Economics Research International The latest articles from Hindawi Publishing Corporation © 2015 , Hindawi Publishing Corporation . All rights reserved. The Effect of Quality Tracing System on Safety of Agricultural Product Mon, 16 Feb 2015 13:49:41 +0000 Frequent occurrence of food safety incidents in recent years has made analyzing safety of agricultural product in view of contract theory become academic research focus. Based on incentive theory, in this paper we establish a static game under the condition of asymmetric information and analyze how the “company + farmer” contract is influenced by a complete quality tracing system composed of ex-ante inspection and ex-post traceability. Meanwhile, we find out that a complete quality tracing system can increase the safety level of agricultural product and that ex-ante inspection and ex-post traceability can replace each other in the process. Finally, we put forward policy suggestion for the policy-maker to solve the problem of food safety. Jun Zhao and Bin Zhou Copyright © 2015 Jun Zhao and Bin Zhou. All rights reserved. In Search of Leading Indicator Property of Yield Spread for India: An Approach Based on Quantile and Wavelet Regression Tue, 06 Jan 2015 14:06:31 +0000 The leading indicator ability of yield spread for future output growth and inflation is tested for India. Using the yields on securities with maturities ten years and three months to construct yield spread, we study the predictive power of yield spread for output growth and inflation. Our results based on regression of future inflation and output on yield spreads indicate that there is no information in the yield spread about future economic activity and inflation in India. Further, the predictive power of yield spread is analyzed over different quantiles of inflation and output growth using quantile regression; we find that there is again no evidence of predictive information in the yield spreads. Using multiscale wavelet based regression, predictive power is however unveiled at higher time scales for output growth only. Arif Billah Dar and Firdous Ahmad Shah Copyright © 2015 Arif Billah Dar and Firdous Ahmad Shah. All rights reserved. Real National Income Average Growth Rate: A Novel Economic Growth and Social Fair Evaluation Index Thu, 01 Jan 2015 09:44:08 +0000 The purpose of this study is to propose a new economic index, namely, real national income average growth rate (RNIAGR), which measures the performance of economic growth with consideration for income distribution. This study also develops another new economic index, called five-scale real national income average growth rate (FSRNIAGR), which simplifies the calculation of RNIAGR. The merits of these new indexes are discussed to justify their efficacy. This paper also justifies the use of proposed index by showing that this index can actually measure the ordering of social welfare. To highlight the difference between this new index and the traditional ones, this paper compares the index with real economic growth rate using the data of Taiwan. In addition, this paper shows that when the real growth stagnates or even declines, this new index indicates that income distribution deteriorates. Chien Wei Wu and Wei Zhan Hung Copyright © 2015 Chien Wei Wu and Wei Zhan Hung. All rights reserved. Technical Efficiency and Technical Change in Canadian Manufacturing Industries Wed, 31 Dec 2014 10:45:43 +0000 This study applies the “true fixed effects” panel stochastic frontier methodology to the Canadian KLEMS data set to estimate technical change and technical efficiency in the Canadian manufacturing sector. To account for the endogeneity of capital inputs as well as the possible problems related to omitted variables, a two-stage residual inclusion method is pursued. The first stage is estimated using the dynamic panel GMM method. The results show that Canadian manufacturing industries experienced significant declines in technical efficiencies during the last ten years. This suggests that the observed slowdown in TFP growth during the recent past is partly due to declining technical efficiency. Samuel Gamtessa Copyright © 2014 Samuel Gamtessa. All rights reserved. The Effect of Monetary Policy on Commodity Prices: Disentangling the Evidence for Individual Prices Wed, 24 Dec 2014 09:44:58 +0000 We study the effect of monetary policy shocks on commodity prices. While most of the literature has found that expansionary shocks have a positive effect on aggregate price indices, we study the effect on individual prices of a sample of four commodities. This set of commodity prices is essential to understand the dynamics of the balance of payments in Colombia. The analysis is based on structural VAR models; we identify monetary policy shocks following Kim (1999, 2003) upon quarterly data for commodity prices and their fundamentals for the period from 1980q1 to 2010q3. Our results show