Dancing Spreads: Market Assessment of Contagion from the Crisis in the Euro Periphery based on Distress Dependence Analysis

The crisis in the eurozone periphery has so far affected markets substantially more than the size of the countries in the region would suggest. Data on direct exposures and simple correlations also fail to explain the cross-border impact of the crisis. Following Segoviano (2006), this paper uses distress dependence analysis to measure market assessment of contagion risks from Greece and Ireland to the rest of Europe during the peaks of the crises in these countries. The results provide insights to possible contagion risks through cross-border negative feedback loops between sovereigns and banking sectors in Europe that help explain the severe impact of the crisis.     

Why Are Rich Countries More Politically Cohesive?*

We document empirically that rich countries are more politically cohesive than poorer countries. In order to explain this regularity, we provide a model where political cohesion is linked to the emergence of a fully functioning market economy. Without market exchange, the welfare of inherently selfish individuals will be mutually independent. Whoever has greater bargaining power will be willing to make decisions that enhance the productivity of their supporters at the expense of other groups in society. If the gains from specialization are sufficiently large, however, a market economy will emerge. From being essentially non‐cohesive under self‐sufficiency, the political decision‐making process becomes cohesive in the market economy, because the welfare of individuals will be mutually interdependent as a result of the exchange of goods.     

Developing Decentralized Capacity for Development Policy Analysis: Lessons for Agricultural Development from Food Security and Nutrition Monitoring in Malawi*

Abstract: Lack of sufficient analytical capacity in most of the developing countries in sub-Saharan Africa has been suggested frequently as a major factor determining the appropriateness of development policy interventions. This paper documents an approach implemented in Malawi for the past three years to develop decentralized capacity to analyze development policies and programs. A conceptual framework for identifying the areas of capacity strengthening in development policy analysis is developed. Generalizable lessons from Malawi's experience in decentralized capacity strengthening arc presented. Various issues that relate to enhancing the efficiency of capacity building programmes in sub-Saharan African are addressed. It is argued that continuous dialogue between development researchers and policy decisionmakers and between the trainers in academic institutions and donor agencies is fundamental for achieving the goals of improved capacity for development policy analysis. Résumé: On avance souvent que l'absence de capacité d'analyse suffisante dans la plupart des pays en développcment d'Afrique subsaharienne constitue l'un des facteurs qui conditionne l'opportunité des interventions en matière de politique de développement. Ce document présente unc approche mise en ocuvre au Malawi au cours des trois dernières années en vuc de développer la capacité décentralisée à analyser les politiques et programmes de développement. Il met au point un cadre conceptuel pour l'identification des domaines nécessitant un appui institutionnel au niveau de 1'analysc des politiques de développement. Des leçons susceptibles d'être généralisées sont tirées de l'expérience du Malawi en matière de renforcement de la capacité décentralisée. Diverses questions ayant trait à l'amélioration de l'efficacité des programmes de renforcement des capacités en Afrique subsaharienne sont abordées. Il est avancé que le dialogue permanent entre chercheurs s'intéressant au développcment et décideurs, et entre formateurs des institutions académiques et organismes d'aide est essentielle pour atteindrc l'objectif d'amélioration de la capacité d'analyse des politiques de développement.     

The effect of cash flow on investment: an empirical test of the balance sheet theory

Using a large data set on investments and accounting information for private firms, we put the balance sheet theory to test. We find that firm cash flow has a positive impact on investment and that the effect is enhanced for firms which are more likely to be financially constrained. We also find that the investment-cash flow sensitivity is significantly larger and more persistent during the first half of our sample period, which includes a severe banking crisis and recession. Our results suggest that financial constraints matter more in periods characterized by adverse economic conditions.     

Recombination in the open-ended value landscape of digital innovation

Digital innovation introduces a new open-ended value landscape to anyone seeking to generate or capture new value. To understand this landscape, we distinguish between design recombination and use recombination, explore how they play out together, and redirect the attention from products and services toward digital resources. Digital resources serve as building-blocks in digital innovation, and they hold the potential to simultaneously be part of multiple value paths, offered through design recombination and assembled through use recombination. Building on this perspective, we offer the value spaces framework as a tool for better understanding value creation and capture in digital innovation. We illustrate the framework and offer the early contours of a research agenda for information systems researchers.