Using household surveys to implement field experiments: the willingness to donate to food banks

This paper demonstrates that it is possible to jointly produce household surveys and field experiments by incorporating field experiments into the structure of the financial incentives used to enhance response rates. We use the opportunity to donate the financial incentive to a food bank to illustrate how the strategy would work.     

Detrimental externalities,nonconvexities and technical change

This paper reexamines the implications of detrimental externalities for the nonconvexity of the social production set. A simple model, allowing for induced technical change, is developed to illustrate that the imposition of effluent changes can induce technological changes which serve to ameliorate these nonconvexities.     

Estimation of Mortgage Defaults Using Disaggregate Loan History Data

This paper addresses, theoretically and empirically, the structure of influences affecting the default option in mortgage contracts. A formal theoretical model recognizes that a number of loan and non-loan related effects beyond equity in the unit could influence the default decision. These include 1) payment levels relative to income, which could displace other investment opportunities or cause a need for borrowing or sale to meet mortgage obligations; 2) current and expected neighborhood and housing market conditions, in particular the expected relative rate of appreciation of the unit and the relative cost of homeownership; 3) economic conditions; 4) wealth; 5) borrower characteristics proxying for variability in income or "crisis" events; as well as 6) transactions costs incurred upon default. Estimates of the model making use of a micro-level sample of individual loan histories over a twelve year period, supplemented by longitudinal census and economic information, find a number of these "other" effects important. Simulations find several of them to dominate the equity effect on default and to help explain why some households with zero or negative equity may not default, while others with positive equity may. The implications of these results for appropriate specification of the pricing model describing the default option and for appropriate underwriting of AMIs are noted.     

Limited paternalism and the Pontius Pilate Plight

Ebejer and Morden (‘Paternalism in the Marketplace: Should a Salesman Be His Buyer's Keeper?”, Journal of Business Ethics 7, 1988) propose ‘limited paternalism’ as a sufficient regulative condition for a professional ethic of sales. Although the principle is immediately appealing, its application can lead to a counter-productive ethical quandary I call the Pontius Pilate Plight. This quandary is the assumption that ethical agents' hands are clean in certain situations even if they have done something they condemn as immoral. Since limited paternalism can give rise to this queer conclusion in the salesperson/buyer relationship, the principle is suspect. It may be a necessary condition for ethical sales, but is not sufficient. This discussion concludes by suggesting two additional criteria which, when complemented by the limited paternalism principle, are jointly sufficient.     

China's Interest Rate Pass‐through to Commercial Banks Before and After Interest Rate Liberalisation

On 23 October 2015, the People's Bank of China (PBoC) completed the process of interest rate liberalisation. This study examines China's interest rate pass‐through to the lending rate of commercial banks before and after interest rate liberalisation. Based on data from Q3, 2007 to Q2, 2016, the study shows that the interest rate pass‐through from policy rate to lending rate, which was effective before October 2015, lost effectiveness thereafter. PBoC interventions, the ‘Impossible Trinity’ theory and institutional factors may contribute to this ineffectiveness of the policy rate pass‐through, which may also be related to the higher premium for risk required by banks and to the worsening of their financial condition. The study also offers policy advice in response to the declining effectiveness of China's interest rate pass‐through.     

MERGERS AND PRODUCT QUALITY: A SILVER LINING FROM DE‐HUBBING IN THE U.S. AIRLINE INDUSTRY

This paper investigates how de‐hubbing, which occurs when an airline ceases hub operations, impacts product quality. Examining four cases of de‐hubbing following U.S. airline mergers between 1998 and 2016, we analyze three product quality measures: on‐time performance, travel time, and flight cancellations. In order to isolate a merger's impact on product quality, we compare the results of four de‐hubbing events that followed a merger with three de‐hubbing cases that occurred independently of a merger. We find a silver lining from mergers because product quality improvements are isolated to de‐hubbing events which follow airline mergers rather than nonmerger‐induced de‐hubbing. (JEL L15, L93)     

Chinese commercial paper: The bank lending channel of monetary transmission and beyond

China's commercial paper financing experienced dramatic growth in January 2019. This paper examines the bank lending channel of China's monetary transmission to commercial paper, and more broadly, the factors that affect the growth of commercial paper, which is the first of its kind in the academic literature. The main conclusions include: the bank lending channel to commercial paper exists; the performance of the real economy also has a significant effect on the growth of the commercial paper.     

Finite sample bias of the least squares estimator in an AR(p) model: estimation,inference, simulation and examples

This paper shows that the first order bias of least squares estimators of the coefficients of an AR(p) model is important for ‘typical’ macroeconomic time series and proposes a simple to apply method of bias reduction. Biases in individual coefficients often cumulate in the sum with far-reaching consequences for the cumulative impulse response function. This function, being nonlinear in the underlying coefficients, is particularly sensitive to biases when, as is often the case, the shocks are long-lived. Simulations and examples demonstrate some of the magnitudes involved.