duopoly supergames with product differentiation abstract when goods are complements or very close substitutes more tacit collusion is supported by trigger strategies in price setting supergames than in quantity setting supergames for moderate or poor substitutes the situation is reversed this contrasts with the static situation where price setting strategies always lead to higher welfare

price versus quantity in a mixed duopoly abstract we revisit the classic discussion of the endogenous choice of a price or a quantity contract but in a mixed duopoly we find that choosing the price contract is a dominant strategy for both firms whether the goods are substitutes or complements

quantitative analysis of network externalities in competing technologies the vcr case we develop a dynamic structural model of consumers choices and producers pricing in an oligopolistic market for newly introduced durable products with network externalities the model is then applied to empirically analyze the de facto standardization of the vhs format in the u s home vcr market during 1981 1988 we find i the network advantage of vhs explains at least 70 3 to 86 8 of the logarithm of relative sales of vhs to betamax in each year ii an increase in the network advantage of vhs was an engine of tipping toward the vhs format and iii in the early 1980s the network advantage of vhs was mainly due to its expected growth advantage

more mortgages lower growth in newly collected data on 46 economies over 1990 2011 we show that financial development since 1990 was mostly due to growth in credit to real estate and other asset markets which has a negative growth coefficient we also distinguish between growth effects of stocks and flows of credit we find positive growth effects for credit flows to nonfinancial business but not for mortgage and other asset market credit flows by accounting for the composition of credit stocks and for the effect of credit flows we explain the insignificant or negative growth effects of financial development in recent times what was true in the 1960s 1970s and 1980s when the field of empirical credit growth studies blossomed is no longer true in the 1990s and 2000s new bank lending is not primarily to nonfinancial business and financial development may no longer be good for growth these trends predate the 2008 crisis they prompt a rethink of the role of banks in the process of economic growth jel e44 o16 o40 c33

financial market illiquidity shocks and macroeconomic dynamics evidence from the uk we examine the link between financial market illiquidity and macroeconomic dynamics by fitting a bayesian time varying parameter var with stochastic volatility to uk data from 1988q1 to 2016q4 we capture liquidity conditions in the stock market using a battery of illiquidity proxies this paper departs from previous studies examining macro financial linkages by using theoretically grounded sign restrictions and conducting structural inference in a non linear framework we document both statistically significant differences in the transmission of these shocks and substantial increases in the economic importance of these shocks during the 2008 recession

dsge model with financial frictions over subsets of business cycle frequencies abstract we estimate a dsge model with financial frictions and banks on subsets of frequency bands corresponding to higher and lower business cycle frequencies our results show that goodness of fit and parameter estimates associated with real and financial frictions vary substantially across business cycle frequency bands with the estimated coefficients related to financial adjustment costs and for the parameter governing the costs associated to capital requirements displaying the largest variations moreover the comparison of the marginal likelihoods with a frictionless framework suggests that the introduction of financial frictions provides a significant improvement at lower business cycle frequencies this is consistent with the presence of macro financial linkages where credit market frictions affect spending decisions over longer time horizons

bank risk within and across equilibria abstract the global financial crisis highlighted that the financial system can be most vulnerable when it seems most stable this paper models non linear dynamics in banking small shocks can lead from an equilibrium with few bank defaults straight to a full freeze the mechanism is based on amplification between adverse selection on banks funding market and moral hazard in bank monitoring our results imply trade offs between regulators microprudential desire to shield individual weak banks and the macroprudential consequences of doing so moreover limiting bank reliance on wholesale funding always reduces systemic risk but limiting the correlation between bank portfolios does not

debt deleveraging and the liquidity trap a fisher minsky koo approach in this paper we present a simple new keynesian style model of debt driven slumps that is situations in which an overhang of debt on the part of some agents who are forced into rapid deleveraging is depressing aggregate demand making some agents debt constrained is a surprisingly powerful assumption fisherian debt deflation the possibility of a liquidity trap the paradox of thrift a keynesiantype multiplier and a rationale for expansionary fiscal policy all emerge naturally from the model we argue that this approach sheds considerable light both on current economic difficulties and on historical episodes including japan s lost decade now in its 18th year and the great depression itself

time frequency characterization of the u s financial cycle despite an increase in research motivated by the global financial crisis of 2007 08 empirical studies on the financial cycle are rare compared to those on the business cycle this paper adds some new evidence to this scarce literature by using a different empirical methodology wavelet analysis to extract financial cycles from the data our results confirm that the u s financial cycle is much longer than the business cycle but we do not find strong evidence supporting the view that the financial cycle has lengthened during the great moderation period

collusion in differentiated duopolies revisited abstract in a letter previously published in this journal rothschild 1992 rothschild r 1992 on the sustainability of collusion in differentiated duopolies economics letters 40 33 37 claims to obtain results in contrast with those obtained by deneckere 1983 deneckere r 1983 duopoly supergames with product differentiation economics letters 11 37 42 we show however that taking correctly into account non negativity constraints on output rothschild s formulation yields the same conclusions as deneckere s

