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Pástor and Stambaugh (2012) find that from a forward-looking perspective, stocks are more volatile in the long run than they are in the short run. We demonstrate that when the nonnegative equity premium (NEP) condition is imposed on predictive regressions, stocks are in fact less volatile in the long run, even after taking estimation risk and uncertainties into account. The reason is that the NEP provides an additional parameter identification condition and prior information for future returns. Combined with the mean reversion of stock returns, this condition substantially reduces uncertainty on future returns and leads to lower long-run predictive variance. [ABSTRACT FROM AUTHOR]

This paper examines the link between the social networks surrounding business leaders and temporal myopia in strategic planning. Specifically, we hypothesize that processes characteristic of being embedded in a closed network are associated with a lack of foresight and a tendency to neglect long-run strategic planning. Using a probability sample of 700 CEOs in China, we showthat network closure is associatedwith temporalmyopia, which is evidenced in various measures of business planning. We show that managers embedded in closed networks are less experienced in long-run planning and are also less successful in implementing long-run business plans. Our contribution to the literature is twofold: we add a network perspective to the literature on temporal myopia in strategic management and, more significantly, by grounding temporal myopia in the network surrounding a person, we separate temporal myopia fromthe person. Myopia emerges from the social situations we create or in which we find ourselves. [ABSTRACT FROM AUTHOR]

This study exploits a new long-run data set of daily bid and offered exchange rates in spot and forward markets from 1919 to the present to analyze carry returns in fixed and floating currency regimes. We first find that outsized carry returns occur exclusively in the floating regime, being zero in the fixed regime. Second, we show that fixed-to-floating regime shifts are associated with negative returns to a carry strategy implemented only on floating currencies, robust to the inclusion of volatility risks. These shifts are typically characterized by global flight-to-safety events that represent bad times for carry traders. [ABSTRACT FROM AUTHOR]

Investment by oil firms positively affects the futures basis and negatively predicts excess returns on crude oil futures. I build an equilibrium model of drilling, exploration, and storage to understand these facts. Firms' capital stock lowers extraction costs as firms drill in increasingly expensive fields. Drilled wells produce the resource at a geometrically declining rate; however, by specifying consumers' habit level equaling production from old wells, the futures basis and risk premium are only related to drilling, investment, and inventory. Investment leads to a more elastic drilling response by firms and dampens oil price increases from demand shocks, thus lowering the risk premium. Received October 10, 2015; editorial decision March 30, 2018 by Editor Philip Strahan. Author has furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online [ABSTRACT FROM AUTHOR]

Large shocks to local labor markets can cause long-lasting changes to employment, unemployment, and the local labor force. This study examines the relationship between mass layoffs and the long-run size of the local labor force. The authors consider four main channels through which the local labor force may adjust: in-migration, out-migration, retirement, and disability insurance enrollment. These channels, primarily out-migration, account for more than half of the labor force reduction over the past two decades. Findings show, however, that during and after the Great Recession, instead of out-migration, non-participation in the labor force grew to account for most of the local labor force exits following a mass layoff. [ABSTRACT FROM AUTHOR]

We study the effect of corporate cultural similarity on merger decisions and outcomes. Using the similarity in firms' corporate social responsibility characteristics to proxy for cultural similarity, we find that culturally similar firms are more likely to merge. Moreover, these mergers are associated with greater synergies, superior long-run operating performance, and fewer write-offs of goodwill. Our evidence is consistent with the notion that cultural similarity eases post-deal integration. Our results contribute to the literature on the determinants of merger success, provide new evidence on the impact of corporate culture, and offer a new approach to defining firms' cultural similarity. [ABSTRACT FROM AUTHOR]

