uncertain regulatory timing and market dynamics abstract using a dynamic model of capacity accumulation i examine the relationship between uncertainty about the timing of a new pigouvian tax and oligopolistic competition i find that for some market structures uncertainty about the timing of the regulatory change leads firms to increase investment these results stem from the nature of the uncertainty and its interaction with firms strategic incentive to engage in capacity races they dramatize the importance of accounting for initial conditions when forecasting firms reactions to anticipated regulatory changes in addition i find that more protracted uncertainty leads to greater welfare costs

foreign direct investment and exports with growing demand we explore entry into a foreign market with uncertain demand growth a multinational can serve the foreign demand by two modes or by a combination thereof it can export its products or it can create productive capacityvia foreign direct investment fdi the advantage of fdi is that it allows for lower marginal cost than exporting does the disadvantage is that fdi is irreversible and hence entails the risk of creating under utilized capacity in the case that the market turns out to be small the presence of demand uncertainty and irreversibility gives rise to an interior solution where the multinational under certain conditions both exports its products and does fdi

on the endogeneity of cournot nash and stackelberg equilibria games of accumulation abstract we characterize equilibria of games with two properties i agents have the opportunity to adjust their strategic variable after their initial choices and before payoffs occur but ii they can only add to their initial amounts the equilibrium set consists of just the cournot nash outcome one or both stackelberg outcomes or a continuum of points including the cournot nash outcome and one or both stackelberg outcomes a simple theorem that uses agents standard one period reaction functions and the one period cournot nash and stackelberg equilibria delineates the equilibrium set applications include contribution oligopoly and rent seeking games

endogenous r d symmetry in linear duopoly with one way spillovers a duopoly model of cost reducing r d cournot competition is extended to study the endogenous timing of r d strategic investment under the assumption that r d spillovers only flow from the r d leader to the follower sequential and simultaneous play at the r d stage are compared in order to assess the role of technological externalities in stimulating or attenuating endogenous firm asymmetry the only timing structure of the r d stage sustainable as subgame perfect nash equilibrium involves simultaneous play and zero spillovers

optimal pricing and quality choice when investment in quality is irreversible this paper examines the price and quality choice of a single product risk neutral monopolist who can delay irreversible investments required for market entry it is shown that the price and quality she chooses at entry increase with uncertainty about the size of future demand in a stackelberg leader follower game the leader and follower pre commit immediately up to a certain level of uncertainty in this case the leader produces the higher quality good when uncertainty is higher than this threshold the follower will wait and enter the market later with a higher quality good

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

technology diffusion and public policy a useful typology of technological change is provided by the schumpeterian trilogy invention the generation of new ideas innovation the development of those ideas through to the first marketing or use of a technology and diffusion the spread of new technology across its potential market until recently policy schemes in most oecd countries have tended to focus predominantly on the invention and innovation or science and r d end of this technology spectrum see e g limpens et al i 992 although it is generally realised that it is the process of diffusion or use of technology that creates productive potential and competitiveness policy initiatives have largely bypassed opportunities to improve the diffusion process if this may seem misplaced emphasis it does in fact reflect the state of the academic literature which is wide ranging and extensive as it relates to policies on r d but small and fragmented as regards policies on diffusion currently a gradual reorientation of policy direction toward diffusion seems to be taking place the us and uk governments for example have recently proposed major technology policy initiatives that despite differences in emphasis both stress the importance of creating an infrastructure conducive to a rapid spread of awareness and knowledge of innovations we argue that although sensible in themselves such policies may be too limited in scope and that a broader policy stance may be needed this paper has two main objectives the first is to provide an overview of why policy intervention in the diffusion process may be desirable and what form it might take this discussion is rather long since to the best of our knowledge there is no published systematic synthesis of the diffusion policy literature though see stoneman i987 for an earlier attempt the second aim is to look at actual diffusion policies and their impacts to make the task manageable we are restricting this paper to a discussion of the diffusion of new process technologies although similar issues apply to new consumer technologies these are not explicitly addressed we also consider diffusion policy only within the context of a given institutional and macroeconomic environment although it may well be that the supply of skilled manpower the nature of the capital market animal spirits and entrepreneurship fiscal and monetary policies will all impact upon the diffusion path improvements in these areas will also impact upon a whole host of other aspects of the economy s performance to use a plea for diffusion policy as a rationale for changes in such areas would be equivalent to the tail wagging the dog and thus they fall outside the remit of this paper

