how do cartels use vertical restraints reflections on bork s the antitrust paradox abstractin the antitrust paradox robert bork discusses vertical restraints and policy responses to naked and ancillary price fixing empirical research finds that vertical restraints are generally welfare enhancing we examine cartels that used vertical restraints to support collusion we find that one quarter of a sample of convicted contemporary international cartels used vertical restraints some of these cartels used vertical restraints to control downstream firms who might otherwise have undermined collusion in other cases distributors themselves had market power and received a share of cartel rents in return for their willingness to exercise that power as part of a cartel this raises questions for antitrust policy toward vertical restraints in highly concentrated industries or in those with a history of cartel activity

optimal consumption and investment with transaction costs and multiple risky assets we consider the optimal intertemporal consumption and investment policy of a constant absolute risk aversion cara investor who faces fixed and proportional transaction costs when trading multiple risky assets we show that when asset returns are uncorrelated the optimal investment policy is to keep the dollar amount invested in each risky asset between two constant levels and upon reaching either of these thresholds to trade to the corresponding optimal targets an extensive analysis suggests that transaction cost is an important factor in affecting trading volume and that it can significantly diminish the importance of stock return predictability as reported in the literature this paper studies the optimal intertemporal consumption and investment policy of an investor with a constant absolute risk aversion cara preference and an infinite horizon the investor can trade in one risk free asset and n 1 risky assets in contrast to the standard setting the investor faces both fixed and proportional transaction costs in trading any of these risky assets in the absence of transaction costs and when risky asset prices follow geometric brownian motions the optimal investment policy is to keep a constant dollar amount in each risky asset as shown by merton 1971 this trading strategy requires continuous trading in all the risky assets in addition the optimal consumption is affine in the total wealth in the presence of transaction costs however trading continuously in a risky asset would incur infinite transaction costs therefore risky assets are traded only infrequently in this case the literature on optimal consumption and investment with multiple risky assets subject to transaction costs is limited leland 2000 examines a multiasset investment fund that is subject to transaction costs and capital gains taxes under the assumption that the fund has an exogenous target for each risky asset he develops a relatively simple numerical procedure to compute the no transaction region akian menaldi and sulem 1996 consider an optimal consumption and investment problem with proportional transaction costs for

do governors get what they want an alternative examination of the line item veto this paper reconsiders the impact of the governor s line item veto on the state budget process the governor s ability to obtain his or her most desired budget measures item veto effectiveness rather than a smaller expenditure budget the percentage difference between the final state budget and the governor s original budget request over fiscal years 1983 1989 is examined the empirical results indicate that under certain political situations the line item veto authority enhances the governor s ability to obtain his or her desired budget

optimal production management when demand depends on the business cycle we assume that the cumulative consumer demand for an item follows a brownian motion with both the drift and the variance parameters modulated by a continuous time markov chain that represents the regime of the economy the management of the company would like to maintain the inventory level as close as possible to a target inventory level and would also like to produce at a rate that is as close as possible to a target production rate the company is penalized for deviations from the target levels and the objective is to minimize the total discounted penalty costs we consider two models in the first model the management of the company knows the state of the economy whereas in the second model the management does not know it we solve both problems and obtain the optimal production policy and the minimal total expected discounted cost furthermore we compare the total expected discounted costs of the two models and determine the value of knowing the regime of the economy we also solve the above prob

price wars and price collusion in china s airline markets in the absence of an effective antitrust law both fare wars and price collusion have been pervasive in china s airline markets causing concern for both airlines and consumers a study of monthly airfare data from 2002 to 2004 confirms that fare wars occur periodically as well as price collusion both tend to be short lived the fact that collusion is more likely to occur in january and april when demand is high as revealed by china eastern s and china southern s price war and collusion models has been confirmed by interview information obtained from the airlines sales managers however there is also evidence in these models suggesting that collusion can be more easily formed when demand is low high airport concentration measured by the hhi may facilitate collusion in certain circumstances but it may also lead to more price wars under other conditions concentration in both airports and routes does not appear to systematically affect the occurrence of fare wars and collusion in all the models estimated we also reject the possibility that mutual forbearance due to multimarket contact plays any important anti competitive role in china s airline markets