I study managerial short-termism in a dynamic model of project development with hidden effort and imperfect observability of quality. The manager can complete the project faster by reducing quality. To preempt this behavior, the prin cipal makes payments contingent on long-term outcomes. I analyze the dynamics of the optimal contract and its implications for the level of managerial turnover. I show that optimal contracts might be stationary and entail no termination. In general, I show that the principal reduces the manager’s temptation to behave myopically by reducing the likelihood of termination and deferring compensation. The model predicts a negative relation between the rate of managerial turnover and the use of deferred compensation that is consistent with evidence of managerial compensation contracts. Received May 23, 2016; editorial decision May 27, 2017 by Editor Francesca Cornelli. [ABSTRACT FROM AUTHOR]

We investigate whether long-term and short-term components of typical conditioning variables in asset pricing studies, such as the dividend yield or yield spread, have different implications for optimal asset allocation. We argue that short-term components relate mostly to momentum, and long-term components relate mostly to mean-reversion effects, respectively. Therefore, they may have a different information content for investors with different horizons. We obtain improvements in terms of out-of-sample Sharpe ratios and expected utilities for decomposed state variables that directly reflect information related to the stock market, such as the dividend yield and stock market trend. [ABSTRACT FROM PUBLISHER]

The authors reexamine the relation between customer satisfaction (measured by the American Customer Satisfaction Index) and long-term stock returns using statistical tests that are well specified in the presence of industry clustering. Their results are consistent with those of Fornell, Morgeson, and Hult (2016), who find positive abnormal stock returns for companies with high levels of customer satisfaction. However, the authors also identify three caveats that could affect the robustness of this conclusion. First, the results critically depend on the manner in which industry is defined. Second, because Fornell, Morgeson, and Hult use a proprietary trading strategy that has not been disclosed to the general public, the authors are unable to discern what fraction of their reported performance is due to customer satisfaction as opposed to other characteristics of the trading strategy. Finally, because the authors also find positive abnormal returns for the entire American Customer Satisfaction Index sample, at least some of the performance reported by Fornell, Morgeson, and Hult might be driven by sample characteristics unrelated to customer satisfaction. This article also provides useful guidance for measuring long-term abnormal returns in the presence of industry clustering. [ABSTRACT FROM AUTHOR]

We quantify investors' preferences over the dynamics of shocks by deriving frequencyspecific risk prices that capture the price of risk of consumption fluctuations at each frequency. The frequency-specific risk prices are derived analytically for leading models. The decomposition helps measure the importance of economic fluctuations at different frequencies.We precisely quantify the meaning of "long-run" in the context of Epstein-Zin preferences - centuries - and measure the exact relevance of business-cycle fluctuations. Finally, we estimate frequency-specific risk prices and show that cycles longer than the business cycle - long-run risks - are significantly priced in the equity market. [ABSTRACT FROM AUTHOR]

Electrifying as many end-uses as technically and economically feasible is a key strategy for achieving net-zero greenhouse gas (GHG) emissions. However, “electrifying everything” is not currently a practical or economical option for everything. In many of these hard-to-decarbonize sectors, hydrogen has a role to play. Hydrogen and hydrogen derivatives can play a key role in certain emission-intensive sectors that are important to Canada’s economy, including steel, chemical and clean fuel production, and possibly heavy freight, long distance rail, and other off-grid end-uses that currently depend on diesel motors. In a companion piece, we discuss the role for hydrogen in electricity systems. Unlike oil and gas, whose resources are isolated to only some parts of the country, hydrogen has the potential for broad participation across Canada due to the ability to produce it from hydrocarbons and clean electricity. The former is likely to dominate in the near term, whereas declining costs for hydrogen from electricity should tilt the economics in that direction in the longer run. In all cases, however, regulators and policy makers should be focused on life-cycle emissions from the production process rather than arbitrary colour classification schemes. Canada’s natural advantages in producing clean hydrogen also puts it in a position to capitalize on new export opportunities from hydrogen-derived products. It already has one of the cleanest steel-production facilities in the world in Québec, a technology that can be adapted to operate on 100% hydrogen. Opportunities exist for Canada to become a green iron or steel exporter, from Québec or even possibly Alberta with its unused iron ore deposits and abundance of hydrogen potential. For hydrogen to reach its potential, there are some key areas where government policy and support will be needed. From helping to establish clean hydrogen industrial clusters, where firms share production and storage infrastructure, to ensuring hydrogen refueling networks for transport are established with sufficient breadth needed for heavy freight transport, government has a role to play in setting up the landscape for innovators to thrive. Ultimately, hydrogen will not solve every decarbonization challenge Canada faces, but it will have a critical role to play as a complement to a variety of strategies aimed at reaching net-zero emissions. Hydrogen has had many “hype cycles” before, and while it is no panacea for decarbonization, it is now genuinely poised to help Canada achieve its net-zero goals. [ABSTRACT FROM AUTHOR]

