Bankruptcy costs, liability dollarization, and vulnerability to sudden stops

Countries with intermediate levels of institutional quality suffer larger output contractions following sudden stops of capital inflows than less developed nations. However, countries with strong institutions seldom experience significant falls in output after capital flow reversals. We reconcile these two observations using a calibrated DSGE model that extends the financial accelerator framework developed in Bernanke, Gertler and Gilchrist (1999). The model captures financial market institutional quality with creditors' ability to recover assets from bankrupt firms. Bankruptcy costs affect vulnerability to sudden stops directly but also indirectly by affecting the degree of liability dollarization. Simulations reveal an inverted U-shaped relationship between bankruptcy costs and the output loss following sudden stops.     

Understanding consumers' purchase intentions toward natural‐claimed products: A qualitative research in personal care products

In recent years there is a trend of consuming natural products for a sustainable and healthier life. Therefore, firms began aligning their strategy with sustainability by communication strategies that they produce natural products, which are better for health as well as the environmental sustainability. However, sometimes these claims may be deceptive. The purpose of this paper is to understand the consumers' purchasing intentions toward products claiming naturalness in their advertising and packaging strategies. This research also examined greenwashing perceptions and their potential roles in purchasing intentions. In‐depth face‐to‐face interviews carried out with 20 Turkish women regarding personal care products (local brand and international brand). The findings of the interviews revealed eight themes (perceived greenwashing, perceived green image, price perception, environmental concern, green trust, skepticism, perceived risk, and purchase intention). This study contributes to predict a framework from consumer viewpoint for identifying the themes related to greenwashing.     

Identifying the balance sheet and the lending channels of monetary transmission: A loan-level analysis

We make a novel attempt at comparing the strength of the lending and balance sheet channels of monetary transmission. To make this comparison, we use loan-level data to determine how borrower balance sheets and bank liquidity are related to bank lending decisions and how monetary policy can affect these relationships. The key innovation in this paper is the use of loan-level data. This enables us to measure the independent effects of the two channels and directly account for borrower balance sheets and lender liquidity instead of using proxies. Our results show that the balance sheet channel is the main mechanism through which monetary policy shocks are transmitted to the economy and that the lending channel does not play a significant role.     

Exchange rate exposure: A nonparametric approach

The typical conclusion reached when researchers examine exchange rate exposure is that only a few firms are exposed. This finding is puzzling since institutional knowledge and theory suggests a larger effect. In this paper, we compare results obtained using a linear approach with those from nonlinear and nonparametric models. Among firms that don't have a linear exposure, we find that a considerable proportion of these are exposed when nonlinear or nonparametric models are used. This exposure is most striking when a nonparametric model is used. We also find that firms' hedging activities decrease linear exposure but don't affect nonparametric exposure.     

Multi-product newsvendor problem with value-at-risk considerations

We consider the single period stochastic inventory (newsvendor) problem with downside risk constraints. The aim in the classical newsvendor problem is maximizing the expected profit. This formulation does not take into account the risk of earning less than a desired target profit or losing more than an acceptable level due to the randomness of demand. We utilize Value at Risk (VaR) as the risk measure in a newsvendor framework and investigate the multi-product newsvendor problem under a VaR constraint. To this end, we first derive the exact distribution function for the two-product newsvendor problem and develop an approximation method for the profit distribution of the N-product case (N>2). A mathematical programming approach is used to determine the solution of the newsvendor problem with a VaR constraint. This approach allows us to handle a wide range of cases including the correlated demand case that yields new results and insights. The accuracy of the approximation method and the effects of the system parameters on the solution are investigated numerically.     

The common sources of business cycles in Trans‐Pacific countries and the US? A comparison with NAFTA

This paper uses both a non‐structural and a structural approach to investigate the drivers of the business cycles in the US and 15 Trans‐Pacific (TP) countries. Our non‐structural analysis, based on a principal component methodology, reveals the shares of variation in macroeconomic variables that are due to factors common to both the US and the TP region, and factors that are region‐specific. We obtain similar measures by using a structural model (an estimated two‐country dynamic stochastic general equilibrium model) that allows for common and correlated shocks across the two regions. The clear and common finding from our analyses is that common shocks explain a substantial amount of macroeconomic variation. Comparison with the NAFTA region, along this dimension, reveals that the US economy is more similar to the TP region (a wider region that also includes Mexico and Canada) than its two neighbours.     

Securitization and the balance sheet channel of monetary transmission

This paper shows that the balance sheet channel of monetary transmission is stronger for US banks that securitize their assets. This finding is different, in spirit, from the widely-found negative relationship between financial development and the strength of the lending channel of monetary transmission. Focusing on the balance sheet channel, and using bank-level observations, we find that securitizing banks are more sensitive to borrowers’ balance sheets and that monetary policy has a greater impact on this sensitivity for securitizing banks. The optimality conditions from a simple partial equilibrium framework suggest that the positive effects of securitization on policy effectiveness could be due to the high sensitivity of security prices to policy rates.