line item veto where is thy sting roponents of giving the president the authority to use a line item veto argue that the institutional change is needed to limit special interest legislation and restrain spending opponents respond that it would grant too much added power to the president thereby upsetting the delicate balance wisely crafted by the founding fathers this article focuses on the presumption evidently shared by both sides in the debate that adoption of item veto authority will have significant consequences in terms of budget outcomes and the distribution of power 1 curiously there presently exists little empirical support for the presumption that item veto authority is important most studies comparing states with various types of veto authority have failed to detect significant effects associated with item veto additional tests of our own are consistent with these results after reviewing the empirical evidence we reconsider the alleged effects of item veto authority by seating the popular depiction in an explicit model of the budgetary process formal modeling exposes logical inconsistencies contained in popular veto discourse further the model makes clear that the predicted consequences of item veto commonly projected as ubiquitous in fact arise only in select settings

political and institutional checks on corruption explaining the performance of brazilian audit institutions this article investigates the performance determinants of accountability institutions in new democracies current scholarship on accountability has identified a distinct mechanism through which the introduction of political competition may affect such institutions the electoral connection or vertical accountability mechanism this connection is not expected to be effective in new democracies because political competition is found to be volatile and nonprogrammatic another strand of the literature focuses on the effect of power alternation government turnover is expected to generate incentives for the creation and strengthening of autonomous institutions by exploring a unique data set on 33 state audit institutions the authors bring together these distinct claims and provide systematic empirical tests for them they find a negative effect of volatility on their institutional activism and a positive direct and indirect influence of power alternation on their levels of autonomy and sanctioning patterns

supermajority rule and the law of 1 n this paper investigates the impact of a supermajority rule on the law of 1 n which posits that a larger number of districts increases the size of government our analysis suggests that supermajority rule despite the claim that it restrains excessive spending increases the 1 n effect because qualified majorities require logrolling to attract additional members using data from us states from 1970 to 2007 we find that the adoption of a supermajority rule has a robust worsening effect on the fiscal commons problem identified by the law of 1 n

politics partisanship and the power to veto does gubernatorial line item veto power affect state budgets abstracthow does line item veto liv power affect a governor s ability to structure the state budget is liv power only relevant as a partisan tool is it still relevant when the state legislature can override the veto we use a rich disaggregated data set to test the effect of the gubernatorial liv on state budgets controlling for political factors such as party affiliation of the governor and legislature minority status of the governor and the legislature s ability to override a liv our results suggest that liv power has very weak influence if any on governors ability to influence state budgets

target zones and exchange rate dynamics this paper develops a simple model of exchange rate behavior under a target zone regime it shows that the expectation that monetary policy will be adjusted to limit exchange rate variation affects exchange rate behavior even when the exchange rate lies inside the zone and is thus not being defended actively somewhat surprisingly the analysis of target zones turns out to have a strong formal similarity to problems in option pricing and investment under uncertainty

state responses to fiscal crises the effects of budgetary institutions and politics this paper explores the dynamics of state taxes and spending during the late 1980s when regional economic downturns and increased expenditure demands led to substantial state budget deficits more restrictive state fiscal institutions such as no deficit carryover rules and tax and expenditure limitations are correlated with more rapid fiscal adjustment to unexpected deficits political factors are also important when a single party controls the state house and the governorship deficit adjustment is much faster than when party control is divided in gubernatorial election years tax increases and spending cuts are both significantly smaller than at other times

target zones and exchange rates an empirical investigation this paper develops an empirical model of exchange rates in a target zone the distribution of exchange rate changes is conditioned on a latent jump variable where the probability and size of a jump vary over time as a function of financial and macroeconomic variables when there is no jump the target zone is credible and exchange rate changes are constrained to remain within the target zone band the paper revisits the empirical evidence from the european monetary system regarding the conditional distribution of exchange rate changes the credibility of the system and the size of the foreign exchange risk premia in contrast to some previous findings we conclude that the french franc deutschmark rate exhibits considerable nonlinearities realignments are somewhat predictable and the credibility of the system did not increase substantially after 1987 moreover our model implies that the foreign exchange risk premium becomes large during speculative crises