We provide a model of nonredundant credit default swaps (CDSs), building on the observation that CDSs have lower trading costs than bonds. CDS introduction involves a trade-off: it crowds out existing demand for the bond, but improves the bond allocation by allowing long-term investors to become levered basis traders and absorb more of the bond supply. We characterize conditions under which CDS introduction raises bond prices. The model predicts a negative CDS-bond basis, as well as turnover and price impact patterns that are consistent with empirical evidence. We also show that a ban on naked CDSs can raise borrowing costs. [ABSTRACT FROM AUTHOR]

We develop an optimal tax-timing model that takes into account asymmetric long-term and short-term tax rates for positive capital gains and limited tax deductibility of capital losses. In contrast to the existing literature, this model can help explain why many investors not only defer short-term capital losses to long term but also defer large long-term capital gains and losses. Because the benefit of tax deductibility of capital losses increases with the short-term tax rates, effective tax rates can decrease as short-term capital gains tax rates increase. [ABSTRACT FROM AUTHOR]

This study investigates whether the existence or strength of any misreaction in the options market is affected by investor sophistication and investor sentiment. Based on a unique data set of the complete history of all transactions in the Taiwan options market, we find that individual investors exhibit significant misreaction to information and that this misreaction becomes stronger during periods of high investor sentiment. In addition, more active or aggressive individual investors always exhibit misreaction and do not learn from their past mistakes. Our empirical results are robust to alternative measures of investor sentiment and definitions of long- and short-term horizons. [ABSTRACT FROM PUBLISHER]

Using a large hand-collected database of chief executive officer (CEO) bonus structures, we find that when a CEO’s bonus is directly tied to earnings per share (EPS), his company is more likely to conduct a buyback. This effect is especially pronounced when a company’s EPS is right below the threshold for a bonus award. Share repurchasing increases the probability the CEO receives a bonus and the magnitude of that bonus, but only when bonus pay is EPS based. Bonus-driven repurchasing firms do not exhibit positive long-run abnormal returns. [ABSTRACT FROM PUBLISHER]

There is a generalized conviction that variation in dividend yields is exclusively related to expected returns and not to expected dividend growth, for example, Cochrane’s (2011) presidential address. We show that this pattern, although valid for the aggregate stock market, is not true for portfolios of small and value stocks, where dividend yields are related mainly to future dividend changes. Thus, the variance decomposition associated with the aggregate dividend yield has important heterogeneity in the cross section of equities. Our results are robust to different forecasting horizons, econometric methodology (long-horizon regressions or first-order vector autoregression), and alternative decomposition based on excess returns. [ABSTRACT FROM PUBLISHER]

In this article, the authors propose that in the long run, a nonprofit organization with supportively oriented positioning (e.g., promoting a cause) is likely to survive longer and achieve more donations compared with a nonprofit with a combative orientation (e.g., fighting against something). To test this proposition, the authors adopt a three-pronged approach that (1) uses publicly available financial data from nonprofits' tax filings over a ten-year period, (2) measures annual donor pledges from a field study with a registered nonprofit organization, and (3) examines actual donation behavior of participants in a longitudinal lab study. Moreover, the authors test this proposition for donations of money as well as time. They consider various theoretical mechanisms that might cause the proposed effect, such as regulatory focus theory, inertia in giving, and the preponderance of supportive charities. [ABSTRACT FROM AUTHOR]