that commodity prices overshoot their long run equilibrium in response to a contractionary shock in the US monetary policy and, in contrast with literature, the response of the individual prices considered is stronger than what has been found in aggregate indices. Additionally, it is found that the monetary policy explains a substantial share of the fluctuations in prices. Carolina Arteaga Cabrales, Joan Camilo Granados Castro, and Jair Ojeda Joya Copyright © 2014 Carolina Arteaga Cabrales et al. All rights reserved. A Complex Dynamical Analysis of the Indian Stock Market Sun, 14 Dec 2014 12:04:48 +0000 This paper seeks to analyze the dynamical structure of the Indian stock market by considering two major Indian stock market indices, namely, BSE Sensex and CNX Nifty. The recurrence quantification analysis (RQA) is applied on the daily closing data of the two series during the period from January 2, 2002, to October 10, 2013. A Rolling Window of 100 and step size 21 are applied in order to see how both the series behave over time. The analysis based on three RQA measures, namely, % determinism (DET), laminarity (LAM), and trapping time (TT), provides conclusive evidence that the Indian equity market is chaotic in nature. Evidences for phase transition in the Indian equity market around the time of financial crisis are also found. Anoop Sasikumar and Bandi Kamaiah Copyright © 2014 Anoop Sasikumar and Bandi Kamaiah. All rights reserved. An Empirical Analysis of Unpaid Leave in Taiwan Wed, 12 Nov 2014 00:00:00 +0000 This paper investigates the factors influencing unpaid leave or furlough in Taiwan. The data used is from the First Social Image Survey in 2009, which focused on work situation, cross-strait relations, interpersonal trust, institutional trust, and other related issues. The sample ages are from 19 to 89. The method used is probit modelling for examining the influences on unpaid leave. The main empirical results find that older workers, people with highest educational attainment, widows and widowers, middle class workers, and workers living in eastern areas are less likely to take unpaid leave from the labour market. In particular, male Mainlander workers are more likely to take unpaid leave. Moreover, female workers with highest educational attainment, widowed, and of middle class are less likely to take unpaid leave. Finally, workers with high earnings are less likely to take unpaid leave, but female workers with high family income and female workers who are divorced or separated have a higher probability of unpaid leave. Shu-Hsi Ho and Wen-Shai Hung Copyright © 2014 Shu-Hsi Ho and Wen-Shai Hung. All rights reserved. Investigating the Existence of Chaos in Inflation Data in relation to Chaotic Foreign Exchange Rate Tue, 21 Oct 2014 07:48:01 +0000 Foreign exchange (ForEx) rates are amongst the most important economic indices in the international monetary markets. ForEx rate represents the value of one currency in another and it fluctuates over time. It is related to indicators like inflation, interest rate, gross domestic product, and so forth. In a series of works, we investigated and confirmed the chaotic property of ForEx rates by finding positive largest Lyapunov exponent (LLE). As inflation influences ForEx, in this work we would like to address the specific question, Is inflation data also chaotic? We collected data for time period of 2000 to 2013 and tested for nonlinearity in data by surrogate method. Calculating LLE, we find existence of chaos in inflation data for some countries. Pritha Das and Atin Das Copyright © 2014 Pritha Das and Atin Das. All rights reserved. Analysis of Economic Efficiency and Farm Size: A Case Study of Wheat Farmers in Nakuru District, Kenya Thu, 16 Oct 2014 11:36:15 +0000 The primary objective of this study is to examine the effect of farm size on economic efficiency among wheat producers and to suggest ways to improve wheat production in the country. Specifically, the study attempts to estimate the levels of technical, allocative, and economic efficiencies among the sampled 130 large and small scale wheat producers in Nakuru District. The social-economic factors that influence economic efficiency in wheat production have also been determined. Results indicate that the mean technical, allocative, and economic efficiency indices of small scale wheat farmers are 85%, 96%, and 84%, respectively. The corresponding figures for the large scale farmers are 91%, 94%, and 88%, respectively. The number of years of school a farmer has had in formal education, distance to extension advice, and the size of the farm have strong influence on the efficiency levels. The relatively high levels of technical efficiency among the small scale farmers defy the notion that wheat can only be efficiently produced by the large scale farmers. Samuel Mburu, Chris Ackello-Ogutu, and Richard Mulwa Copyright © 2014 Samuel Mburu et