Director Networks and Credit Ratings

We explore the effect of director social capital, directors with large and influential networks, on credit ratings. Using a sample of 11,172 firm‐year observations from 1999 to 2011, we find that larger board networks are associated with higher credit ratings than both firm financial data and probabilities of default predict. Near‐investment grade firms improve their forward‐looking ratings when their board is more connected. Last, we find that larger director networks are more beneficial during recessions, and times of increased financial uncertainty. Our results are robust to controls for endogeneity. Tests confirm that causality runs from connected boards to credit ratings.     

Trade effects of alternative carbon border-tax schemes

In industrial countries contemplating emissions reductions, there have been calls for additional border taxes on imports from countries with lower carbon prices. A key factor affecting the impact of any border taxes is whether they are based on the carbon content of imports or the carbon content of domestic production. Our quantitative estimates suggest that the former action when applied to all merchandise imports would address competitiveness and environmental concerns in high-income countries but with serious consequences for trading partners. For example, China’s manufacturing exports would decline by one-fifth and those of all low- and middle-income countries by 15 %; the corresponding declines in real income would be 3.7 and 2.4 %. Border tax adjustment based on the carbon content in domestic production would broadly address the competitiveness concerns of producers in high-income countries and less adversely affect developing country trade.     

An empirical investigation of environmental performance and the market value of the firm

This paper analyzes the shareholder value effects of environmental performance by measuring the stock market reaction associated with announcements of environmental performance. We examine the market reaction to two categories of environmental performance. The first category includes 417 announcements of Corporate Environmental Initiatives (CEIs) that provide information about self-reported corporate efforts to avoid, mitigate, or offset the environmental impacts of the firm's products, services, or processes. The second category includes 363 announcements of Environmental Awards and Certifications (EACs) that provide information about recognition granted by third-parties specifically for environmental performance. Although the market does not react significantly to the aggregated CEI and EAC announcements, we find statistically significant market reactions for certain CEI and EAC subcategories. Specifically, announcements of philanthropic gifts for environmental causes are associated with significant positive market reaction, voluntary emission reductions are associated with significant negative market reaction, and ISO 14001 certifications are associated with significant positive market reaction. The difference between the market reactions to the CEI and EAC categories is statistically insignificant. Overall, the market is selective in reacting to announcements of environmental performance with certain types of announcements even valued negatively.     

An aspect of variable population poverty comparisons

This paper demonstrates that the property of Replication Invariance, generally considered to be an innocuous requirement for the extension of fixed-population poverty comparisons to variable-population contexts, is incompatible with other plausible variable- and fixed-population axioms. This fact raises questions about what constitutes an appropriate headcount assessment of poverty, in terms of whether one should focus on the proportion, or the absolute numbers, of the population in poverty. This observation, in turn, has important implications for tracking poverty and setting targets for its reduction or elimination.     

Loan recommender system for microfinance loans: Increasing efficiency to assist growth

A majority of the world's population does not have access to basic financial services. Therefore, financial inclusion is gaining attention from different governments, Non-governmental Organizations and private institutions. Microfinance Institutions (MFIs) have made a significant impact in the field of financial inclusion. But this impact is just the tip of the iceberg and these institutions need to grow exponentially and have efficient processes to have a more meaningful impact. In this article we discuss the design and implementation of a decision support system to help the MFIs achieve that target. We discuss an adaptive loan recommender system that assists the MFIs in making a more informed decision and help them grow with minimum resources. The article also discusses the implementation of this system in one MFI in India and the observed impact and limitations of the system.     

Explaining outcomes in competition among foreign multinationals in a focal host market

Multinational enterprises (MNEs) from different home regions now routinely confront one another in third markets. There is, however, little conceptual or theoretical literature on the determinants of outcome patterns in these contests. This paper offers a first attempt at systematic and parsimonious conceptualization of the issue. In Brazil, for instance, while U.S.‐based MNEs such as Coca‐Cola and IBM lead in their sectors, other leading U.S. MNEs including Citibank, GE, and Pfizer are outsold by European rivals that appear less competitive globally. Extending theory on the liability of foreignness and firm‐specific advantages, we contend that (i) the MNE whose home nation has greater ties to the focal host nation (along geographic, colonial, immigration, linguistic, and institutional dimensions) will lead in that host nation; and (ii) ties notwithstanding, if an MNE's firm‐specific advantages are so superior that it outsells a rival MNE in that rival's home market, then it will outsell that rival as well in the focal host market. Based on this we develop a conceptual framework, statistical analysis pertaining to MNE competition in Brazil, and three avenues for fruitful new research. Copyright © 2003 John Wiley & Sons, Ltd.     

One size does not fit all: Heterogeneous economic impact of integrated pest management practices for mango fruit flies in Kenya—a machine learning approach

Most previous studies evaluating agricultural technology adoption focus on estimating homogeneous average treatment effects across technology adopters. Understanding the heterogeneous effects and drivers of impact heterogeneity should enable interventions to be better targeted to maximise benefits. We apply machine learning using data from a randomised controlled trial to estimate the heterogeneous treatment effect of fruit fly IPM practices (i.e., parasitoids, orchard sanitation, use of food bait, biopesticides, male annihilation technique, and their combinations) in Central Kenya. Results suggest significant heterogeneity in the effect of IPM practices conditioned on household characteristics. The most important covariates explaining differences in treatment effects are wealth, distance to the mango fruit market, age of the household head, labour and experience in mango farming. Results further indicate that those with fewer mango trees benefit more from most IPM practices. Additional analysis across other covariates shows mixed results but generally suggests significant differences between households benefiting the most and those benefiting the least from IPM practices.     

Optimal choice of monetary policy instruments under velocity and fiscal shocks

This paper, in the spirit of Poole [Poole, William, 1970. The Optimal Choice of Monetary Policy Instruments in a Simple Macro Model. Quarterly Journal of Economics, 84, 192–216.], studies how differently monetary and fiscal shocks influence the appropriate choice of the monetary policy regime. Velocity shocks are introduced by embedding a stochastic cash-in-advance constraint within the New Keynesian framework. In addition to optimal policy under discretion, three classic rules, interest rate targeting, monetary targeting, and the Taylor rule are ranked under both fiscal and velocity shocks. The non-stationarity of prices under the Taylor rule makes it inferior to the other rules under which prices are stationary. Monetary targeting, by stabilizing aggregate demand under fiscal shocks, outperforms interest rate targeting, while the latter provides a better insulation against velocity shocks. Monetary targeting (under fiscal shocks) and interest rate targeting (under velocity shocks) even outperform the optimal policy under discretion for sufficiently high intertemporal elasticities of consumption substitution.     

Temporary Stabilizations, Sudden Stops, and Asset Prices

The authors study a temporary exchange-rate based stabilization plan in which agents face a sudden stop of capital inflows. The model generates a rising path of real interest rates in advance of the exchange rate collapse. This generates a time-dependent non-monotonic path of required premium on domestic assets. The model-generated asset price dynamics closely mimic their empirical counterpart, as witnessed during recent collapses of exchange-rate based stabilization plans. The model also reproduces consumption and foreign reserve dynamics that closely mimic the data.