should central bankers talk to the foreign exchange markets in this paper we study the role of official statements and speeches given by central bank authorities in charge of foreign exchange policy we investigate the impact of statements that comment on and confirm such interventions on the day of the intervention on the two major foreign exchange markets over an extended period 1989 2003 we also study the impact in terms of policy effectiveness of central bank communication before the actual operations our results suggest that appropriate speeches clarifying the current intervention policy can have marginally virtuous effects both in terms of exchange rate level and exchange rate volatility this leads us to conclude that in general actual interventions on the market should still be employed provided that official statements are used to clarify the nature and purpose of these interventions c 2008 elsevier ltd all rights reserved

budget institutions and fiscal policy in the u s states this paper summarizes state balanced budget requirements and the available empirical evidence on the effect of these rules on state fiscal policies existing state rules differ from many current proposals at the federal level they are typically restricted to part of the state budget they frequently permit short term borrowing and they lack formal enforcement mechanisms the paper also surveys previous research on how anti deficit provisions affect state fiscal policy the available evidence indicates that stringent anti deficit provisions lead to more rapid adjustment of state taxes and expenditures when fiscal deficits emerge this suggests that changing the federal budget process has the potential to affect federal fiscal policy this abstract was borrowed from another version of this item

cartel code attributes and cartel performance an industry level analysis of the national industrial recovery act abstract this paper uses the cartel enabling national industrial recovery act nira of 1933 to gain insight into cartel performance i employ a monthly panel of 66 industries that passed an nira code of fair competition to examine how specific attributes of these cartel codes affected the ability to achieve collusive outcomes i find that output growth was significantly lower during cartel months consistent with cartel theory and that industries with more complex codes were more successful than those with simpler ones furthermore industries with code restrictions on new productive capacity production quotas and requirements to file data with a central board were the most successful at reducing output which suggests that these types of provisions were the most effective in helping firms attain collusive outcomes finally i find that the effectiveness of data filing provisions was limited to the early months of the nira prior to a wave of cartel breakdown occurring in spring 1934

natural resource economics under the rule of hotelling abstract natural resource stocks held in situ are physical assets equilibrium in the assets market requires that their rates of return be such that their owners are just willing to hold on to them rather than invest elsewhere i discuss a number of factors relating to the evolution of extraction costs to the durability of the resource to market structure and to uncertainty that are important in correctly characterizing the rate of return on holding exhaustible natural resource stocks the emphasis is put on how those factors can potentially help bridge the gap between the basic hotelling s rule of natural resource exploitation and the historical behaviour of the flow price of a number of resources i also highlight some theoretical and empirical issues that need further attention

separation of powers and the tax level in the u s states we estimate a nonlinear and discontinuous relationship between the tax level and the degree of alignment between the legislature and the governor measured as the number of seats in the legislature that belong to the governor s party in the states with the line item veto the tax level jumps at the point where the government switches from divided to unified with a regression discontinuity design we show that this jump can be interpreted as a causal effect we propose a simple model to account for this nonlinear relationship the sequential nature of the budget bargaining game that is the legislature proposes and the governor cuts with the line item veto implies that the tax level is determined by the overlap between the supporters of the governor and the supporters of the legislative majority changes in the size of the overlap determine the tax level

multi market collusion with territorial allocation abstract we develop a supergame model of collusion between price setting oligopolists located in different markets separated by trade costs the firms produce a homogeneous good and sustain collusion based on territorial allocation of markets we first show in a much more general framework than some earlier literature that a reduction in trade costs can paradoxically increase the sustainability of collusion then we prove a new paradox in which the scope for collusion may be enhanced by an increase in the number of firms the paper thus highlights several hitherto unknown theoretical implications of collusion under price competition

optimal target zones how an exchange rate mechanism can improve upon discretion abstract using krugman s 1991 target zone model we find an explicit subgame perfect solution for a central bank wishing to stabilise the exchange rate given proportional costs of intervention we demonstrate however that precommitment to narrower bands would yield a welfare gain which provides a theoretical rationale for an exchange rate mechanism erm numerical simulations suggest that the optimal currency band with precommitment via an erm is only half as wide as that under discretion and that the welfare benefits are sufficient to sustain the system

