trust trustworthiness and information sharing in supply chains bridging china and the united states whether and how trust and trustworthiness differ between a collectivist society e g china and an individualistic one e g the united states generates much ongoing scientific debate and bears significant practical values for managing cross country transactions we experimentally investigate how supply chain members countries of origin china versus the united states affect trust trustworthiness and strategic information sharing behavior in a cross country supply chain we consider a two tier supply chain in which the upstream supplier solicits demand forecast information from the retailer to plan production but the retailer has an incentive to manipulate her forecast to ensure abundant supply the levels of trust and trustworthiness in the supply chain and supplier s capability to determine the optimal production quantity affect the efficacy of forecast sharing and the resulting profits we develop an experimental design to disentangle these three aspects and to allow for real time interactions b

velocity futures markets does the fed need a structural model i introduction during the 1990s the concept of inflation targeting caught on among both monetary theorists and monetary policy makers this interest took several forms some advocated a backward looking approach as exemplified by the taylor rule which would require central bankers to offset shocks that had driven inflation away from its target path others advocated a forward looking approach whereby the central bank would target the forecast that is set policy in such a way that the optimal forecast of inflation was exactly equal to its target value this forward looking strategy could use either central bank or private forecasts of inflation some of those who advocated a forward looking strategy based on private forecasts went so far as to suggest that such a policy would eliminate any need for the central bank to develop a structural model of the economy bernanke and woodford 1997 criticized this line of analysis by suggesting that due to problems related to circularity and indeterminacy or solution multiplicity 1 a policy of targeting the forecast was not likely to be effective in this article we argue that because the circularity problem can be easily remedied a private forecast based policy is feasible and central banks do not need a structural model of the economy ii the circularity problem because monetary policy impacts the price level with a long and variable lag it is not surprising that many economists have looked for ways of incorporating private sector forecasts into the monetary policy making process taken to its logical extreme such an approach would require the central bank to adjust its policy instrument until the private sector s forecast of inflation for instance was equal to the target value at first glance the idea of replacing a bureaucratic decision making process with a simple rule based on rational expectations and efficient markets theory has great intuitive appeal bernanke and woodford however showed that there is a circularity problem associated with attempts to target private sector forecasts of inflation or any other goal variable if a policy of targeting the forecast were credible and effective then at each and every point in time the market would expect the future price level to be equal to its target value but in that case private sector forecasts would be uninformative that is they would be unable to provide the monetary authority with information about economic shocks that might impact the price level and thus would provide no guidance as to how the monetary authority could use its tools to offset those shocks on closer inspection it turns out that there are a number of distinct issues entangled in the general circularity problem for instance does the problem apply only to private sector forecasts or to central bank forecasts as well and are there ways of developing private sector forecast based policy rules that are not susceptible to the circularity problem if the answer is yes what does this imply about the widely held view that monetary authorities need to base policy on their own internal structural models of the economy svensson 1997 suggested that his inflation forecast targeting proposal was not susceptible to the circularity problem because it relied on internal central bank forecasts not private sector forecasts bernanke and woodford however showed that the effectiveness of svensson s proposal was based on the fact that central bank forecasts were derived from a structural model of the economy and that the distinction between internal and external forecasts was essentially meaningless for the circularity problem if the problem is not private sector forecasts per se then the next question is whether it is possible to set up a policy targeting rule based on private sector forecasts that avoids the circularity problem and also minimizes the need for the central bank to rely on a structural model of the economy

general equilibrium pricing of cpi derivatives we examine the issue of pricing forward futures and option contracts written on the consumer price index cpi the change of which is a measure of inflation affecting the economy traditional approaches postulate an exogenous process for the price level and then derive cpi derivatives prices by standard arbitrage arguments by contrast we build the general equilibrium of a continuous time monetary economy that is affected by both real and nominal shocks the price level and thus the inflation rate are found endogenously and solutions for the prices of cpi derivatives are obtained which are in closed form in a specialized version of the economy

behavioral causes of the bullwhip effect and the observed value of inventory information the tendency of orders to increase in variability as one moves up a supply chain is commonly known as the bullwhip effect we study this phenomenon from a behavioral perspective in the context of a simple serial supply chain subject to information lags and stochastic demand we conduct two experiments on two different sets of participants in the first we find the bullwhip effect still exists when normal operational causes e g batching price fluctuations demand estimation etc are removed the persistence of the bullwhip effect is explained to some extent by evidence that decision makers consistently underweight the supply line when making order decisions in the second experiment we find that the bullwhip and the underlying tendency of underweighting remains when information on inventory levels is shared however we observe that inventory information helps somewhat to alleviate the bullwhip effect by helping upstream chain members better anticipate and prepare for fluctuations in inventory needs downstream these experimental results support the theoretically suggested notion that upstream chain members stand to gain the most from information sharing initiatives

