Systemic financial crises and the housing market cycle

Using quarterly data for a group of 20 industrialized countries and both continuous- and discrete-time duration models, we show that financial crisis recessions are associated with a two- to three-fold increase in the likelihood of the end of a housing boom. Additionally, recessions preceded by booms in mortgage credit are especially damaging, as their occurrence coincides with an increase in the duration of housing market slumps of almost 90%.     

The Impact of Social Capital on the Start‐ups' Performance Growth

This paper analyzes the development of strong and weak ties of social capital between a start‐up and its main customers and its impact on the growth of the start‐up's economic and innovative task performance outcomes. Results confirm that there are different configurations of social capital able to influence the start‐up's performance growth during its life cycle, which are contingent on the selected measures of task performance outcomes. Our findings can offer some interesting reflections in the field of social capital, entrepreneurship, and performance research, raising critical strategic implications for start‐ups in terms of opportunities, resources, and governance.     

GENDER DISCRIMINATION ESTIMATION IN A SEARCH MODEL WITH MATCHING AND BARGAINING*

This article develops a search model of the labor market with matching, bargaining, and employers' taste discrimination in which—under necessary but standard distributional assumption—it is possible to separately identify gender discrimination and unobserved productivity differences. The equilibrium shows that both prejudiced and unprejudiced employers wage discriminate. Maximum likelihood estimates on CPS data indicate that half of the employers are prejudiced, average female productivity is 6.5% lower, and two‐third of the gender earning differential may be explained by prejudice. An affirmative action policy is implemented resulting in a redistribution of welfare from men to women at no cost for employers' welfare.     

Reciprocal Trade Agreements in Gravity Models: A Meta-Analysis

The gravity model is a workhorse tool applicable in a wide range of empirical fields. It is regularly used to estimate the impact of reciprocal trade agreements (RTAs) on trade flows between partners. The studies report very different estimates since there is a significant difference in datasets, sample sizes, and independent variables. This paper combines, explains, and summarizes a large number of results using a meta-analysis approach. We provide pooled estimates, obtained from fixed and random effects models of the RTAs' effect size on bilateral trade: the hypothesis that there is no effect of RTAs on trade is robustly rejected at standard significance levels. The information collected on each estimate allows us to test the sensitivity of the results to alternative specifications and differences in the control variables considered, as well as the impact of the publication selection process.     

Communication in dynastic repeated games: ‘Whitewashes’ and ‘coverups’

Summary. We ask whether communication can directly substitute for memory in dynastic repeated games in which short lived individuals care about the utility of their offspring who replace them in an infinitely repeated game. Each individual is unable to observe what happens before his entry in the game. Past information is therefore conveyed from one cohort to the next by means of communication.When communication is costless and messages are sent simultaneously, communication mechanisms or protocols exist that sustain the same set of equilibrium payoffs as in the standard repeated game. When communication is costless but sequential, the incentives to whitewash the unobservable past history of play become pervasive. These incentives to whitewash can only be countered if some player serves as a neutral historian who verifies the truthfulness of others reports while remaining indifferent in the process. By contrast, when communication is sequential and (lexicographically) costly, all protocols admit only equilibria that sustain stage Nash equilibrium payoffs.We also analyze a centralized communication protocol in which history leaves a footprint that can only hidden by the current cohort by a unanimous coverup. We show that in this case the set of payoffs that are sustainable in equilibrium coincides with the weakly renegotiation proof payoffs of the standard repeated game.Received: 30 September 2002, Revised: 5 August 2003, JEL Classification Numbers: C72, C73, D82.We wish to thank an Associate Editor and Dino Gerardi as well as seminar participants at Arizona State, Columbia, Duke, Georgetown, Indiana, Montreal, Princeton, Rochester, Vanderbilt, VPI, the 2001 NSF/NBER Decentralization Conference, the Summer 2001 North American Econometric Society Meetings, and the Midwest Theory Conference, 2000, for useful comments and suggestions. All errors are our own.     

The Polish Experience in Bank and Enterprise Restructuring

MOCT-MOST: Economic Policy in Transitional Economies -     

Futures-Style Options on Euro-deposit Futures: Nihil sub Sole Novi?

Euro-deposit futures play a relevant role among the derivative products traded in official markets. As opposed to most futures contracts, the underlying instrument is not represented by a traded asset but by a linear transformation of an interest rate, the Libor. The options written on Euro-deposit futures that are traded at the London International Financial Futures & Options Exchange (LIFFE) are subject to daily marking to market, as the underlying futures; thus, they are called futures-style options or pure futures options. These options are often priced with the Black (1976) formula, whose use entails several shortcomings. A more realistic alternative is represented by the univariate Cox, Ingersoll and Ross (1985) model. The closed-form solutions for the prices of Euro-deposit futures and futures-style options on Euro-deposit futures obtained in the CIR model are two major original contributions presented in this paper. Other original contributions involve the determination of the relation between futures rates and forward rates and the derivation of the equivalent portfolio for the hedging of futures-style options on Euro-deposit futures.     

The Social Opportunity Cost of Consumption for Australia, 1960–61 to 1988–89

The social opportunity cost of consumption (SOCC) for an economy is the rate at which current consumption can be traded for consumption in the future. The SOCC is an important determinant of the socially optimal levels of investment and the current account surplus and should be an input into the framing of government economic policy. Using overseas interest rates, the SOCC for Australia is calculated in this article. The calculated series is fairly constant for the 1960s and then has a pronounced cyclical pattern from the late 1960s to 1988–89. The average value of the SOCC for Australia is about four per cent.     

Improving the outcomes of youth with medical limitations: Evidence from the National Job Corps Study

Improving work outcomes for youth with disabilities and reducing their reliance on disability benefits are important policy priorities, but existing interventions have shown limited promise. We provide new evidence to inform this discussion by re-analyzing data from the 1990s National Job Corps Study, a randomized field experiment conducted nationwide in the United States. Job Corps, which provides comprehensive training to economically disadvantaged youth, is the nation's largest youth program outside of the school system. We examine youth who had medical limitations when they enrolled in the experiment, a group that has not previously been studied. During the 4 years after random assignment, participation in Job Corps increased the earnings of youth with medical limitations—substantially more so than for youth without medical limitations—and additionally reduced their receipt of disability cash benefits. Interventions designed specifically for such youth have not typically demonstrated reductions in benefit receipt. Hence, our re-analysis of the field experiment suggests that Job Corps could be a promising model for helping some youth with disabilities gain a foothold in the labor market and achieve greater self-sufficiency.     

Short-term inflation projections: A Bayesian vector autoregressive approach

In this paper we construct a large Bayesian Vector Autoregressive model (BVAR) for the Euro area that captures the complex dynamic inter-relationships between the main components of the Harmonized Index of Consumer Prices (HICP) and their determinants. The model generates accurate conditional and unconditional forecasts in real-time. We find a significant pass-through effect of oil-price shocks on core inflation and a strong Phillips curve during the Great Recession.