Creditworthiness and thresholds in a credit market model with multiple equilibria

Summary. The paper studies creditworthiness in a model with endogenous credit cost and debt constraints. Such a model can give rise to multiple candidates for steady state equilibria. We use new analytical techniques such as dynamic programming (DP) with flexible grid size to find solutions and to locate thresholds that separate different domains of attraction. More specifically, we (1) compute present value borrowing constraints and thus creditworthiness, (2) locate thresholds where the dynamics separate to different domains of attraction, (3) show jumps in the decision variable, (4) distinguish between optimal and non-optimal steady states, (5) demonstrate how creditworthiness and thresholds change with change of the credit cost function of the debtor and (6) explore the impact of debt ceilings and consumption paths on creditworthiness.JEL Classification Numbers: C61, C63, D91, D92, E51, G12, G32.An earlier version of this paper has been prepared for the 1998 North American Winter Meeting of the Econometric Society, January 1998, Chicago. We want to thank Jess Benhabib, Buz Brock, Gustav Feichtinger, Franz Wirl, Michael Woodford, Wolf-Jürgen Beyn and Thorsten Pampel for helpful discussions and comments on various versions of the paper. We also want to thank participants in a workshop at the University of Technology, Vienna, the Macroeconomic Workshop at Columbia University, and the SCE conference, at Yale University, June 2001. We are also grateful for comments from a referee of the journal.     

Sarmanov Family of Bivariate Distributions for Multivariate Loss Reserving Analysis

The correlation among multiple lines of business plays a critical role in aggregating claims and thus determining loss reserves for an insurance portfolio. We show that the Sarmanov family of bivariate distributions is a convenient choice to capture the dependencies introduced by various sources, including the common calendar year, accident year, and development period effects. The density of the bivariate Sarmanov distributions with different marginals can be expressed as a linear combination of products of independent marginal densities. This pseudo-conjugate property greatly reduces the complexity of posterior computations. In a case study, we analyze an insurance portfolio of personal and commercial auto lines from a major U.S. property-casualty insurer.     

The strategies of supply chain risk management – a synthesis and classification

This paper conducts an in-depth systematic literature review of 86 peer-reviewed academic journal articles on supply chain risk management (SCRM) strategies from 2000 to mid-2015. The findings indicate a variety of dispersed supply chain risk (SCR) mitigating strategies and suggest a more homogeneous use of terminology. Moreover, the analysis also reveals insufficient evidence for the effect of SCRM on performance. The current study groups and synthesises the various SCRM strategies into proactive and reactive approaches for the ante and the post disruption state and classifies them according to the different supply chain types. Altogether the findings provide essential practical and theoretical contributions to strategic responses to adverse incidents by creating a unique conceptual framework of SCRM strategies and providing direction towards promising areas of research.     

The Middle Class ‘at Home among the Poor’ — How Social Mix is Lived in Parisian Suburbs: Between Local Attachment and Metropolitan Practices

How do households belonging to the middle classes decide to come live in a ‘poor’ city in the Parisian suburbs? What makes them stay? What are the judgements and strategies that have been brought to bear both individually in their daily lives and as a social group in terms of their collective involvement and their relationships with other social groups? What does this kind of ‘social mix’ imply in terms of social practices, local and social belonging? This article shows that attitudes towards social mixing have to be considered in terms of their sociological dimensions. This analysis thus takes into account middle‐class diversity in socio‐residential terms, in terms of trajectories, values and attachment to a particular area. The article also emphasizes the importance of distinguishing between different dimensions of attitudes towards social mixing: depending on the issues at stake, people can accept and sometimes promote a form of cohabitation, or, quite to the contrary, reject it. Finally, the article emphasizes the importance of local contexts and their temporality: for someone belonging to the middle classes, living in a poor city may also mean holding a relatively higher position than elsewhere.     

