Liquidity when it matters : QE and Tobin’s q

When financial markets freeze in fear, borrowing costs for solvent governments may fall towards zero in a flight to quality – but credit-worthy private borrowers can be starved of external funding. In Kiyotaki and Moore (2008), where liquidity crisis is captured by the effective rationing of private credit, tightening credit constraints have direct effects on investment. If prices are sticky, the effects on aggregate demand can be pronounced – as reported by FRBNY for the US economy using a calibrated DSGE-style framework modified to include such frictions. In such an environment, two factors stand out. First the recycling of credit flows by central banks can dramatically ease credit-rationing faced by private investors: this is the rationale for Quantitative Easing. Second, revenue-neutral fiscal transfers aimed at would-be investors can have similar effects. We show these features in a stripped- down macro model of inter-temporal optimisation subject to credit constraints

"The Global Crisis and the Remedial Actions: A Nonmainstream Perspective"

The global financial crisis has now spread across multiple countries and sectors, affecting both financial and real spheres in the advanced as well as the developing economies. This has been caused by policies based on "rational expectation" models that advocate deregulated finance, with facilities for easy credit and derivatives, along with globalized exposures for financial institutions. The financial crisis has combined with long-term structural changes in the real economy that trend toward underconsumption, generating contractionary effects therein and contributing to further instabilities in the financial sector. The responses so far from US monetary authorities have not been effective, especially in dealing with issues of unemployment and low real growth in the United States, or in other countries. Nor have these been of much use in the context of the lost monetary and fiscal autonomy in both developing countries and the eurozone, especially with the debt-related distress in the latter. Solutions to the current maladies in the global economy include strict control of financial speculation and the institution of an "employer of last resort" policy, both at the initiative of the state.Global Crisis; Expectations; Underconsumption; Ponzi; Labor Flexibility

It Does Matter

(WP 15/03 Clave pdf) Some articles lately have hypothesized about IT being a commodity from which firms cannot extract a true competitive advantage anymore. Therefore, according to those authors, the competitive edge would be now in carefully managing IT to reduce costs and avoid overspending. The author rebates these viewpoints using Swanson´s Tri-Core model and proposes a different way to look IT management in the future in order to avoid the current pitfalls.IS strategic planning, IT evaluation, IT management, Organizational use of ISRL, Productivity

Mergers and acquisitions in Germany: social setting and regulatory framework

The paper describes the legal and economic environment of mergers and acquisitions in Germany and explores barriers to obtaining and executing corporate control. Various cases are used to demonstrate that resistance by different stakeholders including minority shareholders, organized labour and the government may present powerful obstacles to takeovers in Germany. In spite of the overall convergence of European takeover and securities trading laws, Germany still shows many peculiarities that make its market for corporate control distinct from other countries. Concentrated share ownership, cross shareholdings and pyramidal ownership structures are frequent barriers to acquiring majority stakes. Codetermination laws, the supervisory board structure and supermajority requirements for important corporate decisions limit the execution of control by majority shareholders. Bidders that disregard the German preference for consensual solutions and the specific balance of powers will risk their takeover attempt be frustrated by opposing influence groups. Revised version forthcoming in "The German Financial System", edited by Jan P. Krahnen and Reinhard H. Schmidt, Oxford University Press

Give Me Shelter: Responding to Milwaukee County's affordable housing challenges

Few issues better capture the complex and controversial nature of urban problems facing Metropolitan Milwaukee than the issue of affordable housing. Encompassing matters of racial segregation, poverty and failed public-private partnerships, the Milwaukee metro area's struggle to provide a safe, decent and affordable supply of housing to low-income citizens has been a difficult one. Even before the national economic meltdown, countless reports documented the severe housing burden facing low-income citizens in Milwaukee County. That burden, combined with the scarcity of affordable housing in suburban parts of southeast Wisconsin, has cemented the region's place as one of the most racially segregated in the country. In today's economy, those problems have intensified

Legal Origin, Shareholder Protection and the Stock Market: New Challenges from Time Series Analysis

This paper uses a new time series dataset of shareholder protection consisting of 60 annual legal indicators for the period 1970-2005 for France, Germany, the UK and the US. On the basis of these data it examines developments in shareholder protection and reassesses the claims that common-law countries have better shareholder protection than civil law countries. Furthermore it examines the relationship between legal changes and stock market development. It casts serious doubt on the claim that common-law countries have better shareholder protection which in turn leads to more stock market development.Stock Market, Corporate Governance, Financial Development, Leximetrics