there is no strong evidence that classical PPP holds in all cases. However, the generalized version of PPP holds in all cases, and provides a better explanation of the long-run relations between exchange rates and relative prices.The use of different price indices, i.e CPI and WPI,lead to different estimates and hence different policy implications.     

On the Economics of Callback Services

This paper investigates the economic effects of callback services, an issue which has previously brought much disputes and conflicts. Whereas the existence of callback services has been attributed to a rate disparity between countries, we show that it can arise either from the inefficiency of domestic markets or from the accounting rate which is far from cost-based. Although callback service is an inefficient means of utilizing resources, its introduction may lead the international telephony markets in an efficient direction when inefficiencies exist in the market. It also helps us understand why conflicts occur among the agents with respect to the legitimacy of callback services by comparing the international telephony markets before and after the introduction of callback services.     

Competitive screening and information transmission

We consider a model in which schools and colleges compete for high-ability students, which are independently identified through a costly screening procedure. This independence creates a channel through which students' preferences affect the strategic interaction between schools: students with competing offers accept the most-preferred one, increasing the screening costs of unpopular schools. When preferences between schools are more heterogeneous, schools screen more, increasing the proportion of students with multiple offers, but paradoxically reducing the extent to which their preferences determine their outcomes. By observing the students' schools of origin, colleges can free-ride of the fierce competition that occurs during screening.     

Asset value management in the Portuguese real estate sector

This paper analyzes whether real estate investment fund managers use asset valuation discretion strategically to achieve financial reporting objectives. Portuguese real estate investment funds represent a unique opportunity to investigate executive behavior regarding accounting choice, as fund managers may choose to use historical cost, fair value or a mixed system (historical cost with internal revaluations) to value fund properties. We also investigate the factors that influence this strategic behavior. Empirical results confirm that fund managers manage asset valuations in order to avoid net asset value declines, particularly in a period of financial distress. We also observe that funds with a higher level of past unconditional conservatism are more likely to manage asset values. With respect to corporate governance issues, we conclude that audit quality reduces managerial discretion and that the conflicts that may arise between fund management company shareholders and fund participants due to management fees do not seem to have impact on fund managers’ opportunistic behavior.     

The Effect of Forward‐looking Criteria and IFRS on the Informativeness of Banks’ Loan Loss Allowances: Evidence from Korea

This study analyses how forward‐looking criteria (FLC) and International Financial Reporting Standards (IFRS), as well as changes in accounting principles, affect the informativeness of banks’ loan loss allowances. The results indicate that although the relationship between non‐performing loans and loan loss allowances strengthened after the application of FLC, the relationship between non‐performing loans and loan loss allowances weakened and that between net charge‐offs and loan loss allowances strengthened after the application of IFRS, presumably because banks delayed the reflection of insolvent loans on loan loss allowances in the latter case. Moreover, the introduction of IFRS did not improve the ability to predict the future charge‐off scale using loan loss allowances, referred to as the ‘informativeness of loan loss allowances’. This result occurred because IFRS's incurred loss model does not incorporate the impact of macroeconomic situations into loan loss allowances in the early stage, although it does enhance the accuracy of loan loss allowances. By exploring the effect of accounting principles on the determinants of loan loss allowances, this study has implications for the assessment of loan loss allowances, capital adequacy and asset quality for stakeholders such as depositors, creditors, capital markets and financial supervisory authorities.     

The Monasteries of Putuoshan,China: Sites of Secular or Religious Tourism?

The article reports an analysis derived from a sample of 640 respondents visiting the Buddhist site of Putuoshan that is sacred to the Bodhisattva of Compassion, Avalokitesvara. Drawing on literature and observation over a 12-month period, the article adopts a fourfold designation of visitors: Xiankes, Sushi, Sightseers, and Cultural/Heritage Visitors. Three scales are developed and exploratory factor analysis supports distinctions between the clusters with reference to motives, activities and beliefs, and the categorization is supported by logistic regression analysis. The findings are discussed in the context of destination management with reference to two considerations—namely: (a) sites of religious importance often possess secular as well as religious significance; and (b) the numbers of tourists appear to be growing, thereby raising concerns of future negative tourism impacts.     

Strategic managerial incentives and cross ownership structure: A note

In this note, we study the behavior of firms competing in a Cournot duopoly framework where owners and managers are separate identities and where cross-participation at the ownership level exists. We find that depending on the degree of cross ownership, managerial incentives may be more or less towards profit maximizing behavior. Moreover we show that limited cross-participation may be a way for owners to obtain collusive behavior without apparently offending Anti-Trust laws.We would like to thank M. P. Espinosa, C. Matutes, J. D. Pérez Castrillo, J. Ricart, V. Salas, X. Vives, and an anonymous referee for their comments and suggestions. I. Macho-Stadler's research was partially supported by the project PGV 9022.1. The usual disclaimers apply.     

Sources of momentum profits in international stock markets

This paper examines the sources of momentum profits of countries exhibiting and not exhibiting momentum and compares the differences in the underlying factors determining momentum profits between these two groups of countries. We find remarkable differences in the decomposed components between these two groups of countries. Countries exhibiting momentum show that the cross‐sectional dispersion in unconditional mean returns dominates the negative contribution from the component reflecting the intertemporal behaviour of asset returns. However, this is not the case in countries exhibiting no momentum. Furthermore, countries with greater relative contribution from the cross‐sectional variance in unconditional mean returns tend to have greater momentum profits. Our results may support risk‐based explanations for the momentum phenomenon rather than behavioural finance‐based explanations.