We find that the stock market underreacts to stock-level liquidity shocks: liquidity shocks are not only positively associated with contemporaneous returns, but they also predict future return continuations for up to six months. Long-short portfolios sorted on liquidity shocks generate significant returns of 0.70% to 1.20% per month that are robust across alternative shock measures and after controlling for risk factors and stock characteristics. Furthermore, we show that investor inattention and illiquidity contribute to the underreaction: while both are significant in explaining short-term return predictability of liquidity shocks, the inattention-based mechanism is more powerful for the longer-term return predictability. [ABSTRACT FROM PUBLISHER]

We explore whether acquiring CEOs and directors act consistently with the idea that their newly announced acquisitions will increase long-term firm value. Specifically, we examine postannouncement adjustments to CEOs' equity-based holdings and find acquiring CEOs tend to exercise options and sell firm stock following acquisition announcements. Moreover, positive short-term market performance exacerbates this effect. Further, we find directors tend to grant their acquiring CEOs stock options, after acquisition announcement, presumably to more tightly align CEO-shareholder interests. These findings suggest that when CEOs and directors manage acquiring CEOs' equity-based holdings, they do not appear to anticipate long-term value creation from their acquisitions. [ABSTRACT FROM AUTHOR]

Inspired by impossibility theorems of social choice theory, many democratic theorists have argued that aggregative forms of democracy cannot lend full democratic justification for the collective decisions reached. Hence, democratic theorists have turned their attention to deliberative democracy, according to which "outcomes are democratically legitimate if and only if they could be the object of a free and reasoned agreement among equals" (Cohen 1997a, 73). However, relatively little work has been done to offer a formal theory of democratic deliberation. This article helps fill that gap by offering a formal theory of three different modes of democratic deliberation: myopic discussion, constructive discussion, and debate. We show that myopic discussion suffers from indeterminacy of long run outcomes, while constructive discussion and debate are conclusive. Finally, unlike the other two modes of deliberation, debate is path independent and converges to a unique compromise position, irrespective of the initial status quo. [ABSTRACT FROM AUTHOR]

We show that bond risk premia rise with uncertainty about expected inflation and fall with uncertainty about expected growth; the magnitude of return predictability using these uncertainty measures is similar to that by multiple yields. Motivated by this evidence, we develop and estimate a long-run risks model with timevarying volatilities of expected growth and inflation. The model simultaneously accounts for bond return predictability and violations of uncovered interest parity in currency markets. We find that preference for early resolution of uncertainty, time-varying volatilities, and non-neutral effects of inflation on growth are important to account for these aspects of asset markets. [ABSTRACT FROM PUBLISHER]

How are job satisfaction and firm value linked? I tackle this long-standing management question using a new methodology from finance. I study the effect on firm-level value, rather than employee-level productivity, to take into account the cost of increasing job satisfaction. To address reverse causality, I measure firm value by using future stock returns, controlling for risk, firm characteristics, industry performance, and outliers. Companies listed in the "100 Best Companies to Work For in America" generated 2.3% to 3.8% higher stock returns per year than their peers from 1984 through 2011. These results have three main implications. First, consistent with human resource management theories, job satisfaction is beneficial for firm value. Second, corporate social responsibility can improve stock returns. Third, the stock market does not fully value intangible assets, and so it may be necessary to shield managers from short-term stock prices to encourage long-run growth. [ABSTRACT FROM AUTHOR]