classical and restricted impulse control for the exchange rate under a stochastic trend model abstract building on cadenillas and zapatero 2000 and bertola et al 2016 we consider the problem faced by a central bank to optimally control the exchange rate whereby the control is composed of a direct impulse control intervention and an indirect continuously acting intervention given by the control of the domestic interest rate similarly to cadenillas and zapatero 2000 and bertola et al 2016 we formulate the problem as a mixed classical impulse control problem and the approach is based on a quasi variational inequality by considering a specific class of the optimal value functions and controls as in bertola et al 2016 but differently from cadenillas and zapatero 2000 we consider a finite horizon that makes the problem time inhomogeneous and we do not have to impose a smooth fit condition so that a fully analytical solution is possible with respect to bertola et al 2016 we generalize the problem by letting more realistically the drift in the dynamics of the exchange rate to be time varying or even unobservable so that it has to be filter estimated from observable data numerical illustrations are presented as well

divided government fiscal institutions and budget deficits evidence from the states does partisan control of american state government have systematic effects on state spending and taxing levels does divided control affect the government s ability to make hard decisions do institutional rules like legal deficit carryover restrictions matter using a formal model of fiscal policy to guide empirical analysis of data covering the american states from 1968 to 1987 we conclude that 1 aggregate state budget totals are driven by different factors under democrats and republicans the net result being that democrats target spending and taxes to higher shares of state level personal income 2 divided government is less able to react to revenue shocks that lead to budget deficits particularly where different parties control each chamber of the legislature and 3 unified party governments with restricted ability to carry deficits into the next fiscal year outside the south have sharper reactions to negative revenue shocks than those without restrictions

the effectiveness of central bank intervention in the ems the post 1993 experience abstract we analyze the effectiveness of intervention in the european monetary system by using data on the dem intervention activity of six european central banks covering the period from august 1993 to april 1998 to allow for regime specific intervention effects we estimate markov switching autoregressive conditional heteroscedasticity models we find that interventions have only limited effects on the conditional means and variances

cartel contract duration empirical evidence from inter war international cartels a formal cartel organization sets up a multilateral relationship between firms in a given industry while standard contracting literature has studied bilateral monopoly relationships in detail there are horizontal relationships like cartels that also have contractual aspects to shed light on how these contracts work this paper takes a sample of legal formal cartel contracts and examines their structure and durability borrowing from industrial organization theories and transaction cost theories the empirical model tests for the importance of demand uncertainty and cartel organizational characteristics in determining cartel contract duration the results show that the more uncertain the environment within which the cartel operates the shorter the expected cartel duration other industry structure characteristics and cartel organization variables included in the empirical model have a much weaker influence on duration copyright 2005 oxford university press

the industrial organization of congress or why legislatures like firms are not organized as markets this paper provides a theory of legislative institutions that parallels the theory of the firm and the theory of contractual institutions like market institutions legislative institutions reflect two key components the goals or preferences of individuals here representatives seeking reelection and the relevant transactions costs we present three conclusions first we show how the legislative institutions enforce bargains among legislators second we explain why given the peculiar form of bargaining problems found in legislatures specific forms of nonmarket exchange prove superior to market exchange third our approach shows how the committee system limits the types of coalitions that may form on a particular issue

ringleaders in larger number asymmetric cartels the concept of a cartel ringleader has specific legal meaning but has received relatively little attention in the economic literature of cartels this article draws on a sample of 89 european cartels to identify how often ringleaders exist who they are and what they do it argues that ringleaders are more likely where the traditional cartel problems are likely to be most acute i e with larger numbers of members exhibiting substantial size asymmetries this is confirmed for price fixing and bid rigging cartels and is especially pronounced where the ringleader displays aggressive as opposed to merely organisational behaviour

temporary natural resource cartels abstract we analyze the behavior of a nonrenewable resource cartel that anticipates being forced at some date in the future to break up into an oligopolistic market in which its members will then have to compete as rivals under reasonable assumptions about the value function of the individual firms in the oligopolistic equilibrium that follows the breakup we show that the cartel will then produce more over the same interval of time than it would if there were no threat of dissolution and that its rate of extraction is a decreasing function of the cartel s life that there are circumstances under which the cartel will attach a negative marginal value to the resource stocks in which case the rate of depletion will be increasing over time during the cartel phase that for a given date of dissolution the equilibrium stocks allocated to the post cartel phase will increase as a function of the total initial stocks whereas those allocated to the cartel phase will increase at first but begin decreasing beyond some level of the total initial stocks

