profits layoffs and priorities this study examines the deliberations of professional mba students when presented with a dilemma that weighs the difference between commitments to profit maximization against concerns for fired workers who would need to seek a new job during a recession using content analysis accounting economic and ethically based rationales that differ from the profit maximizing recommendation are categorized results also show that those who make non profit maximizing recommendations consider but ultimately reject the profit maximizing approach to layoffs

foreign borrowing and macroeconomic adjustment to external shocks abstract this paper analyzes the impact of anticipated and unanticipated external shocks on the evolution of macroeconomic variables particularly foreign borrowing and on steady state stocks of capital and debt we find that the desired mode of adjustment to a shock is highly sensitive to its nature intertemporal substitution effects often dominate the pure wealth loss effect external disturbances will typically be intertemporally correlated in the real world the paper analyses the resulting implications for the dynamic smoothing of adjustment

is agency theory self activating this article examines the conditions under which the principal agent model is self activating socially causal we do so by exploring a principal agent framework that allows for the possibility that rational agents may hold intrinsic preferences for autonomy in decision making and experience disutility from being monitored using a dynamic model of preference formation we identify conditions under which the principal agent model is self activating in that over time the introduction of the model in an otherwise efficient monitor worker relationship leads to the inefficient adoption of the agency model we also examine the extent to which the agency model is robust when autonomy preferring agents are introduced into the population jel g30 l20 c72 i introduction as a social science economics seeks to both explain and influence behavior this in turn fosters a constructive process of self assessment of the economic approach to decision making for example in examining the effect of exposure to economics and differences in cooperativeness in the prisoner s dilemma frank gilovich and regan 1993 report that economics students were statistically more likely to frame the objective of the game in self interested terms and to refer exclusively to the features of the game itself in explaining their strategy choices rather than considering issues such as fairness trust or social norms frey and meier 2003 offer a more distilled view they use a nonlaboratory experiment voluntary student contributions to two university funds with an eye toward examining whether self interested students self select into economics selection bias or self interested behavior is a consequence of indoctrination surprisingly their most significant variable was the study of business economics which obviated both the self selection and indoctrination effects by contrast those with primary training in political economy exhibited neither effect in examining a dilemma in which subjects were forced to weigh their commitment to profit maximization against concern for workers who would be fired as a consequence of profit maximization during a time of high unemployment rubinstein 2006 found that economics students were statistically more likely to adhere to the profit maximization criterion similarly israeli readers of a business daily who had a ba in economics or an mba laid off more workers in the same survey one area where economic theory has played a significant role in both framing the issues and training the affected parties is executive compensation particularly the principal agent model beginning with berle and means 1932 agency theorists have recognized the need to overcome problems stemming from the separation of ownership and control in public corporations for example jensen and meckling 1976 further not only are the lessons from the principal agent model widely taught but its operationalization is also recognized within the popular press as the intellectual foundation for the shareholder value movement within corporate america as well as the doubling of the number of chief executives who were offered stock option plans from 1980 to 1994 1 whether seen as the embodiment of best practice or as the impetus for corporate avarice it cannot be denied that the operationalization of agency theory has revolutionized the culture of corporate america further bebchuck and fried s 2004 finding that the design of compensation schemes creates its own agency problems reinforces the core assumption of opportunistic behavior in agency theory the principal agent model is an example of a widely disseminated theory in which those who are exposed to it are expected both to put it into practice and have it practiced on them consequently the model raises expectations about the usefulness and occurrence of incentive based compensation schemes through its underlying assumptions about agents opportunism

oil volatility and sovereign risk of brics abstract we study the dependence between oil implied volatility shocks and brics sovereign risk from july 2009 to march 2017 first we examine spillovers in value at risk using multivariate regression quantiles and reveal that oil volatility represents a common risk for oil exporting and oil importing brics countries we also employ a quantile impulse response function and reveal the presence of an asymmetry in the mechanisms of shock transmissions between oil exporters russia and brazil and oil importers china and india the former are more sensitive to positive oil shocks whereas the latter are more sensitive to negative oil shocks second we measure the directional predictability in the quantiles using the bivariate cross quantilogram approach and show that in most cases a low high volatility of oil market predicts low high sovereign risk at various quantiles and lags policy implications are discussed

