Regime Shifts in Asian Equity and Real Estate Markets

This paper applies a new statistical technology for identifying regime shifts to analyze recent data on real estate and equity markets in eight developing Far Eastern countries in the 1992–1998 time period. We find that regime shifts in volatility occur in the summer of 1997; however, most of the regime shifts in returns occur in the spring of 1998. While the clustering of regime breaks does not seem to follow any obvious pattern, the country's exposure to trade and firm leverage are important. An analysis of Granger causality suggests that, in most cases, equity returns cause real estate returns but the converse is not true. We also find two-way causality in volatility, suggesting that a common factor drives volatility in these markets. Finally, we provide evidence that the regime shifts generally imply higher relative risk for real estate securities after the estimated breaks.     

A Dynamic Analysis of Fixed- and Adjustable-Rate Mortgage Terminations

This paper provides a side-by-side comparison of loan-level statistical models for fixed- and adjustable-rate mortgages. Multinomial logit models for quarterly conditional probabilities of default and prepayment are estimated. We find that the estimated impacts of embedded option values for prepayment and default are generally quite similar across both FRM and ARM loans, providing additional empirical support for the basic predictions of the options theory. We also find that differences in estimates of conditional probabilities of prepayment and default associated with mortgage age, origination period, original LTV, and relative loan size, indicate the continued significance of these other economic and demographic factors for empirical models of mortgage terminations.     

Are the Japanese Selfish,Altruistic or Dynastic?

I analyse a variety of evidence for Japan and, where available, for the United States on bequest practices, the importance and nature of bequest motives, bequest division, the willingness of individuals to help others, etc., in order to shed light on which model of household behaviour applies in the two countries. My results suggest that the selfish lifecycle model is the dominant model of household behaviour in both countries but that it is far more applicable in Japan; that the dynasty model is also more applicable in Japan but is not of dominant importance even there; and, conversely, that the altruism model is far more applicable in the USA. JEL Classification Numbers: D12, D64, D91, E21.     

Exchange rate exposure and foreign exchange derivatives: do ineffective hedgers modify future derivatives use?

Recent studies examining the relationship between stock returns and exchange rate changes have provided evidence that the exchange rate exposure of non-financial companies is reduced by the use of foreign exchange derivatives. Building on such research, this study investigates whether past ineffective derivative hedging contributes to explaining future derivatives use. To the extent that companies monitor the effectiveness of their currency risk management practices, past ineffective hedgers can be expected to modify their future use of foreign exchange derivatives accordingly. In our study of 94 non-financial US multinationals, we provide evidence that the change in derivatives use from 1996–1998 to 1998–2000 can be explained in part by the ineffective hedging of currency risk in 1996–1998, controlling for variables associated with theories of optimal hedging. Additional analyses confirm that such primary results are robust to firm size, the level of foreign operations, and the use of derivatives to partially hedge currency risk. Our results imply that as exchange markets and risk management practices change, the use of derivatives to manage exchange rate risk also changes. Our contribution to this field of study is that we find evidence that past ineffective hedgers tend to increase their future use of FXDs.     

Multilateral Reforms of Trade and Environmental Policy

The paper analyzes environmental tax policy reform using a competitive model of world trade that includes production‐generated environmental damage (pollution) and trade tariffs. The authors examine the feasibility of Pareto‐improving multilateral reforms of environmental taxes, and show that any environmental tax reform that is mutually welfare‐improving when compensating lump‐sum transfers are assumed is also welfare‐improving when a suitable tariff reform (but no transfers) is combined with the tax changes. Several specific reform proposals are developed. These results expand the feasible set of mutually improving policy proposals for international policy initiatives.     

The Impacts of Unemployment on Alternative Poverty Rates

The analysis uses March Current Population Survey data to estimate state-level cross-section/time-series models of the effects of the unemployment rate on alternative poverty rates. The measures include the official headcount rate, and alternatives based higher thresholds, revised equivalence scales and income defined as inclusive and exclusive of taxes and cash and in-kind transfers. The estimated effects turn critically on the measurement approaches, both for the total sample population and for four population sub-groups. For several alternative poverty rate measures, the unemployment rate has no significant impact on poverty. By contrast, real per-capita median earnings have strong and consistently negative effects on the poverty rates of all groups studied. The findings thus provide important lessons for researchers exploring the links between economic conditions and poverty, and for policy makers developing poverty reduction strategies.     

The decentralisation of Japan's wage setting system in comparative perspective

Japan's wage setting system has undergone considerable decentralisation since 1995. An overview of recent changes, framed by comparative analysis, suggests that rapid change has occurred because of the informal institutionalisation of industrial relations practices, which reflects in turn the strong enterprise consciousness of workers and unions.     

Corporate Board Composition, Protocols, and Voting Behavior: Experimental Evidence

We examine voting by a board designed to mitigate conflicts of interest between privately informed insiders and owners. Our model demonstrates that, as argued by researchers and the business press, boards with a majority of trustworthy but uninformed “watchdogs” can implement institutionally preferred policies. Our laboratory experiments strongly support this conclusion. Our model also highlights the necessity of penalties on insiders when there is dissension among board members. However, penalties for dissent appeared to have little impact on the experimental outcomes.     

Comments on the Brenner–Wood Exchange on the Low Countries

The exchange between Brenner and Wood on the Low Countries in the early modern period raises a number of theoretical and historical issues relating to the conditions for the emergence of capitalist social-property relations and their unique historical laws of motion. This contribution focuses on three issues raised in the Brenner-Wood exchange: the conditions under which rural house-hold producers become subject to 'market coercion', the potential for ecological crisis to restructure agricultural production, and the relative role of foreign trade and the transformation of domestic, rural class relations to capitalist industrialization.