the impact of futures price targeting on the precision and credibility of monetary policy this paper analyzes the hypothesis that the targeting of macroeconomic aggregates can be done more effectively by pegging the price of a futures contract linked to future announcements of the policy target where there is an information lag futures price targeting may be more efficient than a contingent money supply rule a policy of futures price targeting would be less likely to suffer from the time inconsistency problem the use of futures price targeting would also appear to be superior to policies based on intermediate targeting as well as most types of discretion copyright 1995 by ohio state university press

a proposal to end inflation this paper suggests how the price level could be stabilized by the bank of england adopting a rule to peg the price of a new financial instrument this new instrument would be similar but not identical to a price index futures contract the paper explains how the scheme would work assesses potential objections and discusses how the bank of england could enhance the credibility of its commitment to the rule it also compares the scheme with the alternatives of targeting the monetary growth rate or targeting the price level copyright 1994 by royal economic society

the minimum variance hedge ratio under stochastic interest rates in an environment where interest rates are stochastic we examine the case of a pure hedger endowed with a fixed position in a long term bond in contrast to conventional wisdom according to which the difference between hedging through forward contracts and futures is immaterial it turns out that the minimum variance hedge ratio using forwards comprises two terms instead of one only when using futures the magnitude of the difference between the two hedge ratios may be important under some plausible assumptions this result is due to the presence of additional interest rate risk that bears on the profit and loss statement associated with the forward position this sheds some additional light on the respective features of forward and futures contracts written on interest rate sensitive securities

deregulation liberalization and consolidation of the mexican banking system effects on competition este articulo analiza la evolucion de la competencia en el sistema bancario mexicano en el periodo 1993 2005 periodo de desregulacion liberalizacion y consolidacion del sector para ello se utilizan dos medidas de competencia derivadas de la teoria de la organizacion industrial el indice de lerner y el estadistico h de panzar y rosse la evidencia empirica no permite rechazar la existencia de competencia monopolistica el indice de lerner muestra una disminucion en la rivalidad competitiva en el mercado de los depositos y un incremento en el mercado de los prestamos observandose una estrategia de subsidiacion cruzada entre ambos mercados los resultados obtenidos cuestionan la efectividad de las medidas hasta ahora implementadas dirigidas a incrementar la competencia en la banca mexicana

can monetary stabilization policy be improved by cpi futures targeting scott sumner and similarly kevin dowd proposes to have the central bank write futures contracts on the consumer price index and automatically adjust the money stock in response to the public s net position in such contracts as a way of improving the precision and credibility of monetary policy the authors identify two serious problems that can be expected to render sumner s proposal ineffective 1 the public has no incentive to take a speculative position in the contracts until it is too late to adjust the money stock and 2 the central bank lacks an effective budget constraint copyright 1997 by ohio state university press

privatization competition and supercompetition in the mexican commercial banking system abstract much literature before and after the privatization of mexico s commercial banking system in 1991 1992 argued that the system was collusive and noncompetitive and would likely continue to be for years banks would collude to underloan so that at least in comparison with what would happen in a competitive system they could overcharge because a parallel literature on lending after bank privatization suggests that the problem is often not too little but too much we resolved to test for competitive behavior in the mexican banking system using an empirical approach developed by shaffer econom lett 29 1989 321 j money credit bank 25 1993 49 federal reserve bank of philadelphia working paper no 93 28r we find a structural break in the middle of the privatization period that signals the start of an episode of what shaffer calls supercompetitive behavior in such a supercompetition banks run at levels of output where marginal cost exceeds marginal revenue this behavior is consistent with a struggle in which banks take losses now because they think the market share they get in the bargain offers a positive present value of expected future return the behavior can also be consistent with just the sort of banking crises that ensued in mexico

mexico s experiments with bank privatization and liberalization 1991 2003 during the 1990s mexico conducted two experiments with its banking system in the first experiment 1991 96 it privatized the banks this experiment took place with weak institutions to enforce contract rights it also took place without institutions that encourage prudent behavior by bankers the result was reckless behavior by banks and a collapse of the banking system in the second experiment 1997 2003 mexico reformed many of the institutions that promoted bank monitoring and it opened up the industry to foreign investment it was less successful however in reforming the institutions that promote the enforcement of contract rights the result was that bankers behaved prudently but prudent behavior in the context of weak contract rights implies that banks are reluctant to extend credit to firms and households

