Please select from the titles below:
- Excise Taxation and Product Quality: The Gasoline Market
- Do fat tails matter in GARCH estimation: testing market efficiency in two transition economies
- Determinants of Credit Risk in Indian State-owned Banks: An Empirical Investigation
- Using Cooper’s Approach to Explore the Extent of Congestion in the New British Universities
- Expanding Product Variety and Human Capital Formation in an Ageing Economy
Back to the Past Issues' Index
Excise Taxation and Product Quality: The Gasoline Market (p.1)
With the advent of New Labour, numerical targets have become ubiquitous in the public sector. They are used to monitor and assess performance by government agencies; but how helpful are targets if couched only in numerical terms? In this paper the proposition is that targets must be set in context: targets must be set with reference to a social welfare function. Pressures in 'political markets' are quite different to incentive structures that ensure that targets will maximise welfare. If targets are inappropriate in Paretian terms, welfare loss might be magnified, the more ‘successfully’ government agencies hit targets. Misallocation of resources is gauged against a Paretian benchmark and illustrated with reference to waiting in the NHS. Analysis of a welfare critique of target-setting suggests a policy rule capable of mitigating distortion.
by T Nesbit
Do fat tails matter in GARCH estimation: testing market efficiency in two transition economies (p.15)
by B Harrison and D Paton
Targets have become a key instrument in UK economic policy. Numerical targets, such as the UK target for waiting list times for inpatient treatment, have a rationale in terms of public choice analysis. They appear to be premised on politicians' pursuit of getting elected. However, increasingly they are a target for criticism. This paper provides an assessment of targets in the public sector. It considers the rationale for adopting targets and actors' responses to incentives created by NHS targets. Whilst targets may make short-run political sense and therefore be 'politically correct', from other perspectives they look 'incorrect'. The analysis indicates that, in political processes, credibility gains contingent on target setting are likely to be short-lived and counter-productive.
Determinants of Credit Risk in Indian State-owned Banks: An Empirical Investigation (p.27) by M Bahmani-Oskooee and Y Wang
Exchange rate uncertainty is said to have negative or positive effects on the trade flows. A Large body of the empirical research that tries to address the issue has used aggregate trade data between one country and rest of the world, or bilateral total trade data between two countries. The support for a significant relation between a measure of exchange rate volatility and trade flows is negligible from these studies. In this paper, when we use disaggregated data between the U.S. and China at commodity level (88 industries) and a bounds testing approach to cointegration, we find that almost half of the industries are sensitive to a measure of exchange rate uncertainty.
Using Cooper’s Approach to Explore the Extent of Congestion in the New British Universities (p.47)
A rarely noted, economically unrealistic feature of Goodwin’s (1967; 1972) celebrated ‘growth-cycle’ model is that its state variables — the wage share of output and the employment proportion — can exceed unity. We propose a novel extension of the two-variable dynamical system which ensures that its solutions remain within the economically feasible region, i.e. the unit square of the wage-share–employment-proportion phase plane. In a further extension, we obtain a model which, besides possessing a richer economic interpretation than the original, is able to generate asymmetric solution cycles. We use numerical techniques to investigate the new model’s properties; in particular, we examine business-cycle deepness and steepness.
by A T Flegg and D O Allen
Expanding Product Variety and Human Capital Formation in an Ageing Economy (p.83)
This paper seeks to characterise optimal monetary policy rules in the presence of risk and uncertainty. I explore a situation in which the true parameters and the true structure of the economy are unknown to the policymaker, and he is reluctant to make a decision based on a single distribution estimate (i.e. he faces Knightian uncertainty). I show analytically that if the policymaker does not know the true structure of the economy he will be more cautious than in the case of only parameter risk. Further, I show that Knightian uncertainty can also lead to an extra precautionary motive when one considers its interaction with parameter risk. In a simple exercise, I provide empirical estimates that demonstrate that adjustments due to parameter and structural risk and Knightian uncertainty can potentially be quite large.
by H Noda
Page last modified on 20 May 2007