a perspective on the symptoms and causes of the financial crisis abstract prior to the 2007 2008 financial crisis banking sector profits were very high but the profitability of financial intermediation was poor using a novel model of banking this article argues that the high profits were achieved through balance sheet expansion and growing default liquidity and term risk mismatches between assets and liabilities as a result large banks financial leverage rose as they became less liquid setting the conditions for a systemic banking crisis this article argues that the increase in financial leverage was possible due to misguided changes in the regulatory framework specifically the basel i capital accord and reductions in reserve requirements finally this article overviews and assesses the policy response in the aftermath of the crisis

lp modeling for asset liability management a survey of choices and simplifications dynamic linear programming lp models for asset liability management alm are quite powerful and flexible but face two challenges 1 many modeling choices not all consistent with one another or with finance theory and 2 solution difficulties due to the large number of scenarios obtained from standard interest rate models we first survey these modeling choices with a view to help researchers make self consistent choices next we review how the dynamic lp model for alm and the representation of uncertainty therein have been simplified in the past to motivate new or hybrid models emphasizing tractability to this end we review existing static lp models as extreme modeling simplifications and aggregation as a simplification of uncertainty

financial reforms and income inequality abstract using a panel of 62 countries for 1973 2005 we assess the impact of financial reforms on income inequality we find that removal of policies towards directed credit and excessively high reserve requirements and improvements in the securities market reduce inequality

is there a leviathan in your neighborhood this paper measures effects of decentralization in local government hierarchies on local public sector size this sector shrinks if decentralization encourages competition among governments it expands if decentralization sacrifices scale economies in a sample of 3 022 counties larger county governments reduce competition and increase aggregate local public sector size relative to aggregate county income more cities and towns increase competition and reduce its size more special and school districts sacrifice scale economies and increase it two recent articles have attempted to identify the effects of decentralization in state and local government on the size of the state and local public sector wallace oates 1985 finds no important effects michael nelson 1987 finds modest evidence that increased competition among government units reduces the size of the public sector this article demonstrates that the effects of decentralization are important and complex decentralization which encourages competition reduces the size of the local public sector decentralization which discourages scale economies increases it

making a case for robust optimization models robust optimization searches for recommendations that are relatively immune to anticipated uncertainty in the problem parameters stochasticities are addressed via a set of discrete scenarios this paper presents applications in which the traditional stochastic linear program fails to identify a robust solution despite the presence of a cheap robust point limitations of piecewise linearization are discussed we argue that a concave utility function should be incorporated in a model whenever the decision maker is risk averse examples are taken from telecommunications and financial planning

analyzing legal regulations in the norwegian life insurance business using a multistage asset liability management model the legal regulations for the life insurance business in norway have recently been and still are under revision the government s intention is to secure the interests of the customers in life insurance companies however there has been debate as to whether the regulations really are in the customers best interest we apply an asset liability management alm model to analyze the implications of the regulations the model is multistage stochastic and integrates assets and liabilities we employ a four stage model to analyze the legal regulations and conclude that the current legal framework is not in the insurance holders best interests

the implications of competition among jurisdictions does tiebout need politics the paper investigates whether compensation among local jurisdiction is by itself sufficient to ensure efficient provision of local public goods jurisdictions have fixed boundaries and each has an entrenched government with the power to tax and supply the public good residents can move costlessly among jurisdictions it is shown that competition among numerous jurisdictions is not sificient to guarantee public sector efficiency though residents can vote with their feet land is immobile hence governments can unsurp some land rents for their own ends increasing the number of jurisdictions limits but cannot completely eliminate the ability to exercise discretionary governmental power

an equilibrium model of bond pricing and a test of market efficiency in two previous and related papers 3 4 the authors have reported the results of estimating a particular equilibrium model of bond pricing using quarterly data on canadian government bonds for the period 1964 to 1979 this paper reports the results of applying a similar model to the pricing of u s government bonds for the period 1958 1979 using data from the crsp government bond file the paper also extends the previous empirical analysis by evaluating the ability of the pricing model to detect underpriced and overpriced bonds the data reveal a strong relation between price prediction errors and subsequent bond returns