on the optimal hedge of a nontraded cash position in this paper we focus on the optimal demand for futures contracts by an investor with a logarithmic utility function who attempts to hedge a nontraded cash position when the analysis is conducted in the cash commodity price space we show that the value function associated with the bernoulli investor program is not additively separable thus suggesting that this investor hedges against shifts in the opportunity set as represented by the commodity price by establishing the equivalence between the cash formulation of the problem and the wealth formulation we are able to analyze the problem in the wealth commodity price space in this space we show the additive separability of the value function when the futures settlement price process is perfectly locally correlated with the commodity price process the demand for futures in this instance is composed of a a mean variance term and b a minimum variance component that is a classic feature of models with nontraded assets since the first best nonmyopic optimum is attained however the deviation from a mean variance demand should not be interpreted as the expression of a nonmyopic behavior but rather as an attempt to restore a first best optimum on the other hand when the correlation between the futures price and the underlying commodity price is imperfect in general the value function does not separate additively the first best solution cannot be attained and the optimal futures trading strategy involves a hedging term against shifts in the opportunity set in the classic dynamic portfolio problem the investor selects a trading strategy in risky and riskless assets so as to maximize his or her expected lifetime utility in this environment where all assets can be freely traded the logarithmic investor behaves myopically to the extent that he or she ignores shifts in the opportunity set when making current choices samuelson 271 mossin 24 hakansson 16 merton 22 in particular in models with continuous trading it turns out that the value function corresponding to the investor s program is additively separable in wealth and state variables the implication is that his or her behavior will be myopic i e that his or her demand functions for assets will be of the pure meanvariance efficiency type and in particular will not include any dynamic hedging components that are characteristic of financial markets with shifting opportunities in this paper we investigate the structure of the bernoulli investor s demand functions in the situation where one asset cannot be freely traded in the market

financial market innovation and security design an introduction abstract the article describes in the context of theory and practice this special issue of the journal of economic theory on financial market innovation and security design the main focus is on security design in incomplete financial markets possibly with asymmetrically informed traders we first survey the general equilibrium literature which emphasizes the spanning role of securities we then provide a unified framework encompassing the literature that employs a cara guassian setting to study the impact of financial innovation on risk sharing and information aggregation journal of economic literature classification numbers g10 d52

mainstreaming microfinance social performance management or mission drift summary what scope is there for the pursuit of explicit development goals in the context of increasing integration of specialized microfinance and commercial banking sectors this question and the idea of mission drift is first analyzed using a model that distinguishes between institutions financial and social performance possibilities preferences and assessment systems the model is used to review findings from action research with an international sample of poverty oriented microfinance institutions that suggest some simple steps for improved social performance management it is then used to illustrate the relationship between social and financial performance more widely across the retail financial services sector and to offer pointers for more policy analysis at this level

do depositors punish banks for bad behavior market discipline deposit insurance and banking crises this paper empirically investigates two issues largely unexplored by the literature on market discipline we evaluate the interaction between market discipline and deposit insurance and the impact of banking crises on market discipline we focus on the experiences of argentina chile and mexico during the 1980s and 1990s we find that depositors discipline banks by withdrawing deposits and by requiring higher interest rates deposit insurance does not appear to diminish the extent of market discipline aggregate shocks affect deposits and interest rates during crises regardless of bank fundamentals and investors responsiveness to bank risk taking increases in the aftermath of crises

bank privatization in sub saharan africa the case of uganda commercial bank previous empirical analyses have found that bank privatizations are more successful when the government fully relinquishes control when the bank is privatized to a strategic investor and when foreign owned banks are allowed to participate in the bidding the privatization of uganda commercial bank ucb to the south african bank stanbic met all these criteria suggesting that it is a likely candidate for success but other features suggest reasons for caution ucb dominated the ugandan banking sector prior to privatization and the institutional environment in uganda was less favorable than in many of the middle income countries looked at in earlier empirical studies despite these concerns the privatization appears to have been relatively successful the portfolio of the privatized bank which was cleaned prior to sale remains relatively strong and profitability and credit growth are now on par with other ugandan banks though market segmentation remains a concern since stanbic faces little or no direct competition in many remote areas some early results suggest that access to credit has improved for some hard to serve groups

corporate governance of banks a survey this paper reviews the empirical literature on the corporate governance of banks we start by highlighting the main differences between banks and nonfinancial firms and focus on three characteristics that make banks special i regulation ii the capital structure of banks and iii the complexity and opacity of their business and structure next we discuss the characteristics of corporate governance in banks and how they differ from the governance of nonfinancial firms we then review the evidence on three governance mechanisms i boards ii ownership structures and iii executive compensation our review suggests that some of the empirical regularities found in the literature on corporate governance of nonfinancial institutions such as the positive negative association between board independence size and performance do not hold for banks also existing work provides no conclusive results regarding the relationship between different governance mechanisms and various measures for banks performance we discuss potential explanations for these mixed results

optimal fiduciary monetary systems abstract in a fiduciary monetary system there is a social agreement to quote prices and denominate financial instruments in terms of a specific paper liability of the government what are the best terms for this paper instrument i investigate a system where the terms involve not only paying market interest rate on the monetary instrument as proposed by many economists earlier but also indexing the returns to the price level the result is a homeostatic monetary system with a highly stable price level in the face of shifts in money demand and other disturbing influences the paper examines the performance of the new fiduciary standard in equilibrium and disequilibrium models

the numeraire portfolio abstract a portfolio formed from a given list of assets is defined as a numeraire portfolio for the list if a it is self financing b its value is always positive and c zero is always the best conditional forecast of the numeraire dominated rate of return of every asset on the list the numeraire portfolio exists if and only if there are no profit opportunities from trading assets on the list for a sample list of heterogeneous assets nyse size quintile portfolios corporate bonds and short term bills numeraire dominated returns are similar to market model forecast errors and as abnormal return measures clearly dominate market adjusted returns

