bluuebunny/crossref_metadata_2025 huggingface dataset:
Consumers' preferences for locally produced food: A study in southeast Missouri
Authors: Brown Cheryl
Published: December 2003

A mail survey was used to gather information from the main food buyer in random households in southeast Missouri to analyze consumer preferences for locally grown food. A majority of shoppers in the region were not aware of the state's AgriMissouri promotion program. Consumers defined locally grown not as a statewide concept but as a narrower regional concept that could cross state boundaries. Most important when purchasing produce were quality and freshness, and most consumers perceived local produce at farmers' markets to be of higher quality and lower price. Farm households were not significantly different from other households in the region and did not show a preference or willingness to pay a price premium for local food products. Food buyers who were members of an environmental group had higher education and income and were more likely to purchase organic food and more willing to pay a higher price for local produce. Households in which someone was raised on a farm, or had parents who were raised on a farm, had a preference for locally grown food and were willing to pay a price premium for it. Marketing local products should stress quality, freshness, and price competitiveness, and appeal to environmentalists and those with a favorable attitude towards family farms.
L1-dependent neuritogenesis involves ankyrinB that mediates L1-CAM coupling with retrograde actin flow
Authors: Nishimura Kazunari , Yoshihara Fumie , Tojima Takuro , Ooashi Noriko , Yoon Woohyun , Mikoshiba Katsuhiko , Bennett Vann , Kamiguchi Hiroyuki
Published: December 2003

The cell adhesion molecule L1 (L1-CAM) plays critical roles in neurite growth. Its cytoplasmic domain (L1CD) binds to ankyrins that associate with the spectrin–actin network. This paper demonstrates that L1-CAM interactions with ankyrinB (but not with ankyrinG) are involved in the initial formation of neurites. In the membranous protrusions surrounding the soma before neuritogenesis, filamentous actin (F-actin) and ankyrinB continuously move toward the soma (retrograde flow). Bead-tracking experiments show that ankyrinB mediates L1-CAM coupling with retrograde F-actin flow in these perisomatic structures. Ligation of the L1-CAM ectodomain by an immobile substrate induces L1CD–ankyrinB binding and the formation of stationary ankyrinB clusters. Neurite initiation preferentially occurs at the site of these clusters. In contrast, ankyrinB is involved neither in L1-CAM coupling with F-actin flow in growth cones nor in L1-based neurite elongation. Our results indicate that ankyrinB promotes neurite initiation by acting as a component of the clutch module that transmits traction force generated by F-actin flow to the extracellular substrate via L1-CAM.
Drosophila aPKC regulates cell polarity and cell proliferation in neuroblasts and epithelia
Authors: Rolls Melissa M. , Albertson Roger , Shih Hsin-Pei , Lee Cheng-Yu , Doe Chris Q.
Published: December 2003

Cell polarity is essential for generating cell diversity and for the proper function of most differentiated cell types. In many organisms, cell polarity is regulated by the atypical protein kinase C (aPKC), Bazooka (Baz/Par3), and Par6 proteins. Here, we show that Drosophila aPKC zygotic null mutants survive to mid-larval stages, where they exhibit defects in neuroblast and epithelial cell polarity. Mutant neuroblasts lack apical localization of Par6 and Lgl, and fail to exclude Miranda from the apical cortex; yet, they show normal apical crescents of Baz/Par3, Pins, Inscuteable, and Discs large and normal spindle orientation. Mutant imaginal disc epithelia have defects in apical/basal cell polarity and tissue morphology. In addition, we show that aPKC mutants show reduced cell proliferation in both neuroblasts and epithelia, the opposite of the lethal giant larvae (lgl) tumor suppressor phenotype, and that reduced aPKC levels strongly suppress most lgl cell polarity and overproliferation phenotypes.
ADF/cofilin use an intrinsic mode of F-actin instability to disrupt actin filaments
Authors: Galkin Vitold E. , Orlova Albina , VanLoock Margaret S. , Shvetsov Alexander , Reisler Emil , Egelman Edward H.
Published: December 2003

Proteins in the ADF/cofilin (AC) family are essential for rapid rearrangements of cellular actin structures. They have been shown to be active in both the severing and depolymerization of actin filaments in vitro, but the detailed mechanism of action is not known. Under in vitro conditions, subunits in the actin filament can treadmill; with the hydrolysis of ATP driving the addition of subunits at one end of the filament and loss of subunits from the opposite end. We have used electron microscopy and image analysis to show that AC molecules effectively disrupt one of the longitudinal contacts between protomers within one helical strand of F-actin. We show that in the absence of any AC proteins, this same longitudinal contact between actin protomers is disrupted at the depolymerizing (pointed) end of actin filaments but is prominent at the polymerizing (barbed) end. We suggest that AC proteins use an intrinsic mechanism of F-actin's internal instability to depolymerize/sever actin filaments in the cell.
Activation of Microglial Poly(ADP-Ribose)-Polymerase-1 by Cholesterol Breakdown Products during Neuroinflammation
Authors: Diestel Antje , Aktas Orhan , Hackel Dagmar , Häke Ines , Meier Susanne , Raine Cedric S. , Nitsch Robert , Zipp Frauke , Ullrich Oliver
Published: December 2003

