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02-08 Beaulieu, Marie-Claude; Cosset, Jean-Claude; Essaddam, Naceur - The Impact of Political Risk on the Volatility of Stock Returns: the Case of Canada

This paper examines the impact of political risk in Canada on the volatility of stock returns. Our results suggest that political news associated with a possible separation of Quebec from Canada plays an important role in the volatility of stock returns. We also show that the volatility of stock returns varies with the degree of a firm’s exposure to political risk, namely, the structure of assets and the extent of foreign involvement.

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02-07 Fortin, Bernard - Les enjeux de l'économie souterraine

In this text, the underground economy is presented as a natural reaction of consumers and producers to the constraints and costs imposed by the government on exchanges. We provide a definition of the underground economy and discuss the causes and consequences of this phenomenon. We also present an analysis of some methods used by researchers to measure its importance. We finally insist on the necessity in the future to obtain new sources of information in order to better understand the factors that influence the decisions to work and to consume in the underground economy.

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02-06 Fischer, Klaus P.; Fournier, Eric M. - Does Corporate Governance Matter in Deposit Insurance? DI and Moral Havard in Joint Stock and Mutual Financial Intermediaries

In this paper, we analyze the differences of effects of a deposit insurance schemes on financial cooperative and joint stock banks risk taking. We develop a methodology which includes the specifics of the utility function for the financial cooperative and we compare the results to a similar profit maximizing joint stock bank. We find that the introduction of deposit insurance does in fact increase optimal risk level for the financial cooperative but less so than the stock bank. Thus, corporate governance does matter in the level of risk exposure of a deposit insurance scheme. Further, like in joint stock banks, this moral hazard can be curbed through incentives such as risk adjusted premias, risk adjusted regulatory capital and possibly reserve requirements.

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02-05 Tanguay, Georges; Hunt, Gary; Marceau, Nicolas - Using a Canadian-American Natural Experiment to Study Relative Efficiencies of Social Welfare Payment Systems

We study whether social welfare recipients may end up paying more for their grocery if social welfare payments are more concentrated over time. We first present a theoretical model showing that lower incomes in general and a lower lower bound of the income distribution lead to less mobility for poorer consumers. This causes local stores to have more market power and increase their prices when the incomes of poorer people go down and/or when the number of poorer people goes up. Secondly, we verify these theoretical findings by using a natural experiment to study links between food prices and the more restrictive timing of social welfare payments in Montreal, Canada compared to the timing in Bangor, Maine. We find some statistically significant evidence of : i) a negative effect on prices in the week of social welfare check issue ; ii) increasing prices over a month. We also find that some socio-economic factors such as a higher percentage of single-parent families in one area may increase prices charged by grocery stores in that area.

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02-04 Donni, Olivier - A Simple Model of Collective Consumption

In this paper, we present a collective model of household demand based on Pareto-efficiency. In addition, we suppose that (i) each household member is egoistic and consumption is purely private, (ii) there is a set of distribution factors and (iii) there is one exclusive good. Then we derive the testable restrictions which are implied by this
theoretical setting.

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02-03 Bibi, Sami - On the Impact of Better Targeted Transfers on Poverty in Tunisia

This paper describes the effects of general food subsidies on poverty in Tunisia, as revealed by household survey data for 1990. The analysis indicates that the poorest certainly take advantage of this system, but at the price of considerable leakages to non-poor people and at a sizeable economic efficiency loss resulting from relative price distortions. Further, non-parametric estimations suggest that there are no commodities predominantly consumed by the poor. This implies that targeting by commodities is not an effective way to fight against poverty and so, it is unlikely that restructuring the current scheme would improve significantly the living standards of the less well-off members of society. We then investigate the impact on poverty of a more targeted transfer scheme, based on proxy means-tests, using an appropriate econometric technique to model it. Simulations show that this design would be more effective in reducing poverty than the use of general food subsidies. Finally, dominance tests show that this design would first-order-dominate food subsidies scheme within a range of poverty lines including all those estimated and generally used for Tunisia.

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02-02 Fluet, Claude - Enforcing Contracts: Should Courts Seek the Truth?

I examine the case where fulfillment of a contractual commitment is only imperfectly verifiable and ask whether the court should then "tell the truth" regarding the action in dispute. I show that truth seeking does not maximize the expected surplus from contractual relationships. From the parties' viewpoint, the enforcer should disregard some of the available information and should sometimes rule in favor of one party, even though his understanding is that the other party is most probably right. The analysis provides a justification for rules of evidence in common law and for the use by courts of neutral normative priors regarding contending claims. 

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02-01 Desrochers, Martin; Fischer, Klaus P. - Corporate Governance and Depository Institutions Failure: the Case of an Emerging Market Economy

In this paper we study the relationship that exists between ownership and governance structure of depository institutions (DI) on one side, and the dominant cause of failure on the other. Extant theory implies that while in stock owned DI where management is either well controled (through markets or board control) or interests are aligned with those of shareholders, the dominant cause of failure will be moral hazard between shareholders and debtholders, manifested in balance sheet or off-balance sheet risk taking. On the other hand, in DI of diffuse ownership with poor management control or where management’s interests are not alligned with those of owners, the dominant cause of failure will be agency costs, manifested in expense preference behavior that leads of failure. We exploit the opportunity that offers the Colombian crisis of banks and financial cooperatives (FC) and the relatively good quality of data available for this country to perform the study. Our objective is to establish empirically the relative importance of these two conflicts as determinants of insolvency in DI. Results suggest that, in the case of Colombia, moral hazard is a key factor in explaining bank failure while agency costs explain insolvencies among FC. In state-owned banks both moral hazard and agency costs are significant in explaining failure. We also control whether the absence « quality of management » provides a better explanation of failure than agency costs, but reject this hypothesis.

 

Centre interuniversitaire sur le risque, les politiques économiques et l'emploi
ESG UQAM, Université du Québec à Montréal, C.P. 8888, Succ. Centre-Ville, Montréal (Québec) CANADA H3C 3P8
Madame Hélène Diatta  | Téléphone : 514 987-6181 | Télécopieur : 514 987-4707 | Courriel : diatta.helene@uqam.ca
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