Working Papers

From College of Business, University of Texas at San Antonio
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2012: Financial Development and the Distributional Effects of Monetary Policy Do the distributional consequences of monetary policy depend on the extent of financial development? Should optimal monetary policy vary across countries? In order to answer these questions, we develop a monetary growth production model with heterogeneous agents. In our economy, optimal policy needs to weigh the effects of policy across two groups — capital owners and individuals who hold liquid assets. While banks help limit the exposure to inflation, there are limits because money alleviates the frictions of private information and limited communication. In this environment, we compare two economies that are identical in every aspect except for their level of financial development. In a country with limited financial development, a stock market is absent. In the other, an equity market is active. In either economy, inflation adversely affects capital formation and output. Individuals who hold liquid assets are always adversely affected by inflation, but the attitude of capital owners depends on the level of financial development. In particular, in the presence of a stock market, the impact of inflation on the welfare of capital owners is non-monotonic. Nevertheless, optimal monetary policy is always more conservative at higher levels of financial development

Edgar Ghossoub and Robert Reedy

2012: Economic Development and the Welfare Costs of Inflation It has been widely observed that the role of money in the ?nancial system varies across developing and advanced countries. While the connections between economic development and the e¤ects of monetary policy on macroeconomic outcomes appear to be well understood, their consequences for living standards across the world are not. That is, existing research on the welfare costs of in?ation has focused nearly ex- clusively on the United States. In contrast to the existing literature, this paper seeks to determine the gains from eliminating in?ation across a broad section of countries. These countries vary according to their: (i) level of economic development, (ii) re- liance on cash for transactions, and (iii) average in?ation rates. Upon calibrating our model to quantify the role of money for transactions in the economy, we ?nd that there are substantial di¤erences in welfare costs across countries. Notably, the welfare costs of in?ation in advanced countries such as the United States are quite low. In particular, the cost of in?ation in countries such as Germany and the United States may be as low as 0.3%. However, the gains from eliminating in?ation in the developing world are much higher. Di¤erences in total factor productivity promote capital accumulation and reduce the reliance on cash in advanced countries so that the e¤ective tax rate on capital formation is mitigated

Edgar Ghossoub

2012: Bohn’s Test of Fiscal Sustainability of the American State Governments The dramatic fall in state government revenues during the “Great Recession” and the resultant large budget deficits accentuated concerns about the fiscal sustainability of state finances. We use a model-based approach proposed by Bohn (1998) to test for state fiscal sustainability. In this approach, a positive response of the primary surplus to government debt (both as a ratio of output) constitutes a sufficient condition for sustainability. We use the data for panel of 48 contagious states (1961-2008) and several model specifications that control for measures of cyclical variations in state output and government expenditures, presence of balanced budget requirements in state constitution or statutes, the partisan balance of the state government, and /or regional factors. We found consistent evidence in favor of state fiscal sustainability. Our results also suggested that the primary surplus ratio was higher in states with a higher degree of fiscal stringency in general and “own-revenue” and “no-deficit-carryover” anti-deficit provisions in particular. Finally, we found mixed results in relation to the effects of the partisan balance and divided state government on the primary surplus ratio

Saeid Mahdavi

2012: OBSTACLES TO SUCCESS IN THE WORKPLACE FOR PEOPLE WITH DISABILITIES: A REVIEW AND RESEARCH AGENDA

Mukta Kulkarni and Mark Lengnick-Hall

2012: EVALUATING THE EFFECT OF INDUSTRY SPECIALIST DURATION ON AUDIT QUALITY AND AUDIT FEES

Jose Vega and Dennis López

2012: Price Promotion (In)consistency and Consumers’ Brand Evaluations: The Role of Reference Prices

Ashok Lalwani, David Silvera and Kent Monroe

2012: Variations in Information Security Cultures across Professions: A Qualitative Study