why are excess returns on china s treasury bonds so predictable the role of the monetary system abstract it is well documented that the time varying bond excess returns can be explained by predetermined variables such as information in the term structure and macro economic variables recent studies suggest that demand and supply of bonds influence bond excess returns we extend the literature and find that monetary system attributes affect return dynamics in the bond market by introducing a theoretical model to forecast excess returns on treasury bonds in the context of china s unique monetary system this paper attributes the predicted components of bond excess returns mainly to the inflexible term structures of official interest rates set by china s central bank

the financial crisis of 2008 in fixed income markets we explore how a relatively small amount of heterogeneous securities created turmoil in financial markets in much of the world in 2007 and 2008 the drivers of the financial turmoil and the financial crisis of 2008 were heterogeneous securities that were hard to value these securities created concerns about counterparty risk and ultimately created substantial uncertainty the problems spread in ways that were hard to see in advance the run on prime money market funds in september 2008 and the effects on commercial paper were an important aspect of the crisis itself and are discussed in some detail

term premia and inflation uncertainty empirical evidence from an international panel dataset this paper provides cross country empirical evidence on bond risk premia i construct a panel of zero coupon nominal government bond yields spanning ten industrialized countries and nearly two decades i hence compute forward rates and then use two different methods to decompose these forward rates into expected future short term interest rates and term premiums the first method uses an affine term structure model with macroeconomic variables as unspanned risk factors the second method uses surveys i find that term premium estimates declined across countries over the sample period especially in countries that appear to have reduced inflation uncertainty by making substantial changes in the monetary policy frameworks of their central banks during the recent financial crisis term premiums have remained flat and even declined further in some countries perhaps reflecting the effects of quantitative easing actions by many central banks

strategic timing of adoption of new technologies under uncertainty abstract in this paper we introduce experience effects into a duopoly game of timing of adoption of new technologies which exhibit exogenous technological progress departing from the existing literature with this model we obtain continuous and downward sloping reaction functions we find that a higher level of uncertainty increases the extent of dispersion between the equilibrium timings of adoption furthermore we find that the equilibrium timings are even more dispersed when the leader takes the follower s reaction into account when firm roles are made endogenous we find that if there is an incentive to lead follow the equilibrium timings are more less dispersed finally we show that it is possible for collusive adoption to improve welfare

heterogeneous expectations and bond markets this paper presents a dynamic equilibrium model of bond markets in which two groups of agents hold heterogeneous expectations about future economic conditions the heterogeneous expectations cause agents to take on speculative positions against each other and therefore generate endogenous relative wealth fluctuation the relative wealth fluctuation amplifies asset price volatility and contributes to the time variation in bond premia our model shows that a modest amount of heterogeneous expectations can help explain several puzzling phenomena including the excessive volatility of bond yields the failure of the expectations hypothesis and the ability of a tent shaped linear combination of forward rates to predict bond returns the author 2009 published by oxford university press on behalf of the society for financial studies all rights reserved for permissions please email journals permissions oxfordjournals org oxford university press

adoption and diffusion of an innovation of uncertain profitability the argument has frequently been made that the pattern of diffusion associated with most new innovations will typically have certain characteristics a diffusion curve for an innovation is usually defined as the proportion of its potential users who have already adopted as a function of time measured from the first adoption many empirical studies by both economists and other social scientists have shown that diffusion curves nearly always have two distinct characteristics i they are s shaped the proportion adopted is an increasing function of time which is initially convex but eventually becomes concave and ii they tend to be right hand skewed the inflection point occurs at a time corresponding to a proportion adopted which is less than one half so that the function is concave over the greatest amount of time in fact this skewing is occasionally severe enough to make the diffusion curve appear concave everywhere the focus of most empirical studies of innovation diffusion has centered on identification of either the major determinants of the speed of diffusion or the characteristics of firms which determine how long they delay adoption the seminal contributions are griliches 6 study of hybrid corn and mansfield s 121 study of 12 industrial innovations these studies and most of the similar ones following conclude that diffusion is faster for innovations with higher profitability and that large firms tend to be the earliest adopters some studies e g mansfield 121 herregat 71 have attempted to ascertain

