financial development income inequality and the redistributive effects of monetary policy abstract how should financial systems be designed to limit income inequality does the redistributive impact of inflation depend on the extent of financial development should optimal monetary policy vary across countries with different levels of financial development in order to address these questions we develop a monetary growth production model with heterogeneous agents in our economy optimal policy needs to weigh the effects of policy across two groups capital owners and individuals who hold liquid assets in this environment we compare various economies that are identical in every aspect except for their level of financial development interestingly we generally find that economies at the highest stages of financial development economies in which money bonds and claims to capital are traded experience the highest amount of capital formation and social welfare as long as inflation is low yet regardless of the extent of financial development there are generally redistributive consequences from inflation moreover the model tends to predict that economies with relatively small stock markets produce the highest levels of income inequality empirical work examining the role of money growth and the implications of financial development across countries is consistent with predictions from the model

equilibrium dynamics in an endogenous growth model of money and banking we construct an analytically tractable endogenous growth model of money and banking where money provides liquidity services to facilitate transactions and banks convert non reserve deposits into productive capital we examine both the long and short run effects of changes in the money growth rate or the reserve requirement ratio in response to a change in the required reserve ratio the inflation rate and the growth rates of capital real balances and consumption need not adjust monotonically along the transition path while the balanced growth equilibrium may be either a saddle or a source locally the global dynamical system exhibits flip bifurcation

financial intermediary coalitions abstract in this article an environment in which the investment opportunities of agents are private information is studied and it is shown that financial intermediaries arise endogenously within that environment it is established that financial intermediaries are part of an efficient arrangement in the sense that they are needed to support the authors private information core allocations these intermediaries which are coalitions of agents exhibit the following characteristics in equilibrium they borrow from and lend to large groups of agents they produce information about investment projects and they issue claims that have different state contingent payoffs than claims issued by ultimate borrowers

banking development socioeconomic structure and income inequality abstract using rich unique data from the italian local credit markets provinces this paper investigates the impact of local banking development on income inequality and the role of the socioeconomic structure in this link exploiting the italian historical banking regulation to instrument for the local presence of bank branches we find that local banking development mitigates income inequality however the finance inequality nexus manifests itself only in relatively advanced areas when we study the structural channels of influence we uncover evidence that banking development can reduce inequality by affecting geographical mobility and urbanization while it has modest effects through the development of material infrastructures and human capital

a model of product line design and introduction sequence with reservation utility abstract cannibalization is a major concern for a firm when designing a product line in addition external options from outside the firm s product line may also play a significant role in this paper we investigate the impact of external options represented by reservation utility on product line design and introduction sequence we find that a heterogeneous reservation utility defines the relative attractiveness of segments and corresponding product line b reservation utility makes it more favorable to introduce products sequentially rather than simultaneously c aggregating segments is an effective way to mitigate cannibalization when it becomes too difficult to manage with different values of reservation utility across multiple segments and d introducing products in a non monotone order of quality can improve profit from simultaneous introduction when the value of reservation utility of a middle segment is particularly high

secondary capital markets long run growth and the term structure of asset yields an endogenous growth model is presented in which production uses a vector of capital inputs technologies for creating capital of different types vary by gestation period and productivity ownership of gestating capital must be rolled over in secondary capital markets in which transactions are costly we study how reductions in transactions costs affect the equilibrium growth rate the rate of return on saving the volume of activity in secondary capital markets and the term structure of asset yields we give conditions under which reductions in transactions costs result in higher or lower growth rates

financial intermediation and endogenous growth an endogenous growth model with multiple assets is developed agents who face random future liquidity needs accumulate capital and a liquid but unproductive asset the effects of introducing financial intermediation into this environment are considered conditions are provided under which the introduction of intermediaries shifts the composition of savings toward capital causing intermediation to be growth promoting in addition intermediaries generally reduce socially unnecessary capital liquidation again tending to promote growth

the financial development and growth nexus a meta analysis this is the accepted manuscript the final version is available from wiley at http onlinelibrary wiley com doi 10 1111 joes 12086 abstract

