Junk-bond issuers, underwriters, and investors each abandoned established standards of value for new, less rigorous criteria. Excessive prices were paid for businesses by buyers able to issue risky paper to investors who in turn stretched their own customary analytical standards to justify the prices paid. New wrinkles, such as non-cash-pay bonds and interest rate reset features, camouflaged the relaxation of standards. The substitution of cash-flow analysis for other barometers of business performance also contributed. It is crucial that investors understand how the relaxation of standards came about, for the process was so subtle that many junk-bond buyers were probably not even aware that it had occurred. The relaxation of investment standards by junk-bond investors was accompanied by the dangerous misconception that the amount of debt and equity in a company's capital structure junior to one's own investment provided a degree of protection. It was as if the value of a business...
Although direct solution of the coupled equations for the potential is not difficult using Mathematical Solve function, it can be much more difficult to program an efficient direct solution in other computing environments where access to sophisticated linear algebra packages may be limited. In these situations, relaxation methods are often useful. These methods have the advantage that they are relatively simple to code, needing no sophisticated external library routines. On the other hand, they are typically not as fast as the direct methods. In the following relaxation method, one uses the following idea solutions to Poisson's equation can be thought of as the equilibrium solution to the heat equation with a source, Eq. (6.2.26). Starting with any initial condition, the heat equation solution will eventually relax to a solultion of Poisson's equation.
Deregulation era that escaped CAB controls altogether by confining their services within one state. Outstanding examples were Pacific Southwest Airlines within California and Southwest Airlines within Texas. However, with the relaxation of entry controls under deregulation, these operators extended their services well beyond their home states.
Another characteristic of airline service may seem somewhat contradictory to the one just mentioned. It is that airlines may have an inherent tendency toward gradual elimination of competitors, with a resultant oligopoly, or even monopoly, in a market. This is a controversial point, but a belief in such a tendency has been one basis for the existence of governmental economic regulation of the industry. Is it contradictory to say that this is a field that competitors can enter with ease, yet at the same time a field where only the strongest will survive It is not contradictory if we distinguish between the short run and the long run. It is one thing for a small company to enter the airline business, and quite another for it to survive. The relaxation of entry controls that came with deregulation has been followed, as we will later see, by the entry of many new small airlines but the survival of very few.
Among transportation companies, the railroads seem the most likely example of the natural monopoly with their heavy investment in right-of-way and track. Yet there are pairs of cities served by more than one railroad, and the term natural monopoly must be applied with some caution. Neither the trucking industry nor the airlines would appear to fit this natural monopoly concept. Federal economic regulation for them has meant regulating the degree of competition in each market, which can be a more complex task than the job faced by a public utilities commission regulating a monopoly electric power company. The relaxation of the economic regulation of airlines has had its counterpart in similar relaxation for the motor carriers and, to a lesser extent, for the railroads. But while proponents of this deregulation questioned the usefulness of regulating these carriers, they in no way disputed the high degree of their importance to society.
This is particularly relevant in the forthcoming market for 3G mobile services in Europe, where a new design of market structure has taken place. Governments decided for simultaneous entry of a larger number of firms than for 2G (second-generation) mobile services, but with apparently little assessment of whether the new market would support such a large number of firms. Moreover, there has been a tendency to privilege auctions as the assignment method. It has turned out that with auctions there is a tendency to increase the number of firms in the industry, and with individual firms paying more than with other assignment methods. Chapter 7 develops a benchmark model that illustrates the interplay between sunk costs, such as licence fees, and market structure. It suggests that 'overbidding' of licence fees may occur, at the expense of forsaking the market structure envisaged by the policy maker or of collusion at the post-entry stage in the market. The model's...
A decline in the real interest rate will increase investment and will increase risk for each investor
If we accept that investment is riskier than consumption, the second assumption follows from a standard substitution effect. The real interest rate decline will encourage investment, which implies a riskier set of portfolio holdings. Note that the concept of a real interest rate decline is a general one, and may include relaxation of finance constraints, as well as declines in observed market rates. When an individual cannot borrow, he or she faces an effective real interest rate which is prohibitively high or infinite the subsequent ability to borrow implies a fall in real rates.