Multiple sclerosis (MS) is a chronic demyelinating disease in which it has only recently been suggested that damage to neuronal structures plays a key role. Here, we uncovered a link between the release of lipid breakdown products, found in the brain and cerebrospinal fluid (CSF) of MS patients as well as in experimental autoimmune encephalomyelitis, and neuronal damage mediated by microglial activation. The concentrations of the breakdown product 7-ketocholesterol detected in the CSF of MS patients were capable of inducing neuronal damage via the activation and migration of microglial cells in living brain tissue. 7-ketocholesterol rapidly entered the nucleus and activated poly(ADP-ribose)-polymerase (PARP)-1, followed by the expression of migration-regulating integrins CD11a and intercellular adhesion molecule 1. These findings reveal a novel mechanism linking demyelination and progressive neuronal damage, which might represent an underlying insidious process driving disease beyond a primary white matter phenomenon and rendering the microglial PARP-1 a possible antiinflammatory therapeutic target.
Superior Protection against Malaria and Melanoma Metastases by a C-glycoside Analogue of the Natural Killer T Cell Ligand α-Galactosylceramide
Authors: Schmieg John , Yang Guangli , Franck Richard W. , Tsuji Moriya
Published: December 2003

α-Galactosylceramide (α-GalCer) is a glycolipid that stimulates natural killer T cells to produce both T helper (Th) 1 and Th2 cytokines. This property enables α-GalCer to ameliorate a wide variety of infectious, neoplastic, and autoimmune diseases; however, its effectiveness against any one disease is limited by the opposing activities of the induced Th1 and Th2 cytokines. Here, we report that a synthetic C-glycoside analogue of α-GalCer, α-C-galactosylceramide (α-C-GalCer), acts as natural killer T cell ligand in vivo, and stimulates an enhanced Th1-type response in mice. In two disease models requiring Th1-type responses for control, namely malaria and melanoma metastases, α-C-GalCer exhibited a 1,000-fold more potent antimalaria activity and a 100-fold more potent antimetastatic activity than α-GalCer. Moreover, α-C-GalCer consistently stimulated prolonged production of the Th1 cytokines interferon-γ and interleukin (IL)-12, and decreased production of the Th2 cytokine IL-4 compared with α-GalCer. Finally, α-C-GalCer's enhanced therapeutic activity required the presence of IL-12, which was needed to stimulate natural killer cells for optimal interferon-γ production, but did not affect IL-4. Overall, our results suggest that α-C-GalCer may one day be an excellent therapeutic option for diseases resolved by Th1-type responses.
CD40-deficient, Influenza-specific CD8 Memory T Cells Develop and Function Normally in a CD40-sufficient Environment
Authors: Lee Byung O. , Hartson Louise , Randall Troy D.
Published: December 2003

Two models have been proposed to explain the requirement for CD40 signaling in CD8 T cell responses. The first model suggests that CD4 T cells activate antigen-presenting cells (APCs) through CD40 signaling (APC licensing). In turn, licensed APCs are able to prime naive CD8 T cells. The second model suggests that CD154-expressing CD4 T cells activate CD40-bearing CD8 T cells directly. Although the requirement for CD40 in APC licensing can be bypassed by inflammatory responses to pathogens that activate APCs directly, the second model predicts that CD8 responses to all antigens will be dependent on CD40 signaling. Here we determined which model applies to CD8 responses to influenza. We demonstrate that optimal CD8 T cell responses to influenza are dependent on CD40 signaling, however both primary and secondary responses to influenza require CD40 expression on non–T cells. Furthermore, CD40−/− CD8 T cells proliferate and differentiate to the same extent as CD40+/+ CD8 T cells in response to influenza, as long as they have equal access to CD40+/+ APCs. Thus, CD4 T cells do not activate influenza-specific CD8 cells directly through CD40 signaling. Instead, these data support the classical model, in which CD4 T cells provide help to CD8 T cells indirectly by activating APCs through CD40.
The Value of Life: Estimates with Risks by Occupation and Industry
Authors: Viscusi W. Kip
Published: December 2003

The worker fatality risk variable constructed for this article uses BLS data on total worker deaths by both occupation and industry over the 1992–97 period rather than death risks by occupation or industry alone, as in past studies. The subsequent estimates using 1997 CPS data indicate a value of life of $4.7 million for the full sample, $7.0 million for blue‐collar males, and $8.5 million for blue‐collar females. Unlike previous estimates, these values account for the influence of clustering of the job risk variable and compensating differentials for both workers' compensation and nonfatal job risks.
Delivered Pricing and Merger with Demand Constraints
Authors: Monaco Kristen , Heywood John S. , Rothschild R.
Published: December 2003

