The Effect of Regulatory and Risk Management Advancement on Non-Performing Loans in European Banking, 2000–2011

We study whether the implementation of advanced risk management techniques in compliance with the internal ratings-based (IRB) approaches in the Basel Capital Accord reduced non-performing loans (NPLs) and, hence, had a significant impact in controlling credit risk in emerging and advanced European banks during 2000–2011. Our analysis reveals that there exists wide variation in terms of adoption of such advanced techniques across European banks. Emerging Europe, which suffered the most from the surge in NPLs in the post-crisis period, lags significantly behind the Eurozone economies in terms of the intensity of IRB adoption rates. We employ dynamic generalized method of moments (GMM) estimation methods in our panel regressions to investigate the effect of such regimes on the level of NPLs on a country level. Our findings confirm that the intensity of IRB usage within a banking system leads to a statistically significant decrease in the aggregate amount of NPLs in the post-crisis period, after controlling for macroeconomic and bank-specific characteristics of individual economies. This result is consistent with the view that the efficiency of credit risk management may turn out to be a critical factor in avoiding widespread banking distress and for improving the profitability and solvency of banking systems as a whole.     

The cost of warfarin treatment for stroke prevention in patients with non-valvular atrial fibrillation in Mexico from a collective perspective

Aims: To describe the collective costs of vitamin K antagonist (VKA) treatment for stroke prevention in non-valvular atrial fibrillation (NVAF). VKA drug costs are relatively low, but they necessitate frequent international normalized ratio (INR) monitoring. There are currently minimal data describing the economic impact of this in Mexico.

Materials and methods: Cardiologists provided data on their NVAF patients (n?=?400) to quantify direct medical costs (INR testing, appointments, drug costs). A sub-set of patients (n?=?301) completed a patient questionnaire providing data to calculate direct non-medical costs (travel and other expenses for attendance at VKA-associated appointments) and indirect costs (opportunity cost and reduced work productivity associated with VKA treatment).

Results: Estimated annual direct medical costs totaled $753.6 per patient. Annual direct non-medical and indirect costs were USD$149.8 and $132.1, respectively.

Limitations: Recruited patients were those who consulted with a cardiologist during the study period and selected due to inclusion criteria. All had received uninterrupted treatment for 12–24 months. Consequently, the results are not fully generalizable to all VKA treated NVAF patients.

Conclusions: The true cost of VKA treatment cannot be appreciated by a consideration of drug costs alone. Ongoing monitoring appointments incur additional expenses for both patients and the healthcare system.     

Trade Elasticities

Conventional aggregate trade elasticity estimates hardly vary across countries. We introduce an aggregate elasticity that is implied by theory: It is the value that equates the welfare gains from trade as implied by one‐ and multi‐sector versions of the model in Arkolakis et al. (American Economic Review, 102 (2012):94–130). These estimates are predicated on sector‐level values for trade elasticites, which we provide at three‐digit levels for 28 developed and developing countries. The values for this aggregate elasticity vary greatly across countries, and they do so because of countries' patterns of production and because a given sector‐level elasticity displays considerable cross‐country heterogeneity.     

The Growth and Decline of the Modern Sector and the Merchant Class in Imperial China

This paper offers an explanation of why, in Imperial China, the merchant class expanded and the economy modernized up to the 13th century, and why it entered into decline from the 14th century onward. The modernization of China required the accumulation of public capital and the building of good institutions, upon which a vibrant class of merchants and entrepreneurs could gradually emerge. This class contributed to the enrichment of the society and the emperor, but its activities also weakened the dominance of the emperor and the élite, who would then prefer to block the modernization of China and to restrict the size of the merchant class, putting the economy into long‐run stagnation. However, when the emperor faced severe foreign military threats and when he realized that a modern sector improved the defense capabilities of China, he made the opposite choice.     

