LIQUIDITY CONSTRAINTS AND INCENTIVE CONTRACTS

1999 ◽  
Vol 3 (1) ◽  
pp. 1-47 ◽  
Author(s):  
Andreas Lehnert ◽  
Ethan Ligon ◽  
Robert M. Townsend

Are firms and households constrained in the use of a productive input? Theoretical approaches to this question range from exogenously imposed credit allocation rules to endogenous market failures stemming from some sort of limited-commitment or moral-hazard problem. However, when testing for constraints, researchers often simply ask firms or households if they would wish to borrow more at the current interest rate and/or test for suboptimal use of inputs in production functions relative to a full-information, full-commitment benchmark. We demonstrate that if credit is part of a much larger information-constrained (or limited-commitment) incentive scheme, then input use may very well be distorted away from the first-best. Further, households and firms, in certain well-defined circumstances, may, at the true interest rate or opportunity cost of credit, desire to borrow more (or less) than the assigned level of credit. In other, more constrained, contractual regimes, firms and households would say that they do not want to borrow more (or less), but these regimes are decidedly suboptimal, although the magnitude of the loss does depend on parameter values. We conclude with empirical methods that, in principle, could allow researchers armed with enough data to estimate parameters and distinguish regimes. Researchers then could see if firms and households are truly constrained and, if so, what the welfare loss might be.

2014 ◽  
Vol 553 ◽  
pp. 780-785 ◽  
Author(s):  
S.K. Hashemi ◽  
Mark A. Bradford

The development of advanced computational technologies in recent years has seen studies of the effects of explosions on large structures becoming feasible and, as a consequence, the number of destructive tests and their high cost can be reduced significantly. This paper presents a study of air-burst explosion wave propagation using computational modelling based on LS-DYNA. Incident and reflected pressure waves are investigated, as well as the mesh sensitivity, different scaled distances and the charge shape. The Multi-Material Arbitrary Lagrangian-Eulerian (MM-ALE) representation is used to model the blast, and the results are validated by empirical methods. The effects of parameter values adopted in these methods are studied. The results show that LS-DYNA can effectively simulate an air-burst explosion. Additionally, the mesh size and explosive weight have a large influence on the peak incident and reflected pressures. It is observed that there is an optimum range of the mesh size in relation to the explosive weight, material properties and the scaled distance which can significantly reduce the CPU usage while having reasonable accuracy. Different charge shapes cause different pressure distributions over the air domain.


2021 ◽  
Vol 66 (1) ◽  
pp. 50-67
Author(s):  
Zsuzsanna Novák ◽  
Tibor Tatay

There is no uniform theoretical standpoint on the effects of changing interest rates and the role of money among economists. Though these disputes exercise a great influence on the economic policy measures adopted as well. For the management of the 2008 global financial crisis many central banks entered into forceful interest rate cuts to contribute to the revitalisation of the economy. The economic recession caused by the pandemic of 2020 again raises the issue how central banks can stimulate growth. In this study we deal with the liquidity trap issue attributed to Keynes. Keynes pointed out that there might exist a lower interest rate limit under which money demand becomes infinite. His conceptions put the foundations to the question, at what interest rate levels might the liquidity trap – a term coined later by Robertson – phenomenon become effective. He was followed by numerous renowned economists dealing with the conception. In this paper we are discussing the most important theoretical approaches – among others the views of Hansen, Hicks, Tobin, Patinkin, Krugman, Brunner and Meltzer and Eggertson. We provide an overview on the effects of low interest rate levels adopted by Japan, by the central banks of Japan, the USA and the ECB aimed at stimulating the economy. Based on the study it can be confirmed that central banks can contribute to economic growth keeping interest rates low and therewith fostering investment. Nevertheless, beyond keeping short-term interest rates low, it might be adequate to control interest rates of other maturities and, especially under deflationary expectations, central banks should express their prolonged commitment to low interest rates.