an intertemporal general equilibrium model of asset prices this paper develops a continuous time general equilibrium model of a simple but complete economy and uses it to examine the behavior of asset prices in this model asset prices and their stochastic properties are determined endogenously one principal result is a partial differential equation which asset prices must satisfy the solution of this equation gives the equilibrium price of any asset in terms of the underlying real variables in the economy in this paper we develop a general equilibrium asset pricing model for use in applied research an important feature of the model is its integration of real and financial markets among other things the model endogenously determines the stochastic process followed by the equilibrium price of any financial asset and shows how this process depends on the underlying real variables the model is fully consistent with rational expectations and maximizing behavior on the part of all agents our framework is general enough to include many of the fundamental forces affecting asset markets yet it is tractable enough to be specialized easily to produce specific testable results furthermore the model can be extended in a number of straightforward ways consequently it is well suited to a wide variety of applications for example in a companion paper cox ingersoll and ross 7 we use the model to develop a theory of the term structure of interest rates many studies have been concerned with various aspects of asset pricing under uncertainty the most relevant to our work are the important papers on intertemporal asset pricing by merton 19 and lucas 16 working in a continuous time framework merton derives a relationship among the equilibrium expected rates of return on assets he shows that when investment opportunities are changing randomly over time this relationship will include effects which have no analogue in a static one period model lucas considers an economy with homogeneous individuals and a single consumption good which is produced by a number of processes the random output of these processes is exogenously determined and perishable assets are defined as claims to all or a part of the output of a process and the equilibrium determines the asset prices our theory draws on some elements of both of these papers like merton we formulate our model in continuous time and make full use of the analytical tractability that this affords the economic structure of our model is somewhat similar to that of lucas however we include both endogenous production and

what explains the speed of recovery from banking crises abstract while a large body of research has explored the causes and effects of banking crises less is known about what determines recovery from banking crises despite large variations in post crisis performances across countries in order to identify local and global factors that determine the length of recovery i e the time it takes until countries reach their pre crisis level of per capita gdp this exploratory paper employs event history analysis on 138 incidents of banking crises between 1970 and 2012 regarding domestic factors the simultaneous occurrence of currency crises large financial sectors overvalued currencies and large primary deficits are associated with later recovery whereas higher debt to gdp ratios or inflation levels do not exhibit a negative effect on post crisis performances regarding external factors a low growth of world trade as well as indicators of uncertainty in financial markets are correlated with later recovery global interest rate shocks are particularly harmful for the speed of recovery among middle income countries with a strong reliance on external capital the results are similar when using the length of recessions as an alternative indicator of post crisis performances

inflation forecast targeting implementing and monitoring inflation targets abstract inflation targeting is shown to imply inflation forecast targeting the central bank s inflation forecast becomes an explicit intermediate target inflation forecast targeting simplifies both implementation and monitoring of monetary policy the weight on output stabilization determines how quickly the inflation forecast is adjusted towards the inflation target money growth or exchange rate targeting is generally inferior than inflation targeting and leads to higher inflation variability commitment to target rules may be better than commitment to instrument rules

a continuous time equilibrium model of forward prices and futures prices in a multigood economy abstract this paper is a theoretical investigation of equilibrium forward and futures prices we construct a rational expectations model in continuous time of a multigood identical consumer economy with constant stochastic returns to scale production using this model we find three main results first we find formulas for equilibrium forward futures discount bond commodity bond and commodity option prices second we show that a futures price is actually a forward price for the delivery of a random number of units of a good the random number is the return earned from continuous reinvestment in instantaneously riskless bonds until maturity of the futures contract third we find and interpret conditions under which normal backwardation or contango is found in forward or futures prices these conditions reflect the usefulness of forward and futures contracts as consumption hedges

a reappraisal of state owned banks we revisit the public banks debate survey the theoretical arguments and test the robustness and expand the existing empirical evidence while we find some support for the view that public banks do not allocate credit optimally we also report indicative evidence that they exert a positive influence on private bank efficiency and may contribute to reduce credit procyclicality ultimately we find that the recent criticism to public banks has generally been based on inconclusive cross country evidence more specific bank level research is still needed to substantiate a case for or against public banks in developing economies

bank privatization and performance empirical evidence from nigeria the authors assess the effect of privatization on performance in a panel of nigerian banks for the period 1990 2001 they find evidence of performance improvement in nine banks that were privatized which is remarkable given the inhospitable environment for true financial intermediation their results also suggest negative effects of the continuing minority government ownership on the performance of many nigerian banks the authors results complement aggregate indications of decreasing financial intermediation over the 1990s banks that focused on investment in government bonds and non lending activities enjoyed a relatively higher performance

