economic determinants of free trade agreements abstract the purpose of this study is to provide the first systematic empirical analysis of the economic determinants of the formation of free trade agreements ftas and of the likelihood of ftas between pairs of countries using a qualitative choice model we develop this econometric model based upon a general equilibrium model of world trade with two factors of production two monopolistically competitive product markets and explicit intercontinental and intracontinental transportation costs among multiple countries on multiple continents the empirical model correctly predicts based solely upon economic characteristics 85 of the 286 ftas existing in 1996 among 1431 pairs of countries and 97 of the remaining 1145 pairs with no ftas

maximum likelihood estimation of first passage structural credit risk models correcting for the survivorship bias abstract the survivorship bias in credit risk modeling is the bias that results in parameter estimates when the survival of a company is ignored we study the statistical properties of the maximum likelihood estimator mle accounting for survivorship bias for models based on the first passage of the geometric brownian motion we find that if we neglect the survivorship bias then the drift has a positive bias that may not disappear asymptotically we show that correcting the survivorship bias by conditioning on survival in the likelihood function underestimates the drift therefore we propose a bias correction method for non iid samples that is first order unbiased and second order efficient the economic impact of neglecting or miscorrecting for the survivorship bias is studied empirically based on a sample of more than 13 000 companies over the period 1980 through 2016 inclusive our results point to the important risk of misclassifying a company as solvent or insolvent due to biases in the estimates

free trade agreements in the americas are the trade effects larger than anticipated this paper argues that the competitive liberalisation of national governments of the past several decades reflects national governments expectations of larger trade impacts from regional economic integration agreements eias than typical ex ante economic models have suggested moreover we show that previous typically cross section ex post empirical evaluations of the effects of eias on trade have seriously over or underestimated the effects partly due to ignoring the endogenous self selection bias of country pairs into eias accounting for this bias we find that economic integration agreements in the americas have had much larger impacts on trade over the period 1960 2000 than previously found and the ex post estimates are less fragile than those in earlier cross section analyses the results shed further light on understanding the causes and consequences of the growth of regionalism in the world

pricing risk adjusted deposit insurance an option based model this paper presents a methodology for arriving at empirical estimates of deposit insurance premiums from market data by using isomorphic relationships betweeen equity and a call option and insurance and a put option the data utilizes the market value of equity to solve for the asset value and its volatility market perceptions of fdic bailout policies are explicitly modeled so as to eliminate the bias in inverted values of assets and their volatility sensitivity analyses are performed to show that rank orderings based on premiums are robust to changes in specification thus facilitating allocation of aggregate premium across banks while economists have long argued in favor of risk adjusted deposit insurance as both more equitable and more efficient than the current system of flatrate premiums various recent developments have further contributed to an increasing dissatisfaction with the current system first both the banking industry and the government seem to be tending to the view that deregulation of the banking industry would be necessary in order to meet more sophisticated future demands on the industry as well as desirable as a policy means of stimulating greater competition among banks moreover a sudden rise in the incidence of bank failures 1 and the vulnerability of the u s banks to the socalled international debt crisis have served to bring to the fore concern about the health of the banking industry in the absence of deposit insurance riskier banks will be able to attract deposits only at higher rates and these higher costs of funding serve as built in market regulated incentives to limit excessive risk taking by banks as introduction of deposit insurance makes deposits equally risk free across banks these incentives disappear and regulation and close supervision of the banking industry must necessarily replace them as deterrents to excessive risk taking thus when insurance is offered at a flat premium regulation is designed to ensure that the risk posed to the insurer both asset and financial risk is appropriately uniform

the role of market forces in assuring contractual performance the conditions under which transactors can use the market repeat purchase mechanism of contract enforcement are examined increased price is shown to be a means of assuring contractual performance a necessary and sufficient condition for performance is the existence of price sufficiently above salvageable production costs so that the nonperforming firm loses a discounted steam of rents on future sales which is greater than the wealth increase from nonperformance this will generally imply a market price greater than the perfectly competitive price and rationalize investments in firm specific assets advertising investments thereby become a positive indicator of likely performance