risk spillovers between oil and stock markets a var for var analysis abstract this article investigates the risk spillover effect between oil and stock markets using a novel multivariate quantile model i e the var for var approach and pseudo impulse response functions we explore the risk spillover at different quantiles using daily data over the period from january 4 2000 through august 31 2018 our results indicate the asymmetry in spillover effect which is significant at upside quantiles but not significant at downside quantiles based on subsample analysis we find that the risk spillover becomes stronger after 2008 financial crisis while before the crisis the spillover effect is very weak the international evidence shows that the asymmetric risk spillover can also be found in other six major stock indices of the g7 group

profits and principles four perspectives this article clarifies the relationship between profits and principles by distinguishing four alternative perspectives the win win perspective in which ethical behaviour generates the highest profits a licence to operate perspective in which a minimum ethical performance is required to receive legitimation from the society an acceptable profits perspective in which an acceptable profitability is required to assure the financial continuity and an integrated perspective these four perspectives are illustrated by statements from shell reports and from interviews with managers of a large european retail company

how do global investors differentiate between sovereign risks the new normal versus the old abstract when global investors go into emerging markets or get out of them how do they differentiate between economies has this behavior changed since the crisis of 2008 to reflect a new normal we consider these questions by focusing on sovereign risk as reflected in monthly returns on credit default swaps cds for 18 emerging markets and 10 developed countries tests for breaks in the time series of such returns suggest a new normal that ensued around october 2008 or soon afterwards dividing the sample into two periods and extracting risk factors from cds returns we find an old normal in which a single global risk factor drives half of the variation in returns and a new normal in which that risk factor becomes even more dominant surprisingly in both the old and new normal the way countries load on this factor depends not so much on economic fundamentals as on whether they are designated an emerging market

adjustment policies in developing countries a reassessment this paper analyzes policy responses to external shocks of the 1973 76 and 1979 81 periods in developing economies grouped according to the level of industrialization and the policies applied it is shown that outward oriented economies relied largely on export promotion and import substitution to offset the balance of payments effects of external shocks in both periods inward oriented economies failed to apply such output increasing policies of adjustment rather they financed the balance of payments effects of external shocks by foreign loans in the 1974 76 period and had to take deflationary measures in 1979 81 when their increased indebtedness limited the possibilities for further borrowing the policies applied led to rates of economic growth substantially higher in outward oriented than in inward oriented economies with growth rates in 1983 averaging 5 percent in the first case and practically nil in the second

oil shocks and financial systemic stress international evidence abstract by conducting a structural var analysis on the financial systemic stress in 20 countries this paper provides international evidence that oil structural shocks impact not only stress in individual financial markets but also their connectedness the oil structural shocks explain a large fraction of the variation in the connectedness among various financial markets the effect of oil structural shocks on financial systemic stress is largely dependent on the origins of oil price changes and a country s net oil export position in most oil importing economies financial systemic stress is negatively impacted by supply and aggregate demand shocks and positively impacted by oil market specific demand shocks opposite patterns are detected in oil exporting economies the effects of the spillovers are asymmetrically related with market conditions during normal periods more risks are spilled over from the oil market to financial systems but during financial crises the opposite occurs in periods of financial crises and oil price collapses there is noticeable contagion between the oil market and financial systems

