THE INFLUENCE OF DIFFERENT FORMS OF GOVERNMENT SPENDING ON DISTRIBUTION AND GROWTH

This paper deals with the influence of different types of government expenditure on growth in a post‐Keynesian framework. The analysis considers a government sector with a balanced budget and an autonomous and non‐linear investment function, interpreted along a Kaleckian and a Classical‐Harrodian line. It shows under which conditions different types of government expenditure are beneficial or detrimental for economic growth, comparing some results with those reached by Barro in his 1990 Journal of Political Economy article, and points out the emergence of phenomena like multiple equilibria, hysteresis and low growth traps.     

The Breakdown of Idiosyncratic Volatility Into Expected and Unexpected Components and Its Effects on Stock Returns in Brazil

Based on studies of idiosyncratic volatility developed in the recent literature, this study analyzes its relation with expected returns through the breakdown of idiosyncratic volatility in the Brazilian stock market and presents evidence of the importance of expected idiosyncratic volatility for asset pricing. We study the impact of the expected and unexpected components of idiosyncratic volatility on the returns of shares listed on the BOVESPA between 2004 and 2011. The results show a strong positive and significant relation between expected idiosyncratic volatility and returns. This evidence is highlighted when we use unexpected idiosyncratic volatility to control for unexpected returns. Additional robustness tests, controlling for size and momentum effects, also have positive and significant coefficients, corroborating previous findings.     

Modelling Deforestation and Land‐Use Change: Sparse Data Environments

Land‐use change in developing countries is of great interest to policy‐makers and researchers with diverse interests. Concerns about consequences of deforestation for global climate change and biodiversity have received the most publicity, but loss of wetlands, declining land productivity and watershed management are also problems facing developing countries. Analyses of these problems are especially constrained by lack of data. This article reviews modelling approaches for data‐constrained environments that involve discrete choice methods including neural nets and dynamic programming, and research results that link individual household survey data with satellite images using geographic positioning systems.     

On the role and effects of IMF seniority

We analyze the IMF as a lender to countries in financial distress highlighting the fact that it is a senior creditor. An advantage of delegating senior lending in a single institution rather than on competitive markets is that it would be able to reach the socially optimal solution. This would require the IMF not to intervene when the crisis is severe enough. However, a commitment device might be needed to achieve the socially optimal solution. If IMF lending were done for all shocks, the country would be always ex-post better off but lenders would be worse off when the country situation is either good or weak, which is consistent with empirical evidence. Anticipation of senior lending might make the country better off by preventing inefficient liquidation. However it might actually hurt the country ex-ante and too much rescuing in the future could lead to too little lending in the present which is contrary to the moral hazard critique.     

Trading Arrangements and Industrial Development

This article outlines a new approach for analyzing the roleof trade in promoting industrial development. It offers an explanationas to why firms are reluctant to move to countries with lowerlabor costs and shows how trade liberalization can change theincentives for firms to locate in developing countries. It modelseconomic development as the spread of concentrations of firmsfrom country to country. Different trading arrangements mayhave a major impact on this development process. By changingthe attractiveness of countries as a base for manufacturingproduction, they can potentially trigger—or postpone—industrialdevelopment. The analysis shows that unilaterally liberalizingimports of manufactures can promote industrialization but thatmembership in a preferential trading arrangement is likely tocreate larger gains. South-South preferential trading arrangementswill be sensitive to the market size of member states, whileNorth-South arrangements seem to offer better prospects forparticipating southern countries, if not for excluded countries.     

Linking Public Investment to Private Investment. The Case of Spanish Regions

Public investment constitutes one of the main instruments of regional policies. The existence of a direct link between infrastructure and regional income per capita is usually accepted. Literature also describes a positive effect of public investment on private capital accumulation. This paper seeks to provide new empirical evidence on this latter relationship for the case of Spanish regions over the period 1965–1997 using panel data methodology. The results show a positive effect of productive and social public investment (especially in education) on private investment. The spillover effects generated by the productive infrastructures located in other regions do not seem to encourage the private investment in neighbouring regions. Public consumption and interest rate exert a negative influence on private capital accumulation. These results are robust to changes in the econometric specification.     

XBRL for Financial Reporting: Evidence on Italian GAAP versus IFRS

The systematic adoption of the eXtensible Business Reporting Language (XBRL) for financial reporting represents a great challenge. Worldwide, a large number of regulators are making an effort to promote the adoption of this standard to simplify and enhance the communication of financial information. This requires the definition of well‐structured taxonomies that can standardize and accommodate the content of financial reports prepared by firms. This study aims to analyze the regulator‐led adoption of XBRL for financial reporting. It examines the XBRL taxonomies used by Italian firms to reflect their financial reporting under rule‐based Italian GAAP and principles‐based International Financial Reporting Standards (IFRS). We compare the alignment of the Italian GAAP taxonomy and the IFRS taxonomy with Italian companies' financial statements and find two different levels of fit. The results offer useful insights for regulators and policy makers in prescribing or establishing appropriate taxonomies. We illustrate the potential impacts of the different taxonomies on the quality of financial reporting in terms of comparability and potential loss of information.     

Risk averse retail pricing with robust demand forecasting

Good demand estimates are the key to effective pricing decision-making. However, they are subject to a high degree of uncertainty due to various factors that are unpredictable or difficult to model, thus making pricing decisions risky. This research provides a simple proposal for a robust optimization methodology that incorporates both demand uncertainty and the decision maker's degree of risk aversion. Uncertainty is explicitly considered for two coefficients of a linear demand function, price expressions are derived, and a criterion is proposed for defining the degree of risk aversion. The resulting model is also applied to an exponential demand case to better reflect a more realistic retail setting.     

Equity valuation: A survey of professional practice

This paper reports the results of a scientific survey of the equity valuation practices of CFA Institute members with equity analysis job responsibilities. Using an instrument designed to minimize biases in prior valuation surveys and sampling a larger group than in previous studies (13,500 investment professionals, resulting in 1,980 valid completed questionnaires), this paper documents professional practices in the selection of equity valuation approaches, including specific model variations and key input preferences. Important differences in practice were observed across geographies and employer firm types.     

Achieving the Millennium Development Goals in Sub‐Saharan Africa: A Macroeconomic Monitoring Framework

This paper presents a macroeconomic approach to monitoring progress toward achieving the Millennium Development Goals (MDGs) in Sub‐Saharan Africa. At the heart of our framework is a macro model which captures key linkages between foreign aid, public investment (disaggregated into education, infrastructure and health), the supply side and poverty. The model is then linked through cross‐country regressions to indicators of malnutrition, infant mortality, life expectancy and access to safe water. A composite MDG Indicator is also calculated. The functioning of our framework is illustrated by simulating the impact of an increase in foreign aid to Niger at the MDG horizon of 2015, under alternative assumptions about the degree of efficiency of public investment. Our approach can serve as the building block for Strategy Papers for Human Development (SPAHD), a more encompassing concept than the current ‘Poverty Reduction’ Strategy Papers.