Volatility and stock price indexes

The stochastic approach to index numbers has been successfully applied to the estimation of inflation, the world interest rate and international competitiveness.?One distinct advantage of this approach is that it provides the whole distribution of the index, not simply one value. In this article, we extend the stochastic approach to the estimation of a stock market index. We demonstrate how this approach can be used to identify ‘redundant stocks’ that do not contribute significantly to the overall index.?For index tracking purposes, these stocks can be safely excluded.     

The evolution of scale economies in US banking

Continued consolidation of the US banking industry and a general increase in the size of banks have prompted some policymakers to consider policies that discourage banks from getting larger, including explicit caps on bank size. However, limits on the size of banks could entail economic costs if they prevent banks from achieving economies of scale. This paper presents new estimates of returns to scale for US banks based on nonparametric, local‐linear estimation of bank cost, revenue, and profit functions. We report estimates for both 2006 and 2015 to compare returns to scale some 7 years after the financial crisis and 5 years after enactment of the Dodd–Frank Act with returns to scale before the crisis. We find that a high percentage of banks faced increasing returns to scale in cost in both years, including most of the 10 largest bank holding companies. Also, while returns to scale in revenue and profit vary more across banks, we find evidence that the largest four banks operate under increasing returns to scale.     

Exchange rate pass-through in Canadian manufacturing: its direct and indirect components

Changes in the exchange rate have direct and indirect effects on the prices of domestically produced goods and imports in the domestic market. The direct effects originate with the impact of the exchange rate on the marginal cost of imports; the indirect effects, with its impact on the price of materials used by domestic producers and hence on their marginal costs. Direct and indirect exchange rate pass-through elasticities are estimated for 37 Canadian manufacturing industries and their determinants are examined in a cross-section analysis. It is found that the direct and indirect elasticities are approximately equal in size for domestic goods, while the direct effect is dominant for imports. For a small number of industries, the net result of the direct and indirect effects is that a depreciation of the domestic currency increases the competitiveness of imports, contrary to conventional analysis. Important determinants of the direct (indirect) elasticities are the import share and non-tariff barriers (the responsiveness of domestic costs to changes in the exchange rate, and concentration).     

The healthy development of economies: A strategic framework for competitiveness in the health industry

Applying a strategic decision-making perspective on the economics of business, we suggest that a competitive locality in the health industry is one that, relative to other localities, is effective in: (1) providing the healthcare that enables everyone to participate fully in the democratic development of the locality; (2) providing the healthcare that is democratically identified as a direct objective of this development; (3) contributing through the health industry to any other democratically determined objectives of the locality's development. The paper hypothesizes that strategic decision-making in organizations is an especially significant determinant of the impacts of the health industry. We conclude that: (i) a locality that suffers concentration in the power to determine the objectives of its health industry could not be strictly competitive in that industry; (ii) the first best way to achieve competitiveness in the health industry would be to democratize its strategic decision-making. What this would entail in practice is discussed in some detail.     

IMPLEMENTING A TRADE FACILITATION AGREEMENT IN THE WTO: WHAT MAKES SENSE?

Abstract.  In the Doha Round, trade facilitation is the negotiating issue in which the 'implementation issue' is most prominent. At the WTO (the Doha Development Agenda) the international community has approached the implementation problem as a challenge to restore mercantilist balance rather than as a need to build good economics into future agreements. The international community has taken on aggressively the development dimensions of trade facioitation through the development banks, bilateral aid agencies and other specialized institutions. Considerable funding has been provided. Though little progress has been made through WTO negotiations, the content of these development programs is supportive of development.     

Public Stackelberg Leadership in a Mixed Oligopoly with Foreign Firms

This is the first paper to consider a mixed oligopoly in which a public Stackelberg leader competes with both domestic and foreign private firms. The welfare maximising leader is shown to always produce less than under previous Cournot conjectures. Introducing leadership also alters previous public pricing rules resulting in prices that may be either greater than or less than marginal cost depending on the relative number of domestic firms. Furthermore, entry of a foreign firm will increase welfare only when the relative number of domestic firms is small, but that share is shown to be larger than has been indicated without leadership. Unlike previous models, the influence on public profit of a foreign acquisition is ambiguous and is related to the relative number of domestic firms. Finally, the consequences of privatisation are shown, for the first time, to depend on the relative number of domestic firms.     

Customer query handling in sales interactions

Using a novel approach with video-recordings of sales interactions, this study focuses on a dynamic analysis of salesperson effectiveness in handling customer queries. We conceptualize salesperson behaviors, namely, resolving, relating, and emoting, as separate elements of customer query handling and empirically identify the distinct verbal and nonverbal cues that salespeople use to display these behaviors during sales interactions. We draw from compensation effects in social cognition theory to propose that customers’ perceptions of a salesperson’s effectiveness are prone to trade-offs between competence (resolving behaviors) and warmth (relating and emoting behaviors). Results, robust to endogeneity corrections, support the proposed tradeoffs such that the effectiveness of salesperson’s resolving behavior is significantly curtailed, even neutralized, by the salesperson’s relating and emoting behaviors. We situate these counterintuitive results within the extant theory and research on sales interactions, and outline implications for practice.