Input–output-based measures of systemic importance

The analyses of intersectoral linkages of Leontief [The Structure of the American Economy: 1919–1929, 1941] and Hirschman [The Strategy of Economic Development, 1958] provide a natural way to study the transmission of risk among interconnected banks and to measure their systemic importance. In this paper, we show how elements from classic input–output analysis can be applied to banking and how to derive six indicators that capture different aspects of systemic importance, using a simple numerical example for illustration. We also discuss the relationship with other approaches, most notably network centrality measures, both formally and by means of a simulated network.     

Large economies with differential information and without free disposal

We consider exchange economies with a continuum of agents and differential information about finitely many states of nature. It was proved in Einy et al. (Econ Theory 18, 321–332, 2001) that if we allow for free disposal in the market clearing (feasibility) constraints then an irreducible economy has a competitive (or Walrasian expectations) equilibrium, and moreover, the set of competitive equilibrium allocations coincides with the private core. However when feasibility is defined with free disposal, competitive equilibrium allocations may not be incentive compatible and contracts may not be enforceable (see e.g. Glycopantis et al. in Econ Theory 21, 495–526, 2002). This is the main motivation for considering equilibrium solutions with exact feasibility. We first prove that the results in Einy et al. (Econ Theory 18, 321–332, 2001) are still valid without free-disposal. Then, motivated by the issue of contracts’ execution, we adapt the incentive compatibility property introduced in Krasa and Yannelis (Econometrica 62, 881–900, 1994) and we prove that every Pareto optimal exact feasible allocation is incentive compatible, implying that contracts of competitive or core allocations are enforceable. We would like to thank two anonymous reviewers and the Associate Editor for their valuable suggestions and remarks. This work was partially done while V.F. Martins-da-Rocha was visiting the Dipartimento di Matematica e Informatica of the Università degli Studi di Perugia. We thank the audience of the First General Equilibrium Workshop at Rio. Section 6 dealing with contract enforcement and coalitional incentive compatibility has benefited from discussions with J. Correia-da-Silva, W. Daher, F. Forges, C. Hervès-Beloso, E. Moreno-García, K. Podczeck, Y. Vailakis and N.C. Yannelis.     

How can our cars become less polluting? An assessment of the environmental improvement potential of cars

This paper presents a systematic overview of the environmental impacts of new average diesel and petrol cars from a life cycle perspective. An analysis of different technical and non-technical improvement options that could be achieved at each stage of a car’s life cycle was performed. The consequences of the adoption of these options on the environment were estimated. The results show that some of the options analysed could have a major positive impact on the vehicle efficiency and induce large improvements of the environmental profile of passenger cars. The highest improvements are achievable through more efficient power trains (including hybrid car), and through lightweight cars. For some options, burden shifts from one car life cycle phase to another, or from one environmental problem to another, can occur. The results show that besides the purely technological options, those that imply behavioural changes by the driver may also reduce the environmental burden substantially.     

Beer,brewing, and business history

Abstract

This editorial introduces the eight articles in the special issue on ‘Beer, brewing and business history’. Following the BEERONOMICS conference held at the University of York, 2013, and the subsequent approval of the editorial board of Business History, we received many submissions discussing beer, brewing, and their importance to business history (broadly defined). In this editorial we provide a brief overview of the historical development of beer and brewing; explain the appeal to business historians of the principal themes which have emerged in the historiography of this industry, and provide a short introduction to the articles accepted for publication in this special issue.     

Capital regulation and monetary policy with fragile banks

Optimizing banks subject to runs are introduced in a macro model to study the transmission of monetary policy and its interplay with bank capital regulation when banks are risky. A monetary expansion and a positive productivity shock increase bank leverage and risk. Risk-based capital requirements amplify the cycle and are welfare detrimental. Within a class of simple policy rules, the best combination includes mildly anticyclical capital ratios (as in Basel III) and a response of monetary policy to asset prices or bank leverage.     

The dynamic behavior of business loans and the prime rate : A comment

In a recent paper published in this Journal, Kling uses a vector autoregressive model to study the market for bank loans in the United States. The paper's analytical method — consisting of reduced form estimation, orthogonal transformation of the residuals and ‘innovation’ analysis — suffers, however, from certain methodological difficulties that put its results and suggested interpretations into question. The purpose of this note is to enlighten the nature of these problems through a simple example, and to show that the evidence presented by the author is not sufficient to resolve them.