estimating the effects of free trade agreements on international trade flows using matching econometrics abstract this paper provides the first cross section estimates of long run treatment effects of free trade agreements on members bilateral international trade flows using nonparametric matching econometrics our nonparametric cross section estimates of ex post long run treatment effects are much more stable across years and have more economically plausible values than corresponding ols cross section estimates from typical gravity equations we provide plausible estimates of the long run effects of membership in the original european economic community eec and the central american common market cacm between 1960 and 2000 and the estimates confirm anecdotal reports of these agreements effectiveness

long term drivers of global virtual water trade a trade gravity approach for 1965 2010 abstract in the era of globalisation over the last half century there has been an increase in the exchange of agricultural and food products this internationalisation process has led to intense environmental pressures on a global level which has been the case of water resources this paper studies the determinants of global virtual water trade flows between 1965 and 2010 using panel data techniques we have evaluated and quantified the explanatory factors of bilateral virtual water transfers between 70 countries as a result of agri food trade we have used the well known trade gravity equation to explain exchanges of water embodied in agricultural goods on the basis of economic geographical institutional and environmental factors the analysis considers economic country heterogeneity in order to evaluate how trade impacts water resources depending on different development patterns our main findings indicate that the traditional economic institutional and geographic factors played a key role as drivers of virtual water bilateral trade flows between 1965 and 2010 in addition the natural endowments also exerted a notable influence on these trends

on the relationship between the breadth of preferential trading arrangements and trade flows this paper uses matching econometrics to extend the literature investigating the impact of preferential trading arrangements ptas on goods trade flows heterogeneity in ptas is accounted for through a provision count index derived from data provided in a recent world bank study pta formation now involves two separate sequential decisions first whether two trading partners should form a pta and second if they do how broad that agreement should be we find our explanatory variables are significant for both decisions but often have opposing effects on each using matched pta and non pta groups of country pairs we estimate a dose response function which indicates that arrangements with few provisions and arrangements with many provisions do not appear to have a significant impact on goods trade flows between their members ptas in an intermediate range are shown to have a significant positive effect we then relate these outcomes to the actual content of the ptas using the concept of provision intensity

heterogeneous trade agreements wto membership and international trade an analysis using matching econometrics this article explores the heterogeneous effects of trade agreements tas and world trade organization wto membership on the volume of international trade we extend baier and bergstrand s 2009a application of matching econometrics by distinguishing between different types of tas and wto participation and account for the endogenous nature of trade policy for a panel data set covering 1960 2005 and 187 countries we find that the treatment effect on international trade systematically varies with the type of ta and wto membership

weather variations and international trade in this paper i investigate the effect of weather variations in the exporter and importer countries separately as well as a the difference between weather variations in both countries on bilateral trade flows the analysis is done at the country sectoral and product levels worldwide and over the 1992 2014 period i find a negative effect of temperature variations in the exporter country and in the difference between exporter and importer countries on bilateral trade at the country level at the product level both negative and positive effects arise but the negative effect of temperature dominates the temperature effects are on the agricultural and manufacturing sectors especially in the textile and metals sectors i show that possible channels are the impact of temperature on output and labour productivity the negative impacts are larger in exporter countries that are closer to the equator that have lower quality of institutions and that export to more remote countries if countries are able to adapt to climate change the long term effects of temperature variations should be lower than the contemporaneous effect nevertheless my results on the long term effects analysis do not support this hypothesis suggesting no or very low adaptation moreover the negative effect of temperature is persistent and cumulative through several years after the temperature shock concerning precipitation variation effects they are found mainly at the product level with the positive effect dominating for the affected products

the term structure of credit spreads with jump risk abstract default risk analysis is important for valuing corporate bonds swaps and credit derivatives and plays a critical role in managing the credit risk of bank loan portfolios this paper offers a theory to explain the observed empirical regularities on default probabilities recovery rates and credit spreads it incorporates jump risk into the default process with the jump risk a firm can default instantaneously because of a sudden drop in its value as a result a credit model with the jump risk is able to match the size of credit spreads on corporate bonds and can generate various shapes of yield spread curves and marginal default rate curves including upward sloping downward sloping flat and hump shaped even if the firm is currently in a good financial standing the model also links recovery rates to the firm value at default so that the variation in recovery rates is endogenously generated and the correlation between recovery rates and credit ratings before default reported in altman j finance 44 1989 909 can be justified

