Social Interaction and Beer Consumption

The aim of this article is to describe young consumers’ attitudes and conduct regarding beer consumption, analyzing the consumer as an individual (addressing internal factors) and in a collective (external factors). The research was designed in Brazil involving 52 participants, divided into 16 focus groups, and the respective data was transcribed and analyzed. The findings show three distinct types of consumers were identified. The authors termed these the Inductor, the Induced, and the Sophisticated. The article details how each type of consumer can be distinguished through different attitudes and factors. The results suggest that, rather than thinking of beer consumption as an individual item, beer consumption should be thought of as different types, involving different behavior, attitudes, and social interaction. The article demonstrates originality and value to put forward the notion that beer consumption should not be defined as an individual item. The framework offered in this article will assist future researchers to consider consumption of different types and brands of beer, based on social interaction.     

A STRUCTURAL RISK‐NEUTRAL MODEL FOR PRICING AND HEDGING POWER DERIVATIVES

We develop a structural risk‐neutral model for energy market modifying along several directions the approach introduced in Aïd et al. In particular, a scarcity function is introduced to allow important deviations of the spot price from the marginal fuel price, producing price spikes. We focus on pricing and hedging electricity derivatives. The hedging instruments are forward contracts on fuels and electricity. The presence of production capacities and electricity demand makes such a market incomplete. We follow a local risk minimization approach to price and hedge energy derivatives. Despite the richness of information included in the spot model, we obtain closed‐form formulae for futures prices and semiexplicit formulae for spread options and European options on electricity forward contracts. An analysis of the electricity price risk premium is provided showing the contribution of demand and capacity to the futures prices. We show that when far from delivery, electricity futures behave like a basket of futures on fuels.     

Unconventional Monetary Policy in the Eurozone: A Lack of Forward Guidance?

From July to December 2011, the three-month EURIBOR-OIS and EURIBOR-Repo spreads quadrupled and reached 100 basis points due to a stabilization of the EURIBOR and a decrease in the overnight index swap (OIS) and Repo. Using a specific monetary policy announcements and financial indicators database, we find that the European Central Bank’s (ECB’s) unconventional measures did not systematically have a calming effect: Asset buyout announcements decreased market strains, whereas interest rates and liquidity provision announcements did not. Moreover, liquidity provision seems to have a stressing effect. Our findings are consistent with the theoretical underpinnings according to which forward guidance crucially determines the effectiveness of unconventional monetary policies.     

Raising the bar (4)

This editorial summarizes and comments on the papers published in issue 11(4) so as to raise the bar in applied spatial economic research and highlight new trends. The first paper deals with common factors and spatial dependence in the error term specification of a production function model. The second paper sets forth a New Economic Geography (NEG) model with production activities that vary in their complexity, so as to analyse the impact on specialization patterns across different regions. The third paper measures the efficiency of local public investments using a relatively unknown econometric technique in which the time span over which the variables in the regression equation are measured is increased by one time period every run. The fourth paper adopts a conditional quantile regression approach to determine the impact of people employed in informal jobs on the wage distribution in Colombia and five of its regions. Finally, the last paper proposes and tests two new Bayesian variable selection approaches for spatial econometric models.     

Hyperinflation in a small open economy with a fixed exchange rate: A post Keynesian view

This paper examines the emergence of hyperinflation in a small open economy with a fixed exchange rate from a post Keynesian perspective. Three variables play key roles: distributive conflict, external debt, and expectations about the exchange rate. First, we propose a short-run Kaleckian macro model. Then, we study the long-run behavior of the model by endogenizing the price level and foreign indebtedness. We conclude that the existence of expectations about the nominal exchange rate is crucial to explaining the emergence of hyperinflation.     

Efficiency and the trading system: The case of SETSmm

This paper studies the impact that a change from a dealer system to a market-maker supported auction system has on market quality. We study the impact that the introduction of SETSmm at the London Stock Exchange had on firm value, price efficiency and liquidity. We discover a small SETSmm return premium associated with the announcement that securities are to migrate to the new trading system. Moreover, securities that migrate to SETSmm are characterized by improvements to liquidity and pricing efficiency. We find that these changes are related to the return premium.     

Comparing a Traditional IRA and a Roth IRA: Theory Versus Practice

Financial planners often advise their clients to first take advantage of employer‐sponsored 401(k) plans, especially those with matching employer contributions. They often recommend next that clients consider a traditional or Roth IRA, depending on their current eligibility and tax bracket. Generally, the traditional IRA tends to be preferable to the Roth IRA if one expects to be in a lower tax bracket during the retirement versus the contribution years. This preference could be impacted by the theoretical or the practical assumptions one could make as to the tax bracket effect, minimum distribution requirements, and the impact of withdrawals on the amount of Social Security benefits taxed. This research compares the traditional and the Roth IRA, examining both the theoretical and practical assumptions of client behavior. The results indicate that the best choice between the types of IRAs depends on whether the investor's actual behavior is consistent with theory or practice.