finance and business cycles the credit driven household demand channel what is the role of the financial sector in explaining business cycles this question is as old as the field of macroeconomics and an extensive body of research conducted since the global financial crisis of 2008 has offered new answers the specific idea put forward in this article is that expansions in credit supply operating primarily through household demand have been an important driver of business cycles we call this the credit driven household demand channel while this channel helps explain the recent global recession it also describes economic cycles in many countries over the past 40 years

a note on debt and economic activity this note explores how debt flows may have an effect on economic activity crucially banks are not viewed as mere financial intermediaries but as agents who create and lend money to borrowers without reducing anyone s holdings of money in the process

platform competition in two sided markets many if not most markets with network externalities are two sided to succeed platforms in industries such as software portals and media payment systems and the internet must get both sides of the market on board accordingly platforms devote much attention to their business model that is to how they court each side while making money overall this paper builds a model of platform competition with two sided markets it unveils the determinants of price allocation and end user surplus for different governance structures profit maximizing platforms and not for profit joint undertakings and compares the outcomes with those under an integrated monopolist and a ramsey planner jel l5 l82 l86 l96

the impact of risk regulation on price dynamics most financial risk regulations assume that asset returns are exogenous where risk is estimated from historical data this assumption fails to take into account the feedback effect of trading decisions on prices we investigate the consequences of risk constrained trading by means of simulations of a general equilibrium model with a value at risk constraint and compare the results to the case when risk constraints are not present prices are lower on average in the presence of risk regulation while volatility is higher risk regulation may have the perverse effect of exacerbating price fluctuations

effects of monetary and macroprudential policies evidence from four inflation targeting economies we examine the effects of monetary and macroprudential policies in the asia pacific region where many inflation targeting economies have adopted macroprudential policies in order to safeguard financial stability using structural panel vector autoregressions that identify both monetary and macroprudential policy actions we show that tighter macroprudential policies used to contain credit growth also have a significant negative impact on macroeconomic aggregates such as real gdp and the price level the similar effects of monetary and macroprudential policies may suggest a complementary use of the two policies at normal times however they could also create challenges for policymakers especially during times when low inflation coincides with buoyant credit growth

the threat of rent extraction in a resource constrained future abstract ecological economists aim to transform our economic institutions so that society can flourish within planetary boundaries the central message of this article is that private rent extraction forms a key barrier to the realisation of that goal i define rent as an economic reward which is sustained through control of assets that cannot be quickly and widely replicated and which exceeds proportionate compensation for the labour of the recipient i argue that unless we close opportunities for rent extraction and socialise unavoidable rents our governments will be compelled to pursue output growth regardless of its environmental consequences in order to prevent spiralling inequality and unemployment the positive proposition in this article is that the concept of rent can help us to identify and build democratic support for the institutional transformations necessary to prepare for a resource constrained future measures to reduce and redistribute rentier power could be emancipatory for the poorest in society whilst making more feasible many proposals that have been advocated already in this journal including reduced working hours and resource caps by contrast if environmental protections are introduced before opportunities for private rent extraction are closed we could see intensified rent seeking asset price bubbles poverty and economic insecurity

zombie lending and depressed restructuring in japan this paper explores the role that misdirected bank lending played in prolonging the japanese macroeconomic stagnation that began in the early 1990s the investigation focuses on the wide spread practice of japanese banks of continuing to lend to otherwise insolvent firms we docu ment the prevalence of this forbearance lending and show its distorting effects on healthy firms that were competing with the impaired firms the paper by hoshi 2000 was the first to call attention to this phenomenon and its ramifi

leverage and the central banker s put among the many unusual aspects of the ongoing financial crisis is the unprecedented provision of backstop liquidity by central banks around the world the federal reserve alone had committed 4 400 billion by mid novem ber 2008 the fed funds rate is almost equal to zero these are extraordinary numbers this paper establishes a formal relationship between the recent monetary developments and the trends in private leverage and its structure over the last few years some traditional insti tutions for example broker dealers have relied more and more on markets securitization money market for their funding some banks have also increased their dependence on mar kets the standard illustration is northern rock a uk mortgage bank which prior to its bailout relied on short term wholesale markets for 75 percent of its funding a second factor contributing to the reliance on wholesale markets is the overall shift from a bank based system to a market based one the expanding so called shadow banking system conduits hedge funds investment banks monolines has engaged in substantial transfor mation and unlike commercial banks could not avail itself of stable insured deposits mutual funds are under the threat of redemptions and may well face liquidity shortages as well adding subprime borrowers who are heavily dependent on high housing prices and for those with adjustable rate mortgages arms on low short term interest rates and highly lever

measuring financial cycles in a model based analysis empirical evidence for the united states and the euro area we adopt an unobserved components time series model to extract financial cycles for the united states and the five largest euro area countries over the period 1970 2014 we find that financial cycles can parsimoniously be estimated by house prices and total credit or the credit to gdp ratio we show that these medium term cycles are longer and have larger amplitudes than business cycles and that their length and amplitude vary over time and across countries