The pervasive optimism of investors led to a relaxation of investment standards. A study by Barrie Wigmore, a limited partner at Goldman Sachs, showed that the typical interest coverage ratio for newly issued junk bonds declined drastically between 1980 and 1988 to the point where it fell below 1.0 that is, pretax earnings were less than interest expense for the aver
The great relaxation of governmental barriers to domestic entry brought about by deregulation seemed, by the late 1980s, to have been succeeded by a nongovernmental, but nonetheless effective, process by which a large, well-established airline can prevent the entry, or limit the scope of entry, of a competitor into its markets, especially if the competitor is a new or small airline.
Most generally, changes in real interest rates are not the only potential influence on investment, as discussed above. Lucas correctly criticizes over-reliance on real interest rate mechanisms, but we need not reject investment-based theories as a result. Changes in expectations, shocks to retained earnings, relaxation of finance constraints, and uncertainty resolution all may play critical roles in the cycle.
Positive comovement poses a dilemma for theories of the business cycle expansion which start with the assumption of full employment. Comovement requires that all, or nearly all sectors of the economy expand at once, as we usually find in the data. Such a general expansion requires a relaxation of real resource constraints real business cycle theory advocates sometimes cite this point in support of approaches based on aggregate productivity shocks. If we start with a full employment assumption, the production possibilities frontier must expand to generate positive comovement.
With the demise of the board, DOT took over this function. While there has been some relaxation of reporting requirements, consistent with the regulatory reform trend, much data are still filed and available to the public. These records show traffic and revenue, broken down in various ways such as by passengers and cargo, and aircraft statistics. Of course there are balance sheets and income statements. But the accounts also cover costs, the portion of them that we are concerned with in this chapter.
Recovery of raw-material prices from 1933 to 1937 was followed by some considerable reduction in tariffs, and relaxation of quota restrictions. The renewed, though less far-reaching, decline of these prices in September 1937, outside the fields dominated by European rearmament, set back the movement towards freer trade. The last five years of the interwar period were most clearly characterized by what have been called disparate world trading systems (Tasca, 1938). At the limits were the system of German trade, locked into a network of bilateral clearing and payments agreements, and practising autarky for the sake of war economy (Petzina, 1968), and at the other extreme, the United States, which stood aloof from all payments and clearing agreements, with few quota restrictions, largely in agriculture, some subsidies to export in agricultural commodities, plus government credit through the Export-Import Bank for export promotion. Within Europe, the Balkan countries were nearer to the...
This diminution of genetic control has allowed cognitive development to be shaped by interaction with particular environments at the level of the individual, on evolutionary principles of variation and selective preservation. Thus the evolutionary process has itself evolved, as genetic determination has been supplemented by a genetically enabled potential for adaptation on a much shorter timescale than genetic evolution. The principle that greater diversity requires a relaxation of central control is familiar in studies of organisational design and innovation and it is, of course, a central principle of Austrian economics. (It is not good news for economists who rely on general equilibrium modelling.) That this diversity within the human species should apparently be an unintended consequence of the increase in brain size (even though to a neoDarwinian all consequences are unintended) should also appeal to an Austrian mindset.
The loss of genetic control has allowed cognitive development to be shaped by interaction with particular environments at the level of the individual, on evolutionary principles of variation and selective preservation. Thus the evolutionary process has itself evolved, as genetic determination has been supplemented by a genetically-enabled potential for adaptation on a much shorter time scale than genetic evolution (though even within a human lifetime, as Adam Smith realised, the development of domain-specific skills and habits of thought may lead to dangerous reductions of adaptability). The evolution of the evolutionary process (though not precisely so expressed) is also a feature of Adam Smith's psychological theory of the growth of knowledge, in which specialisation between individuals, in both knowledge and capabilities, is a later development that enhances the effectiveness of the powerful human motivation to create mental models of puzzling phenomena (Loasby, 2002). The...
Monetary policy has become virtually synonymous with variations in the interest rate, which have an uncertain effect on the rate of inflation and economic activity. Alternative forms of monetary policy should also be considered (Arestis and Sawyer, 2005). Explicit forms of credit control implemented by the Central Bank, or other government agencies, could be used to supplement interest rate policy. There are well-known difficulties with the use of credit controls. They can be evaded (legally or otherwise) through switching from regulated to unregulated forms of credit including the development of products which fall outside the range of regulation and the switch of lending to overseas sources. Credit controls may have some effect in restraining credit and thereby expenditure, but the relaxation of credit controls may do little to stimulate expenditure during a downswing.