In this paper, an economic cost model is proposed for processes integrating both automatic process control (APC) and statistical process control (SPC) for quality monitoring and control. Both the special cause and common cause variations are reduced by applying integrated APC and SPC. Traditionally, the integrated processes using APC and SPC are evaluated by the average run length (ARL). However, ARL may not be appropriate as a measurement of the economic design since it does not take into consideration the run length variation. Also, there are few studies that compare the cost models of such an integrated control system and the effect of cost parameters using different APC controllers. Therefore, we develop an economic cost model using non-homogenous Poisson process to describe the occurrence of an APC adjustment and develop a long run expected cost to investigate the use of different controllers in such integrated systems. Numerical examples are presented to demonstrate the applicability of the proposed model. [ABSTRACT FROM AUTHOR]

We analyze 3,547 initial public offerings (IPOs) from 1985 through 2003 to determine the impact of acquisition activity on long-run stock performance. The results show that IPOs that acquire within a year of going public significantly underperform for 1- through 5-year holding periods following the 1st year, whereas nonacquiring IPOs do not significantly underperform over these time frames. For example, the mean 3-year style-adjusted abnormal return is – 15.6% for acquirers and 5.9% for nonacquirers. Our cross-sectional and calendar-time results suggest that the acquisition activity of newly public firms plays an important and previously unrecognized role in the long-run underperformance of IPOs. [ABSTRACT FROM PUBLISHER]

We investigate the long-term effect of the Asian financial crisis on corporate cash holdings in 8 East Asian countries. The Asian firms build up cash holdings by decreasing investment activities after the crisis. We find that the increase in cash holdings is not explained by changes in firm characteristics but by changes in the firms’ demand function for cash, which indicates that the crisis has systematically changed the firms’ cash-holding policies. Specifically, the firms’ increased sensitivity to cash flow volatility is one of the main factors explaining the higher level of their cash holdings in the postcrisis period. [ABSTRACT FROM PUBLISHER]

Previous studies document that the stock returns of bond-issuing firms significantly underperform matched peers over the three to five years following issuance. We revisit this phenomenon and show that the underperformance is the result of an omitted return factor (a “bad model problem”). Debt issuers have significantly higher stock market liquidity than size and book-to-market matched counterparts, and differences in liquidity are largest for the worst-performing groups of issuers. When we additionally match on liquidity or when we include a liquidity factor in the model for expected returns, the evidence of underperformance disappears. [ABSTRACT FROM PUBLISHER]

Economy-wide increasing returns to scale embodied in a general purpose technology (GPT) and its applications are often a key source of long-run growth. Yet the successful exploitation of increasing returns calls for coordination on a particular technological direction, reducing flexibility and choice ex post and potentially creating a growth bottleneck. When the bottleneck is controlled by a single firm, the resulting entry barriers reduce the ability of demanders to choose superior, alternative technologies. We examine how such a growth bottleneck can eventually be overcome under certain key conditions. Demand must be fundamentally diverse so that the original GPT does not serve all demanders. Firms barred from entry into the primary GPT market can then reallocate innovative resources to create new markets to meet the unserved demand. The demand in these new markets must be valuable enough (even if not as valuable as in the primary GPT market) to generate a positive-feedback cycle that results in considerable technical advance in the alternative GPT. This ultimately can lead to indirect entry by the alternative GPT into the original GPT market if and when it becomes strong enough to compete with the original GPT. This sequence of (i) increasing returns to scale around a GPT, (ii) reallocation of innovative resources around growth bottlenecks, and (iii) indirect entry has growth implications. A large contribution to growth follows the exploitation of increasing returns to scale in the original GPT. Much later, another large contribution to growth follows when demand is finally met by an alternative, competitive GPT. Between these two periods falls a period of lesser contributions to growth due to the dominant firm bottleneck. The market-based resolution of the bottleneck is not merely a theoretical possibility. We illustrate the role of this sequence in the two most important technologies for automating white-collar work of the past 50 years. [ABSTRACT FROM PUBLISHER]