the directional volatility connectedness between crude oil and equity markets new evidence from implied volatility indexes in this paper we use a set of newly introduced implied volatility indexes to investigate the directional connectedness between oil and equities in eleven major stock exchanges around the globe from 2008 to 2015 the inference on the oil equity implied volatility relationships depends on diebold and yilmaz 2012 2014 2015 who proposed a set of directional measures that enable the dynamic and directional characterization of the relationships among financial variables we find uniform results across the sample countries indicating that the connectedness between oil and equity is established by the bi directional information spillovers between the two markets however we find that the bulk of association is largely dominated by the transmissions from the oil market to equity markets and not the other way around the pattern of transmissions is varying over the sample period however most of the linkages between oil and equities are established from the mid of 2009 to the mid of 2012 which is a period that witnessed the start of global recovery

the indirect ethics of aig s backdoor bailout we experimentally assess the ethics of the u s government s indirect bailout of the bank counterparties of american international group during the 2008 financial crisis when the indirect bailout is jointly compared with a counterfactual where the government directly bails out the banks subjects judge the indirect bailout to be far more unethical on the other hand when the two scenarios are judged separately subjects consider a direct bailout of banks to be more unethical this suggests that ethical judgments of indirect versus direct action exhibit a type of preference reversal that is dependent upon whether the evaluation mode is joint or separate the pedagogical and policy implications of this preference reversal are discussed

the terms of trade and the current account the harberger laursen metzler effect the paper examines the effect of terms of trade changes on a small country s spending and current account assuming optimizing behavior in an intertemporal framework with perfect international capital mobility a temporary future terms of trade deterioration implies a deterioration improvement of the trade balance whereas a permanent terms of trade deterioration has an ambiguous effect depending on the rate of time preference nominal and real variables are considered via exact price indexes two periods and an infinite horizon are examined

avoiding the resource curse the case norway in many countries natural resources have been detrimental to the economic development the literature on the resource curse shows a bleak relationship countries with large natural resources generally experience lower economic growth than other countries norway does not fit into this picture economic growth has much higher than in most other industrialized countries this paper describes the key features of the norwegian management of the petroleum resources the main focus is on the management of the revenues from the petroleum sector but the effects of the petroleum sector on the norwegian economy more generally are also discussed

the standard error of regressions statistical significance as used in economics has weak theoretical justification in particular it merges statistical and substantive significance the 182 papers using regression analysis in the american economic review in the 1980s were tested against 19 criteria for the accepted use of statistical significance most some three quarters of the papers did poorly likewise textbooks in econometrics do not distinguish statistical and economic significance statistical significance should not be the focus of empirical economics

explaining credit default swap spreads by means of realized jumps and volatilities in the energy market abstract this paper studies the relationship between credit default swap cds spreads for the energy sector and oil futures dynamics using data on light sweet crude oil futures from 2004 to 2013 which contains a crisis period we examine the importance of volatility and jumps extracted from the futures in explaining cds spread changes the analysis is performed at an index level and by rating group as well as for the pre crisis crisis and post crisis periods our findings are consistent with merton s theoretical framework at an index level futures jumps are important when explaining cds spread changes with negative jumps having higher impact during the crisis the continuous volatility part is significant and positive indicating that futures volatility conveys relevant information for the cds market as for the analysis per rating group negative jumps have an increasing importance as the credit rating deteriorates and during the crisis period while the results for positive jumps and futures volatility are mixed overall the relation between the cds market and the futures market is stronger during volatile periods and strengthened after the global financial crisis

principals preferences for agents with social preferences abstract this study explores a nested representation of ethical moral social identity motivated opportunistic and reciprocal agent preferences to characterize screening contracts in a principal agent model under adverse selection this leads to a ranking of the type of social preferences that principals should seek in agents based upon the information rents associated with each agent type when moral hazard is introduced the ranking further depends upon the interaction of limited liability with self selection these results are interpreted in light of the 2010 dodd frank act and principal agent experiments

