Why are African commodity exchanges languishing? A case study of the Zambian Agricultural Commodity Exchange

Food price volatility and high transactions costs remain major problems in African food markets. These persistent problems provide a strong theoretical justification for the development of commodity exchanges. However, the majority of African commodity exchanges remain underdeveloped. Through a case study of the Zambian Agricultural Commodity Exchange (ZAMACE), this article explores why agricultural commodity exchanges in the region have thus far failed to develop into sustainable trading platforms and identifies the most important changes needed to enhance their performance.     

Price versus quantity in a mixed duopoly with foreign penetration

We characterize the endogenous competition structure (in prices or quantities) in a differentiated duopoly between a public firm that maximizes domestic welfare and a private firm that can be owned by domestic or foreign investors. The market for which they compete can be domestic or integrated: in the first case Bertrand competition emerges endogenously and in the second case Cournot competition can emerge if the fraction of domestic consumers in the integrated market is low enough. We also determine the optimal degree of foreign penetration showing the optimality of a partial foreign ownership. Finally, we extend the model to increasing marginal cost confirming the robustness of the results.     

Saving up or settling down: Home ownership over the life cycle

In a Bewley model with endogenous price volatility, home ownership and mobility across locations and jobs, we assess the contribution of financial constraints, housing illiquidities and house price risk to home ownership over the life cycle. The model can explain the rise in home ownership and fall in mobility over the life cycle. While some households rent due to borrowing constraints in the mortgage market, factors that affect propensities to save and move, such as risky house values and transactions costs, are equally important determinants of the ownership rate.     

中国金融市场开放度——基于两类模型的比较研究

本文引入两类分析一国金融市场对外开放程度的模型:基于投资与储蓄关系的F-H条件模型和基于利率平价理论的利率平价条件模型,并结合中国的实际情况,选取美国、日本、巴西等具有代表性的国家,以这两个模型作为实证模型分别研究这四个国家的金融市场对外开放程度。从实证分析的结果看,与其他三个国家相比,中国金融市场对外开放程度仍然较低,其原因在于资本市场的管制程度较高,国内利率还无法与国际市场建立较强的关联性等。     

Divestitures,privatization and corporate performance in emerging markets

We use new firm‐level data to examine the effects of firm divestitures and privatization on corporate performance in a rapidly emerging market economy. Unlike the existing literature, we control for accompanying ownership changes and the fact that divestitures and ownership are potentially endogenous variables. We find that divestitures increase the firm's profitability but do not alter its scale of operations, while the effect of privatization depends on the resulting ownership structure – sometimes improving performance and sometimes bringing about decline. The effects of privatization are thus more nuanced than suggested in earlier studies. Methodologically, our study provides evidence that it is important to control for changes in ownership when analyzing divestitures and to control for endogeneity, selection and data attrition when analyzing the effects of divestitures and privatization.     

Exchange market pressure and primary commodity – exporting emerging markets

This paper studies short-term sensitivity between exchange market pressure and various domestic and external factors in primary commodity-exporting emerging markets. The paper focuses on the top country-commodity groups in sugar, cereal, fuels, ores and coffee during the pre-peak and post-peak commodity price periods across floating and pegged exchange rate regimes, using the price of crude oil as a general benchmark. Employing a panel model and panel VAR analysis, the paper finds the heterogeneity of response patterns unique to country-commodity groups and exchange rate regimes. According to the results, in flexible regimes, volatility occurs via the foreign exchange market, interest rates, and domestic credit cycles, feeding into the social costs for structurally weaker economies. Hard exchange-rate pegs often result in a drain on international reserves as the terms of trade deteriorate following post-price peaks, leading to unpopular depreciation. These results accentuate concerns over uneven international trade patterns, an open economy’s short-term foreign exchange policy, and speculative capital flows. Such sensitivity has broad implications for macroeconomic balance and the sustainability of implied exchange rate targets in the presence of a foreign exchange constraint across emerging markets.     

