Solvency Capital estimation and Risk Measures

This paper examines why a financial entity’s solvency capital estimation might be underestimated if the total amount required is obtained directly from a risk measurement. Using Monte Carlo simulation we show that, in some instances, a common risk measure such as Value-at-Risk is not subadditive when certain dependence structures are considered. Higher risk evaluations are obtained for independence between random variables than those obtained in the case of comonotonicity. The paper stresses, therefore, the relationship between dependence structures and capital estimation.

Wage effects from changes in local human capital in Britain

This paper examines the impact of local human capital on individuals’ wages through external effects. Employing wage regressions, it is found that changes in individuals’ wages are positively associated with changes in the shares of high-paid occupation workers in the British travel-to-work-areas for the late 1990s. I examine this positive association for different occupational groups (defined by pay) in order to disentangle between production function and consumer demand driven theoretical explanations. The wage effect is found to be stronger and significant for the bottom-paid occupational quintile compared to the middle-paid ones, and using also sectoral controls the paper argues to provide evidence for the existence of consumer demand effects.

HSS (F)2004 04/04 - Revised Cost of Capital Rate in Fees and Charges Recovery Policy (PDF 51 KB)

HSS (F)2004 04/04 - Revised Cost of Capital Rate in Fees and Charges Recovery Policy

Factor shares, the price markup, and the elasticity of substitution between capital and labor.

In a Walrasian labor market, the labor income share is constant under the assumptions of a Cobb-Douglas production function and perfect competition. Given the observed decline of the labor share in recent decades, this paper relaxes these assumptions, proposes a time-series calculation of the aggregate price mark-up reflecting the degree of imperfect competition in the product market, and provides estimates of the elasticity of substitution under such product market imperfections. We focus on Spain and the U.S. and show that the elasticity of substitution is above one in Spain and below one in the U.S. We also show that the price markup drives the elasticity of substitution away from one, upwards in Spain, downwards in the U.S. These results are used to explain the declining path of the labor income share, common to both economies, and their contrasted patterns in terms of capital deepening.

Land use regulation and productivity - Land matters: Evidence from a UK Supermarket chain

We use store-specific data for a major UK supermarket chain to estimate the impact of planning on store output. Using the quasi-natural experiment of the variation in policies between England and other UK countries, we isolate the impact of Town Centre First policies. We find that space contributes directly to store productivity; and planning policies in England directly reduce output both by reducing store sizes and forcing stores onto less productive sites. We estimate that since the late 1980s planning policies have imposed a loss of output of at least 18.3 to 24.9% - more than a “lost decade’s” growth. JEL codes: D2, L51, L81, R32.

Public Service Agreement 2010-2014 (Croke Park Agreement) - Second Annual Progress, Savings and Productivity Reports for the Department and its Agencies

Public Service Agreement 2010-2014 (Croke Park Agreement) – Second Annual Progress, Savings and Productivity Reports for the Department and its Agencies Integrated Annual Progress Report for the Department and its Agencies PDF 327kb Annual Savings Report for the Department’s Agencies PDF 205kb Productivity Report for the Department and its Agencies PDF 205kb