statistical properties of country risk ratings under oil price volatility evidence from selected oil exporting countries abstract this paper focuses on the application of panel models for identification and analysis of influence of oil price volatility on statistical properties of country risk ratings which stem from uncertainty of macroeconomic fluctuations firstly two statistical properties of country risk ratings volatility clustering and asymmetrical revision were identified in a theoretical framework based on cruces 2006 secondly considering the oil price volatility numerical experiments were conducted based on extended models to test and verify specific properties of country risk ratings in selected oil exporting countries empirical results suggest that properties of country risk remain comparatively steady despite oil price volatility it is also found that the oil price volatility can obviously exaggerate the country risk volatility as it happened during 2007 2009 country clustering based on the properties of country risk ratings shows that the selected countries maintain a significant clustering tendency these features are of great importance for estimating risk exposure of international trade and investments in oil export during extreme situations

monetary policy preferences of individual fomc members a content analysis of the memoranda of discussion the memoranda of discussion provide detailed records of federal open market committee fomc meeting deliberations procedures are developed for coding the textual data in the memoranda and assessing the reliability of those codings the codings are then used in the estimation of parameters of individual fomc members reaction functions data from the 1970 to 1976 period are employed in the estimation in the future similar methods could be used to analyze newly released transcripts of fomc meetings held after 1976

conspicuous by its absence ethics and managerial economics this paper gives prescriptions for introducing ethical concerns into the economic theory of the firm topics include social responsibility corporate governance profit maximization competition barriers collusion the market system and welfare economics the need for such prescriptions is based on a content analysis of 21 managerial economics texts for their coverage of ethics my analysis finds that substantive discussions of ethics are conspicuous by their absence as ethical breaches can involve significant monetary damages to a firm particularly through adverse market reactions moral reasoning abilities can complement analytical skills consequently my analysis demonstrates how ethics figure into the opportunity costs of managerial decision making which is central to the economic definition of profit

dynamic nonlinear impacts of oil price returns and financial uncertainties on credit risks of oil exporting countries abstract this paper investigates the dynamic and nonlinear impact of oil price returns on the sovereign credit default swap cds spreads for the oil rich countries of the gulf cooperation council gcc and other important oil exporting countries namely venezuela mexico and russia we employ the standard quantile regression analysis the rolling quantile regression and finally the quantile on quantile qq approach that allows one to investigate the dependence dynamics of the sovereign cds spreads under different credit market conditions the empirical results show that oil price returns significantly and favorably decrease the sovereign credit risk premium of the non gcc oil exporting countries under consideration however the results also suggest no or little impact on the sovereign credit risk premium of saudi arabia uae and norway which have the most significant sovereign wealth funds in the world the negative i e favorable impact of oil price returns on the sovereign cds spreads where present gradually increases with the quantile level and is the highest during the bullish credit market conditions the results also show that those cds spreads are more sensitive to the global bond market uncertainty factor than to the global equity market uncertainty factor

energy prices substitution and optimal borrowing in the short run an analysis of adjustment in oil importing developing countries this paper builds a normative framework to evaluate three questions to what extent the increases in indebtedness of developing countries was excessive or simply the result of a perfectly rational strategy what borrowing strategies can be expected in the future as the developing countries revise their expectations about the length of time between shocks what is the derived demand to be faced by multilateral institutions providing some amount of concessionary credit the framework used here consists of a short term model traded and nontraded goods prices are flexible and the exchange rate is allowed to float an optimal borrowing rule is derived by maximizing a welfare function over the planning period that period defined by the expected number of years of oil price stability after the shock is short

