Reflections on the Euro Area Fiscal Stance

Avoiding the mistakes of the past, when the good times were not used to build buffers, will be crucial to avoid countries again being forced to engage in a pro-cyclical fiscal tightening in the next downturn.     

Measuring Corporate Environmental Performance: A Methodology for Sustainable Development

Assessing corporate environmental performance (CEP) that is both comprehensive and consistent with sustainable development both for society and companies, while at the same time taking heed of the facts and interests of each stakeholder, is not a simple feat. Due to the multidimensional character of the sustainability concept, several questions must be considered in the evaluation process: (i) the qualitative nature of indicators and the complexity of developing a synthetic index; (ii) the difficulty of choosing properly statistical techniques for aggregation and (iii) the difficulty of introducing stakeholders’ preferences in the assessment models. This paper is an attempt to address this challenge by developing a framework for the assessment of CEP, based on the application of a fuzzy multi‐criterion decision‐making (MCDM) method. To achieve positive scores in a CEP assessment, an organization should be strategically committed and engage in environmental management and governance structures that are translated into good results in terms of both engagement and operational performance. Unless such premises are explicitly incorporated into the assessment criteria, the results would reveal that the CEP measurement could not be brought into a line with an earnest ambition of achieving true sustainable development. Copyright © 2015 John Wiley & Sons, Ltd and ERP Environment     

Brand Attachment and Consumer Emotional Response to Unethical Firm Behavior

Attaching consumers to a brand is a cornerstone of relationship marketing as attachment increases loyalty. This research investigates another possible benefit of attachment, its potential and limits for shielding brands from firms’ ethical missteps. Merging motivated reasoning and attachment theories, two studies focus on how brand attachment influences consumer judgments of firm ethics and the emotional and behavioral consequences developing from those. A field study indicates that attachment attenuates judgments of unethical behavior, contributes to emotional ambivalence, and affects purchase intentions. A subsequent experiment corroborates these findings and shows that the buffering role of attachment is limited to conditions when the information about firm ethics is moderately rather than extremely negative. Implications focus on advancing research on ethics and emotional ambivalence in consumer brand relationships and on managerial implications.     

Exchange rate determination: a theory of the decisive role of central bank cooperation and conflict

Economists’ faith that variable exchange rates benevolently equilibrate has been empirically disconfirmed. That faith is here tackled at its theoretical core with an exchange rate model that although ultra abstract, includes the undeniable fundamentals of market power and differential goals of central bankers and large-scale private players. It permits a game theoretic analysis under the assumption that all agents maximize their payoffs. The paper then relaxes the assumption of maximising agents, allowing for a more complex and thus realistic second version of the model that is interpretable within SKAT, the Stages of Knowledge Ahead Theory of risk and uncertainty. In an experimental setting, this second version of the model points to: a) the inability of agents in central banks, governments and the private real and financial sectors to operate in maximising ways; b) destructive central bank conflict; and c) the widely discrepant outcomes arising from the dynamics of individual personality differences. The paper’s theoretical and empirical findings thus both point to the merits of a single world currency.     

Managing Perplexity: Lessons from Inside the Romanian Business Culture

Despite the passage of several decades since the revolution of 1989, there is little professional literature designed to prepare foreign investors for the Romanian business culture. Visitors to this nation discover a friendly people who engage in business practices often characterized as perplexing, frustrating, and imbued with self-defeating actions. The communist period in Romania's history imbedded unethical behavior into the nation's culture, including the morally ambiguous practice of favor trading. This paper describes this central business activity and how it shapes business dealings and often undermines opportunities. The cultural context that created the favor trading environment is discussed, and methods for managing this perplexing practice are explained.     

An assessment of the Bank of Canada's term PRA facility

This paper empirically assesses the effectiveness of the Bank of Canada's term Purchase and Resale Agreement (PRA) facility in reducing funding pressures, as measured by the CDOR-OIS spread. It examines the behaviour of this spread around both term PRA announcement dates and term PRA operation dates, using an event-study methodology to control for developments in other money markets as well as proxies for Canadian banking sector credit risk. Overall, there is robust evidence that the term PRA announcements reduced bank funding costs at both 1-month and 3-month terms, whereas we find no evidence of an impact from term PRA operations.     

