On the energetics of information exchange

We consider the thermodynamic properties of systems in contact with an information source and focus on the consequences of energetic cost associated with the exchange of information. To this end we introduce the model of a thermal tape and derive a general bound for the efficiency of work extraction for systems in contact with such a tape. Depending on the perspective, the correlations between system and tape may either increase or reduce the efficiency of the device. We illustrate our general results with two exactly solvable models, one being an autonomous system, the other one involving measurement and feedback. We also define an ideal tape limit in which our findings reduce to known results.Comment: 6 pages, 6 figure

Double Taxation, Tax Credits and the Information Exchange Puzzle

This paper analyzes the choice of taxes and international information exchange by governments in a capital tax competition model. We explain situations where countries can choose tax rates on tax savings income and exchange information about the domestic savings of foreigners, implying that the decentralized equilibrium is efficient. However, we also identify situations with adverse welfare properties in which information exchange is compatible with zero taxes on capital income. The model helps to identify the linkage between voluntary information exchange and the choice of tax rates. It is shown that the recent development in information exchange treaties may not be useful to overcome the inefficiencies caused by decentralized tax setting.withholding tax, tax credit, international tax competition, information exchange

Modelling information and hedging: the exporting firm

The paper examines the economic role of modelling information on the decision problem of an exporting firm under exchange rate risk and hedging. Information is described in terms of market transparency, i.e., a publicly observable signal conveys more information about the random foreign exchange rate. We analyze the interaction between market transparency and the ex ante expected utility of the exporting firm. It is shown that more transparency on the foreign exchange market may result in higher or lower export production. --Information,transparency,exchange rate risk,hedging,trade

A Functional Architecture Approach to Neural Systems

The technology for the design of systems to perform extremely complex combinations of real-time functionality has developed over a long period. This technology is based on the use of a hardware architecture with a physical separation into memory and processing, and a software architecture which divides functionality into a disciplined hierarchy of software components which exchange unambiguous information. This technology experiences difficulty in design of systems to perform parallel processing, and extreme difficulty in design of systems which can heuristically change their own functionality. These limitations derive from the approach to information exchange between functional components. A design approach in which functional components can exchange ambiguous information leads to systems with the recommendation architecture which are less subject to these limitations. Biological brains have been constrained by natural pressures to adopt functional architectures with this different information exchange approach. Neural networks have not made a complete shift to use of ambiguous information, and do not address adequate management of context for ambiguous information exchange between modules. As a result such networks cannot be scaled to complex functionality. Simulations of systems with the recommendation architecture demonstrate the capability to heuristically organize to perform complex functionality

The electronic exchange of information and respect for private life, banking secrecy and the free internal market