are rta agreements with environmental provisions reducing emissions article i nfo this paper investigates whether rtas with environmental provisions affect relative and absolute pollution levels in order to do so the determinants of carbon dioxide emissions convergence are estimated for a cross section of 182 countries over the period 1980 to 2008 a propensity score matching approach is com bined with difference in differences techniques to effectively isolate the effect of the regional trade agree ment rta variable the usual controls for scale composition and technique effects are added to the estimated model and the endogeneity of income and trade variables is modeled using instruments the main results indicate that the co2 emissions of the pairs of countries that belong to an rta with environmen tal provisions tend to converge and are lower in absolute terms whereas this is not the case for rtas without environmental provisions as regards specific agreements we find that emissions converge more rapidly for nafta than for eu 27 and euro med countries we find consistent evidence that only rtas with environ mental harmonization policies affect relative and absolute pollution levels

assessing the impact of unilateral trade policies eba and agoa on african beneficiaries exports using matching econometrics the existing literature studying the impact of non reciprocal preferential trade agreements nrptas assumes implicitly nrptas are non randomly assigned without showing the evidence of that using a matching methodology this paper investigates whether the african growth and opportunity act agoa and the everything but arms eba unilateral trade concessions have had an impact and in what magnitude on the exports of african beneficiary countries in the light of the evidence of the non random nature endogeneity of nrptas methodologically previous studies using the matching procedure focused on bi or multilateral trade agreements our work focuses on nrptas that depend only on donors conditions accordingly we show that for nrptas gravity covariates cannot be used for the matching procedure we propose to use political variables as determinants for obtaining non reciprocal trade preferences in order to address the endogenous nature of nrpta assignment our main results confirm that a country becomes eligible for a nrpta only when it meets certain conditions defined by their donors such as political stability and economic regulation for agoa and freedom of expression and human development for eba results also show that both agoa and eba policies have had a positive impact on african beneficiary countries exports to nrpta s providers even if the magnitude impact of eba is significantly lower than that of agoa

endogenizing exogenous default barrier models the mm algorithm abstract in this paper we propose a maximization maximization mm algorithm for the assessment of hidden parameters in structural credit risk models step m1 updates the value volatility and expected return on the firm s assets by maximizing the log likelihood function for the time series of equity prices step m2 updates the default barrier by maximizing the equity holders participation in the firm s asset value the main contribution of the method lies in the m2 step which allows for endogenizing the default barrier in light of actual data on equity prices using a large international sample of companies we demonstrate that theoretical credit spreads based on the mm algorithm offer the lowest cds pricing errors when compared to other traditional default barrier specifications smooth pasting condition value maximum likelihood estimate kmv s default point and nominal debt

are regional trading arrangements trade creating an application of extreme bounds analysis in this study we use extreme bounds analysis to test the robustness of the hypothesis that regional trading arrangements rtas are trade creating extreme bounds analysis provides a more rigorous test of specification uncertainty than traditional econometric theory by incorporating prior information and using a systematic approach to testing the fragility of coefficient estimates the results show that the trade creation effect of most rtas is fragile using a least squares estimator where all weight is attached to the sampling distribution eight or more of the twelve rtas considered are found to be trade creating when the relative weight in the estimation is shifted from the sampling to the prior distribution the number of rtas that are trade creating falls to six at the 95 percent likelihood ellipsoid moreover when we specify that not all rtas are trade creating four rtas increase trade at the 95 percent likelihood ellipsoid at the extreme bounds when all weight is attached to the prior distribution none of the rtas are found to be trade creating as a result we conclude that the pervasive trade creation effect found in the literature reflects not the information content of the data but rather the unacknowledged beliefs of the researchers

choosing the open sea the cost to the uk of staying out of the euro abstract in this paper we provide an estimate of the trade flows that there would have been between the uk and its main trading partners if the uk had joined the euro as an alternative approach to the standard log linear gravity equation we employ the synthetic control method we show that the aggregate trade flows between britain and eurozone members would have been 16 higher if the uk had adopted the euro we also provide an estimate of the hypothetical euro s effect on trade flows between the uk and non euro countries our results suggest that the adoption of the european currency would also have led to a substantial increase in british trade flows with non euro members finally we provide a new estimate of the euro s trade impact for euro members our results suggest that the adoption of the single currency led to an increase in intra european trade flows of between 19 and 55