money in a theory of banking we introduce money in a model of banking in order to examine how open market operations can affect aggregate bank lending and output we see two important ways changes in money supply affect the banking system first by changing prices and interest rates it affects the wealth of demanders of real liquidity and thus the equilibrium production of liquid assets aggregate output and the health of the banking system second it changes the value of money as a means of payment and thus the attractiveness of moving from deposits to currency the demand for financial liquidity again this impacts the health of the banking system and thus bank lending and aggregate output we use this understanding to see how changes in money supply can create alleviate or be ineffective in banking crises

sudden stops and phoenix miracles in emerging markets a decade has passed since the salvos from mexico s tequila crisis of 1994 1995 echoed around the financial world since then many more crises have taken place in emerging market economies ems furthermore crises have tended to bunch together bringing to the forefront the systemic nature of these events true every new crisis has its own idiosyncratic features but useful policy lessons must be derived from robust empirical regularities this is the research strategy we have pursued in the last few years we will report on two types of regularities that strike us as highly robust across em crises a sudden stops of capital inflows and b phoenix miracles a sudden stop is a sharp fall in capital inflows relative to their past trajectory sudden stops are not a common feature in developed economies and display a large degree of temporal bunching suggesting that global capital market turmoil acts as a coordinating factor external to ems as shown in section i however balance sheet effects namely the interaction of large changes in the real exchange rate during sudden stops and liability dollarization i e foreign exchange denominated debts are key in influencing the likelihood of a sudden stop thus even though the initial shock is in principle exogenous to the economy whether or not it materializes into a sudden stop depends on domestic financial vulnerabilities on the other hand a phoenix miracle is defined as a case in which output recovers relatively quickly from a sharp collapse with virtually no recovery in credit or capital inflows and a very weak recovery in investment hence the reference to the mythical bird rising from the ashes the existence of phoenix like recoveries suggests that financial frictions play a key role in pushing economies to the abyss from which in some way or another they can crawl back to safe ground by means less than apparent to the conventional observer looking for standard fundamentals and thus may appear miraculous interestingly the great depression of the 1930s shares some of the key features of phoenix miracles in ems but shows salient differences as well that suggest nominal labor market rigidities are not crucial in explaining output collapse in ems understanding these regularities could and we believe does shed light on policies aimed at preventing crises and attenuating their effects

private debt overhang and the government spending multiplier evidence for the united states using state dependent local projections and historical us data we find that government spending multipliers are considerably larger in periods of private debt overhang in particular while multipliers are below or close to one in low private debt states we find significant crowding in of private spending in periods of debt overhang resulting in multipliers that are much larger than one in high private debt episodes more government purchases even reduce the ratio of government debt to gross domestic product these results are robust for the type of shocks and when we control for the business cycle financial crises deleveraging episodes government debt overhang and the zero lower bound

bertrand vs cournot competition in distribution channels with upstream collusion abstract this paper applies repeated game theory to tacit collusion in dynamic distribution channels based on the grim trigger strategy we examine competitors choice of the strategic instruments in distribution channels comprised of two manufacturers distributing through two independent retailers respectively first the paper discusses the upstream manufacturers collusion incentives under different competition modes for downstream retailers and shows that the manufacturers collusion incentives critically depend on the retailers competition modes and the discount factor we then identify the endogenous competition modes in equilibrium we find that upstream collusion is easier to sustain under cournot competition than bertrand competition and it is least likely to be sustained under mixed bertrand cournot competition furthermore in equilibrium retailers can engage in bertrand cournot or mixed bertrand cournot competition depending on the discount factor and the degree of product differentiation this study provides the rationale behind the emergence of various modes of competition in practical dynamic distribution channels especially the recent mixed bertrand cournot competition mode finally the manufacturers collusion incentives and retailers competition modes jointly affect the manufacturers profitability and social welfare we also discuss how the manufacturers profitability and social welfare vary under different competition modes taking upstream collusion into consideration we find that upstream collusion increases decreases social welfare for complements substitutes

transmission of monetary policy through global banks whose policy matters abstract this paper explores the basic question of whose monetary policy matters for banks international lending in the international context monetary policies from several countries could come into play the lender s the borrower s and that of a third country the issuer of the currency in which cross border lending is denominated using the rich dimensionality of the bis international banking statistics we find significant effects for all three policies us monetary easing fuels cross border lending in us dollars as befits a global funding currency at the same time a tightening in the lender or the borrower country reinforces international dollar lending as global banks turn to the greenback for cheaper funding and toward borrowers abroad our results also show that stronger capitalization and better access to funding sources mitigate the frictions underpinning the transmission channels analogous results for euro denominated lending confirm that global funding currencies play a key role in international monetary policy transmission

r d subsidies spillovers and privatization in mixed markets we examine the use of subsidies to research and development rd however it does not lead to the equalization of per firm output and therefore to an efficient distribution of production costs we also find that privatization of the public firm reduces r d activity and welfare in the duopoly market this result stands even when optimal r d subsidies are provided