optimal central bank intervention in the foreign exchange market abstract we consider a currency with exchange rate dynamics modeled as a geometric brownian motion the objective of the central bank is to keep this exchange rate as close as possible to a given target so there is a running cost associated to the difference between the exchange rate and the target additionally there are also fixed and proportional costs associated with each intervention the objective of this paper is to find the optimal level of intervention and the optimal sizes of the interventions so as to minimize the total cost we solve this problem by applying the theory of stochastic impulse controls journal of economic literature classification numbers c61 d81 f31 g15

optimal dividend and capital injection problem in the dual model with proportional and fixed transaction costs in this paper we consider the dividend payments and capital injections control problem in a dual risk model such a model might be appropriate for a company that specializes in inventions and discoveries which pays costs continuously and has occasional profits the objective is to maximize the expected present value of the dividends minus the discounted costs of capital injections this paper can be considered as an extension of yao et al 2010 we include fixed transaction costs incurred by capital injections in this paper this leads to an impulse control problem using the techniques of quasi variational inequalities qvi this optimal control problem is solved numerical solutions are provided to illustrate the idea and methodologies and some interesting economic insights are included

what determines cartel success following george stigler 1964 many economists assume that incentive problems undermine attempts by firms to collude to raise prices and restrict output but the potential profits from collusion can create a powerful incentive as well theory cannot tell us a priori which effect will dominate whether or when cartels succeed is thus an empirical question we examine a wide variety of empirical studies of cartels to answer the following questions 1 can cartels succeed 2 if so for how long 3 what impact do cartels have 4 what causes cartels to break up we conclude that many cartels do survive and that the distribution of duration is bimodal while the average duration of cartels across a range of studies is about five years many cartels break up very quickly i e in less than a year but there are many others that last between five and ten years and some that last decades limited evidence suggests that cartels are able to increase prices and profits to varying degrees cartels can also affect other non price variables including advertising innovation investment barriers to entry and concentration cartels break up occasionally because of cheating or lack of effective monitoring but the biggest challenges cartels face are entry and adjustment of the collusive agreement in response to changing economic conditions cartels that develop organizational structures that allow them the flexibility to respond to these changing conditions are more likely to survive price wars that erupt are often the result of bargaining issues that arise in such circumstances sophisticated cartel organizations are also able to develop multipronged strategies to monitor one another to deter cheating and a variety of interventions to increase barriers to entry

strategic institutional choice voters states and congressional term limits states choices on term limits are quantified as a multiple categorical variable capturing variation in the type of limits passed measures of relative political influence in congress explain much of this variation using 1992 data on the american states the model controls for unobserved heterogeneity due to voter access to direct democracy in some states at 2002 values for congressional tenure and federal spending the model predicts approximately eight to ten additional states would choose to limit their own members terms but cannot under a supreme court ruling we discuss implications for institutional federalism and the potential passage of similar political institutions across the states

government debt control optimal currency portfolio and payments motivated by empirical facts we develop a theoretical model for optimal currency government debt portfolio and debt payments which allows both government debt aversion and jumps in the exchange rates we obtain first a realistic stochastic differential equation for public debt and then solve explicitly the optimal currency debt problem we show that higher debt aversion and jumps in the exchange rates lead to a lower proportion of optimal debt in foreign currencies furthermore we show that for a government with extreme debt aversion it is optimal not to issue debt in foreign currencies to the best of our knowledge this is the first theoretical model that provides a rigorous explanation of why developing countries have reduced consistently their proportion of foreign debt in their debt portfolios

the linkage between speculative attack and target zone models of exchange rates in this paper we generalize the target zone exchange rate as model formalized by krugman 1988b to include finite sized interventions in defense of the zone the main contributions of these pages consist of linking the recent developments in the theory of target zones to the mirror image theory of speculative attacks on asset price fixing regimes and in using aspects of that linkage to give an intuitive interpretation to the smooth pasting condition usually invoked as a terminal condition this abstract was borrowed from another version of this item