The consequences of a demand constraint (low willingness to pay) are examined in a model of merger by spatial price discriminators. The imposition of a demand constraint reduces the extent of inefficiency associated with merger and also eliminates the resolution of the merger paradox obtained in the earlier, unconstrained case. Moreover, with the introduction of a demand constraint, a tax on transport cost can actually improve efficiency, which is never the case in the absence of the demand constraint. Indeed, the optimal tax often eliminates all spatial price competition by creating local monopolies.
XML and e‐journals
Authors: Wusteman Judith
Published: December 2003

The use of XML in the lifecycle of e‐journals has recently emerged as a hot topic in the library world. This burst of interest is largely due to proposals to use XML in e‐journal archiving and also a growing awareness of the advantages of XML for metadata. But the publishing community are increasingly viewing XML as playing a central role in the future of the entire e‐journals process. The papers in this special issue cover a breadth of opinion but there is a common theme; namely, that XML and its related technologies can help to fulfil the promise of e‐journals.
XML for e‐journal archiving
Authors: Abrams Stephen L. , Rosenblum Bruce
Published: December 2003

e‐journals have many advantages over print, including enhanced media types, actionable reference links, and sophisticated searching capabilities. However, for many institutional subscribers, e‐journals are not an acceptable replacement for print without the reassurance that E‐journal content is maintained in a sustainable archival form for guaranteed future retrieval. Domain‐neutral schemas for e‐journal content defined in XML provide an appropriate mechanism for capturing e‐journal content in a manner that is amenable to long‐term preservation and retrieval. We present the results of a study of this problem undertaken by the Harvard University Library as part of the Andrew W. Mellon Foundation’s E‐journal Archiving Project. One tangible result of this project has been the development of an XML e‐journal article‐level archival interchange DTD.
The Pattern of Migration With Variable Migration Cost
Authors: Chau Nancy H.
Published: December 2003

In this paper the role of migrant networks in determining patterns of out‐migration is examined. Conditions under which migration equilibrium may permit multiple steady states are identified. The analysis discusses instances where migration generates its own demand and explains differences in migration propensities across potential sources of out‐migration.
Employment Opportunities, Wages and International Migration in Sweden 1970–1989
Authors: Westerlund Olle
Published: December 2003

In this study I focus on the impact of aggregate labor turnover and regional labor market conditions on gross in‐ and out‐migration within the framework of a neoclassical flexible‐wage (equilibrium) model and a fixed‐wage (labor‐market disequilibrium) model. Using annual panel data on internal gross migration flows in Sweden from 1970 to 1989, I find that regional differences in employment opportunities have the expected effects on migration. The empirical relationship between real wages and gross migration flows is found to be less congruent with theory implications, indicating that compensated regional income prospects are equalized primarily via the interaction between employment opportunities and gross migration flows. Cyclical changes in hirings are shown to have a robust and strongly significant positive scale effect on migration.
Israeli Settlement in Occupied Territories and its Impact on Housing Prices in Israel
Authors: Alperovich Gershon
Published: December 2003

The real price of housing in Israel rose 132 percent from 1959 through 1988. This paper investigates the factors standing behind the temporal movement of the real price of housing. Special emphasise is given to the role of government policies that encouraged settlement in occupied territories. A static model of the housing market is formulated and estimated, which takes into account the interrelation between the housing market in Israel proper and the emerging market in the occupied territories. In addition to confirming the role of demand shifters in accounting for the increase in real housing prices, it is found that settlement in occupied territories was an important moderating factor. According to our estimates, settlement in occupied territories accounts for a moderation of 1 percent in the annual rate of price appreciation during the Labor government, and 2.4 percent during the Likud government. These figures are in line with our expectations in view of the different policies pursued by the rival governments.
Stability of Risk Premia in the Italian Stock Market
Authors: Mazzariello Giovanni , Roma Antonio
Published: December 2003

In this work, we estimate the arbitrage pricing theory (APT) on the Italian Stock Market using the reduced‐rank regression technique recently propossed by Bekker et al. (1996). Due to its computational simplicity, this technique allows extensive empirical analysis of the properties of the estimator employed. In this work, we carry out an initial exploration of the cross‐sectional stability of the risk premia estimates in relation to the stocks' sample composition. We show that, by choosing an appropriately diversified sample, some acceptable degree of stability may be obtained. We also investigate, using the bootstrap method, the small sample properties of the estimator. (J.E.L.: G11, G12).
Individual Decision Making and Investor Welfare
Authors: Brennan Michael J. , Torous Walter N.
Published: December 2003

This article analyses and quantifies the costs of suboptimal decision making for an investor with a multi‐period horizon. In light of the empirical evidence that investors are too conservative and hold portfolios that are insufficiently diversified, we evaluate the costs of suboptimal equity participation both analytically and using simulation, and also estimate the costs of suboptimal diversification using simulation. We find that suboptimal leverage imposes only modest costs on the investor for reasonable parameter values. While the costs of inadequate diversification can be very high, we find that, because of the higher returns on small firms, an equally weighted portfolio of as few as five randomly chosen firms can provide the same level of expected utility as the value weighted market portfolio.