Heuristiques Et Methodes De Decomposition Appliquees A Loptimisation Commerciale Et Technique A La Sncf
RESUME - ABSTRACT LA GENERATION DE COLONNES A MONTRE, CETTE DERNIERE DECENNIE, UNE GRANDE EFFICACITE DANS LA CONSTRUCTION D'HORAIRES DE PERSONNELS ROULANTS. CEPENDANT, SON APPLICATION A LA SNCF SOULEVE D'IMPORTANTES DIFFICULTES DUES A LA COMPLEXITE DU SOUS-PROBLEME DE PLUS COURT CHEMIN AVEC CONTRAINTES SUPPLEMENTAIRES. LES TECHNIQUES DE PROGRAMMATION DYNAMIQUE NE PERMETTENT PAS D'ATTEINDRE LES NIVEAUX DE RAPIDITE RENCONTRES DANS LA LITTERATURE, ET OBLIGENT A CONTRAINDRE SEVEREMENT LE NOMBRE D'APPELS AU SOUS-PROBLEME. DANS CE CONTEXTE, LES TECHNIQUES D'INITIALISATION COURANTES CONDAMNENT L'APPROCHE DANS SON ENSEMBLE, ET INCITENT A CONSTRUIRE DES HEURISTIQUES D'INITIALISATION BASEES SUR UNE UTILISATION ORIGINALE DU GRAPHE DU SOUS-PROBLEME. CE PRINCIPE D'HYBRIDATION DES METHODES DE DECOMPOSITION PAR DES HEURISTIQUES EST EGALEMENT APPLIQUE A LA RESOLUTION D'UN PROBLEME D'ALLOCATION STOCHASTIQUE DE RESSOURCES (YIELD MANAGEMENT) RESOLU PAR RELAXATION LAGRANGIENNE ET ALGORITHME DE...
Some of the assumptions involved in the above analysis should be examined at this stage. The last three conditions in subsection 8.4.1 are all questionable in terms of their realism. Entry and exit barriers may be low rather than nonexistent, and some firms may be more efficient than others. Thus the relaxation of the third and fourth assumptions may result in some firms being able to make supernormal profit in the long run. Only the marginal firm, meaning the least efficient firm, may in fact just be making normal profit, while all other firms make some amount of supernormal profit, depending on their efficiency and the level of entry and exit barriers.
While the difference may be largely attributable to the changing of staff, and demonstrates the effect of relaxation of survey controls and standards, and while variability of estimates using the same staff would be much smaller, the episode demonstrates clearly both the truth that different interviewers arrive at different results and that bias is introduced into the data by interviewers.14
During the First World War, the white miners' union1 had succeeded in enforcing wage-rate increases many times larger than those obtained by the unorganised Africans. But the position of the latter had in some respects improved because, through the emergency, they had been permitted to undertake semi-skilled work especially as drill-sharpeners. This opportunity for a small proportion of Africans mitigated the increased costs of mining gold, the price of which rose to a premium after the war for a short period only. When it was obvious that the sterling price of gold would return to its standard level, the mine-owners naturally attempted to retain Africans in semi-skilled tasks and tried further to obtain some relaxation of other wasteful provisions enforced through regulations under the 1911 Colour Bar Act. They asked for a ratio of 10.5 Africans to 1 White but the labour union demanded 3.5 to 1. A disastrous strike followed in 1922. The miners were supported by a general strike on...
Using members of the public observed this punishment and, finding it unpleasant, began to clamor for a reduction or relaxation of legal standards. The effect is, of course, to increase demands for marijuana usage, with subsequent further demands for reduction in punishment, or decriminalization. The sequence may be stopped only after the legal restrictions on behavior are abandoned and marijuana usage shifted to that set of social interactions that is organized anarchistically. The implication that may be drawn from the analysis, and the example, is that the basic social decision on whether such restrictions should be imposed should be made in an ex ante planning or constitutional stage and that this decision should not be influenced unduly by observed impositions of penalties.