consumer capture of regulatory institutions the creation of public utility consumer advocates in the united states we examine the conditions under which state legislatures in the united states orga nized public utility consumers during the 1970s and 1980s by creating independent consumer advocates with resources and authority to intervene in public utility rate making procedures while economic factors notably utility fuel cost increases were important predictors state political conditions were estimated to have a larger impact on the probability of implemen tation we find that the pattern of adoption is consistent with the hypothesis that legislatures deploy institutions as a mechanism for insulating regulatory policies against future reform in general democrat controlled governments were significantly more likely to implement con sumer advocates when they were less certain about being re elected to office during this period we find also that the effect of political re election expectations was particularly acute for the creation of advocates representing solely residential consumers a relatively disorganized in terest group our results suggest that legislatures organize and publicly fund interest groups to protect supportive but vulnerable groups against adverse future political environments

starving the beast intra generational conflict and balanced budget rules a balanced budget requirement does not only prevent fiscal policy makers from smoothing tax distortions but also affects their preferred choice of government spending the paper analyzes the conditions under which groups opposed to government spending might want to implement a balanced budget requirement in order to induce the government to spend less it shows that relaxing a balanced budget requirement need not be associated with higher government spending

the political economy of benefits and costs a neoclassical approach to distributive politics this essay offers a rational political explanation for the notorious inefficiency of pork barrel projects with an optimization model of legislative behavior and legislative institutions the model emphasizes the economically arbitrary from a welfare point of view importance of the geographic incidence of benefits and costs owing to the geographic basis for political representation we explore the implications of a legislator s objective function and derive conditions under which a representative legislature will select an omnibus of projects each of which exceeds the efficient scale

public spending and the paradox of supermajority rule this article examines the paradox that a supermajority rule in a legislature promotes excessive government spending we propose a simple conjecture if rent seeking coalitions dominate legislative politics and if individual legislators demands for rent seeking activities are price inelastic a change of legislative rules from simple majority to a supermajority will lead to greater public spending other things equal using data from u s state legislatures 1970 to 2007 we find that the adoption of a supermajority rule has a robust positive impact on various types of tax revenues and government expenditures

the impact of fx central bank intervention in a noise trading framework abstract in this paper we analyse the effectiveness of the direct central bank interventions using a new effectiveness criterion to this aim we investigate the effects of central bank interventions cbi in a noise trading model with chartists and fundamentalists we first estimate a model in which chartists extrapolate past returns and fundamentalists forecast a mean reverting dynamics of the exchange rate towards a fundamental value then we investigate the role of central bank interventions for explaining the switching properties between the two types of agents we find evidence that in the medium run interventions increase the proportion of fundamentalists and therefore exert some stabilizing influence on the exchange rate

target zones and realignments recent contributions emphasize that the presence of exchange rate target zones has important effects on the within band behavior of exchange rates when agents are forward looking the authors find that the implications of available models are inconsistent with european exchange rate data and they suggest that the frequent realignments occurring in the period they consider may be responsible for this they construct a model in which the likelihood of a realignment in the near future increases as the exchange rate approaches the limits of its fluctuation band and show that its implications are broadly consistent with the evidence copyright 1992 by american economic association

deviations from constituent interests the role of legislative structure and political parties in the states this paper investigates the determinants of state spending over 1960 1990 recent empirical studies suggest that state government expenditure is greater than the electorate desires our main finding is that expenditure was positively related to the number of seats in a state s legislature this is consistent with the hypothesis that logrolling leads representatives to spend more than their constituents would like we also find that political parties do not have a pronounced effect on overall levels of expenditure but do influence the composition of spending in particular democratic control of state government is associated with higher levels of welfare spending

equilibrium asset prices and exchange rates abstract in a two country two good world we construct an intertemporal international general equilibrium for two logarithmic representative agents financial markets are fully integrated and independently incomplete the equilibrium expected rate of change of the exchange rate increases with the differential of interest rates and the volatility of the domestic equity markets and decreases with the covariance between domestic and foreign equity markets the equilibrium volatility of the exchange rate is the sum of the volatilities due to idiosyncratic factors in the financial markets and a term that represents the difference of weights in the common international factor

budget institutions and political insulation why states adopt the item veto abstract forty three of the fifty states of the united states have granted item veto authority to their governors as part of state constitutions in this paper i test explanations of why and when a legislature would cede institutional power using data from 1865 to 1994 i show that these measures are most likely proposed by fiscal conservatives who fear the loss of power in the future in order to protect their interests for those periods when they will be in the minority they implement institutions such as the item veto which will limit future liberal legislatures the results therefore shed light on two important substantive areas first by showing how the choice of budgetary institutions is endogenous to the political process it clarifies that political factors must be considered in addition to social efficiency to understand the adoption of budget institutions second it provides evidence in support of theories that have posited that electorally weak groups will heavily insulate policies in periods in which they momentarily hold power e g moe 1989 de figueiredo 2002

