Monetary and Fiscal Policy Design in the EMU: An Overview

The interaction of monetary and fiscal policies is a crucial issue in a highly integrated economic area such as the European Union. This paper analyzes the design of monetary and fiscal policies in the EMU. To do so, the paper starts with an overview of the most important aspects. Next, it analyzes monetary and fiscal policy interaction in a stylized model of a monetary union, in which monetary and fiscal policy design is modeled as a dynamic stabilization game. Macroeconomic policy making and adjustment are studied under alternative forms of cooperation and in both symmetric and asymmetric settings.     

Methods of privatization and economic growth in transition economies1

We examine how different methods of privatization might have affected growth in transition economies. Using several econometric specifications, including fixed effects and GMM, we estimate a cross‐country panel growth model for 1990–2003. We find only voucher privatization to have been significantly associated with faster growth. Moreover, neither private sector development per se nor capital market development exercised a significant influence. We speculate that voucher privatization may have been effective because of the speed with which links between firms and the state were severed.     

Estimating the joint tail risk under the filtered historical simulation: An application to the CCP’s default and waterfall fund

The estimation of joint tail risk is necessary to evaluate the size of portfolio margins and default funds of central counterparties. The ability of filtered historical simulation to satisfy new regulatory requirements in this area is examined at the very high confidence levels, necessary to ensure market integrity over time.     

Costly contracting in a long‐term relationship

We examine a model of contracting where parties interact repeatedly and can contract at any point in time, but writing formal contracts is costly. A contract can describe the external environment and the parties' behavior in a more or less detailed way, and the cost of writing a contract is proportional to the amount of detail. We consider both formal (externally enforced) and informal (self‐enforcing) contracts. The presence of writing costs has important implications both for the optimal structure of formal contracts, particularly the tradeoff between contingent and spot contracting, and for the interaction between formal and informal contracting. Our model sheds light on these implications and generates a rich set of predictions about the determinants of the optimal mode of contracting.     

The impact of technological convergence on firms' product portfolio strategy: an information-based imitation approach

Technological convergence in the electronics industry has enabled disparate new functionalities to be added to existing basic products. Although the main drivers of technological convergence have been examined by the technological change literature, the impact of technological convergence on firms' product portfolio strategies remains a largely unexplored issue. Drawing on the technological change and information-based imitation literatures, we develop hypotheses on how the introduction in the market of technologies from other product categories affects the way firms modify their product portfolio vis-à-vis the market leader. Data on nearly 300 imitation strategies at the product portfolio level, which cover over 3,500 handset models introduced by 55 mobile phone vendors from 1994 to 2010, show that the relationship between the level of technological convergence in a product category and the firms' level of imitation of the market leader product portfolio strategy is U-shaped. Data also show that the firm's prior experience plays an important role in moderating this curvilinear relationship.     

Open innovation: Are inbound and outbound knowledge flows really complementary?

One novel implication of the open innovation paradigm is that inflows and outflows of knowledge are complementary. We argue that engaging simultaneously in buying and selling knowledge should allow firms to increase innovation outcomes. At the same time, we identify some of the relevant costs (cognitive, transaction, and organizational costs) that “open” firms can reduce by combining knowledge inflows and outflows. Empirically, however, we find no evidence for such complementarity in a sample of Belgian manufacturing firms. Firms buying and selling knowledge do increase their sales of new products, but at the same time their R&D costs increase more than proportionally. Our findings, therefore, indicate the need for research into a better understanding of the drivers of actual costs of organizing for open innovation. Copyright © 2015 John Wiley & Sons, Ltd.     

Bribery and investment: Firm‐level evidence from Africa and Latin America

Research summary : Using a unique database that measures firm‐level bribery in Africa and Latin America, we corroborate extant results in the literature that paying bribes deters firm investments in fixed assets. Our contribution is to explore four mechanisms. By adopting a reverse causality approach (Gelman and Imbens, 2013), we find evidence consistent with one of them: short‐term oriented firms prefer to bribe rather than invest in fixed assets, while the opposite is true for firms with a long‐term orientation. We rule out that bribe payments drain financial resources for investment, that firms that invest do not bribe because fixed assets make them less flexible and more vulnerable to future bribes, and that less efficient firms bribe rather than invest. Managerial summary : We ask whether, along with ethical issues, bribing affects the behavior and performance of firms in Africa and Latin America. Our statistical analysis shows that bribe payments do not reduce the short‐term performance of firms, but frustrate investments in fixed assets, which is the foundation of firms' long‐term growth. It is like seeking a job via nepotism or education. Nepotism makes it likely to find a job in the short term. However, the solid skills generated by education raise the odds of finding better jobs in the future. We rule out some common explanations for the trade‐off between bribing and investment (e.g., bribes drain resources to invest or that less efficient firms bribe and do not invest). Our analysis suggests that firms with short‐term orientations are more likely to bribe and firms with long‐term orientation are more likely to invest. Copyright © 2015 John Wiley & Sons, Ltd.     

Lundberg parameters for non standard risk processes

We consider risk processes with delayed claims in a Markovian environment, and we study the asymptotic behaviour of finite and infinite horizon ruin probabilities under the small claim assumption. We also consider multivariate risk processes of the same kind, and we give upper and lower bounds for the Lundberg parameters of the corresponding total reserve. Our results have strong analogies with those one in the paper by Juri (Super modular order and Lundberg exponents, 2002).     

Uncertainty about fundamental,pessimistic and overconfident traders: a piecewise-linear maps approach

Decisions in Economics and Finance - We analyze a financial market model with heterogeneous interacting agents where fundamentalists and chartists are considered. We assume that fundamentalists are...