(J.E.L.: G11, G18, G23).
A Base Model for Multifactor Specifications of the Term Structure
Authors: Berardi Andrea , Esposito Marcello
Published: December 2003

In this article, we aim to show that most of the recent multifactor specifications of the term structure can be traced back to a common general equilibrium model, based on an economy of the Cox, Ingersoll and Ross type. This base model of the term structure has a very general form and includes both square root and Gaussian dynamics of the underlying state variables. We establish a direct link among the state variables used in the different specifications of many multifactor models and analyse the structure of the resultant implied relationships. This technique has relevant implications from a practical point of view, as it can allow one to recover from the estimated coefficients of one model the implied value of the coefficients of other models. Moreover, it provides a way of recovering from the term structure the values of such unobservable variables as the real short rate and the expected inflation rate.

(J.E.L.: E43, G12).
The Credit Channel at Work: Lessons from the Financial Crisis in Korea
Authors: Ferri Giovanni , Kang Tae Soo
Published: December 2003

We demonstrate that the credit channel of transmission of monetary/financial shocks appears to have aggravated Korea's economic crisis. We use micro‐data gathered at the individual bank level to identify this channel of transmission. Our major findings are as follows: i) consistent with banks' autonomous retrenchment in loan supply, monetary tightening broadens the spread between marginal bank lending rates and corporate commercial paper rates; ii) credit limits on overdrafts – arguably a proxy identifying shifts in loan supply – react negatively to the monetary squeeze; iii) large negative capital shocks induce banks to disproportionately slow‐down both lending and deposit taking and to disproportionately raise their lending rates. Our findings lend unequivocal support to the hypothesis that banks' autonomous contraction restricted the availability of credit and magnified the increase in its cost. In turn, this compounded the Korean crisis by aggravating liquidity constraints for the vast majority of agents who rely only on bank credit as an external source of funds.
A Simple Model of an International Lender of Last Resort
Authors: Goodhart C. A. E. , Huang H.
Published: December 2003

This paper develops a simple model of an international lender of last resort (ILOLR). The world economy consists of many open economies, each with its own banking system and its own central bank which uses its reserves to manage a pegged exchange rate. The fragility of the banking system and the limited ability of a domestic central bank to provide international liquidity together can cause currency and banking crises. An international interbank market can help an economy with the needed international liquidity, but this risk‐sharing also comes with potential costs of international financial contagion. Such contagious risk is much higher when there is an international interbank market than otherwise. An ILOLR can play a useful role in providing international liquidity and reducing international contagion.
The Pricing of Italian Equity Returns
Authors: Aleati Annalisa , Gottardo Pietro , Murgia Maurizio
Published: December 2003

In this paper, we investigate the relationship between common risk factors and average returns for Italian stocks. Our research has identified the Italian stock market's economic variables by using the results from factor analyses and time series regressions.

We study several multi‐factor models combining the relevant macroeconomic variables with the mimicking equity portfolios SMB (small minus big) and HML (high minus low) proposed by Fama and French (1993). The key question we want to ask ourselves, is whether the influential role of the size and book‐to‐market equity factors in explaining average stock returns can stand up well when competing with some macroeconomic factors. In other words, do stock returns carry some risk premium that is independent of either the market return or the economic forces that underlie the common variation in returns?

Our empirical work estimates risk premiums using both traditional two‐pass procedures and one‐pass (full information) methodologies. We show that only the market index and variables linked to interest rate shifts are consistently priced in the Italian stock returns. The role of other factors, and in particular both the size and the price‐to book ratio, are crucially dependent on the estimation procedure.

(J.E.L.: G11, G12).
Liquidity, Trading Size, and the Co‐existence of Dealership and Auction Markets
Authors: Bagliano F. C. , Brandolini Andrea , Dalmazzo Alberto
Published: December 2003

This paper analyses the co‐existence of two markets for the same shares, a quote‐driven market and an order‐driven market, as observed for example for the trading of continental shares on the London SEAQ International. The focus is on the trade‐off between the uncertain execution price faced by investors on an auction market and the implicit transaction cost represented by the spread in a dealer market. We obtain that those investors who desire to make large trades will prefer to trade with the dealer, while trades of smaller size will be carried out on the auction market. Moreover, we explicitly investigate the interrelations between the two markets showing that the pricing policy followed by a dealer depends on the conditions prevailing on the auction market.