oral interventions versus actual interventions in fx markets an event study approach the article assesses whether exchange rate communication or oral intervention has been an effective policy tool for monetary authorities to influence exchange rates it employs an event study methodology that identifies intervention clusters or events for the euro dollar and the dollar yen exchange rates the article finds that both oral intervention events and actual intervention events have been highly successful over the short to medium run the article shows that the success of intervention events is related to market conditions and to the coordination among policy makers it also finds that the success of communication and actual interventions is largely unrelated to monetary policy thus suggesting that interventions primarily function through a coordination channel

cartel overcharges an empirical analysis abstract using 406 overcharge estimates the study analyzes the impact of cartel characteristics and the market environment on the magnitude of overcharges attained by cartels in different geographic markets and during six antitrust law regimes starting from the 18th century the median overcharge achieved by cartels is 20 percent of selling price as predicted by cartel theory market structure is an important determinant of the overcharge level markets where cartels have high market shares tend to have higher overcharges the number of cartel participants and the size inequality among them are inversely related to the overcharge level international cartels impose higher overcharges than domestic cartels overcharges attained in the us and european markets tend to be lower than overcharges achieved in the asian markets and the rest of the world results on the impact of changes in the antitrust law environment over time on the size of cartel overcharges are mixed however there is some evidence indicating that the lowest overcharges are associated with the latest antitrust law period

collusion enforcement with private information and private monitoring abstract this paper shows that a cartel that observes neither costs prices nor sales may still enforce a collusive agreement by tying each firm s continuation profit to the truncated current profits of the other firms the mechanism applies to both price and quantity competition and the main features are broadly consistent with common cartel practice identified by harrington and skrzypacz 24

fed intervention dollar appreciation and systematic risk abstract in a four factor asset pricing model estimated on daily data fed intervention significantly affects betas of surprises in the market return expected inflation rate yield curve and corporate bond risk premium fed foreign currency sales cause economically and statistically significant increases in the systematic risk premium in appreciation and thus in the dollar s expected appreciation rate the direction the fed desires and consistent with the signaling but not the portfolio balance channel intervention s effects on actual appreciation are less reliable they depend on unpredictable risk factor realizations even successful intervention to strengthen the dollar may be costly by increasing the dollar s systematic risk intervention reduces the attractiveness of u s relative to foreign investments further uncertainty about future fed interventions may induce resource misallocation ceteris paribus investors find it harder to estimate risk adjusted discount rates and forecast the home currency value of cash flows

an anatomy of cartel contracts we study cartel contracts using data on 18 contract clauses of 109 legal finnish manufacturing cartels one third of the clauses relate to raising profits the others deal with instability through incentive compatibility cartel organization or external threats cartels use three main approaches to raise profits price market allocation and specialization these appear to be substitutes choosing one has implications on how cartels deal with instability simplifying we find that large cartels agree on prices cartels in homogenous goods industries allocate markets and small cartels avoid competition through specialization

legislative organization and government spending cross country evidence abstract the law of 1 n posits that an increase in the number of elected representatives fuels excessive government spending despite its wide acceptance as a stylized fact the law of 1 n has received only limited empirical scrutiny and the existing evidence for the american states provides mixed support for the thesis this paper examines the law of 1 n in bicameral and unicameral legislative structures using a cross section of democratic countries the results indicate that legislative size matters under both legislature structures but bicameralism dampens the 1 n effect relative to unicameralism

the effect of competition on trade evidence from the collapse of international cartels how do changes in competitive intensity affect trade patterns some cartels may find it advantageous to eliminate cross hauling and divide markets geographically we exploit a quasi natural experiment associated with increased antitrust enforcement to determine if market division strategies were used in seven recently prosecuted international cartels since antitrust activity is unlikely to affect spatial patterns of demand and supply other than through its effect on the competitive environment enforcement induced changes are ideally suited to study the effect of competition on trade patterns analyzing the cartels individually and as a group we find no significant change in spatial patterns of trade following cartel breakup in particular there is no systematic change in the effect of distance on trade these results suggest that cross hauling is not uncommon under collusion and hence that the existence of cross hauling by itself does not provide evidence of effective competition