privatization neutrality theorem revisited fjell and heywood 2004 show that privatization is not necessarily welfare neutral in mixed oligopolies under a production subsidy if firms move sequentially we find that the neutrality holds for any time structure if instead an output floor is introduced

monetary analysis the equilibrium method and keynes s general theory compared with the work of his contemporaries keynes s general theory represented a radical change in theoretical method from sequence analysis to the method of equilibrium the nature of this change is discussed together with its implications for the substance of keynes s message and for the subsequent development of macroeconomics

financial and fiscal interaction in the euro area crisis this time was different abstract this paper highlights the anomalous characteristics of the euro area twin crises by contrasting the aggregate macroecosnomic dynamics in the period 2009 2013 with the business cycle fluctuations of the previous decades we report three novel stylised facts first the contraction in output was marked by an anomalous downfall in private investment and an increase in households savings while consumption and unemployment followed their historical relation with gdp second households and financial corporations debts and house prices deviated from their pre crisis trends while non financial corporations debt followed historical regularities third the jumps in the public deficit gdp and debt gdp ratios in 2008 2009 were unprecedented and so was the fiscal consolidation that followed our analysis points to the financial nature of the crisis as a likely explanation for these facts importantly the anomalous increase in public debt is in large part explained by extraordinary measures in support of the financial sector which show up in the stock flow adjustments and reveal a keyinteraction between the fiscal and the financial sectors

an international housing market in the british isles evidence from business and medium term cycles using a friedman test it has been averred that there is an international market in housing inter alia adams z and fuss r 2010 macroeconomic determinants of international housing markets journal of housing economics

on stock market illiquidity and real time gdp growth this study examines whether stock market illiquidity forecasts real uk gdp growth using data over the period 1989q1 2012q2 apart from standard linear model specifications we also utilize non linear models which allow for regime switching behavior in terms of a liquid versus an illiquid market regime and over the phases of the business cycle our findings support a statistically significant negative relationship between stock market illiquidity and future uk gdp growth over and above the usual control variables this relationship is found to be stronger during periods of highly illiquid market conditions and weak economic growth our out of sample forecasting analysis indicates that a regime switching model of illiquid versus liquid market conditions predicts uk growth better than any other model actually this model is the only one to significantly outperform the gdp growth forecasts published in the bank of england s inflation report

business fluctuations in a behavioral switching model gridlock effects and credit crunch phenomena in financial networks abstract in this paper we characterize the evolution over time of a credit network in the most general terms as a system of interacting banks and firms operating in a three sector economy with goods credit and interbank market credit connections change over time via an evolving fitness measure depending from lenders supply of liquidity and borrowers demand of credit moreover an endogenous learning mechanism allows agents to switch between a loyal or a shopping around strategy according to their degree of satisfaction the crucial question we investigate is how financial bubbles and credit crunch phenomena emerge from the implemented mechanism

seeing like the fed culture cognition and framing in the failure to anticipate the financial crisis of 2008 one of the puzzles about the financial crisis of 2008 is why regulators particularly the federal open market committee fomc were so slow to recognize the impending collapse of the financial sys

good bye financial repression hello financial crash some unintended consequences of financial liberalization in latin america are analyzed in this paper intrinsic imperfectious in financial markets and the policy dilemmas they pose are reviewed first the stylized facts of southern cone experiments in financial liberization are then presented alternative ways of organlzing domestic capital markets under latin american conditions are discussed and an eclectic reform mongering program is proposed

the effect of content on global internet adoption and the global digital divide a country s human capital and economic productivity increasingly depend on the internet as a result of its expanding role in providing information and communications this has prompted a search for ways to increase internet adoption and narrow its disparity across countries the global digital divide previous work has focused on demographic economic and infrastructure determinants of internet access that are difficult to change in the short run internet content increases adoption and can be changed more quickly however the magnitude of its impact and therefore its effectiveness as a policy and strategy tool has until now been unknown quantifying the role of content is challenging because of feedback network effects between content and adoption more content stimulates adoption which in turn increases the incentive to create content we develop a methodology to overcome this endogeneity problem we find a statistically and economically significant effect implying that policies promoting content creation can substantially increase adoption because it is ubiquitous internet content is also useful to effect social change across countries content has a greater effect on adoption in countries with more disparate languages making it a useful tool to overcome linguistic isolation our results offer guidance for policymakers on country characteristics that influence adoption s responsiveness to content and for internet firms on where to expand internationally and how to quantify content investments this paper was accepted by lorin hitt information systems

the financial cycle and macroeconomics what have we learnt abstract it is high time we rediscovered the role of the financial cycle in macroeconomics in the environment that has prevailed for at least three decades now it is not possible to understand business fluctuations and the corresponding analytical and policy challenges without understanding the financial cycle this calls for a rethink of modelling strategies and for significant adjustments to macroeconomic policies this essay highlights the stylised empirical features of the financial cycle conjectures as to what it may take to model it satisfactorily and considers its policy implications in the discussion of policy the essay pays special attention to the bust phase which is less well explored and raises much more controversial issues

