Inflation Target Credibility: Do the Financial Markets Find the Targets Believable?

We investigate the credibility of inflation targeting (IT) central banks (CBs) by estimating perceived inflation targets of the financial markets. We calculate financial markets’ beliefs about the inflation targets of 24 IT countries. Then, we analyse whether the financial markets’ beliefs about inflation targets match the announced targets. We conclude that the perceived upper bound of the inflation target is significantly higher than the announced one in many countries. Additionally, the perceived target band is narrower and asymmetric around the mid‐point of the target for most CBs. We examine the implications of these findings and find that IT CBs are more likely to miss their targets when the perceptions of the financial markets are higher than the announced IT targets. These results indicate that IT CBs should pay attention to the perceptions of the announced targets when implementing policy actions.     

GRAPHICAL MODELS FOR CORRELATED DEFAULTS

A simple graphical model for correlated defaults is proposed, with explicit formulas for the loss distribution. Algebraic geometry techniques are employed to show that this model is well posed for default dependence: it represents any given marginal distribution for single firms and pairwise correlation matrix. These techniques also provide a calibration algorithm based on maximum likelihood estimation. Finally, the model is compared with standard normal copula model in terms of tails of the loss distribution and implied correlation smile.     

A hierarchical clustering and routing procedure for large scale disaster relief logistics planning

We describe a hierarchical cluster and route procedure (HOGCR) for coordinating vehicle routing in large-scale post-disaster distribution and evacuation activities. The HOGCR is a multi-level clustering algorithm that groups demand nodes into smaller clusters at each planning level, enabling the optimal solution of cluster routing problems. The routing problems are represented as capacitated network flow models that are solved optimally and independently by CPLEX on a parallel computing platform. The HOGCR preserves the consistency among parent and child cluster solutions obtained at consecutive levels. We assess the performance of the algorithm by using large scale scenarios and find satisfactory results.     

A direct test of the endogeneity of money: Implications for Gulf Cooperation Council (GCC) countries

This paper contributes to the ongoing discussion about the endogeneity of money supply by empirically investigating the GCC countries. We propose and implement a direct test of money supply endogeneity that depends on econometric specification of exogeneity which has not been used in the literature before. To be able to make comparisons with previous studies, we also conducted Granger Causality tests to analyze the causality relationship between bank credit and money supply. Both of the empirical studies provide empirical evidence for the endogeneity of money supply in GCC countries. The results of the paper have many significant monetary policy implications for the upcoming monetary unification of the GCC countries.     

On two kinds of manipulation for school choice problems

Many school districts in the US. employ centralized clearing houses to assign students to public schools. An important potential threat against any school choice mechanism is the tendency of schools to circumvent the procedure via two kinds of strategic manipulation: manipulation via capacities and manipulation via pre-arranged matches. This paper studies the extent of the vulnerability of three prominent school choice mechanisms that have been adopted (or, considered for adoption) by some school districts in the US. We find that the highly debated Boston mechanism as well as the top trading cycles mechanism are immune to manipulation via capacities, unlike the student-optimal stable mechanism (SOSM). We show that SOSM is immune to manipulation via capacities if and only if the priority structure satisfies an acyclicity condition proposed by Ergin (Econometrica 70:2489?C2497, 2002). On the other hand, we show that essentially no mechanism is immune to manipulation via pre-arranged matches.     

Why do popular mechanisms lack efficiency in random environments?

We consider the problem of randomly assigning n indivisible objects to n agents. Recent research introduced a promising mechanism, the probabilistic serial that has superior efficiency properties than the most common real-life mechanism random priority. On the other hand, mechanisms based on Gale's celebrated top trading cycles method have long dominated the indivisible goods literature (with the exception of the present context) thanks to their outstanding efficiency features. We present an equivalence result between the three kinds of mechanisms, that may help better understand why efficiency differences among popular mechanisms might arise in random environments. This result also suggests that the probabilistic serial and the random priority mechanisms can be viewed as two top trading cycles based mechanisms that essentially differ in the initial conditions of the market before trading starts.     

Inflation Targeting and Inflation Uncertainty

This article empirically investigates the impact of inflation targeting on inflation uncertainty. We implement PARCH and GARCH methodologies to model conditional variance of inflation. We also investigate the relationship between level and volatility of inflation to analyze the validity of the Friedman hypothesis for IT countries. We find that most of the inflation targeting countries have significantly lower inflation variances after inflation targeting. In most of the IT countries, the relationship is consistent with the Friedman hypothesis.     

Gender,generation and sustainable consumption: Exploring the behaviour of consumers from Izmir,Turkey

This study investigates the relationship between consumers’ sustainable consumption behaviour and both gender and generation‐related individual differences in a sample of Turkish consumers. A total of 393 participants from different generations and gender took part in the study. To measure sustainable consumption behaviour, we used four‐dimensional sustainable consumption behaviour scale. The results showed that generation is associated with unneeded consumption as a dimension of sustainable consumption behaviour. Consumers who are Baby Boomers found to have the highest level of unneeded consumption behaviour while Gen‐Zers have fewest. Additionally, data supported the association between gender and sustainable consumption behaviour. Women showed a higher level of sustainable consumption behaviour both in overall behaviour and tendency to reuse products. Taken together, the findings suggest that gender and generation of consumers can differentiate sustainable consumption behaviour. The implications of these findings, as well as the limitations and future directions, are also discussed.     

Is corporate social responsibility sufficient enough to explain the investment by socially responsible funds?

I propose an explanation for investment decisions by socially responsible investment funds (SRI) on the firms with higher corporate social responsibility (CSR). Different from the previous literature, I use a unique and comprehensive measure that considers both firm CSR ratings and fund CSR perception. I show SRI mutual funds increase their ownership about 15 % for one unit increase in the firm CSR score when those funds are highly sensitive to CSR. This finding is more pronounced for employee relations and society areas of CSR. The results also hold for a broader range of mutual funds. While industry concentration does not have influence on the fund investment, SRI funds particularly choose socially responsible firms operating in construction, transportation, personal services, and financial sector. I show the funds with CSR sensitivity underperform the market in general and fail to improve their portfolio performance after they invest in the firms with high CSR.