On the impact of fundamentals, liquidity and coordination on market stability

We develop a coordination game to model interactions betweenfundamentals and liquidity during unstable periods in financial markets.We then propose a flexible econometric framework for estimationof the model and analysis of its quantitative implications. The specificempirical application is carry trades in the yen dollar market, includingthe turmoil of 1998. We find a generally very deep market, withlow information disparities amongst agents. We observe occasionallyepisodes of market fragility, or turmoil with up by the escalator, downby the elevator patterns in prices. The key role of strategic behaviorin the econometric model is also confirmed.

A comparison of stock market mechanisms

This paper studies the relationship between the amount of publicinformation that stock market prices incorporate and the equilibriumbehavior of market participants. The analysis is framed in a static, NREEsetup where traders exchange vectors of assets accessing multidimensionalinformation under two alternative market structures. In the first(the unrestricted system), both informed and uninformed speculators cancondition their demands for each traded asset on all equilibrium prices;in the second (the restricted system), they are restricted to conditiontheir demand on the price of the asset they want to trade. I show thatinformed traders incentives to exploit multidimensional privateinformation depend on the number of prices they can condition upon whensubmitting their demand schedules, and on the specific price formationprocess one considers. Building on this insight, I then give conditionsunder which the restricted system is more efficient than the unrestrictedsystem.

Adverse selection, credit and efficiency: The case of the missing market

We analyze a standard environment of adverse selection in credit markets. In our environment,entrepreneurs who are privately informed about the quality of their projects need toborrow from banks. Conventional wisdom says that, in this class of economies, the competitiveequilibrium is typically inefficient.We show that this conventional wisdom rests on one implicit assumption: entrepreneurscan only borrow from banks. If an additional market is added to provide entrepreneurs withadditional funds, efficiency can be attained in equilibrium. An important characteristic of thisadditional market is that it must be non-exclusive, in the sense that entrepreneurs must be ableto simultaneously borrow from many different lenders operating in it. This makes it possible toattain efficiency by pooling all entrepreneurs in the new market while separating them in themarket for bank loans.

Product market deregulation and labor market outcomes

We consider the dynamic relationship between product market entry regulationand equilibrium unemployment. The main theoretical contribution is combininga Mortensen-Pissarides model with monopolistic competition in the goods marketand individual wage bargaining. Product market competition affects unemploymentvia two channels: the output expansion effect and a countervailing effect dueto a hiring externality. Competition is then linked to barriers to entry. Acalibrated model compares a high-regulation European regime to a low-regulationAnglo-American one. Our quantitative analysis suggests that under individualbargaining, no more than half a percentage point of European unemployment ratescan be attributed to entry regulation.

Generic entry into a regulated pharmaceutical market

The aim of this paper is to analyse empirically entry decisions by generic firms intomarkets with tough regulation. Generic drugs might be a key driver of competitionand cost containment in pharmaceutical markets. The dynamics of reforms ofpatents and pricing across drug markets in Spain are useful to identify the impact ofregulations on generic entry. Estimates from a count data model using a panel of 86active ingredients during the 1999 2005 period show that the drivers of genericentry in markets with price regulations are similar to less regulated markets: genericfirms entries are positively affected by the market size and time trend, and negativelyaffected by the number of incumbent laboratories and the number of substitutesactive ingredients. We also find that contrary to what policy makers expected, thesystem of reference pricing restrains considerably the generic entry. Short run brandname drug price reductions are obtained by governments at the cost of long runbenefits from fostering generic entry and post-patent competition into the markets.

A century of global equity market correlations

In this paper, we use a unique long-run dataset of regulatory constraints on capital account openness to explain stock market correlations. Since stock returns themselves are highly volatile, any examination of what drives correlations needs to focus on long runs of data. This is particularly true since some of the short-term changes in co-movements appear to reverse themselves (Delroy Hunter 2005). We argue that changes in the co-movement of indices have not been random. Rather, they are mainly driven by greater freedom to move funds from one country to another. In related work, Geert Bekaert and Campbell Harvey (2000) show that equity correlations increase after liberalization of capital markets, using a number of case studies from emerging countries. We examine this pattern systematically for the last century, and find it to be most pronounced in the recent past. We compare the importance of capital account openness with one main alternative explanation, the growing synchronization of economic fundamentals. We conclude that greater openness has been the single most important cause of growing correlations during the last quarter of a century, though increasingly correlated economic fundamentals also matter. In the conclusion, we offer some thoughts on why the effects of greater openness appear to be so much stronger today than they were during the last era of globalization before 1914.

