Debts on debts

This paper studies the impact of mortgages on consumer debt and on debt on durable goods. Outstanding debt, representing mortgages, affects positively consumer debt, and the debt on durable goods. This hypothesis is empirically tested for the U.S. using PSID 2005 wave. Our results are striking. First, we find strong evidence supporting a positive association between mortgage loans and consumer debts, regardless of the measures used, the control variables used, and the methods used. The results remain unchanged when we address potential endogeneity and measurement error problems. Second, we find that the effects of mortgages on the debt on durable goods are in general smaller than the effects of mortgages on other types of debts. Third, our distributional analysis reveals an interesting pattern of the effects on consumer debt of mortgage over the distribution. Specifically, the effects monotonically decrease as the quantile increase, with the smallest effects being at the upper tail of the distribution. Finally, we also examine the short-run dynamics of the relation between mortgage and consumer debts. We find that there is no systematic relation between the growth rate of mortgage and the growth rates of consumer debts.     

Road traffic injuries in Mozambique

Road traffic injuries affect the economy, health and quality of life of the people of Mozambique. Current road safety programmes are inadequate and inefficient given the magnitude of the problem. Data reported on road traffic crashes in the period 1990 to 2000 from the National Institute for Road Safety, the traffic police and the Central Hospital of Maputo were reviewed. The burden of road traffic injuries in Mozambique is rising, with at least three people killed daily. The age group most affected is 25-38 (39.35%), followed by 16-24 (20.79%). The main causes of crashes include reckless driving, drunken driving, roads with potholes, inadequate signs, lack of protection for pedestrians, and inadequate traffic law enforcement. However, the data are not adequate to reveal the true magnitude of the problem. Data collected by different sources are incomplete and not coordinated with other sources and databases. In urban areas, however, better response to crashes, treatment of the injured, reporting and data collection is attributable to a greater concentration of police and medical facilities. Road traffic safety programmes in Mozambique are inadequate and inefficient, starting with the data collection system. Improvement of injury surveillance systems is needed to help make road traffic safety a national development agenda priority and for developing and implementing road safety policies. For road safety programmes to be effective, government must facilitate stakeholders’ involvement, and the clear definition of government activities, civil society activities and public-private partnerships need to be established.     

Pricing real options under the constant elasticity of variance diffusion

Much of the work on real options assumes that the underlying state variable follows a geometric Brownian motion with constant volatility. This paper uses a more general assumption for the state variable process that better captures the empirical regularities found in commodity markets. We use the constant elasticity of variance diffusion, where volatility is a function of underlying asset prices, and we provide analytic solutions for perpetual American options. We show that a firm that uses the standard lognormal assumption is exposed to significant errors of analysis, which may lead to nonoptimal investment and disinvestment decisions. © 2010 Wiley Periodicals, Inc. Jrl Fut Mark 31:230–250, 2011     

Interest Rate Derivatives in a Duffie and Kan Model with Stochastic Volatility: An Arrow-Debreu Pricing Approach

Simple analytical pricing formulae have been derived, by different authors and for several derivatives, under the Gaussian Langetieg (1980) model. The purpose of this paper is to use such exact Gaussian solutions in order to obtain approximate analytical pricing formulas under the most general stochastic volatility specification of the Duffie and Kan (1996) model. Using Gaussian Arrow-Debreu state prices, first order stochastic volatility approximate pricing solutions will be derived only involving one integral with respect to the time-to-maturity of the contingent claim under valuation. Such approximations will be shown to be much faster than the existing exact numerical solutions, as well as accurate.     

EVIDENCE ON GENDER WAGE DISCRIMINATION IN PORTUGAL: PARAMETRIC AND SEMI‐PARAMETRIC APPROACHES

In this paper we consider several alternative approaches to analyze gender wage discrimination. Besides the traditional OLS estimator, we use two other approaches to control for sample selection bias problems: the parametric procedure suggested by Vella and Wooldridge, and the Li and Wooldridge semi‐parametric estimator. We study the case of Portugal, employing data from the European Community Household Panel. The results reveal that the discrimination estimates are sensitive to the different econometric approaches. In fact, when sample selection bias is taken into account, the discrimination values are reduced and are typically not significant.     

Clustering financial time series with variance ratio statistics

This study introduces a new distance measure for clustering financial time series based on variance ratio test statistics. The proposed metric attempts to assess the level of interdependence of time series from the point of view of return predictability. Simulation results show that this metric aggregates time series according to their serial dependence structure better than a metric based on the sample autocorrelations. An empirical application of this approach to international stock market returns is presented. The results suggest that this metric discriminates stock markets reasonably well according to size and the level of development. Furthermore, despite the substantial evolution of individual variance ratio statistics, the clustering pattern remains fairly stable across different time periods.     

The business-to-business relationship dimensions in financial services markets

This paper discusses the nature of financial business relationships by drawing on the IMP Group’s theory of industrial relationships. It discusses, among other aspects, the interaction process between banks and their corporate clients, the longevity of relationships, the interdependence between both sides, and the atmosphere of financial services relationships. The conclusions are thought to be interesting and useful for the managers of firms and financial services when setting relationship marketing policies and for academic research on business-to-business services relationships. The field research was done in Portugal and the case method was used.

On positional consumption and technological innovation: an agent-based model

Positional behaviour is arguably a source of social externalities. Remedies for this market failure are defended by some authors and rejected by others. One of the issues discussed is the role that the competition for positional goods may have in generating technological innovation. This article aims to contribute to the understanding of the dynamics of this process through the use of an agent-based model. Simulations show a plausible dynamics of the process of technological innovation as generated by consumption of positional nature. An interpretation of the results in the scope of the policy discussion in question is provided. The influence of key factors such as income inequality, the materialization of the Hirsch conjecture, and characteristics of the network of relative preferences, is analised. We also frame the potential interest of positional consumption and this model in particular in the context of the ongoing discussion among evolutionary economists on the behaviour of demand.