Demographic structure and overlapping generations: A simpler proof with more general conditions

d’Albis (2007) considers a continuous-time general equilibrium overlapping-generations model with age-specific mortality rates. His proof of the existence and uniqueness of the steady-state equilibrium, which can be extended to other overlapping-generations models, relies on the shape of a function that appears in the equation defining the equilibrium. By focusing on the mean age as a function of the stable population growth rate instead of the function used in d’Albis (2007), we provide a simpler proof with more general conditions. We also obtain useful properties about the first and second derivatives of the mean age function that can be applied in future work.     

Exploring the nexus between financial openness and informational efficiency – does the quality of institution matter?

This article examines the empirical link between financial openness and informational efficiency of stock markets in 27 emerging markets. Improving on earlier papers, this study has used World Bank’s Worldwide Governance Indicators (WGI) as the proxy of institutional development in dynamic panel data models estimated by generalized method of moments (GMM). Our results show, first, financial liberalization by itself has no impact on enhancing efficiency of stock market. Second, for countries with high level of institutional development, the interaction of trade openness and financial openness become significant. Third, for the same group of countries, interaction effect of financial liberalization and institutional development leads to more efficiency in stock market. Hence, our finding demonstrates the utmost importance of institutional development and its role on liberalization. Our results conclude that institutional development and trade openness are pre-requisites for a country to benefit from financial openness. Our study further provides empirical evidence to theoretical model proposed by Basu and Morey (2005) that governance is the missing link between stock market efficiency and financial liberalization. Our findings suggest that policy makers in developing economies should enhance the quality of their institution in order to optimize the benefits of financial liberalization.     

Does New Information Technology Lower Media Quality? The Paradox of Commercial Public Goods

We define commercial public goods as goods that are broadcast via television, radio, newsprint, or websites for which consumption is non-rival and non-exclusive, and revenue is generated mainly through advertising alongside a product in a two-sided market. With new information technology the fixed cost of entry in these markets has substantially declined. We demonstrate that as fixed costs of entry decline in a competitive media market, lower industry concentration results in lower resources to each firm for the production of commercial public goods. The counterintuitive result of new information technology is that it may result in lower quality news reporting and a less-informed population. The result may hold even when consumers exhibit preferences for diversity in media outlets.     

Investor sentiment and feedback trading: Evidence from the exchange-traded fund markets

This paper extends the standard feedback trading model of Sentana and Wadhwani (1992) by allowing the demand for shares by feedback traders to depend on sentiment. Our empirical analysis of three largest Exchange-Traded Fund (ETF) contracts in the U.S. suggests that there is a significant positive feedback trading in these markets and the intensity of which is generally linked to investor sentiment. Specifically, the level of feedback trading tends to increase when investors are optimistic. In addition, we find that the influence of sentiment on feedback trading varies across market regimes. These results are consistent with the view that feedback trading activity is largely caused by the presence of sentiment-driven noise trading. Overall, the findings are important in understanding the role of sentiment in investment behaviour and market dynamics and are of direct relevance to the regulators and investors in ETF markets.     

Economics at the FTC: Multi-level Marketing and a Coal Joint Venture

Review of Industrial Organization - Economists in the Federal Trade Commission’s Bureau of Economics support the Commission’s dual missions of protecting consumers and maintaining...     

PREDICTING CURRENCY CRISES WITH A NESTED LOGIT MODEL

Abstract.  This paper is the first to apply a nested logit model to measure the probabilities of speculative attacks and the probabilities of successful defences by the central banks. This model allows us to predict the probability not only of speculative attacks but also of successful defences, given attacks. It also provides a framework for analysing the degree to which different factors affect the likelihood of attacks and defences. We find strong evidence that external illiquidity and financial fragility are reliable predictors of currency crises. The results shed light on the validity of the three generations of currency crisis models.     

LOST IN STATE SPACE: ARE PREFERENCES STABLE?*

We use field experiments to examine the temporal stability of risk preferences. Over a 17‐month period, we elicited risk preferences from subjects chosen to be representative of the adult Danish population. During this period we revisited many of these subjects and repeated a risk aversion elicitation task. We find some variation in risk attitudes over time, but we do not detect a general tendency for risk attitudes to increase or decrease over a 17‐month span. The results also suggest that risk preferences are state contingent with respect to personal finances.     

Interaction effects in software piracy

The paper presents an exploratory attempt to analyse self-reported leniency toward software piracy systematically, using an approach based on empirical factors, rather than ethical factors. The empirical factors studied were: (i) social acceptance of software piracy; (ii) the cost of original software; (iii) urgency of the subject's need for software; (iv) availability of original software; (v) knowledge of computer software copyright law; (vi) gender; (vii) monthly household income; and (viii) education level. It provides new insights to software companies and government officials who are developing programmes to promote the concept of anti-piracy among software consumers. This is also the first exploratory research to study the interaction effects among factors influencing the reported leniency towards software piracy, at the individual level.     

Export channel structure in a newly industrialized economy

Using data from the Hong Kong electronics industry, this paper studies the “make” or “buy” decisions associated with export channel strategies (Peng, Zhou, & York, 2006). Findings show that the integrated channels (the “make” decision in transaction cost theory) play a more important role on exporting than the market governance channels (the “buy” decision, i.e., buying channel services from local export intermediaries). In addition to manufacturers’ integrated channels, from the buyers’ standpoint, we find two active integrated channels, namely, (1) the buying offices of firms from developed economies which are located in Hong Kong and (2) the regular visiting buyers of firms from developed economies. These two export channels are integrated channels from the buyers’ standpoint. They are not found in the export distribution structure of developed economies. This paper explains the development and the importance of these buyers’ channels in newly industrialized economies. It also examines the similarities and dissimilarities of export behavior between manufacturing firms in developed and newly industrialized economies, using Hong Kong as an example.