ripoffs lemons and reputation formation in agency relationships a laboratory market study this paper examines the effect of the moral hazard problem in an agency relationship where the principal cannot observe the level of service provided by the agent using data from laboratory markets we demonstrate that the presence of moral hazard leads to shirking by agents however this lemons phenomenon occurs only about one half of the time while there is evidence of reputation effects in these markets seemingly reputable agents are often able to use opportunities for false advertising to their advantage and ripoff principals there has been considerable discussion about the price and quality of services provided within certain principal agent relationships for example the securities and exchange commission and congress have focused a great deal of attention on the price and quality of outside audit services to investors the securities and exchange commission and the department of justice have considered the regulation of investment banking contracts because of their concern over the price and level of services provided finally a large and growing literature has focused attention on the conflict between owners and managers and the problem of shirking by managers the above examples share a feature common to most agency relationships in that the services provided by the agent have a hidden characteristic specifically the principal cannot costlessly observe the level of service provided by the agent and thus cannot determine whether an unfavorable outcome is due to the agent s shirking or due to an unfortunate occurrence of a state of nature a large theoretical literature has developed e g shavell 9 which proposes remedies for dealing with the moral hazard problem that arises in these situations yet to our knowledge there has been no direct empirical test demonstrating that the moral hazard problem does in fact lead to shirking by agents furthermore the theoretical literature provides a number of competing models about the market s ability to provide pareto optimal levels of service in the presence of moral hazard

a barrier option framework for corporate security valuation abstract this paper proposes a framework for corporate security valuation based on path dependent barrier option models instead of the commonly used path independent approach we argue that path dependency is an intrinsic and fundamental characteristic of corporate securities because equity can be knocked out whenever a legally binding barrier is breached a direct implication of this framework is that equity will be priced as a down and out call option we provide empirical validation of the barrier model by showing that implied barriers are statistically and economically significant for a large cross section of industrial firms additional robustness tests confirm that barriers remain significant over a wide range of input variable estimates and finally we apply the barrier option framework to bankruptcy prediction and find that implied failure probabilities dominate z scores in most cases

trade creation and diversion revisited accounting for model uncertainty and natural trading partner effects summary the effect of preferential trade agreements ptas on trade flows is subject to model uncertainty stemming from the diverse and even contradictory effects suggested by the theoretical pta literature the existing empirical literature has produced remarkably disparate results and the wide variety of empirical approaches reflects the uncertainty about the correct set of explanatory variables that ought to be included in the analysis to account for the model uncertainty that surrounds the validity of the competing pta theories we introduce bayesian model averaging bma to the pta literature statistical theory shows that bma successfully incorporates model uncertainty in linear regression analysis by minimizing the mean squared error and by generating predictive distributions with optimal predictive performance once model uncertainty is addressed as part of the empirical strategy we find strong evidence of trade creation trade diversion and open bloc effects our results are robust to a range of alternative empirical specifications proposed by the recent pta literature copyright 2010 john wiley sons ltd

one money one market the effect of common currencies on trade currency unions their dramatic effect on international trade a gravity model is used to assess the separate effects of exchange rate volatility and currency unions on international trade the panel data bilateral observations for five years during 1970 90 covering 186 countries includes 300 observations in which both countries use the same currency i find a large positive effect of a currency union on international trade and a small negative effect of exchange rate volatility even after controlling for a host of features including the endogenous nature of the exchange rate regime these effects statistically significant imply that two countries sharing the same currency trade three times as much as they would with different currencies currency unions like the european emu may thus lead to a large increase in international trade with all that that entails andrew rose

estimating the effects of kyoto on bilateral trade flows using matching econometrics many kyoto countries fear a loss of competitiveness due to unilateral climate policy efforts policymakers therefore call for carbon related border tax adjustments with this paper we attempt to estimate the treatment effect of kyoto commitment on bilateral export flows using regression adjusted differences in differences matching techniques the gravity and international environmental agreement formation literatures provide guidelines for the choice of matching variables we find that kyoto countries exports are reduced by 13 to 14 per cent due to kyoto commitment trade effects are largest in energy intensive homogeneous industries such as iron and steel non ferrous metals organic and inorganic chemicals but also in machinery and equipment

