Beta-product dependent Pitman–Yor processes for Bayesian inference

Multiple time series data may exhibit clustering over time and the clustering effect may change across different series. This paper is motivated by the Bayesian non-parametric modelling of the dependence between clustering effects in multiple time series analysis. We follow a Dirichlet process mixture approach and define a new class of multivariate dependent Pitman–Yor processes (DPY). The proposed DPY are represented in terms of vectors of stick-breaking processes which determine dependent clustering structures in the time series. We follow a hierarchical specification of the DPY base measure to account for various degrees of information pooling across the series. We discuss some theoretical properties of the DPY and use them to define Bayesian non-parametric repeated measurement and vector autoregressive models. We provide efficient Monte Carlo Markov Chain algorithms for posterior computation of the proposed models and illustrate the effectiveness of the method with a simulation study and an application to the United States and the European Union business cycle.     

The proper panel econometric specification of the gravity equation: A three-way model with bilateral interaction effects

We argue that the proper specification of a panel gravity model should include main (exporter, importer, and time) as well as time invariant exporter-by-importer (bilateral) interaction effects. In a panel of 11 APEC countries, the latter are highly significant and account for the largest part of variation. First version received: February 2001/Final version received: June 2002 RID="*" ID="*"  We are grateful to two anonymous referees and Robert Kunst for their helpful comments.     

Unconventional Monetary Policy in the Euro Zone

The European Central Bank adopted a policy of quantitative easing early in 2015, long after the US and UK, and after implementing a succession of measures to increase liquidity in the Euro zone financial markets, none of which proved sufficient eventually. The paper draws out lessons for the Euro zone from US and UK experience. Numerous event studies have been undertaken to uncover the effects of QE on yields on and prices of financial assets. Estimated effects on long-term government bond yields are then converted into the size of the cut in the policy rate that would normally have been needed to produce them. From these implicit cuts in policy rates, estimates of the effect on GDP and inflation are generated. Euro zone QE appears to have had a much smaller effect on bond yields for the core members states than did QE in the US or UK. Therefore its effects on output and inflation are likely to be proportionately smaller. Its effects on long-term government bond yields in periphery members are greater. QE is compressing interest differential among Euro zone member states. The dangers of QE to which various commentators draw attention, that it creates a danger of inflation in the future, that it creates asset price bubbles, that it allows zombie firms and banks to survive, slowing down the process of adjustment, seem remote. Meanwhile it makes a useful contribution to cutting the costs of debt service and allowing member states more fiscal room for maneouvre.     

VAT attacks!

Like the theory of the second best that the 2006 congress marks, the value added tax (VAT) is now fifty years old. Judged by the extent and speed of its spread around the world, and the revenue that it raises, the VAT would seem to have been a remarkable success. Over the last few years, however, it has come under a series of attacks. This paper considers three of the most prominent of these. One is the fear (raised mainly in the United States) that the VAT actually does too good a job of raising tax revenue—which raises the empirical question of whether it has indeed proved as effective a source of revenue as its proponents claim and its opponents fear. The second is the view that the VAT does a bad job of taxing the informal sector—and that tariffs might consequently be a better revenue-raising instrument for many developing countries. The third attack is the most literal, by criminals rather than theorists: in the European Union and elsewhere, sophisticated VAT fraud, targeting its refund provisions, has become a serious concern. The paper also argues, more generally, that the many unanswered questions concerning the VAT reflect an unfortunate disconnect between the development of the tax itself and of second best tax analysis. I am grateful to Ben Lockwood and Stephen Smith for allowing me to draw on our joint work, and to Vidar Christiansen, Sijbren Cnossen, Isaias Coelho, Alain Jousten, Victoria Perry, and Emil Sunley for many helpful comments and suggestions. Views and errors remain mine alone, and should not be attributed to the International Monetary Fund.     