a survey of recent developments in the literature of finance and growth this paper provides a survey of the recent progress in the literature of financial development and economic growth the survey highlights that most empirical studies focus on either testing the role of financial development in stimulating economic growth or examining the direction of causality between these two variables although the positive role of finance on growth has become a stylized fact there are some methodological reservations about the results from these empirical studies several key issues unresolved in the literature are highlighted the paper also points to several directions for future research

is globalization detrimental to financial development further evidence from a very large emerging economy with significant orientation towards policies abstractthis study attempts to explore the relationship between globalization and financial development by endogenizing economic growth population density inflation and institutional quality for india during the period from 1971 2013 using the more conclusivecombined cointegration method the study provides evidence of cointegration among these variables the long run and short run estimates from the ardl model and causality tests respectively suggest that globalization in its all forms political social and economic and its overall measure as well as inflation are detrimental to financial development while economic growth and population density both promote financial development furthermore the results also point out that institutional quality is not conducive to financial development in india and there exists a feedback effect between financial development and inflation moreover financial development is influenced by economic growth institutional quality and population density

bertrand edgeworth competition demand uncertainty and asymmetric outcomes abstract we analyze investment and pricing incentives in a symmetric bertrand edgeworth framework with uncertain demand firms choose production capacities before observing demand prices are chosen after demand is observed if the extent of demand variation exceeds a threshold level then a symmetric equilibrium in pure strategies for capacities does not exist a smaller firm has no incentive ex ante to expand its capacity because capacity expansion would reduce its expected revenue in the event that demand is lower than expected output prices are predicted to have positive variance when demand is low and zero variance when demand is high journal of economic literature classification numbers d43 l13

markets for risk and openness to trade how are they related if protectionist trade policies aim to insure domestic industries against swings in world market prices the development of financial markets could lead to trade liberalization likewise trade lib

historical evidence on the finance trade growth nexus abstract we study linkages between financial development international trade and long run growth using data since 1880 for 17 now developed atlantic economies and a set of cross country and dynamic panel data models we find that finance and trade reinforce each other in data before 1930 but that these effects do not persist after the second world war financial development affects growth positively throughout the sample period while trade affects growth strongly and independently after 1945 we attribute the rising importance of trade to major post world war ii changes in tariffs and quantity restrictions associated with the gatt the establishment of the european common market and the gradual elimination of capital controls after 1973 the findings are robust to the use of deep fundamentals such as legal origin and indicators of the political environment as instruments for financial development and trade financial development however links more closely than trade to these fundamentals

innovation adoption and welfare under uncertainty the incentives of firms to adopt a new process need not coincide with maximum expected consumer surplus or social welfare if there is uncertainty before the process is adopted and if the only loss from failure is a fixed cost in some cases no firm will adopt an innovation likely to fail although expected welfare is maximized if one adopts in other cases both firms will adopt an innovation likely to succeed although expected welfare is maximized if one firm adopts this occurs because rivalry between firms leads them to adopt together when total expected profits are higher if one firm adopts copyright 1992 by blackwell publishing ltd

is the tourism economic growth nexus time varying bootstrap rolling window causality analysis for the top 10 tourist destinations this article explores the time varying causal nexus between tourism development and economic growth for the top 10 tourist destinations in the world namely china france germany italy mexico t

two to tangle financial development political instability and economic growth in argentina abstract this paper studies the impact of financial liberalization on economic growth it contributes to this literature by using an innovative econometric methodology and a unique data set of historical series it presents power arch estimates for argentina for the period from 1896 to 2000 the main results show that the long run effect of financial liberalization on economic growth is positive while the short run effect is negative albeit substantially smaller interestingly we find that financial development affects growth only directly that is not through growth volatility

reputations in the adoption of a new technology abstract this paper studies the effects of uncertainty on the timing of adoption of a new technology in a duopoly firms are uncertain of the innovative capabilities of their rivals and about the profitability of adoption these features lead to a richer and in some respects more plausible theory of adoption in which rents from delayed adoption are always realized and returns are not equalized across adoption times