Sriraman Ramachandran, Srinivasan Rao, Timothy Goles and Gurpreet Dhillon

2012: Phonetic Similarity in Brand Name Innovation

Tina Lowrey and Ann Kronrod

2012: Audit Market Concentration and Auditor Tolerance for Earnings Management

Jeff Boone, Inder Khurana and K. K. Raman

2012: Mathematical formulation and exact solution for landing location problem in tropical forest selective logging, a case study in Southeast Cameroon

Julien Philippart, Minghe Sun and Jean-Louis Doucet

2012: Golden Parachutes, Incentives, and the Cost of Debt

John Wald, Sattar Mansi and Anh Nguyen

2012: Investigating the Reciprocal Relationships Within Health Virtual Communities

Zhechao Liu, Nima Kordzadeh, Yoris Au and Jan Clark

2012: Is the stationarity of the yen real exchange rates a puzzle? This paper attempts to shed light on the puzzling finding that the results of applying the conventional or nonlinear unit root tests to the yen real exchange rates (RERs) in some recent studies appear to be rather sensitive to whether or not including the data of recent decade in the studies. It is found that this sensitivity of the test results may come from the failure to take into account the large rise and fall in the yen RERs. Using the newly developed unit root tests which account for the presence of multiple smooth temporary breaks in the RERs, the results clearly show that the yen RERs in the post-Bretton Woods period can be characterized as being linear or nonlinear stationary around infrequent smooth temporary mean changes, supporting the validity of PPP

Su Zhou

2012: A Phase I Dose-_finding Study Based on Polychotomous Toxicity Responses Toxicity issue is always a main concern in phase I study and it is commonly categorized to multiple grades. In this study, the concept of overall maximum tolerated dose (overall MTD) is introduced along with its analytic properties. The traditional definition of MTD is shown to be a special case of the overall MTD. A dose finding strategy is also proposed to find the overall MTD. Motivated by the continual reassessment method (CRM), a cumulative probit model with latent variables is introduced to fit the data. By introducing latent variables, Markov chain Monte Carlo (MCMC) methods are employed to estimate the model parameters. Simulation studies show that the cumulative probit model, which takes into account of the severity level of toxicity, reduces the number of patients allocated to the higher toxicity dose level. This could reduce the risk of toxicity for patients in the phase I study

Xiaobin Yang and Keying Ye

2012: Market for Accounting Faculty This paper addresses compensation of a group of individuals of particular interest to the target audience – accounting faculty. We observe that salary increases with publications, with the magnitude of those increases related to journal quality, i.e., the payment for a top tier publication exceeds that of a second tier publication, etc. For example we estimate the increase in annual salary for a top tier publication to be close to $4,000, with the increase varying across ranks - from about $2,500 for a full professor, to over $9,000 for an assistant. Given that these are annual increases in base salary, under reasonable assumptions for longevity and discount rate, the present value of a top tier publication easily tops $100,000 for an assistant professor! In addition we find salary increases with the prestige of the school at which the individual is employed, the individual’s rank, and the cost of living of the city in which the employing school is located. We also find salary increases with prestige of the school from which the individual received his/her degree, although the premium dissipates over time. Not surprisingly we find a reward to mobility/penalty to loyalty. That is, we observe a statistically significant negative association between accounting faculty salary and the number of years the faculty member has been with his/her current employer

Sharad Asthana and Steven Balsam

2012: Central Bank Liquidity Provision and Financial Sector Competition This paper presents a general equilibrium production economy where money is essential and financial intermediaries provide important economic functions. In this setting, we study the effects of liquidity provision by the monetary authority under two different banking structures: a perfectly competitive and a fully concentrated banking system. When the banking sector is perfectly competitive, liquidity injections through an open market purchase stimulate capital investment and production. Interestingly, an expansionary monetary policy can become contractionary when the banking sector is fully concentrated. This necessarily happens in economies where government liabilities constitute a large fraction of total deposits and inflation is high. Moreover, we demonstrate that imperfect banking competition is a source of indeterminacy of dynamical equilibria. More specifically, the economy can display Hopf bifurcation. However, monetary policy plays an important role in controlling deterministic cycles and endogenous volatility that could arise under a fully concentrated banking sector