Marginal tax, 45, the comparable externally imposed component. In such a model, the added assumption that the choosing-acting person places no evaluation on either the utility levels attained by others or the changes in these levels that are the results of his own behavior will restore the consistency between the Pigovian policy logic and overall efficiency norms. What we now must show is that, even if we retain the narrowly defined self-interest assumption about individual behavior, any relaxation of the assumption about ''profits'' or ''quasi-rents'' in alternative courses of action will undermine the whole policy apparatus.
The strict requirement of budget-balance will, however, during periods of unemployment also distort the individual choice calculus. Under the balance constraint, the individual will necessarily overestimate the real costs that public expenditure programs involve in such circumstances. In the essentially mixed post-Keynesian world, where elements of both the full-employment and the unemployment model are likely to be present, the relaxation of the budget-balance rule along with the absence of an agreed-on alternative makes any reasoned comparison of benefits and costs almost impossible. To the extent that governmental budgets are used to achieve what are essentially macro-economic objectives without the constraints of predictable rules, the scope for individual control over the size and composition of budgets, through ordinary democratic procedures, must be progressively reduced. How is it possible for the individual to answer the question, How much public goods should I purchase if,...
One of the more important of our simplifications has been the assumed absence of monopoly power throughout the market. In particular, no resource was monopolized, and no monopoly in the production of any one product was assumed. In the next chapter we will explore the implications of the relaxation of this no-monopoly assumption.
After liberalizing capital flows in 1987-1992 by exempting foreign investors from capital gain taxes, Brazil started to tighten its capital controls on short-term capital flows once again in 1993. The objective was to introduce a larger spread between domestic and international interest rates in order to, in turn, control the aggregate demand and inflationary pressures. Brazilian capital controls were implemented also in an attempt to shift the composition of inflows toward longer-term investments. Examples of the specific implementation of capital controls in Brazil include an increase in the minimum average amortization terms for loans from 30 to 36 months and the income tax reimbursement period from 60 to 96 months. After another brief relaxation of capital restrictions in 1995, Brazil raised the tax rates on certain capital flows again in 1996. Thus, Brazil is the most prominent example of the on-off-type capital control policies.
Banking, and digital currency services, for example, are necessary for the virtual market. A firm that can dominate the world digital currency market can take a lion's share of the seigniorage. Such a firm must possess the reputation and capital necessary to convince consumers to hold its currency, just as the wealth and credibility of the U.S. government is the sole guarantee to those who hold dollars. The process of vertical integration and monopolization in all these sectors of the worldwide economy has been unimaginable, but is becoming a reality driven by the convergence in markets and the relaxation in or lack of regulatory market interventions.
The shadow price of a constraint is the reduction in cost (more precisely the increase in total surplus) that would result from a small relaxation of that constraint For example, if a 1 kW increase in the flow limit of a power line would reduce the cost of delivered power by 3 h by allowing more use of a cheap remote generator, then the shadow price of the line is 3 kWh,
Model that allows for a real balance effect. Figure 13.4 shows the effect of a positive monetary shock in the credit channel framework. A positive monetary shock (a relaxation in monetary policy) results in a strengthening of corporate balance sheets which causes a reinforcing rightward shift of the IS curve.
Also, in the 1990s, there has been a progressive relaxation of capital controls. Some countries moved earlier than others, for example, the UK in 1979, but relaxation of capital controls has been increasingly encouraged by the International Monetary Fund (IMF) as a means of stimulating inward portfolio and direct (in plant and machinery and so on) investment to facilitate economic development. The result has been a rapid growth in overseas portfolio investments by mutual, insurance and pensions funds, with UK and US institutional investors playing a prominent role. Further, the conclusion of the GATS agreement relating to financial services in the mid-1990s encourages the opening of financial sectors in countries around the world to entry by foreign financial institutions. Progress with European financial integration, which has culminated in the European Monetary Union (EMU) and the creation of 'Euroland', is encouraging more cross-border activity in the financial service sector,...
There are many explanations for volatility in business value. The credit cycle, the periodic tightening and relaxation of the availability of credit, is a major factor, for example, because it influences the cost and terms upon which money can be borrowed. This in turn affects the multiples that buyers are willing to pay for businesses. Simply put, buyers will willingly pay higher multiples if they receive low-rate nonrecourse financing than they will in an unleveraged transaction.
