Pricing pension buy-outs under stochastic interest and mortality rates

Pension buy-out is a special financial asset issued to offload the pension liabilities holistically in exchange for an upfront premium. In this paper, we concentrate on the pricing of pension buy-outs under dependence between interest and mortality rates risks with an explicit correlation structure in a continuous time framework. Change of measure technique is invoked to simplify the valuation. We also present how to obtain the buy-out price for a hypothetical benefit pension scheme using stochastic models to govern the dynamics of interest and mortality rates. Besides employing a non-mean reverting specification of the Ornstein–Uhlenbeck process and a continuous version of Lee–Carter setting for modeling mortality rates, we prefer Vasicek and Cox–Ingersoll–Ross models for short rates. We provide numerical results under various scenarios along with the confidence intervals using Monte Carlo simulations.     

Regime-Dependent Effect of Crude Oil Price on BRICS Stock Markets

In this study, the dynamic relation between global crude oil prices and stock prices is investigated in terms of crude oil-exporting and -importing countries. The relationship between crude oil prices and stock prices is examined for BRICS countries (Brazil, Russia, India, China, and South Africa) for the periods of January 1995 to December 2016 by means of the Markov Switching Vector Autoregression (MS-VAR) model. The impulse-response analysis results suggest that the responses of the stock market to an oil price shock vary over the regimes for all countries. Specifically, we find that the responses of the stock market to an unexpected oil price shock are positive and statistically significant in the high-volatility regime in all countries except for China, and these results suggest that the increase in oil prices may be evaluated by demand-side shock in these countries.     

Costly Pre‐Play Communication and Coordination in Stag‐Hunt Games

In this paper, we experimentally investigate the impact of costly indirect and direct messages on coordination levels in a stag‐hunt game. Three main insights emerge from our experiments. First, we find a significant decrease in message usage with message cost in both treatments and a higher decrease in the indirect‐message treatment. Second, we find that although there is no significant effect of costless or costly indirect messages on the frequency of risky actions, both costless, and costly direct messages significantly increase the frequency of risky actions. Third, while we find a significant increase in the coordination rate on the payoff‐dominant equilibrium from costless indirect message treatment to costly indirect message treatment, this rate significantly decreases from costless direct message to costly direct message treatment. Our findings show that depending on the structure of messages, message cost may increase or decrease the coordination rates on the payoff‐dominant equilibrium with respect to costless communication. However, costly communication increases efficient coordination rates with respect to the no communication baseline. Copyright © 2016 John Wiley & Sons, Ltd.     

Oil exports and the Iranian economy

This paper presents an error-correcting macroeconometric model for the Iranian economy estimated using a new quarterly data set over the period 1979Q1–2006Q4. It builds on a recent paper by the authors, Esfahani, Mohaddes, and Pesaran (in press), which develops a theoretical long-run growth model for major oil exporting economies. The core variables included in this paper are real output, real money balances, inflation, exchange rate, oil exports, and foreign real output, although the role of investment and consumption are also analysed in a sub-model. The paper finds clear evidence for the existence of two long-run relations: an output equation as predicted by the theory and a standard real money demand equation with inflation acting as a proxy for the (missing) market interest rate. The results show that real output in the long run is influenced by oil exports and foreign output. However, it is also found that inflation has a significant negative long-run effect on real GDP, which is suggestive of economic inefficiencies and is matched by a negative association between inflation and the investment–output ratio. Finally, the results of impulse responses show that the Iranian economy adjusts quite quickly to the shocks in foreign output and oil exports, which could be partly due to the relatively underdeveloped nature of Iran's financial markets.     

Why and When Do Governments Initiate Public Enterprise Reform?

Initiating public enterprise reform is a complex decision influencedby economic factors as well as the ideological biases and personalitiesof political leaders. Nevertheless, the use of a contractingframework yields important generalizations about what drivesthe decision. This article argues that the decision dependsfundamentally on the potential efficiency gains from the reformand its associated transactions costs. Costs arise because ofasymmetries in information and opportunism, problems that usuallyplague contract negotiations. The article identifies observablevariables that may affect either the potential gains or thetransactions costs, uses them to construct a simple probit decision-makingmodel, and tests the model using data from fifteen developingcountries over a twenty-year period.     