endogenous growth and the emergence of equity finance abstract this paper characterises the development of equity markets as a dynamic process that both influences and is influenced by the development of the real sector of the economy in overlapping generations economy borrowers seek funds to run risky investment projects by drawing up contracts which may take the form of either equity or debt issue in the presence of information asymmetry between borrowers and lenders the optimal contract is determined by trading off information dilution costs against bankruptcy costs significantly the equilibrium choice of contract depends on the state of the economy which in turn depends on the contracting regime based on this analysis the paper provides a theory of the joint determination of real and financial development with the ability to explain the emergence of a stock market along the path of real development

corporate social responsibility in the international banking industry this article aims at providing a framework to assess corporate social responsibility with international banks currently it is mainly rating institutions like eiris and kld that provide information about firms social conduct and performance however this is costly information and it is not clear how the rating institutions arrive at their conclusion we develop a framework to assess the social responsibility of internationally operating banks we apply this framework to more than 30 institutions and find significant differences among individual banks countries and regions furthermore it appears that social responsibility of these banks has significantly improved between 2000 and 2005

the innovation potential of new infrastructure development an empirical study of heathrow airport s t5 project abstract we propose a conceptual framework to analyze technology adoption in mega infrastructure projects and assess their potential to innovating large socio technical systems drawing on an in depth empirical analysis of heathrow airport s terminal 5 project we find that innovation hinges on technology adoption decisions that are governed systematically by two intertwined determinants assessment of expected profitability and development of absorptive capacity both of which are distributed across various interdependent actors on an ad hoc basis technological decisions are also affected by other factors namely attitudes toward risk politics and lack of established standards we reveal how a schedule driven project framing creates an underlying boundary condition that constrains the longitudinal process of building a whole collective with capacity to absorb new technologies the innovation potential of mega projects is thus subjected to a fundamental unifying tension on the one hand they offer a one off opportunity to invest in cutting edge technologies and innovate socio technical systems on the other hand project stakeholders have limited time to develop capacity to absorb novel technologies and negotiate differences on assessments of profitability and risk stakeholders may therefore be compelled to agree to adopt proven technologies upfront to reduce uncertainty and mitigate risks thus limiting the innovation potential of new infrastructure development

educated guesses and income distribution abstract the matching of jobs and workers depends on the level of knowledge in the economy in this paper a natural threshold arises and hence there are two possible steady states asymptotically

finance and income inequality in kazakhstan evidence since transition with policy suggestions abstractkazakhstan gained independence in 1990 and has undergone significant changes in economic social and trade conditions since then we analyse the effects of financial development on income inequality in kazakhstan incorporating economic growth foreign investment education and the role of democracy as the drivers we establish that income inequality in kazakhstan is impaired by financial development in summary we send three messages for policy purposes first strengthening financial sector is necessary to close the gap between haves and have nots second attracting fdi beyond the hydrocarbon sector is necessary to alleviate inequality finally adaptation of education system to the new social and economic environment would help in improving income distribution

agricultural land values and the value of rights to future land development we investigate the inuence of fu ture land development on current agricultural land values from a theoretical model of land markets we derive a reduced form expression for agricultural land values in terms of observable variables this result dictates the speci cation of our econometric model and we nd strong sup port for the model in an application to new york state the estimated model together with a spa tial interpolation algorithm is used to generate a surface of estimated development rights values for orange county this approach overcomes several problems that arise with the use of stan dard appraisal methods to value conservation easements jel q24

is the relationship between financial development and economic growth monotonic evidence from a sample of middle income countries summary we revisit the relationship between financial development and economic growth in a panel of 52 middle income countries over the 1980 2008 period using pooled mean group estimations in a dynamic heterogeneous panel setting we show that there is an inverted u shaped relationship between finance and growth in the long run in the short run the relationship is insignificant this suggests that too much finance can exert a negative influence on growth in middle income countries the finding of a non monotonic effect of financial development on growth is confirmed by estimating a threshold model

the effects of potential land development on agricultural land prices abstract we conduct a national scale analysis of the determinants of agricultural land values the theoretical basis for the study is a spatial city model with stochastic returns to future land development the empirical model of agricultural land prices is estimated with a cross section on approximately three thousand counties in the contiguous us the results provide evidence that option values associated with irreversible and uncertain land development are capitalized into current farmland values for each county we decompose the current agricultural land value into components measuring rents from agricultural production and rents from future land development

