7,466 research outputs found
Upon Daedalian Wings of Paper Money: Adam Smith and the Crisis of 1772
No full textAdam Smith advocated laissez faire for most sectors of the economy, but he believed that banking and finance required several forms of regulation including usury laws and the prohibition of small-denomination bank notes. Smith’s support for banking regulation appears to have been a response to the shocks that hit the Scottish banking system during the time that he was composing the Wealth of Nations. The most important was the Crisis of 1772, which has been described as the first modern banking crisis faced by the Bank of England. It resembles the Crisis of 2008 in a number of striking ways. This paper describes the Crisis of 1772, the other shocks that hit the Scottish banking system, and the evolution of Smith’s views on the regulation of banking. It is based on Smith’s writings, the secondary sources, and a quantification of the new issues of Scottish bank notes during Smith’s era.
The classical notion of competition revisited
No full textWe compare and analyse two different conceptions of market competition: the walrasian notion of perfect competition and the Classical notion of free competition: while the former may be described as an equilibrium state in which atomistic agents treat prices parametrically, the latter is a situation in which agents, endowed by market power, fix prices strategically. We show that price undercutting or outbidding are the typical phenomena that, for the Classical authors, may be observed in a market characterized by free competition. We investigate some problematic aspects of the neoclassical notion of perfect competition and we reconstruct the Classical theory of free competition, as developed, in particular, by Adam Smith and Karl Marx, in the light of the modern notion of mixed strategies equilibria.Classical Economics, Competition, Adam Smith, Karl Marx, mixed strategies
House Price Booms and the Current Account
No full textA simple open economy asset pricing model can account for the house price and current account dynamics in the G7 over the years 2001-2008. The model features rational households, but assumes that households entertain subjective beliefs about price behavior and update these using Bayes' rule. The resulting beliefs dynamics considerably propagate economic shocks and crucially contribute to replicating the empirical evidence. Belief dynamics can temporarily delink house prices from fundamentals, so that low interest rates can fuel a house price boom. House price booms, however, are not necessarily synchronized across countries and the model correctly predicts the heterogeneous response of house prices across the G7, following the fall in real interest rates at the beginning of the millennium. The response to interest rates depends sensitively on agents' beliefs at the time of the interest rate reduction, which are a function of the prior history of disturbances hitting the economy. According to the model, the US house price boom could have been largely avoided, if real interest rates had decreased by less after the year 2000.interest rates, house prices, short-term capital movements
THE USE OF MEAN-VARIANCE FOR COMMODITY FUTURES AND OPTIONS HEDGING DECISIONS
No full textThis study provides additional evidence of the usefulness of mean-variance procedures in the presence of options which can truncate and skew the returns distribution. Using a simulation analysis, price hedging decisions are examined for hog producers when options are available. Mean-variance results are contrasted with optimal decisions based on negative exponential and Cox-Rubinstein utility functions over 56 ending price scenarios and two levels of risk aversion. The findings from our simulation, which considers discrete contracts, basis risk, lognormality in prices, transactions costs, and alternative utility specifications, affirm the usefulness of mean-variance framework.Marketing,
A defence of Mr. Garrick, in answer to the letter-writer. With remarks upon plays and players, and the present state of the stage. By a dramatic author [electronic resource].
