The foreign exchange exposure of Chinese banks

Using the capital market approach and the equity price data of 14 listed Chinese banks, this empirical study finds that there is a positive relationship between bank size and foreign exchange exposure. This relationship may reflect the larger foreign exchange operations and trading positions of larger Chinese banks and their significant indirect foreign exchange exposure arising from impacts of the renminbi exchange rate movements on their customers. Empirical evidence also suggests that the average foreign exchange exposures of state-owned and joint-stock commercial banks in China are higher than those of banks in Hong Kong, notwithstanding their limited participation in international banking businesses compared with their Hong Kong counterparts. It is also found that negative foreign exchange exposure is prevalent for larger Chinese banks, suggesting that an appreciation of the renminbi tends to reduce their equity value. It is therefore likely that the banking sector's performance will be hampered. Together with the fact that decreases in equity values generally imply a higher default risk, the effects of different scenarios of renminbi appreciation on the default risk of Chinese banks should therefore be closely monitored.     

Higher Tax for Top Earners

The literature can justify both increasing and decreasing marginal taxes (IMT & DMT) on top incomes under different welfare objectives and income distributions. Even when DMT are theoretically optimal, they are often politically infeasible. Then a flat tax seems to be a constrained optimal solution. We show however that, given any flat tax we can increase the total utility of a poor majority by raising the top income tax rate under a simple condition, which can be checked with empirical data. We further generalize our main results allowing different welfare weights, declining elasticity of labor supply and more tax bands.     

Modelling Competition in the Textbook Market: Some Lessons still to Learn

Many European governments still advocate a so-called ‘cultural exception’, intended to protect consumers and smaller bookshops, to keep their book markets isolated from competition. Other countries, with similar aims in mind, have chosen liberalization schemes instead. To reconcile these opposing views, this paper provides a theoretical framework to study the textbook market, depicting it as dominated by two simultaneous forces: horizontal differentiation among booksellers and a vertical relationship between publishers and bookshops. Using this model, we analyse the effects of alternative price schemes on the market structure and how potential benefits from price liberalization are influenced by the number (and size of) booksellers.     

Out of Recession?

Britain is emerging uncertainly from recession. This essay looks at the character of the recession, the financial crisis that inaugurated it and the key issues that will dominate the recovery phase. In particular, it argues that the underlying and deeply entrenched political conditions which underpinned the crisis, notably bi-partisan encouragement of a ‘property-owning democracy’, show no signs of abating. Without such a change, a recurrence of the crisis appears highly likely.     

Is there a case for revising the UNWTO's Global Code of Ethics to include a new article on the ethical treatment of animals by the tourism industry? A response to the opinion piece by David Fennell

This opinion piece reviews and critiques the opinion piece by David Fennell which presents a proposal for a new article about the ethical treatment of animals to be added to the UNWTO Global Code of Ethics for the tourism industry. The case presented here rests on a detailed examination of the use of the concepts of speciesism and anthropocentrism in the original opinion piece. It finds that, while speciesism is currently a fashionable way to draw parallels between animals and humans, it is dependent on the evidence around the questions of sentience, cognition and consciousness. While there is increasing evidence for animal sentience and cognition, human consciousness is wholly different from that of even the most advanced animals. And, although anthropocentrism is a dominant idea in many forms of political decision making in general, it cannot be used as a stick with which to beat tourism scholarship: many writers on tourism adopt distinctly ecocentric lines of argument, including the concepts of ecotourism and sustainable tourism. The paper also notes that only ca. 30% of UNWTO's national members had given legal recognition to the existing code of ethics nearly 10 years after its ratification by the UN.     

Economic growth as a function of human capital,internet and work

The World Bank has suggested the need to enhance Information and Communication Technology skills in all sectors because a 10% increase in internet connectivity was found to boost GDP growth by 1.38%. Simultaneously, the OECD argued that high internet access rates generate a 2% increase in GDP. Because the internet positively affects economic growth, we investigated the relationship between an economically active population, human capital and technology to evaluate these effects in Mexico. A data series from 1991 to 2010 was analysed in three stages according to the least-squares method. A Cobb–Douglas function under the Solow model was considered. Technology and internet access were found to positively affect top-level students and graduate students and thus contribute to the global innovation index.     

The effects of domestic rice market interventions outside business-as-usual conditions for imported rice prices

The Philippine government intervenes in the domestic rice market through the imposition of import tariffs and the provision of producer and consumer subsidies. While policymakers are aware that these programmes come with allocative efficiency costs, they justify the programmes on the grounds that they insulate the domestic economy from unexpected price spikes in the international rice market. An interesting matter for policy evaluation is to quantify the insulation benefit that the programmes provide in circumstances of sudden severe import price spikes. To examine this question, we undertake a dynamic computable general equilibrium (CGE) simulation in which the Philippines is subject to an external rice price shock. We find that the insulation benefit of the support programmes under a 2008-like event is worth approximately 0.10% of real consumption. However, the cost of insuring against these price spikes is significant. We estimate the annual cost of the rice market interventions at approximately 0.40% of real consumption.     

The employability of new graduates: a study of differences between UK universities

The non-stationarity tests of Phillips-Perron (1988) (PP tests) suggest that Australian macroeconomic output possesses a stochastic rather than a deterministic log-linear trend. Kwiatkowski et al. (1991) argue that such tests have low power and propose the KPSS test, in which the null is stationary. However, the KPSS test results reinforce the PP findings for Australia. Cochrane (1988) variance ratio (VR) tests further suggest that there may be a very strong random-walk component in the Australian business cycle. Rappoport and Reichlin (1989), however, argue that all such tests are biased in favour of the stochastic trend alternative if there are trend breaks in the data. Following up on this point, the paper finds that, in Australia's case, the stochastic trend alternative is statistically dominated when the data are allowed to be characterized by a probabilistic, regime-switching, segmented trend specification. Therefore, to the extent that real business-cycle theories of the business cycle gain support from stochastic trends in real output, this latter piece of Australian evidence does not strengthen their case.     

Price transmission and volatility spillovers in Asian rice markets: Evidence from MGARCH and panel GARCH models

ABSTRACT

This article examines world rice price transmission and volatility spillovers across six major Asian rice markets over the period 2005-13. In addition to the conventional GARCH models, we use a panel GARCH framework to estimate the spillover effects along with the consideration of heterogeneity and interdependence among countries. Empirical results suggest that changes in the world rice price affected not only the price levels of domestic rice markets but also their conditional variances. Moreover, interdependence across rice markets contributed to a strong spillover of a price shock in one country to another within the region.     

Fundamentals of service science

Service systems are value-co-creation configurations of people, technology, value propositionsconnecting internal and external service systems, and shared information (e.g., language, laws, measures, and methods). Service science is the study of service systems, aiming to create a basis for systematicservice innovation. Service science combines organization and human understanding with business andtechnological understanding to categorize and explain the many types of service systems that exist as wellas how service systems interact and evolve to co-create value. The goal is to apply scientific understandingto advance our ability to design, improve, and scale service systems. To make progress, we think servicedominantlogic provides just the right perspective, vocabulary, and assumptions on which to build a theory ofservice systems, their configurations, and their modes of interaction. Simply put, service-dominant logicmay be the philosophical foundation of service science, and the service system may be its basic theoreticalconstruct.