General preferences for consumption goods in the random matching model of commodity money

This paper generalizes the original random matching model of money byKiyotaki and Wright (1989) (KW) in two aspects: first, the economy ischaracterized by an arbitrary distribution of agents who specialize in producing aparticular consumption good; and second, these agents have preferences suchthat they want to consume any good with some probability. The resultsdepend crucially on the size of the fraction of producers of each goodand the probability with which different agents want to consume eachgood. KW and other related models are shown to be parameterizations ofthis more general one.

Efeitos da correcção do resultado contabilístico na determinação da matéria colectável: O caso só construções, S.A.

O desmantelamento das barreiras ao comércio mundial traduziu-se no aumento das operações comerciais e financeiras, na crescente necessidade de capitais, na utilização de novos instrumentos financeiros e no consequente desenvolvimento dos mercados de capitais com empresas cotadas em diversos mercados. Este fenómeno contribuiu ainda para a globalização da informação financeira que, para suprir as exigências de um mercado abrangente, teve de encontrar novas formas de difusão, sem contudo descurar as suas qualidades, nomeadamente a compreensibilidade, a comparabilidade e a fiabilidade. O interesse do desenvolvimento deste tema ressalta-se pela importância que a contabilidade nas organizações, recomenda-se ser organizada de forma a possibilitar o conhecimento claro e inequívoco dos elementos necessários ao cálculo do imposto, bem como a permitir o seu controlo, comportando todos os dados necessários ao preenchimento das declarações periódicas dos impostos. A parte prática do trabalho, em resumo, demonstra que, o ponto de partida para o apuramento do lucro tributável é o resultado contabilístico determinado com base nas suas regras próprias. Em Cabo Verde, a lei fiscal, apesar de desactualizada com o SNCRF, estabelece algumas regras próprias para ajustar o resultado contabilístico ao resultado fiscal. Em conclusão, a aplicação do novo normativo contabilístico cabo-verdiano (SNCRF) na correcção e determinação da matéria colectável em sede do IUR veio dar e construir uma base contabilística comum como ponto de partida para o estabelecimento de uma matéria colectável comum, e se concluir neste TFC, que tem todo o sentido. Sendo as demonstrações financeiras elaboradas com base nas NRF e subsidiariamente às NIC´s constituem o ponto de partida neutro para qualquer discussão sobre uma matéria colectável comum. The dismantling of barriers to world trade has resulted in increased commercial and financial transactions, the growing need for capital, and the use of new financial instruments and the consequent development of capital markets with listed companies in various markets. This phenomenon has also contributed for the globalization of financial information to meet the requirements of a comprehensive market had to find new ways of making, without neglecting their qualities, namely understandability, comparability and reliability. The interest of the development of this theme it emphasizes the importance of accounting in organizations, it is recommended to be organized in order to enable the clear and unambiguous understanding of the elements necessary for calculating the tax, as well as to allow its control, behaving all data needed to fill in of the periodic declarations of taxes. The practical part of the work, in short, shows that the starting point to determining taxable income is the accounting income determined based on its own rules. In Cape Verde, the tax law, although outdated with SNCRF establishes some rules themselves to adjust accounting income to taxable income. In conclusion, the application of new accounting standards Cape Verde (SNCRF) in the correction and determination of the tax base in the headquarters of the IUR to come and build a common basis of accounting as a starting point for the establishment of a common tax base, and conclude TFC this, which makes sense. Being the financial statements prepared in accordance with NRF 'and secondarily to NIC's are the neutral starting points for any discussion about a common tax base.