Three essays in international finance

Executive Summary The first essay of this dissertation investigates whether greater exchange rate uncertainty (i.e., variation over time in the exchange rate) fosters or depresses the foreign investment of multinational firms. In addition to the direct capital financing it supplies, foreign investment can be a source of valuable technology and know-how, which can have substantial positive effects on a host country's economic growth. Thus, it is critically important for policy makers and central bankers, among others, to understand how multinationals base their investment decisions on the characteristics of foreign exchange markets. In this essay, I first develop a theoretical framework to improve our knowledge regarding how the aggregate level of foreign investment responds to exchange rate uncertainty when an economy consists of many firms, each of which is making decisions. The analysis predicts a U-shaped effect of exchange rate uncertainty on the total level of foreign investment of the economy. That is, the effect is negative for low levels of uncertainty and positive for higher levels of uncertainty. This pattern emerges because the relationship between exchange rate volatility and 'the probability of investment is negative for firms with low productivity at home (i.e., firms that find it profitable to invest abroad) and the relationship is positive for firms with high productivity at home (i.e., firms that prefer exporting their product). This finding stands in sharp contrast to predictions in the existing literature that consider a single firm's decision to invest in a unique project. The main contribution of this research is to show that the aggregation over many firms produces a U-shaped pattern between exchange rate uncertainty and the probability of investment. Using data from industrialized countries for the period of 1982-2002, this essay offers a comprehensive empirical analysis that provides evidence in support of the theoretical prediction. In the second essay, I aim to explain the time variation in sovereign credit risk, which captures the risk that a government may be unable to repay its debt. The importance of correctly evaluating such a risk is illustrated by the central role of sovereign debt in previous international lending crises. In addition, sovereign debt is the largest asset class in emerging markets. In this essay, I provide a pricing formula for the evaluation of sovereign credit risk in which the decision to default on sovereign debt is made by the government. The pricing formula explains the variation across time in daily credit spreads - a widely used measure of credit risk - to a degree not offered by existing theoretical and empirical models. I use information on a country's stock market to compute the prevailing sovereign credit spread in that country. The pricing formula explains a substantial fraction of the time variation in daily credit spread changes for Brazil, Mexico, Peru, and Russia for the 1998-2008 period, particularly during the recent subprime crisis. I also show that when a government incentive to default is allowed to depend on current economic conditions, one can best explain the level of credit spreads, especially during the recent period of financial distress. In the third essay, I show that the risk of sovereign default abroad can produce adverse consequences for the U.S. equity market through a decrease in returns and an increase in volatility. The risk of sovereign default, which is no longer limited to emerging economies, has recently become a major concern for financial markets. While sovereign debt plays an increasing role in today's financial environment, the effects of sovereign credit risk on the U.S. financial markets have been largely ignored in the literature. In this essay, I develop a theoretical framework that explores how the risk of sovereign default abroad helps explain the level and the volatility of U.S. equity returns. The intuition for this effect is that negative economic shocks deteriorate the fiscal situation of foreign governments, thereby increasing the risk of a sovereign default that would trigger a local contraction in economic growth. The increased risk of an economic slowdown abroad amplifies the direct effect of these shocks on the level and the volatility of equity returns in the U.S. through two channels. The first channel involves a decrease in the future earnings of U.S. exporters resulting from unfavorable adjustments to the exchange rate. The second channel involves investors' incentives to rebalance their portfolios toward safer assets, which depresses U.S. equity prices. An empirical estimation of the model with monthly data for the 1994-2008 period provides evidence that the risk of sovereign default abroad generates a strong leverage effect during economic downturns, which helps to substantially explain the level and the volatility of U.S. equity returns.

Managing Climate Insecurity by Ensuring Continuous Capital Accumulation : 'Climate Refugees' and 'Climate Migrants'

Numerous recent reports by non-governmental organisations (NGOs), academics and international organisations have focused on so-called 'climate refugees'. This article examines the turn from a discourse of 'climate refugees', in which organisations perceive migration as a failure of both mitigation and adaptation to climate change, to one of 'climate migration', in which organisations promote migration as a strategy of adaptation. Its focus is the promotion of climate migration management, and it explores the trend of these discourses through two sections. First, it provides an empirical account of the two discourses, emphasising the differentiation between them. It then focuses on the discourse of climate migration, its origins, extent and content, and the associated practices of 'migration management'. The second part argues that the turn to the promotion of 'climate migration' should be understood as a way to manage the insecurity created by climate change. However, international organisations enacts this management within the forms of neoliberal capitalism, including the framework of governance. Therefore, the promotion of 'climate migration' as a strategy of adaptation to climate change is located within the tendencies of neoliberalism and the reconfiguration of southern states' sovereignty through governance.

Bonding and Bridging Social Capital in Step- and First-Time Families and the Issue of Family Boundaries

Divorce and remarriage usually imply a redefinition of family boundaries, with consequences for the production and availability of social capital. This research shows that bonding and bridging social capitals are differentially made available by families. It first hypothesizes that bridging social capital is more likely to be developed in stepfamilies, and bonding social capital in first-time families. Second, the boundaries of family configurations are expected to vary within stepfamilies and within first-time families creating a diversity of family configurations within both structures. Third, in both cases, social capital is expected to depend on the ways in which their family boundaries are set up by individuals by including or excluding ex-partners, new partner's children, siblings, and other family ties. The study is based on a sample of 300 female respondents who have at least one child of their own between 5 and 13 years, 150 from a stepfamily structure and 150 from a first-time family structure. Social capital is empirically operationalized as perceived emotional support in family networks. The results show that individuals in first-time families more often develop bonding social capital and individuals in stepfamilies bridging social capital. In both cases, however, individuals in family configurations based on close blood and conjugal ties more frequently develop bonding social capital, whereas individuals in family configurations based on in-law, stepfamily or friendship ties are more likely to develop bridging social capital.