a stochastic convergence model for portfolio selection portfolio selection techniques must provide decision makers with a dynamic model framework that incorporates realistic assumptions regarding financial markets risk preferences and required portfolio characteristics unfortunately multistage stochastic programming sp models for portfolio selection very quickly become intractable as assumptions are relaxed and uncertainty is introduced in this paper i present an alternative model framework for portfolio selection stochastic convergence sc that systematically incorporates uncertainty under a realistic assumption set the optimal portfolio is derived through an iterative procedure where portfolio plans are evaluated under many possible future scenarios then revised until the model converges to the optimal plan this approach allows for scenario analysis over all stochastic components requires no limitation on the structural form of the objective or constraints and permits evaluation over any length planning horizon while maintaining model tractability by aggregating the scenario tree at each stage in the solution process through focused aggregation schemes the sc approach allows for the implementation of a lower partial variance riskmetric which is preferred in investment selection in simulated tests the sc model with scenario aggregation generated portfolios exhibiting performance similar to those generated using the sp model form with no aggregation empirical tests using historical fund returns show that a multiperiod sc decision strategy outperforms various benchmarkstrate gies over a long term test horizon under both asset liability matching and return maximization frameworks

dynamic models for fixed income portfolio management under uncertainty abstract we develop multi period dynamic models for fixed income portfolio management under uncertainty using multi stage stochastic programming with recourse the models integrate the prescriptive stochastic programs with descriptive monte carlo simulation models of the term structure of interest rates extensive validation experiments are carried out to establish the effectiveness of the models in hedging against uncertainty and to assess their performance vis a vis single period models an application to tracking the salomon brothers mortgage index is reported with very encouraging results results that establish the efficacy of the models in hedging against out of sample scenarios are also reported for an application from money management the multi period models outperform classical models based on portfolio immunization and single period models

tales of fiscal adjustment fiscal adjustments why they can be expansionary this paper examines the evidence on fiscal adjustments in oecd countries from the early 1960s to today the results shed light on the recently observed phenomenon of fiscal tightening that produces non keynesian expansionary effects one interpretation is that a serious fiscal tightening increases demand wealth rises when future tax burdens decline and when interest rates decline credibility is restored and inflation or default risks abate both consumption and investment rise for this effect to produce an expansion the tightening must be sizeable and occur after a period of stress when the budget is quickly deteriorating and public debt is building up another interpretation emphasizes the supply side typically a fiscal consolidation based on tax increases is short lived to be long lasting it must include cuts in public employment transfers and government wages to be politically possible such a policy must be supported by trade unions these measures result in more efficient labour markets and boost the supply side based both on statistical evidence and on a detailed analysis of ten cases of major fiscal adjustment this article provides cautious support to the supply side view without denying a more limited role for the demand side channel alberto alesina and silvia ardagna

concepts technical issues and uses of the russell yasuda kasai financial planning model this paper discusses technical aspects of the russell yasuda kasai financial planning model these include the models for the discrete distribution scenario generation processes for the uncertain parameters of the model the mathematical approach used to develop the infinite horizon end effects part of the model a comparison of algorithms used in the model s solution and a comparison of the multistage stochastic linear programming model with the previous technology static mean variance analysis experience and benefits of the model in yasuda kasai s financial planning process is also discussed

deciding to provide local decisions on providing social welfare fiscal federalism predicts local governments will avoid social welfare expenditures owing to capital mobility across local jurisdictions yet census of governments data consistently show that many local governments provide one or more social welfare functions and moreover many jurisdictions provide these functions without federal or state intergovernmental support this article finds evidence that while local expenditures are largely driven by fiscal capacity and federal and state assistance local decisions on providing social welfare functions and participating in intergovernmental revenues are primarily affected by degree of capital mobility and by local political factors consequently local governments exercise much greater autonomy over social welfare policymaking than fiscal federalism suggests

