56,407 research outputs found
Financial Instability under Floating Exchange Rates
No full textAt the end of the nineties, many developing countries featured an open capital market and relied heavily on dollar-debt financing of their economy. This paper analyses whether, in this context, clean floating can be a sustainable policy choice. The model is cast as a game between successive generations of investors who decide whether they buy or not the debt of a representative firm. The exchange rate is subject to random shocks, which makes uncertain the private sector’s solvency. We show that a small risk of insolvency would bring about a much larger risk of illiquidity. A rational expectation equilibrium without default can be put forward only in the highly improbable case when the currency is extremely overvalued. The case against flexible exchange rates may be stronger than usually thought.Floating; Rational Expectations; Financial Crises; Developing Countries
The Ethical Dimension of Economic Choices
No full textIn general, capitalist countries display sustained growth, dynamism and innovation, and a high adaptability in response to external shocks. Yet in the last twenty years discontent over the notorious drawbacks of capitalism – corporate frauds, corruption, abuses of market power – has grown continually. In this paper, we argue that no remedy to these difficulties can be found if ethical dilemmas are not anticipated and addressed at the individual, firm and economy-wide level. While pro-ethical changes in business regulation would help, government action alone may not be effective enough. Given that the social sciences provide the general framework of reference for human action, better integration of the ethical dimension by these disciplines would bring about additional benefits. In particular, economic theory would gain from developing more in-depth reflection on human end-goals and values.Calculativeness; Capitalism; Corporate social responsibility; Economics; Virtue Ethics
The moral layer of contemporary economics: A virtue-ethics perspective
No full textThis paper questions whether the contemporary science of economics and its recommendations are built on sound moral foundations as assessed from a virtue-based definition of ethical behaviour. We argue that the model of man underlying economic analyses can correspond to the model of a virtuous person, and that economics, by advocating reasoned choice and careful resource utilization, makes a positive contribution to the moral development of individuals.Economics; Efficiency; Rationality; Tastes; Virtue Ethics
Money in the Inflation Equation: the Euro Area Evidence
No full textThe ECB is the only major central bank that still emphasizes the role of money in monetary policy management. In this paper, we bring some support to this approach. Taking into account Euro area data from the period between 1999 and 2007, we demonstrate that a steady 10 per cent increase in M3 may result in an inflation rate of approximately 2½ percentage points. A negative output gap would have a short term offsetting effect, and vice versa.ECB; Inflation; Monetary Policy; Money
Value Relevance of R&D Reporting : A Signaling Interpretation
No full textAccounting for research and development (R&D) costs is an open issue. SFAS N°2 mandates that all R&D costs are immediately expensed. International standards prescribe a capitalization of R&D costs if they meet certain criteria (IAS 38). Recent research papers (Healy et al., 2002; Lev and Sougiannis, 1996, 1999; Aboody and Lev, 1998, Zhao, 2002) show that capitalization of R&D costs and software development costs is value relevant. However critics can be leveled at previous research because prior empirical tests are based on simulated or partial data. Our purpose is to test empically R&D accounting issues on a sample of 95 French firms on a three years period (1998-2000). French context provides an experimental field for studying the value relevance of R&D capitalization, because both accounting treatments of R&D costs (expensing and capitalization) are allowed. We find that capitalized R&D is positively associated with stock returns and stock prices, whereas expensed R&D is negatively related to stock prices and stock returns. R&D accounting reduces the information asymmetry on the successfulness of R&D projects: it acts as a signal to investors. This paper extends previous literature by using real data on capitalized R&D, instead of estimated data. Moreover, we show not only that capitalized R&D is value relevant but also that expensing of R&D projects conveys a negative signal.Value relevance; R&D; France; Financial reporting; Capital markets; Accounting choice
Asset Prices and Assymetries in the Fed's Interest Rate Rule : a Financial Approach
No full textFinancial Newspapers have for long suggested that the Fed tends to provide additional Liquidity when the Stock Market thumbs. We provide a theoretical Explanation for this Behaviour that builds on the Methodology developed by Romaniuk (2008) for a central Banker with two main Goals, Output and Price stability. In this Paper, the Policymaker behaves as a Portfolio Manager who aims at stabilizing Output, Goods Prices, as well as Asset Prices. An optimal, Time-varying Interest Rate Rule is obtained as the Merton's (1971) continuous Time Solution to the Portfolio Manager's Problem. In a second Step, we infer the optimal Interest Rate Rule of a central Bank that can react differently to positive and negative Variations in the Stock Market.Optimal Interest Rate Rule; Portfolio Choice; Fed; Asset Prices; Options Theory
TRPV1 properties in thoracic dorsal root ganglia neurons are modulated by intraperitoneal capsaicin administration in the late phase of Type-1 autoimmune diabetes.