why common factors in international bond returns are not so common this paper analyzes the common factor structure of us german and japanese government bond returns unlike previous studies we formally take into account the presence of country specific factors when estimating common factors we show that the classical approach of running a principal component analysis on a multi country dataset of bond returns captures both local and common influences and therefore tends to pick too many factors we conclude that us bond returns share only one common factor with german and japanese bond returns this single common factor is associated most notably with changes in the level of domestic term structures we show that accounting for country specific factors improves the performance of domestic and international hedging strategies

financial development industrialization the role of institutions and government a comparative analysis between india and china this research is the first comparative attempt incorporating the role of economic demographic sectoral contribution government and trade in explaining financial development for india and china

information value under demand uncertainty and endogenous market leadership in an oligopoly model with firms choosing to produce in one of two periods we identify the circumstance under which a firm s having early information regarding stochastic demand results in market leadership high demand volatility leads to stackelberg competition with the information advantaged firm leading in the n firm case an equilibrium with multiple leaders and multiple followers emerges endogenously in a duopoly information acquisition game we identify conditions that determine whether neither one or both firms will pay to acquire early information and note that one firm s obtaining early information may generate a positive externality benefitting its competitor both symmetric and asymmetric outcomes are possible and stackelberg market leadership may occur in equilibrium but only when firms have different costs of information our finding that an information advantage may convey leadership which then affects the value of information to the players applies to other settings exhibiting first mover advantage such as certain public good provision games jel c72 d82 l13

the strategic perils of delayed differentiation the value of delayed differentiation also known as postponement for a monopolist has been extensively studied in the operations literature we analyze the case of imperfectly competitive markets with demand uncertainty wherein the choice of supply chain configuration i e early or delayed differentiation is endogenous to the competing firms we characterize firms choices in equilibrium and analyze the effects of these choices on quantities sold profits consumer surplus and welfare we demonstrate that purely strategic considerations not previously identified in the literature play a pivotal role in determining the value of delayed differentiation in the face of either entry threats or competition these strategic effects can significantly diminish the value of delayed differentiation in fact under plausible conditions these effects dominate the traditional risk pooling benefits associated with delayed differentiation in which case early differentiation is the dominant strategy for firms even under cost parity with delayed differentiation we extend the main model to study the effects of alternate market structures asymmetric markets and inventory holdback our results in particular that for a broad range of parameter values early differentiation is a dominant strategy even under cost parity with delayed differentiation are robust to these relaxations

international evidence on bond risk premia abstract this paper revisits the study of time varying excess bond returns in international bond markets using newly available yield curve data from 10 different countries with independent monetary policy i test the robustness of cochrane and piazzesi 2005 for most countries in my sample i find more modest predictive power for forward rates than originally found by cochrane and piazzesi 2005 for the us their single factor model captures well the predictability in international data and this factor also tends to have a tent shape in most countries of my sample cp factors are more idiosyncratic across countries than yields or forward rates finally i show that the recent financial crisis has significantly affected the predictability of excess bond returns

the expectations hypothesis new hope or illusory support abstract recent studies of the expectations hypothesis of the term structure ehts find evidence in favor of the ehts using post 1980s us data this has been attributed to the relative macro stability of this period and greater market efficiency using a panel of forecasts for 3 month interest rates for ten countries we test separately for ehts and rational expectations assuming rational expectations holds we find support for the ehts is illusory due to an off setting time varying term premia and non rational expectations previous forecast based studies suggest biased expectations tend to reinforce the effect of a time varying term premium this change can be understood in the context of fama s 2006 argument that markets tend to underestimate future spot rates during periods of long run increases and overestimate during declines

dynamic price competition with capacity constraints and a strategic buyer we analyze a simple dynamic durable good model two incumbent sellers and potential entrants choose their capacities at the start of the game we solve for equilibrium capacity choices and the necessarily mixed pricing strategies in equilibrium the buyer splits the order with positive probability to preserve competition making it possible that a high and low price seller both have sales sellers command a rent above the value of unmet demand by the other seller a buyer benefits from either a commitment not to make future purchases or by hiring an agent to always buy from the lowest priced seller