No full textThe letter-writer = H. W., i.e. Edward Purdon, author of 'A letter to David Garrick, Esq; on opening the Theatre' published 13 October, 1759.Price from imprint: price One-Shilling.Electronic reproduction.English Short Title Catalog,Reproduction of original from British Library
Cross hedging under multiplicative basis risk
No full textCross hedging price risk in an incomplete financial market creates basis risk. We propose a new way of modeling basis risk where price risk and basis risk are combined in a multiplicative way. Under this specification, positive prudence is a necessary and sufficient condition for underhedging in an unbiased market. Using the example of cross hedging jet fuel price risk with crude oil futures, we show that the new specification is superior in describing the price series and that optimal cross hedges differ significantly from those derived under the traditional additive cross hedging model. (C) 2011 Elsevier B.V. All rights reserved
Intercommodity price transmittal : analysis offood markets in Ghana
No full textThis report expands on a dynamic model of market integration to investigate how information is transmitted across commodities. The author investigates one property of an efficient market : the full use of available information. Studies of spatial price integration simultaneously looks at the flow of information and commodities. The author investigates the flow of information within a single spatial market and the relationship between prices in spatially separate markets. He studies intercommodity price transmittal from two perspectives. First, he asks whether the government can concentrate on a single commodity price, yet achieve policy objectives in a broader arena. This is important in Ghana because no single commodity dominates consumers'food budgets. The author finds that price movements for the main cereal consumed in the country (maize) are fully transmitted to other regions. Second, he investigates the working of commodity markets in developing countries. He notes imperfections in the way markets process information. There are several possible explanations for this market inefficiency. Traders may set prices for other coarse grains in response to information about maize prices. Another possibility is that some traders may not deal in all grains and thus have different costs of acquiring information. In short the author's dynamic model of price integration indicates functional efficiency in Ghana.Access to Markets,Markets and Market Access,Environmental Economics&Policies,Economic Theory&Research,Agricultural Research
Stock Market Volatility and Learning
No full textWe study a standard consumption based asset pricing model with rationally investing agents but allow agents' prior beliefs about price and dividend behavior to deviate slightly from rational expectations priors. Learning about stock price behavior then causes the model to become quantitatively consistent with a range of basic asset prizing 'puzzles': stock returns display momentum and mean reversion, asset prices become volatile, the price-dividend ratio displays persistence, long-horizon returns become predictable and a risk premium emerges. Comparing the moments of the model with those in the data using confidence bands from the method of simulated moments, we show that our findings are robust to different assumptions on the system of beliefs and other model features. We depart from previous studies of asset prices under learning in that agents form expectations about future stock prices using past price observations.asset pricing, learning, near-rational price forecasts
Price support at any price? Costs and benefits of alternative agricultural policies for Poland
No full textThe author argues that Poland must choose an agricultural policy that promotes efficiency, structural change, and adjustment to the new market environment and eventual membership in the European Union. That policy must take into account both the needs of, and the financial constraints on, Polish agriculture. Results of simulation experiments performed with the use of the computable general equilibrium model of the Polish economy suggest that Common Agricultural Policy-type price supports are not the most efficient agricultural policy for Poland. The author discusses alternative policies and scenarios. Rather than discuss whether the relationship between farmers'incomes and average Polish wages is fair, the author analyzes whether medium- and long-term development trends in the Polish economy may cause this relationship to deteriorate, and what policies will counteract those trends. Rapid growth in the nonagricultural sectors combined with real appreciation of domestic currency (caused either through good current account performance or significant capital inflows) may jeopardize farmers'relative income position. And such developments are probable if positive projections for economic development and membership in the European Union are realized. The agricultural sector can defend its relative income only by becoming more efficient. Price supports improve farmers'relative income but at a high cost to taxpayers and consumers and to macroeconomic efficiency. To meet these costs, Poland must put in place firm quantity controls. But the author thinks that the best strategy would be to avoid price supports until the moment of joining the European Union's Common Agricultural Policy. In the interim, policies aimed at reducing farm employment seem most appropriate. The author discusses two such policies: encouraging older farmers to retire and promoting jobs in rural areas. He also proposes two feasible scenarios for integrating Polish agriculture with that of the European Union by 2005-10.Markets and Market Access,Economic Theory&Research,Environmental Economics&Policies,Labor Policies,Agricultural Knowledge&Information Systems,Economic Theory&Research,Environmental Economics&Policies,Agricultural Knowledge&Information Systems,Markets and Market Access,Access to Markets
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