Potential economic variables and actual economic policies in Europe

Ignoring for a moment the debate on whether balanced budget rules are a sensible idea from a macroeconomic point of view, there remains a major problem with tying one’s fiscal policy to econometric estimates of potential variables: their notorious unreliability. With every one of its biannual economic forecasts, the EC provides revised estimates of structural parameters that are crucial components of its macroeconometric models and, by extension, its economic policy advice. This article shows that the EC’s econometric estimates of potential growth variables in Europe have been subject to massive revisions since the financial crisis.     

How Do Investors' Expectations Drive Asset Prices?

Based on an extension of the process of investors' expectations to stochastic volatility we derive asset price processes in a general continuous time pricing kernel framework. Our analysis suggests that stochastic volatility of asset price processes results from the fact that investors do not know the risk of an asset and therefore the volatility of the process of their expectations is stochastic, too. Furthermore, our model is consistent with empirical studies reporting negative correlation between asset prices and their volatility as well as significant variations in the Sharpe ratio.     

Déjà lu: On the limits of data reuse across multiple publications

Scholars in our field, Operations and Supply Chain Management (OSCM), are under high pressure to show research productivity. At most schools, this productivity is measured by the number of journal articles published. One possible response to such pressure is to improve research efficiency: publishing more journal articles from each data collection effort. In other words, using one dataset for multiple publications. As long as each publication makes a sufficient contribution, and authors ensure transparency in methods and consistency across publications, generating more than one publication from one data collection effort is possible. The aim of this Notes and Debates article, however, is to draw attention to inappropriate reuse of empirical data in OSCM research, to explain its implications and to suggest ways in which to promote research quality and integrity. Based on two cases of extensive data reuse in OSCM, eighteen problematic practices associated with the reuse of data across multiple journal articles are identified. Recommendations on this issue of data reuse are provided for authors, reviewers, editors and readers.     

Do economic integration agreements affect trade predictability? A group effect analysis

Recent theoretical findings in the trade literature suggest that economic integration agreements (EIAs) not only increase the level of trade but also make it more stable and predictable. This paper proposes a Hausman–Taylor quantile regression approach to identify the causal effect of EIA membership on trade predictability. The proposed methodology accounts for group effects in the gravity equation and is computationally efficient. Our results corroborate the theoretical findings that EIAs make trade more stable and predictable and this conclusion is even stronger for deeper EIAs.     

Corporate Cash Holdings and Acquisitions

We find that acquirers’ announcement returns decline with their cash holdings, but only when at least part of the payment is in the form of stock. We further find evidence that acquirers that use stock payment are overvalued, especially when they have excess cash that they could have used instead. Collectively, our results suggest that investors interpret announcements of stock acquisitions as a signal that the acquirers’ equity is overvalued and that high cash holdings intensify this signal. However, our results are inconsistent with the common belief that cash holdings induce value‐destroying acquisitions.