(J.E.L: G10, D40)
Survey Data and the Interest Rate Sensitivity of US Bank Stock Returns
Authors: Benink H. A. , Wolff C. C. P.
Published: December 2003

In this paper, we provide empirical evidence on the interest rate sensitivity of the stock returns of the twenty largest US bank holding companies. The main contribution of the paper is the use of survey data to model the unexpected interest rate variable, which is an alternative approach to the existing literature. We find evidence of significant negative interest rate sensitivity during the early 1980s, and evidence of declining significance in the late 1980s and early 1990s. This result is also obtained when using the forecast errors of ARIMA processes to model the unexpected movement in the interest rate.
The Italian Banking Structure in the 1990s: Testing the Multimarket Contact Hypothesis
Authors: De Bonis Riccardo , Ferrando Annalisa
Published: December 2003

The multimarket contact hypothesis holds that more contacts between firms competing in the same markets may induce more collusion. This paper tests the hypothesis for the Italian banking market, analysing the behaviour of the largest Italian banks from 1990 to 1996. Market rivalry is gauged by changes in loan market shares and interest rates in each Italian province. We estimate the effects of increasing multimarket contacts, concentration indicators, banks' costs and loan demand on variations in market shares and interest rates. No support is found for the multimarket contact hypothesis. Geographical overlap in banking is positively correlated with changes in market shares, confirming the thesis of an overall increase in competition within the Italian banking system. Greater multimarket links also seem to correspond to lower lending rates.

(J.E.L.:G21, C33, L40.)
Convergence within the EU: Evidence from Interest Rates
Authors: Corzo Santamaria Teresa , Schwartz E. S.
Published: December 2003

The economic and political changes which are taking place in Europe affect interest rates. This paper develops a two‐factor model for the term structure of interest rates specially designed to apply to EMU countries. In addition to the participant country's short‐term interest rate, we include as a second factor a ‘European’ short‐term interest rate. We assume that the ‘European’ rate follows a mean reverting process. The domestic interest rate also follows a mean reverting process, but its convergence is to a stochastic mean which is identified with the ‘European’ rate. Closed‐form solutions for prices of zero coupon discount bonds and options on these bonds are provided. A special feature of the model is that both the domestic and the European interest rate risks are priced. We also discuss an empirical estimation focusing on the Spanish bond market. The ‘European’ rate is proxied by the ecu's interest rate. Through a comparison of the performance of our convergence model with a Vasicek model for the Spanish bond market, we show that our model provides a better fit both in‐sample and out‐of sample and that the difference in performance between the models is greater the longer the maturity of the bonds.

(J.E.L.: E43, C510).
Financial and Thermodynamic Equilibrium
Authors: Roma Antonio
Published: December 2003

This paper explores general equilibrium asset pricing implications in a two‐period model in which the production side explicitly describes the thermodynamic process unavoidably connected with production. We show that steady state of the production process, i.e. thermodynamic equilibrium, has a one‐to‐one correspondence with the absence of arbitrage possibilities. This provides an alternative definition of the absence of arbitrage.

(J.E.L.: D5, G1, R3)
The Role of Political Instability in Stock Market Development and Economic Growth: The Case of Greece
Authors: Asteriou Dimitrios , Siriopoulos Costas
Published: December 2003

This article examines empirically the relationship between stock market development, political instability and economic growth in Greece. We measure socio‐political instability by constructing an index which captures the occurrence of various phenomena of political violence using time‐series data. The main advantages of analysing political instability in a case study framework using time‐series, in contrast with the widely used cross‐country empirical studies, are: (a) a more careful and in‐depth examination of institutional and historical characteristics of a particular country; (b) the use of a data set comprised of the most appropriate and highest quality measures; and (c) a more detailed exposition of the dynamic evolution of the economy. The empirical results indicate the existence of a strong negative relationship between uncertain socio‐political conditions and the general index of the Athens Stock Exchange (ASE) and support the theoretical hypothesis that uncertain socio‐political conditions affect economic growth negatively, is true for the Greek case.

(J.E.L.: G10, G14, O40, C32)
Knightian Uncertainty in Financial Markets: An Assessment
Authors: Basili Marcello
Published: December 2003

If information is too vague and imprecise to be summarized by a unique additive probability measure, an agent faces Knightian uncertainty or ambiguity rather than risk. Under Knightian uncertainty, an agent's beliefs may be represented by a capacity or a set of additive probabilities. It is proved that an agent's attitude towards ambiguity has a crucial role in asset price determination and portfolio choice. Knightian uncertainty attitude provides an alternative explanation of financial market failures and enables puzzles to be solved, such as market breakdowns, price indeterminacy and volatility, bid and ask spreads, portfolio inertia, violation of call and put parity.

(J.E.L.: D81, G11, G12).
Current Account and Exchange Rate Dynamics
Authors: Cavallari Lilia
Published: December 2003

The theoretical part of this paper analyses the positive and normative effects of a surprise monetary expansion in a small open economy characterized by imperfect competition and short‐run price rigidity in the domestic sector. The temporary output boom fostered by the monetary expansion is shown to come at the cost of a permanent squeeze of the domestic sector. This affects welfare ambiguously, as the overall welfare consequences of the monetary expansion may eventually turn negative for a critical value of external assets. The empirical part of the paper provides evidence in favour of a key role of monetary shocks in driving current account fluctuations in seven major industrialized countries.

