Interest Rate Uncertainty and the Financial Intermediary's Choice of Exposure

The financial intermediary's choice of operating as a broker with minimal risk exposure or as an asset-transformer with interest rate risk is modeled as a funds inventory decision made prior to the resolution of uncertainty regarding the borrowing or lending interest rates. It is shown that an increase in the interest rate uncertainty leads the intermediary to reduce its exposure, thereby offering decreased asset-transformation and more brokerage services. However, a stochastic increase in the interest rates leads to greater asset-transformation and less brokerage services.     

Unstable Inflation Targets

This paper studies long‐run inflation targets and stability in an imperfect information environment. When central banks set an inflation target that is not fully communicated, agents draw inferences about inflation from recent data and remain alert to structural change by forming expectations from a forecasting model that is estimated via discounted least squares. Inflation targets can lead agents' beliefs to depart from rational expectations through two channels. First, implementing a higher inflation target can lead to overshooting. Second, there can be nearly self‐fulfilling inflation, disinflation, or deflation that arises as an endogenous response to shocks. Policy implications for implementing a higher target without deanchoring expectations are discussed.     

Diagnostic Screener for Compulsive Buying: Applications to the USA and South Korea

Compulsive behavior is an important topic for social scientists. One form of this behavior is compulsive buying. Using data sets from two countries, the USA and South Korea, the Diagnostic Screener for Compulsive Buying (DSCB) (Faber and O'Guinn 1992) is tested with specific emphasis on the scale's cross‐cultural transferability. We find evidence that the DSCB is unidimensional in the USA and bi‐dimensional in South Korea, suggesting a lack of transferability. Potential cultural reasons for the findings are discussed in detail as well as the implications for public policy and future research.     

THE EFFECT OF ACCESS TO IMPROVED WATER SOURCES AND SANITATION ON ECONOMIC EFFICIENCY: THE CASE OF SUB‐SAHARAN AFRICAN COUNTRIES

This paper evaluates the effect of access to improved water sources and sanitation on 41 sub‐Saharan African (SSA) countries' economic efficiency and growth. For this reason data envelopment analysis (DEA), bootstrap techniques and probabilistic approaches are used. The empirical results indicate that SSA countries' economic efficiency is positively influenced by the access of population both on improved water sources and sanitation. Finally, when the provision of access to improved water sources is provided to more than 50% of the population, the positive effect on countries' economic efficiency is much greater compared with the effect of providing sustainable access to improved sanitation to the same proportion of population.     

An Analysis of the Acquisition of Some Consumer Competencies Among Adolescents

Recent public policy discussions have focused on the role and influences of television, school, and family in teaching young people various desirable and undesirable consumer-related cognitions and behaviors. This research provides a theoretical and empirical basis useful in resolving such issues. The study examined the influences of television, family, school and peers on the acquisition of specific consumer skills that contribute to the individual's competency and proficiency as a consumer in the marketplace.     

Interest Rates and the Market for New Light Vehicles

We study the impact of interest rate changes on the demand and supply of new light vehicles in an environment where consumers and manufacturers face their own interest rates. Interest rate changes impact the auto market through both households and manufacturers. For the impact of rate changes on price and output growth, the household channel is quantitatively more important. A 100 basis‐point increase in both interest rates causes annual growth rates of production to fall from 1.0% to ?11.0% and sales to fall from 1.0% to ?2.9% in the short run.     

Lending Policies of Financial Intermediaries Facing Credit and Funding Risk

This paper compares the optimal lending decisions of financial intermediaries that differ in their risk exposure. All intermediaries are assumed to face a loan demand described by a random applicant arrival process with each applicant offering a unique risk-adjusted rate of return; loan demand is therefore uncertain in both quantity and quality. The intermediaries differ in terms of their risk exposure because of disparate funding practices. Intermediaries functioning as brokers minimize their exposure by borrowing funds only as demand is realized, whereas those behaving as asset-transformers borrow in advance of realizing loan demand, thereby maintaining a loanable funds inventory and sustaining the related exposure. The optimal sequential lending policy is shown to involve setting a credit standard that becomes stricter with the length of the intermediary's planning horizon and the volume of loans outstanding. Most importantly, it is shown that brokers adopt stricter credit standards than asset-transformers and therby reduce their volume of lending.