financial asset pricing theory and stochastic programming models for asset liability management a synthesis practical portfolio investment problems under uncertainty can be modeled well as multiperiod stochastic programs however the numerical optimization methods that need to be used to solve such models seriously limit the level of detail in the uncertainty about future asset rices and returns that can be incorporated somewhat surprisingly the question how this necessarily approximate description of the uncertainty should be constructed has received relatively little attention in the stochastic programming literature moreover many of the descriptions that have been used are not arbitrage free and therefore inconsistent with modern financial asset pricing theory in this paper we will present aggregation methods that can be used in combination with financial asset pricing models to obtain a description of the uncertainty that is arbitrage free consistent with observed market prices as well as concise enough for a stochastic programming model furthermore we will discuss how these aggregation methods can form the basis of an iterative solution approach

a dynamic bank portfolio planning model with multiple scenarios multiple goals and changing priorities abstract the paper discusses a practical application of a two stage linear goal programming model to the management of the domestic and foreign currency denominated assets and liabilities of a large bank in finland the planning horizon includes three one year planning periods a number of alternative scenarios are used to describe uncertainty concerning future developments in these periods the scenarios are related to general economic conditions as well as the state of the domestic and foreign financial markets the bank is assumed to have multiple conflicting goals with different and changing priorities the goals deal with expected profits risk liquidity capital adequacy growth customer relationships and several other aspects of the bank s operations

an economic capital model integrating credit and interest rate risk in the banking book banks often measure credit and interest rate risk in the banking book separately and then add the risk measures to determine economic capital this approach misses complex interactions between the two risk types we develop a framework where these risks are analysed jointly since banking book positions are generally not marked to market our model is based on book value accounting our simulations show that interactions matter and that ignoring them leads to risk overstatement the magnitude of the errors depends on the structure of the balance sheet and on the repricing characteristics of assets and liabilities

high performance computing for asset liability management financial institutions require sophisticated tools for risk management for companywide risk management both sides of the balance sheet should be considered resulting in an integrated asset liability management approach stochastic programming models suit these needs well and have already been applied in the field of asset liability management to improve financial operations and risk management the dynamic aspect of the financial planning problems inevitably leads to multiple decision stages trading dates in the stochastic program and results in an explosion of dimensionality in this paper we show that dedicated model generation specialized solution techniques based on decomposition and high performance computing are the essential elements to tackle these large scale financial planning problems it turns out that memory management is a major bottleneck when solving very large problems given an efficient solution approach and a parallel computing facility we report on the solution of an asset liability management model for an actual dutch pension fund with 4 826 809 scenarios 12 469 250 constraints and 24 938 502 variables which is the largest stochastic linear program ever solved a closer look at the optimal decisions reveals that the initial asset mix is more stable for larger models demonstrating the potential benefits of the high performance computing approach for alm

discretized reality and spurious profits in stochastic programming models for asset liability management in the literature on stochastic programming models for practical portfolio investment problems relatively little attention has been devoted to the question how the necessarily approximate description of the asset price uncertainty in these models influences the optimal solution in this paper we will show that it is important that asset prices in such a description are arbitrage free descriptions which have been suggested in the literature are often inconsistent with observed market prices and or use sampling to obtain a set of scenarios about the future we will show that this effectively introduces arbitrage opportunities in the optimization model for an investor who cannot exploit arbitrage opportunities directly because of market imperfections and trading restrictions we will illustrate that the presence of such arbitrage opportunities may cause substantial biases in the optimal investment strategy

formulation of the russell yasuda kasai financial planning model this paper describes the formulation of the russell yasuda kasai financial planning model including the motivation for the model the presentation complements the discussion of the technical details of the financial modeling process and the managerial impact of its use to help allocate the firm s assets over time discussed in carin o et al 1994 1998 respectively the multistage stochastic linear program incorporates yasuda kasai s asset and liability mix over a five year horizon followed by an infinite horizon steady state end effects period the objective is to maximize expected long run profits less expected penalty costs from constraint violations over the infinite horizon scenarios are used to represent the uncertain parameter distributions the constraints represent the institutional cash flow legal tax and other limitations on the asset and liability mix over time

economic constraint and political choice in urban policymaking this paper presents a new conceptual scheme in understanding urban policymaking the proposed political choice model synthesizes the urban literature in economic constraint political institutions and public policy i argue that local politics operates within the general context of structural constraint and can be differentiated by policy arenas however within each arena noneconomic factors generate a wide range of policy alternatives which may or may not reinforce the policy thrust of the structural constraint for the city as a whole hence urban policymaking can be the result of political choice as well as economic consideration