fundamentals news global liquidity and macroprudential policy we study optimal macroprudential policy in a model in which unconventional shocks in the form of news about future fundamentals and regime changes in world interest rates interact with collateral constraints in driving the dynamics of financial crises these shocks strengthen incentives to borrow in good times i e when good news about future fundamentals coincide with a low world interest rate regime thereby increasing vulnerability to crises and enlarging the pecuniary externality due to the collateral constraints quantitatively an optimal schedule of macroprudential debt taxes can lower the frequency and magnitude of financial crises but the policy is complex because it features significant variation across interest rate regimes and news realizations

comparing bertrand and cournot in mixed markets abstract we revisit the classic comparison between bertrand and cournot outcomes in a mixed market with private and public firms the results are often strikingly different and opposite to the ones obtained from a similar comparison in the standard setting with all profit maximizing firms

credit cycle coherence in the eurozone was there a euro effect this paper examines effects of the euro introduction on credit cycle coherence in the eurozone through six channels we construct and describe credit cycles for total bank credit household mortgages and non financial business loans for 16 emu economies over 1990 2015 credit cycle coherence is measured by synchronicity of cycle movements and similarity of their amplitudes we find that the effect of euro introduction runs through elimination of currency risk and higher capital flows which decrease coherence of total credit and mortgage credit cycles but increase coherence of business credit cycles falling interest rates contribute to the convergence of total and mortgage credit cycles financial deregulation and legal harmonization are associated with lower coherence of all credit cycles while trade openness has the opposite impact the findings impinge on monetary policy effectiveness in the eurozone with implications for macroprudential policy

monetary and macroprudential policy coordination among multiple equilibria abstract the notion of a tradeoff between output and financial stabilization is based on monetary macroprudential models with unique equilibria using a game theory setup this paper shows that multiple equilibria lead to qualitatively different results monetary and macroprudential authorities have tools that impose externalities on each other s objectives one of the tools macroprudential is coarse while the other monetary policy is unconstrained we find that this asymmetry always leads to multiple equilibria and show that under economically relevant conditions the authorities prefer different equilibria giving the unconstrained authority a weight on helping the constrained authority leaning against the wind now has unexpected effects the relation between this weight and the difficulty of coordinating is hump shaped and therefore a small degree of leaning worsens outcomes on both authorities objectives

volatile capital flows and financial integration the role of moral hazard abstract we study a model in which income and capital flows between countries are jointly determined in a world economy with integrated financial markets in a setting that combines risky entrepreneurial activity with moral hazard we find that a shift from autarky to financial integration leads to boom bust cycles in capital flows output and consumption moral hazard causes cycles because financial intermediaries incentivize effort by insisting entrepreneurs take an equity share in their own projects the size of this stake rises with wealth discouraging entrepreneurship and inhibiting capital formation the reverse is true when wealth falls generating cycles

price vs quantity competition in oligopoly supergames abstract in a repeated oligopoly with differentiated products and firms following trigger strategies quantity competition leads to a less efficient outcome than price competition this result contrasts with the repeated duopoly result where price competition is less efficient under certain conditions

effective macroprudential policy cross sector substitution from price and quantity measures macroprudential policy is increasingly being implemented worldwide key questions are its effectiveness in influencing bank credit and substitution effects beyond banking our results confirm the expected effects of macroprudential policies on bank credit both for advanced economies and emerging market economies but results also confirm substitution effects towards non bank credit especially in advanced economies reducing the policies effect on total credit quantity restrictions are particularly potent in constraining bank credit but also cause the strongest substitution effects policy implications indicate a need to extend macroprudential policy beyond banking especially in advanced economies

characterizing the financial cycle evidence from a frequency domain analysis a growing body of literature argues that the financial cycle is considerably longer in duration and larger in amplitude than the business cycle and that its distinguishing features became more pronounced over time this paper proposes an empirical approach suitable to test these hypotheses we parametrically estimate the whole spectrum of financial and real variables to obtain a complete picture of their cyclical properties we provide strong statistical evidence for the us and slightly weaker evidence for the uk validating the hypothesized features of the financial cycle in germany however the financial cycle is if at all much less visible

projecting the economic impact of the internet in this paper we analyze the impact of the internet on the performance of the economy and the standard of living of average americans our analyses illustrate that even though the stock market s speculative bubble has burst the internet will continue to have a significant impact on old economy industries and as a result generate real benefits for the overall economy this abstract was borrowed from another version of this item

effects of the us monetary policy shocks during financial crises a threshold vector autoregression approach abstractthis article analyzes the impact of monetary policy during periods of low and high financial stress in the us economy using a threshold vector autoregression model there is evidence that expansionary monetary policy is effective during periods of high financial stress with larger responses having a higher proportionate effect on output the existence of a cost channel effect during periods of high financial stress implies the existence of a short run output inflation trade off during financial crises large expansionary monetary shocks also increase the likelihood of moving the economy out of a high financial stress regime

