Greenspan's Retrospective of Financial Crisis and Stochastic Optimal Control

Alan Greenspan argues that the crisis was unpredictable and inevitable, given the ‘excessive’ leverage of the financial intermediaries. I focus upon the housing sector, which has been at the origin of the financial crisis because the value of the financial derivatives ultimately depended upon the ability of the mortgagors to repay their debts. The uncertainty concerns the capital gains – housing price appreciation – and the rate of interest. I explain why the application of stochastic optimal control (SOC) is an effective approach to determine the optimal degree of leverage, the optimum and excessive risk and the probability of a debt crisis. I show that the theoretically derived early warning signal of a crisis is the excess debt ratio, equal to the difference between the actual and optimal ratio. The excess debt of households starting from 2004‐05 indicated that a housing crisis was most likely.     

Is public capital productive in Europe?

This paper addresses the issue of whether and by how much public investment or public capital can increase GDP. In comparison with the literature on the subject, we apply many different methodologies to answer these questions. A vector autoregressive (VAR) model (for France, Italy, Germany, the UK and the USA), a panel composed of 6 European countries (Austria, Belgium, France, Germany, Italy and the Netherlands) and a regional panel (French regions) are estimated. Public investment is shown to be a significant determinant of output; this is also true for public capital but to a lesser extent than public investment with a VAR methodology. The size of the estimated coefficient is also more realistic than those obtained in the literature. This empirical result confirms that the focus of some economists on safeguarding the level of public investment is not misplaced. The debate on the introduction of a ‘golden rule of public finance’ in the European Monetary Union is legitimate in this respect.     

Capital Constraints and Employmen

Abstract
This article considers whether capital is a significant constraint on employment in Australia. We calculate the level of capital-constrained employment for seven sectors of the Australian economy. The calculations suggest that the manufacturing; transport, storage and communication; and recreation, personal and other services sectors have sufficient capital installed to increase employment. In two other sectors, mining and wholesale and retail trade, the potential for increases in employment through increased capital utilisation may be constrained by surplus labour (as of June 1993). While some sectors are capital constrained at the moment, we find that the investment requirements to increase employment in these sectors are not onerous. We also project investment requirements in each of the sectors for employment growth over the next five years. These projections suggest that a jump in investment followed by relatively modest growth is required to sustain growth in employment.     

The Institution,the Economy and the Market: Karl Polanyi's Institutional Thought for Economists

This paper aims to clarify the logical structure of Karl Polanyi's concept of institution, especially with regard to his most important contribution to political economy—the conception of self-regulating markets as institutions. Although Polanyi did not provide a well-developed concept of institution, this article argues that such a concept exists in his work. Moreover, there is in Polanyi's work a sophisticated institutionalist account of the self-regulating market that has been largely overlooked as Polanyi does not present it explicitly. Analyzing the economy as an institutionalized process, as Polanyi does, reveals that the market is neither a natural nor a spontaneous phenomenon—a conclusion that runs counter to conventional economic thinking. Polanyi's approach enables us to view capitalism (the ‘market society’ in Polanyi's language) through a highly specific cultural fact: the fiction of the self-regulating market. This institutional perspective needs to be reassessed beyond new-institutionalist theoretical constructions.     

The Effects of Korean Pop Culture on Hong Kong Residents' Perceptions of Korea as a Potential Tourist Destination

The goal of this study is to assess the influences that Korean pop culture has on Hong Kong residents' perceptions of Korea as a potential tourist destination. Among the 500 distributed questionnaires, 456 were collected. Finally, 440 usable surveys were used for data analysis after eliminating 16 questionnaires with multiple missing answers that were deemed unusable. Data analyses produced many meaningful results. For example, respondents who were less educated and tended to spend more on Korean cultural products had a higher intention to visit Korea after they tasted Korean food. Expenditures on Korean cultural products were a significant contributor to Hong Kong residents' intention to visit Korea after experiencing the three types of Korean pop culture used in this study. Results of this study confirm those of previous studies, which found that the media had a significant influence on a person's choice of tourist destination.     

Customer Relational Benefits and Relationship-Marketing Outcomes: Comparing Three Transaction Types of Travel Product

Given the increasing popularity of the Internet and TV shopping, travel agencies are using these electronic channels to conduct business transactions. However, few studies investigate how customers' relational benefits affect relationship-marketing outcomes in the travel industry. This study examines the effects of the relational benefits on customer satisfaction and loyalty by focusing on three types of transaction used for travel products. The results indicate that confidence and social benefits, but not special treatment benefits, positively affect customer satisfaction. All three types of customers' relational benefits are positively related to loyalty. The influences of confidence benefits on satisfaction and loyalty are stronger for Internet transaction than interpersonal transaction and TV shopping transaction. The influences of social benefits on satisfaction and loyalty are stronger for TV shopping transaction than interpersonal transaction and Internet transaction. Therefore, the relationships among customer relational benefits, satisfaction, and loyalty are moderated by the three types of transaction.