This paper tests whether bank can be a source of contagion during the 1997 Asian crisis using asset return data from a crisis country – Thailand. In particular, I examine whether Thai banking sector can produce contagion effects in both conditional means and volatilities of its foreign exchange and stock markets during the crisis after controlling economic fundamentals. The test results show that contagion-in-mean effects appear to be multidirectional since return shocks emanating from any one of the three markets can sweep across all markets, but contagion-in-volatility effects are mainly driven by the negative return shocks originating in the banking sector. Overall the empirical evidence indicates that the past return shocks emanating from banking sector have significant impact not only on the volatilities of foreign exchange and aggregate stock markets, but also on their prices, suggesting that bank can be a major source of contagion during the crisis.

Multiproduct firms can set separate prices for all possible bundled combinations of its products (“mixed bundling”). However, this is impractical for firms with more than a few products, because the number of prices increases exponentially with the number of products. We find that simple pricing strategies are often nearly optimal. Specifically, we show that bundle-size pricing—setting prices that depend only on the size of bundle purchased—tends to be more profitable than offering the individual products priced separately and tends to closely approximate the profits from mixed bundling.

One question development economists are especially interested in, but so far left unanswered, is: how would the societal income distribution be affected by introducing a family-planning program to reduce the reproduction rate of the poor, which is usually high in developing countries? The purpose of this paper is to search for analytical answers to this question. We are able to make definite comparisons about some class of inequality measures of the steady-state societal income distributions, and these comparisons provide strong theoretical support in favor of the above-mentioned family-planning program.

This paper is organized as follows. In Section 2, we motivate and discuss the sequential testing approach. Section 3 discusses invariance principles of the past and present, and the CUSUM and fluctuation instability detectors. Section 4 contains some illustrative Monte Carlo experiments. A summary and concluding remarks are given in Section 5. Proofs are gathered into the Mathematical Appendix

The analysis of economic phenomena at the wholistic (aggregative) level 11l8intains a long tradition that assumes the neoclassical production function Q-f(K,L) (i.e., output as a function of capital and labor) satisfies the condition of constant returns to scale.The assumed absence of any (dis-)economies of scale renders the production function useless, when the scale effect is as pronounced as is typically found at the less aggregative levels of individual firm or industry analvsis.. .The purpose of this paper is to deduce new classes of production functions that are not limited to the constant returns to scale characteristic.Hore specifically, the scale effect is described by an arbitrary function of one of the factors of production, capital in this paper.This class of production functions exhibi-ts scale sensitivity with respect to capital (SSWK).The paper shows how different fmidlies of production functions can be derived from two basic .. building blocks," a :wage share function and a scale functitm.The Cobb-])ouglas, CES and VES production fmu:tions are special cases.~e Cobb-Douglas and CES functions can be expanded to incorporate non-constant returns to scale.A smnple of firms from Taiwan is used to test among various derived functional specifications.An interesting diversity of preferred specifications was found among three industries.

This paper explores the reasons behind the discrepancy between interest rates in China’s two repurchase agreement (repo) markets, the interbank repo market and the exchange-traded repo market. The repo rates in the exchange market are at times, significantly higher than those in the interbank market, especially in the first three years of the 2000–2005 sample period. While market segmentation clearly hinders arbitrage, the causes of the repo rate discrepancy are related to the alternative investment opportunities available to market participants and to the volatility differences in the repo rates.

Compensation contracts including incentive instruments not only provide executives with positive incentives to increase shareholder wealth, but also create a negative value-dilution effect for existing shareholders. This study investigates this dilemma by conducting a benefit-cost analysis under a proposed structural form valuation framework. Our design mechanism shows that, given their firms’ current capital structure, shareholders are always capable of designing an optimal compensation contract to maximize their wealth. Due to the different research issue and assumptions, unlike findings of most previous studies, our model proposes that in a firm with a higher leverage ratio shareholders should provide a contract with higher incentive intensity for managers, and this proposition is supported by the empirical analyses which examine the sample of S&P index firms over the period 1992–2006 after adopting an updated fixed effects model.

We show that banks use industry knowledge acquired through corporate lending in mortgage lending, a phenomenon we refer to as the “industry expertise channel.” Specifically, banks that specialize in particular industries expand their mortgage lending activity in regions where those industries are concentrated. The impact of industry expertise increases with information asymmetry and borrower risk. In addition, mortgages originated from this channel contain more soft information and perform better. The effect of the channel increases after unexpected industry distress and the 2008 financial crisis, suggesting that the effect is likely causal.

We study the market for ratings agencies in the commercial mortgage backed securities sector leading up to and including the financial crisis of 2007–2008. Using a structural model adapted from the auctions literature, we characterize the incentives of ratings agencies to distort ratings in favor of issuers. We find an important equilibrium distortion, which decreased after the crisis. We study several counterfactual experiments motivated by recent policymaking in this industry.