are financial development and trade openness complements or substitutes this article studies the long and short run relationships between financial development and trade openness using the pooled mean group estimator of pesaran shin and smith 1999 for unbalanced panel data for 87 countries over the 1960 2005 period our empirical results indicate that long run complementarity between financial development and trade openness coexists with short run substitutionarity between the two policy variables but when splitting the data into oecd and non oecd country groups this finding can be observed only in non oecd countries for oecd countries financial development has negligible effects on trade in addition we find nonlinearity in the relationship in that long run responses of trade decrease with financial development the article further finds coexistence of negative trade effects of financial fragility and positive trade impacts of financial depth

financial frictions occupational choice and economic inequality we develop a quantitative theory of entrepreneurship income inequality and nancial frictions disciplined with household data from brazil the theory extends lucas 1978 by modeling heterogeneity in two skills working and managerial skills consistently with the evidence the theory implies three occupational categories workers employers and self employed entrepreneurs we nd that the correlation between working and managerial skills matters importantly for the distribution of earnings across occupations and for the quantitative implications of nancial frictions we also nd

costly monitoring financial intermediation and equilibrium credit rationing abstract this paper establishes a link between equilibrium credit rationing and financial intermediation in a model with asymmetrically informed lenders and borrowers costly monitoring and investment project indivisibilities intermediation is shown to dominate borrowing and lending between individuals and these financial intermediaries exhibit several of the important features of intermediaries as we know them equilibrium interest rates and the aggregate quantity of loans respond quite differently to changes in taste and technology parameters depending on whether or not there is rationing in equilibrium

welfare gains from financial liberalization financial liberalization has been a controversial issue as empirical evidence for growth enhancing effects is mixed here we find sizable welfare gains from liberalization cost to repression though the gain in economic growth is ambiguous we take the view that financial liberalization is a government policy that alters the path of financial deepening while financial deepening is endogenously chosen by agents given a policy and occurs in transition towards a distant steady state this history dependent view necessitates the use of simulation analysis based on a growth model our application is a specific episode thailand from 1976 to 1996

financial sector development and growth in small open economies this article investigates the granger causal relationship between financial development and economic growth for four small open economies over the period 1960 to 2003 both long and short run granger causality tests are used to assess the finance growth nexus the results suggest that there is a positive association between financial development and growth in all countries however the long run causality tests show that growth tends to lead financial development in singapore and jamaica financial development leads growth in trinidad and tobago and there is a bidirectional link in barbados these results therefore suggest that cross country studies could overstate the impact of financial development on growth since they ignore differences even in relatively homogenous groups

financial development and economic growth international evidence the importance of the relationship between financial development and economic growth has been well recognized and emphasized in the field of economic development 1 although recent writings on this subject seem to accept the hypothesis that financial development is crucial for successful economic growth 2 patrick asked the critical question which sector financial or real leads in the dynamic process of economic development patrick identified two possible patterns in the causal relationship between financial development and economic growth in the first growth induces an expansion of the financial system 3 according to this view called demand following the lack of financial growth is a manifestation of the lack of demand for financial services as the real side of the economy develops its demands for various new financial services materialize and these are met rather passively from the financial side in the second pattern the expansion of the financial system precedes the demand for its services channeling scarce resources from small savers to large investors according to relative rates of return the financial sector precedes and induces real growth the deliberate establishment and promotion of financial institutions in many less developed countries ldcs might reflect this belief in the supply leading relationship between the two developments a natural question then concerns the direction of causality between financial development and economic growth patrick asserted that the direction of causality changes over the course of development in his view financial development is able to induce real innovation type investment before sustained modern economic growth gets under way and as the process of real growth occurs the supply leading impetus gradually becomes less important and the demand following financial response

inside money monetary contractions and welfare this paper presents an explicit physical environment in which optimizing agents choose the composition of their money balances because of their choices changes in the nominal sum of inside and outside money precede changes in output nevertheless changes in the supply of fiat money do not affect subsequent out put moreover an equilibrium with a fixed supply of valued fiat money is pareto optimal despite the cyclical fluctuations of output and of the total money stock monnaie interne contractions monetaires et bien etre ce memoire definit un environne ment physique explicite dans lequel les agents economiques recherchent l optimum en choisissant la composition de leurs actifs monetaires en consequence de leurs choix des changements dans la somme nominale de monnaie interne et de monnaie externe prec dent les changements dans le niveau de production neanmoins des changements dans l offre de monnaie fiduciaire n affectent pas le niveau de production subsequent de plus l equilibre quand l offre de monnaie fiduciaire est fixe est un optimum de pareto malgre les fluctuations dans le niveau de production et dans le stock total