general equilibrium treatment effects a study of tuition policy this paper defines and estimates general equilibrium treatment effects the conventional approach in the literature on treatment effects ignores interactions among individuals induced by the policy interventions being studied focusing on the impact of tuition policy and using estimates from our dynamic overlapping generations general equilibrium model of capital and human capital formation we find that general equilibrium impacts of tuition on college enrollment are an order of magnitude smaller than those reported in the literature on microeconomic treatment effects the assumptions used to justify the late parameter in a partial equilibrium setting do not hold in a general equilibrium setting policy changes induce two way flows we extend the late concept to a general equilibrium setting we present a more comprehensive evaluation to program evaluation by considering both the tax and benefit consequences of the program being evaluated and placing the analysis in a market setting this abstract was borrowed from another version of this item

refuting two claims about virtual water trade abstract using the heckscher ohlin trade model i refute two prominent but incorrect claims on virtual water trade these claims are that virtual water trade i levels uneven water distribution and ii reduces the potential for water conflict both claims are based on an incorrect understanding of comparative advantage in the production of water intensive goods the results show that both claims only hold under certain conditions but do not necessarily follow from the heckscher ohlin trade model

the wto trade effect this paper reexamines the gatt wto membership efiect on bilateral trade ows using nonparametric methods including pair matching permutation tests and a rosenbaum 2002 sensitivity analysis together these methods provide an estimation framework that is robust to misspeciflcation biases allows general forms of heterogeneous treatment efiects and addresses potential hidden selection biases this is in contrast to most conventional parametric studies on this issue our results suggest large gatt wto trade promoting efiects robust to various restricted matching criteria alternative indicators for gatt wto involvement different matching methodologies non random incidence of positive trade ows and inclusion of multilateral resistance terms

poolability and the finance growth nexus a cautionary note abstract the present contribution tests whether countries can be pooled when studying the finance growth nexus overall our results point toward a pragmatic positive answer though considerable heterogeneity is present among developing countries

the erosion of colonial trade linkages after independence high trade between countries with colonial ties may be explained by government policies that establish preferential access or as a consequence of networks formed through social interactions using bilateral trade data from 1948 to 2003 we examine the eect of independence on post colonial trade the severing of formal colonial relations can lead to an immediate reduction in trade as preferential access is eliminated as well as a gradual reduction corresponding to the deterioration of trading networks our results reveal that independence reduces colonial trade with its colonizer metropole the reduction cumulates over a 30 year period and the disruption is particularly severe for hostile separations we also find that overall colonial trade falls subsequent to independence but to a lesser extent than trade with the metropole

the globalization of virtual water flows explaining trade patterns of a scarce resource abstract water availability is paramount for security and development yet many countries suffer from water scarcity virtual water trade or trade in water embedded agricultural commodities has been considered a means for countries to overcome water deficits provided they can import food rather than produce locally despite a rich literature research on the subject has not reached a consensus on whether virtual water trade is actually driven by relative water endowment differentials e g countries seeking to alleviate pressure on their own resources or by comparative advantage in water utilization e g countries using their most abundant and cheap factors of production understanding what drives virtual water trade would support water management policies in targeting the roots of water depletion excessive use due to lack of other available inputs and bad water management due to absence of water use regulation using panel data of bilateral virtual water trade flows from 1994 to 2007 applied to a gravity model we first demonstrate that arid countries do resort to trade as a means to alleviate water scarcity second we demonstrate that there is much inefficiency in water use in some countries where other agricultural inputs land labor are available and cheap given the increased urgency related to global water scarcity our results suggest how agricultural production and trade could help countries preserve and better use precious water resources

economic integration among developed developing and centrally planned economies a comparative analysis we examine six integration schemes and decompose their ability to increase inter member trade into environmental policy and system effects environmental factors caused the greatest variation in trade creation with inter member distance the most important environmental variable the cacm and efta have followed more effective integration policies than the eec lafta and the andean pact although integration can thus benefit developed and developing countries alike for some such as those in latin america inter member distances severely limit its effectiveness while the combination of policy and system has kept the cmea fromrr achieving its full potential for increasing inter member trade its effectiveness does not differ from that of unions among market economies

