credit constraints and international financial crises abstract a version of the kiyotaki and moore j political econom 105 1997 211 model of credit cycles is used to examine the extent to which a crisis in a country can spread to another seemingly unrelated country the model features two small open economies that face credit constraints and produce a differentiated commodity which they export to a large country a productivity shock to one of the small open economies triggers an adverse terms of trade shock to the other which is then amplified by credit constraints the paper provides a new perspective on the relationship between terms of trade shocks and the balance of payments that differs from existing models which focus on risk sharing and consumption smoothing in particular it is shown that if financial frictions are present a temporary terms of trade shock can trigger capital outflows and a rapid deterioration in the current account

globalization and emerging markets with or without crash we analyze the effects of financial and trade globalization on the likelihood of financial crashes in emerging markets while trade globalization always makes crashes less likely financial globalization may make them more likely especially when trade costs are high pessimistic expectations can be self fulfilling and lead to a collapse in demand for goods and assets such a crash comes with a current account reversal and drops in income and investment lower income countries are more prone to such demand based financial crises a quantitative evaluation shows our model is consistent with the main stylized facts of financial crashes in emerging markets

lessons from the debt deflation theory of sudden stops this paper reports results for a class of dynamic stochastic general equilibrium models with credit constraints that can account for some of the empirical regularities of the sudden stop phenomenon of recent emerging markets crises in these models credit constraints set in motion irving fisher s debt deflation mechanism and they bind as an endogenous equilibrium outcome when agents are highly indebted the quantitative predictions of these models yield three key lessons 1 sudden stops can occur as an endogenous response to typical realizations of adverse shocks to fundamentals in environments in which agents plan their actions taking credit constraints and expectations of sudden stops into account 2 credit constraints cause output declines during sudden stops when collateral constraints limit debt to a fraction of the market value of capital when there are limits on access to working capital or when debt deflation lowers the value of the marginal product of factors of production 3 the debt deflation mechanism has significant quantitative effects in terms of the amplification asymmetry and persistence of the responses of macroeconomic aggregates to standard shocks and in the occurrence of sudden stops as infrequent events nested within regular business cycles precautionary saving rules out the largest sudden stops from the stochastic stationary state but sudden stops remain a positive probability event in the long run this abstract was borrowed from another version of this item

some models for estimating technical and scale inefficiencies in data envelopment analysis in management contexts mathematical programming is usually used to evaluate a collection of possible alternative courses of action en route to selecting one which is best in this capacity mathematical programming serves as a planning aid to management data envelopment analysis reverses this role and employs mathematical programming to obtain ex post facto evaluations of the relative efficiency of management accomplishments however they may have been planned or executed mathematical programming is thereby extended for use as a tool for control and evaluation of past accomplishments as well as a tool to aid in planning future activities the ccr ratio form introduced by charnes cooper and rhodes as part of their data envelopment analysis approach comprehends both technical and scale inefficiencies via the optimal value of the ratio form as obtained directly from the data without requiring a priori specification of weights and or explicit delineation of assumed functional forms of relations between inputs and outputs a separation into technical and scale efficiencies is accomplished by the methods developed in this paper without altering the latter conditions for use of dea directly on observational data technical inefficiencies are identified with failures to achieve best possible output levels and or usage of excessive amounts of inputs methods for identifying and correcting the magnitudes of these inefficiencies as supplied in prior work are illustrated in the present paper a new separate variable is introduced which makes it possible to determine whether operations were conducted in regions of increasing constant or decreasing returns to scale in multiple input and multiple output situations the results are discussed and related not only to classical single output economics but also to more modern versions of economics which are identified with contestable market theories

local resource reallocation considering practical feasibility a centralized data envelopment analysis approach abstractmany studies have addressed resource allocation issues by using centralized data envelopment analysis models however few of them provided a local resource reallocation plan which may be carried out more easily this article proposes two models to get such plans the first one considers an acceptable percentage of changes in resources to ensure practical feasibility the second one further considers a situation where resources can only be allowed to shift within specific units the proposed models are applied to an empirical study based on a hospital system in taiwan to demonstrate the practical feasibility of the suggested plans we compare our reallocation suggestions to a plan that can make the whole system be perfectly efficient the main conclusion is that the plans derived from our models are more practically feasible than that with perfect efficiency

do inventory and gross margin data improve sales forecasts for u s public retailers firm level sales forecasts for retailers can be improved if we incorporate cost of goods sold inventory and gross margin defined by us as the ratio of sales to cost of goods sold as three endogenous variables we construct a simultaneous equations model estimated using public financial and nonfinancial data to provide joint forecasts of annual cost of goods sold inventory and gross margin for retailers using historical data we show that sales forecasts from this model are more accurate than consensus forecasts from equity analysts further the residuals from this model for one fiscal year are used to predict retailers for whom the relative advantage of model forecasts over consensus forecasts would be large in the next fiscal year our results show that historical inventory and gross margin contain information useful to forecast sales and that equity analysts do not fully utilize this information in their sales forecasts