Competitive search markets for durable goods

Summary. This paper considers a dynamic version of Akerlof's (1970) lemons problem where buyers and sellers must engage in search to find a trading partner. We show that if goods are durable, the market itself may provide a natural sorting mechanism. In equilibrium, high-quality goods sell at a higher price than low-quality goods but also circulate longer. This accords with the common wisdom that sellers who want to sell fast may have to accept a lower price. We then compare the equilibrium outcomes under private information with those under complete information. Surprisingly, we find that for a large range of parameter values the quilibrium outcomes under the two information regimes coincide, despite the fact that circulation time is used to achieve separation. Received: August 24, 2000; revised version: October 24, 2000     

On the relationship among efficiency,capitalization and risk: does management matter in local banking market?

By employing a Granger causality methodology in a panel data framework, this article explores the relationship among efficiency, capitalization and credit risk within the local Italian banking system. Focusing the attention on cooperative banks, we specifically test whether managers take more risks in highly concentrated markets (i.e. monopoly) than in partially competitive markets (i.e. duopoly). The evidence shows that in more concentrated markets, management efficiency generates a decrease in risk-taking (rejecting the bad management hypothesis) with respect to the partially competitive markets. Results are consistent with the idea that banks with less local competition are able to increase their profits by indulging more freely in rent-seeking behaviour, minimizing their risk-taking and, consequently, improving the quality of their assets through additional screening processes. The financial crisis does not seem to affect the conduct of management in terms of bank investment decisions and risk-taking. A series of robustness tests generally confirms our findings.     

Publishing performance in economics: Spanish rankings (1990–1999)

Abstract. This paper contributes to the growing literature that analyses the Spanish publishing performance in Economics throughout the 1990s. Several bibliometric indicators are used in order to provide Spanish rankings (of both institutions and individual authors) based on Econlit journals. Further, lists of the ten most influential authors and articles over that period, in terms of citations, are reported. We are grateful to many colleagues who made very useful remarks to preliminary versions of this paper, as well as to two anonymous referees. We are particularly indebted to Xavier Sala-i-Martín, without whose invaluable help this work would not have been possible. All errors or omissions are of our exclusive responsibility.     

Exchange Rate Pass-Through and the Role of Market Shares

This paper examines the effects of changing market shares on exchange rate pass-through to US import prices. Based on a static model of imperfect competition, I predict that a country with a larger share of a host’s import market will have lower pass-through than its competitors. Using highly disaggregated data on US imports, I implement rolling regressions to calculate unique quarterly values of pass-through for specific goods from each exporting country. These values are compared across market shares, indicating a general trend of decreasing pass-through for larger shares. Most specifically, as predicted by the model, the country holding the largest share of the market has significantly lower pass-through than its competitors. The negative relationship between pass-through and market share holds across most categories of goods, most notably the larger categories of imports. Lastly, I show the market share effect is stronger following larger fluctuations in the exchange rate, particularly after large dollar appreciations.     

Perceived justice and post-recovery satisfaction in banking service failures: Do commitment types matter?

Based on the notion that the types of customer commitment to a service provider may have diverse reasons and effects on the customer’s perceptions, attitudes, and behaviors, this study aims to investigate the different buffering effects of calculative and affective commitments on the perceived justice and post-recovery satisfaction (PRS) relationship. Multiple and hierarchical regression analyses were conducted based on survey data collected from 284 households who experienced service failure in the banking sector. Results revealed that while affective commitment moderates the effects of procedural and interactional justice, calculative commitment increases the impact of distributive and procedural justice on PRS.     

Value-in-context in crowdfunding ecosystems: how context frames value co-creation

The aim of this paper is to analyse the phenomenon of crowdfunding and determine whether it can be considered a service ecosystem, where the context frames innovation through value co-creation. A qualitative, multiple case study approach is used to analyse three platforms and six initiatives in the Spanish arts sector. The findings reveal that crowdfunding can be considered an ecosystem where value-in-context frames seven types of value co-creation, offering a contribution both to ecosystem theory and to the field of co-creation.