The economic role of foreclosures

We consider the economic consequences of changing the foreclosure rules. By incorporating renegotiation into the analysis, we show that although renegotiation decreases the number of foreclosures it can make the effects of foreclosure more significant. Even when foreclosure does not actually occur, a change in foreclosure rules changes the threat points of lender and borrower in any renegotiation, and thus changes the effective interest rate that the lender receives. In the long run, stated interest rates on loans will adjust to compensate for any change in the effective interest rate. We also examine the impact of a change in foreclosure laws on the borrower's welfare.     

The Scope for Fuel Substitution in Manufacturing Industries: A Case Study of Chile and Colombia

This article analyzes plant-level panel data from Chile andColombia to assess how manufacturers might respond to carbontaxes and other policies that induce substitution between cleanand dirty fuels. Is producer flexibility linked with sectorof activity, capital vintage, or rates of new capital formation?When adjustments in energy use occur, are they accomplishedthrough changes in factor proportions for individual producers,changes in the output shares of producers within an industry,or changes in the relative production levels of different manufacturingindustries? Patterns of energy use within and between industriesshow that fiscal policies can significantly influence the leveland mixture of energy use among manufacturers.     

Implementing Subnational Value Added Taxes on Internal Trade: The Compensating VAT (CVAT)

Thispaper describes an ingenious and elegant scheme for implementinga destination-based value added tax (VAT) on cross-border tradewithin a nation or group of nations. Sales to local purchasers(registered traders, households, and unregistered traders) wouldbe subject to the local VAT, but sales to purchasers in otherstates would be zero-rated for state VAT and subject insteadto a ``compensating value added tax' (CVAT). Credit would beallowed for tax on purchases by registered traders: for the localVAT on intrastate purchases and for the CVAT on interstate purchases.     

Price Discovery without Trading: Evidence from the Nasdaq Preopening

This paper studies Nasdaq market makers' activities during the one and one-half hour preopening period. Price discovery during the preopening is conducted via price signaling as opposed to the auction used to open the NYSE or the continuous market used during trading. In the absence of trades, Nasdaq dealers use crossed and locked inside quotes to signal to other market makers which direction the price should move. Furthermore, we find evidence of price leadership among market makers that bears little resemblance to their IPO\SEO lead underwriter participation.     

大稳健、大恐慌和大收缩

本文为英格兰银行负责货币政策的副行长查尔斯·比恩(Charles Bean)先生在2009年8月25日欧洲经济学协会熊彼特讲座上的主题演讲。与其他对于本轮危机的分析相比,本文有两个最显著的特点:一是视野更加开阔、观点更加平衡:二是分析框架更加规范、逻辑性强。本文所涉及的问题正是国际金融监管改革的核心。     

Costly information production and optimal capital structuring: Theory and implications for finance and accounting

By considering a broad class of securities offerings that we termcapital structurings, a firm can always avoid pooling with firms whose prospects are poorer. This result implies that firms need not indulge in costly information gathering, hoping thereafter to signal to investors. One application allows us to describe a new theory of capital structurings, in which firms choose their capital structure not (as in traditional capital structure signaling theory) to signal privately known prospects, but rather to signal that no (productively useless) investigation of prospects has been pursued. A second application addresses the issue of the impossibility of informationally efficient capital markets: firms are capable of establishing conditions under which investors will recognize informational efficiency. The authors wish to acknowledge helpful comments by participants in seminars at the University of Hawaii at Manoa and the Univeristy of Tsukuba. Particular thanks go to Adam Brandenburger and an anonymous referee. Naturally, any remaining errors are the responsiblity of the authors. C.J.J. is on leave at the Council of Economic Advisers. This article reflects the opinions of the authors and not that of the Council of Economic Advisers. Much of the work for this article was conducted while E.H.R. was on leave at the Institute of Socio-Economic Planning at the University of Tsukuba, Tsukuba, Ibaraki 305, Japan.     

The efficiency of earnings forecast pricing

Prior research has suggested that the information content associated with analysts’ forecast revisions is not immediately incorporated into a firm’s stock price. We find that the apparent anomaly is concentrated in low-priced firms that receive favorable earnings revisions. Variables (such as analyst coverage and celebrity status) cannot reliably explain variations in price formations. Finally, we find that the magnitude of the post-forecast revision drift has decreased after 2002. Overall, our results suggest that the analysts’ forecast revisions anomaly can be explained by a combination of random statistical variations and transaction costs.     

Exposure Triggers and Allocation Methods: Learning Lessons From Prior Court Rulings

This study provides a review of some of the major court rulings that have shaped and continue to shape the commercial general liability (CGL) market. The evolution of the concepts of "triggers" and allocations systems is examined to gain a perspective on the way in which courts reinterpret contract language to apply to new and emerging exposures. A review of the issues impacting the CGL provides valuable insights into the way court rulings can create a significant impact in the insurance market. A stream of court decisions provides the backdrop for today's challenges, including the reemergence of asbestos claims. The study also fills a gap in the literature related to the crisis in the CGL marketplace and changes in the pricing, regulation, and solvency of insurers operating in those lines. As old risks continue to evolve and new risks emerge, courts have begun to reinterpret liability contracts in much the same way as they reinterpreted contracts with regard to pollution and products in the 1970s and 1980s. Recent rulings related to asbestos and environmental liability underscore the importance of these issues in today's marketplace. By reviewing these events related to the CGL policy, insurers, insureds, and regulators may gain a new perspective on the importance of developing a clear standard wording that will be consistently interpreted in light of new exposures.