oligopoly games and the cournot bertrand model a survey traditional oligopoly models hold that firms compete in the same strategic variable output cournot or price bertrand alternatively a hybrid model allows some firms to compete in output and other firms to compete in price also known as the cournot bertrand model when the choice of strategic variable is endogenous the established dominant strategy is output competition a growing body of work demonstrates however that the cournot bertrand outcome can be a subgame perfect nash equilibrium in the presence of market asymmetries observations of real world markets consistent with cournot bertrand behavior bolster justification for the model and have stimulated an impressive and evolving literature on advances and applications we lay out the roots of the cournot bertrand model and explore a number of model developments we categorize 12 primary models in the literature based on alternative assumptions in particular some authors consider when the timing of play as well as the choice of strategic variable are endogenous altogether this research identifies when cournot bertrand behavior can emerge in a dynamic setting and under alternative market conditions we also review the cournot bertrand model applications in the fields of international economics industrial organization labor and public economics we expect the literature to continue to expand in the future

price vs quantity in oligopoly games abstract price setting and quantity setting oligopoly games lead to extremely different outcomes in the market one natural way to address this problem is to formulate a model in which some firms use price while the remaining firms use quantity as their decision variable we introduce a mixed oligopoly game of this type and determine its equilibria in addition we consider an extension of this mixed oligopoly game through which the choice of the decision variables can be endogenized we prove the emergence of the cournot game

financial cycles characterisation and real time measurement abstract we demonstrate that financial cycles identified as the common fluctuation in credit and asset prices proxying balance sheet leverage differ across g 7 countries in terms of duration this contradicts a similar duration assumption inherent in the basel iii credit to gdp gap guiding countercyclical capital buffers against this backdrop we propose an empirical methodology for constructing country specific financial cycles that relaxes the similar duration assumption and is based on the common fluctuation of several variables using credit and asset prices as inputs to our methodology we show that constructed financial cycles significantly outperform the basel iii credit to gdp gap in predicting financial crises

trilemma dilemma and global players abstract this paper investigates the debate between the mundellian trilemma and the dilemma overall the global financial cycle magnifies the binding effect of financial openness on monetary policy autonomy and reduces the effectiveness of the floating exchange rate regime in isolating the domestic economy against financial pressures i provide empirical evidence that the trilemma does not morph into a dilemma furthermore the sensitivity to the global financial cycle depends more on the presence of global investors and global players than on the fluctuations of these financial forces

partial privatization in mixed duopoly abstract we investigate a quantity setting duopoly involving a private firm and a privatized firm jointly owned by the public and private sectors the private firm maximizes profits while the privatized firm takes both profits and social welfare into consideration we consider how many shares the government should hold in the privatized firm we find that neither full privatization the government does not hold any shares nor full nationalization the government holds all of the shares is optimal under moderate conditions

does the new economy measure up to the great inventions of the past abstract during the four years 1995 99 u s productivity growth experienced a strong revival and achieved growth rates exceeding that of the golden age of 1913 72 accordingly many observers have declared the new economy to be an industrial revolution even more important than the second industrial revolution of 1860 1900 which made the golden age of productivity growth possible this paper dissects the recent productivity revival subtracts out a cyclical component and concludes that there is no revival of the productivity growth trend in the 88 percent of the private economy lying outside of the durables manufacturing sector the paper explains this surprising finding by pointing to limitations in computers and the internet in comparison with the great inventions of the past

price or quantity the strategic choice of subsidized firms in a mixed duopoly this paper investigates the endogenous choice of the strategic variable price or quantity taken in a mixed duopoly by a public and a private firm prior to market competition while matsumura and ogawa 2012 in a standard mixed duopoly find that price is the unique equilibrium we show that by introducing firm subsidization in the same setting quantity can constitute a dominant strategy equilibrium

on the sustainability of collusion in differentiated duopolies abstract we consider a rule designed to maintain collusion in a duopoly made up of firms producing differentiated products we analyse both price setting and quantity setting models and show that product differentiation plays a crucial role in determining the effectiveness of this rule our results contrast with those obtained by earlier writers

prisoners dilemma in duopoly super games abstract the choice between quantity and price in order to stabilize collusion is modeled here it is shown that this relocates the prisoners dilemma backward from the market stage to the stage where the market variable is chosen in order to sustain collusion and where discount rates appear as the payoffs likewise a prisoners dilemma arises also when both the market variable and the type of behavior cooperative or non cooperative are simultaneously chosen journal of economic literature classification numbers c72 d43 l13

austerity and private debt this study provides empirical evidence that the costs of austerity crucially depend on the level of private indebtedness in particular fiscal consolidations lead to severe contractions when implemented in high private debt states contrary fiscal consolidations have no significant effect on economic activity when private debt is low these results are robust to alternative definitions of private debt overhang the composition of fiscal consolidations and controlling for the state of the business cycle and government debt overhang i show that deterioration in household balance sheets is important to understand private debt dependent effects of austerity

