Asymmetric Adjustment Costs and Aggregate Job Flows: Specification, Estimation and Testing with French Data

This paper aims to study whether a simple asymmetric adjustment costs model with tractable heterogeneity can account for the observed distribution of French aggregate job flows. Each firm chooses endogenously its level of hiring or firing depending on the level of a specific technology shock. These policy rules allows, via aggregation, to account for dynamics in aggregate job flows. The deep parameters of the model are then estimated using the Simulated Method of Moments. We then show that the model is able to match some key features of the French aggregate job flows, but the results appears sensitive to the level of heterogeneity.asymmetric adjustment costs

Corporate finance and the monetary transmission mechanism

This paper analyzes the transmission mechanisms of monetary policy in a general equilibrium model of securities markets and banking with asymmetric information. Banks' optimal asset/liability policy is such that in equilibrium capital adequacy constraints are always binding. Asymmetric information about banks' net worth adds a cost to outside equity capital, which limits the extent to which banks can relax their capital constraint. In this context monetary policy does not affect bank lending through changes in bank liquidity. Rather, it has the effect of changing the aggregate composition of financing by firms. The model also produces multiple equilibria, one of which displays all the features of a "credit crunch". Thus, monetary policy can also have large effects when it induces a shift from one equilibrium to the other.Asymmetric information, liabilities structure, capital regulation, monetary policy, transmission mechanism

Off-design considerations through the properties of some pressure-ratio line of radial inflow turbines

Radial turbines are commonly used in applications involving operation through severe off-design conditions. The emergence of variable-geometry systems leads to the distinction between two off-design concepts: operational and geometric off-designs. Both of these operating constraints should be integrated in the design procedure. Recent developments in prediction and optimization methods allowed such an integration, but involving complex algorithms is coupled with semiempiric loss models. This paper provides a basis to obtain simple information from an existing or predesigned machine, for both operational and geometric offdesign conditions. An alternative turbine map is defined using loading and flow coefficients. A one-dimensional analysis shows that the constant pressure-ratio lines are straight lines whose slope is remarkably correlated with the pressure-ratio value and geometrical characteristics. This theoretical approach is validated against the experimentation of two machines, the linearity is observed in both cases. The direct influence of the stator configuration on the pressure-ratio lines confirms the applicability of this work to variable-geometry stages. A dimensionless cross-section of the stator is thus defined. However, the unexpected displacement of the intercept of the pressure-ratio lines limits the application field of this method. Nevertheless, a simple performance prediction analysis is proposed for blocked mass flow operation

Conflicts of Interest and Credible Information Provision by Specialized and One-Stop Banks

This paper is concerned with the general question of the provision of information by financial intermediaries to their customers. Specifically, it analyzes the different ways the market can be organized and its effects on pricing and the level of information investors obtain. We find that market structure depends on on the reputation costs, switching costs for customers, and the existence of market power. This provides a new justification for the presence of one-stop banks. We demonstrate these findings by embedding signaling within a model of multi-product price competition.One-stop Bank, Information Provision, Signaling

The credit ratings game

The collapse of so many AAA-rated structured finance products in 2007-2008 has brought renewed attention to the causes of ratings failures and the conflicts of interest in the Credit Ratings Industry. We provide a model of competition among Credit Ratings Agencies (CRAs) in which there are three possible sources of conflicts: 1) the CRA conflict of interest of understating credit risk to attract more business; 2) the ability of issuers to purchase only the most favorable ratings; and 3) the trusting nature of some investor clienteles who may take ratings at face value. We show that when combined, these give rise to three fundamental equilibrium distortions. First, competition among CRAs can reduce market efficiency, as competition facilitates ratings shopping by issuers. Second, CRAs are more prone to inflate ratings in boom times, when there are more trusting investors, and when the risks of failure which could damage CRA reputation are lower. Third, the industry practice of tranching of structured products distorts market efficiency as its role is to deceive trusting investors. We argue that regulatory intervention requiring: i) upfront payments for rating services (before CRAs propose a rating to the issuer), ii) mandatory disclosure of any rating produced by CRAs, and iii) oversight of ratings methodology can substantially mitigate ratings inflation and promote efficiency.credit rating agencies, conficts of interest, ratings shopping.

The credit ratings game

The spectacular failure of top-rated structured finance products has brought renewed attention to the conflicts of interest of Credit Rating Agencies (CRAs). We model both the CRA conflict of understating credit risk to attract more business, and the issuer conflict of purchasing only the most favorable ratings (issuer shopping), and examine the effectiveness of a number of proposed regulatory solutions of CRAs. We find that CRAs are more prone to inflate ratings when there is a larger fraction of naive investors in the market who take ratings at face value, or when CRA expected reputation costs are lower. To the extent that in booms the fraction of naive investors is higher, and the reputation risk for CRAs of getting caught understating credit risk is lower, our model predicts that CRAs are more likely to understate credit risk in booms than in recessions. We also show that, due to issuer shopping, competition among CRAs in a duopoly is less efficient (conditional on the same equilibrium CRA rating policy) than having a monopoly CRA, in terms of both total ex-ante surplus and investor surplus. Allowing tranching decreases total surplus further. We argue that regulatory intervention requiring upfront payments for rating services (before CRAs propose a rating to the issuer) combined with mandatory disclosure of any rating produced by CRAs can substantially mitigate the con.icts of interest of both CRAs and issuers.Credit rating agencies, conflicts of interest, ratings shopping

Rethinking universal service for a next generation network environment

There is a clear need, in view of significant competitive, technological and service changes taking place in the telecommunications sector, to review universal service obligations, their coverage, how they are financed and who is responsible for providing them. In many OECD countries, a primary longer term issue is how to provide universal service in the new competitive environment where voice is ubiquitous and cheap, voice revenues low and where voice has become just one of many applications provided on networks. Access too is changing, with more choice in platforms available that allow access to voice applications. This paper overviews the main issues that need to be examined in such a review with a view to the reform of universal service in a way consistent with emerging technological realities and competitive circumstances. [Introduction

Two-equation modeling of turbulent rotating flows

The possibility to take into account the effects of the Coriolis acceleration on turbulence is examined in the framework of two-equation eddy-viscosity models. General results on the physical consistency of such turbulence models are derived from a dynamical-system approach to situations of time-evolving homogeneous turbulence in a rotating frame. Application of this analysis to a (k,epsilon) model fitted with an existing Coriolis correction [J. H. G. Howard, S. V. Patankar, and R. M. Bordynuik, "Flow prediction in rotating ducts using Coriolis-modified turbulence models", ASME Trans. J. Fluids Eng. 102, (1980)] is performed. Full analytical solutions are given for the flow predicted with this model in the situation of homogeneously sheared turbulence subject to rotation. The existence of an unphysical phenomenon of blowup at finite time is demonstrated in some range of the rotation-to-shear ratio. A direct connection is made between the slope of the mean-velocity profile in the plane-channel flow with spanwise rotation, and a particular fixed point of the dynamical system in homogeneously sheared turbulence subject to rotation. The general analysis, and the understanding of typical inaccuracies and misbehavior observed with the existing model, are then used to design a new model which is free from the phenomenon of blowup at finite time and able to account for both of the main influences of rotation on turbulence: the inhibition of the spectral transfer to high wave numbers and the shear/Coriolis instability