Articles

(Interstate) banking and (interstate) trade: Does real integration follow financial integration?

T. K. MICHALSKI, E. ÖRS

Journal of Financial Economics

April 2012, vol. 104, n°1, pp.89-117

Departments: Economics & Decision Sciences, GREGHEC (CNRS), Finance

Keywords: Trade, Banking deregulation, Finance growth nexus


We examine whether financial sector integration leads to real sector integration through trade. Our conjecture is that financial sector integration between two regions leads to higher trade flows between them. In our stylized model, this happens because banks with presence in the two regions are better able to assess risks and charge the appropriate premiums for trade-related projects pertinent for the two markets; whereas the same banks charge higher average interest rates for projects that involve trade to other markets from which they are absent. We use the deregulation of the inter-state banking in the U.S. as a natural experiment to test the implication of our theory model with the state-level Commodity Flow Survey data. Our empirical evidence, based on difference-in-difference and GMM2S-IV estimates, indicates that there is a trade channel associated with the finance-growth nexus: the trade share of state-pairs that have opened their banking market to each other's financial institutions increases by 9.2% relative to the trade shares of state-pairs that did not. Looking at actual entry data, we estimate that bank entry within a trading pair increases trade in this pair by 54% relative to those that do not have such a bank link. This is probably the lower bound estimate for international trade barriers stemming from the lack of a unified banking system.

A folk theorem for repeated games played in a network

M. LACLAU

Games and Economic Behavior

2012, vol. 76, n°2, pp.711-737


A folk theorem for repeated games played on a network

M. LACLAU

Games and Economic Behavior

November 2012, vol. 76, n°2, pp.711-737

Departments: Economics & Decision Sciences

Keywords: Repeated gamesImperfect monitoringNetworksFolk theoremCommunication protocols

https://www.sciencedirect.com/science/article/pii/S0899825612001285


I consider repeated games on a network where players interact and communicate with their neighbors. At each stage, players choose actions and exchange private messages with their neighbors. The payoff of a player depends only on his own action and on the actions of his neighbors. At the end of each stage, a player is only informed of his payoff and of the messages he received from his neighbors. Payoffs are assumed to be sensitive to unilateral deviations. The main result is to establish a necessary and sufficient conditionon the network for a Nash folk theorem to hold, for any such payoff function

A generalized single product and single period problem with nonlinear parameters

K. Luo, L. KERBACHE, M. Menezes, C. VAN DELFT

International Transactions in Operational Research

May 2012, vol. 19, n°3, pp.421-433

Departments: Information Systems and Operations Management, GREGHEC (CNRS)

Keywords: Optimization, Perishable items, Production, Supply chain management


In this paper, we extend the study of the classical single-period newsboy inventory problem by considering Q1 costs that are non-linear functions of the decision variable. We assume that the demand probability density function is known to the decision maker.We prove that, under some much more relaxed conditions, the total expected profit function remains concave and classical optimization methods can thus be used to get the global optimal solution. After that, we provide numerical examples for illustrative purpose

A Global Equilibrium Asset Pricing Model with Home Preference

L. Zuo, B. SOLNIK

Management Science

February 2012, vol. 58, n°2, pp.273-292

Departments: Finance

Keywords: International asset pricing, Home bias, Familiarity, Regret

http://dx.doi.org/10.2139/ssrn.1778662


We develop a global equilibrium asset pricing model assuming that investors suffer from foreign aversion, a preference for home assets based on familiarity. Using a utility formulation inspired by regret theory, we derive closed-form solutions. When the degree of foreign aversion is high in a given country, investors place a high valuation on domestic equity, which results in a lower expected return. Thus, the model generates the simple prediction that a country’s degree of home bias and the expected return of its domestic assets should be inversely related. Our predicted relation between the degree of home bias and a country’s expected return has the opposite sign predicted by models that assume some form of market segmentation. Using IMF portfolio data we find that expected returns are negatively related to home bias


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