1999 ◽  
Vol 16 (2) ◽  
pp. 45-53
Author(s):  
Zamir Iqbal

This paper identifies a major lacuna in the conceptual development ofIslamic financial market operations. It argues that in the absence of awell developed benchmark that would facilitate macro- and micro-leveldecision making with regards to cost of capital and opportunity cost ofinvestments in comparative projects of similar risk, Islamic financialinstitutions are relying on interest rate-based indices such as the LondonInter-Bank Offer Rate (LIBOR) to make lending decisions. The authorcontends that this is clearly unacceptable since Islam disallows a predeterminedor fixed rate of capital. The paper then proposes a benchmarkbased on Tobin’s q theory of investment. The author further maintainsthat unlike existing alternatives which are limited to macro-levelapplications only, the q-based benchmark would be useful for firms andbanks (micro-decisions) as well as governments and institutions(macro-planning).


Author(s):  
Jeremy Tan ◽  
Rolando P. Orense ◽  
Andy O’Sullivan

The majority of current procedures used to deduce liquefaction potential of soils rely on empirical methods. These methods have been proven to work in the past, but these methods are known to overestimate the liquefaction potential in certain regions of Christchurch due to a whole range of factors, and the theoretical basis behind these methods cannot be explained scientifically. Critical state soil mechanics theory was chosen to provide an explanation for the soil’s behaviour during the undrained shearing. Soils from two sites in Christchurch were characterised at regular intervals for the critical layers and tested for the critical state lines (CSL). Various models and relationships were then used to predict the CSL and compared with the actual CSL. However none of the methods used managed to predict the CSL accurately, and a separate Christchurch exclusive relationship was proposed. The resultant state parameter values could be obtained from shear-wave velocity plots and were then developed into cyclic resistance ratios (CRR). These were subsequently compared with cyclic stress ratios (CSR) from recent Christchurch earthquakes to obtain the factor of safety. This CSL-based approach was compared with other empirical methods and was shown to yield a favourable relationship with visual observations at the sites’ locations following the earthquake.


Author(s):  
Erik Mellander

Public human resource policies are motivated by market failures that prevent equal access to education and training and lead to too low investments in skills. The market failures also limit the supply of information about human resources—and, thus, transparency. At the same time, the dynamics of learning impose strong requirements on information, for planning and evaluation purposes. Five aspects of human resource policy relevant for transparency are considered: efficiency and equity, input utilization, learning outcomes, the dimensioning of education, and benefits and costs. The chapter shows that there need not be a tradeoff between equity and efficiency and argued that input use transparency should focus on the teachers. Regarding learning outcomes, needs for better information are identified in the tails of the age distribution. Suggestions for enhanced transparency concern, inter alia, improved benefit–cost analyses through better estimates of educational externalities and extended policy accountability through initial commitment to effect evaluations.


2021 ◽  
Vol 12 (3) ◽  
Author(s):  
Natalya Fontalova ◽  
Yulia Ryumkina

The article examines the relationship between the need for power and the system of life meanings among modern youth. The needs for power and the systems of life meanings of young men and women are compared. The theoretical basis of the research consists of scientific and theoretical approaches of psychologists to understanding the need for power, as well as approaches to the study of life meanings. Theoretical research methods and techniques are analysis and systematization of psychological literature on the research problem. Empirical methods are survey and testing: methodology "Research of the system of life meanings" by V.Yu. Kotlyakov. The technique allows to determine the content of value system and the sequence of its representation in the system of life meanings. Methodology test questionnaire "Motive of power" by E.P. Ilyina is aimed to determine a person's ability to exercise their will despite the resistance of other people. Statistical methods are methods of quantitative and qualitative analysis of empirical data. As a result of the empirical study the authors formulated and proposed recommendations for psychological support of young people. The results of the study made it possible to clarify the relationship between the need for power and the system of life meanings in modern youth.