financial globalization financial crises and the external portfolio structure of emerging markets financial globalization and crises and external portfolio structure we study the transitional dynamics of financial integration in emerging economies using a two sector model with a collateral constraint on external debt and trading costs incurred by foreign investors the probability of a financial crisis displays overshooting it rises sharply initially and then falls sharply but remains non zero in the long run while equity holdings fall permanently bond holdings initially fall but rise after the probability of a crisis peaks conversely asset returns and asset prices first rise and then fall these results are in line with the post globalization dynamics observed in emerging markets and the higher frequency of crises that they display

quantitative implications of a debt deflation theory of sudden stops and asset prices abstract this paper shows that the quantitative predictions of an equilibrium asset pricing model with financial frictions are consistent with key features of the sudden stop phenomenon foreign traders incur costs in trading assets with domestic agents and a collateral constraint limits external debt to a fraction of the market value of domestic equity holdings when this constraint does not bind standard productivity shocks cause typical real business cycle effects when it binds the same shocks cause strikingly different effects depending on the leverage ratio and asset market liquidity with high leverage and a liquid market the shocks force fire sales of assets and fisher s debt deflation mechanism amplifies the responses of asset prices consumption and the current account precautionary saving makes these sudden stops infrequent in the long run

financial markets views about the euro swiss franc floor exchange rates and option prices incorporate market participants views about the credibility and the effects of exchange rate targets i present a model to determine exchange rates under policy targets that can be used to price options the model is estimated with euro swiss franc exchange rate and options price data in the first few months of the minimum exchange rate policy the implied survival probability of the policy for a 3 month horizon was typically less than 75 over time the credibility increased and this probability reached 95 in august 2014

a postscript on aggregate farrell efficiencies abstract in this note we derive alternative weighting schemes that complement those of fare and zelenyuk 2003 for consistent aggregation of farrell efficiencies when the technology exhibits global constant returns to scale

rational contagion and the globalization of securities markets this paper argues that globalization may promote contagion by weakening incentives for gathering costly information and by strengthening incentives for imitating arbitrary market portfolios in the presence of short selling constraints the gain of gathering information at a fixed cost may diminish as markets grow moreover if a portfolio manager s marginal cost for yielding below market returns exceeds the marginal gain for above market returns there is a range of optimal portfolios in which all investors imitate arbitrary market portfolios and this range widens as the market grows numerical simulations suggest that these frictions can have significant implications for capital flows in emerging markets

allocating fixed costs and resources via data envelopment analysis abstract in this paper we show that data envelopment analysis dea can be viewed as maximising the average efficiency of the decision making units dmus in an organisation building upon this we present dea based models for a allocating fixed costs to dmus and b allocating input resources to dmus simultaneous to allocating input resources output targets are also decided for each dmu numeric results are presented for a number of example problems taken from the literature

efficiency of hospitals in germany a dea bootstrap approach various attempts to assess the performance of german hospitals have generated a wide range of estimates regarding their efficiency these attempts were based on different often rather small data sets consisting of heterogeneous hospitals the techniques applied range from simple benchmarking approaches to studies which employ data envelopment analysis dea some studies report dramatic differences in efficiency and propose savings potentials of 50 others find an average efficiency in excess of 95 and characterize almost 75 of their observations as fully efficient this study presents results for two datasets representative of two segments of the german hospital system these segments comprise all hospitals that have one internal medicine and one surgery department the hospitals are located in the old federal states of germany none of the hospitals provides tertiary care dea can be applied because all hospitals offer a comparable quality and range of services the results were estimated with a d

comparing french and us hospital technologies a directional input distance function approach french and us hospital technologies are compared using directional input distance functions the aggregation properties of the directional distance function allow comparison of hospital industry level performance as well as standard firm level performance with regard to productive efficiency in addition the underlying constituents of efficiency in the short run congestion and technical inefficiency and in the long run scale inefficiency are analysed by decomposing the overall measure by virtue of using the directional distance function it is also possible to obtain an estimate of a lower bound on allocative inefficiency it is found that french and us hospitals use quite different technologies long run scale inefficiencies cause most of the french hospitals inefficiency while short run technical inefficiency is the main source of overall productive inefficiency in the us hospitals

international and domestic collateral constraints in a model of emerging market crises abstract we build a model of emerging markets crises which features two types of collateral constraints firms in a domestic economy have limited borrowing capacity from international investors they also have limited borrowing capacity with respect to each other we study how the presence and changes in these collateral constraints affect financial and real variables a binding international constraint in the aggregate leads to a sharp rise in interest rates and fire sales of domestic assets while limited domestic collateral can lead to wasted international collateral these two collateral constraints can interact in important ways the first is disintermediation a fire sale of domestic assets causes banks to fail in their function of reallocating resources across the economy leading to wasted international collateral the second is a dynamic effect we show that firms in an economy with limited domestic collateral and a binding international collateral constraint will not adequately precaution against adverse shocks increasing the severity of these shocks

