Across-the-Curve Credit Spread Indices

We design a novel across-the-curve credit spread index, AXI, a measure of the recent cost of wholesale unsecured debt funding for publicly listed US bank holding companies and commercial banks. AXI, a benchmark for bank lending and risk management, is the weighted average of credit spreads for unsecured debt instruments with maturities ranging from overnight to five years, with weights that reflect both transaction and issuance volumes. We provide illustrative output of the bond-based component of AXI. By widening coverage to include all corporate debt issuers, we also build a financial conditions index (FXI).     

Does European development have Roman roots? Evidence from the German Limes

This paper contributes to the understanding of the long-run consequences of Roman rule on economic development. In ancient times, the area of contemporary Germany was divided into a Roman and a non-Roman part. The study uses this division to test whether the formerly Roman part of Germany are more developed than the non-Roman part. This is done using the Limes Germanicus wall as geographical discontinuity in a regression discontinuity design framework. The results indicate that economic development—as measured by luminosity—is indeed significantly and robustly larger in the formerly Roman part of Germany. The study identifies the persistence of the Roman road network until the present as an important factor causing this developmental advantage of the formerly Roman part of Germany both by fostering city growth and by allowing for a denser road network.     

Minimum return guarantees,investment caps,and investment flexibility

We study the merits of capped retirement products with guarantee for investors who have the flexibility to dynamically adjust their investment strategy. All contracts under consideration are fairly priced such that the net profit of the provider is zero. Without the rider, an expected utility maximizing CRRA investor does not want an investment cap. Here, she commits herself to a strategy a priori. With the flexibility rider, the optimization problem changes and the optimal strategy is a response to an exogenously set price. A fair pricing then anticipates the optimal response of the investor. We show that the maximum expected utility of the investor can, for anticipated fairly priced products, be obtained for a finite cap. Thus, a capped product design can give a Pareto improvement to the otherwise uncapped contract version.     

Remittances and the human capital of children: New evidence from Kyrgyzstan during revolution and financial crisis, 2005–2009

We analyze the effect of the receipt of remittances on the education and health of children in Kyrgyzstan during a volatile period of their recent history, 2005–2009. The country experienced revolution in 2005 and the global financial crisis beginning in 2008. Both events impact human capital investment, and the changes vary by region of the country. We use fixed effects estimation and fixed effects, instrumental variables estimation to isolate the effects of remittances and other events on human capital. We find that boys aged 14–18 in remittances’ receiving households are less likely to be enrolled in school than other children. We also find that girls in remittances’ receiving households are more likely to be malnourished (thin). Both effects are relatively small. Remittances do not improve the human capital of children left behind. However, we do find an overall positive improvement in school enrollment among young children between 2005 and 2009 but a negative trend in enrollment among older boys and girls. Nutrition improves over time. Regional differences are apparent in these trends in nutrition and education.     

Liquidity constrained exporters and trade

We present a model of a risk-averse exporting firm subject to liquidity constraints. We show that preferences and expectations become important for optimum export and hedging decisions. Only firms that have sufficient financial resources can fully materialize gains from trade.     

Consumer Attitudes to Genetically Modified Food in Norway

There is a lack of public acceptance of genetically modified (GM) food products in Europe. Using a dichotomous choice contingent valuation methodology, we find that, on average, survey respondents with a positive attitude toward the use of biotechnology in food production, higher educated, younger, and male need less of a discount to choose to purchase bread made with GM wheat. Further, we estimate confidence intervals for the mean discount required for consumers to choose GM bread. The 95% confidence interval for the mean discount required for the respondents to choose the GM bread is a 37% to 63% discount relative to conventional bread.     

Faidherbia albida on the Tonga Plateau of southern Zambia: an agroecological analysis

Faidherbia albida is a tree species indigenous to semi-arid regions of Africa that reportedly substantially increases maize (Zea mays) yields in its immediate vicinity. In southern Zambia, F. albida is widely used in indigenous maize farming systems and this has apparently increased over the past two decades. Using a combination of interviews, group meetings, and observations, this study sought to understand why this species seems to have recently been embraced, while other technological innovations apparently have not. We observed a bimodal age distribution of the trees in agricultural fields and posit that the missing cohorts were removed as weeds as a result of evolving notions of what constituted modern farming practices in the emerging maize economy. With subsequent research and social promotion of the beneficial effects of F. albida, farmers now allow the trees to grow in their fields. A holonic analysis points to the important relationship of F. albida to contexts that shaped past and current uses of the tree by farmers on the Tonga Plateau: information, maize, cattle, land tenure, and government policy. Advice promulgated by social promotion activities took root in farmer knowledge contexts because of positive regard for F. albida and timeless injunctions against cutting mature specimens. Furthermore, cultivation of the tree was highly compatible with other important contexts in which farmers operate. However, our research also revealed the potential for adoption of the tree to create new tensions arising from the strong gendering of work and crops in the region.     

Moral hazard and adverse selection in the originate-to-distribute model of bank credit

Bank credit has evolved from the traditional relationship banking model to an originate-to-distribute model. We show that the borrowers whose loans are sold in the secondary market underperform their peers by about 9% per year (risk-adjusted) over the three-year period following the initial sale of their loans. Therefore, either banks are originating and selling loans of lower quality borrowers based on unobservable private information (adverse selection), and/or loan sales lead to diminished bank monitoring that affects borrowers negatively (moral hazard). We propose regulatory restrictions on loan sales, increased disclosure, and a loan trading exchange/clearinghouse as mechanisms to alleviate these problems.     

The German bank–growth nexus revisited: savings banks and economic growth in Prussia†

This article provides evidence that smaller, regional public financial intermediaries contributed to Germany's industrial development, using a new dataset of the foundation year and location of Prussian savings banks. This extends the bank–growth nexus beyond its traditional focus on large universal banks. Since savings banks were public financial intermediaries, our results further suggest that state intervention can be successful in the financial sector, particularly at the early stages of industrial development when capital requirements are manageable, and access to international capital markets is limited.     

Western popular music consumption by highly involved Chinese music fans

This paper explores the development of Western popular music consumption for highly involved Chinese consumers. This research is exploratory and uses semi-structured online interviews. The consumption of Western popular music in China is deeply embedded in the changing political and social context. In the late 1980s and early 1990s, an underground culture of ‘dakou’, cut tapes and CDs, developed, which was a decisive and formative influence for many of our respondents. Later this was supplemented by counterfeit tapes/CDs, and by Internet downloads, which also increased access to Western music. However, both recorded and live music are still censored in China. Our respondents agreed that the political restrictions on music have prevented China from developing a 'normal' music market, and created a market which is almost entirely based on illegal downloading. As the lifestyle choices of our respondents were deeply influenced by the consumption of Western music, many of them ultimately decided to leave China and live abroad.