al. All rights reserved. Working the Night Shift: The Impact of Compensating Wages and Local Economic Conditions on Shift Choice Thu, 09 Oct 2014 10:22:05 +0000 The theory of compensating differentials asserts that night shift workers should receive compensating wage differentials due to undesirable work conditions. In weak local economies, workers may have difficulty finding jobs; thus, these workers might be more likely to accept night shift work and be less concerned with the size of the compensating differential for night shifts. Using CPS data from 2001, this paper employs maximum likelihood estimation of an endogenous switching regression model to analyze wages of day and night shift workers and shift choice. The findings indicate the presence of selection bias, thus emphasizing the importance of correcting for self-selection into night shifts. The average of the estimated wage differentials for night shift work is negative for the overall sample, with differentials varying by worker characteristics. The shift differential is found to be a statistically significant predictor of shift choice, indicating that shift premiums play an important role in motivating individuals to select night shift work. Using two measures of local economic conditions and a new method of analyzing interaction effects in the context of an endogenous switching regression model, this paper finds limited evidence that weak local economic conditions lessen the impact of compensating differentials on shift choice. Colene Trent and Walter J. Mayer Copyright © 2014 Colene Trent and Walter J. Mayer. All rights reserved. Effect of Physician Gender on Demand for Pap Tests Thu, 18 Sep 2014 07:09:57 +0000 People’s demand for preventive medical care is one type of investment in health. The aim of this paper is to examine women’s demand for secondary prevention in Taiwan, focusing on the role a physician’s gender plays in women’s inclination to undergo Pap tests. Our estimation results show that regional ratio of female doctors has a positive and significant effect on utilization of Pap tests for the full sample and for women aged below 30. In addition, doctor’s gender matters only in utilization of Pap tests not in other types of preventive healthcare services in Taiwan. We suggest that the government may consider liberalizing medical laws to make it legal for trained female nurses or nurse practitioners to perform Pap tests in order to encourage the utilization of Pap tests, especially in rural and mountain areas. The government may also consider subsidizing the use of cervical cancer vaccines to help females prevent cervical cancer. Tsui-Fang Lin and Jennjou Chen Copyright © 2014 Tsui-Fang Lin and Jennjou Chen. All rights reserved. Public Investments, Human Capital, and Political Stability: The Triptych of Economic Success Tue, 09 Sep 2014 08:39:56 +0000 This study assesses the effects of fiscal policy on economic growth in a sample of 96 countries from 1990 to 2010. Ordinary Least Squares (OLS) and Extreme Bound Analysis are mainly estimated in order to investigate whether public investments, human capital, and political stability affect growth controlling for initial output and human capital levels. Furthermore, in this empirical research four subsets of independent variables were used: (a) demographic factors, (b) political determinants, (c) region variables, and (d) variables regarding macroeconomic policy. Empirical results suggest that there is an important difference in the impact of public and private sector investments on the growth of per capita income. Moreover, political indicators such as corruption control, rule of law, and government effectiveness have a high impact on economic growth. Demographic factors, including fertility rate and mortality growth, as well as several macroeconomic variables, like inflation rate index and government consumption, were estimated to be statistically significant factors of economic performance. Fiscal volatility may also be a new possible channel of macroeconomic instability that leads to lower growth. Policy implications of the findings are discussed in detail. Ioannis Kostakis Copyright © 2014 Ioannis Kostakis. All rights reserved. Exchange Rates and Monetary Fundamentals: What Do We Learn from Linear and Nonlinear Regressions? Tue, 09 Sep 2014 05:14:30 +0000 This paper revisits the association between exchange rates and monetary fundamentals with the focus on both linear and nonlinear approaches. With the monthly data of Euro/US dollar and Japanese yen/US dollar, our linear analysis demonstrates the monetary model is a long-run description of exchange rate movements, and our nonlinear modelling suggests the error correction model describes the short-run adjustment of deviations of exchange rates, and monetary fundamentals are capable of explaining exchange rate dynamics under an unrestricted framework. Guangfeng Zhang