a one factor model of interest rates and its application to treasury bond options 1990 a one factor model of interest rates and its application to treasury bond options financial analysts journal vol 46 no 1 pp 33 39

term structure movements and pricing interest rate contingent claims this paper derives an arbitrage free interest rate movements model ar model this model takes the complete term structure as given and derives the subsequent stochastic movement of the term structure such that the movement is arbitrage free we then show that the ar model can be used to price interest rate contingent claims relative to the observed complete term structure of interest rates this paper also studies the behavior and the economics of the model our approach can be used to price a broad range of interest rate contingent claims including bond options and callable bonds

fiscal adjustments labour market flexibility and unemployment using a panel of 17 countries for 1978 2009 we find that tax driven consolidations increase unemployment by 0 25 percentage points labour market flexibility mitigates this a one point rise in the flexibility index reduces youth long term unemployment by 0 6 0 7 1 8 2 2 percentage points

theories of the local welfare role this article investigates four competing explanations of variation in the extent of local governments welfare activity a need responsiveness explanation a fiscal capacity explanation a crimeoriented version of social disturbance theory and a community homogeneity thesis using census data for a national sample of u s cities in 1977 the analysis shows that once the powerful effects of intergovernmental influence and functional scope are taken into account only the fiscal capacity and social disturbance explanations are empirically supported the social disturbance explanation is supported whether a simple homicide incidence indicator or a more complex indicator reflecting the interaction of race and crime is used

optimal deleveraging with nonlinear temporary price impact abstract in this paper we first propose a portfolio management model where the objective is to balance equity and liability the asset price dynamics includes both permanent and temporary price impact where the permanent impact is a linear function of the cumulative trading amount and the temporary impact is a k th between 0 and 1 order power function of the instantaneous trading rate we construct efficient frontiers to visualize the tradeoff between equity and liability and obtain analytical properties regarding the optimal trading strategies in the second part we further consider an optimal deleveraging problem with leverage constraints it reduces to a non convex polynomial optimization program with polynomial and box constraints a lagrangian method for solving the problem is presented and the quality of the solution is studied

a bank asset and liability management model in managing its assets and liabilities in light of uncertainties in cash flows cost of funds and return on investments a bank must determine its optimal trade off between risk return and liquidity in this paper we develop a multiperiod stochastic linear programming model alm that includes the essential institutional legal financial and bank related policy considerations and their uncertainties yet is computationally tractable for realistically sized problems a version of the model was developed for the vancouver city savings credit union for a 5 year planning period the results indicate that alm is theoretically and operationally superior to a corresponding deterministic linear programming model and that the effort required for the implementation of alm and its computational requirements are comparable to those of the deterministic model moreover the qualitative and quantitative characteristics of the solutions are sensitive to the model s stochastic elements such as the asymmetry of cash flow distributions we also compare alm with the stochastic decision tree sdt model developed by s p bradley and d b crane alm is computationally more tractable on realistically sized problems than sdt and simulation results indicate that alm generates superior policies

searching for leviathan comment and extension in a recent article wallace oates 1985 investigated whether fiscal decentralization tended to act as a constraining influence on the overall size of the public sector this hypothesis has been advanced by several alternative theories of government behavior including richard musgrave s 1959 model of how the distribution function of government would be carried out by subnational governments geoffrey brennan and james buchanan s 1980 leviathan model and the more traditional public choice model for example walter hettich and stanley winer 1984 all contend that the decentralization of tax and spending decisions introduces competition among governmental units seeking to attract citizens and other mobile resources and thereby constrains taxing power oates analyzed two data sets one pertaining to the state and local sector in the united states and the other consisting of a sample of 43 countries and found little empirical support for the decentralization hypothesis the purpose of this paper is to reconsider his analysis in the case of state and local governments specifically it will be argued that oates s measures of decentralization may be inappropriate to test the hypothesis furthermore by taking into account the structure or composition of local governmental jurisdictions within a state empirical support of the decentralization hypothesis can be marshaled for general purpose local governments such as counties and municipalities i measuring fiscal decentralization among the states