foreign entry and the mexican banking system 1997 2007 proquest denotes formulae omitted in recent years governments around the world have been opening up their banking systems to foreign competition with the expectation of making them more efficient stable and resilient to shocks academics and policymakers have therefore been exploring the effects of foreign bank entry from both a theoretical and an empirical point of view most studies conclude that foreign entry increases the contestability of markets thereby reducing administrative costs lowering net interest margins nims and driving down bank rates of return nevertheless as clarke and others note much of what we know comes from cross country studies that are heavily weighted toward developed economies 1 this is particularly crucial because the impact of foreign entry may vary with the level of economic development 2the literature to date on foreign bank entry in developing economies does not provide a consensus set of results there is some evidence that foreign entry increases social welfare clarke cull and martinez peria find that enterprises in countries with high levels of foreign bank participation tend to rank interest rates and access to long term loans as lesser constraints on their operations and growth than do enterprises in countries with low levels of foreign bank participation 3 martinez peria and mody analyzing a group of latin american cases in a pooled time series cross sectional framework find that foreign banks charge lower interest rate spreads than domestically owned banks 4 they also find that foreign bank entry is associated with an overall increase in administrative efficiency and a decrease in interest spreads suggesting that foreign entry spurred competition denizer obtains similar results in a study of turkey foreign entry reduced domestic bank overhead expenses as well as bank profitability 5 unite and sullivan find that foreign entry was associated with declines in interest rate spreads overhead expenses and profits in the philippines but the effect was confined to domestic banks that had been tied to business groups 6 kasekende and sebudde report that foreign banks in uganda have better internal control mechanisms than domestic banks in terms of judging the quality of borrowers 7not all the evidence points in the same direction however havrylchyk finds that foreign banks in poland are more efficient than domestic banks but then shows that the efficiency gains are all located in so called greenfield banks domestic banks that are acquired by foreign banks do not become more efficient 8 cardim de carvalho finds no differences between foreign and domestic banks in brazil in terms of credit allocation or technical efficiency 9 indeed technical progress in online banking and automation in brazil has been introduced more aggressively by domestically owned banks claessens demirguc kunt and huizinga find that foreign banks operating in developing economies have higher overhead expenses charge higher interest margins and earn higher rates of return than domestic banks 10foreign banks may also be less willing to extend credit on the basis of softknowledge about firms than domestically owned banks studies of argentina and pakistan suggest that foreign entry may therefore give larger firms even greater advantages by exacerbating problems of differential access to capital 11 the finding that foreign banks eschew soft knowledge lending is supported by multicountry studies that use panel data techniques detragiache tressel and gupta report that foreign entry in a panel of poor economies is associated with a net reduction in total lending to the private sector foreign banks appear to have skimmed offthe best credit risks leaving domestic banks with a pool of weaker borrowers from which to select 12 a related body of research suggests that foreign banks represent a trade offfor a developing country galindo micco and powell develop a model and present evidence indicating that foreign banks may be less susceptible to funding shocks than domestic banks because they can tap capital from their home institutions but at the same time foreign banks are more reactive to shocks that affect expected returns

on the fluctuations in consumption and market returns in the presence of labor and human capital an equilibrium analysis abstract we examine the effects of human capital on consumption stock market and other fluctuations in a general equilibrium continuous time model a representative consumer worker investor derives utility from consumption and leisure a representative firm demands labor as the sole input to a stochastic production technology driven by general possibly nonmultiplicative shocks for cobb douglas utility and multiplicative shocks labor is nonstochastic and consumption and stock market volatility are equated as under no human capital deviations from this are analyzed for logarithmic utility and constant elasticity of substitution production technology cases are identified where the presence of labor causes consumption to be smoother than the stock market

information distortion in a supply chain the bullwhip effect this article originally appeared in management science april 1997 volume 43 number 4 pp 546 558 published by the institute of management sciences consider a series of companies in a supply chain each of whom orders from its immediate upstream member in this setting inbound orders from a downstream member serve as a valuable informational input to upstream production and inventory decisions this paper claims that the information transferred in the form of orders tends to be distorted and can misguide upstream members in their inventory and production decisions in particular the variance of orders may be larger than that of sales and distortion tends to increase as one moves upstream a phenomenon termed bullwhip effect this paper analyzes four sources of the bullwhip effect demand signal processing rationing game order batching and price variations actions that can be taken to mitigate the detrimental impact of this distortion are also discussed

a human experiment on inventory decisions under supply uncertainty abstract controlled human experiments are adopted in this paper to investigate the impact of supply uncertainty on buyers inventory management the experiments aim at assessing the impact of one specific source of supply chain uncertainty namely stochastic lead times on inventory holdings and the extent of the bullwhip effect three experimental treatments are run within the framework of the beer game manipulating variability in demand and in lead times results confirm that the bullwhip effect arises in all experimental treatments and that the variance of orders is higher under stochastic lead times analysis of players behaviour in the course of the game suggests that players react to higher uncertainty by holding fewer inventories a behaviour consistent with the predictions of some psychological models of choice under ambiguity