corporate social responsibility or payoff asymmetry a study of an endogenous timing game we revisit an endogenous timing game by introducing corporate social responsibility into firms payoffs previous research investigates an endogenous timing game in a mixed oligopoly wherein one welfare maximizing public firm competes against profit maximizing private firms it shows that the outcome is completely different from that of private oligopoly in contrast to its result we find that this change in payoff does not matter as long as the payoffs are symmetric our result indicates that asymmetry and not welfare concerning objectives yields specific results in the literature on mixed oligopoly

competition and credit procyclicality in european banking abstract this paper empirically assesses how competition in the banking sector affects credit procyclicality by estimating both an interacted panel var model using macroeconomic data and a single equation model with bank level data these two empirical approaches show that a deviation of actual gdp from potential gdp leads to greater credit fluctuations in economies where bank competition is weak this suggests that increased market power for banks increases the financial accelerator mechanism which is consistent with recent macroeconomic models showing that monopolistic banking tends to increase macroeconomic volatility by making credit cheaper during booms and more expensive during recessions

measuring business cycle time the business cycle analysis of arthur f burns and wesley c mitchell and the national bureau of economic research presumed that aggregate economic variables evolve on a time scale defined by business cycle turning points rather than by months or quarters do macroeconomic variables appear to evolve on an economic rather than a calendar time scale evidence presented here suggests that they do however the estimated economic time scales are only weakly related to business cycle time scales providing evidence against the view underlying traditional business cycle analysis copyright 1987 by university of chicago press

the time varying characteristics of the chinese financial cycle and impact from the united states abstractalthough there have been many empirical studies about the financial cycle since the financial crisis of 2008 few have analysed the structural changes in the chinese financial cycle over ti

fiscal policy in good times and bad in the 1980s several countries with large government debt or deficit implemented substantial and in some cases drastic deficit cuts contrary to widespread expectations in many cases private consumption boomed rather than contracted this paper shows that in times of fiscal stress shocks to government revenues and especially expenditure have very different effects on private consumption than in normal times

the synchronization of credit cycles abstract this paper proposes a simple econometric procedure to test for the synchronization of credit cycles using a century of data for 14 advanced economies we find that credit cycle synchronization dropped in the early 1920s from initially relatively high levels between the 1920s and the 1970s synchronization was overall low and concentrated within five predominantly regional clusters however synchronization has significantly increased in the post bretton woods era and has become less associated with geographic proximity australia denmark france italy japan norway spain switzerland the uk and the us form a single major credit cycle cluster since the 1970s a smaller cluster is formed by canada the netherlands and sweden while the german credit cycle follows a distinct path using logistic regressions we find that the synchronization of credit and business cycles go hand in hand our findings are especially relevant for the international coordination of macroprudential policy as well as to spur and inform further analysis on credit cycle dynamics

cross border travellers and parallel trade implications for asian economies this paper explores the impact of parallel trade in an export market by cross border travellers on welfare of the home country in a model with heterogeneous consumers perceptions we show that such parallel trade when it is organised trading always hurts the home country welfare however when parallel trade is unorganised trading it might benefit the home country welfare provided that the size of the export market is relatively small along these lines we suggest optimal policy responses in the home country to parallel trade by cross border travellers the results of the paper yield insightful policy implications for asian economies

unnatural selection perverse incentives and the misallocation of credit in japan we examine the misallocation of credit in japan associated with the perverse incentives faced by banks to provide additional credit to the weakest firms firms are more likely to receive additional bank credit if they arein poor financial condition because troubled japanese banks have an incentive to allocate credit to severely impaired borrowers in order to avoid the realization of losses on their own balance sheets this evergreening behavior is more prevalent among banks that have reported capital ratios close to the required minimum and is compounded by the incentives arising from extensive corporate affiliations

how to compete cournot versus bertrand in a vertical structure with an integrated input supplier we study whether a quantity or a price contract is chosen at equilibrium by one integrated firm and its retail competitor in a differentiated duopoly using a similar vertical structure arya et al 2008 show that bertrand competition is more profitable than cournot competition which contrasts with conventional wisdom in this article we first demonstrate that such a result is robust to the endogenous determination of the type of contract second by introducing managerial incentives in the model we find that delegation to managers may lead each firm to choose a quantity contract and as long as products are sufficiently differentiated entails conflicting choices causing nonexistence of equilibrium in pure strategies significantly high product substitutability reconciles firms objectives under delegation leading unique or multiple equilibria with symmetric types of contracts to arise