stochastic network programming for financial planning problems several financial planning problems are posed as dynamic generalized network models with stochastic parameters examples include asset allocation for portfolio selection international cash management and programmed trading arbitrage despite the large size of the resulting stochastic programs the network structure can be exploited within the solution strategy giving rise to efficient implementations empirical results are presented indicating the benefits of the stochastic network approach for the asset allocation case

the power to tax analytical foundations of a fiscal constitution preface 1 taxation in constitutional perspective 2 natural government a model of leviathan 3 constraints on base and rate structure 4 the taxation of commodities 5 taxation through time income taxes capital taxes and public debt 6 money creation and taxation 7 the disposition of public revenues 8 the domain of politics 9 open economy federalism and taxing authority 10 toward authentic tax reform prospects and prescriptions epilogue notes selected bibliography index

on line portfolio selection using stochastic programming abstract this paper is dedicated to the problem of dynamic portfolio optimization for the case when the number of decision periods is large and new information about market arrives during each such period we propose the family of adaptive portfolio selection policies which rebalance the current portfolio during each decision period by adopting portfolio from a specified family with the best performance on the past data in the absence of transaction costs the general conditions are found under which this policy yields asymptotically the same performance as the best portfolio from the same family constructed with the full knowledge of the future these results are extended for the case of nonzero transaction costs by introducing a class of threshold portfolio optimization policies which rebalance current portfolio only when its performance differs from performance of the best portfolio by a given threshold the value of this threshold is adapted to the changing market conditions we show that it is possible to select a sequence of threshold values in such a way that the asymptotic influence of transaction costs on portfolio performance is negligible and overall portfolio performance is asymptotically the same as the performance of portfolio with the perfect knowledge of the future we do not assume neither specific probabilistic structure of the market data nor their stationarity our theory is illustrated by numerical experiments with real data finally we discuss the relevance of our results in the context of high performance computing

poverty and urban public expenditures cities in the us bear a disproportionate responsibility for the public expenditures that grow out of poverty because they contain disproportionate numbers of the poor and because a substantial part

from data to model and back to data a bond portfolio management problem abstract the bond portfolio management problem is formulated as a multiperiod stochastic program using interest rate scenarios the scenarios are sampled from the binomial lattice from a black derman toy model the paper analyzes the sensitivity of the solution of the resulting large scale mathematical program with respect to the model inputs the numerical results are for the italian bond market

unemployment questions and some answers in more or less every country in the oecd unemployment was lower in the decades following the second world war than in any other period of comparable length either before or since for example in britain unemployment has exceeded 5 in every peacetime decade from 1850 onwards except for the 1950s and 1960s alternatively as we can see in table 1 p 779 average unemployment in the 1980s and 90s is higher generally much higher than in the 1960s in every country considered why this is so is one of the questions which underlies this paper a second question which is also illustrated in the unemployment numbers presented in table 1 p 779 concerns the causes of the enormous variation in unemployment rates across the oecd countries as we shall see these are difficult questions the first in particular is one for which we do not have a complete answer by this i do not mean that we do not have theories which are broadly consistent with these numbers in fact we have theories consistent with more or less any numbers what we lack is a satisfactory empirical explanation of the time series pattern of oecd unemployment in what follows we remain focused on these two questions first considering the theoretical background and then looking at some possible answers we finish with some speculative conjectures on the first question

scenario generation and stochastic programming models for asset liability management in this paper we develop and test scenario generation methods for asset liability management models we propose a multi stage stochastic programming model for a dutch pension fund both randomly sampled event trees and event trees fitting the mean and the covariance of the return distribution are used for generating the coefficients of the stochastic program in order to investigate the performance of the model and the scenario generation procedures we conduct rolling horizon simulations the average cost and the risk of the stochastic programming policy are compared to the results of a simple fixed mix model we compare the average switching behavior of the optimal investment policies our results show that the performance of the multi stage stochastic program could be improved drastically by choosing an appropriate scenario generation method