structural change and financing constraints abstract in a multi industry growth model firms need external funds for productivity enhancing r d and face financing constraints the cost of research differs across industries so financing constraints hinder industry productivity growth unevenly equilibrium industry dynamics map into a differences in differences regression specification where industry growth depends on the interaction between country financial development and industry r d intensity the paper provides a framework for interpreting several empirical results that rely on industry growth data in terms of r d induced technology transfer and identifies a new channel for finance to encourage aggregate growth the reallocation of resources towards sectors with rapidly expanding technological frontiers

the coevolution of the real and financial sectors in the growth process the role of debt and equity changes over time and with the level of development what are these changes and why should they systematically occur across different countries and time periods this article characterizes financial innovation as a dynamic process that both influences and is influenced by the development of the real sector it focuses on the emergence and development of equity markets using a model that allows for growth and for capital accumulation that is financed externally through a combination of debt and equity as an economy develops the aggregate ratio of debt to equity will generally fall yet debt and equity remain complementary sources for the financing of capital investments the results suggest how various government policy actions might affect capital accumulation and equity market activity

productivity growth increasing income inequality and social insurance the case of china abstract this paper builds a simple dynamic general equilibrium model to mimic two striking stylized facts observed in china s reform productivity growth contributes significantly to output growth and income inequality increases dramatically over time calibration exercises broadly matches the data the economic growth rate the aggregate productivity and income inequality increase as the coverage of the social insurance decreases perfect insurance is shown to be sub optimal with empirically plausible parameters the level of income inequality under different degrees of social insurance can be very similar even though their welfare implications are not social insurance cannot effectively reduce inequalities

financial development and economic growth the role of stock markets utilizing time series methods and data from five developed economies we examine the relationship between stock market development and economic growth controlling for the effects of the banking system and stock market volatility our results support the view that although both banks and stock markets may be able to promote economic growth the erects of the former are more powerful they also suggest that the contribution of stock markets on economic growth may have been exaggerated by studies that utilize cross country growth regressions

optimal fiscal and monetary policy in an economy without capital abstract this paper is concerned with the structure and time consistency of optimal fiscal and monetary policy in an economy without capital in a dynamic context optimal taxation means distributing tax distortions over time in a welfare maximizing way for a barter economy our main finding is that with debt commitments of sufficiently rich maturity structure an optimal policy if one exists is time consistent in a monetary economy the idea of optimal taxation must be broadened to include an inflation tax and we find that time consistency does not carry over an optimal inflation tax requires commitment by rules in a sense that has no counterpart in the dynamic theory of ordinary excise taxes the reason time consistency fails in a monetary economy is that nominal assets should from a welfare maximizing point of view always be taxed away via an immediate inflation in a kind of capital levy this emerges as a new possibility when money is introduced into an economy without capital

financial intermediation and delegated monitoring this paper develops a theory of financial intermediation based on minimizing the cost of monitoring information which is useful for resolving incentive problems between borrowers and lenders it presents a characterization of the costs of providing incentives for delegated monitoring by a financial intermediary diversification within an intermediary serves to reduce these costs even in a risk neutral economy the paper presents some more general analysis of the effect of diversification on resolving incentive problems in the environment assumed in the model debt contracts with costly bankruptcy are shown to be optimal the analysis has implications for the portfolio structure and capital structure of intermediaries

limited enforcement financial intermediation and economic development a quantitative assessment we present a model of economic development where the importance of financial differences caused by limited enforcement can be measured economies where enforcement is poor direct less capital to the production sector and employ less efficient technologies calibrated simulations reveal that the resulting effect on output is large furthermore the model correctly predicts that the average scale of production should rise with the quality of enforcement finally we find that the importance of limited enforcement rises with the importance of capital in production

incomplete markets labor supply and capital accumulation we explore the accumulation of capital in the presence of limited insurance against idiosyncratic shocks borrowing constraints and endogenous labor supply in the exogenous labor supply case e g aiyagari 1994 huggett 1997 the presence of limited insurance increases the demand for savings for precautionary reasons as a consequence capital and output are higher under incomplete markets we show that if labor hours are endogenous labor supply is likely to be lower under incomplete markets because those agents who experience a high shock to productivity are ex post richer and they work fewer hours in some cases this wealth effect can overcome the aggregate precautionary savings and give rise to lower savings and output under incomplete

