A macroeconomic approach to corporate capital structure

The cross-sectional distribution of corporate capital structure and its macroeconomic implications are underexplored research areas. This paper embeds a dynamic trade-off theory of firm financing into a general equilibrium model with firm dynamics. I find that the stationary equilibrium replicates fairly well the distribution of leverage as well as the relationship between leverage, size and profitability. The counterfactual experiment points out relatively small effects of tax benefits on corporate capital structure. It also implies that the effects of the default cost on macroeconomic variables are almost negligible under endogenous capital structure choice.     

APPROACHES AND METHODS FOR THE ECONOMETRIC ANALYSIS OF MARKET POWER: A SURVEY AND EMPIRICAL COMPARISON

This study discusses two widely used approaches in the New Empirical Industrial Organization (NEIO) literature and examines the strengths and weaknesses of the Production-Theoretic Approach (PTA) and the General Identification Method (GIM) for the econometric analysis of market power in agricultural and food markets. We provide a framework that may help researchers to evaluate and improve structural models of market power. Starting with the specification of the approaches in question, we compare published empirical studies of market power with respect to the choice of the applied approach, functional forms, estimation methods and derived estimates of the degree of market power. Thereafter, we use our framework to evaluate several structural models based on PTA and GIM to measure oligopsony power in the Ukrainian dairy industry. The PTA-based results suggest that the estimated parameters of oligopsony power are significantly different from zero, while GIM-based results do not indicate any evidence of oligopsony market power in the Ukrainian dairy industry. Moreover, estimations results vary substantially due to the employed estimation procedure.     

The role of infrastructure in China’s regional economic growth

This study investigates the relationship between infrastructure capital and China's regional economic growth for the period 1990–2013. Four types of infrastructure are considered: electricity generating capacity, roadway, railway, and telecommunications. Using a vector error correction model, we find mixed support across time period and region for the contribution of infrastructure investment to economic development. With regard to road construction in lagging regions in particular, the impact appears to have become negative under a program of ramped up efforts. The results resonate with the theoretical literature on the inverse U-shaped relationship between infrastructure investment and growth which posits a “crowding-out effect” of private capital when infrastructure investment becomes too dominant.     

Scheduling aircraft take-offs and landings on interdependent and heterogeneous runways

This paper presents an optimization method for the aircraft scheduling problem with general runway configurations. Take-offs and landings have to be assigned to a runway and a time while meeting the sequence-dependent separation requirements and minimizing the costs incurred by delays. Some runways can be used only for take-offs, landings, or certain types of aircraft while schedules for interdependent runways have to consider additional diagonal separation constraints.Our dynamic programming approach solves realistic problem instances to optimality within short computation times. In addition, we propose a rolling planning horizon heuristic for large instances that returns close-to-optimal results.     

Economic evaluation of asymmetric and price range information in gold and general financial markets

Gold is widely perceived as a good diversification or safe haven tool for general financial markets, especially in market turmoil. To fully understand the potential, this study constructs an asymmetric multivariate range-based volatility model to investigate the dependence and volatility structures of gold, stock, and bond markets and further to compare the difference between the financial crisis and post-financial crisis periods. We find a striking explanatory ability to volatility structures provided by the price range information and significant evidence of asymmetric dependence across gold, stock, and bond markets. We implement an asset-allocation strategy incorporating asymmetric dependence and price range information to explore their economic importance. The out-of-sample results show that between 35 and 517 basis points and between 90 and 1111 basis points are earned annually when acknowledging asymmetric dependence and price range information, respectively. These economic benefits are inversely related to the level of investors’ risk aversion and are particularly significant in the period of the global financial crisis.     

Nonconstant reputation effect in a dynamic tourism demand model for Spain

Following the ideas of the Tourism Area Life Cycle (TALC) theory, we propose a dynamic econometric model for tourism demand where the reputation effect (the effect of the lagged demand on the current tourism demand) is not constant, but dependent on congestion. We test the model using panel data from Spanish regions during the period 2000–2013. Two estimations are performed depending on whether the tourists' origin is domestic or international. The results show that the reputation effect is not constant in both estimates, supporting the idea that tourism congestion influences tourist arrivals in Spain.     

Information and the persistence of private-order contract enforcement institutions: An experimental analysis

We study an experimental market in which some sellers are prone to moral hazard, and in which a private-order contract enforcement institution exists that can mediate trade and prevent sellers from reneging on their contractual obligations. Using the institution to resolve the moral-hazard problem is costly. We demonstrate that in this market, the utilization of the private-order contract enforcement institution may make public and private market signals uninformative and inhibit learning. We study whether this potential information externality can limit adaptation away from the private-order institution when it is efficient to do so. Consistent with theory, we find inefficient persistence when the institution is used, but by contrast, efficient adaptation in other situations. Providing information to individuals who are using the private-order institution allows them to partially adapt.     

Does advertising spending improve sales performance?

Hotel managers and investors commonly analyze the impact of advertising spending on firm performance. This paper investigates such an impact using a comprehensive framework incorporating the moderating effects of hotel size and star ratings. We estimated sales performance via dynamic, stochastic frontier modelling. Using longitudinal data from a sample of Slovenian and Croatian hotels, we demonstrate that advertising spending has a positive impact on hotel sales performance, and that the relationship strengthens for larger hotels and hotels with higher star ratings. Theoretical and managerial implications along with directions for future research are also discussed.     

Minimum cost path problem for Plug-in Hybrid Electric Vehicles

We introduce a practically important and theoretically challenging problem: finding the minimum cost path for PHEVs in a road network with refueling and charging stations. We show that this problem is NP-complete and present a mixed integer quadratically constrained formulation, a discrete approximation dynamic programming heuristic, and a shortest path heuristic as solution methodologies. Practical applications of the problem in transportation and logistics, considering specifically the long-distance trips, are discussed in detail. Through extensive computational experiments, significant insights are provided. In addition to the charging infrastructure availability, a driver’s stopping tolerance arises as another critical factor affecting the transportation costs.     

Timber price dynamics after a natural disaster: Hurricane Hugo revisited

Timber prices in the area struck by a natural disaster such as a hurricane or pest infestation are known to drop sharply immediately following the disaster, only to recover after about a year or so. Previous research attributes the rapid recovery to shifts in supply and demand curves. Our analysis suggests the more probable explanation is rotation in the curves. Supply and demand shifts come into play in the second and third years as rebuilding from the hurricane begins in earnest, and as timber inventory is rebuilt in response to elevated price expectations. But for the period in which price recovery occurs, model simulations based on data for Hurricane Hugo indicate the major causal factors of the observed price dynamics are curve rotation and trade with the surrounding undamaged region. Inventory-based supply shifts, the previously-identified causal factor, play a minor role in the observed price dynamics. Getting the causal factors right is important for predicting the price effects of forest inventory shocks, and for proper measurement of their welfare effects.