What will be the risk-free rate and benchmark yield curve following European monetary union?

Using a linear factor model, we study the behaviour of French, Germany, Italian and British sovereign yield curves in the run up to EMU. This allows us to determine which of these yield curves might best approximate a benchmark yield curve post EMU. We find that the best approximation for the risk free yield is the UK three month T-bill yield, followed by the German three month T-bill yield. As no one sovereign yield curve dominates all others, we find that a composite yield curve, consisting of French, Italian and UK bonds at different maturity points along the yield curve should be the benchmark post EMU.

The monetary benefit of early flood warnings in Europe

Effective disaster risk management relies on science-based solutions to close the gap between prevention and preparedness measures. The consultation on the United Nations post-2015 framework for disaster risk reduction highlights the need for cross-border early warning systems to strengthen the preparedness phases of disaster risk management, in order to save lives and property and reduce the overall impact of severe events. Continental and global scale flood forecasting systems provide vital early flood warning information to national and international civil protection authorities, who can use this information to make decisions on how to prepare for upcoming floods. Here the potential monetary benefits of early flood warnings are estimated based on the forecasts of the continental-scale European Flood Awareness System (EFAS) using existing flood damage cost information and calculations of potential avoided flood damages. The benefits are of the order of 400 Euro for every 1 Euro invested. A sensitivity analysis is performed in order to test the uncertainty in the method and develop an envelope of potential monetary benefits of EFAS warnings. The results provide clear evidence that there is likely a substantial monetary benefit in this cross-border continental-scale flood early warning system. This supports the wider drive to implement early warning systems at the continental or global scale to improve our resilience to natural hazards.

Separating real incentives and accountability

In experimental investigations of the effect of real incentives, accountability—the implicit or explicit expectation of a decision maker that she may have to justify her decisions in front of somebody else—is often confounded with the incentives themselves. This confounding of accountability with incentives makes causal attributions of any effects found problematic. We separate accountability and incentives, and find different effects. Accountability is found to reduce preference reversals between frames, for which incentives have no effect. Incentives on the other hand are found to reduce risk seeking for losses, where accountability has no effect. In a choice task between simple and compound events, accountability increases the preference for the simple event, while incentives have a weaker effect going in the opposite direction. It is thus shown that the confounding of accountability and incentives is relevant for studies on the effect of the latter, and that existing conclusions on the effect of incentives need to be reconsidered in light of this issue.

The housing market channel of monetary policy transmission in the Euro area

Purpose – The purpose of this paper is to explore the role of the housing market in the monetary policy transmission to consumption among euro area member states. It has been argued that the housing market in one country is then important when its mortgage market is well developed. The countries in the euro area follow unitary monetary policy, however, their housing and mortgage markets show some heterogeneity, which may lead to different policy effects on aggregate consumption through the housing market. Design/methodology/approach – The housing market can act as a channel of monetary policy shocks to household consumption through changes in house prices and residential investment – the housing market channel. We estimate vector autoregressive models for each country and conduct a counterfactual analysis in order to disentangle the housing market channel and assess its importance across the euro area member states. Findings – We find little evidence for heterogeneity of the monetary policy transmission through house prices across the euro area countries. Housing market variations in the euro area seem to be better captured by changes in residential investment rather than by changes in house prices. As a result we do not find significantly large house price channels. For some of the countries however, we observe a monetary policy channel through residential investment. The existence of a housing channel may depend on institutional features of both the labour market or with institutional factors capturing the degree of household debt as is the LTV ratio. Originality/value – The study contributes to the existing literature by assessing whether a unitary monetary policy has a different impact on consumption across the euro area countries through their housing and mortgage markets. We disentangle monetary-policy-induced effects on consumption associated with variations on the housing markets due to either house price variations or residential investment changes. We show that the housing market can play a role in the monetary transmission mechanism even in countries with less developed mortgage markets through variations in residential investment.

Engaging Faculty in Online Education: Rightsizing Incentives and Optimizing Support

: Colleges and universities of all types are pursuing increasingly ambitious goals for online education for a range of reasons—enhancing learning, increasing access, growing enrollment, managing costs. However, concerns about workload, support resources, autonomy, and course quality leave many faculty skeptical of online instruction, and most institutions expanding online offerings are struggling to get sufficient numbers of faculty both willing and prepared to teach online. This study presents best practices in managing the strategic and operational challenges associated with increasing the number of fully online and hybrid courses

Incentives for Increased Graduate Enrollments: Incentive Types and Implementation Strategies

Institutions seeking to increase graduate enrollment consider incentivizing program growth. This report outlines ways that institutions allow graduate programs to keep surplus revenue, including tuition rebates, funding proportional to credit-hours, and decreased tax rates. It also examines scholarship programs created to increase admitted graduate student yield, new program offerings, and ongoing unit review.

The trade-off between incentives and endogenous risk

Standard models of moral hazard predict a negative relationship between risk and incentives, but the empirical work has not confirmed this prediction. In this paper, we propose a model with adverse selection followed by moral hazard, where effort and the degree of risk aversion are private information of an agent who can control the mean and the variance of profits. For a given contract, more risk-averse agents suppIy more effort in risk reduction. If the marginal utility of incentives decreases with risk aversion, more risk-averse agents prefer lower-incentive contractsj thus, in the optimal contract, incentives are positively correlated with endogenous risk. In contrast, if risk aversion is high enough, the possibility of reduction in risk makes the marginal utility of incentives increasing in risk aversion and, in this case, risk and incentives are negatively related.

Some benefits of cyclical monetary policy

In this paper, we present a simple random-matching model of seasons, where di§erent seasons translate into di§erent propensities to consume and produce. We Önd that the cyclical creation and destruction of money is beneÖcial for welfare under a wide variety of circumstances. Our model of seasons can be interpreted as providing support for the creation of the Federal Reserve System, with its mandate of supplying an elastic currency for the nation.

The contagion effect of public debt on monetary policy: the brazilian experience

This paper attempts to explain why the Brazilian inter-bank interest rate is so high compared with rates practiced by other emerging economies. The interplay between the markets for bank reserves and government securities feeds into the inter-bank rate the risk premium of the Brazilian public debt.

Bubbles, collateral and monetary equilibrium

Consider an economy where infinite-lived agents trade assets collateralized by durable goods. We obtain results that rule out bubbles when the additional endowments of durable goods are uniformly bounded away from zero, regardless of whether the asset’s net supply is positive or zero. However, bubbles may occur, even for state-price processes that generate finite present value of aggregate wealth. First, under complete markets, if the net supply is being endogenously reduced to zero as a result of collateral repossession. Secondly, under incomplete markets, for a persistent positive net supply, under the general conditions guaranteeing existence of equilibrium. Examples of monetary equilibria are provided.

Financial integration and public financial institutions

This article highlights the problems associated with the existence of financiai institutions owned by a State which is a member of a federation. We show that these financiai institutions allow the States to transfer deficits to the federal government. This possibility creates incentives to higher deficits at State and federal leveis, implying an inefficiently high inflation rate. The main policy implication is that stabilization policies are more difficult to be implemented in countries such as Brazil, and Argentina which allow the members of the federation to own financiai institutions. A second policy implication is that Economic Blocks such as the European Community or Mercosur should not allow regional central banks if they create a monetary authority to help the members in financiai difficulty.