The crisis of 1998 and the role of the central bank

Following the Russian default and devaluation in August 1998, financial markets were characterized by a withdrawal of liquidity, a flight to the safest assets, increased concerns about credit quality, and large declines in asset values. However, the crisis ended following a rather modest interest rate cut by the Federal Reserve. Why did the central bank's action have this effect? This article argues that the crisis was an episode of potential coordination failure, triggered by, but distinct from, the events in Russia. The Federal Reserve's action signaled a policy change that serve to eliminate the coordination failure equilibrium.Financial crises ; Banks and banking, Central

Circumference and Pathwidth of Highly Connected Graphs

Birmele [J. Graph Theory, 2003] proved that every graph with circumference t has treewidth at most t-1. Under the additional assumption of 2-connectivity, such graphs have bounded pathwidth, which is a qualitatively stronger result. Birmele's theorem was extended by Birmele, Bondy and Reed [Combinatorica, 2007] who showed that every graph without k disjoint cycles of length at least t has bounded treewidth (as a function of k and t). Our main result states that, under the additional assumption of (k + 1)- connectivity, such graphs have bounded pathwidth. In fact, they have pathwidth O(t^3 + tk^2). Moreover, examples show that (k + 1)-connectivity is required for bounded pathwidth to hold. These results suggest the following general question: for which values of k and graphs H does every k-connected H-minor-free graph have bounded pathwidth? We discuss this question and provide a few observations.Comment: 11 pages, 4 figure

Fundamental Economic Shocks and The Macroeconomy

Recently there has been renewed interest in assessing economic models in the context of specific, empirically identified economic shocks. Typically, these shocks are identified one-at-a-time, ignoring potential correlations across shocks, or are identified in the context of a structural vector autoregression (SVAR) using zero restrictions only loosely tied to economic theory. In this paper, we develop an alternative approach that utilizes measures of economic shocks explicitly derived from economic models to identify multiple orthogonal structural impulses. We use this approach to identify technology shocks, marginal-rate-of-substitution (labor supply) shocks, and monetary policy shocks in the context of a Factor Augmented VAR. We then examine the Bayesian posterior distribution for the responses of a large number of endogenous macroeconomic and financial variables to these three shocks.. The shocks account for the preponderance of output, productivity and price fluctuations. Technology shocks have a permanent impact on measures of economic activity, whereas the other shocks are more transitory. Labor inputs have little initial response to technology shocks, with the response building steadily over the 5 year period. Consumption’s sluggish response to the technology shock is inconsistent with a simple formulation of the permanent income hypothesis, but would be consistent with a model of habit formation. Monetary policy has a rather small response to technology shocks, but responds “leans against the wind” in response to the more cyclical labor supply shock. This more cyclical shock has the biggest impact on interest rates. Stock prices respond to all three shocks. A number of other empirical implications of our approach are discussed.

Bank capital regulation with and without state-contingent penalties

A moral hazard model with exogenous bank franchise value is used to analyze bank capital regulation. Banks choose their capital structure as well as the riskiness and mean of their portfolio. The portfolio mean is determined by the level of costly screening. Screening and portfolio risk are private information, so there are two dimensions to the moral hazard problem. Deposit insurance gives banks an incentive to hold less capital, and to choose a higher-risk, lower-mean portfolio. To mitigate these incentives, capital requirements with and without ex post fines are studied. We find an endogenous reverse mean-variance trade-off in banks' portfolios. Prudent banks choose high-screening, low-risk portfolios and are virtually self regulating. Imprudent banks choose low-screening, high-risk portfolios. Without state-contingent penalties, optimal capital regulations are often V-shaped in bank franchise value. Adding state-contingent regulation can significantly lower capital requirements. Optimal state-contingent regulations are characterized by fines on extreme right-hand-tail returns.Bank capital

HRXRD study of the theoretical densities of novel reactive sintered boride candidate neutron shielding materials

Reactive Sintered Borides (RSBs) are novel borocarbide materials derived from FeCr-based cemented tungsten (FeCr-cWCs) show considerable promise as compact radiation armour for proposed spherical tokamak,[1],[2],[3],[4],[5]. Six candidate compositions (four RSBs, two cWCs) were evaluated by high-resolution X-ray diffraction (XRD), inductively coupled plasma (ICP), energy dispersive X-ray analysis (EDX) and scanning electron microscopy (SEM) to determine the atomic composition, phase presence, and theoretical density. RSB compositions were evaluated with initial boron contents equivalent to 25 at% 30 at%. All RSB compositions showed delamination and carbon enrichment in the bulk relative to the surface, consistent with non-optimal binder removal and insufficient sintering time. Phase abundance within RSBs derived from powder XRD was dominated by iron tungsten borides (FeWB/FeW2B2), tungsten borides (W2B5/WB) and iron borides. The most optimal RSB composition (B5T522W) with respect to physical properties and highest ρ/ρtheo had ρtheo = 12.59 ± 0.01 g cm-3 for ρ/ρtheo = 99.3% and had the weigh-in and post-sintered W : B : Fe abundance closest to 1 : 1 : 1. This work indicates that despite their novelty, RSB materials can be optimized and in principle be processed using existing cWC processing routes