futures markets and commodity options hedging and optimality in incomplete markets abstract this paper examines the allocational roles of futures markets and commodity options in multi good and multi period economies in a continuous time model with time additive utilities and homogeneous beliefs trading in unconditional futures contracts the market portfolio and a riskless asset gives any pareto optimal allocation individuals optimal holdings of futures contracts in the continuous time model are related to their consumption bundles and to their risk tolerances it is shown that both hedging and reverse hedging behavior are possible in the general model with discrete trading options on portfolios of commodity options are shown to permit any unconstrained pareto optimal allocation

measuring endogenous supply chain volatility beyond the bullwhip effect most recent research on supply chain volatility has focused on one particular dimension of that volatility namely the amplification of upstream order variability while not ignoring this aspect of supply chain volatility we focus on a different but equally critical aspect of volatility the cyclical oscillation of on hand and on order inventories about their target values we prove that such cyclicality does not require oscillatory or random retailer demand as a prerequisite the resulting volatility is therefore endogenous rather than simply an amplification of exogenous demand inputs we also measure the amount of amplification resulting from a step increase in demand the order amplification is the product of two factors each of which is clearly linked to either on hand or on order inventory our results attest that supply chain volatility can arise in the absence of exogenous oscillatory or random demand and suggest strategies for avoiding or minimizing such volatility

the bullwhip effect progress trends and directions the bullwhip effect refers to the phenomenon where order variability increases as the orders move upstream in the supply chain this paper provides a review of the bullwhip literature which adopts empirical experimental and analytical methodologies early econometric evidence of bullwhip is highlighted findings from empirical and experimental research are compared with analytical and simulation results assumptions and approximations for modelling the bullwhip effect in terms of demand forecast delay replenishment policy and coordination strategy are considered we identify recent research trends and future research directions concerned with supply chain structure product type price competition and sustainability

federal reserve information and the behavior of interest rates this paper tests for the existence of asymmetric information between the federal reserve and the public by examining federal reserve and commercial inflation forecasts it demonstrates that the federal reserve has considerable information about inflation beyond what is known to commercial forecasters it also shows that monetary policy actions provide signals of the federal reserve s information and that commercial forecasters modify their forecasts in response to those signals these findings may explain why long term interest rates typically rise in response to shifts to tighter monetary policy jel e52 e43 d82 asymmetric information between the federal reserve and the public is a phenomenon that is often posited but rarely tested numerous models of central bank behavior for example show that the existence of asymmetric information has important implications for the effectiveness of policy and the consequences of dynamic inconsistency yet there

should central banks target cpi futures the author considers recent proposals that the government should attempt to stabilize the nominal value of a cpi futures contract under a variety of conditions arbitrageurs will break the peg and bankrupt the central bank the central bank ends up in a gaming problem with private traders or the regime collapses into discretion copyright 1997 by ohio state university press

inflation forecasts and monetary policy proposals for inflation targeting as a strategy for monetary policy leave open the important operational question of how to determine whether current policies are consistent with the long run inflation target an interesting possibility is that the central bank might target current private sector forecasts of inflation either those made explicitly by professional forecasters or those implicit in asset prices we address the issue of existence and uniqueness of rational expectations equilibria when the central bank uses private sector forecasts as a guide to policy actions in a dynamic model which incorporates both sluggish price adjustment and shocks to aggregate demand and aggregate supply we show that strict targeting of inflation forecasts is typically inconsistent with the existence of rational expectations equilibrium and that policies approximating strict inflation forecast targeting are likely to have undesirable properties we also show that economies with more general forecast based policy rules are particularly susceptible to indeterminacy of rational expectations equilibria we conclude that although private sector forecasts may contain information useful to the central bank ultimately the monetary authorities must rely on an explicit structural model of the economy to guide their policy decisions this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item

using futures prices to control inflation reply to garrison and white in a recent paper garrison and white g w 1997 offered a thoughtful and skeptical assessment of several recent proposals to use price index futures contracts to achieve price level targets their main focus is a scheme put forward by sumner 1995 but they also addressed a scheme that i suggested dowd 1994 1995 and made substantial criticisms of price index futures schemes in general sumner 1997 has already replied to those that pertain to his scheme and this reply responds to those that pertain to mine 1 the objective of my scheme is to achieve price stability whilst also making the monetary system fully automatic and so doing away with discretionary monetary policy this objective would be achieved by the central bank pegging the price of price index futures contracts and then relying on private sector arbitrage to ensure that the money supply is consistent with a stable expected price level the actual price level would then be equal to this expected price level plus or minus a hopefully small random error