Dynamics of Customer Response to Promotional and Relational Direct Mailings from an Apparel Retailer: The Moderating Role of Relationship Strength

Although direct mails have traditionally been used to sell a product or service, they can also be effective in enhancing retailer-customer relationships. This study examines how customers respond to ‘promotional’ (‘call to action’) and ‘relational’ (‘retailer-image enhancement’) direct mailings. The study develops a model that includes: (i) the dynamic effects of both types of direct mailings over time; and (ii) the moderating role of strength of the relationship that a customer enjoys with the retailer. Past purchase behavior is also considered. The model is then used in a study of customers of a Belgian apparel retailer. The results show that relational mailings positively affect customer response, irrespective of when they are sent. In contrast, the effects of promotional mailings are less clear-cut: although they work well in the short term, their effects can vary in the longer term. In addition, the study finds that a direct-mailing strategy should be planned in accordance with the strength of the relationship between the retailer and the target customers. The results of the study provide valuable insights for retailers in optimizing the effectiveness of their direct-mail initiatives.     

International nonlinear causality between stock markets

In this paper, we test for linear and nonlinear Granger causality between the French, German, Japanese, UK and US daily stock index returns from 1973 to 2003. We find a strong contemporaneous linear dependence between European countries and a directional linear dependence from the US towards the other markets. Besides, linear causality increases after 1987, a finding consistent with the expected effects of financial liberalization of the 1980s and the 1990s. Above all, we document the presence of bidirectional nonlinear causality between daily returns. To check for spurious nonlinear causality, we filter out heteroskedasticity using a FIGARCH model. The dramatic decrease in the number of significant nonlinear causality lags confirms that heteroskedasticity played a major part in the previous findings. We then check if a few structural breaks can explain the remaining nonlinear causality. We find that a large number of nonlinear relationships vanish when we control for structural breaks, whereas linear causality remains.     

A fractionally integrated exponential STAR model applied to the US real effective exchange rate

The aim of this paper is to study the dynamics of the US real effective exchange rate by capturing non-linearity and long-memory features. In this context, we use the family of fractionally integrated STAR (FISTAR) models proposed by van Dijk et al. (van Dijk, D., Franses, P.H., and Paap, R., 2002. A non-linear longmemory model with an application to US unemployment. Journal of Econometrics 110, 135–165.) in the case when the transition function is an exponential function and we develop an estimation procedure. Indeed, these models can take into account processes characterized by several distinct dynamic regimes and persistence phenomena.     

Analysis of ruin measures for the classical compound Poisson risk model with dependence

In this paper, we consider an extension to the classical compound Poisson risk model. Historically, it has been assumed that the claim amounts and claim inter-arrival times are independent. In this contribution, a dependence structure between the claim amount and the interclaim time is introduced through a Farlie–Gumbel–Morgenstern copula. In this framework, we derive the integro-differential equation and the Laplace transform (LT) of the Gerber–Shiu discounted penalty function. An explicit expression for the LT of the discounted value of a general function of the deficit at ruin is obtained for claim amounts having an exponential distribution.     

Job mobility restriction mechanisms and appropriability in organizations: The mediating role of secrecy and lead time

This paper addresses the following question: does mobility restriction enhance the appropriability of R&D investments? And if so, how does this occur? We propose that mobility restriction mechanisms affect appropriability through their impact on secrecy and lead time. We test mediation hypotheses in a sample of biotechnology firms and discuss the implications for intellectual property protection strategies and human resource management.     

The impacts of standard monetary and budgetary policies on liquidity and financial markets: International evidence from the credit freeze crisis

This paper evaluates the domestic and international impacts of lowering short-term interest rates and increasing budget spending on several indicators of liquidity, volatility, credit and economic activity. Data from the 2003–2011 period in the United States, the Euro zone and Canada were used to develop two SVAR models for assessing the national effectiveness and the international spillovers of monetary and budgetary policies during the credit freeze crisis. While monetary policies caused a temporary decrease in volatility and increase in liquidity in North American stock markets, the shocks were mainly domestic and ineffective at generating liquidity in the banking sector. In contrast, government spending shocks had a positive impact on credit and consumption, especially in Europe and Canada. Moreover, budgetary policies also had a positive international spillover effect on consumption and credit, especially for smaller economies such as Canada.