Hamid Beladi and Edgar Ghossoub

2012: Cultural Differences in Response to Social Exclusion Two experiments tested the hypothesis that subtly different types of social exclusion (being ignored vs. being rejected) produce very different consumer responses and these responses are moderated by cultural orientations. For people from individualistic cultures, inducing feelings of being ignored produced a greater preference for conspicuous consumption than did being rejected, whereas being rejected produced a greater preference for helping behavior than did being ignored. However, these findings were reversed when it comes to people from collectivistic cultures. For them, feelings of being ignored produced a greater preference for helping behavior than did being rejected, whereas feelings of being rejected produced a greater preference for conspicuous consumption than did being ignored

L. J. Shrum and Jaehoon Lee

2011: Does Index Speculation Impact Commodity Prices? An Intraday Futures Analysis Using intraday data, we find that unidirectional causality runs from commodity index linked commodity futures to non-index linked commodity futures for up to one hour but disappears when using daily data. Also, the economic significance of index to non-index commodity transmission declines to zero within about an hour. Finally, we find that the magnitude of index-to-non index returns relationships are positively related to the amount of speculation, both long and short, in the GSCI commodity index futures contract. We conclude that speculative pressures exerted by commodity index investors can impact non-index commodities. These results are likely not due to speculative pressure itself, but rather the subsequent price destabilizing trades of uninformed, positive feedback traders

Yiuman Tse and Michael Williams

2011: On Merger and Acquisition and Protectionism We develop a dynamic model of merger assuming a monopolistic competitive market with heterogeneous rms. We show the existence of a non-trivial equilibrium in the merger market and the conditions under which mergers lower the industry aggregate price. Most importantly, we show as our main result that merger and acquisition activities are in a sense protectionary, nonetheless they can be welfare improving

Hamid Beladi and Reza Oladi

2011: Could IFRS Replace US GAAP? A Comparison of Earnings Attributes and Informativeness in the US Market*

Elizabeth Gordon, Bjørn Jørgensen and Cheryl Linthicum

2011: Debt Covenants, Bankruptcy Risk, and Issuance Costs

Sattar Mansi, Yaxuan Qi and John Wald

2011: The Impact of Trading Activity by Trader Types on Asymmetric Volatility in Nasdaq-100 Index Futures

Jullavut Kittiakaraskun, Yiuman Tse and George Wang

2011: Whither Germany and the EMU In a Challenging Environment?

Lila Truett and Dale Truett

2011: Litigation Risk and Abnormal Accruals

Jeff Boone, Inder Khurana and K.K. Raman

2011: THE MARKET FOR AUDIT SERVICES AND S&P 500 INDEX CLIENTS

Sharad Asthana and Rachana Kalelkar

2011: Performance measurement and antecedents of early internationalizing firms: A systematic assessment

Gordian Rättich, Kim Clark and Evi Hartmann

2011: A Study of the Probit Model with Latent Variables in Phase I Clinical Trials

Xiaobin Yang, Keying Ye and Yanping Wang

2011: An Elementary Proposition on Technical Progress and Non-traded Goods

Hamid Beladi

2011: The South Korean Auto Industry: All Grown Up Now? Since 1962, South Korea has recognized the motor vehicle industry as a critical industry for economic development. The government has been closely involved in the industry's growth from infancy to its current position among the top five motor vehicle producers in the world. The results of this study strongly suggest that the industry as a whole has achieved a minimally efficient scale of operations. However, cross price elasticity estimates indicate that many rigidities exist in the input markets, particularly with respect to outsourced intermediate products. The restrictions on imports of these products may have to be reduced as South Korea seeks to expand its global trade footprint by participating in bilateral preferential trade agreements, presenting challenges for the industry