Evaluation periods and asset prices: Myopic loss aversion at the financial marketplace

Examining myopic loss aversion (MLA [Benartzi, S., Thaler, R., 1995. Myopic loss aversion and the equity premium puzzle. Quarterly Journal of Economics 110, 73–92]) in real financial markets has several merits: in repeated situations investors may learn from each other, aggregate market prices may eliminate individual violations of expected utility, and individuals may decide differently in real situations than in laboratories. We utilize a special feature at the Tel Aviv stock exchange (TASE): occasional shifts of securities from daily to weekly trading. If investors’ decisions are influenced by trading frequency manipulation, then returns should be predictably affected. MLA results in a negative relation between risk aversion and the length of the evaluation period. Thus, the longer the evaluation period is, the lower the expected return is. This intuition also suggests reduced sensitivity to economic events in longer evaluation periods. We find strong support for MLA in the marketplace when testing expected return, as well as return sensitivity.     

Competition and open source with perfect software compatibility

In this paper we study duopolistic competition between closed and open source software. Inspired by recent contributions on open source, we propose a two-stage game with perfect information and product differentiation, in which producers first set software quality and then determine prices (the price is zero for open source programs). We assume perfect software compatibility and model lock-in effects, a network externality component of software quality, and accumulation of experience in software use and implementation. In comparison to the monopolistic benchmark case, we argue that, in a duopoly created by the emergence of an open source program, the proprietary software producer will reduce its selling price if: (i) its network of users is larger than the open source network and its consumers are largely familiar with its program, (ii) it has a small network of unskilled consumers. On the other hand, the price of proprietary software will increase if its users form a large, but poorly-skilled network. Furthermore, we show that, in all of the above cases, the hedonic quality of proprietary software increases. Finally, by modeling experience accumulation processes through difference equations, we show that the ratio between the closed and open source programs’ opportunity costs for software learning and deployment plays a crucial role in shaping market outcomes. If open source software remains too complex and technical for unskilled or time-pressed users, a shared market solution, in which both programs are adopted, is likely to emerge. However, if opportunity costs in learning and understanding open source programs are particularly low, or at least equal to the opportunity costs of a closed-source program, then open source dominance emerges (i.e. markets tip to open source).     

Real interest rate linkages in the Pacific-Basin region

This paper examines the linkage of real interest rates of a group of Pacific-Basin countries with a focus on East Asia. We consider monthly real interest rates of US, Japan, Korea, Singapore, and Thailand from 1980 to 2006. The impulse response analysis and half-life estimation are conducted in a multivariate setting, adopting the bias-corrected bootstrap as a means of statistical inference. It is found that the degree of capital market integration has increased after the Asian financial crisis in 1997. The overall evidence suggests that the crisis has substantially changed the nature of the short run interactions among the real interest rates. Before the crisis, both the US and Japanese capital markets dominated the region. After the crisis, the dominance of the Japanese market has completely disappeared, while the US market remains as a sole dominant player and the Korean market has become more influential.     

Some Empirical Evidence of the Efficacy of Job Matching in Urban Labor Markets

Theory predicts that workers in cities are more likely to engage in job search, ceteris paribus, due to market efficiencies associated with greater job density. However, if job search is more efficient in urban markets, then the quality of a given job match should also tend to be higher in cities, ceteris paribus. Employed workers living in cities might then be expected to search less than their nonurban counterparts. In this latter instance, it is not city residency itself that makes search less likely, but rather the positive correlation between city residency and job match quality. Using data from the National Longitudinal Survey of Youth 1979, this prediction is confirmed: The estimated coefficient on an indicator of urban residency is found to be near zero and statistically insignificant in models of employed search that omit proxies for job match quality. When job match proxies are included in the models, the estimated coefficient on urban residency becomes positive and highly significant. This result suggests that workers are not only more likely to engage in employed search in urban labor markets, but also tend to find more productive job matches in cities over time.