immigration and the collapse of communism

Will Western Europe have to deal with a flood of emigrants from the East? Jonathan Eyal, of the Royal United Services Institution, argues that the West should not be unduly affected.     

The Use and Deployment of Soft Process Technologies within UK Manufacturing SMEs: An Empirical Assessment Using Logit Models

This study assesses the adoption of different soft process technologies from a survey of 218 British engineering and electronics small and medium-sized firms (SMEs). The new process (soft) technologies that were modeled included total quality management, Kaizan, and statistical process control. Logit models demonstrate that the determinants of soft process technology adoption vary significantly from technology to technology. The study questions a blanket approach to technology adoption. Firm-specific factors make a larger difference to the adoption of process technologies than competitive factors. While on the whole small firms are slow to adopt new techniques, this does not hold for all technologies, and future research might investigate what technologies SMEs adopt and why. Benchmarking, suggestions schemes, problem-solving techniques and ISO 9000 adoption was unrelated to firm size, which holds out the prospect of soft process technologies as an alternative technological path for small firm productivity growth.     

Marginal Property Tax Effects of Conservation Easements: A Vermont Case Study

Conservation easements allow landowners to transfer their land's development rights to another entity, usually a nontaxable conservation organization. Conservation reduces the town's tax base, necessitating a tax rate increase to maintain service levels. However, conserving land also decreases the supply of developable land and provides open space amenities that may be capitalized into the value of nearby properties. These effects may offset the decrease in the tax base caused by the easement. Using a sample of twenty-nine Vermont towns, we show that private conservation easements increase property tax rates in the short run, but are tax-neutral or tax-suppressing in the long run.     

Forecasting Credit Spread Volatility: Evidence from the Japanese Eurobond Market

Different approaches to forecasting the volatility associated with the credit spreads on Yen Eurobonds are investigated. The actual volatility, historical volatility and estimated conditional volatility on spreads derived from a regression-based model with a GARCH and ARMA specification are compared within an adaptation of Black’s (J. Finance, 31, 1976, 361–367) option-pricing model. Surprisingly, the regression forecast over a medium forecasting horizon suggests that historic volatility provides the better forecast. The implications of these results for volatility forecasting and credit spread modelling are also discussed.JEL Classification: C32; G15     

Momentum and Autocorrelation in Stock Returns

This article studies momentum in stock returns, focusing onthe role of industry, size, and book-to-market (B/M) factors.Size and B/M portfolios exhibit momentum as strong as that inindividual stocks and industries. The size and B/M portfoliosare well diversified, so momentum cannot be attributed to firm-or industry-specific returns. Further, industry, size, and B/Mportfolios are negatively autocorrelated and cross-seriallycorrelated over intermediate horizons. The evidence suggeststhat stocks covary "too strongly" with each other. I argue thatexcess covariance, not underreaction, explains momentum in theportfolios.     

Optimal consumption and portfolio rules with intertemporally dependent utility of consumption

In the usual consumption portfolio problem, lifetime utility is assumed to be time-additive. This assumption has been criticized for failing to capture important intertemporal dependencies in utility such as intertemporal risk aversion and habit formation. This paper studies the consumption portfolio problem for a class of intertemporally dependent utility functions.     

Financial globalization and real regionalization

Over the period 1972-1986, the US business cycle was strongly correlated with the business cycle in the rest of the industrialized world. Over the period 1986-2000, international co-movement was much weaker (real regionalization). At the same time, US international asset trade has increased significantly ( financial globalization). We first document these phenomena in detail and then argue that they are related. In particular, we present a model in which financial globalization occurs endogenously in response to less correlated real shocks. Financial globalization, by enhancing cross-border capital flows, further reduces the international correlations in GDP and factor supplies. We find that both less correlated shocks and the endogenous change in international financial markets are needed to quantitatively account for the observed changes in the international business cycle.     

An Empirical Examination of the Stability of Housing Price Equations Over Time

This study investigates the extent to which the coefficients of housing price equations are stable over time. Using annual data from 1959 to 1979 for a large neighbourhood in Vancouver, British Columbia, a series of twenty-four housing price equations is estimated. The estimated coefficients exhibit substantial instability over the period. Further, prediction errors are generally minimized for a given year when the coefficients estimated for that year are used to predict. The results strongly suggest that such equations should be recalibrated each year.