explaining and forecasting bank loans good times and crisis abstractthis article aims to develop a parsimonious model to explain and forecast bank loans to nonfinancial companies during calm periods as well as in situations of financial turmoil it focuses on the french context over a period including financial banking and sovereign debt crises theoretical views and intuitions led us to gauge the marginal informational content of a large set of leading indicators in var and vecm models and to investigate potential nonlinearity in credit dynamics in accordance with firms and banks balance sheet effects the growth rate of equity prices appears to be one of the most interesting leading indicator as well as a significant threshold variable for explaining regime switching however it appears difficult to accurately predict the right credit dynamics regimes a simple var model finally performs better

should civil servants be restricted in wage bargaining a mixed duopoly approach abstract should civil servants employees in the public sector be allowed to bargain collectively to answer this question we construct a model of unionized mixed duopoly and examine the regulatory framework of public institutions especially focusing on a wage regulation imposed on the public firm the wage regulation turns out to yield critical welfare implications as it gives rise to two opposing strategic effects the wage regulation intensifies downstream market competition while it loosens upstream market competition the overall welfare effect is ambiguous depending crucially on the degree of product differentiation between the firms we also show that in contrast to the popular belief granting the right to bargain collectively to civil servants would not necessarily help them because they tend to demand excessively high wages when they are allowed to bargain collectively finally we briefly discuss a new perspective on the role of profit motives in public institutions when the wages are determined endogenously

mixed oligopoly privatization and subsidization abstract this paper demonstrates three effects of domestic production subsidies in a mixed oligopoly industry regarding privatization and efficiency first if subsidies are used before and after privatization welfare is unchanged by privatization second if subsidies are used only before privatization then privatization always lowers welfare regardless of the number of private firms in the industry third the subsidy contributes to overall efficiency in a mixed oligopoly due to cost distribution effects

budgetary risks from real estate and stock markets fiscal revenues and government expenditures are affected by asset price changes in ways that are not accounted for by standard cyclical adjustment methods revenues are influenced by capital gains and turnover taxation as well as by output changes determined by the effect of wealth changes on consumption and investment and outlays may also be affected if collapsing asset prices prompt fiscal authorities to bail out private sector balance sheet problems we point out that these effects can be asymmetric resulting in deficit and debt biases and we find support for this phenomenon in panel estimates for a sample of 20 industrialized countries over 1982 2002 the estimated coefficients indicate that 30 40 of the dramatic early 1990s fiscal balance deteriorations in the uk and sweden was due to asset price effects with a particularly relevant role for real estate price changes if financial markets experience boom bust cycles prudent management of fiscal windfalls in boom phases is needed to ensure fiscal and financial sustainability in bust phases and budgetary rules may need to account explicitly for a separate role of asset price related effects felix eschenbach and ludger schuknecht

distribution channel strategies in a mixed market abstract this paper studies equilibrium channel strategies in a mixed market with a public firm and a private firm the public firm is concerned with social welfare while the private firm aims to maximize its own profit each firm decides whether to adopt an integrated or a decentralized channel we examine two standard market competition modes bertrand and cournot within each competition mode we consider two typical vertical contracts wholesale price and two part tariff contracts our results suggest that equilibrium channel structures depend on the market competition mode the vertical contract form and the level of product substitutability specifically the channel strategy of the private firm depends mainly on the vertical contract form under a two part tariff contract the private firm always chooses decentralization under a wholesale price contract the private firm chooses integration for most scenarios except for highly substitutable products under bertrand competition i e under very intense competition the channel strategy of the public firm depends mainly on the competition mode under bertrand competition the public firm always chooses decentralization under cournot competition the public firm always chooses the opposite of the private firm s strategy

price or quantity in tacit collusion abstract we investigate the choice of market variable price or quantity of an optimal implicit cartel if the discount factor is high the cartel can realize the monopoly profit in both cases otherwise it is optimal for the cartel to rely on quantities in the collusive phase if goods are substitutes and prices if goods are complements the reason is that this minimizes the gains from deviations from collusive play

mixed oligopoly public firm behavior and free private entry we analyze a mixed oligopoly with free entry by private firms assuming that a public firm maximizes an increasing function of output subject to a break even constraint we establish an irrelevance result whenever a mixed oligopoly is viable then aggregate output aggregate costs and welfare are the same with and without the public firm however replacing a viable mixed oligopoly with a public monopoly yields higher net welfare implications for privatization policy are suggested

short and medium term financial real cycles an empirical assessment 2019 elsevier ltd theories such as minsky s financial instability hypothesis or new keynesian financial accelerator models assign a key role to financial factors in business cycle dynamics we propose a simple var based estimation framework to examine some of the financial real interaction mechanisms that are at the core of these theories we examine cycle frequencies in seven oecd countries over the period 1970 2015 and find that output contains short and medium business cycle frequencies while interest rates business debt and household debt exhibit short medium and long cycles respectively we find robust evidence for financial real interaction mechanisms i at high frequencies between interest rates and gdp in australia and the usa and ii at medium frequencies between business debt and gdp in canada and great britain the effect of interest rates and debt seems to operate via investment rather than consumption we find no evidence for an interaction mechanism between household debt and gdp our results provide support for minskyan and financial accelerator models in which output interacts with interest rates or corporate debt