Copyright © 2014 Guangfeng Zhang. All rights reserved. Phillips and Wage Curves: Empirical Evidence from Bosnia and Herzegovina Sun, 31 Aug 2014 10:42:58 +0000 This study is an empirical examination of the existence and characteristics of the Phillips curve and the wage curve in Bosnia and Herzegovina. The findings indicate that there is no evidence of the existence of the short-term Phillips curve. Instead, the data suggests that in the short-term an increase in inflation leads to an increase in unemployment. The estimated wage curves indicate that only increases in real payment increase employment. The conclusion of this study is that increases in inflation might have a negative short-term impact on the level of employment in Bosnia and Herzegovina. Edo Omerčević and Elif Nuroğlu Copyright © 2014 Edo Omerčević and Elif Nuroğlu. All rights reserved. Rural Credit and Farms Efficiency: Modelling Farmers Credit Allocation Decisions, Evidences from Benin Thu, 28 Aug 2014 09:43:11 +0000 This paper analyses farmers’ credit allocation behaviors and their effects on technical efficiency. Data were collected from 476 farmers using the multistage sampling procedure. The stochastic frontier truncated-normal with conditional mean model is used to assess allocation schemes effects on technical efficiency. Tobit model reveals the impact of farmers’ sociodemographic characteristics on efficiency scores. Results reveal that farm revenue (about 2,262,566 Fcfa on average) is positively correlated with land acreage, quantity of labour, and costs of fertilizers and insecticides. Farmers’ behaviors respond to six schemes which are categorized in two allocations contexts: out-farm and in-farm allocations. The model shows that only scheme (e) positively impacts technical efficiency. This scheme refers to the decision to invest credit to purchase better quality of pesticides, herbicides, fertilizers, and so forth. The positive effect of the scheme (c) may be significant under conditions of farmers’ education level improvement. Then, scheme (e) is a better investment for all farmers, but effect of credit allocation to buy agricultural materials is positive only for educated farmers. Efficiency scores are reduced by household size and gender of the household head. Therefore a household with more than 10 members and a woman as head is likely to not be technically efficient. Comlan Hervé Sossou, Freddy Noma, and Jacob A. Yabi Copyright © 2014 Comlan Hervé Sossou et al. All rights reserved. Are Eurozone Fixed Income Markets Integrated? An Analysis Based on Wavelet Multiple Correlation and Cross Correlation Thu, 28 Aug 2014 00:00:00 +0000 This paper investigates the synchronization of fixed income markets within Eurozone countries using the new wavelet based methodology. Conventional wavelet methods that use multivariate set of variables to calculate pairwise correlation and cross correlation lead to spurious correlation due to possible relationships with other variables, amplification of type-1 errors, and results, in the form of large set of erroneous graphs. Given these disadvantages of conventional wavelet based pairwise correlation and cross-correlation method, we avoid these limitations by using wavelet multiple correlation and multiple cross correlations to analyze the relationships in Eurozone fixed income markets. Our results based on this methodology indicate that Eurozone fixed income markets are highly integrated and this integration grows with timescales, and hence there is almost no scope for independent monetary policy and bond diversification in these countries. Arif Billah Dar and Firdous Ahmad Shah Copyright © 2014 Arif Billah Dar and Firdous Ahmad Shah. All rights reserved. The Effect of Exchange Rate Movements on Trade Balance: A Chronological Theoretical Review Sun, 24 Aug 2014 09:45:18 +0000 This paper evaluates the current state of the literature concerning the effects of exchange rate movements on trade balance. Thus, this paper is a review article and provides a survey of the alternative theories that focus on the effect of exchange rate changes on the trade balance. It systemizes the literature into four distinct reviews and approaches following the chronological order. The paper presents the (a) Standard Theory of International Trade, (b) Elasticity Approach, (c) Keynesian Absorption Approach, and (d) Monetary Approach. The study shows that higher attention should be given for the most plausible dynamic theory in this field, known as the J-Curve. Dhakir Abbas Ali, Fuadah Johari, and Mohammad Haji Alias Copyright © 2014 Dhakir Abbas Ali et al. All rights reserved. The Effectiveness and Sustainability of the Sterilization Policy in China Wed, 20 Aug 2014 07:15:13 +0000 The aim of this paper is to examine the sterilization policy in China. First, several indices are used to measure the status of China’s markets and to determine effectiveness and