Site selection to test an integrated approach to agricultural research for development: combining expert knowledge and participatory Geographic Information System methods

The sub-Saharan Africa challenge programme is designed to address the problems of failures of agricultural markets, inappropriate policies and natural resource degradation, that contribute to the continuing deterioration of livelihoods and food security in the region. It is seeking to do this by redefining the roles of scientists and farmers through collaborative learning processes, addressing questions about the level, timing, type and formof participation, as well as themost effective approaches andmethods to foster them. The research domains of the programme deal with sustainable intensification of smallholder agriculture, the sustainable management of natural resources, the development of efficient markets, and the promotion of enabling policies. One question that was addressed in designing the initiative was deciding where to work so as to maximize the chances of successful testing of this new approach, so that it would lead to significant reductions of rural poverty. A participatory process was put in place to design a framework to accomplish this site selection, and then to apply it in west, east and southern Africa. A mixture of spatial data analysis and expert knowledge on spatial and non-spatial factors was used, and one primary site in each region was identified to form the basis for the next phase of the challenge programme. Several lessons were learnt from the process, including the importance of adapting themethods to actual conditions, the increased utility of targetting when the quantitative and the qualitative are freely combined, and the continued need for baseline spatial and non-spatial data to improve the targeting of research in the future that is designed to alleviate poverty in sub-Saharan Africa.     

Monitoring and Controlling Bank Risk: Does Risky Debt Help?

We examine whether mandating banks to issue subordinated debt would enhance market monitoring and control risk taking. To evaluate whether subordinated debt enhances risk monitoring, we extract the credit‐spread curve for each banking firm in our sample and examine whether changes in credit spreads reflect changes in bank risk variables, after controlling for changes in market and liquidity variables. We do not find strong and consistent evidence that they do. To evaluate whether subordinated debt controls risk taking, we examine whether the first issue of subordinated debt changes the risk‐taking behavior of a bank. We find that it does not.     

Estimating the expected marginal rate of substitution: A systematic exploitation of idiosyncratic risk

We develop a methodology to estimate the shadow risk free rate or expected intertemporal marginal rate of substitution, “EMRS”. Our technique relies upon exploiting idiosyncratic risk, since theory dictates that idiosyncratic shocks earn the EMRS. We apply our methodology to recent monthly and daily data sets for the New York and Toronto Stock Exchanges. We estimate EMRS with precision and considerable time-series volatility, subject to an identification assumption. Both markets seem to be internally integrated; different assets traded on a given market share the same EMRS. We reject integration between the stock markets, and between stock and money markets.     

Informed and uninformed trading on the Australian dollar

Using a high-frequency data set of the spot Australian/US dollar, this study examines the distribution of quotes, spreads, and returns across the trading day. By identifying the direction of trade and the subsequent quote returns from contributing banks, the segmented nature of the market into market-makers and informed and uninformed traders is investigated. The results suggest that the economic gain possible from private information is maximised over 2 to 5 quotes and is rapidly eroded by 20 quotes (about 2 min later during busy trading times) as other new information enters the market. Also, the analysis is revealing of discontinuities in trading and the volatility of pricing across the trading day.     

From growth to basic needs

Despite growing hostility and basic misconceptions, the concept of "basic human needs" has superseded former approaches, including concentration on growth, creation of employment, and redistribution of benefits to the poor, as the approach by which mass deprivation may be reduced. The new approach can be defined briefly as one which is designed to improve, first, the income earning opportunities for the poor; second, the public services that reach the poor; third, the flow of goods and services to meet the needs of all members of the household; and fourth, participation of the poor in the ways in which their needs are met. All four pillars must be built on a sustainable basis. In addition, basic needs must be met in a shorter period and at a lower level of earned income per capita than has generally been true in the past, or than would have been achieved via the income expansion associated with growth alone. The basic needs approach is concerned with particular goods and services directed at particular, identified human beings. Another advantage of the basic needs approach is that it is a more positive concept than the double negatives of eliminating or reducing unemployment, alleviating poverty, or reducing inequality. The basic needs approach spells out in considerable detail human needs in terms of health, food, education, water, shelter, transport, simple household goods, as well as non-material needs like participation, cultural identity, and a sense of purpose in life and work, which interact with the material needs.     

The Leasing Puzzle

Prevailing theories in finance and economics suggest that leases and debt are substitutes; an increase in one should led to a compensating decrease in the other. In particular, there are three views on the magnitude of the substitution coefficient. Standard finance theory treats cash flows from lease obligations as equivalent to debt cash flows, thus describing the tradeoff between debt and leases as one-to-one. Others are willing to use a tradeoff of leases for debt which is less than, but close to, one. The rationale for a dollar of leases using less of debt capacity than a dollar of debt obligation is based upon the differences in the terms and nature of lease and debt contracts. Finally, there are some who argue that since leased assets may be firm-specific, the risk of moral hazard may be great, resulting in a tradeoff of greater than one-to-one; that is, a dollar of a lease obligation uses more of debt capacity than a dollar of a debt obligation. A series of empirical tests are performed in this study on samples of approximately 600 firms, covering the years 1976 through 1981, with none of the three views supported by the results. Instead, the results indicate that leases and debt are complements; greater use of debt is associated with a greater use of leasing. This finding reappears consistently for each year, each definition of leverage ratios, and each approach to analysis. This complementary relationship persists even after refinements are made to the estimation technique.     

When financial markets work too well: A cautious case for a securities transactions tax

Unlike most major industrialized nations, the United States does not impose an excise tax on securities transactions. This article examines the desirability and feasibility of implementating a U.S. Securities Transfer Excise Tax (STET) directed at curbing excesses associated with short-term speculation and at raising revenue. We conclude that strong economic efficiency arguments can be made in support of a STET that throws sand into the gears, in James Tobin's (1982) phrase, of our excessively well-functioning financial markets. Such a tax would have the beneficial effects of curbing instability introduced by speculation, reducing the diversion of resources into the financial sector of the economy, and lengthening the horizons of corporate managers. The efficiency benefits derived from curbing speculation are likely to exceed any costs of reduced liquidity or increased costs of capital that come from taxing financial transactions more heavily. The examples of Japan and the United Kingdom suggest that a STET is administratively feasible and can be implemented without crippling the competitiveness of U.S. financial markets. A STET at a .5% rate could raise revenues of at least $10 billion annually.