stabilising economic growth through risk sharing macro instruments the risk sharing principles of islamic finance have ironically been studied and used extensively outside the muslim world the development of early european city states was founded on the risk sharing principle the risk sharing financing helped these city states to develop their infrastructure and rule the scientific and economic landscape of the west the western financial system of today still carries traces of risk sharing in the form of venture capital financing albeit the primary focus has diverted to risk shifting based debt financing over the past decades much effort and research has gone into establishing a viable set of islamic financial institutions most muslim nations are heavily indebted with high reliance on multilateral financing primarily based on high interest rates this vicious cycle of interest rates and debt has stunted the growth of these nations and worsened the conditions of the masses this research brings to the forefront the concept of an equity in nature gdp linked paper which allows for enhanced risk sharing based sovereign financing it aims to present empirical proof of the stability this instrument offers in economic growth for a large sample of developing economies comprising bulk of islamic countries while analysing the empirical work a strong favourable argument for this instrument is derived for its benefits in stability through this study we endeavour to initiate a thought provoking and practical discussion for further development of these instruments for the betterment of developing countries

blueprint for an international lender of last resort abstract this paper proposes a low cost alternative to the large bailout packages that the international monetary fund imf has organized to address financial crises the imf would act as a lender of last resort faced with an unsustainable debt burden a government would declare default it would announce negotiations to restructure its debt at a sustainable level and a minimum restructured value of the debt during the restructuring period the imf would provide a cash support bid at a discount to the government s minimum offer the imf floor would guarantee liquidity and create a functioning market in the defaulted debt the proposal would remedy market failure preclude panic and contagion and facilitate an orderly debt restructuring this would be achieved without substantial official funds lenders would be forced to bear the risks they undertake thereby reducing moral hazard and future instability

solving the puzzles of structural efficiency abstract since the concept of structural efficiency first appeared in farrell farrell m j 1957 the measurement of productive efficiency journal of the royal statistical society series a part iii 120 253 281 attempts have been made to derive measures for the performance of a group of production units often referred to an industry with many firms many empirical studies used the technical efficiency of an average unit to measure the structural efficiency of a group but researchers have been puzzled by the discrepancies between the average of individual efficiency scores and the performance of the group as a whole in this paper we point out that the shadow price model provides a useful framework for understanding the economic meaning of the structural efficiency as well as its components by recognizing these components the puzzles related to the inconsistencies between the individual and group performance can be solved readily

fiscal and monetary policies and the cost of sudden stops abstract this article investigates the effects of monetary and fiscal policies on output growth during sudden stop balance of payments crisis in emerging markets and developing countries sudden stops in capital flows and subsequent deep recessions are a frequent occurrence in these countries but there is no professional consensus and little systematic empirical evidence shedding light on the macroeconomic policy mix most likely to limit output losses during these episodes to address this issue we investigate 83 sudden stop crisis in 66 countries using a baseline empirical model to control for the various determinants of output losses during sudden stops we measure the marginal effects of policy on output losses and find strong evidence that monetary tightening rise in the discount rate or unsterilized rise in international reserves and discretionary fiscal contraction are significantly correlated with larger output losses following a sudden stop fiscal expansion is associated with smaller output losses following a sudden stop but monetary expansion has no discernable effect the macroeconomic policy mix associated with the least output loss during a sudden stop financial crisis is a discretionary fiscal expansion combined with a neutral monetary policy

measuring production efficiency of acute hospitals in scotland 1991 94 validity issues in data envelopment analysis data envelopment analysis is a potentially useful technique for measuring production efficiency and is being increasingly applied to health care services as with other areas however some fundamental concerns need to be addressed before data envelopment analysis can be accepted widely as a routine tool these include issues of validity and specification error this paper suggests a broad framework for assessing validity which should be developed further and gives illustrative examples of the problems in a real application within health care data from 75 scottish acute hospitals for three years from 1991 94 are analysed internal validity is assessed by examining the effect on the results obtained of the choice of inputs and outputs selected for analysis external validity is assessed by examining differences in the results obtained from the data for each of the three years in both cases it is concluded that there is a disturbing lack of concordance between the different results obtained caution mu

are asset price guarantees useful for preventing sudden stops a quantitative investigation of the globalization hazard moral hazard tradeoff abstract an implication of the globalization hazard hypothesis is that sudden stops caused by global financial frictions could be prevented by offering foreign investors price guarantees on emerging markets assets these guarantees create a tradeoff however because they weaken globalization hazard while creating international moral hazard we study this tradeoff using a quantitative equilibrium asset pricing model without guarantees margin calls and trading costs cause sudden stops driven by a fisherian deflation price guarantees prevent this deflation by propping up foreign demand for assets the effectiveness of price guarantees their distortions on asset markets and their welfare implications depend critically on whether the guarantees are contingent on debt levels and on the price elasticity of foreign demand for domestic assets