capitalization of exclusive agricultural zoning into farmland prices development in agricultural areas coughlin et al 1981 this exclusive agricultural zoning differs from traditional rural zoning in that it limits development and is often strictly enforced economists have argued that conceptually agricultural zoning lowers land values by restricting non farm development and three recent empirical studies support the hypothesis knaap 1985 vaillancourt and monty 1985 nelson 1988 but in fact economic theory predicts both positive and negative price effects distributed differentially among farmland parcels depending on parcel characteristics the purpose of this research is to test the hypothesis that the price effect of exclusive agricultural zoning varies with the characteristics of parcel subject to the regulations the research results suggest that economists investigating the land price effects of zoning should use methodologies that distinguish between positive and negative price effects deriving from parcel characteristics

human capital risk and economic growth this paper develops a tractable incomplete markets model of economic growth in which households invest in risk free physical capital and risky human capital the paper shows that a reduction in uninsurable idiosyncratic labor income risk decreases physical capital investment but increases human capital investment growth and welfare a quantitative analysis based on a calibrated version of the model reveals that these effects are substantial and of the same order of magnitude as the effects of distortionary income taxation the analysis further suggests that government sponsored severance payments to displaced workers increase growth and welfare even if these payments have to be e nanced through distortionary income taxation

financial development growth and the distribution of income a paradigm is presented in which both the extent of financial intermediation and the rate of economic growth are endogenously determined financial intermediation promotes growth because it allows a higher rate of return to be earned on capital and growth in turn provides the means to implement costly financial structures thus financial intermediation and economic growth are inextricably linked in accord with the goldsmith mckinnon shaw view on economic development the model also generates a development cycle reminiscent of the kuznet hypothesis in particular in the transition from a primitive slow growing economy to a developed fast growing one a nation passes through a stage in which the distribution of wealth across the rich and poor widens

valuing future development rights the costs of conservation easements while theory strongly suggests that restricting development rights should reduce land prices empirical evidence of this effect has been hard to obtain largely based on this difficulty legislation governing the tax benefits that easement donors may receive is periodically challenged we collect data on 131 land transactions in south central wisconsin including 19 cases of development restricted parcels when we use the whole sample to estimate the impact of conservation easements we replicate the results of nickerson and lynch nickerson c j lynch 2001 the effect of farmland preservation programs on farmland prices american journal of agricultural economics 83 2 341 351 finding a negative but statistically insignificant effect however we then show that when the sample is appropriately restricted to a more homogenous group of land parcels our ability to detect an effect increases dramatically in particular for vacant agricultural land we find a statistically significant negative impact of conservation easements that ranges up to 50 of land values

heterogeneous borrowers liquidity and the search for credit abstract we develop a general equilibrium model of credit formation where borrowers and lenders must search for matches and where the composition of borrowers adjusts to satisfy equilibrium entry conditions when market liquidity dries up as a result of fundamental shocks to the system fewer borrowers will participate in the credit market with low quality borrowers suffering disproportionately because of a flight to quality however less liquid credit markets need not be associated with lower social output because the effect of higher average quality may outweigh that of reduced market participation depending crucially on the source of the liquidity shock

financial infrastructure and house prices we argue that banks operating in a local market possess better information about the local housing market than do nonlocal banks possessing this information may influence their willingness to grant loans to house buyers and the specifics of the loan terms which in turn may affect house prices because credit facilitation makes the housing market more efficient using a panel data set covering a period from 1993 to 2007 and involving 274 municipalities in sweden we establish a positive causal influence of local bank presence on local house prices there are significant spatial and spillover effects that is banks in a municipality affect the housing markets in neighbouring municipalities although to a lesser extent than in their own municipality similar results are obtained through a gravity model the results are robust over time and municipality size