strategic financial management in a multinational financial conglomerate a multiple goal stochastic programming approach abstract the paper discusses a multi stage stochastic programming approach to the strategic financial management of a multi company financial conglomerate the planning system creates a comprehensive strategy which simultaneously covers a number of future scenarios within a multi period planning horizon multiple conflicting goals may be specified for the group level company level or individual business area level and the decision maker s preferences are allowed to change over time to reflect changing operating conditions and trade off relationships between the goals special features include among other things full market valuation throughout the model integrated treatment of different types of risks explicit modelling of various types of intra group transactions and relationships extensive structures to deal with distressed assets and the covering of losses within the group as well as consideration of potential portfolio effects of a diversified group structure on the cost of funding

short term financial planning under uncertainty this paper presents a stochastic linear programming formulation of a firm s short term financial planning problem this framework allows a more realistic representation of the uncertainties fundamental to this problem than previous models in addition using wets s algorithm for linear simple recourse problems this formulation has approximately the same computational complexity as the mean approximation i e the deterministic program obtained by replacing all random elements by their means using this formulation we empirically investigate the effects of differing distributions and penalty costs we conclude that even with symmetric penalty costs and distributions the mean model is significantly inferior to the stochastic linear programming formulation thus we are able to demonstrate that ignoring the stochastic components in linear programming formulations can be very costly without having significant computational savings

the regulation of labor author s botero juan djankov simeon la porta rafael lopez de silanes florencio shleifer andrei abstract we investigate the regulation of labor markets through employment collective relations and social security laws in 85 countries we find that the political power of the left is associated with more stringent labor regulations and more generous social security systems and that socialist french and scandinavian legal origin countries have sharply higher levels of labor regulation than do common law countries however the effects of legal origins are larger and explain more of the variation in regulations than those of politics heavier regulation of labor is associated with lower labor force participation and higher unemployment especially of the young these results are most naturally consistent with legal theories according to which countries have pervasive regulaory styles inherited from the transplantation of legal systems

modeling financial reinsurance in the casualty insurance business via stochastic programming abstract in this paper we examine the rationale for financial reinsurance in the casualty insurance business as opposed to regular reinsurance financial reinsurance refers to an investment strategy that uses the financial markets to hedge insurance risk the casualty insurer takes positions in derivatives on underlying assets whose prices are highly positively or negatively correlated with specific insurance risks we formulate the asset liability management problem for a mutually owned casualty insurer in the context of a dynamic stochastic portfolio selection model using numerical studies of the resulting large scale non linear program we compare properties of optimal portfolios with and without the possibility of financial reinsurance we let an alleged representative policyholder endowed with a linear plus negative exponential utility function evaluate the various optimal portfolios when policyholders utility functions exhibit reasonable levels of risk aversion we find that portfolios reflecting financial reinsurance dominate portfolios that are not financially reinsured

overlapping jurisdictions substitutes or complements this paper presents a simple model of the demand relationship between the activities undertaken by overlapping governments and uses the framework to estimate the relationship between municipal and county expenditures the empirical results reveal a complementary relationship between county and city general expenditures any public sector expansion effects of monopoly power at the county level will therefore be reinforced by greater municipal spending further expanding the total size of the local public sector on the other hand changes in county police and roads expenditures appear to have no strong stable impact on municipal police and roads expenditures respectively providing no reinforcing or offsetting municipal spending responses to decisions at the county level

operational research and financial management abstract the use of operational research in financial management is reviewed its application to both short term problems of cash management and long term problems of capital investment is critically examined the contribution that operational research has made to modern theories of finance and their use is explored and differences in orientation are discussed the increasing complexity of financial management problems facing many corporations is providing more opportunities for the operational researcher whose role in this area is being reappraised

how powerful are public bureaucrats as voters empirical evidence is collected and discussed regarding the influence of public bureaucrats on government sector outcome in their capacity as consumer voters it is necessary to isolate the specific effect of working in the public sector compared to other occupations on voting participation and on the probability to support an increase in the public budget for a balanced evaluation of public bureaucrats power other forms of their influencing the government sector outcome need to be taken into account

