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In this study, I employ a SVAR method that filters out the business cycle and monetary policy to produce conservative but realistic estimates of fiscal responses and multipliers for Australia that ...

This study provides a fresh look at the SME sector’s economic backbone vis-a-vis credit constraint dichotomy in Vietnam—Asia’s rising economic star. The study uses data from the Survey of Manufactu...

This article examines the financial constraint of 18 listed Canadian forest firms between 2000 and 2014 following the stochastic frontier approach. Empirical results support the observation that Ca...

This paper is an empirical assessment of the government finance and food security nexus in China from 1978 to 2016. Using autoregressive distributed lag for linear and threshold cointegration, the results suggest that China’s government finance and food security have reinforced each other throughout the reform era when a structural break was allowed in the model. However, the strength of cointegration and Granger causality in the government-led food security link is stronger, hence supporting the state interventionist view that a strong state has played a dominant role in fulfilling national food security in China. China’s government finance and food security changes indicate food sector reform probabilities under fiscal constraint, as regime-switching indicators have delineated the Chinese government’s difficult fiscal periods and the main reforms in the food sector. In practice, this result implies that further policy reforms can be effective for China’s future food security.

This article is a first step towards understanding the relationship between credit market imperfections and inequality of opportunity in skill formation. The main goal is to investigate the effects of the credit constraint on the optimal human capital decision, in terms of degree of schooling, taking into account the household preferences for education. Our starting point is a theoretical model of human capital investment decision with credit constraint. Following a previous model in the literature, we propose a reduced-form approach that estimates the relation between education decision and initial wealth in Brazil. Our empirical analysis is conducted using data from a Brazilian Household Budget Survey (Pesquisa de Orcamentos Familiares), for years 2002–2003 and 2008–2009. Our results point out that education decision is in fact credit constrained. The empirical results show a strong and highly significant effect of wealth on educational level of children, teenagers and adults, even controlling b...

In a series of cases spanning more than three decades, the courts have attempted to establish boundaries on the permissible use of racial preferences in college admissions. Proponents of these policies believe that race-based preferences are needed to create a diverse student body that facilitates effective learning and social inclusion. Opponents of such policies contend that racial preferences are inherently discriminatory and eliminating them would yield a more able student body. Whereas race-based preferences have garnered the most attention, elite colleges regularly employ other types of preferences, including those for alumni and talented athletes. To inform this important policy debate, we develop a simple model comprised of a rational college administrator that maximizes a linear combination of student body ability and the college endowment through the choice of race, legacy and merit admission shares. We find that relaxing the racial-preferences constraint can produce a ‘less-able’ studen...

The article presents a theoretic model of tranching in asset securitization. When potential buyers are heterogeneous in the constraint on their portfolios, we find that senior tranche, which is less risky and created by tranching, will introduce more investors and thus reduce risk exposure to investors. Thus, tranching helps improve the sale’s revenue. We also find that the portfolio constraints of investors are always binding at optimum, which is called marginal rating.

This paper empirically tests how formal retail entrepreneurs’ perception about the business environment in Cameroon affects the performance of the retail sector. I use business owners’ responses from the 2009 Enterprise Survey to estimate an econometric model that corrects for heteroscedasticity. The results show that regulation costs, corruption, credit constraints, and lack of infrastructure negatively affect the gross margins of firms. In contrast, the competition of the informal sector – perceived by many formal entrepreneurs as a major constraint – is positively associated with the gross margins of formal firms. Policy implications are discussed.

The article proposes a portfolio model subjected to a constraint that captures the investor’s goal, with maximum estimation of expected return that is affected by investor sentiment. And we give a solution of the portfolio model by exploring the geometric features. Furthermore, we discuss the relationship between investor sentiment and the financial crisis by analysing the optimal allocation. The results show that: when investor sentiment is low enough, the investor should reject the investment, this condition leads the depression financial market to prevail, then the financial crisis erupts; when investor sentiment is modest, the financial crisis is difficult to erupt unless the decline of investor sentiment is quick and deep; but there is a special status that the financial crisis is caused by other factors rather than by investor sentiment; and only improving investor sentiment cannot move away from the financial crisis.