can world real interest rates explain business cycles in a small open economy abstract while the world real interest rate is potentially an important mechanism for transmitting international shocks to small open economies much of the recent quantitative research that studies this mechanism concludes that it has little effect on output investment and net exports we re examine the importance of world real interest rate shocks using an approach that reverses the standard real business cycle methodology we begin with a small open economy business cycle model but rather than specifying the stochastic processes for the shocks and then solving and simulating the model to evaluate how well these shocks explain business cycles we use the model to back out the shocks that are consistent with the model s observable endogenous variables then we use variance decompositions to examine the importance of each shock we apply this methodology to canada and find that world real interest rate shocks can play an important role in explaining the cyclical variation in a small open economy in particular they can explain up to one third of the fluctuations in output and more than half of the fluctuations in net exports and net foreign assets

post independence india a case of finance led industrialization abstract this paper examines whether financial intermediaries have played a leading role in influencing india s economic performance after describing the evolution and functions of the financial sector we construct a set of vector autoregressive var and vector error correction models vecm to evaluate the strength and direction of the links between measures of formal intermediation and various economic aggregates the results suggest that i the financial sector was instrumental in promoting aggregate investment and output but also in the steady shift toward industry that has characterized india s development ii the operative channel was one of debt accumulation rather than improvements in total factor productivity and iii its contributions went beyond the passive support of fiscal policy

r d rivalry with licensing or imitation the authors study the rivalry between two firms to develop an innovation in a dynamic setting that allows for post development dissemination of the innovation such as licensing or imitation this dissemination may cause the noninnovating firm to benefit from the discovery when this occurs conventional results in the economics of r d no longer need apply they find that industry leaders will tend to develop minor innovations but will develop major innovations only if imitation is difficult copyright 1987 by american economic association

preemptive patenting and the persistence of monopoly this article takes a different tack and inquires whether institutions such as the patent system create opportunities for firms with monopoly power to maintain their monopoly power the results apply to other situations such as brand identification spatial location and capacity expansion which share the characteristic that early or preemptive actions may lower the returns to potential competitors

revisiting the expectations hypothesis of the term structure of interest rates the expectations hypothesis of the term structure has been decisively rejected in a large empirical literature that spans several decades in this paper using a newly constructed dataset of synthetic zero coupon bond yields we show that evidence against the expectations hypothesis is substantially weaker in data generated after the widespread publicity of its failure these results are consistent with the idea that asset pricing anomalies tend to disappear once they are widely recognized

the structural determinants of external vulnerability the authors examine empirically how domestic structural characteristics related to openness and product and factor market flexibility influence the impact that terms of trade shocks can have on aggregate output for this purpose they apply an econometric methodology based on semi structural vector auto regressions to a panel of 90 countries with annual observations for the period 1974 2000 using this methodology the authors isolate and standardize the shocks estimate their impact on gdp and examine how this impact depends on the domestic conditions outlined above they find that larger trade openness magnifies the output impact of external shocks particularly the negative ones while improvements in labor market flexibility and financial openness reduce their impact domestic financial depth has a more nuanced role in stabilizing the economy it helps reduce the impact of external shocks particularly in environments of high exposure that is when trade and financial openness are high firm entry is unrestricted and labor markets are rigid

varying risk premia in international bond markets abstract cochrane and piazzesi cochrane j h piazzesi m 2005 bond risk premia american economic review 95 138 160 use forward rates to forecast future bond returns we extend their approach by applying their model to international bond markets our results indicate that the unrestricted cochrane and piazzesi 2005 model has a reasonable forecasting power for future bond returns the restricted model however does not perform as well on an international level furthermore we cannot confirm the systematic tent shape of the estimated parameters found by cochrane and piazzesi 2005 the forecasting models are used to implement various trading strategies these strategies exhibit high information ratios when implemented in individual countries or on an international level and outperform alternative approaches we introduce an alternative specification to forecast future bond returns and achieve superior risk adjusted returns in our trading strategy bayesian model averaging is used to enhance the performance of the proposed trading strategy