technology selection and commitment in new product development the role of uncertainty and design flexibility selecting the right technologies to incorporate in new products is a particularly challenging aspect of new product definition and development while newer advanced technologies may offer improved performance they also make the product development process more risky and challenging in this paper we focus on the problem of technology selection and commitment under uncertainty a major challenge to firms in turbulent environments we argue that the pizza bin approach of rejecting prospective technologies outright may not serve firms well when the pressure to differentiate products is enormous after motivating the challenges and decisions facing firms using a real life application from dell computer corporation we formulate a mathematical model of a firm that must define its products in the presence of technology uncertainty specifically the firm faces two options i aproven technology that is known to be viable and ii aprospective technology that offers superior price to performance results but whose viability is not a fully certain outcome to minimize the impact of technology uncertainty we consider two approaches to design flexibility termedparallel path andsufficient design which allow the firm to concurrently develop its products while the technology is being validated our analysis helps understand appropriateness of the different flexible design approaches we illustrate our model with the dell portable computer example and note the managerial implications of our analysis

an econometric analysis of land development with endogenous zoning zoning is a widely used tool to manage residential growth estimating the effect of zoning on development however is difficult because zoning can be endogenous in models of land conversion we compare three econometric methods that account for selection bias in a model of land conversion a jointly estimated probit logit model propensity score matching and regression discontinuity our results suggest that not accounting for selection bias leads to erroneous estimates after correcting for selection bias we find that zoning has no effect on a landowner s decision to subdivide in a rural wisconsin county

information acquisition and the adoption of new technology the profitability of a new technology is rarely known with certainty at its announcement date consequently prior to making an adoption decision it behooves the firm considering the adoption of this innovation to reduce the level of uncertainty associated with its profitability the firm accomplishes this by sequentially gathering information updating its prior estimate of profitability in a bayesian manner quantifying the uncertainty regarding the innovation permits application of dynamic programming techniques criteria are derived which tell the firm when to stop collecting information and make the adoption decision it will be shown that it is optimal for the firm to continue to collect information until its estimate of profitability crosses one of two thresholds upon crossing the upper threshold the firm adopts the technology whereas the firm rejects the technology if the lower threshold is crossed the model predicts that even the manager who behaves optimally will occasionally adopt unprofitable technologies and reject profitable ones

product development decisions a review of the literature this paper is a review of research in product development which we define as the transformation of a market opportunity into a product available for sale our review is broad encompassing work in the academic fields of marketing operations management and engineering design the value of this breadth is in conveying the shape of the entire research landscape we focus on product development projects within a single firm we also devote our attention to the development of physical goods although much of the work we describe applies to products of all kinds we look inside the black box of product development at the fundamentaldecisions that are made by intention or default in doing so we adopt the perspective of product development as a deliberate business process involving hundreds of decisions many of which can be usefully supported by knowledge and tools we contrast this approach to prior reviews of the literature which tend to examine the importance of environmental and contextual variables such as market growth rate the competitive environment or the level of top management support

the stock market monetary policy and economic development author affiliation edgar a ghossoub department of economics university of texas at san antonio san antonio tx 78249 usa e mail edgar ghossoub utsa edu robert r reed dagger department of economics finance and legal studies 200 alston hall university of alabama tuscaloosa al 35487 e mail rreed cba ua edu corresponding author acknowledgment we thank two anonymous referees and the co editor kent kimbrough for their insightful comments 1 introductiona vast amount of research in macroeconomics studies the role of financial markets for economic development for example king and levine 1993 document that active banking systems help economies achieve higher rates of growth 1 in addition to banking systems other measures of financial development are important notably levine and zervos 1998 conclude that stock market liquidity promotes activity 2 however minier 2003 identifies nonlinearities in the relationship between stock market activity and growth in particular minier concludes that there are threshold effects from financial development to economic performance beyond a threshold level of financial development growth and stock market activity are positively related however the correlation is not observed in countries with small stock markets consequently access to a stock market may result in a significant increase in economic activity or it may have little impact 3in addition to the stage of financial development monetary policy also affects the development process while initial studies indicate that inflation is generally associated with slower economic progress more recent research concludes that the effects of monetary policy vary across countries bae and ratti 2000 observe that higher rates of money growth are correlated with lower levels of output in argentina and brazil in contrast bullard and keating 1995 point out that inflation may be associated with an increase in output in low inflation countries in particular the recent work of ahmed and rogers 2000 finds evidence of a tobin effect for the united states 4 5why does the impact of financial development vary across countries furthermore why does the effect of monetary policy also differ across countries in this article we demonstrate that the impact of financial development depends on the services provided by various financial markets that is the economic functions of banks may be substantially different than stock markets although different types of financial markets fulfill unique allocative functions there has been surprisingly little attention devoted to studying the ways in which asset markets collectively interact from a general equilibrium perspective 6 furthermore previous work does not address how the role of monetary policy depends on the extent of financial market development we attempt to fill this gap by developing a monetary growth model that incorporates money bank deposits and equity 7 as in schreft and smith 1998 spatial separation and limited communication create a role for money and commercial banks in our economy young individuals are subject to random relocation shocks as money is the only asset that can cross locations relocated agents must liquidate all their asset holdings into currency thus random relocation is analogous to the liquidity preference shocks in diamond and dybvig 1983 as a result our model illustrates the risk pooling role of financial intermediaries in contrast to banks we consider that the stock market promotes economic development by establishing a market in which capital can be transferred across time for example this may reflect specialization of factor inputs to illustrate such ideas we consider the following motivation individuals in the economy have specialized production technologies

