Scaling the volatility of GDP growth rates

The distribution of shocks to GDP growth rates is found to be exponential rather than normal. Their standard deviation scales with GDP^β where β=−0.15±0.03. These macroeconomic results place restrictions on the microeconomic structure of interactions between agents.     

The Federal Trade Commission's Anti-trust Attack on Advertising

Over the last decade, American public policy has turned increasingly against advertising. The Federal Trade Commission, in several test cases, has set out to show that advertising strengthens and sustains the power of the monopolist. By and large, the attack has failed, and thereby enhanced the contrary view that advertising is a force for competitive efficiency.     

Click Here for a Data Scientist: Big Data,Predictive Analytics,and Theory Development in the Era of a Maker Movement Supply Chain

Predictive analytics is impacting many diverse areas, ranging from baseball and epidemiology to forecasting and customer relationship management. Manufacturers, retailers, software companies, and consultants are creatively discovering new applications of big data using predictive analytics in supply chain management and logistics. In practice, predictive analytics is generally atheoretical; however, we develop a 2 × 2 model to explain the role of predictive analytics in the theory development process. This 2 × 2 model shows that in our discipline we have traditionally taken one path to theory development, but that predictive analytics can be a salient component of a comprehensive theory development process. The model points to a number of research questions that need to be addressed by our research community. These questions are not just highly relevant to the academic community but also in urgent need of answers to help practitioners execute the right strategies with greater precision and efficiency. We also discuss how one disruptive trend, the maker movement, changes the nature of who the producers are in the supply chain, making big data even more valuable. As we engage in higher levels of dialogue we will be able to make meaningful progress addressing these vital research topics.     

Convertibility risk: the precautionary demand for foreign currency in a crisis

This paper presents theoretical work linking money demand to the perceptions of households about the risk that domestic currency may become inconvertible or that it may be devalued. An empirical investigation of the size of this effect is carried out using monthly data for Korea to estimate an augmented demand-for-money equation. It is found that the fear of inconvertibility arising from the 1997 Korean currency crisis may have caused broad money demand to fall by 4–5% points,equivalent to the loss of reserves of $6–7.5 billion (or about 30% of reserves as measured at end-November 1997). This is a revised version of IMF Working paper WP/2001/210; it was written while Professor Black was Senior Policy Advisor at the IMF Institute and Christofides and Mourmouras were staff members in the IMF’s Policy Development and Review Department. The views expressed are those of the authors and should not be attributed to the IMF, its Executive Board, or its management. For useful comments and suggestions we thank an anonymous referee, Tim Lane, Ydahlia Metzgen, Roberto Perelli, Tony Richards, Christian Mulder, Steve Russell, as well as seminar participants at the IMF Institute, the IMF’s Asia and Pacific Department, Federal Reserve Board, and Bank of Indonesia. We would also like to note similar (unpublished) empirical results using our approach by Dr. Rino Effendi for Indonesia and Angana Banerji for Russia     

Inductive research in last-mile delivery routing: Introducing the Re-Gifting heuristic

The last-mile problem presents a daunting challenge for many logistics service providers, especially some 7000 small, localized operations for whom the cost of complex software solutions is often prohibitive. As a result, last-mile dispatchers rely on simple heuristics to ensure adequate customer service at an acceptable cost. This research effort extends prior qualitative work by developing and testing a simple vehicle routing heuristic, based on behaviors observed in practice, that prioritizes customer service over cost against other simple vehicle routing heuristics across a variety of environments using simulation. The results support the inclusion of a customer service focus in vehicle routing and the addition of such heuristics to existing algorithm portfolios, specifically in urban areas with well-developed highway systems.     

How Investment Opportunities Affect Optimal Capital Structure

This article addresses the question of how competition for investments among companies in a certain industry affects their capital structure. The authors develop a new modelling framework that simulates financial variables of a set of firms in a given sector, and uses the framework to analyze how such firms compete for new investments. The leverage of companies affects their flexibility to react to and take advantage of investment opportunities, and the authors show how such flexibility can be optimized to maximize the firm’s growth. As an illustration, they apply the model to a set of European airlines and global pharmaceutical companies. The novelty introduced by this paper is the explicit modelling of the interaction between several companies. The literature on optimal capital structure focuses on individual companies optimizing their capital structure in a world in which the actions of their competitors are exogenous. The authors’ results show how to incorporate the competitive position of the firm as well as the availability of investment opportunities into the capital structure decison.     

Fuzzy Numbers in the Credit Rating of Enterprise Financial Condition

Most of the parameters used to describe the credit rating are in linguistic terms, which are vague and difficult to put into precise numerical values. Fuzzy set theory, which was developed to handle this kind of vagueness, is used to represent and to aggregate the various linguistic data usually used in commercial banks. To illustrate the approach, numerical examples are solved and compared with existing approaches.     

On automated e‐business negotiations: Goal,policy, strategy,and plans of decision and action

In recent years, there has been increasing interest in automated e‐business negotiations. The automation of negotiation requires a decision model to capture the negotiation knowledge of policymakers and negotiation experts so that the decision‐making process can be carried out automatically. Current research on automated e‐business negotiations has focused on defining low‐level tactics (or negotiation rules) so that automated negotiation systems can carry out automated negotiation processes. These low‐level tactics are usually defined from a technical perspective, not from a business perspective. There is a gap between high‐level business negotiation goals and low‐level tactics. In this article, we distinguish the concepts of negotiation context, negotiation goals, negotiation strategy, and negotiation tactics and introduce a formal decision model to show the relations among these concepts. We show how high‐level negotiation goals can be formally mapped to low‐level tactics that can be used to affect the behavior of a negotiation system during the negotiation process. In business, a business organization faces different negotiation situations (or contexts) and determines different sets of goals for different negotiation contexts. In our decision model, a business policymaker sets negotiation goals from different perspectives, which are called goal dimensions. A negotiation policy is a functional mapping from a negotiation context to some quantitative measures (or goal values) for the goal dimensions to express how competitive the policymaker wants to reach that set of goals. A negotiation expert who has the experience and expertise to conduct negotiations would define the negotiation strategies needed for reaching the negotiation goals. Formally, a negotiation strategy is a functional mapping from a set of goal values to a set of decision‐action rules that implement negotiation tactics. The selected decision‐action rules can then be used to control the execution of an automated negotiation system, which conducts a negotiation on behalf of a business organization.