The approximate solution of finite‐horizon discrete‐choice dynamic programming models

The estimation of finite‐horizon discrete‐choice dynamic programming (DCDP) models is computationally expensive. This limits their realism and impedes verification and validation efforts. Keane and Wolpin (Review of Economics and Statistics, 1994, 76(4), 648–672) propose an interpolation method that ameliorates the computational burden but introduces approximation error. I describe their approach in detail, successfully recompute their original quality diagnostics, and provide some additional insights that underscore the trade‐off between computation time and the accuracy of estimation results.     

Firm exit,technological progress and trade

The dynamics of export market exit and firm closure have found limited attention in the new heterogeneous-firms trade literature. In fact, several of the predictions on firm survival and exit stemming from this new class of models are at odds with the stylized facts. Empirically, higher productivity firms survive longer, most firm closures are young firms, higher productivity exporters are more likely to continue to export compared to less productive exporters and market exits as well as firm closures are typically preceded by periods of contracting market shares. The present paper shows that the simple inclusion of exogenous economy wide technological progress into the standard Melitz (2003) model generates a tractable dynamic framework that generates endogenous exit decisions of firms in line with the stylized facts. Furthermore, we derive the effects of faster technological progress and trade liberalization on export market exit and firm closure.     

The Home Bias in Equities and Distribution Costs

We show that incorporating distribution costs into a general equilibrium model of international portfolio choice helps to explain the home bias in international equity investment. Our model is able to replicate observed investment positions for a wide range of parameter values, even if agents have an incentive to hedge labor income risk by purchasing foreign equity. This is because the existence of a retail sector affects both the correlation of domestic returns with the domestic price level and the correlation between financial and non‐financial income.     

Does economic globalisation affect income inequality? A meta-analysis

A large volume of econometric literature has studied the impact of economic globalisation on income inequality around the world. However, reported econometric estimates vary substantially, which makes it difficult to draw valid conclusions. This paper presents a quantitative summary and analysis of existing estimates regarding the globalisation–inequality relationship. We use a new data set consisting of 1,254 observations from 123 primary studies. By applying meta-analysis and meta-regression methods, we obtain several main findings. First, globalisation has a (small-to-moderate) inequality-increasing effect. Second, while the effect of trade globalisation is small, financial globalisation shows a more sizeable and significantly stronger inequality-increasing impact. Third, we find an average inequality-increasing impact of globalisation in both advanced and developing countries. Fourth, education and technology moderate the impact of globalisation on income inequality.     

Understanding economic openness: a review of existing measures

Review of World Economics - This paper surveys measures of economic openness, the latter being understood as the degree to which non-domestic actors can or do participate in a domestic economy....     

An ethical defense of cryptocurrencies

The growing importance of the cryptocurrency phenomenon has raised concerns about the ethical implications of a hypothetical widespread use of these new forms of digital money. In this paper, we undertake an ethical assessment of cryptocurrencies drawing upon two specific ethical theories: private property ethics and utilitarianism. Particularly, we focus on three distinctive aspects. First, we examine the advantages and disadvantages of cryptocurrencies vis-à-vis central bank fiat money. Second, we analyze cryptocurrencies as facilitators of tax evasion and the ethical implications arising therefrom. Finally, we explore the use of cryptocurrencies for nefarious consumption. We conclude that, were cryptocurrencies to become widespread media of exchange, governments capacity to undertake monetary, fiscal, and drug policy would be undermined. We argue that this would be an ethically desirable outcome from both a private-property-rights and a utilitarian perspective since it would force governments to reduce their size and scope in these three areas.     

Effects of Tariffication: Tariffs and Quotas under Monopolistic Competition

Recent rounds of GATT and later WTO have advocated widespread tariffication, meaning that existing non-tariff barriers be converted into import equivalent tariffs. From an economic point of view, the effects of such tariffication are not entirely clear. The paper presents a trade model with monopolistic competition to examine the welfare effects of tariffication. The ranking of pre- and post-tariffication welfare crucially depends on the nature of the initial trade barrier and the tariff tool applied. Tariffication using a specific (ad valorem) tariff results in the same (reduced) welfare level compared to an initial sold quota, whereas welfare is increased (the same) compared to an initial shared quota.     

The Euro-area Financial System: Structure, Integration, and Policy Initiatives

Four years after the introduction of the euro, this paper providesan overview of the current structure and integration of theeuro-area financial systems and related policy initiatives.We first compare the euro-area financial structure with thoseof the United States and Japan. Using new and comprehensivefinancial account data, we also describe how the euro-area financialstructure has evolved since 1995. We document the progress towardsintegration of the major euro-area financial segments, namelymoney markets, bond markets, equity markets, and banking. Finally,we discuss recent policy initiatives aimed at further improvingEuropean financial integration.     

Determinants and value of enterprise risk management: empirical evidence from Germany

Enterprise risk management (ERM) has become increasingly relevant in recent years, especially due to an increasing complexity of risks and the further development of regulatory frameworks. The aim of this paper is to empirically analyze firm characteristics that determine the implementation of an ERM system and to study the impact of ERM on firm value. We focus on companies listed at the German stock exchange, which to the best of our knowledge is the first empirical study with a cross-sectional analysis for Germany and one of the first for a European country. Our findings show that size, international diversification and the industry sector (banking, insurance, energy) positively impact the implementation of an ERM system, and financial leverage is negatively related to ERM engagement. In addition, our results confirm a significant positive impact of ERM on shareholder value.     

Capacity effects and winner fund performance: the relevance and interactions of fund size and family characteristics

This study analyzes the existence of capacity effects and performance persistence for US equity mutual funds for the period from 1992 to 2007. We focus on winner funds and distinguish between capacity effects from both size and inflows and explore their interactions with two measures of family size, i.e. family total net assets under management (family TNA) and the number of funds at the family level (family breadth). The differentiation of family size allows us to analyze competing effects at the family level such as economies of scale as well as organizational complexity costs and conflicts of interest. Our empirical results confirm diseconomies of scale at the winner fund level and indicate that only small winner funds with low inflows significantly outperform the four-factor benchmark on a net return basis. There are no universal benefits from economies of scale at the family level, but our findings suggest the existence of conflicts of interest in families offering a relatively large number of funds. Small winner funds in families offering a small number of funds significantly outperform while economies of scale only materialize among extremely small winner funds. We provide detailed robustness checks for our empirical results. Overall, simply conditioning on fund size is not sufficient for selecting future outperforming funds. The results indicate that fund investors may earn positive abnormal returns when combining information on fund size with information on fund flows or fund family affiliations in their asset allocation decisions.