a stochastic programming model for money management abstract portfolio managers in the new fixed income securities have to cope with various forms of uncertainty in addition to the usual interest rate changes uncertainy in the timing and amount of cashflows changes in the default and other risk premia and so on complicate the portfolio manager s problem we develop here a multi period dynamic portfolio optimization model to address this problem the model specifies a sequence of investment decisions over time that maximize the expected utility of return at the end of the planning horizon the model is a two stage stochastic program with recourse the dynamics of interest rates cashflow uncertainty and liquidity default and other risk premia are explicitly modeled through postulated scenarios simulation procedures are developed to generate these scenarios the optimization models are then integrated with the simulation procedures extensive validation experiments are carried out to establish the effectiveness of the model in dealing with uncertainty in particular the model is compared against the popular portfolio immunization strategy and against a portfolio based on mean absolute deviation optimization

budgeting costs of nursing in a hospital this paper examines issues in building decision support models for budgeting nursing workforce requirements in a hospital we determine regular time overtime and agency workforce levels for various skill classes in a budget cycle we introduce a family of eight models ranging from a single period aggregate and deterministic model to a multiperiod disaggregate and probabilistic model in a single period model we ignore the time varying nature of demand for nursing hours aggregation is done over the nurse skill class mix for probabilistic models we consider demand uncertainty using empirical data we evaluate the effects of level of sophistication in model building and in information requirements on their relative performances the results suggest that ignoring the time varying nature of demand does not induce gross errors in budget estimates however ignoring demand uncertainty produces underestimates about five to six percent of budget needs a consequence of a madansky madansky a 1960 inequalities for stochastic linear programming problem management sci 6 197 204 inequality it also induces added costs to the system due to implementing nonoptimal regular time workforce levels finally we find that a simple formula using a single period demand estimate gives excellent approximations to the budget estimates obtainable from the more precise models

bank asset and liability management under uncertainty abstract this study presents a multiperiod stochastic linear simple recourse model for asset and liability management in banking the model determines the portfolio of assets and liabilities over the planning horizon given a set of deterministic rates of returns of investments and costs of borrowings and a set of random outstanding deposit levels liquidity and total reserve requirements with a given discrete probability distribution the intention is to develop an optimization tool to assure sustained profitability and good management of risks while balancing sources and uses of funds to meet legal and policy requirements and satisfy withdrawal requests of depositors on time and in full effects of changes in bank policies and banking regulations environmental factors potential risks additional decision alternatives and constraints can be handled and evaluated by the model therefore it can be used both for planning and analysis the model is verified using a turkish sample bank s data over the period 1987 1990 and several sensitivity anallyes are reported as the model takes into account the stochastic behaviour of crucial uncontrollable variables the results of the model can be deemed more realistic compared with the deterministic model

fiscal consolidation and financial reforms we use a rare events logistic regression model as well as traditional probit and logit models to investigate the impact of fiscal consolidation on the likelihood of financial reforms for a panel of 17 countries over the period 1980 2005 we show that large austerity plans mainly implemented through spending cuts rather than tax hikes promote financial reforms by considering reforms affecting specific areas of the financial sector we find that the banking sector reforms and domestic finance reforms are more likely to occur when fiscal adjustments are put in place interestingly while banking sector reforms are mainly prompted during periods of tax driven consolidations spending cuts driven consolidation packages seem to propel the implementation of domestic finance reforms finally we show that higher inflation lower degree of trade openness a deterioration of financial conditions and to some extent a fall in the degree of competitiveness enhance the probability of financial reforms

a goal programming model for bank assets and liabilities management abstract assets and liabilities management is one of the most important issues in bank strategic planning in the past this problem has often been addressed through conventional mathematical programming i e linear programming however bank management typically involves several conflicting goals such as the maximisation of returns minimisation of risk expansion of deposits and loans etc the complexity of this problem can be captured more adequately by multiobjective mathematical programming this paper discusses the construction and application at the commercial bank of greece of a goal programming model that takes into account the essential institutional financial legal and bank policy considerations