an empirical investigation on causes and effects of the bullwhip effect evidence from the personal care sector abstract this paper analyses the empirical demand data for fast moving consumer goods to measure the bullwhip effect the data consist of the sell in from a large manufacturer to the retailers and the sell out from a retailer to the consumers our findings show that the bullwhip effect can be substantial indeed in more than 50 of the cases the demand upstream sell in is twice as variable as the demand downstream sell out however in other cases it can be negligible and in one case the demand upstream is slightly less variable than the demand downstream so while the bullwhip effect can be very large it need not be so finally we attempted to delve into the dynamics that generate a significant bullwhip effect and discovered that among the various causes that create the bullwhip effect discussed by lee et al 1997a price fluctuations and forward buys driven by sales targets play a decisive role we show that the flatter the final consumer demand sell out the more room there is for the retailers to forward buy in order to take advantage of the deals offered by the manufacturer s sales force toward the end of the sales period on the contrary the more variable the final consumer demand the less willing the retailer is to make a risky inventory investment and thus the more the retailer s orders closely follow consumer demand this result at the product family level is very consistent with the results that cachon et al 2007 obtained at the company industry level

endogenous determination of the degree of market incompleteness in futures innovation abstract this paper studies the determination of the number of futures contracts created by an exchange we show that though the exchange can create the futures contracts costlessly if the investors have differential information there may be an upper bound on the number of contracts that the exchange is willing to create in a stylized economy we investigate what type of contracts and how many of these the exchange is willing to create journal of economic literature classification numbers d52 d82 g14

the determinants of net interest income in the mexican banking system an integrated model abstract this paper analyzes net interest income in the mexican banking system over the period 1993 2005 taking as reference the seminal work by ho and saunders ho t saunders a 1981 the determinants of banks interest margins theory and empirical evidence journal of financial and quantitative analysis xvi 4 581 600 and subsequent extensions by other authors our study models the net interest margin simultaneously including operating costs and diversification and specialization as determinants of the margin the results referring to the mexican case show that its high margins can be explained mainly by average operating costs and by market power although non interest income has increased in recent years its economic impact is low

supply chain decision making will shorter cycle times and shared point of sale information necessarily help using a simulated supply chain experiment based on the well known beer game we examine how changes in order and delivery cycles availability of shared point of sale pos information and the pattern of customer demand affect supply chain efficiency we find that speeding up cycle time is beneficial but the sharing of pos information is not necessarily so whether or not the sharing of pos information is beneficial depends on the nature of the demand pattern represented by the pos information if the demand pattern conveys continual change in ultimate downstream customer demand as does an s shaped demand pattern the pos information can distract the upstream decision maker from what is perhaps more immediately relevant information orders placed by the proximate downstream agent and the supply line

dynamic asset pricing with non redundant forwards abstract in an incomplete market in which non redundant forward contracts contribute to span the uncertainty some standard results of portfolio theory must be amended when the investment opportunity set is driven by k state variables a k 3 mutual fund separation theorem is obtained in lieu of merton s k 2 fund separation result the additional fund is a portfolio that hedges the interest rate risk brought about by the optimal portfolio strategy itself second the mean variance efficiency of the market portfolio of cash assets is neither a necessary nor a sufficient condition for the linear relationship between expected return and beta to hold third the pricing equation for a forward contract is shown to contain an extra term relative to that for a cash asset term we name strategy risk premium

comments on information distortion in a supply chain the bullwhip effect in this commentary we trace back how we pursued research on the bullwhip effect which resulted in the article published in management science we reflect on the evolution of this concept the impact that our work has had on industry the way our work has been used in the teaching of supply chain management and the key directions of research that have taken place since then

quantifying the bullwhip effect using two echelon data a cross industry empirical investigation the bullwhip effect denotes the phenomenon whereby demand variability is amplified from a downstream site buyer to an upstream site supplier in the supply chain this paper contributes to the literature that empirically investigates the bullwhip effect by providing new evidence regarding its prevalence and magnitude in contrast to previous work we use a two echelon approach which allows us to observe variations at both the upstream and the downstream sites by drawing on a financial accounting standard regarding information disclosure about major customers we are able to link 5494 buyers and suppliers in the u s between 1976 and 2009 we merge this information with quarterly financial accounting data to form a sample of 14 933 buyer supplier dyad observations we correct for sample selection bias using propensity score matching and estimate the average bullwhip effect in our sample to be 1 90 i e 90 demand variability amplification between echelons a significant bullwhip effect is observed across industries mining manufacturing wholesale and retail and is supported by several robustness checks we investigate and discuss how these results can be generalized beyond our sample

privatization as an agency problem auctions versus private negotiations abstract this paper investigates the design of privatization mechanisms in emerging market economies characterized by political constraints that limit the set of viable privatization options our objective is to explain the striking diversity of mechanisms observed in practice and the frequent use of an apparently sub optimal privatization mechanism private negotiations we develop a simple model in which privatization is to be carried out by a government agent who plays favorites among bidders but is potentially disciplined by losing his private benefits of staying in office if the political environment is such that the privatization agent himself aims at raising the fair value for the company then privatization auctions and private negotiations are equally successful in raising public revenues if however political considerations distort the agent s incentives it may be that a seemingly transparent auction will raise less revenue than opaque private negotiations we also show that information disclosure laws may have negative welfare implications they may help the privatization agent to collude with some of the bidders to the disadvantage of non colluding bidders