sustainability of the sterilization policy and the possible impacts it may have induced. Second, within a microeconomic framework, we incorporate the housing price variable into the target loss function of the monetary authority to explore its financial capabilities and evaluate the effectiveness and sustainability of China’s sterilization policy. The empirical results show that Chinese monetary authorities sterilize almost all of the effects of international capital inflows and increase foreign exchange reserves on the monetary base. That is, increased capital mobility does not sabotage the independence of the Chinese monetary policy. Nevertheless, analyses of the sustainability of sterilization policy indicate that the sustainability of the monetary sterilization policy has been seriously challenged since March 2008, which suggests that Chinese monetary authority has endured tremendous pressure for unsustainable sterilization. Chien-Ping Chung, Jen-Te Hwang, and Chieh-Hsuan Wang Copyright © 2014 Chien-Ping Chung et al. All rights reserved. Econometric Analysis of Landscape Preferences in Canterbury, New Zealand Sun, 17 Aug 2014 06:24:23 +0000 The landscape of rural Canterbury, New Zealand, has evolved from tussock grasslands to one of the most productive dairying areas in the world. While these changes represent a boon for Canterbury’s economy, the visual impact of land-use change has been dramatic. In this paper, we evaluate which changes to the Canterbury landscape have been most pronounced, how people react to those changes, which aspects of the rural landscape are of greatest importance to both urban and rural residents of Canterbury, and whether cost-effective means of mitigating visual changes to the landscape exist. We find that the majority of Cantabrians hold unfavourable views of recent changes to the landscape—particularly with regard to dairying—a finding that is consistent across both urban and rural survey respondents. Using a visual assessment study with cross-classified random effect, we find that dairy cows, irrigators, and silage bales significantly reduce viewers’ subjective evaluations of landscapes while shelterbelts dramatically increase their subjective evaluations. Moreover, native New Zealand shelterbelts are preferred to exotic shelterbelts, but both are preferred to having no shelterbelts, suggesting that the negative visual impacts of dairy farming may be ameliorated by intensified tree planting. P. Brown and C. Mortimer Copyright © 2014 P. Brown and C. Mortimer. All rights reserved. Theocharis Problem Reconsidered in Differentiated Oligopoly Sun, 17 Aug 2014 00:00:00 +0000 Oligopolies with product differentiation are examined with both quantity-adjusting and price-adjusting firms. Conditions are given for the positivity of the equilibrium outputs as well as for that of the equilibrium prices. The stability of the positive equilibria is then investigated; the positivity and stability conditions are also compared. The dependence of these conditions on the number of firms, their qualifications and the degree of relation between the goods is discussed. The analysis is given by assuming both discrete- and continuous-time scales. Akio Matsumoto and Ferenc Szidarovszky Copyright © 2014 Akio Matsumoto and Ferenc Szidarovszky. All rights reserved. The Long-Term Impact of Human Capital Investment on GDP: A Panel Cointegrated Regression Analysis Tue, 05 Aug 2014 08:11:19 +0000 This study aims to determine the long-run impact of physical and human capital on GDP by using the panel data set of 13 developed and 11 developing countries over the period 1970–2010. Gross fixed capital formation is used as physical capital indicator while education expenditures and life expectancy at birth are used as human capital indicators. Panel DOLS and FMOLS panel cointegrated regression models are exploited to detect the magnitude and sign of the cointegration relationship and compare the effect of these physical and human capital variables according to these two different country groups. As a consequence of panels DOLS and FMOLS models, the impact of physical capital and education expenditures on GDP in the developed countries is determined as higher than the impact in the developing countries. On the other hand, the impact of life expectancy at birth on GDP is determined as higher in the developing countries. Ahmet Gökçe Akpolat Copyright © 2014 Ahmet Gökçe Akpolat. All rights reserved. The Collaboration of SMEs through Clusters as Defense against Economic Crisis Thu, 24 Jul 2014 00:00:00 +0000 The aim of this paper is to present the realistic solution to the survival problem that SMEs have during the economic crisis. The role of SMEs is very important in the development of the regional and national economy of each country, particularly for small countries like Greece. On the other hand, universities also play a significant role in the