the allocation of federal aid monies the synthesis of demand side and supply side explanations previous research on the distribution offederal aid monies has been dominated by the donor s perspective different distribution formulas political influence of congressional representatives bureaucrats and individual aid recipients have been studied as the sole determinants of aid allocations each explanation however fails to examine the question of aid allocations from a demand side perspective this omission assumes that all governmental units are equally desirous of federal assistance and that any bias in the distribution of federal aid is a function of supply side conditions identifying a linkage between demand side and supply side determinants of aid allocations this article proposes and tests hypotheses derived from an integrated model of federal aid allocations

the performance of stochastic dynamic and fixed mix portfolio models the purpose of this paper is to demonstrate how to evaluate stochastic programming models and more specifically to compare two different approaches to asset liability management the first uses multistage stochastic programming while the other is a static approach based on the so called constant rebalancing or fixed mix particular attention is paid to the methodology used for the comparison the two alternatives are tested over a large number of realistic scenarios created by means of simulation we find that due to the ability of the stochastic programming model to adapt to the information in the scenario tree it dominates the fixed mix approach

searching for leviathan an empirical study in several papers and a recent book geoffrey brennan and james buchanan 1977 1978 1980 have put forth a striking and controversial view of the public sector drawing by analogy on the conventional theory of monopoly in the private sector they envision a monolithic government that systematically seeks to exploit its citizenry through the maximization of the tax revenues that it extracts from the economy from this perspective they develop a fiscal constitution whose central purpose is to constrain leviathan by limiting in various ways its access to tax and other fiscal instruments while the leviathan hypothesis has been the source of lively debate and a wide range of policy proposals it has not been the subject of much systematic empirical work or testing this is a matter of some importance since the policy implications of the leviathan view are disturbing to put it mildly in particular brennan and buchanan virtually stand on their heads many of the basic theorems in public finance for an efficient and equitable tax system if in fact the leviathan view is an inaccurate depiction of the functioning of the public sector the introduction of their policy proposals is likely to make a sorry mess of the fiscal system the leviathan model does however have some straightforward implications for observable fiscal behavior it is the purpose of this paper to examine one of these testable implications brennan and buchanan stress that fiscal decentralization is itself a powerful constraint on leviathan competition among governments in the context of the interjurisdictional mobility of persons in pursuit of fiscal gains can offer partial or possibly complete substitutes for explicit fiscal constraints on the taxing power 1980 p 184 such competition among governments in a federal system that places heavy reliance on local fiscal decisions will greatly limit the capacity of leviathan to channel resources into the public sector in short as indicated by the epigraph to this paper the leviathan model implies that other things equal the size of the public sector should vary inversely with the extent of fiscal decentralization 2

representation in municipal government municipal governments play a vital role in american democracy as well as in governments around the world despite this little is known about the degree to which cities are responsive to the views of their citizens in the past the unavailability of data on the policy preferences of citizens at the municipal level has limited scholars ability to study the responsiveness of municipal government we overcome this problem by using recent advances in opinion estimation to measure the mean policy conservatism in every u s city and town with a population above 20 000 people despite the supposition in the literature that municipal politics are non ideological we find that the policies enacted by cities across a range of policy areas correspond with the liberal conservative positions of their citizens on national policy issues in addition we consider the influence of institutions such as the presence of an elected mayor the popular initiative partisan elections term limits and at large elections our results show that these institutions have little consistent impact on policy responsiveness in municipal government these results demonstrate a robust role for citizen policy preferences in determining municipal policy outcomes but cast doubt on the hypothesis that simple institutional reforms enhance responsiveness in municipal governments

inventory management with asset based financing most of the traditional models in production and inventory control ignore the financial states of an organization and can lead to infeasible practices in real systems this paper is the first attempt to incorporate asset based financing into production decisions instead of setting a known exogenously determined budgetary constraint as most existing models suggest we model the available cash in each period as a function of assets and liabilities that may be updated periodically according to the dynamics of the production activities furthermore our models allow different interest rates on cash balance and outstanding loans which is an enhancement over most traditional models in that inventory financed by a loan may be more expensive than that by out of pocket cash we demonstrate the importance of joint consideration of production and financing decisions in a start up setting in which the ability to grow the firm is mainly constrained by its limited capital and dependence on bank financing we then explain the motivation for asset based financing by examining the decision making at a bank and a set of retailers in a newsvendor setting