The purpose of this essay is to assess the automatic exchange of information as described in EU Directive 2003/48 of 3 June 2003 on taxation of savings income in the form of interest payments with regard to the fundamental right of the individual to a private life, to banking secrecy and the freedoms on which the European internal market is based. The assessment reveals the conflicts of interests and values involved in the holding by banks (particularly those offering private banking services) of increasingly extensive, detailed and intimate information about their clients and in the automatic processing of that information by ever more powerful and sophisticated systems. Banking secrecy plays an essential role in protecting clients against the dangers which the disclosure of such information without their permission might produce. Banking secrecy exists not only in Luxembourg but also in many other European countries, and in Germany and France in particular it is not very different from the system applying in Luxembourg. While the French and German tax authorities do have some investigative powers not enjoyed by their Luxembourg counterparts, those powers are strictly circumscribed and cannot rely on the electronic exchange of information set out in EU Directive 2003/48/EC. While banking secrecy is totally incompatible with the electronic exchange of information, the core question is whether the latter can be reconciled with the respect for private life. In a Europe that sets itself up as the cradle of human rights, the general and en-masse exchange of private information cannot provide adequate and sufficient guarantees that the information exchanged will not be misused. The amount of interference in private life is clearly out of proportion to the public interest involved and is contrary to sub-section 2, article 8 of the European Convention for the Protection of Human Rights and Fundamental Freedoms and to articles 7 and 8 of the Charter of Fundamental Rights of the European Union. Since the automatic exchange of information at least potentially risks restricting the free flow of capital among Member States and discouraging the use of transborder banking services, its compliance with the fundamental principles of the internal market also needs to be closely examined. The restrictions imposed by such exchange very probably go beyond the limits within which the free movement of capital and services is possible. The European Court of Justice has found that there is no proportionality if the measures supposedly undertaken in the general interest are actually based on a general presumption of tax evasion or tax fraud. However, it would be true to say that the ECJ does not always examine the tax restrictions placed on the free movement of capital particularly thoroughly to ensure that they are necessary or proportionate. The economic effectiveness of the automatic exchange of information is far from being proved and involves significant cost to the banks providing the information and to the tax authorities using it. To date the system does not appear to have produced any significant new tax revenue nor does it prevent the continuing outflow of capital from Europe. Yet withholding at source, which respects individual and economic freedoms, does generate tax revenue that is cost-free to the State. Exchange of information on request in justified cases using the OECD Tax Convention on Income and Capital model does also fight tax fraud while at the same time providing citizens with the guarantees required to ensure their private lives are respected. A combination of these two systems - withholding at source and exchange of information on request in justified cases - would create the proper balance between the public and private interest that the automatic exchange of information cannot provide

Price Discovery Across Geographic Locations in the Foreign Exchange Market

The ongoing process of price discovery in foreign exchange markets provides valuable information to certain market participants. Recent empirical findings suggest that aggregate measures of order flow convey information about the fundamental value of the exchange rate. Using a market microstructure approach, D'Souza reports on a two-year study of completed transactions within the Canadian and Australian exchange rate markets to examine the relationship between exchange rate returns and trades initiated in different locations. Based on the information content of the trades, he finds that geographic location and hours of operation are two of the factors driving informed interdealer trading.

Incentives and Information Exchange in International Taxation

The exchange of taxpayer-specific information between national tax authorities has recently emerged as a key and controversial topic in international tax policy discussions, most notably with the OECD s harmful tax practices project and the EU s savings tax initiative.This paper analyses the effects of information exchange and withholding taxes, recognizing that countries which agree to exchange information do not forfeit the ability to levy withholding taxes, and also focusing in particular on the effects of innovative revenuesharing arrangements.Amongst the findings are that: (i) the transfer of withholding tax receipts to the residence country, as planned in the EU, has no effect on equilibrium tax rates, but acts purely as a lump sum transfer; (ii) in contrast, allocating some of the revenue from information exchange to the source country counter to usual practice (though no less so than the EU agreement) would have adverse strategic effects on total revenue; (iii) nevertheless, any withholding tax regime is Pareto dominated by information exchange combined with appropriate revenue sharing; and, in particular, (iv) sharing of the additional revenues raised from information provided, while efficiency-reducing, could be in the interests of large (high-tax) countries as a means of persuading small (low-tax) countries to provide that information voluntarily.incentives;information;taxation;competition;international economics

Price limits are not always bad : a thesis presented in partial fulfilment of the requirements for the degree of Masters of Business Studies in Finance at Massey University, Albany, New Zealand, December 2006

Regulators impose price limits on daily price movements to protect investors from excessive volatility, but several empirical studies have cast serious doubt on the benefits of such mechanisms. Using a large cross-sectional sample combined with intraday data from the Tokyo Stock Exchange, this study finds evidence that partially supports conventional criticisms that price limits spread out volatility, delay price discovery, and interrupt trading activities. More importantly, the transaction data analysis reveals that price limits help to reduce order imbalance and improve information asymmetry, justifying the existence of price limits on the Tokyo Stock Exchange. JEL Classification: G10; G14 Keywords: Price limit; Order imbalance; Information asymmetry; Tokyo Stock Exchange