Appropriate contract durations in the German markets for on-line reserve capacity

This paper explores the economic implications of different contract durations in markets for on-line (primary and secondary) reserve capacity in Germany with the crucial feature of separate markets for spot energy and reserve capacity provision. The analysis is based on an equilibrium model developed by Just and Weber (Energy Econo 30:3198–3221, 2008) for reserve markets. It reveals the implicit trade-off for the bidders and implicit interdependencies between the reserve and the spot markets. Even if the markets are not explicitly coordinated, they are interrelated through the dispatch decisions of the power plant owners. The paper concludes that the current German reserve market design is inefficient and should be improved. The results clearly show that shorter periods (with resulting lower variations in overall electricity demand) lead to more efficient dispatch and market results. Not only prices in the reserve capacity markets are expected to be lower, but also spot market prices. As these benefits can be partially reaped by owners of large generation portfolios also under longer contract durations, it discriminates against smaller generation companies and can potentially deter market participation. Further, the paper takes a broader perspective and discusses security concerns against shorter contract durations. It is shown that the opportunity costs character of the reserve market implies sufficient incentives for supplying online reserve capacity. The concerns do not appear to be predominant and it should be possible to manage them appropriately.     

The impact of cash transfers on household welfare in Namibia

Namibia has a long history of providing a universal and non-contributory old age pension, child grants using means testing and quasi-conditionalities, and other cash transfers. Multivariate analysis presented in this paper confirms that these transfers play an important role in alleviating poverty, especially for the very poor. The poverty-reducing effects of the child grants are likely to increase further as access is being rapidly expanded. However, the impact in terms of reducing Namibia's extremely high inequality is limited. The targeting of the cash transfers towards the poorest groups takes place through two main channels. For the child grant, targeting occurs as a result of the orphan status eligibility criteria, as orphans are over-represented in lower-income households. For the universal social pension, it appears that some of the relatively less poor do not receive it even if they are eligible. Means testing of child grants appears ineffective, even without considering administrative costs.     

Assessing Advertising Effectiveness: The Potential of Goal‐Directed Behavior

Advertising clutter and declining audience attention means advertisers need pretesting to ensure the effectiveness of their advertisements. This study uses, for the first time, a variable‐resolution display to measure viewers’ visual attention to advertising. The display features only the part of an ad that corresponds with the observer's eye gaze with high acuity, whereas the resolution of the other parts reflects the decline in spatial resolution of the human visual system. Participants keep the highest resolution area aligned with their foveal vision using manual cursor movements. In accordance with neuroscientific theory, recorded cursor movements parallel the eye gaze patterns observed in a control group. However, unlike tracking eye movements, the instrument offers a simple, unobtrusive, low‐cost, and time‐efficient way to measure the effectiveness of visual advertising. The results encourage the use of goal‐directed manual pointing movements to indicate attentional signals generated in the brain.     

Nanomaterials and the Precautionary Principle in the EU

This article focuses on the risks of nanomaterials and nanotechnologies, and the challenges they pose to European consumer law. These risks are exemplary for the sociological phenomenon of modern risk society, living under the condition of uncertainty with regard to the likelihood and the extent of possible negative effects. Generally, in law important functions in risk societies are fulfilled by the precautionary principle. It serves both, as a justification for state measures vis-à-vis other legal interests, especially economic human rights, and as a request for state action in response to possible risks. This paper will argue that the precautionary principle applies at least to health protection as a core part of consumer protection and basically EU law is well equipped to deal with uncertainties. This is established in case law and practice. However, although there is pressure to apply the precautionary principle to nanomaterials and nanotechnologies, the European Commission has adopted a rather modest approach. That has been criticized especially by the European Parliament. For dealing with the gap in basic research and methodology, this article suggests a burden sharing in financing taking into account both, the precautionary principle and the principle of proportionality.