making sense of the experimental evidence on endogenous timing in duopoly markets abstract the prediction of asymmetric equilibria with stackelberg outcomes is clearly the most frequent result in the endogenous timing literature several experiments have tried to validate this prediction empirically but failed to find support for it in contrast these experiments find that simultaneous move outcomes are modal and that behavior in endogenous timing games is quite heterogeneous this paper generalizes hamilton and slutsky s hamilton j slutsky s 1990 endogenous timing in duopoly games stackelberg or cournot equilibria games and economic behavior 2 29 46 endogenous timing games by assuming that players are averse to inequality in payoffs i explore the theoretical implications of inequity aversion and compare them to the empirical evidence i find that this explanation is able to organize most of the experimental evidence on endogenous timing games however inequity aversion is not able to explain delay in hamilton and slutsky s endogenous timing games

international capital markets and foreign exchange risk author s brennan michael j xia yihong abstract the relation between the volatilities of pricing kernels associated with di erent currencies and the volatility of the exchange rate between the currencies is derived under the assumption of integrated capital markets and the volatilities of the pricing kernels are related to the foreign exchange risk premium time series of pricing kernel volatilities are estimated from panel data on bond yields for five major currencies using a parsimonious term structure model that allows for time varying pricing kernel volatilities the resulting estimates are used to test hypotheses about the relation between the volatilities of the pricing kernels in di erent currencies and the volatility of the exchange rate as predicted time variation in foreign exchange risk premia is found to be related to time variation in both the volatility of the pricing kernels and the volatility of exchange rates the estimated pricing kernel volatilities can account for the forward premium puzzle in an average sense across exchange rates

local financial development and growth using a unique sample of net domestic product data for districts in india i investigate the connection between banking sector development human capital and economic growth at the sub national level using disaggregate data avoids many of the omitted variable problems that plague cross country studies of the finance growth connection and facilitates an instrumentation strategy the findings show that the growth of many districts in india is financially constrained due to lack of banking sector development and that the relationship between finance and growth may be non linear for the districts in the sample moving from the 75th percentile of credit net domestic product to the 25th percentile implies an average loss of 4 percent in growth over the 1990s this indicates that the gains from increased banking sector outreach may be large the analysis shows that human capital deepening can reduce the effect of the financial constraint and help decouple growth from financial development in a district at the 25th literacy percentile the implied growth loss due to a constrained banking sector is twice as large as in a district at the 75th literacy percentile thus higher levels of human capital may activate alternative growth and production channels that are less finance intensive

second mover advantages in the strategic adoption of new technology under uncertainty abstract this paper introduces technological uncertainty into a timing game of new technology adoption it is shown that the timing neither necessarily involves first mover advantages in precommitment equilibria reinganum review of economic studies xlviii 1981 395 405 nor rent equalization due to the threat of preemption fudenberg and tirole review of economic studies lii 1985 383 401 rather there may be second mover advantages because of informational spillovers furthermore the model predicts that the equilibrium payoffs will typically be discontinuous and non monotonic in the probability that the new technology is profitable a welfare analysis reveals several market failures and suggests that policy intervention should adequately depend on the nature of uncertainty and the rate of technological progress

capacity investment timing by start ups and established firms in new markets we analyze the competitive capacity investment timing decisions of both established firms and start ups entering new markets which have a high degree of demand uncertainty firms may invest in capacity early when uncertainty is high or late when uncertainty has been resolved possibly at different costs established firms choose an investment timing and capacity level to maximize expected profits whereas start ups make those choices to maximize the probability of survival when a start up competes against an established firm we find that when demand uncertainty is high and costs do not decline too severely over time the start up takes a leadership role and invests first in capacity whereas the established firm follows by contrast when two established firms compete in an otherwise identical game both firms invest late we conclude that the threat of firm failure significantly impacts the dynamics of competition involving start ups this paper was accepted by yossi aviv operations management

on the diffusion of new technology a game theoretic approach this paper is an attempt at a rigorous albeit not exceedingly general analysis of the diffusion of new technology in particular consider an industry composed of two firms each using the current best practice technology the firms are assumed to be operating at nash equilibrium output levels generating a market price given demand and profit allocations when a cost reducing innovation is announced each firm must determine when if ever to adopt it based in part upon the discounted cost of implementing the new technology and in part upon the behavior of the rival firm if either firm adopts before the other it can expect to make substantial profits at the expense of the other firm on the other hand the discounted sum of purchase price and adjustment costs may decline with the lengthening of the adjustment period as various quasi fixed factors become more easily variable therefore although waiting costs the firm more in terms of foregone profits it may save money on the cost of purchasing the new technology thus the firm must weigh the costs and benefits of delaying adoption as well as take account of its rival s strategic behavior