This article uses contingent claims analysis and regulatory constraints to show how a bank can create incentive-compatible compensation for the senior management aligned with the interests of the other stakeholders. For this purpose, the remuneration package takes the form of a ‘call spread’ on the bank’s equity. Unlike regular stock option programmes, a call spread limits the upside potential for the senior management. This prevents unlimited risk taking. Additionally, a maximum regulatory default probability also constrains risk-taking behaviour. We show under which parameterizations the remuneration package and the regulatory constraint offer equal incentives for the senior management.

We investigate the relationship between alternative definitions of sex ratios and marriage outcomes among African and white women in South Africa. In contrast to marriages among whites, African marriages in South Africa traditionally have involved the payment of bridewealth (or ilobolo) by a husband to the prospective wife's family. Using matched data from the 2001 Population Census and the South African Labour Force Surveys, we find that among Africans, both the quantity and quality of unmarried men relative to women in local marriage markets are significant predictors of marriage. However, economic-based measures of marriageability have a larger effect on marriage outcomes than simple sex ratios. These findings are consistent with the argument that bridewealth payments act as a financial constraint to marriage among African couples, raising the marriageability criteria of men. In contrast, we find mostly insignificant results for the relationship between sex ratios and marriage outcomes among white women.

Some sectors of the Jordanian agriculture have reached, over the last few years, a considerably high standard of competitiveness. Such evolution occurred in a period where the government started to have a more passive position and, producers, in turn, tried themselves to modify the production structures, adapting to the forces of the market and to the demands for internal and external competitiveness. Jordan Valley (JV) is considered as a basket of fruit and vegetables of Jordan that allows production of seasonal crops. The main constraint to agriculture in JV is water availability. Target Minimization of Total Absolute Deviation (MOTAD) model was used to evaluate three levels of water availability and these are: current normal situation, 50% and 30% water reduction. It was evident that crops behaviour under risk condition in JV differs according to the risk associated with production process, both for season and amount of water available for irrigation where the impact of water reduction was obvious in w...

This research investigates several dynamic stochastic models of a bank's management problem of the term structures of its assets and liabilities. A bank can either eliminate most of its interest risk with appropriate options, or it can utilize its expertise in its core business and seek extraordinary profits. This research concerns a bank with the latter goal. In this model, the bank seeks to maximize the expected present value of dividend issued subject to the Federal Reserve's regulatory constraint and liquidity constraint. With this model, we find that if the available deposits are not too high and the level of liquid assets is high enough, then it is optimal for a bank to accept all of the available deposits. However, if the level of liquid assets is too low, then a bank should not issue a dividend or to accept any deposits. The properties are still valid even if the bank is not risk neutral.

In the literatures of location and firm behaviour, most of the papers deal with location and theory of firms in conjunction with a heterogeneous space where markets are given at discrete points. Also, most of writers of the papers considered the optimum location problem only for an unregulated firm and industry. On the other hand, there are many regulated firms and industries in real economies. Also, we can consider a location problem of an industrial city (industry complex) which means a big company town. Many comparisons after combining some effects such as agglomeration (scale economies/diseconomies), etc. were implemented. We analysed the optimum location of industrial city (big company town) and input usage under regulatory constraint and agglomeration. We introduced an active constraint of a fair rate of return from the pioneering work of Averch and Johnson to the location problem of the big firm with multi inputs. With multi-inputs, simple one dimension locational problems are solved.

The study explores the conditions under which a government in a developing country is likely to run a balanced or surplus budget. We contend that primary fiscal deficits are likely to persist where the economy is too saving constrained to raise private sector investment. To conduct the investigation, a logit model is applied to a sample of developing countries to see whether the saving constraints are associated with the fiscal stance of governments. Accordingly, income level, growth, external current account balance and foreign direct investment are used as indicators of the saving constraint. With the exception of economic growth, positive developments in these variables turned out to be significant to the likelihood of the government adopting a surplus budget.

Starting from a theoretical model with importable, traded and nontraded goods, we identify a long run relationship among Greek imports, domestic activity and relative prices. The model supports weak exogeneity of relative prices which means that Greek importers take the price of imports as given. The greater than one income elasticity, which persists even when cyclical demand effects are netted out, means that Greece faces an external constraint on growth as verified by the negative effect of the disequilibrium error in the short run output equation. The findings of this paper suggest that the price of domestic tradeables and nontradeables are significant determinants of the long run and short run import demand, while instability in domestic inflation is found to have a strong short run depressing effect on domestic activity.