measuring the effects of preservation on farm profits in a continuous treatment setting abstractdespite billions of dollars of public appropriations to state purchase of development rights pdr programmes there has been limited evaluation of the effects of these investments on the economic performance of preserved farms this article estimates dose response functions to evaluate the effects of enrolment in new jersey s pdr programme on farm profitability the generalized propensity score method in a continuous treatment setting is used to address selection bias arising from voluntary programme participation treatment effects are measured across treatment levels to determine whether farm profitability is affected differently across levels of programme participation our findings reveal that relative to unpreserved farms profit per acre tends to increase along lower treatment levels the profit per acre of preserved farms in the 1 40 treatment range is on average 407 higher than that of unpreserved farms in the full sample positive profit differentials averaging between 317 and 472

investment climate and firm productivity an application to vietnamese manufacturing firms abstractthe fundamental aspect of a national competitive advantage is a good investment climate understanding the role of the investment climate in generating firm productivity has received extensive attention by policymakers and economists in many countries the article studies the effect of different dimensions of the investment climate on firm productivity using a large dataset of vietnamese manufacturing firms the article finds that deficiencies in the investment climate are prejudicial to firm productivity and competition furthermore in examining the effect of corruption in association with the quality of the business environment the study also investigates the possibility that corruption may compensate firms for a bad investment climate or at least may neutralize the negative impact of inefficient government regulations in other words corruption acts as speed money to improve the efficacy of the provision of public services or provides leeway for entrepreneurs to bypass the inefficient reg

volatility and slow technology diffusion abstract i study the effects of uncertainty on technology adoption and thereby on volatility and growth i present an analytically tractable model in which i uncertainty about the returns to adoption delays technology diffusion and ii the mean and volatility of output growth are jointly determined in equilibrium i then test the key predictions of the model by studying the introduction of three major information and communication technologies icts computers internet and cell phones i find that countries with more volatile growth rates of real gdp per capita have higher time adoption lags and lower average growth as predicted by the model

why put all your eggs in one basket a competition based view of how technological uncertainty affects a firm s technological specialization conventional wisdom suggests that when a firm faces technological uncertainty it responds by becoming less technologically specialized so as to remain adaptable to subsequent resolution of this uncertainty we adopt a competition based view of technological uncertainty to identify an opposite effect in competitive settings the firm may instead become more specialized when faced with greater technological uncertainty so as to focus on advancing its technologies against competition and influence the resolution of uncertainty in its favor over rivals we propose that this effect is accentuated when the firm expects that it cannot easily adapt to rivals technologies subsequently specifically when rivals are a greater deterrent through being litigious or innovative using u s government funding for fuel cell research as a policy shock with stock option implied volatilities to measure expected uncertainty we find empirical support for our propositions among firms active in research and development in the u s communications equipment industry through these findings we demonstrate that a competition based view of uncertainty identifies an alternative path for the firm s resource accumulation under uncertainty and we stress that the resolution of uncertainty can be something the firm attempts to influence rather than adapt to

volatility and development why is gdp growth so much more volatile in poor countries than in rich ones we identify four possible reasons i poor countries specialize in more volatile sectors ii poor countries specialize in fewer sectors iii poor countries experience more frequent and more severe aggregate shocks e g from macroeconomic policy and iv poor countries macroeconomic fluctuations are more highly correlated with the shocks of the sectors they specialize in we show how to decompose volatility into these four sources quantify their contribution to aggregate volatility and study how they relate to the stage of development we document the following regularities first as countries develop their productive structure moves from more volatile to less volatile sectors second the level of specialization declines with development at early stages and slowly increases at later stages of development third the volatility of country specific macroeconomic shocks falls with development fourth the covariance between sector specific and country specific shocks does not vary systematically with the level of development we argue that many theories linking volatility and development are not consistent with these findings and suggest new directions for future theoretical work