dynamic patent licensing abstract this paper shows one way a fixed fee can dominate an auction if no one knows whether the innovation will succeed or not when it appears and if its life exceeds the life of the patent then selling one licence by fixed fee maximizes inventor profit for some probabilities of success the reason is a nonlicensee is better off when a rival buys a license because this reveals the nature of the innovation if it succeeds the nonlicensee can adopt in the future after the patent has expired this expected future gain can outweigh the expected loss during the life of the patent

globalisation institutional reforms and financial development in east asian economies this study investigates the dynamic effects of globalisation on institutions and financial development in east asian economies using panel data tests our empirical results demonstrate that globalisation has a significant influence on institutional quality and that institutional reforms in turn facilitate and support financial development in particular the development of the banking sector in east asia globalisation is also found to have a favourable direct impact on stock market development without passing through an institutional quality channel

linkages between financial deepening trade openness and economic development causality evidence from sub saharan africa summary this contribution tests for causality between financial deepening trade openness and economic development for 16 sub saharan african countries the hsiao granger method is used to add to the existing empirical evidence only limited support is found for the popular hypothesis of finance led growth in general the evidence indicates that financial deepening and trade openness have swayed economic development rather marginally in particular the investigated countries have failed to benefit from financial deepening development strategies prioritizing financial or trade sector development hence cannot be supported

a multivariate latent factor decomposition of international bond yield spreads a factor analysis of long term bond spreads is performed by decomposing international interest rate spreads into national and global factors the factors are latent and are assumed to have garch type specifications as well as exhibiting serial dependence an indirect estimator is used to compute estimates of the unknown parameters the sampling performance of this estimator is investigated and compared with an alternative direct estimator based on the kalman predictor the factor model is applied to weekly data on long bond spreads between five countries australia japan germany canada and the uk and the usa over the period 1991 to 1999 the resulting factor decomposition is used to examine the international investor s optimal portfolio decision in a mean variance framework copyright 2000 john wiley sons ltd

preemption and rent equalization in the adoption of new technology we study the adoption of a new technology to illustrate the effects of preemption in games of timing we show that the threat of preemption equalizes rents in a duopoly but that this result does not extend to the general oligopoly game if the gain to preemption is sufficiently small then the optimal symmetric outcome which involves late adoption is an equilibrium this contrasts with reinganum s result that in precommitment equilibria there must be diffusion we develop a new and richer formalism for modeling games of timing which permits a continuoustime representation of the limit of discrete time mixed strategy equilibria

endogenous leadership in a new market in this article i analyze strategic investment under uncertainty in a new market where firms face a tradeoff between commitment and flexibility the model predicts asymmetric equilibria under fairly general conditions even though firms are ex ante identical and have symmetric opportunities to enter the market in equilibrium one firm commits to early investment and the other firm follows a wait and see strategy in the ex post outcome firms end up with asymmetric sizes if the market profitability turns out close to or lower than expected firms end up in symmetric position if the market turns out highly profitable if uncertainty is small the model yields approximately stackelberg outcomes

a theory of endogenous commitment commitment is typically modelled by assigning to one of the players the ability to take an initial binding action the weakness of this approach is that the fundamental question of who has the opportunity to commit cannot be addressed as it is assumed this paper presents a framework in which commitment power arises endogenously from the fundamentals of the model we construct a finite dynamic game in which players are given the option to change their minds as often as they wish but pay a switching cost if they do so we show that for games with two players and two actions there is a unique subgame perfect equilibrium with a simple structure this equilibrium is independent of the order and timing of moves and is robust to other protocol specifications moreover despite the perfect information nature of the model and the costly switches strategic delays may arise in equilibrium the flexibility of the model allows us to apply it to various environments in particular we study an entry deterrence situation its equilibrium is intuitive and illustrative of how commitment power is endogenously determined copyright 2008 wiley blackwell