Judges' cognition and market order

We argue that during the crystallization of common and civil law in the 19th century, the optimal degree of discretion in judicial rulemaking, albeit influenced by the comparative advantages of both legislative and judicial rulemaking, was mainly determined by the anti-market biases of the judiciary. The different degrees of judicial discretion adopted in both legal traditions were thus optimally adapted to different circumstances, mainly rooted in the unique, market-friendly, evolutionary transition enjoyed by English common law as opposed to the revolutionary environment of the civil law. On the Continent, constraining judicial discretion was essential for enforcing freedom of contract and establishing a market economy. The ongoing debasement of pro-market fundamentals in both branches of the Western legal system is explained from this perspective as a consequence of increased perceptions of exogenous risks and changes in the political system, which favored the adoption of sharing solutions and removed the cognitive advantage of parliaments and political leaders.

Adverse selection, credit and efficiency: The case of the missing market

We analyze a standard environment of adverse selection in credit markets. In our environment,entrepreneurs who are privately informed about the quality of their projects needto borrow in order to invest. Conventional wisdom says that, in this class of economies, thecompetitive equilibrium is typically inefficient.We show that this conventional wisdom rests on one implicit assumption: entrepreneurscan only access monitored lending. If a new set of markets is added to provide entrepreneurswith additional funds, efficiency can be attained in equilibrium. An important characteristic ofthese additional markets is that lending in them must be unmonitored, in the sense that it doesnot condition total borrowing or investment by entrepreneurs. This makes it possible to attainefficiency by pooling all entrepreneurs in the new markets while separating them in the marketsfor monitored loans.

Circulation of private notes during a currency shortage

This paper provides a search theoretical model that captures two phenomena that have characterized several episodes of monetary history: currency shortages and the circulation of privately issued notes. As usual in these models, the media of exchange are determined as part of the equilibrium. We characterize all the different equilibria and specify the conditions under which there is a currency shortage and/or privately issued notes are used as means of payment. There is multiplicity of equilibria for the entire parameter space, but there always exist an equilibrium in which notes circulate, either alone or together with coins. Hence, credit is a self-fulfilling phenomenon that depends on the beliefs of agents about the acceptability and future repayment of notes. The degree of circulation of coins depends on two crucial parameters, the intrinsic utility of holding coins and the extent with which it is possible to find exchange opportunities in the market.

Does money matter in shaping domestic business cycles? An international investigation (with appendices)

We study the contribution of money to business cycle fluctuations in the US,the UK, Japan, and the Euro area using a small scale structural monetary business cycle model. Constrained likelihood-based estimates of the parameters areprovided and time instabilities analyzed. Real balances are statistically importantfor output and inflation fluctuations. Their contribution changes over time. Models giving money no role provide a distorted representation of the sources of cyclicalfluctuations, of the transmission of shocks and of the events of the last 40 years.

Japan's lost decade: Does money have a role?

We study the contribution of the stock of money to the macroeconomic outcomesof the 1990s in Japan using a small scale structural model. Likelihood-basedestimates of the parameters are provided and time stabilities of the structural relationshipsanalyzed. Real balances are statistically important for output and inflationfluctuations and their role has changed over time. Models which give moneyno role give a distorted representation of the sources of cyclical fluctuations. Thesevere stagnation and the long deflation are driven by different causes.

Money, fame and the allocation of talent: Brain drain and the institution of science

The earning structure in science is known to be flat relative to the one in theprivate sector, which could cause a brain drain toward the private sector. In thispaper, we assume that agents value both money and fame and study the role ofthe institution of science in the allocation of talent between the science sector andthe private sector. Following works on the Sociology of Science, we model theinstitution of science as a mechanism distributing fame (i.e. peer recognition). Weshow that since the intrinsic performance is less noisy signal of talent in the sciencesector than in the private sector, a good institution of science can mitigate thebrain drain. We also find that providing extra monetary incentives through themarket might undermine the incentives provided by the institution and therebyworsen the brain drain. Finally, we study the optimal balance between monetaryand non-monetary incentives in science.