the effect of farmland preservation programs on farmland prices government agencies in urbanizing areas are increasingly utilizing purchase and transfer of development rights programs to preserve farmland and protect local farm economies this article tests the effect of development restrictions imposed by permanent easement sales on farmland sales prices using maryland data we correct for selectivity bias due to the voluntary nature of these programs in estimating hedonic sales equations although preserved parcels actual land values are lower the effect of the restrictions is not statistically significant these findings may encourage additional participation in preservation programs or justify reductions in the easement prices paid by agencies copyright 2001 oxford university press

run proof banking without suspension or deposit insurance abstract in a model of banking with asymmetric information among depositors and multiple sources of aggregate risk i show that a demand deposit arrangement with state contingent deposit payments and a priority of claims provision on final date resources is almost best under this arrangement intermediaries infer the realization of aggregate risk and of a privately observed signal on the outcome of the risky technology from depositors withdrawal choices and panics as well as information based runs are averted neither suspension provisions nor deposit insurance are necessary for an efficient run proof banking system furthermore intermediation provides information production services that a credit market does not necessarily provide

dollars dollars everywhere nor any dime to lend credit limit constraints on financial sector absorptive capacity we exploit an unexpected inflow of liquidity in an emerging market to study how capital is intermediated to firms we find that backward looking credit limit constraints imposed by banks make it difficult for firms to borrow despite readily available bank liquidity healthy aggregate demand and a sharply falling cost of capital the resulting aggregate failure to extend and retain capital in the economy suggests that agency costs that force banks to rely on sticky balance sheet based credit limits prevent emerging economies from effectively intermediating capital

investor protection optimal incentives and economic growth does investor protection foster economic growth to assess the widely held affirmative view we introduce investor protection into a standard overlapping generations model of capital accumulation better investor protection implies better risk sharing because of entrepreneurs risk aversion this results in a larger demand for capital this is the demand effect a second effect the supply effect follows from general equilibrium restrictions better protection i e higher demand increases the interest rate and lowers the income of entrepreneurs decreasing current savings and next period s supply of capital the supply effect is stronger the tighter are the restrictions on capital flows our model thus predicts that the positive effect of investor protection on growth is stronger for countries with lower restrictions cross country data provide support for this prediction as does the detailed examination of the growth experiences of south korea and india

financial integration productivity and capital accumulation understanding the mechanism through which nancial globalization aects eco nomic performance is crucial for evaluating the costs and bene ts of opening nancial markets this paper is a rst attempt at disentangling the eects of nancial inte gration on the two main determinants of economic performance productivity tfp and investment i provide empirical evidence from a sample of 70 countries observed between 1975 and 1999 the results for both de jure and de facto indicators suggest that nancial integration has a positive direct eect on productivity while it does not directly aect capital accumulation i also control for indirect eects of nancial globalization through nancial development and banking and currency crises while nancial integration does not systematically increase domestic nancial depth it may raise the likelyhood of banking crises though only to a minor extent yet the overall eect of nancial liberalization remains positive for productivity and negligible for investment

managing new product definition in highly dynamic environments in highly dynamic environments characterized by changing customer preferences and uncertainty about competitive products managing the development of a new product is a complex managerial task the traditional practice recommended in the literature of reaching a sharp definition early in the new product development npd process may not be optimal desirable or even feasible in such dynamic situations under high uncertainty forcing early finalization of specifications may result in a firm getting locked into an incorrect definition based on our study of npd in the high technology industry we present a model of an approach called real time definition in which a firm adapts its product definition process to the market and competitive environment uncertainty in the product definition is resolved through frequent repeated interactions with customers and using a flexible development process we find that early definition is optimal only in a limited set of situations to maximize its anticipated profits a firm should tune its definition process to the prevailing level of market uncertainty the marginal value of information obtained from the customer during the npd process and its own risk profile and internal development capabilities effects of competition on a firm s definition approach are also examined and implications for managers of a npd process are presented using a conceptual framework