In this paper we use a fixed–random coefficients regression model to analyse data for cereal growing small-scale farmers in efficiency. Results show that land size is a major constraint and only small changes in cultivated area and land quality yield relatively high increments to output. Larger farms are relatively less productive, everything else being equal. Human capital in the form of literacy and experience are found to affect productivity positively. Our findings show a high degree of farm-specific technical inefficiency. With regard to the inputs we find high degrees of input-specific technical inefficiency, especially so for labour and fertilizer. The age structure of the household, environmental factors and education are found to be weakly correlated with efficiency. Furthermore, sharecropping is found to be positively correlated with technical efficiency.

The determinants of the growth of government in Canada over the period 1926–90 are examined. Of particular interest is whether changes in the degree of centralization have affected the public sector's share of GDP. Unlike other studies using time-series data, the effect of decentralization toward the provincial/state and toward the local levels of government are measured separately. Empirical estimates provide strong support for the conclusion that citizen mobility acts as an important constraint on the growth of government.

The sources of growth in government revenues and expenditures in 22 OECD countries is addressed. The question of whether the revenue constraint is binding on the growth of government expenditures, or whether the ‘displacement’ effect of expenditure growth is binding is considered. Controls for the effects of the output gap and inflation rate on government revenues and expenditures in each of the 22 countries are presented. A major conclusion is that reductions in spending are essential to reducing budget deficits and controlling government size.

Dairy quotas were introduced in April 1984. Since then, producers have been adjusting their production systems to cope with a constraint on milk output. In this paper, stochastic production functions are used to examine both allocative efficiency of input use and technical efficiency in the industry during the post-quota period. The results indicate that producers have successfully adjusted the use of the variable input, feed, to optimal levels but are finding it more difficult to adjust quasi-fixed inputs such as labour, land, machinery and the herd size. Technical efficiency has remained relatively constant.

In this study an aggregate labour market model is formulated and its parameters estimated, using Maltese annual time-series data, covering the years 1955–79. The constraint that the wage rate clears the market in all periods is not imposed and the model is specified in such a way as to enable the reseacher to judge whether or not the assumption of equlibrium is valid. One conclusion that emerges from this study is that the Maltese labour market was not characterized by equilibrium during the period under consinderation.

The economist makes recommendations in a world full of imperfections. Many of these imperfections will persist and thus must be treated as constraints on the analysis being conducted. Second-best recommendations are thus in order. This paper examines the principles underlying a benefit-cost analysis which must be conducted within the context of a pricing constraint. Specifically, social gains from investment schemes which serve to ameliorate congestion on public facilities are examined under two assumptions about pricing: Policy I-congestion tolls are charged, and Policy II-congestion tolls are not charged. It is seen that when pricing policy is treated as a constraint on the analysis, efficiency may sometimes be served by having projects approved under Policy II that would not be approved under policy I.

This paper derives a systematic method of determining user fees which maximize social welfare within the airport's capacity and noise constraints. Once such a fee structure is developed it then becomes possible to consider the second problem of whether the peak and off-peak demand for the use of the airport justifies additional expenditures on increased capacity if the capacity constraint is indeed the relevant consideration. An efficient fee system may, on the other hand, reveal that the noise condition produced by airport operations is the controlling constraint and that until this problem is resolved further additions to capacity are unjustifiable. A mathematical derivation of an optimal user fee policy is presented in the first section. These fees allocation capacity efficiently between the two types of users for a given time period. By solving this allocation problem we are then able to estimate for that period the shadow price of additional capacity. This shadow price is the amount users in that time period are willing to pay in order to expand current facilities. The shadow prices for capacity generated for each period of time are then employed to determine the optimal capacity. If the noise constraint is relevant in a particular time period shadow prices are generated which indicate the amount users are willing to pay in order to reduce the noise levels of current operations or community objections to them. In the second section these mathematical results are used to develop a graphical procedure which can be applied to calculate the economically efficient fees and the shadow prices for the capacity and noise constraints.