In a recently published paper, Edmans, García, and Norli (2007) reveal a strong association between results of soccer games and local stock returns. Inspired by their work, we propose a novel approach to exploit this effect on the aggregate international level with the following three unique features: i) The aggregate effect does not depend on the games' results; hence, the effect is an exploitable predictable effect. ii) The aggregate effect is based on many games; hence, it is very large and highly significant. We find that the average return on the U.S. market over the World Cup's effect period is -2.58%, compared to +1.21% for all-days average returns over the same period length. iii) Exploiting the aggregate effect is involved with trading in a single index for a relatively long period. [ABSTRACT FROM AUTHOR]

We argue that the cointegrating relation between dividends and consumption, a measure of long-run consumption risks, is a key determinant of risk premia at all investment horizons. As the investment horizon increases, transitory risks disappear, and the asset's beta is dominated by long-run consumption risks. We show that the return betas, derived from the cointegration-based VAR (EC-VAR) model, successfully account for the cross-sectional variation in equity returns at both short and long horizons; however, this is not the case when the cointegrating restriction is ignored. Our evidence highlights the importance of cointegration-based long-run consumption risks for financial markets. [ABSTRACT FROM AUTHOR]

Existing research shows that significantly more acquisitions occur when stock markets are booming than when markets are depressed. Rhodes-Kropf and Viswanathan (2004) hypothesize that firm-specific and market wide (mis-)valuations lead to an excess of mergers, and these will be value destroying. This article investigates whether acquisitions occurring during booming markets are fundamentally different from those occurring during depressed markets. We find that acquirers buying during high-valuation markets have significantly higher announcement returns but lower long-run abnormal stock and operating performance than those buying during low-valuation markets. We investigate possible explanations for the long-run underperformance and conclude it is consistent with managerial herding. [ABSTRACT FROM AUTHOR]

The article investigates structural change among the four-digit (SIC) industries of the US manufacturing sector during 1958-1996 and its relation to productivity growth within a distribution dynamics framework. Focus is on the transition density of the Markov process that characterizes the value-added shares of the industries. This transition density is estimated nonparametrically as well as by maximum likelihood, in which case the functional form of the density is motivated by a search theoretic model, The nonparametric fit and the maximum likelihood fit show striking similarities. The relation of structural change to a measure of total factor productivity change is tested by quantile regression and appears to be significantly positive throughout. [ABSTRACT FROM AUTHOR]

This paper studies the apparent contradiction between two strands of the literature on the effects of financial intermediation on economic activity. On the one hand, the empirical growth literature finds a positive effect of financial depth as measured by, for instance, private domestic credit and liquid liabilities (e.g., Levine, Loayza, and Beck 2000). On the other hand, the banking and currency crisis literature finds that monetary aggregates, such as domestic credit, are among the best predictors of crises and their related economic downturns (e.g., Kaminsky and Reinhart 1999). The paper accounts for these contrasting effects based on the distinction between the short- and long-run impacts of financial intermediation. Working with a panel of cross-country and time-series observations, the paper estimates an encompassing model of short- and long-run effects using the Pooled Mean Group estimator developed by Pesaran, Shin, and Smith (1999). The conclusion from this analysis is that a positive long-run relationship between financial intermediation and output growth co-exists with a mostly negative short-run relationship. The paper further develops an explanation for these contrasting effects by relating them to recent theoretical models by linking the estimated short-run effects to measures of financial fragility (namely, banking crises and financial volatility) and by jointly analyzing the effects of financial depth and fragility in classic panel growth regressions. [ABSTRACT FROM AUTHOR]

This paper analyses the role of the real exchange rate in a structural vector autoregression framework for the United Kingdom, Euro area, Japan, and Canada vis-á-vis the United States. A new identification strategy is proposed building on sign restrictions. The results are compared to the benchmark conventional approach of Clarida and Gali (1994) based on long-run zero restrictions. Although the restrictions are derived from the same theoretical model, the results are strikingly different. In contrast to the benchmark model, an important role for nominal shocks in explaining real exchange rate fluctuations is found. Hence, the exchange rate can rather be considered as a source of shocks instead of a shock absorber. [ABSTRACT FROM AUTHOR]