the political economy of state level administrative procedure acts abstract one of the most important developments in theories of american bureaucracy has been the claim that organizational procedures that are enacted by public officials have a significant impact on the nature of both bureaucratic control and performance this development has been accompanied however by limited empirical investigation we address this gap by examining the conditions under which administrative procedure acts apas are adopted by the states in particular we test five hypotheses derived from the literature as to when a state level apa slapa will be adopted in general two conditions increase the likelihood that a slapa will be adopted 1 when democratic legislative supermajorities face a republican governor and 2 when democratic control is perceived to be temporary these results indicate that existing theories emphasizing agency and dynamic effects are empirically valid albeit with an important qualification there is a distinctive partisan bias in the usefulness of administra

a structural threshold model of the exchange rate under optimal intervention abstract by considering a social trade off between targeting the exchange rate and minimizing intervention costs nonlinear exchange rate dynamics can be captured by a structural threshold model this article provides a theory based empirical exchange rate model and shows how to put the model into an empirical investigation to estimate the structural threshold model we propose a two step procedure which separately estimates the permanent and temporary fundamentals of the foreign exchange market a demonstration of our approach is applied to 1981q3 2008q3 taiwan s foreign exchange market with a brief review of its monetary policies and central bank given prior estimation results are consistent with theoretical predictions and many intervention operations of taiwan s central bank are successfully identified

optimal control of a mean reverting inventory motivated by empirical observations we assume that the inventory level of a company follows a mean reverting process the objective of the management is to keep this inventory level as close as possible to a given target there is a running cost associated with the difference between the actual inventory level and the target if inventory deviates too much from the target management may perform an intervention in the form of either a purchase or a sale of an amount of the goods there are fixed and proportional costs associated with each intervention the objective of this paper is to find the optimal inventory levels at which interventions should be performed as well as the magnitudes of the interventions to minimize the total cost we solve this problem by applying the theory of stochastic impulse control our analysis yields the optimal policy which at times exhibits a behavior that is not intuitive

the term structure of interest rate differentials in a target zone theory and swedish data abstract the term structure of interest rate differentials is derived in a model of a small open economy with a target zone exchange rate regime for given time to maturity the interest rate differential is decreasing in the exchange rate and for given exchange rate the interest rate differential s absolute value and its instantaneous variability are both decreasing in the time to maturity devaluation realignment risks are incorporated and imply upward shifts of the interest rate differentials several implications of the theory are found to be broadly consistent with data on swedish exchange rates and interest differentials for the period 1986 1989

the inefficient use of power costly conflict with complete information recent work across a wide range of issues in political economy as well as in american comparative and international politics tries to explain the inefficient use of power revolutions civil wars high levels of public debt international conflict and costly policy insulation in terms of commitment problems this paper shows that a common mechanism is at work in a number of these diverse studies this common mechanism provides a more general formulation of a type of commitment problem that can arise in many different substantive settings the present analysis then formalizes this mechanism as an inefficiency condition that ensures that all of the equilibria of a stochastic game are inefficient this condition has a natural substantive interpretation large rapid changes in the actors relative power measured in terms of their minmax payoffs may cause inefficiency

collusion under risk aversion and fixed costs we analyze collusion under demand uncertainty by risk averse cartels that care about the utility derived from profits with sufficient risk aversion and non trivial fixed operating costs it becomes difficult for cartels to collusively restrict output both when demand is low and marginal dollars are highly valued and when demand is high and potential defection profits are high output relative to monopoly levels becomes a u shaped function of demand greater risk aversion or higher fixed operating costs make collusion more difficult to support in recessions but easier to support in booms

the welfare implications of foreign exchange intervention abstract this paper examines the welfare implications of foreign exchange intervention in a two country two currency general equilibrium model with limited participation in financial markets and cash in advance constraints on transactions both sterilized and nonsterilized intervention operations have significant impacts on the allocation of liquidity in international financial markets and therefore affect real economic activities the welfare effects of shocks to monetary policy sterilized and nonsterilized foreign exchange interventions are examined and compared the design of welfare maximizing intervention policy rules is also discussed