national economy, since they provide Know-How and important research in the SMEs. Nevertheless, due to their small size and financial weakness, especially on the grounds of economic crisis, SMEs would not be able to cover on their own the cost of purchase of university research. The author of this working paper suggests the collaboration of SMEs in the form of clusters so as to be able to self-fund and absorb university Know-How at the same time. Ioannis Makedos Copyright © 2014 Ioannis Makedos. All rights reserved. Relationship between Fiscal Subsidies and CO2 Emissions: Evidence from Cross-Country Empirical Estimates Wed, 23 Jul 2014 06:41:30 +0000 Countries disburse subsidies with various motivations, for example, to promote industrial development, facilitate innovation, support national champions, and ensure redistribution. The devolution of subsidies may however also encourage economic activities leading to climate change related concerns, reflected through higher greenhouse gases (GHGs) emissions, if such activities are conducted beyond sustainable point. Through a cross-country empirical analysis involving 131 countries over 1990–2010, the present analysis observes that higher proportional devolution of budgetary subsidies leads to higher CO2 emissions. The countries with higher CO2 emissions are also characterized by higher per capita GDP, greater share of manufacturing sector in their GDP, and higher level of urbanization. In addition, the empirical findings underline the importance of the type of government subsidy devolution on CO2 emission pattern. The analysis underlines the importance of limiting provision of subsidies both in developed and developing countries. Sacchidananda Mukherjee and Debashis Chakraborty Copyright © 2014 Sacchidananda Mukherjee and Debashis Chakraborty. All rights reserved. Trade Negotiation Capacity and Health Carve-Outs in Trade Agreements Wed, 23 Jul 2014 06:38:01 +0000 There is a dearth of scholarship on the relationship between international trade and health status in countries. This paper contributes to filling this gap by proposing a formal analytical framework to study the link between the extent of health issues carved out from trade agreements by negotiating countries and their expenditure on public health. We also examine the role played by the nature of the political and fiscal regime prevalent in the country in the securing of the carve-outs. The model predicts that a higher level of carve-outs is more likely for countries that have relatively low levels of public health spending and which tend to be more politically free and fiscally liberal. We provide anecdotal evidence that supports our findings. Sheikh Shahnawaz Copyright © 2014 Sheikh Shahnawaz. All rights reserved. An Empirical Estimation of the Underground Economy in Ghana Mon, 21 Jul 2014 08:20:49 +0000 The main aim of this paper is to estimate the size of the underground economy in Ghana during the period 1983–2003. There is no agreement on the appropriate estimation approach to adopt to measure the size of the underground activities. To this end, we employ the well-applied currency demand approach in our measurement. Parameter estimates from the estimated currency demand equation are used in quantifying the ratio of “underground” to “measured” output/income for the Ghanaian economy. The estimated long-run average size of the underground economy to GDP for Ghana over the period is 40%. The underground economy is found to vary from a high of 54% in 1985 to a low of 25% in 1999. Estimates may represent lower bound estimates. Edward Asiedu and Thanasis Stengos Copyright © 2014 Edward Asiedu and Thanasis Stengos. All rights reserved. Determinants of Household Savings in India: An Empirical Analysis Using ARDL Approach Wed, 16 Jul 2014 06:00:11 +0000 Indian economy witnessed significant transformations in the postreform period both in terms of change in policy paradigm adopting greater market orientation and overall macroeconomic performance with development of a broad-based financial market and increasing global integration. Guided by the fact that domestic savings play a critical role in augmenting capital accumulation and contributing to achieve and sustain high economic growth, an attempt to review and reassess the role of various factors influencing domestic savings under the changed environment is quite relevant for sustaining the growth momentum. In this backdrop, the present study empirically analyzed the role of various determinants of household savings in India with the latest available data. It employed ARDL approach for this purpose due to its suitability for estimating an equation with a mix of stationary and nonstationary variables of order (1) and address potential endogeneity problems. The estimated results revealed that GDP, dependency ratio, interest rate, and inflation have statistically significant influence on