Financial innovation and Divisia monetary indices in Taiwan: a neural network approach

In this paper a weighted index measure of money using the ‘Divisia’ formulation is constructed for the Taiwan economy and its inflation forecasting potential is compared with that of its traditional simple sum counterpart. This research extends an earlier study by Gazely and Binner by examining the theory that rapid financial innovation, particularly during the financial liberalization of the 1980s, has been responsible for the poor performance of conventional simple sum monetary aggregates. The Divisia index is adjusted in two ways to allow for the major financial innovations that Taiwan has experienced since the 1970s. The technique of neural networks is used to allow a completely flexible mapping of the variables and a greater variety of functional form than is currently achievable using conventional econometric techniques. Results suggest that superior tracking of inflation is possible for networks that employ a Divisia M2 measure of money that has been adjusted to incorporate a learning mechanism to allow individuals to gradually alter their perceptions of the increased productivity of money. Divisia measures of money appear to offer advantages over their simple sum counter parts as macroeconomic indicators.     

Consumer preferences for organic production methods and origin promotions on ornamental plants: evidence from eye‐tracking experiments

The strategic value of organic production and origin promotions may vary based on product end‐use. Conjoint analysis and eye‐tracking technology were used to investigate consumers’ purchase likelihood (PL) and visual search behavior for esthetic and food‐producing ornamental plants. Organic production methods, in‐state, and domestic origins positively impacted participants’ PL. Respondents’ visual attention to the organic production attribute had a strong positive effect on PL for food‐producing plants as did sociodemographic variables. Findings imply that producers and retailers could successfully implement signage emphasizing organic production methods and origin designations to generate consumer interest.     

Estimating economic relationships subject to firm‐ and time‐varying equality and inequality constraints

Applied econometricians often fail to impose economic regularity constraints in the exact form economic theory prescribes. We show how the Singular Value Decomposition (SVD) Theorem and Markov Chain Monte Carlo (MCMC) methods can be used to rigorously impose time‐ and firm‐varying equality and inequality constraints. To illustrate the technique we estimate a system of translog input demand functions subject to all the constraints implied by economic theory, including observation‐varying symmetry and concavity constraints. Results are presented in the form of characteristics of the estimated posterior distributions of functions of the parameters. Copyright © 2001 John Wiley & Sons, Ltd.     

Moral Schemas and Business Practices: The Ethics of Guangzhou Migrant Marketers

This article explores the ethics of migrant marketers in Guangzhou. Data were collected from 357 migrant marketers who lived in Guangzhou. A model of Ethical Action has been developed to test the antecedents and outcomes of the ethical decision-making process. It measured moral intention using four ethical scenarios. The results show that the egoistic schema had a positive effect on their intention to act unethically, while the legislative schema exerted a negative effect. The results confirm that moral intention was a strong predictor of an individual’s subsequent actual behavior, and it fully mediated the influence of the legislative schema on actual behavior. This study adds to ethics literature by incorporating the construct of social identity and found a moderating effect between the legislative schema and moral intention. The relationships were stronger for individuals who were lower rather than higher in social identity. Analysis of these results lead to a discussion of the implications for marketing ethics in China.     

ICT introduction in the city councils. A regional analysis

The peculiarities and heterogeneity of city councils hinder the homogenous implementation of Information and Communication Technologies (ICT) in all Spanish regions. This study investigates some city council websites and its aim is to enhance the degree of ICT integration, relating it to municipality size. The websites of six Spanish regions have been analyzed and aspects such as accessibility, e-participation, transparency, website design, and use of channels as well as the usefulness to the user have been investigated. In certain aspects, some regional differences and deficiencies have been observed, particularly in small municipalities. Other issues such as participation or use of languages besides the official ones do not seem to be related to size.     

Balance sheet effects and the country risk premium: An empirical investigation

Based on recent theories emphasizing financial imperfections, this paper is an empirical investigation of the link between a country's risk premium and the balance sheet effect of a devaluation. In a panel of emerging economies, balance sheet effects, due to increased external debt service after an unexpected real depreciation, significantly raise the risk premium. This result is robust to various checks and appears driven by those countries with the largest financial imperfections. Also, particularly large real depreciations turn out to be disproportionately important, meaning that balance sheet effects may be strongest at times of economic crisis. JEL no. F34, F41     

Monte Carlo Evidence on Cointegration and Causation

The small sample performance of Granger causality tests under different model dimensions, degree of cointegration, direction of causality, and system stability are presented. Two tests based on maximum likelihood estimation of error-correction models (LR and WALD) are compared to a Wald test based on multivariate least squares estimation of a modified VAR (MWALD). In large samples all test statistics perform well in terms of size and power. For smaller samples, the LR and WALD tests perform better than the MWALD test. Overall, the LR test outperforms the other two in terms of size and power in small samples.     

Self-organized criticality in evolutionary systems with local interaction

This paper studies a stylized model of local interaction where agents choose from an ever increasing set of vertically ranked actions, e.g. technologies. The driving forces of the model are infrequent upward shifts (‘updates’), followed by a rapid process of local imitation (‘diffusion’). Our main focus is on the regularities displayed by the long-run distribution of diffusion waves and their implication on the performance of the system. By integrating analytical techniques and numerical simulations, we come to the following two main conclusions. (1) If non-coordination costs are sufficiently high, the system behaves critically, in the sense customarily used in physics. (2) The performance of the system is optimal at the frontier of the critical region. Heuristically, this may be interpreted as an indication that (performance-sensitive) evolutionary forces induce the system to be placed ‘at the edge of order and chaos’.     

How do auditors perceive CEO's risk‐taking incentives?

Prior literature documents that executive compensation influences managerial risk preferences through executives’ portfolio sensitivities to changes in stock prices (delta) and stock‐return volatility (vega). Large deltas discourage managerial risk‐taking, while large vegas encourage risk‐taking. Theory suggests that auditors charge higher audit fees when standard audit procedures do not allow auditors to reduce audit risk including the risk arising from higher business risk. We posit and find evidence of a negative (positive) relation between CEO portfolio deltas (vegas) and audit fees. We also find a negative relation between CEO portfolio deltas and the issuance of going‐concern audit opinions (GCO).