World class healthcare for London. Mind the gap! A briefing on equity of health and healthcare in the capital

This briefing provides an overview of equity of access to some of the essential elements of healthcare in the capital

Paleopathology of the commoners at Tell Amarna, Egypt, Akhenaten's capital city

The Egyptian Pharaoh Akhenaten initiated worship of a single god and established a new capital city (Tell Amarna) that was built and occupied only once from 1350-1330 BCE. This single short occupation offers a unique opportunity to study a short time period. The royal tombs have long been known and studied, but the location of graves for the common inhabitants has been an archaeological puzzle for more than 50 years. Recently four cemeteries have been located and the analysis of commingled bones from the South Tombs cemetery is presented here. The remains yield the following demographic profile: 53 adults with 19 females and 18 males; 14 juveniles between the ages of 5 and 17; and 3 infants. Arthritis and degenerative joint disease of the spine and joints indicates that DJD was not excessive. Only 2 to 8% of the adult population exhibits arthritis. There are 3 healed fractures of the arm (2 to 8% of the adult sample). There is 1 healed compressed fracture of the skull suggesting violence. The adult infection rate is between 2 and 8% with 3 healed and 1 active case of periostitis and no severe infections. Anemia is implicated by 23% of adult frontals exhibiting cribra orbitalia. Life for the common residents of Amarna appears to not have been as good as initially postulated.

Variation in Aedes aegypti(Diptera: Culicidae) container productivity in a slum and a suburban district of Rio de Janeiro during dry and wet seasons

Seasonal variation in container productivity and infestation levels by Aedes aegypti were evaluated in two areas with distinct levels of urbanization degrees in Rio de Janeiro, a slum and a suburban neighborhood. The four most productive containers can generate up to 90% of total pupae. Large and open-mouthed containers, such as water tanks and metal drums, located outdoors were the most productive in both areas, with up to 47.49% of total Ae. aegypti pupae collected in the shaded sites in the suburban area. Water-tanks were identified as key containers in both areas during both the dry and rainy seasons. Container productivity varied according to seasons and urbanization degree. However, the mean number of pupae per house was higher in the suburban area, but not varied between seasons within each area (P > 0.05). High infestation indexes were observed for both localities, with a house index of 20.5-21.14 in the suburban and of 9.56-11.22 in the urban area. This report gives potential support to a more focused and cost-effective Ae. aegypti control in Rio de Janeiro.

Innovación, financiación y mercados financieros : análisis de las relaciones entre inversión en I+D, estructura de capital y señalización contable

Aquest treball té com a objectiu determinar l'existència de restriccions en el finançament de projectes empresarials de recerca i desenvolupament (R+D) i analitzar-ne les causes. Els resultats de la investigació mostren els fets següents: en primer lloc, hi ha restriccions financeres per a la realització d'inversions en R+D i es manifesten en la necessitat de les empreses de recórrer a recursos interns i a fons aliens a curt termini; en segon lloc, les restriccions esmentades fonamentalment sorgeixen a causa de dos factors, el desequilibri entre les característiques econòmiques de les inversions d'R+D i el comportament dels agents finançadors en els mercats de capitals, i l'existència d'asimetries d'informació entre agents gestors i finançadors; finalment, en tercer lloc, la formulació per part de les empreses de més informació comptable sobre l'R+D desenvolupada comporta la millora de la valoració de l'empresa en els mercats financers i, per tant, l'assignació de fons als processos d'innovació.

El paper del capital social en l'organització d'esdeveniments

La intenció d'aquest article és detallar l'abast del capital social als esdeveniments culturals celebrats a Catalunya i analitzar la influència sobre l'atracció turística dels mateixos. Es pretén determinar també quin és l'impacte que tres elements de capital social que intervenen en l'organització d'esdeveniments (elements de motivació, creació de xarxes internes i lideratge) tenen sobre el sector turístic local. L'estudi parteix d'una mostra de 263 esdeveniments als quals s'ha adreçat una enquesta per determinar la presència i pes dels factors de capital social. Aquesta informació s'ha creuat amb dades sobre impactes i atracció turística obtingudes també a partir de la mateixa enquesta i, a partir de l'aplicació del test del chi quadrat, s'ha contrastat si les diferències existents entre els diferents factors del capital social són estadísticament significatives. Les conclusions principals obtingudes indiquen que els esdeveniments que tenen elements de capital social que els reforça la seva cohesió social entenen i justifiquen la celebració com a fet socialitzador, independentment del seu abast turístic. A més es detecta que la creació de xarxes de relació enforteix la cohesió interna, la representativitat i el sentit d'identitat de la comunitat. Finalment es constata que la presència d'elements de lideratge que donen visibilitat i vinculen l'esdeveniment amb xarxes externes explica la diferència existent en la capacitat d'atracció i impactes turístics dels esdeveniments. La principal aportació del treball és posar de manifest el paper del capital social com a factor que incideix en la repercussió social i turística dels esdeveniments catalans. La diagnosi efectuada permet recomanar la incorporació del capital social com un actiu estratègic per a la gestió i per a la creació de nous productes i polítiques turístiques centrades en els esdeveniments culturals.