Lila Truett and Dale Truett

2011: Do Stock Markets Catch the Flu? We examine the impact of influenza on the U.S. stock market. A higher incidence of flu is associated with decreased trading, decreased volatility, and higher bid-ask spreads. We also find some evidence that more flu implies lower stock returns. Consistent with the flu affecting institutional investors and market-makers, the decrease in trading activity and volatility is primarily driven by the incidence of influenza in the greater New York City area. However, the effect of the flu on bid-ask spreads and returns is driven by the incidence of flu nationally. We provide estimates of the potential impacts of a pandemic on equity returns

Yiuman Tse, Brian McTier and John Wald

2011: The Relationship between Currency Carry Trades and U.S. Stocks The article examines the relationship between daily returns of currency carry trades and U.S. stocks from January 1995 through September 2010. Carry trade and stock returns are highly correlated with no Granger-causality in either direction. An EGARCH model shows that significant volatility spillovers flow from the stock market to the carry trade market, but not vice versa. The markets are more correlated in periods of high volatility. Volatilities in both markets also increase more with negative innovations than positive innovations. A sectoral analysis of the index suggests that volatilities of cyclical stocks have more impact than non-cyclical stocks on carry trades

Yiuman Tse and Lin Zhao

2011: Do Stock Markets Catch the Flu? We examine the impact of influenza on the U.S. stock market. A higher incidence of flu is associated with decreased trading, decreased volatility, and higher bid-ask spreads. We also find some evidence that more flu implies lower stock returns. Consistent with the flu affecting institutional investors and market-makers, the decrease in trading activity and volatility is primarily driven by the incidence of influenza in the greater New York City area. However, the effect of the flu on bid-ask spreads and returns is driven by the incidence of flu nationally. We provide estimates of the potential impacts of a pandemic on equity returns

Yiuman Tse, Brian McTier and John Wald

2011: On Competition for Listings

Hamid Beladi, Nicholas Tay and Reza Oladi

2011: A Holistic View of Trade, Pollution Permits and Abatement

Hamid Beladi, Lu Liu and Reza Oladi

2011: Outsourcing: Volume and Composition of R&D

Hamid Beladi, Sugata Marjit and Lei Yang

2010: Linear Models for Multivariate Repeated Measures Data

Anuradha Roy

2010: Fiscal Stringency and Fiscal Sustainability in the American States: Panel Evidence

Saeid Mahdavi

2010: Maximum Lilkelihood and Restricted Maximum Likelihood Estimation for a Class of Gaussian Markov Random Fields

Victor De Oliveira

2010: IT Innovativeness and Environmental Consciousness on Organizational Performance

Myung Ko

2010: The Antecedents and Consequences of Defensive Attributions inProduct-Harm Crises

David Silvera

2010: IT Innovativeness and Environmental Consciousness on Organizational Performance

Myung Ko

2010: Intergenerational Bargaining and Indeterminacy of Equilibria

Edgar Ghossoub

2010: Exchange Rate Pass-Through: A Generalization

Hamid Beladi, Avik Chakrabarti and Sugata Marjit

2010: Auditor Type and Audit Quality Differences in Nonprofit Healthcare Organizations – U.S. Evidence

Dennis Lopez and Pamela Smith

2010: The Choice of Operating Cash Flow in Incentive Compensation

Emeka Nwaeze

2010: A Branch-and-Bound Algorithm for Representative Integer Efficient Solutions in Multiple Objective Network Programming Problems

Mingue Sun

2010: The Relationship between Commodity Prices and Currency Exchange Rates: Evidence from the Futures Markets

Yiuman Tse

2010: The Korean Textile Industry: Still Competitive, After All These Years?

Lila Truett

2010: Nonlinearity and stationarity of inflation rates: Evidence from the euro-zone countries

Su Zhou

2010: Liquidity Risk and Financial Competition: Implications on Asset Prices and Monetary Policy

Edgar Ghossoub

2010: Real Earnings Management through Share Repurchases

Sharad Asthana