Anti-competitive agreements in Russian courts (2008–2012): antitrust law implementation and interpretation

This article analyses antitrust enforcement practice in Russian courts in the area of competition-restricting agreements. The analysis is based on the court decision database of litigations with the Russian competition authority (the Federal Antimonopoly Service (FAS)). In the database litigations that officially started in the period 2008–2012 were included. Final court decisions were evaluated, taking into account litigation duration (sometimes up to 3 years). The database contains 400 cases, including 236 horizontal agreements and 164 other agreements (mostly vertical agreements). Based on the evidence of this database, important features and problems of the interpretation and implementation of competition law in Russia and priority areas of enforcement were identified. Antitrust policy was analysed taking into account the risks of type 1 and type 2 errors, including the problem of flexibility of prohibitions (per se vs Rule of reason (ROR) approaches), standards of proof and the problem of consistency of enforcement.     

APPARENT BIAS: WHAT DOES ATTITUDE POLARIZATION SHOW?

Many, though not all, experiments have found that exposing groups of subjects who disagree to the same evidence may cause their initial attitudes to strengthen and move further apart, or polarize. Some have concluded that findings of attitude polarization show that people process information in a biased manner so as to support their initial views. We argue that, on the contrary, polarization is often what we should expect to find in an unbiased Bayesian population, in the context of experiments that find polarization.     

Remittances and bond yield spreads in emerging market economies

This paper tests whether remittances reduce bond yield spreads in emerging market economies. Drawing upon instrumental variable techniques, our paper reveals that remittance inflows significantly reduce bond yield spreads. This result is robust to different specifications, alternative instrumentation techniques, additional control variables, and the use of credit default swap spreads in place of bond spreads. In addition, we find that the effect of remittances on spreads (i) is larger in (more) poorly developed financial systems, (ii) increases with the degree of trade openness, (iii) is larger in low fiscal space regimes, and (iv) is larger in nonremittance‐dependent countries. The paper concludes that policies that improve the measurement of remittance inflows and reduce their transfer costs or that enable countries to develop securitization of remittances and diaspora bonds could help emerging market economies to leverage remittances for international capital market access.     

Regular Distributive Social Systems

I consider abstract social systems where individual owners make gifts according to their preferences on the distribution of wealth in the context of a noncooperative equilibrium. I define a condition of regularity and a condition of strong regularity of these social systems. I prove notably that: regularity is generic, and implies the local uniqueness of equilibrium and the uniqueness of status quo equilibrium; strong regularity is nongeneric, implies that an equilibrium exists for all initial distributions of wealth, whenever an equilibrium exists for one of them, and implies the connectedness of the range of the equilibrium correspondence. These properties have strong implications for distributive theory and policy, summarized in a general hypothesis of perfect substitutability of private and public transfers. The formulation and discussion of this hypothesis lead to a general assessment of the explanatory power of the theory.     

GIS-Based Hedonic Pricing of Landscape

Hedonic prices of landscape are estimated in the urban fringe of Dijon (France). Viewshed and its content as perceived at ground level are analyzed from satellite images supplemented by a digital elevation model. Landscape attributes are then fed into econometric models (based on 2,667 house sales) that allows for endogeneity, multicollinearity, and spatial correlations. Results show that when in the line of sight, trees and farmland in the immediate vicinity of houses command positive prices and roads negative prices; if out of sight, their prices are markedly lower or insignificant: the view itself matters. The layout of features in fragmented landscapes commands positive hedonic prices. Landscapes and features in sight but more than 100–300~m away all have insignificant prices.     

THE MONEY DEMAND FUNCTION FOR THE EURO AREA: SOME EMPIRICAL EVIDENCE

This paper sets out to re‐examine the money demand function for the euro area. Traditional specifications often yield unsatisfactory results: instability of short and long‐term coefficients; relatively large differences between estimated and actual value of variables; and significant changes in the number of long‐term relationships, etc. Using a standard Vector Error Correction Model, we find that the usual specification is indeed unstable. However, introducing a European equity price gives rise to a more stable system. Furthermore, recursive estimates confirm the relative stability of long‐term coefficients. Estimates of the real money gap, based on the money demand equation including equity prices, point to moderate, albeit persistent, excess liquidity in the euro area in recent years. The real money gap contains information about future inflation but this content may have diminished since 2001.