"Peso Problem" Explanations for Term Structure Anomalies

We examine the empirical evidence on the expectations hypothesis of the term structure of interest rates in the United States, the United Kingdom, and Germany using the Campbell-Shiller (1991) regressions and a vector-autoregressive" methodology. We argue that anomalies in the U.S. term structure, documented by Campbell and Shiller (1991), may be due to a generalized peso problem in which a high-interest rate regime occurred less frequently in the sample of U.S. data than was rationally anticipated. We formalize this idea as a regime-switching model of short-term interest rates estimated with data" from seven countries. Technically, this model extends recent research on regime-switching models with state-dependent transitions to a cross-sectional setting. Use of the small sample distributions generated by the regime-switching model for inference considerably weakens the evidence against the expectations hypothesis, but it remains somewhat implausible that our data-generating process produced the U.S. data. However, a model that combines moderate time-variation in term premiums with peso-problem effects is largely consistent with term structure data from the U.S., U.K., and Germany.

"Peso problem" explanations for term structure anomalies

We examine the empirical evidence on the expectation hypothesis of the term structure of interest rates in the United States, the United Kingdom, and Germany using the Campbell-Shiller (1991) regressions and a vector-autoregressive methodology. We argue that anomalies in the U.S. term structure, documented by Campbell and Shiller (1991), may be due to a generalized peso problem in which a high-interest rate regime occurred less frequently in the sample of U.S. data than was rationally anticipated. We formalize this idea as a regime-switching model of short-term interest rates estimated with data from seven countries. Technically, this model extends recent research on regime-switching models with state-dependent transitions to a cross-sectional setting. Use of the small sample distributions generated by regime-switching model for inference considerably weakens the evidence against the expectations hypothesis, but it remains somewhat implausible that our data-generating process produced the U.S. data. However, a model that combines moderate time-variation in term premiums with peso-problem effects is largely consistent with term-structure data from the U.S., U.K., and Germany.Interest rates ; Econometric models

The Implications of First-Order Risk Aversion for Asset Market Risk Premiums

Existing general equilibrium models based on traditional expected utility preferences have been unable to explain the excess return predictability observed in equity markets, bond markets, and foreign exchange markets. In this paper, we abandon the expected-utility hypothesis in favor of preferences that exhibit first-order risk aversion. We incorporate these preferences into a general equilibrium two-country monetary model, solve the model numerically, and compare the quantitative implications of the model to estimates obtained from U.S. and Japanese data for equity, bond and foreign exchange markets. Although increasing the degree of first-order risk aversion substantially increases excess return predictability, the model remains incapable of generating excess return predictability sufficiently large to match the data. We conclude that the observed patterns of excess return predictability are unlikely to be explained purely by time-varying risk premiums generated by highly risk averse agents in a complete markets economy.

LEAN TRANSFORMATION: OVERCOMING THE CHALLENGES, MANAGING PERFORMANCE, AND SUSTAINING SUCCESS

To remain competitive in a global market, many organizations are transforming their operations from traditional management approaches to the lean philosophy. The success of the Toyota Production System in the automotive industry serves as a benchmark that organizations continually seek to emulate in search of similar results. Despite the abundance of lean resources, many organizations struggle to attain successful lean transformation. To facilitate investigation of the failure mechanisms and critical success factors of lean transformation, this dissertation addresses the following research questions: (1) Why do transformations from traditional organizational philosophies to lean fail? (2) What are the critical factors for lean transformation success? (3) What is the role of an organization’s human resource performance management system during the lean transformation journey? This dissertation utilizes a multi-method, multi-essay format to examine the research questions. First, managers from organizations in various stages of lean transformation are interviewed to establish a foundational research framework. Subsequently, a theoretical model is empirically tested based on data gathered from a survey of industry professionals with expertise in lean transformation. Data analysis techniques employed for this dissertation include: Partial Least Squares (PLS) regression, case descriptions, and case comparisons. Very few studies of lean transformation investigate behavioral influences and antecedents. This dissertation contributes to practitioners and researchers by offering a refined understanding of the role that human resource performance management can play in the overall lean transformation process. In an effort to characterize organizational outcomes resulting from lean transformation, this research introduces a new construct, Lean Transformation Success, to the literature