WAGE–PRICE DYNAMICS AND DEFLATION IN HONG KONG

Abstract. We provide empirical evidence on the dynamics of prices and wages in Hong Kong. The results suggest that the post‐1997 deflation can be understood using a conventional macroeconomic framework wherein foreign influences constitute the basic underlying shocks, and adjustment processes in domestic wages and prices determine the details of the transmission mechanism. We find that the decline in local nominal prices owes much to declining prices of imported intermediate goods. The negative output gap and increase in unemployment during the deflation period also have their origin in foreign shocks, but the domestic wage adjustment process is an important contributing factor.     

Environmental Enforcement with Endogenous Ambient Monitoring

We consider an inspection game between n polluting firms and an environmental enforcement agency. If the cost of monitoring ambient pollution is low enough, the optimal inspection policy consists in imposing the maximal possible fine, and mixing between observing ambient pollution and not conducting any inspection at all. However, with stringent upper limits on the fine, the agency mixes between observing ambient pollution and inspecting all firms. The observation of ambient pollution is always followed by sequentially rational firm inspections. Comparisons with Franckx (2002a, Journal of Environmental Economics and Management 43, 71–92, 2002b, Topics in Economic Analysis Policy 2(1), Article 1) show that commitment power has a very strong impact on the value of prior information.     

Does better governance foster efficiency? An aggregate frontier analysis

We test the relationship between governance and macroeconomic technical efficiency on a sample of 62 countries, both developed and developing. We do so by applying Battese and Coelli (1995)s method at the aggregate level. We find that better governance, measured by six complementary indices each devoted to a different dimension of governance, is always associated with greater efficiency. However, when governance variables are tested against each other, we observe that government efficiency is the aspect of governance that most robustly affects aggregate efficiency.Received: September 2003, Accepted: August 2004, JEL Classification: C31, K40, O4We wish to thank Mohammed Chaffai and Jean-Yves Lesueur for their advice. We are also grateful to participants at the XVth Villa Mondragone International Economic Seminar on Markets, growth and global governance in Rome (June 2003), and seminar participants at the University Robert Schuman of Strasbourg, the University Louis Pasteur of Strasbourg, and the University Lumiére of Lyon, for their helpful comments. We are finally indebted to two anonymous referees whose constructive suggestions led us to substantially improve the paper. All remaining errors are ours.     

Efficient Private Production of Public Goods under Common Agency

A private, profit-maximizing firm produces a public good that enters the utility functions of several users. Each of them separately designs and proposes to the firm a contract specifying a transfer payment as a function of the amount of public good supplied. The firm has to accept or to refuse each contract before knowing the realized value of a random variable that enters its cost function. We study the Nash equilibria of this game and explore some refinements ruling out Pareto inefficient equilibria.Journal of Economic LiteratureClassification Numbers: C72, H41.     

eWOM credibility on social networking sites: A framework

Social networking sites (SNS) offer brands the ability to spread positive electronic Word of Mouth (eWOM) for the purposes of building awareness and acquiring new customers. However, the credibility of eWOM is threatened of late as marketers increasingly try to manipulate eWOM practices on SNS. A greater understanding of eWOM credibility is necessary to better enable marketers to leverage true consumer engagement by generating credible peer-to-peer communications. Yet, to date, there is no one framework synthesising which factors constitute eWOM credibility in the online environment. This paper revisits the word of mouth credibility literature and proposes a new credibility framework – the 4Cs of eWOM Credibility: Community, Competence, Content, and Consensus.     

Safe design of a thermally unstable solid storage container: Natural convection effects on thermal ignition

A numerical simulation of the convection process in a thermally unstable solid storage container has been carried out. The obtained results show that natural convection shifts the thermal ignition to higher induction times. Beyond a critical Rayleigh number, natural convection can prevent the system against thermal ignition. Temperature and velocity fields are calculated. The influence of the dependence of Biot numbers on temperature and the radius/height ratios on the induction times for thermal ignition has been also examined.     

Buy or wait,that is the option: the buyer's option in sequential laboratory auctions

We report results from an experiment on two‐unit sequential auctions with and without a buyer's option (which allows the winner of the first auction to buy the second unit). The four main auction institutions are studied. Observed bidding behavior is close to Nash equilibrium bidding in the auctions for the second unit, but not in the auctions for the first unit. Despite these deviations, the buyer's option is correctly used in most cases. The revenue ranking of the four auctions is the same as in single‐unit experiments. Successive prices are declining when the buyer's option is available.     

Value‐at‐risk for long and short trading positions

In this paper we model Value‐at‐Risk (VaR) for daily asset returns using a collection of parametric univariate and multivariate models of the ARCH class based on the skewed Student distribution. We show that models that rely on a symmetric density distribution for the error term underperform with respect to skewed density models when the left and right tails of the distribution of returns must be modelled. Thus, VaR for traders having both long and short positions is not adequately modelled using usual normal or Student distributions. We suggest using an APARCH model based on the skewed Student distribution (combined with a time‐varying correlation in the multivariate case) to fully take into account the fat left and right tails of the returns distribution. This allows for an adequate modelling of large returns defined on long and short trading positions. The performances of the univariate models are assessed on daily data for three international stock indexes and three US stocks of the Dow Jones index. In a second application, we consider a portfolio of three US stocks and model its long and short VaR using a multivariate skewed Student density. Copyright © 2003 John Wiley & Sons, Ltd.