escaping from a liquidity trap and deflation the foolproof way and others existing proposals to escape from a liquidity trap and deflation including my foolproof way are discussed in the light of the optimal way to escape the optimal way involves three elements 1 an explicit central bank commitment to a higher future price level 2 a concrete action that demonstrates the central bank s commitment induces expectations of a higher future price level and jump starts the economy and 3 an exit strategy that specifies when and how to get back to normal a currency depreciation is a direct consequence of expectations of a higher future price level and hence an excellent indicator of those expectations furthermore an intentional currency depreciation and a crawling peg as in the foolproof way can implement the optimal way and in particular induce the desired expectations of a higher future price level i conclude that the foolproof way is likely to work well for japan which is in a liquidity trap now as well as for the euro area and the united states in case either would fall into a liquidity trap in the future

political booms financial crises political booms measured by the rise in governments popularity predict financial crises above and beyond better known early warning indicators such as credit booms this predictive power howev

optimal futures innovation in a dynamic economy the discrete time case abstract we study the optimal futures innovation in a dynamic economy and investigate how the results obtained in a static economy should be modified due to the possibility of dynamic trading we analyze three different notions of ex ante optimality depending on the authority s ability to redistribute wealth among the investors and characterize the optimal futures innovation in each sense journal of economic literature classification numbers d52 d60 g10

the impact of the strategic sale of restructured banks evidence from indonesia summary we examine the effect of strategic sale which is the sale of banks to strategic foreign investors on bank performance the government of indonesia implemented such a policy as part of a bank restructuring in the aftermath of the 1998 banking crisis using difference in differences models we find that strategic sale leads to a 12 15 cost reduction these results are robust to the use of other estimators such as difference in differences matching estimators and stochastic frontier analysis to that of other performance measures such as return on assets and net interest margin and to that of different sample types these results suggest that strategic sale could play an important role in restructuring troubled banks in developing countries

what is wrong with taylor rules using judgment in monetary policy through targeting rules it is argued that inflation targeting is best understood as a commitment to a targeting rule rather than an instrument rule e ither ageneral targeting rule explicit objectives for monetary policy or a specific targeting rule a criterion for the forecasts of the target variables to be fulfilled essentially the equality of the marginal rates of transformation and substitution between the target variables targeting rules allow the use of judgment and extramodel information are more robust and easier to verify than optimal instrument rules and they can nevertheless bring the economy close to the socially optimal equilibrium

the relation between forward prices and futures prices abstract this paper consolidates the results of some recent work on the relation between forward prices and futures prices it develops a number of propositions characterizing the two prices these propositions contain several testable implications about the difference between forward and futures prices many of the propositions show that equilibrium forward and futures prices are equal to the values of particular assets even though they are not in themselves asset prices the paper then illustrates these results in the context of two valuation models and discusses the effects of taxes and other institutional factors

privatization and bank performance in developing countries abstract we examine the postprivatization performance of 81 banks from 22 developing countries our results suggest that i on average banks chosen for privatization have a lower economic efficiency and a lower solvency than banks kept under government ownership ii in the postprivatization period profitability increases but depending on the type of owner efficiency risk exposure and capitalization may worsen or improve however iii over time privatization yields significant improvements in economic efficiency and credit risk exposure iv we also find that newly privatized banks that are controlled by local industrial groups become more exposed to credit risk and interest rate risk after privatization

bullwhip effect measurement and its implications the bullwhip effect or demand information distortion has been a subject of both theoretical and empirical studies in the operations management literature in this paper we develop a simple set of formulas that describe the traditional bullwhip measure as a combined outcome of several important drivers such as finite capacity batch ordering and seasonality our modeling framework is descriptive in nature as it features certain plausible approximations that are commonly employed in practical inventory systems the results are nonetheless compelling and can be used to explain various conflicting observations in previous empirical studies building on the theoretical framework we discuss the managerial implications of the bullwhip measurement we show that the measurement can be completely noninformative about the underlying supply chain cost performance if it is not linked to the operational details such as decision intervals and leadtimes specifically we show that an aggregated measurement over relatively long time periods can mask the operational level bullwhip in addition we show that masking also exists under product or location aggregation in some illustrative cases

reply to garrison and white gairison and white henceforth g w have written an interesting critique of my 1995 paper on cpi futures they have questioned the feasibility of using short term cpi futures as a target of monetarzr policy and have also criticized my auxiliary proposal for using long term cpi futures as a way of overcoming the timeinconsistency problem g w have found some significant flaws in my proposal but i don t believe these problems to be unsolvable before discussing their most important criticism i will briefly respond to g w s critique of my solution to the time inconsistency problem in my proposal i argued that if speculators expected inflation then they would buy long term cpi futures from the government in that case the government would be taking a short position and would thus have less incentive to adopt an inflationary policy assuming that speculators would continue to buy cpi futures so long as the expected inflation rate was significantly higher than zero then equilibrium would occur when the potential losses to the government from cpi futures were just large enough to deter the central bank from inflating the money supply g w suggest that the government could simply print money to pay off the successful speculators and that there is no reason why a central bank would feel constrained by these potential losses they argue that