(J.E.L.: E61, F41).
Rating Agency Actions and the Pricing of Debt and Equity of European Banks: What Can we Infer About Private Sector Monitoring of Bank Soundness?
Authors: Gropp Reint , Richards Anthony J.
Published: December 2003

The recent consultative papers by the Basel Committee on Banking Supervision has raised the possibility of an explicit role for external rating agencies in the assessment of the credit risk of banks’ assets, including interbank claims. Any judgement on the merits of this proposal calls for an assessment of the information contained in credit ratings and its relationship to other publicly available information on the financial health of banks and borrowers. We assess this issue via an event study of rating change announcements by leading international rating agencies, focusing on rating changes for European banks for which data on bond and equity prices are available. We find little evidence of announcement effects on bond prices, which may reflect the lack of liquidity in bond markets in Europe during much of our sample period. For equity prices, we find strong effects of ratings changes, although some of our results may suffer from contamination by contemporaneous news events. We also test for pre‐announcement and post‐announcement effects, but find little evidence of either. Overall, our results suggest that ratings agencies may perform a useful role in summarizing and obtaining non‐public information on banks and that monitoring of banks’ risk through bond holders appears to be relatively limited in Europe. The relatively weak monitoring by bondholders casts some doubt on the effectiveness of a subordinated debt requirement as a supervisory tool in the European context, at least until bond markets are more developed.

(J.E.L.: E53, G21, G33)
The Definition of the Grading Scales in Banks’ Internal Rating Systems
Authors: Foglia A. , Iannotti S. , Marullo Reedtz P.
Published: December 2003

An internal risk rating system can be defined as the process used to classify bank borrowers into categories of different credit riskiness. Most of the related literature has investigated various aspects of this process, but the problem of defining the categories and the distribution of borrowers into the different classes or grades has received rather less attention, other than noting that the number of grades and their dispersion should achieve a meaningful differentiation of risk. An appropriate definition of the grading scale is of primary importance because the probability of default associated to each grade is the key inputs of capital allocation systems at many best‐practice banks and is the core of the January 2001’s new proposal of the Basel Committee for the calculation of capital requirements. Statistical techniques such as cluster analysis can help in identifying distinct subgroups of borrowers possessing the same creditworthiness. We use a logit model to estimate individual default probabilities for four categories of borrowers and apply cluster analysis to assign borrowers to each grade. However, since cluster analysis is not a purely mechanical process, but requires examination of the nature of observations and of the objective of clustering, the ultimate choice of the most appropriate grading scale for a given portfolio relies on empirical grounds. A sufficient granularity and an appropriate quantification of risk must be balanced.

(J.E.L.: G21, G22, G33)
The Role of Hedge Funds in International Financial Markets
Authors: Lubochinsky Catherine , Fitzgerald M. D. , McGinty Lee
Published: December 2003

This paper analyses the risk and return characteristics of a wide universe of hedge funds in the period 1990–2000. Most major categories of hedge funds are found to have outperformed (often by a considerable margin) the performance of traditional asset classes. The potential impact of hedge fund trading on market spreads and volatilities is examined especially in the period 1998, so as to provide some guidelines in terms of regulation of such funds. It is shown, however, that despite hedge fund difficulties in that period, the inclusion of hedge funds in investor portfolios definitely moves the efficiency frontier outwards, and allows significantly higher levels of returns for given levels of risk. This is primarily because of the low level of correlation of certain hedge fund styles, especially arbitrage strategies, with other hedge fund styles and with traditional assets.

(J.E.L.: G10, G11, G14, G23).
Regional Integration and the Co‐ordination of Capital Income Taxation
Authors: De Bonis Valeria
Published: December 2003

This paper addresses the question of the need for income tax harmonization in the context of regional integration. It analyses the international distortions and fiscal interdependence arising in the presence of tax rate differentials both under a theoretical and an empirical perspective, and with reference to actual experiences of harmonization attempts. Attention is also paid to the influence of the countries’ size on the results, to the strategic behaviour of countries under different international taxations rules, and to the relationships with the countries excluded by the integration process. International tax uniformity does not appear to be the preferable solution, even if some form of concerted agreements might help in reducing inefficiencies deriving from taxation differentials. For instance, in the case of highly mobile factors, like financial capital, if the integrating countries apply the source principle and the interest rate is the same across them, the source‐based tax rate on non residents must equal the residence country tax rate on residents. Such a rule would allow the countries to set autonomously their tax rate and, at the same time, eliminate cross‐border effects. If there are more than two integrating countries, the tax rates on non residents should discriminate according to the internal tax rate of the residence country.

(J.E.L.: H87, F20, H20).
Volatility, Stabilization and Union Wage‐setting: The Effects of Monetary Policy on the ‘Natural’ Unemployment Rate
Authors: Bonatti Luigi
Published: December 2003

In a unionized economy with nominal‐wage contracts, the ‘natural’ (rational‐expectations equilibrium) employment level is not invariant with respect to the stabilization rule followed by the monetary authority. This is because alternative monetary policies change the variance of the inflation rate (price level) relatively to the variance of some measure of economic activity (employment level), thereby influencing the trade‐off desired by union members between the real wage and the probability of employment. Indeed, a more volatile employment level induces the (risk‐neutral) union members to prefer a higher expected real wage.