But it was not until 21 May 1990 that the BoT took the most important step in the process of exchange rate deregulation by accepting the obligations under Article VIII of the Articles of Agreement of the International Monetary Fund (IMF), and implementing the first phase of exchange control relaxation. The aim was to liberalize the foreign exchange system in line with the globalization of the economic and financial systems, and allow freedom of international capital movements. Specifically, exchange rate deregulation was implemented in three main phases. Phase I of the
To show that X indeed measures the sensitivity of Z to changes in the constraint, let us perform a comparative-static analysis on the first-order condition (12.8). Since A, x, and y are endogenous, the only available exogenous variable is the constraint parameter c. A change in c would cause a shift of the constraint curve in the xy plane and thereby alter the optimal solution. In particular, the effect of an increase in c (a larger budget, or a larger production quota) would indicate how the optimal solution is affected by a relaxation of the constraint.
The second phase of deregulation was the relaxation of the specialization of business between banks and other financial intermediaries allowing both parties to compete in each other's markets. In the UK this was about the opening up of the mortgage market to competition between banks and building societies in the 1980s. The Building Societies Act 1986 in turn enabled building societies to provide consumer credit in direct competition with the banks and specialized credit institutions. In the USA, the Garn St Germain Act 1982 enabled greater competition between the banks and the thrift agencies. A further phase came later in 1999 with the repeal of the Glass Steagal Act (1933) that separated commercial banking from investment banking and insurance services.
Chapter 3 will cover in more detail the complex and often fascinating subject of international cooperation in the economic regulation of airlines and of recent efforts by the United States to bring about a relaxation of governmental controls on international services. As we will see, a type of bilateral agreement described as open skies has been negotiated with several countries which allows airlines of each country to serve whichever points they choose in the other country.
The authors seem to implicitly suggest a change in approach from the United Nations Conference on Trade and Development (UNCTAD) may be called for and that open registries should no longer be castigated as an undesirable feature of the modern shipping industry. Since the advent of the Second Register (discussed earlier) and the implementation of Port State Control, this appears to be an entirely sensible suggestion that warrants further discussion. The one caveat over any possible relaxation of attitudes towards open registries and their possible acceptance should be, however, a concommitant tightening up of safety and environmental regulation and its enforcement in order to avoid the worst excesses of the open registry system. Persuading the ITF that this is a policy worth pursuing, however, may prove to be a rather more difficult concession to obtain.
There are two main aspects of usefulness to be considered. The first concerns the implications of the BPM, along with the other elements of the neoclassical model, in terms of welfare and efficiency. The second involves an aspect that has already been discussed in the previous chapter, the ability to explain and predict, combined with sensitivity to a relaxation of assumptions. These are now discussed in turn. Regardless of how nice and neat a set of conclusions is, such conclusions are useless in practice if the model underlying them is unable to produce accurate explanations and predictions. This point has been made in both of the first two chapters. As was noted in connection with the narrow self-interest model, the profit maximization model also performs well in this respect. The reason is the same the model is robust, meaning that it is not very sensitive to relaxations in its assumptions.
The question naturally arises whether we are at all able to really understand and assimilate such diversity, when humans in the ages when these works of culture were born obviously could not or would not. It has been proposed that we only have a partial understanding of all this, and that we use culture in a way which was never intended, as mere relaxation, escape, and recreation.
The divorce rate, after rising steadily throughout the twentieth century, exploded during 1960-80 in the United States, and has increased in parallel, though usually not at such a high level, throughout most of the world (Goode, 1993). Allen (1990) notes that no-fault divorce statutes seem to increase across cultures as more married women participate in the paid labour force, and South (1985) indicates the relationship between divorce and lack of strong social cohesion in the party's home state. Scholars debate whether no-fault divorce itself causes more divorces, though there is little doubt that the rates increase around the time no-fault is introduced (Nakoneszy et al., 1995). Peters (1986) used a panel data study to suggest that, under the Coase theorem, unhappy spouses would reach an efficient level of divorce. The relaxation of divorce grounds would negatively affect women, who would be forced to trade tangible property rights to keep a marriage together. Peters's results were...
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