modeling sovereign yield spreads a case study of russian debt we construct a model for pricing sovereign debt that accounts for the risks of both default and restructuring and allows for compensation for illiquidity using a new and relatively efficient method we estimate the model using russian dollar denominated bonds we consider the determinants of the russian yield spread the yield differential across different russian bonds and the implications for market integration relative liquidity relative expected recovery rates and implied expectations of different default scenarios this paper develops a model of the termstructure of credit spreads on sovereign bonds that accommodates i default or repudiation the sovereign announces that it will stop making payments on its debt ii restructuring or renegotiation the sovereign and the lenders agree to reduce or postpone the remaining payments and iii a regime switch such as a change of government or the default of another sovereign bond that changes the perceived risk of future defaults we build on the framework of duffie and singleton 1999 showing that cash flows promised by a sovereign bond can be discounted using a default adjusted short termdiscount rate that reflects the m ean arrival rate and associated losses in market value upon arrival of each of the aforementioned types of credit events since a sovereign credit event is often not a liquidation event the model allows for continued trading and pricing of a sovereign instrument through credit events possibly after writedowns in face value or cash distributions to creditors on credit event dates additionally we accommodate the possibility that bonds issued by the same sovereign of exactly the same type but possibly of different maturities may be priced in the market using different discount factors reasons for this may include i bond covenants may not include cross default clauses that would force upon the default of one bond the simultaneous default of other bonds of the same type but of a different maturity for various strategic reasons related to internal

are profit maximisers the best survivors a darwinian model of economic natural selection abstract this paper demonstrates that the friedman conjecture that profit maximisation summarises appropriately the conditions for firm survival is not generally true if firms have market power profit maximisers are not necessarily the best survivors because of the possibility of spiteful behaviour of the following kind say a firm forgoes profit maximisation and thus decreases its survival chances but its deviation from maximisation harms its profit maximising competitors more than itself though the firm will be less likely to survive than it would if it maximised its profits it will still be more likely to survive than its competitors

the dynamics of business ethics and economic activity the authors model the agency relationship between managers and investors through socialization ethical managers develop internalized norms that prevent them from acting opportunistically unethical managers lack these norms higher ethical standards on the part of managers increase economic activity in the short run however increased economic activity increases opportunities to profit from unethical behavior eroding ethical standards over the long run when this rate of erosion is high cycling of ethics and economic activity emerges otherwise ethics and economic activity converge to a stable long run limiting value

the dynamics of resource based economic development evidence from australia and norway australia and norway have achieved modern levels of development as resource based economies thus avoiding the so called resource curse their ability to achieve this rested heavily on repeated diversification into new resource products and industries these processes relied largely on innovation confirming the close ties that have existed between resource based industries and knowledge producing and disseminating sectors of society we develop a resource based diversification model that analyses the interaction between enabling sectors and resource industries and apply it to the historical experience of the two countries

oil price shocks and emu sovereign yield spreads abstract this study examines for the first time the relationship among the oil price shocks and the sovereign yield spreads in the emu which is collectively the largest oil importer of the world in a time varying environment in particular we examine the time varying correlation between oil price shocks and the 10 year sovereign yield spread of core and periphery countries in the emu by employing a scalar bekk framework the main findings reveal that the correlations between sovereign yield spreads and oil price shocks are indeed time varying and are influenced by specific economic and geopolitical events that took place during the study period furthermore even though the correlation patterns are constantly low or zero prior to the great recession a change is revealed in the post 2008 period when correlations become moderate and more volatile finally we do not observe noteworthy differences in the correlation behaviour between core and periphery countries to different oil price shocks the findings of this study are particularly useful and provide valuable information to marketplace participants

dynamic relationship of oil price shocks and country risks abstract this study investigates the dynamic relationship between oil price shocks and country risks using a structural var framework for a sample of both net oil exporting and net oil importing countries over the period january 1994 december 2014 the results reveal that country risk is significantly affected by oil price shocks but the impacts are different unanticipated positive oil price shocks trigger a reduction addition in country risk for net oil exporting country net oil importing countries as to the responses of oil prices to country risk shock evidence show that country risk shocks have a delayed significantly positive impacts on oil price for oil exporting country with respect to the effects of subcomponents of country risk we find evidence that economic and political risk have a significant impact on supply side shocks in net oil exporting countries like canada while economic and political risk have a significant effect on supply side shocks and oil specific demand shocks in net oil importing countries like the us these results are particularly important to policy makers and government