household savings in India, both in the long run and short run. As regards policy implications, we suggest that ensuring price stability and avoiding any disruption to the growth process will be useful for augmenting savings and sustaining the savings-growth spiral in India. Amaresh Samantaraya and Suresh Kumar Patra Copyright © 2014 Amaresh Samantaraya and Suresh Kumar Patra. All rights reserved. Domestic Investment, Foreign Direct Investment, and Economic Growth Nexus: A Case of Pakistan Sun, 29 Jun 2014 08:00:28 +0000 This study aims to find dynamic interaction between domestic investment, foreign direct investment, and economic growth in Pakistan for the period 1976–2010. Phillips and Perron (PP) test is used to assess unit root in the concerned data series. Johansen cointegration approach applied to examine the long run relationship and Toda-Yamamoto causality approach is exercised to evaluate causal linkages. Besides foreign direct investment inflow to Pakistan and domestic investments variables, this study also used GDP as a third variable in order to avoid misspecification problems in the model and also to know the interrelationship between the variables. The empirical findings of this study reveal the existence of long run relationship between domestic investments, foreign direct investment, and economic growth, further supported by Toda-Yamamoto causality, and bidirectional causality has been found between FDI and domestic investment implying that both domestic investment and FDI cause each other. Irfan Ullah, Mahmood Shah, and Farid Ullah Khan Copyright © 2014 Irfan Ullah et al. All rights reserved. Bankruptcy Problem Allocations and the Core of Convex Games Wed, 25 Jun 2014 07:56:31 +0000 A well-known result related to bankruptcy problems establishes that a vector is a bankruptcy allocation if and only if it belongs to the core of the associated O’Neill’s bankruptcy game. In this paper we show that this game is precisely the unique TU-game based on convex functions that satisfies the previous result. In addition, given a bankruptcy problem, we show a way for constructing bankruptcy games such that the set of bankruptcy allocations is a subset of their core or their core is a subset of the set of bankruptcy allocations. Also, we show how these results can be applied for finding new bankruptcy solutions. William Olvera-Lopez, Francisco Sanchez-Sanchez, and Iván Tellez-Tellez Copyright © 2014 William Olvera-Lopez et al. All rights reserved. Regional Convergence in Greece (1995–2005): A Dynamic Panel Perspective Wed, 25 Jun 2014 05:55:04 +0000 This paper discusses the issue of regional convergence in Greece during the period 1995–2005. Following the theoretical concept of Barro and Salla-i-Martin, 1990 (- and -convergence concepts), several tests are conducted to test for conditional or unconditional convergence across Greek regions including GMM estimation of Barro regressions. The results indicate absence of convergence across NUTS II regions while there is evidence of convergence at prefectural level (NUTS III). The effect of agriculture industry and services sector is examined and services are found to have significant impact on growth and convergence. Finally, we examine the effect of the implementation of the European funding programs in some detail. Mike Tsionas, Stylianos Sakkas, and Nikolaos C. Baltas Copyright © 2014 Mike Tsionas et al. All rights reserved. Optimal Penalties on Deviations from Budgetary Targets Mon, 02 Jun 2014 09:18:53 +0000 Beyond traditional arguments justifying the introduction of fiscal rules, this paper analyses their potential contribution to an indirect budgetary coordination between the member countries of a monetary union. Indeed, thanks to appropriate fiscal penalties, the noncooperative and decentralized equilibrium could get closer to the optimal equilibrium where the budgetary authorities cooperate. Our macroeconomic model shows that whatever penalty on the structural budgetary deficit would be optimal in case of asymmetric shocks. A moderate penalty on the excessive indebtedness level would be optimal in “normal times,” or in case of asymmetric shocks if openness to trade and price flexibility are sufficiently high, whereas the share of public consumption in GDP, taxations rates, and indebtedness levels is sufficiently weak in the monetary union. Besides, in case of symmetric shocks, a fiscal penalty would be useful to decrease the excessive budgetary activism, even if it doesn’t allow reaching the optimal and first-best equilibrium. Furthermore, the fiscal penalty should always be an increasing function of the share of public consumption in GDP and of taxation rates but a decreasing function of the strength of automatic stabilizers, of openness to trade, and of price flexibility in the member countries of the monetary union. Séverine Menguy Copyright © 2014 Séverine Menguy. All rights reserved.