trade benefits under the eec generalized system of preferences the purpose of the paper is to test for the existence of a statistically significant effect of the eec generalized system of preferences on actual trade flows between developing countries and the eec using a gravity type model we estimate the gross trade creation effect of the eec generalized system of preferences on the eec imports from 10 major developing countries estimation on a yearly basis for the period 1967 1978 indicates the presence of a statistically significant effect it would appear that gross trade creation amounted to about s2 billion for these 10 countries in 1978 in addition to these calculations the paper reviews the eec generalized system of preferences in detail and offers comments on its future impact on exports from developing countries

do sanitary phytosanitary and quality related standards affect international trade evidence from chilean fruit exports summary increasing awareness of food safety issues has led to intensive use of sanitary phytosanitary and quality related regulations and standards imposing a burden on exporting countries worldwide this study assesses the impact of such regulations and standards estimating a gravity model for chilean fresh fruit exports that incorporates a stringency perception index that comprises different dimensions of trade requirements our results suggest that an increase in stringency has a negative and substantial effect on exported volumes and the reduction is higher if stringency increases in developed countries results also showed that different dimensions have different effects on trade

migration and development dissecting the anatomy of the mobility transition abstract emigration first increases and then decreases as a country experiences economic development this inverted u shaped cross sectional relationship between emigration and development was first hypothesized by zelinsky s theory of the mobility transition although several mechanisms have been proposed to explain the upward segment of the curve the most common being the existence of financial constraints they have not been examined in a systematic way in this paper we propose two decomposition methods to disentangle the main drivers of the mobility transition curve to oecd destination countries our simple decompositions shed light on the role of both microeconomic drivers i e financial incentives and constraints and macroeconomic drivers as well as the skill composition of the population our double decomposition further distinguishes between migration aspirations and realization rates by education level overall we provide consistent evidence that the role of financial constraints while relevant for the poorest countries is limited rather a large fraction of the increasing segment is explained by the skill composition and by macroeconomic drivers i e by factors that do not change in the short run

economic effects of currency unions we develop a new instrumental variable iv approach to estimate the effects of different exchange rate regimes on bilateral outcomes the basic idea is that the characteristics of the exchange rate between two countries are partially related to the independent decisions of these countries to peg explicitly or de facto to a third currency notably that of a main anchor this component of the exchange rate regime can be used as an iv in regressions of bilateral outcomes we apply the methodology to study the economic effects of currency unions the likelihood that two countries independently adopt the currency of the same anchor country is used as an instrument for whether they share a common currency we find that sharing a common currency enhances trade increases price comovements and decreases the comovement of real gross domestic product shocks

currency unions and trade how large is the treatment effect currency unions and trade what can the data say the impact of a common currency on trade can be grossly mismeasured if countries that belong to currency unions are systematically different from those that do not and if the relationship between trade and its observable determinants is complex i argue that such complications are plausible and likely to distort the empirical results of a recent economic policy paper by andrew rose issue 30 2000 pp 7 45 using techniques designed to be robust in this situation i find that the effects of common currency on international trade are considerably less dramatic and much less precisely estimated torsten persson i have always maintained that the measured effect of a single currency on trade appears implausibly large but i am not convinced by torsten persson s diagnosis and proposed solution i apply a variety of estimation techniques to a new larger data set where many more instances of currency union creation and abandonment make it possible to rely on time series as well as cross sectional evidence the results are similar to my earlier ones the effect of a single currency on trade is large andrew rose

assessing the trade impact of the european neighbourhood policy on the eu med free trade area the european neighbourhood policy enp set an additional objective for the southern mediterranean countries smcs the prospect of a stake in the internal market the launch of this new policy has been the occasion for a revival of empirical studies aimed at assessing the impact of the eu med partnership on bilateral trade the novelty of this work is twofold i to present nonparametric matching estimators besides gravity estimates ii to assume as a counterfactual of the treatment the ex post long run average treatment effects of the europe agreements by controlling for likely selection bias and country and time heterogeneity using both qualitative and quantitative measures of the policy variable we assess ex post the trade enhancing impact of the eu preferential agreements towards smcs and ex ante the actual efficacy of the enp