Author(s):  
Дубініна Віра Олександрівна

The possibilities of philosophical hermeneutics in connection with the problems of interpretation and understanding of metaphors are examined. The hermeneutic method and its use in the analysis of specific semantic formations is associated with the concept of metaphor, which can be considered as the most important component of hermeneutic discourse. The metaphor and its capabilities are an essential characteristic of language and speech activity, reflecting the creative nature of our consciousness, the very structure of rationality. Various theoretical approaches to understanding metaphors are analyzed.Criticism of metaphors continues to the present. It seems to many researchers that metaphors, trails, idioms are illegitimate children of knowledge, rationality, and language. This is quite typical for representatives of modern empiricism, nominalism, reductionism, skepticism, etc., which are driven, in general, by good motivation. This is an attempt to achieve at least conditional objectivity, accuracy and reliability of the results in our humanitarian knowledge, for which, of course, we should bring the language of philosophy closer to the language of nature sciences.True, it has long been noted that this notorious and exacted “accuracy” is not at all true or true, the correct reflection of the objects studied, such as culture, morality, truth or poetry. Oddly enough, getting rid of metaphors, we can not say anything more true, and just something non-trivial about poetry, such that it really clarifies its essence or simply explains to us why people write and read poetry.Another approach that we can already find with Aristotle, and implicitly among the pre-Socratics, not to mention Plato, is to recognize the metaphor as the most important role in our language and knowledge. The fact that no language can do without metaphors is quite obvious. But is metaphor so important for our knowledge? We strive to present the point of view according to which the metaphor is an instrument of cognitive activity and, as a consequence, of the knowledge of the world by man, no less than logic or mathematics, not to mention the empirical methods of the natural sciences.Even a preliminary examination of the role of metaphor in hermeneutic discourse shows that it is a metaphor, more generally, metaphorical, and in another aspect, idiomaticity, that creates the very possibility for hermeneutics to exist. It is metaphors with their ambiguity that provoke interpretation and cognition using the hermeneutic method. Even a single metaphor creates a certain semantic tension, which can only be resolved through the effort of interpretation. A text that is fundamentally built or consists mainly of metaphors creates a special semantic space in which the hermeneutic consideration realizes itself. In a sense, these are approximately coincident regions, wherever we meet with a metaphor, hermeneutics also becomes possible. The reverse is also partly true, the task of hermeneutic discourse is not only the interpretation of explicit metaphors, but also the discretion of metaphorical or idiomatic where it is not at first glance visible. It cannot be argued that the search for metaphors is the only thing of hermeneutics, however, it is also true that without considering the tropes, modern hermeneutics would have a completely different look and purpose.


Urban Science ◽  
2021 ◽  
Vol 5 (1) ◽  
pp. 17
Author(s):  
Olaf Kühne ◽  
Corinna Jenal

The present contribution to a neopragmatic approach to regional geography attempts to collect, structure, and reflect knowledge with different spatial, social, and cultural references. This is not a matter of designing a classical regional or landscape “compartmentalization” of distinct spatial units, which are characterized by a specific reciprocal shaping of culture and the initial physical substrate, but of investigating and reflecting the reciprocal influences of different levels of scale as well as the construction mechanisms and contingency of spatial units. By means of “theoretical” and also empirical “triangulation”, a differentiated picture of complex research objects—here Baton Rouge, LA—is generated, whereby (partial) contradictions between theoretical approaches and the relationship between the various appropriately chosen theories and equally well-chosen empirical methods are also accepted.


Author(s):  
Sheereen Fauzel

The global financial crisis of 2007-2008 depicted that conventional banking has many weaknesses. Hence, there has been much debate on the strength of Islamic banking to confront such crises. There are various advantages of using Shari'ah-compliant financial products pointed out by researches. Moreover, people who abide by their religious belief are mainly those who demand such financial services. But research relating to the determinants of Islamic banking is scant. This chapter examines the determinants of Islamic Banking in Africa over the period 2005-2018. The result shows that if the share of the Muslim population is high compared to other religions, Islamic banking is better diffused. Furthermore, important determinants of Islamic banking obtained from the results are the growth rate of the country and the extent to which the financial system is developed. Interestingly, it is observed that interest rate affects the diffusion of Islamic banking as it represents an opportunity cost.


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