No full textPharmacological therapies in type 1 diabetes for efficient control of glycemia and changes in pain alterations due to diabetic neuropathy are a continuous challenge. Transient receptor potential vanilloid type 1 (TRPV1) from dorsal root ganglia (DRG) neurons is one of the main pharmacological targets in diabetes, and its ligand capsaicin can be a promising compound for blood-glucose control. Our goal is to elucidate the effect of intraperitoneal (i.p.) capsaicin administration in type 1 diabetic mice against TRPV1 receptors from pancreatic DRG primary afferent neurons. A TCR+/−/Ins-HA+/− diabetic mice (dTg) was used, and patch-clamp and immunofluorescence microscopy measurements have been performed on thoracic T9–T12 DRG neurons. Capsaicin (800 μg/kg, i.p. three successive days) administration in the late-phase diabetes reduces blood-glucose levels, partly reverses the TRPV1 current density and recovery time constant, without any effect on TRPV1 expression general pattern, in dTg mice. A TRPV1 hypoalgesia profile was observed in late-phase diabetes, which was partly reversed to normoalgesic profile upon capsaicin i.p. administration. According to the soma dimensions of the thoracic DRG neurons, a detailed analysis of the TRPV1 expression upon capsaicin i.p. treatment was done, and the proportion of large A-fiber neurons expressing TRPV1 increased in dTg capsaicin-treated mice. In conclusion, the benefits of low-dose capsaicin intraperitoneal treatment in late-phase type-1 diabetes should be further exploited
The Information Limit to Honest Managerial Behavior
No full textIn the last years of the Internet bubble, many managers provided fraudulent financial statements with the aim at inflating the market value of their firms. Is this shortage of honesty an accident or a buit-in feature of shareholder capitalism? This paper argues that in an economy hosting publicly traded companies where investors have only imperfect information about a firm’s type and where a honest financial report may be wrong, at least some bad firms managers will provide false statements. Furthermore, in equilibrium some good firm managers may also resort to corrupt auditors which will issue a favorable report without carrying out any investigation. The frequency of dishonest managers is analysed in keeping with the precision of the report and the total number of firms.Corporate fraud; Accounting information; Manager behavior; Honesty; Perfect Bayesian Equilibrium
Manager Unethical Behavior During The New Economy Bubble
No full textThis paper investigates factors that brought about the surge in manager unethical behavior within the US economy. Key structural causes are the weak internal control, perverse incentives related to managers’ compensation, conflicts of interest in the banking and auditing sectors. Unethical behavior was further enhanced by the large economic noise specific to the IT bubble, which emerged in the late nineties against the background of increased deregulation in the goods and financial markets. The US administration opposed to the proliferation of CEO unethical behavior the Sarbanes-Oxley Act of 2002; we argue why some of its provisions might be taken one step furtherUnethical behavior; CEOs; Financial deregulation; Activism; Sarbanes-Oxely Act
Excessive Liability Dollarization in a Simple Signaling Model
No full textIf a dollar denominated external debt comes with so many risks, why do emerging economies allow for such an imbalance to accumulate ? The explanation provided in this paper builds on a simple signaling model. By assumption, lenders have no direct possibility to infer a firm’s financial stance. Therefore sound firms might want to borrow dollars and bear a high clearance cost, just in order to signal their type. The success of this policy depends on the behavior of bad firms. When dollar borrowing clearance costs are relatively small with respect to the clearance cost of borrowing in the local currency, the whole private sector would opt for liability dollarization. In this case the signaling effect vanishes, while all firms bear high clearance costs.Original sin; Signaling; Developing countries; Liability dollarization; Perfect Bayesian Equilibrium
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