Economic growth and urbanization: A cross-section and time-series analysis of thirty-five developing countries

In this paper, we discuss the influence of urbanization and urban primacy on the economic growth rates of developing nations. Included in the paper is preliminary evidence, from cross-section and time-series analyses, that while urbanization is an inevitable product of economic development, the process of urbanization is best achieved when the urbanization is managed and gradual. Time-series and cross-section analyses indicate a negative relationship between urbanization and urban primacy and economic growth. However, further cross-section analysis shows that all industrialized economies are highly-urbanized. The dichotomy is explained in that urbanization is inevitable with economic growth, but the pace and character of urbanization also matters. We present a basic model that predicts the economic growth rates of developing nations. The tests performed could only follow the general tone of the model because of the limitations of the data sources. (JEL: O10, O18, O40)     

Non Parametric Efficiency Measurement

Efficiency measurement using non parametric methods is increasing rapidly. One important initial step in measuring efficiency is deciding which software package to make use of. Here Data Envelopment Analysis (DEA) efficiency packages are reviewed, including those which undertake Malmquist productivity analysis. While most packages are commercially available, the one which is not a commercial product has an obvious initial advantage.     

A general proposition on the design of a neutral business tax

A simple and general means of levying a business tax that is ‘neutral’ in the sense that it does not affect the firm's decisions at the margin is discussed. In particular, we analyze the effect of a business tax of our design on the investment decision of the firm. The well-known ‘imputed income’ and ‘immediate write-off’ methods of levying a neutral business tax are found to be special cases of our general tax design. The implication of our results is that a neutral ‘pure profits’ tax can be levied without the informational difficulties of the imputed income method or the cash flow disadvantages of the immediate write-off method.     

Hedge Fund Involvement in Convertible Securities

Convertible arbitrage hedge funds combine long positions in convertible securities with short positions in the underlying stock. In effect, hedge funds use their knowledge of the borrowing and short‐sale market to hedge themselves while distributing equity exposure to a large number of well‐diversified investors through their short positions. The authors argue that many “would‐be” equity issuers that would otherwise pay high costs in a secondary equity issue choose instead to issue convertible debt to hedge funds that in turn distribute equity exposure to institutional investors. This allows companies to receive “equity‐like” financing today at lower cost than a secondary equity offering. The authors' findings also suggest that more convertibles will be privately placed with hedge funds when issuer and market conditions suggest that shorting costs will be lower.     

Assessing central bank credibility during the ERM crises: Comparing option and spot market-based forecasts

Financial markets embed expectations of central bank policy into asset prices. This paper compares two approaches that extract a probability density of market beliefs. The first is a simulated moments estimator for option volatilities described in [Mizrach, B., 2002. When Did the Smart Money in Enron Lose Its’ Smirk? Rutgers University Working Paper #2002-24]; the second is a new approach developed by [Haas, M., Mittnik, S., Paolella, M.S., 2004a. Mixed normal conditional heteroskedasticity, J. Financial Econ. 2, 211–250] for fat-tailed conditionally heteroskedastic time series. In an application to the 1992–1993 European Exchange Rate Mechanism crises, we find that both the options and the underlying exchange rates provide useful information for policy makers.