Fiscal consolidation in Germany

The German federal government’s fiscal consolidation package, announced in June, is designed to permanently reduce the federal deficit to a new target level. This article uses a three-region version of the European Commission’s QUEST model to gauge the impact of the package on Germany and the spillover to the rest of the euro area and the rest of the world.     

Griechenlands Krise: Das währungspolitische Trilemma im Euroraum

Die Eurozone ist vor allem durch die gef?hrdete Kreditwürdigkeit Griechenlands in eine schwere Krise geraten. Jetzt zeigt sich, dass jede W?hrungsunion ein Konstruktionsproblem hat. Die Mitgliedstaaten müssen auf die Autonomie in der Geldpolitik verzichten und ohne die Instrumente der Geld- und Wechselkurspolitik ihre internationale Wettbewerbsf?higkeit bewahren.     

The G20 proposal on IMF governance: Has any progress been made?

At their London summit in April 2009 the G20 proposed major changes in the governance of the International Monetary Fund (IMF): a reallocation of voting shares to emerging and developing countries, an antedated reform of the quota system, a delinking of the managing director’s election from regional origin and support for the Singapore quota and voice reform of 2006. Unfortunately, these reform proposals remain in part imprecise, they leave crucial issues untouched and they have so far not been implemented.     

The victim matters – experimental evidence on lying,moral costs and moral cleansing

In an experiment on moral cleansing with an endogenously manipulated moral self-image, we examine the role of the addressee of an immoral action. We find that cheating is highest and moral cleansing lowest when subjects cheat at the expense of the experimenter, while cheating is lowest and moral cleansing highest once cheating harms another participant. A subsequent measurement of subjects’ moral self-image supports our interpretation that the occurrence of moral cleansing crucially depends on the moral costs resulting from immoral actions directed at individuals in different roles. Our results can help to explain the different propensity to cheat and conduct moral cleansing when immoral actions harm either another person or representatives of organizations.     

Vorschau

VORSCHAU

Vorschau     

When do Heuristics Matter in Global Capital Markets? The Case of the BRIC Acronym

ABSTRACT

Several recent publications have argued that the use of heuristics by financial investors can distort global capital flows, but scholars have paid little attention to the scope conditions that determine when heuristics become influential (and when they don’t). Building on work in economic sociology and behavioural finance we suggest that the degree to which investment heuristics can bias aggregate capital flows depends on the levels of uncertainty and self-referentiality that structure the environments under which investment decisions are being made. Applying these insights to the two principal global markets for corporate investment, we argue that the institutional structure of markets for short-term portfolio equity investments (PEI) is far more conducive to trigger the mimetic adoption of a specific heuristic than in markets for long-term foreign direct investments (FDI). To test this hypothesis, we leverage the high level of arbitrariness of the selection of Brazil, Russia, India and China into the BRIC acronym and empirically examine the impact of its remarkable rise to prominence among communities of financial investors in the mid-2000s on global capital flows to emerging economies. In line with the theoretical argument, we find robust evidence of a strong BRIC-bias in markets for PEI but not FDI.     

Simultaneous Estimation of Cost and Distance Function Share Equations

The study considers the simultaneous estimation of share equations using cost and distance functions. Simultaneous rather than single system estimation utilizes full as opposed to limited information. Econometric results exploit the nonstationary nature of the data and that variables are cointegrated. Under cointegration all variables are endogenous and so it is not necessary to undertake the somewhat ad hoc exercise of choosing instruments to achieve parameter consistency. Johansen's maximum likelihood estimator is applied to data from Central Canada and Western Canada (1935–2006). Symmetry and homogeneity restrictions are not rejected for either region. Monotonicity held for all data points and concavity held at 92% of the data points. Long‐run constant returns and Hicks neutral technological change are rejected for both regions. Morishima elasticity estimates coming from the cost function in Western Canada indicate highly elastic long‐run substitution between the land/fertilizer input pair and mildly elastic long‐run substitution between land and both machinery and labor. In contrast, substitution for land and other inputs is inelastic for the land/machinery pair and the land/labor pair, with only the land/fertilizer pair being mildly elastic. The results indicate the limiting nature of land as a fundamental constraint on long‐term agricultural production is a real possibility in Central Canada because other inputs are inelastic, or at best only mildly elastic, substitutes for land. In Western Canada, fertilizer is the only factor that is highly substitutable for land and, therefore, could mitigate the limiting nature of land in that region. However, given that fertilizer applications are often considered to be environmentally unfriendly, the long‐run substitution of fertilizer for land as a fundamental mitigating factor to land scarcity in Western Canada is at a cost to the environment.     

The effect of market orientation on product innovation

Numerous scholars have debated whether marketing fosters or stifles innovation. The discussions, however, have been inconclusive due to limited empirical evidence. The authors investigate the relationship between two focal constructs in the debate: market orientation and product innovation. On the basis of a sample of U.S. manufacturing companies, the authors’ analysis shows that product innovation varies with market orientation. Specifically, (1) customer orientation increases the introduction of new-to-the-world products and reduces the launching of me-too products, (2) competitor orientation increases the introduction of me-too products and reduces the launching of line extensions and new-to-the-world products, and (3) interfunctional coordination increases the launching of line extensions and reduces the introduction of me-too products. Bryan A. Lukas is a senior lecturer in marketing at the University of Melbourne, Australia. His research interests are in the areas of strategic marketing and strategic innovation. His publications have appeared in theJournal of Business Research and other journals. Two conference papers have received recognition from the American Marketing Association. O. C. Ferrell is a professor of marketing at Colorado State University. He has served as president of the Academic Council of the American Marketing Association and is a fellow of the Society for Marketing Advances and Southwest Marketing Association. His publications have appeared in theJournal of Marketing, theJournal of Marketing Research theJournal of the Academy of Marketing Science, theJournal of Public Policy & Marketing, theJournal of Business Research, as well as others. He has co-authored 17 books and more than 100 articles and proceedings’ publications. He has worked as a consultant with organizations such as General Motors, Emerson Electric, and the Water Quality Association.     

Trader see,trader do: How do (small) FX traders react to large counterparties’ trades?

We show that information about the counterparty of a trade affects the future trading decisions of individual traders. The effect is such that traders tend to reverse their order flow in line with the better-informed counterparties. Informed traders primarily incorporate their own private as well as publicly available information into prices, whereas uninformed traders mainly magnify the effect of the informed. This pattern of interaction among traders extends to different order types: traders treat their own and others’ market orders as more informative than limit orders.