product warranties and double moral hazard this article explores a model of warranties in which moral hazard problems play a key role the goal is to understand the important characteristics of warranties including their provision of incomplete insurance and the relationship between product quality and coverage we analyze a model in which buyers and sellers take actions that affect a product s performance since these actions are not cooperatively determined an incentives problem arises we characterize the optimal warranty contract and undertake comparative statics to determine the predicted correlation of warranty coverage and product quality

on the economics of virtual water trade abstract virtual water trade is increasingly recognized as a useful metaphor for thinking about freshwater resources in an international context its legitimacy in terms of economic theory has been questioned by a number of authors however in this article i develop new theoretical results that place the virtual water concept on a firm economic foundation and which correct several misconceptions within the existing literature on virtual water economics

the surface of implied firm s asset volatility abstract this paper analyzes the surface of cds implied firm s asset volatility at the aggregate market level using a sample of european investment grade firms during the 2007 2014 period the term structure of asset implied volatilities is backed out from the term structure of cds spreads while the moneyness dimension is proxied by the ratio of the default barrier to asset value we find both a downward sloping term structure and a negative skew principal component analysis on the entire volatility surface shows that the first four components interpreted as a level a term structure a skew and a moneyness related curvature mode capture 86 of the daily variation in asset implied volatility we also find that the term structure slope is related to market and funding illiquidity investors risk aversion informational frictions demand supply factors and momentum

are virtual water flows in spanish grain trade consistent with relative water scarcity abstract virtual water adds a new dimension to international trade and brings along a new perspective about water scarcity and water resource management most virtual water literature has focused on quantifying virtual water flows and on its application to ensure water and food security nevertheless the analysis of the potential gains from international trade at least from a water resources perspective needs to take into account both spatial and temporal variations of blue groundwater and stream flow and green soil moisture water as well as the socioeconomic and policy conditions this paper evaluates whether spanish international trade with grains is consistent with relative water scarcity for this purpose the study estimates the volume and economic value of virtual water flow through international grain trade for the period 1997 2005 which includes 3 years with different rainfall levels the calculations show that spain is a net virtual water importer through international grain trade the volume of net virtual water imports amounts to 3420 4383 and 8415 million m 3 in wet 1997 medium 1999 and dry 2005 years respectively valuing blue water at its shadow price or scarcity value blue water exports oscillate between 0 7 and 34 2 million euros for a wet and dry year respectively overall grain trade is apparently consistent with relative water scarcity as net imports increase in dry years however the evolution of grain exports expressed as a variation in quantity and volume does not match the variations in resource scarcity a disaggregated crop analysis reveals that there are other factors such as quality product specialization or the demand for a standardized product which also influence trade decisions and are not included in the notion of virtual water these facts among others can therefore create potential distortions in the application of virtual water to the analysis of specific trade patterns nevertheless from a water resources perspective virtual water can bring important insights across countries for improving water and land management globally fostering adaptation strategies to climate change and to transboundary resource management

a gravity model of virtual water trade this work investigates the determinants of virtual water trade vwt ows by means of an estimated gravity model of trade applied to the virtual water embodied in the agricultural goods exchanged across countries in line with the recent literature on the gravity model the paper presents a battery of estimation methods cross section and panel ols and pseudo maximum likelihood with and without two way xed eects the analysis shows that bilateral vwt ows are aected by the classical determinants of trade but also by national water endowments as well as by the level of pressure on water resources these general ndings are robust even though some variation can be observed across the estimation methods and in particular when smaller sub samples of countries such as continents and regional groups are considered this contributes to account for the mixed evidence in the literature on the importance of water endowments for the vwt ows

a theory of credit bureaus when both the buyer and seller have the potential to exercise opportunistic behavior some balancing of these mal incentives must be found seller financing has the potential to work as a quality assurance device because the lien holder is clearly at risk when mortgaged property fails the buyer is at risk in the amount of the down payment and installments if the property is abused credit bureaus act as arbitrators our model accurately predicts the shifting in contract terms to account for relative opportunism and the incidence of this contract based on changes in the relative costs and benefits