Bank/sovereign risk spillovers in the European debt crisis

This paper investigates contagion between bank and sovereign default risk in Europe over the period 2007–2012. We define contagion as excess correlation, i.e. correlation between banks and sovereigns over and above what is explained by common factors, using CDS spreads at the bank and at the sovereign level. Moreover, we investigate the determinants of contagion by analyzing bank-specific as well as country-specific variables and their interaction. Using the EBA’s disclosure of sovereign exposures of banks, we provide empirical evidence that three contagion channels are at work: a guarantee channel, an asset holdings channel and a collateral channel. We find that banks with a weak capital buffer, a weak funding structure and less traditional banking activities are particularly vulnerable to risk spillovers. At the country level, the debt ratio is the most important driver of contagion. Furthermore, the impact of government interventions on contagion depends on the type of intervention, with outright capital injections being the most effective measure in reducing spillover intensity.     

Optimal Bonus Scales Under Path-Dependent Bonus Rules

Bonus malus systems have been studied by several authors under the framework of Markov chains. Optimal scales have been deduced by Norberg (1976), Borgan, Hoem & Norberg (1981) and Gilde & Sundt (1989). In these articles the authors assumed that the bonus system forms a first order Markov chain. In the present paper we deduce the optimal scales, using the same criteria as in the cited papers, for bonus systems that are not first order Markovian processes, but that can be regarded as Markovian by increasing the number of states of the system.     

The deterrent effects of the penalty points system for driving offences: a regression discontinuity approach

Using data on road accidents, traffic fatalities and driving offences taking place in Italy over the period 2001–2005, we estimate the effects of the introduction on July 2003 of a penalty points system for driving offences. To identify the causal effect of the penalty points system (PPS) on road safety we use a regression discontinuity design. It emerges that, controlling for weather conditions, police patrols, speed cameras, gasoline price, unemployment rate, the introduction of the PPS has led to a reduction of about 9 % of road accidents and of about 30 % of traffic fatalities. These findings are robust to different specifications of the model and different time windows. Moreover, it emerges that the driving offences for which the introduction of the new regime has determined a sharp change in the sanction scheme have reacted more than offences for which the change was less relevant.     

Alternative Strategies for Monetary Policy

The aim of the paper is to emphasize the importance of the central bank's alternative strategies for macroeconomic equilibrium. Using a constrained maximization process founded on a behavioural equation, we underscore the relevance, for monetary policy, of the assumptions adopted by policymakers regarding how the economic system works. In particular, under a flexible exchange rate regime, the relevant hypotheses are those concerning the supply curve. Under a fixed exchange rate regime the relevant assumptions are those related to the maintenance of the currency agreements and to the internal sustainability of an interest rate setting policy. We demonstrate that these hypotheses define the objective pursued and the strategy followed. Furthermore, if they do not coincide with the actual characteristics of the market, the adjustment dynamics of aggregate income and inflation do not allow convergence toward equilibrium. We use the tools of New Consensus Macroeconomics to discuss the implications of the model and to offer an enhanced analytical framework for teaching intermediate macroeconomics without necessarily adopting the mainstream hypotheses.     

The conditional performance of US mutual funds over different market regimes: do different types of ethical screens matter?

We investigate the performance of US mutual funds that employ different ethical criteria: religious, socially responsible, and irresponsible. Performance is evaluated over different market regimes using a Markov-switching conditional CAPM approach that endogenously defines different states of the market. This model is also extended to a multifactor context. The results show that estimates of performance vary across different market regimes. The Vice Fund, which invests in unethical firms, outperforms in low-volatility regimes, but underperforms in high-volatility regimes. These results contradict the Vice Fund’s claim that it constitutes a “solid investment during recessionary periods”. Our results show that socially responsible and morally responsible funds exhibit different performance across different market conditions, thereby supporting the use of performance evaluation models that take into account different market regimes. Overall, different types of ethical screens seem to lead to different performance patterns across different market regimes.     

Drivers of environmental innovation in Majorcan hotels

Using a database of Majorcan hotels, this paper examines several previously untested determinants of environmental innovations in hotels derived from the Porter hypothesis and from the specifics of knowledge transfer in the tourism industry. The empirical analysis is original in that it distinguishes between eight types of environmental innovations. The results show that hotels’ general predisposition to implement innovations, manager remuneration based on environmental performance, staff satisfaction, environmental accounting, and trainings are important determinants of the overall environmental innovation activity of Majorcan hotels. Moreover, the use of environmental management systems is associated with innovations with cost-saving potential, whereas the hotel star category is associated with innovations that contribute to hotel quality, such as wastewater treatment, noise reduction, noise isolation, and visual impact improvements. Furthermore, high levels of staff satisfaction are related to the implementation of water-saving and noise reduction innovations, as such innovations require staff participation, whereas the role of information sources in explaining innovation adoption varies based on the technical complexity of innovations. The paper concludes with policy implications for sustainable tourism development, recommendations for the hoteliers, and directions for future research.     

Small-Sized Suppliers Entering Large Markets: An Ethical Initiative of the Caras do Brasil Program

The Pão de Açúcar Group was a pioneer in food retailing in Brazil and is now one of the largest Brazilian retailers. Working in a pulverized market characterized by small players, the Group produces US$ 20.4 billion in gross sales. It has become the largest employer in the country with 140,000 of employees working in over 1,800 stores, in 18 of the 25 states in Brazil, and covering a sales area of over 2,800,000 m² (Grupo Pão de Açúcar, GPA Consolidado. Resultados 3T12. São Paulo, Brazil, p. 2. November, 1, 2012). The objective of this article is to analyze a business inclusion strategy of the Pão de Açúcar Group. The Caras do Brasil Program (Faces of Brazil) was created in 2002, by the Group directors as an effective initiative, aiming to develop a new sales channel for sustainably handling products. The Program opens opportunities for small suppliers, not only in the Pão de Açúcar chain but also among competitors and in other industries. The Program established some requirements for the producer to become a supplier, aiming to adapt the products to a regular commercialization with the Group. In this way, small producers can now rely on a complete business process, while beforehand the goods were sold mostly through small channels.     

Implementing e-business through eListening in the Spanish information technology industry

Listening to customers and translating what is heard into an action plan is a mark of a successful organization. This article suggests eListening as the core for the possibility of business performance and illustrates this suggestion with an empirical study. In order to achieve this, we examine the relative importance and significance of e-business and the level of eListening-related performance through an empirical investigation of 285 enterprises in the Spanish information technology industry. The results are then calculated using structural equation modelling validated by factor analysis. This leads to the main conclusion that a major organization's ‘business performance’ is unlikely to be successful without embracing eListening.