On Reliability Evaluation of Multistate Weighted k-out-of-n System Using Present Value

A new reliability evaluation methodology for multistate weighted k-out-of-n systems is presented in this article. The present value of the cash flow generated by the system components is used as a reliability value. We take a financial view of reliability and consider functioning periods and the time value of money in system reliability analysis. Two approaches, the universal generating function (UGF) and recursive algorithm, are applied to evaluate the reliability of the multistate weighted k-out-of-n system. An illustrative example is calculated based on the proposed system reliability evaluation methodology. It is shown that this evaluation method can also be used to find the value of the maintenance policy. Finally, the UGF and recursive algorithm approaches are compared with each other for large system reliability assessment.     

Technological structure of trade and BOP-constrained growth in Turkey

This study investigates the empirical validity of the Multisectoral Thirwall's Law for Turkey over the last half century. Multisectoral Thirwall's Law facilitates the discussion of the effects of the sectoral composition of trade on the extent of the balance of payments (BOP) constraint and consequently on the long run growth prospects of an economy. In particular, structural change favoring sectors with Schumpeterian and Keynesian efficiencies is expected to improve these prospects. Lall's commodity classification on a technology basis is adequate for delineating such sectors. In this study, distinct export and import functions are estimated for primary production, low technology manufacturing, medium technology manufacturing and high technology manufacturing industries using the autoregressive distributed lag (ARDL) bounds test and Johansen approaches to cointegration. Resulting income elasticities are used to discuss the structural change in the technological content of Turkish trade and the validity of the Multisectoral Thirwall's Law. Results suggest that Turkey has come a long way in terms of improvements in Schumpeterian and Keynesian efficiency over the last 50 years and that the Multisectoral Thirwall's Law is empirically valid in the case of Turkey.     

Error management culture: impact on cohesion,stress, and turnover intentions

An error management culture involves organizational practices related to communicating about errors, sharing error knowledge, quickly detecting and handling errors, and helping in error situations. Building on error management research, this study examined the influence of organizational error management culture on the turnover intentions of frontline service employees. The study also investigated the underlying mechanism that links this culture with turnover intentions. Data were collected from 345 frontline employees of hotels in Turkey. Structural Equation Modeling results revealed that employee perceptions of organizational error management culture have a direct and significantly negative impact on their turnover intentions. Furthermore, results showed that this relationship is mediated through perceived group cohesion and work stress. Using the job demands-resources model as a theoretical framework, this study revealed that organizational error management culture leads to increased group cohesion; increased group cohesion lowers work stress; and lower work stress lowers turnover intentions. This study contributes to the services management literature by demonstrating how organizational error management culture impacts employee turnover intentions.     

The effect of government-designed export promotion service use on small and medium-sized enterprise goal achievement: A multidimensional view of export performance

Extant literature is equivocal on the effect of government-designed export promotion instruments and services (EPS) on firm performance. Moreover, literature examining the effects of EPS on exporting firms' success is dominated by a single performance perspective, namely, financial goal achievement. Further, the majority of the studies are conducted in developed countries, with limited attention to exporters in developing countries. In order to address these gaps, this study examines the impact of EPS use on export goal achievement of small and medium-sized enterprises (SME) from a developing country, while adopting a four-dimensional view of export performance. Based on a survey of 143 firms in Turkey, the findings suggest that EPS use improves all four export performance dimensions considered, namely, financial, stakeholder relationship, strategic, and organizational learning goal achievements. The article also delineates the performance effects of specific EPS. For example, stakeholder relationship goal achievement is influenced by only one EPS considered, namely, informational materials (e.g., brochures, pamphlets) on exporting. The paper concludes with a discussion of the implications for scholars, public policy makers, and managers.