(J.E.L: E5, J5).
Imperfect Forward Markets and Hedging
Authors: Broll Udo , Wong Kit Pong
Published: December 2003

This paper considers a hedging model of a risk‐averse competitive firm facing output price uncertainty. Imperfections exist in forward transactions in that the firm faces a downward‐sloping demand function for its forward sales. We show that the optimal output and hedge ratio of the firm are, in general, not separable, and are related in a deterministic manner. We also derive some economic implications of production and hedging decisions when firms differ in their attitudes towards risk. A more risk‐averse firm is shown to produce less and hedge more than a less risk‐averse firm.

(J.E.L.: D21, D81).
Managing Credit Risk: A Challenge for the New Millennium
Authors: Altman Edward I
Published: December 2003

The importance of credit–risk management has never been more important with the current high default rates and bankruptcies; but, there was heightened interest even before the current scenario. Indeed, in 1999, at the end of the benign credit cycle, banks, regulators, and financial market practitioners were spending considerable time on this subject due to:

(1) Increased emphasis on sophisticated risk management techniques in a changing regulatory environment – mainly revisions to the so–called ‘Basel Accord’

(2) Refinements in credit–scoring techniques

(3) Establishment of relatively large, relevant data bases on defaults, recoveries and credit migrations

(4) Treatment of bank loans as securities

(5) Development of ‘offensive’ credit–risk mitigation techniques such as securitizations, credit derivatives and credit insurance products

(6) Portfolio management techniques for credit assets.

(J.E.L.: G14, G21, G33).
Principal Component Models for Generating Large GARCH Covariance Matrices
Authors: Alexander Carol
Published: December 2003

The implementation of multivariate GARCH models in more than a few dimensions is extremely difficult: because the model has many parameters, the likelihood function becomes very flat, and consequently the optimization of the likelihood becomes practicably impossible. There is simply no way that full multivariate GARCH models can be used to estimate directly the very large covariance matrices that are required to net all the risks in a large trading book. This paper begins by describing the principal component GARCH or ‘orthogonal GARCH’ (O‐GARCH) model for generating large GARCH covariance matrices that was first introduced in Alexander and Chibumba (1996) and subsequently developed in Alexander (2000, 2001b). The O‐GARCH model is an accurate and efficient method for generating large covariance matrices that only requires the estimation of univariate GARCH models. Hence, it has many practical advantages, for example in value–at–risk models. It works best in highly correlated systems, such as term structures. The purpose of this paper is to show that, if sufficient care is taken with the initial calibration of the model, equities and foreign exchange rates can also be included in one large covariance matrix. Simple conditions for the final covariance matrix to be positive semi‐definite are derived.

(J.E.L.: C32, C53, G19, G21, G28).
The Cross–section of Risk Premia in the Italian Stock Market
Authors: Beltratti Andrea , Di Tria Massimo
Published: December 2003

Our analysis compares multi–factor models with Italian stock market data for the period 1990–2000. The first, the simple CAPM, is the relevant benchmark because of its simplicity. The second, the extended Fama–French model (including the momentum portfolio), is the best candidate for substituting the one–factor model. The third is a multi–factor model including sectors; and the fourth is a multi–factor model including the change in short–term interest rates as an extra factor. The results of our research are mildly positive. The Fama–French multi–factor model behaves rather well in time series tests. However, in the cross–section, the average premia are not significantly different from zero, supporting the idea that they are not able to explain the cross–section of returns in the Italian market. Moreover, there is weak evidence that the factor portfolios have predictive power for macroeconomic variables characterizing the state of the economy. What may explain the results? There are two main components: first is the presumably large size of shocks to returns in the Italian case, which makes it difficult to explore the relation among expected returns; second is the presence of extra factors which are not accounted for in our analysis.

(J.E.L.: G11, G12).
Monetary Policy, Credit and Aggregate Supply: The Evidence from Italy
Authors: Fiorentini Riccardo , Tamborini Roberto
Published: December 2003

This paper concerns theory and evidence of the monetary transmission mechanisms. Current research has deeply investigated factors, such as dependence of firms on bank credit, that amplify the impact of monetary policy impulses on aggregate demand exerting strong but temporary effects on output and employment. We present an intertemporal macroeconomic equilibrium model of a competitive economy where current production is financed by bank credit, and then we use it to identify supply–side effects of the credit transmission mechanism in data drawn from the Italian economy. We find evidence that the ‘credit variables’ identified by the model – the overnight rate as a proxy of monetary policy and a measure of credit risk – have permanent effects on employment and output by altering credit supply conditions to firms.

To save on space, mathematical proofs, statistical tests and data sources have been gathered in two separate appendices that can be examined on request.

