Shortages and economic policy

In this paper, we use an input-output framework to model an economy experiencing a shortage of a primary product or intermediate good. We show that when a shortage is combined with factor price rigidities, the reduction in consumption and employment will be larger than is necessary. In such cases, there is a need for government intervention, to manage the shortage and make the best of a bad situation. We show that the impact of a shortage can be ameliorated by changes in the composition of output, brought about by direct allocation of the scarce input or by differential sales taxes. The traditional instruments of monetary and fiscal policy are shown to be of little use in dealing with shortages.     

Emergent complex systems

Complex systems are becoming the focus of important innovative research and application in many areas, reflecting the progressive displacement of classical physics and the emergence of a new and creative role for mathematics. This article makes a distinction between ordinary and emergent complexity and argues that a full analysis requires dialectical thinking. In so doing the authors aim to provide a philosophical foundation for post-normal science. The exploratory analysis developed here is complementary to those conducted with a more formal, mathematical approach, and begins to articulate what lies on the other side of that somewhat indistinct divide, the conceptual space called emergent complexity.     

The crisis,Fed, Quants and stochastic optimal control

The Dodd–Frank (D–F) Financial Reform Bill authorizes the Federal Reserve to monitor the financial services marketplace to identify potential threats to the stability of the US financial system. Alan Greenspan's retrospective indicates what he has learned from the crisis. He argues that the crisis, the housing price bubble, was unpredictable and unavoidable. Greenspan now focuses on desirable capital requirements, or leverage, for banks and financial intermediaries. I explain why the Fed's and Greenspan's views stem from a lack of the appropriate tools of analysis of what is an excessive debt or leverage. The Quants who devised the highly leveraged financial derivatives ignored systemic risk.My theme is that the application of stochastic optimal control (SOC) is an effective approach to implement what the D–F bill is authorizing. I explain: first, what is the optimal capital requirement/leverage that balances expected return against risk. Second, what is a theoretically derived early warning signal of a crisis. Third, I derive an excess debt ratio, equal to the difference between the actual and optimal ratios. The probability of a debt crisis is directly related to the excess debt ratio. The excess debt ratio starting from 2004–05 indicated that a crisis was most likely. The Fed should use this SOC analysis in implementing the Dodd–Frank bill.     

Bilateral M&A activity from the Global South

This paper studies the factors associated with outbound bilateral mergers and acquisitions (M&A) activity by firms located in emerging economies. We document recent trends in emerging market M&A flows, which have risen dramatically over the past decade, and explore the factors that may have contributed to this rise. We find distinct patterns for M&A deals according to whether the acquisition targets are in other emerging economies or advanced countries, and that these differences can be attributed to differing theoretical motivations behind foreign direct investment. We also consider the implications of our model for future M&A originating in the Global South, in light of the global financial crisis of 2008.     

Performance,Representation and the Economics of Border Control in Uzbekistan

This article explores the contradictions and intersections between the performative and economic aspects of state boundary control. From 1999 onwards, Uzbekistan's formal trade with its neighbours declined dramatically, whilst cross-border smuggling mushroomed. This article examines these developments, using both an economic analysis, and a theoretical approach to the study of international boundaries derived from political geography, anthropology and ‘borders theory’. Methodologically, it employs trade-flow analysis, discourse study and ethnography to construct an account of how an apparently economically counterproductive policy has symbolic and performative value to the state. The changes in trade patterns were largely due to the unilateral introduction of a new and highly disruptive border and customs control policy, which dramatically increased transportation costs, precipitating a growth in smuggling in which some state officials themselves colluded. Economically, whilst this policy would thus appear harmful to the state, the article suggests that border control policies also had a theatrical function related to the performance of national identity and the perpetuation of the incumbent regime. It concludes with policy recommendations addressed to both Central Asian states and international donors.     

Towards Unrestricted Public Use Business Microdata: The Synthetic Longitudinal Business Database

In most countries, national statistical agencies do not release establishment‐level business microdata, because doing so represents too large a risk to establishments’ confidentiality. One approach with the potential for overcoming these risks is to release synthetic data; that is, the released establishment data are simulated from statistical models designed to mimic the distributions of the underlying real microdata. In this article, we describe an application of this strategy to create a public use file for the Longitudinal Business Database, an annual economic census of establishments in the United States comprising more than 20 million records dating back to 1976. The U.S. Bureau of the Census and the Internal Revenue Service recently approved the release of these synthetic microdata for public use, making the synthetic Longitudinal Business Database the first‐ever business microdata set publicly released in the United States. We describe how we created the synthetic data, evaluated analytical validity, and assessed disclosure risk.     

The public management of risk: Separating ex ante and ex post monitors

When a firm undertakes risky activities, the conflict between social and private incentives to implement safety care requires public intervention which can take the form of both monetary incentives and also ex ante or ex post monitoring, i.e., before or after an accident occurs. We delineate the optimal scope of monitoring depending on whether public monitors are benevolent or corruptible. We show that separating the ex ante and the ex post monitors increases the likelihood of ex post investigation, helps prevent capture and improves welfare.     

A comparison of the critical success factors in women-owned business between the United States and Korea

This study examines the relationship between critical success factors of women-owned business and business performance. To date, there has been little research comparing the performance of businesses owned by women to those owned by men. In addition, research is extensive on female entrepreneurs in developed countries, especially in the United States and Europe; however, there are comparatively few studies of women-owned business in Asia. This paper analyzes how business performance is affected by the critical success factors of women-owned business. We also compare the differences between businesses owned by women in the United States and in Korea. The results indicate that business performance had a positive outcome based on the critical success factors for women-owned business. Some factors suggest, however, a significant difference between the two countries.     

Constrained discretion in Sweden

We study whether the institutional adoption of inflation targeting (IT) has constituted both a policy and a macroeconomic switch in Sweden using the nonlinear MSVAR technique. We assess the relative weight put on inflation in the monetary reaction function and the capacity of IT to reduce macroeconomic uncertainty. We show that IT has constituted a policy switch to a lower focus on inflation, in contrast with the usual argument that has been put forth by IT opponents. Moreover, IT adoption is shown to have reduced uncertainty, through lower inflation and output variabilities simultaneously. Last, counterfactuals suggest IT provides higher monetary policy leeway.