In this paper, I use a structural vector autoregression framework to analyze the effects of a permanent change in inflation on the long-run real interest rate and real output level in 14 industrialized countries. Long-run monetary superneutrality is rejected for all 14 countries using annual data: the results indicate that a permanent increase in inflation lowers the long-run real interest rate in each country; a permanent increase in inflation also increases the long-run real output level in a number of countries. Long-run monetary superneutrality is also rejected for tour out of the five countries examined using quarterly data. [ABSTRACT FROM AUTHOR]

Theoretical models of the relationship between investment and the current account impose restrictions on the joint dynamic behavior of these variables. These restrictions come in two forms. One imposes causal orderings on investment and the current account. The other restriction concerns the permanent responses of these variables to different shocks. We use these restrictions to identify empirically structural shocks from vector autoregressions of investment and the current account for Canada. Under certain identifications, our results support the implications of the intertemporal, small open economy model. However, these results are sensitive to perturbations of the identifications. [ABSTRACT FROM AUTHOR]

The purpose of this research is to assess the effect of financial and economic crises on economic growth in emerging Mexico economy. The aim of this work is to empirically examine the short-run and the long run relation between financial crises and economic growth condition in Mexico over the period from 1990-2017. To do this, we opted for (ARDL) model. The results suggest that financial crises have a significant and permanent effect. These real effects seem to be more important and persistent in emerging countries. This research work is one of the very few studies that have investigated Influence the financial crises on long run economic growth in Mexico country situation using (ARDL) model. Moreover, it contributes to the existing literature in the area. [ABSTRACT FROM AUTHOR]

This paper explores the role of fundamentals, included in the transfer effect theory, in explaining medium/long‐run movements in the real effective exchange rates in the EU over the period 1994–2012, together with an analysis of the misalignments. We use heterogeneous, cointegrated panel frameworks in static and a dynamic setup. We find that the coefficients of the determinants are extremely different across groups and the transfer theory does not always hold. The core countries have been undervalued for almost the whole period; the periphery has experienced high rates. The misalignments in the CEECs are still wide and reflect the catching‐up process. [ABSTRACT FROM AUTHOR]

The present study analyses empirically the effect of economic growth and trade openness on international reserves in India. The study employed time series data with annual frequency from 1996 to 2016. The study developed an econometric model relating RES to ECON and TRDOP variables and used logarithmic transformation of the variables for econometric estimation. The econometric tools such as Augmented Dickey-Fuller (ADF) test, Johansen co integration test and vector error correction model were applied. The co integration test results suggest that there is an existence of a stable long-run equilibrium relationship among the variables. The vector error correction model (VECM) of international reserves reveals that lagged independent variables shows the expected signs i. e. economic growth and trade openness have significant effect on international reserves. Findings of the study suggest that economic growth and trade opennessis positively related to international reserves. This implies that the authorities of Indian economy have to involve more actively in foreign reserve management practices. [ABSTRACT FROM AUTHOR]

Tourism industry might be affected by pollution, discouraging current tourism and damaging destination's image, which compromises future arrivals. This paper quantifies the impact of air pollution on inbound tourism analyzing the case of Beijing city, China. Applying a standard tourism demand function, short-run and long-run impacts are explored in a VECM framework. Results show that air pollution had negative effects on tourist arrivals in the long-run, but not in the short-run. Also, there is a long-run causal relation between air pollution and inbound arrivals from most source countries, while air pollution does not Granger-cause a short-run tourist arrivals decrease. [ABSTRACT FROM AUTHOR]

A recent literature introduces autonomous demand as the driver of long‐run economic growth and as a stabilizing force that tames Harrodian instability. The argument is unconvincing. The stabilizing effect is modest for plausible parameter values and more importantly, it is questionable whether any components of aggregate demand can be viewed as autonomous in the long run. By contrast, models that include the supply side (the labor market) and/or economic policy can address Harrodian instability and produce level and growth effects that resemble those derived in the literature on autonomous demand. [ABSTRACT FROM AUTHOR]