(J.E.L.: E2, E5).
A Structural Analysis of Credit Risk With Risky Collateral: A Methodology for Haircut Determination
Authors: Cossin Didier , Hricko Tomas
Published: December 2003

Although many credit risk pricing models exist in the academic literature, very little attention has been paid to the impact of risky collateral on credit risk. It is nonetheless well known that practitioners often mitigate credit risk with collateral, using so–called haircuts for collateral level determination. The presence of collateral has a complex effect that can not be analysed simply with existing models. We analyse the value of credit risk when there is collateral in a range of different situations, including dual–default in a simple setting, stochastic collateral, stochastic bond collateral with stochastic interest rates, continuous and discrete marking–to–market and margin calls. The models confirm many practical intuitions, such as the impact on the haircut level required of the risks of the collateral asset and of the underlying asset to the forward as well as the impact of their correlation. Moreover, the model supports the intuition that the frequency of marking–to–market and collateral are substitutes. The models also stress the possibly unexpected magnitude of these factors. More importantly, they give actual solutions to determining the value of the credit risk depending on the haircut chosen and the frequency of marking–to–markets, results not presented before in the literature. The models are also a good basis to understand the portfolio effect of collateral management. Finally, they illustrate how differences in prices may arise from pure differences of credit risk management, as illustrated here in the case of futures and forwards.

(J.E.L.: G13).
Managing Electricity Risk
Authors: Barone–Adesi Giovanni , Gigli Andrea
Published: December 2003

In this paper we propose an algorithm for pricing derivatives written about electricity in an incomplete market setting. A discrete time model for price dynamics which embodies the main features of electricity price revealed by simple time series analysis is considered. We use, jointly, Binomial and Monte Carlo methods for pricing under a risk–neutral measure of which we prove the existence.
The Behaviour of the Real Exchange Rate: Evidence from an Alternative Price Index
Authors: Sarno Lucio , Chowdhury Ibrahim
Published: December 2003

Although the long–run purchasing power parity (PPP) hypothesis is expected to hold across tradable goods, all price indices available to researchers for testing the validity of PPP contain some proportion of non–tradable goods prices, which may generate substantial persistence in the real exchange rate. We construct time series for quarterly price indices that minimize the presence of non–tradable goods for six major economies. Applying recently developed nonlinear econometric techniques to the resulting five US dollar real exchange rate series for the recent floating exchange rate regime, we provide evidence that the nonlinear mean reverting properties of these real exchange rate series are stronger than the mean reverting properties of real exchange rate time series constructed using the consumer price index (CPI). In turn, these results have a natural economic interpretation.

(J.E.L.: F31).
What does Monetary Policy Reveal about a Central Bank's Preferences?
Authors: Castelnuovo Efrem , Surico Paolo
Published: December 2003

The design of monetary policy depends on the targeting strategy adopted by the central bank. This strategy describes a set of policy preferences, which are actually the structural parameters to analyse monetary policy making. Accordingly, we develop a calibration method to estimate a central bank's preferences from the estimates of an optimal Taylor–type rule. The empirical analysis on US data shows that output stabilization has not been an independent argument in the Fed's objective function during the Greenspan's era. This suggests that the output gap has entered the policy rule only as leading indicator for future inflation, therefore being only instrumental (to stabilize inflation) rather than important per se.

(J.E.L.: C61, E52, E58).
Charles Goodhart and Gerhard Illing (eds) 2002 Financial Crises, Contagion, and the Lender of Last Resort, a Reader
Authors: De Cecco Marcello
Published: December 2003

Book reviewed in this article:

Charles Goodhart and Gerhard Illing (eds.), Financial Crises, Contagion, and the Lender of Last Resort, a Reader
Ben Fine (2001) Social Capital versus Social Theory: Political Economy and Social Science at the Turn of the Millennium
Authors: Sabatini Fabio
Published: December 2003

Book reviewed in this article:

Ben Fine, Social Capital versus Social Theory: Political Economy and Social Science at the Turn of the Millennium
Unemployment, Factor Substitution and Capital Formation
Authors: Kaas Leo , Thadden Leopold von
Published: December 2003

We incorporate a wage-bargaining structure in a dynamic general equilibrium model and show how this feature changes short- and long-run properties of equilibria compared with a perfectly competitive setting.We discuss how employment, capital and income shares respond to wage-setting shocks and show that adjustment dynamics depend decisively on the magnitude of the elasticity of substitution between labour and capital. Values of the elasticity below unity add persistence, tend to preserve stability and lead to empirically plausible adjustment patterns. By contrast, values above unity introduce additional volatility, thereby making steady states potentially unstable.
Buyer Subsidies in an Equilibrium Model of Price Dispersion
Authors: Orzen Henrik , Sefton Martin
Published: December 2003

We present a model of equilibrium price dispersion in which a per-unit subsidy to buyers can reduce average prices. The reason is that subsidies have two effects on average prices that work in opposite directions. First, subsidies raise buyers’ willingness-to-pay, and by itself this causes firms to charge higher prices. However, since a higher willingness-to-pay lowers the relative cost of search, subsidies also induce more search. This creates a second effect that puts pressure on firms to reduce prices.We show that the second effect can dominate, thus causing an overall reduction in average price.