Credit lines as monitored liquidity insurance: Theory and evidence

We propose a theory of credit lines provided by banks to firms as a form of monitored liquidity insurance. Bank monitoring and resulting revocations help control illiquidity-seeking behavior of firms insured by credit lines. The cost of credit lines is thus greater for firms with high liquidity risk, which in turn are likely to use cash instead of credit lines. We test this implication for corporate liquidity management by identifying exogenous shocks to liquidity risk of firms in corporate bond and equity markets. Firms experiencing increases in liquidity risk move out of credit lines and into cash holdings.     

Network externalities in consumer spending on lottery games: evidence from Spain

We use data from two nationally representative Spanish surveys in 2005 and 2006 to investigate spending on lottery games. Estimates from Tobit and double hurdle models of participation in lottery markets and spending on lottery tickets find that frequent participation in one game is not associated with an increased or decreased probability of participating in other games, but is associated with increased spending on other games. Consumer spending on different lottery games exhibits inter-related consumption decisions. Also, the assumptions underlying the double hurdle model, but not the Tobit model, better describe consumer spending on lottery tickets in Spain.     

Preference erosion and market access liberalization: the African dilemma in multilateral negotiations on agriculture

African countries, especially sub-Saharan ones, have conflicting interests in multilateral negotiations on agriculture. On the one hand, their economies may be boosted by the price effect induced by agricultural liberalization. On the other hand, multilateral tariff cuts will result in the erosion of preferential margins. Based on an original methodology, using CGE modeling, detailed tariff calculations and predictive analysis, this paper investigates the potential impact of current multilateral negotiations on the value of preferences for African agriculture. It estimates the preferential value to USD 0.7 billion of welfare and USD 1 billion of exports to the Triad markets. Furthermore, it highlights the “cruel dilemma” African countries face in current negotiations, as they gain from ambitious trade liberalization, despite the large preferential erosion, while they suffer from noticeable trade and welfare losses under conservative scenarios.

Preparing for Medicaid managed care

As Medicaid enrollment continues to rise, hospitals and health systems could benefit from contracting with Medicaid managed care plans. Providers need to establish a Medicaid managed care strategy before beginning the contracting process. Revenue cycle leaders need to ensure that their front-end processes related to patient access, billing, and denials management are compatible with Medicaid managed care.     

The Budget Control Act implications for Medicare

The Budget Control Act of 2011 created a 12-member bipartisan congressional committee to develop proposed legislation aimed at reducing the federal deficit. When the committee failed to produce a bill, automatic across-the-board cuts were triggered that include cuts to Medicare. The Medicare cuts would be covered by reduced reimbursements to hospitals. If Congress does not vote to override the automatic cuts, they will take effect on Jan. 2, 2013.     

Choosing the right people and developing them

As far back as the ninth century BCE in Greece, a talent was a form of currency. In the 21st century, talents remain currency as the special gifts of knowledge, skills, and personal characteristics that individuals bring to organizations. Talent management, also known as human capital management, HCM, is a focus of leadership studies that increasingly strives to acknowledge and measure the tangible contributions that individuals make to the bottom line. In this symposium, we offer a position paper by Ted Harro and Leslie Miller who detail an innovative approach to address how leaders of organizations can create a consistent, positive flow of talent necessary to support success. Our respondents, Karen Kirwan, Dave Wondra, and Edward Perez, each add their perspectives to this timely discussion.     

The Political Economy of Austerity in Southern Europe

ABSTRACT

Europe’s response to the sovereign debt crisis in Southern Europe has been premised on the idea that these states can return to growth through internal devaluation and fiscal consolidation. This article explores the distributive consequences of that strategy in Greece, Portugal, Italy, and Spain. We argue that standard measures of poverty do not capture the deterioration in living standards as fully as anchored poverty. Moreover, we show that inequality trends conceal considerable re-ranking within the income distribution: those who were rich in 2012 had got richer in 2009–12, but those who were rich in 2009 lost ground in 2009–12. We find that in all four countries the new poor include significantly fewer pensioners and more unemployed workers, and are considerably poorer than the old poor had been. We demonstrate that there was significant variation in the magnitude and design of austerity, with Italy imposing a far smaller adjustment than Spain, and Portugal achieving less inequality in spite of robust fiscal consolidation. Nevertheless, even when austerity measures were designed to reduce inequality by compressing incomes downward, their second-order macro-economic effects ultimately increased inequality (except in Portugal). In the last section, we explore the political reasons for this variation.     

US stock market volatility persistence: evidence before and after the burst of the IT bubble

In this paper we test whether the US stock market volatility presents a different behavior before and after the burst of the IT bubble. Using long range dependence techniques we examine the order of integration in the absolute and squared returns in three daily stock market indices (DJIA, S&P and NASDAQ). The results indicate that both absolute and squared returns present long memory behavior. In general, the highest orders of integration in the volatility processes correspond to the NASDAQ index. The results also show that in most cases the volatility is more persistent in the bear market than in the bull market.     

The adoption and adaptation of externally originated ideas

This paper presents a vintage-capital model of technology adoption that takes seriously the fact that new inventions are specific to the environment in which they emerge. The key feature of the model is that the firm can invest resources in R&D to adapt externally originated ideas to the environment in which they are used. We show that because of the possibility of investing in R&D, differences between the inventor's and user's environments can explain why some firms invest in old techniques. Several predictions of the model are consistent with observation.