This paper incorporates indirect reciprocal behavior in the context of bequeathing decisions into an otherwise standard OLG model. We provide conditions for the existence of a unique steady state with operative bequests. Contrary to standard OLG models, we show that taking into account such behavioral interactions allows one to rationalize both an increasing and U‐shaped pattern of the inheritance to GDP ratio over time, consistent with recent empirical evidence. Moreover, the model predicts a nonlinear (U‐shaped) relationship between the size of an unfunded social security program and the long‐run stock of per capita capital, which in turn provides a novel explanation of the inconclusive empirical findings on the relationship between social security, savings and long‐run growth. Ricardian equivalence is shown to hold in a special case of the model [ABSTRACT FROM AUTHOR]

This paper identifies the globally stable conditions under which an individual facing the same choice in many subsequent times learns to behave as prescribed by the expected‐utility model. The analysis moves from the relevant behavioural models suggested by psychology, by updating probability estimations and outcome preferences according to the learning models suggested by neuroscience, in a manner analogous to Bayesian updating. The search context is derived from experimental economics, whereas the learning framework is borrowed from theoretical economics. Analytical results show that the expected‐utility model explains real behaviours in the long run whenever bad events are more likely than good events. [ABSTRACT FROM AUTHOR]

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In this article, a novel maintenance model is proposed for single-unit systems with an atypical degradation path, whose pattern is influenced by inspections. After each inspection, the system degradation is assumed to instantaneously decrease by a random value. Meanwhile, the degrading rate is elevated due to the inspection. Considering the double effects of inspections, we develop a parameter estimation procedure for such systems from experimental data obtained via accelerated degradation tests with environmental covariates. Next, the inspection and replacement policy is optimized with the objective to minimize the Expected Long-Run Cost Rate (ELRCR). Inspections are assumed to be non-periodically scheduled. A numerical algorithm that combines analytical and simulation methods is presented to evaluate the ELRCR. We then investigate the robustness of maintenance policies for such systems by taking the parameter uncertainty into account with the aid of large-sample approximation and parametric bootstrapping. The application of the proposed method is illustrated by degradation data from the electricity industry. [ABSTRACT FROM AUTHOR]

Using panel data for the years 2006–2015, this study empirically investigates the effect of rule of law as an institution on Bangladesh's exports to 28 European Union countries (EU28) based on gravity model analysis. Two-step econometric results suggest that institutional rule of law is strongly associated with Bangladesh's exports, and institutional quality provides evidence of this significant effect. Furthermore, exports of Bangladesh are driven by economic size, market size, and the real exchange rate as well as rule of law. These results are suggestive of an important joint role for both trade and institutions in the long run. [ABSTRACT FROM AUTHOR]

The interplay between growth and public debt is addressed considering a Barro‐type (1990) endogenous growth model where public spendings are financed through taxes on income and public debt. The government has a target level of public debt relative to GDP, and the long‐run debt‐to‐GDP ratio is used as a policy parameter. We show that when debt is a large enough proportion of GDP, two distinct balanced‐growth paths (BGPs) may coexist, one being indeterminate. We exhibit two types of important trade‐offs associated with self‐fulfilling expectations. First, we show that the lowest BGP is always decreasing with respect to the debt‐to‐GDP ratio while the highest one is increasing. Second, we show that the highest BGP, which provides the highest welfare, is always locally indeterminate while the lowest is always locally determinate. Therefore, local and global indeterminacy may arise and self‐fulfilling expectations appear as a crucial ingredient to understand the impact of debt on growth, welfare, and macroeconomic fluctuations. Finally, a simple calibration exercise allows to provide an understanding of the recent experiences of many OECD countries. [ABSTRACT FROM AUTHOR]