the role of globalization on the recent evolution of energy demand in india implications for sustainable development using annual data for the period 1971 2012 this study explores the relationship between globalization and energy consumption for india by endogenizing economic growth financial development and urbanization the cointegration test proposed by bayer hanck 2013 is applied to estimate the long run and short run relationships among the variables after confirming the existence of cointegration the overall results from the estimation of an ardl energy demand function reveal that in the long run the acceleration of globalization measured in three dimensions economic social and overall globalization leads to a decline in energy demand in india furthermore while financial development is negatively related to energy consumption economic growth and urbanization are the key factors leading to increased energy demand in the long run these results have policy implications for the sustainable development of india in particular globalization and financial development provide a win win situation for india to increase its economic growth in the long run and become more environmentally sustainable

does one size fit all a reexamination of the finance and growth relationship abstract recent research has found a strong positive effect of a country s financial development on economic growth we propose that this relationship may vary according to the level of financial development divided in three regions in the low region countries with very low levels of financial development additional improvements in financial markets have an uncertain effect on growth in the intermediate region financial development has a large positive effect on growth finally in the high region the effect is positive but smaller we examine a panel of 74 countries using generalized method of moments gmm dynamic panel techniques and find support for the different regions

patent litigation as an information transmission mechanism patent litigation reveals important information about the validity of the contested patent to other potential entrants this paper explores the implications of such informational externalities for entry dynamics in the presence of multiple potential entrants the nature of the entry game can be one of either waiting or preemption depending on the degree of patent protection therefore the payoffs for the patentee and the initial imitator are discontinuous in the degree of patent protection furthermore strengthening intellectual property rights is not necessarily desirable for the patentee the analysis may also help explain the apparently puzzling practice of delaying patent suits copyright 1998 by american economic association

financial liberalization financial sector development and growth evidence from malaysia abstract the objective of this paper is to examine whether financial development leads to economic growth or vice versa in the small open economy of malaysia using time series data from 1960 to 2001 we conduct cointegration and causality tests to assess the finance growth link by taking the real interest rate and financial repression into account the empirical evidence suggests that financial liberalization through removing the repressionist policies has a favorable effect in stimulating financial sector development financial depth and economic development are positively related but contrary to the conventional findings our results support robinson s view that output growth leads to higher financial depth in the long run

capacity dynamics and endogenous asymmetries in firm size empirical evidence suggests that there are substantial and persistent differences in the sizes of firms in most industries we propose a dynamic model of capacity accumulation that is consistent with the observed facts the model highlights the mode of product market competition and the extent of investment reversibility as key determinants of the size distribution of firms in an industry in particular if firms compete in prices and the rate of depreciation is large then the industry moves toward an outcome with one dominant firm and one small firm industry dynamics in this case resemble a preemption race contrary to the usual intuition this preemption race becomes more brutal as investment becomes more reversible

the saving and investment nexus for china evidence from cointegration tests the saving and investment nexus as postulated by feldstein and horioka fh 1980 is revisited the saving investment correlation for china is estimated over the periods 1952 1998 and 1952 1994 the latter culminating in a period of fixed exchange rate regime amongst the key results it is found that saving and investment are correlated for china for both the period of the fixed exchange rate and the entire sample period with high saving investment correlation the results suggest that the chinese economy is in conformity with the fh hypothesis this is a valid outcome for in china capital mobility was fairly restricted over the 1952 1994 period as indicated by the relatively low foreign direct investment

financial development and openness evidence from panel data abstract this paper addresses the empirical question of whether trade and financial openness can help explain the recent pace in financial development as well as its variation across countries in recent years utilising annual data from developing and industrialised countries and dynamic panel estimation techniques we provide evidence which suggests that both types of openness are statistically significant determinants of banking sector development our findings reveal that the marginal effects of trade financial openness are negatively related to the degree of financial trade openness indicating that relatively closed economies stand to benefit most from opening up their trade and or capital accounts although these economies may be able to accomplish more by taking steps to open both their trade and capital accounts opening up one without the other could still generate gains in terms of banking sector development thus our findings provide only partial support to the well known rajan and zingales hypothesis which stipulates that both types of openness are necessary for financial development to take place