A broadcasting media platform can only succeed if it has viewers. Otherwise, its revenues from advertising as well as its revenues from charging viewers would be zero. In the traditional world of free-to-air television, there is no direct mechanism for charging viewers, rather financing is obtained through advertising bought by firms that wish to promote their products. This environment typically produces a market failure since it is not possible for those viewers who really value a program and would be willing to pay a higher price to do so. The willingness-to-pay of viewers is not internalized by tv channels, thus resulting in sub-optimal allocations. With the appearance of encryption techniques and digital decoders viewers can be charged for their consumption of certain programming. Hence, each channel has two sources of income: subscription revenues and revenues from advertising. New technologies have the potential to transform the TV market into an on-demand service where consumers are able to choose what they want to watch and when they want to watch it. One may thus conclude that the relevance of market failures should be diminished in the new digital world. The purpose of this paper is to investigate under which conditions such conclusion can be supported by a formal analysis.
Clearly, the coexistence of different forms of finance is not unique to broadcasting, as many markets combine revenue streams of different kinds. What is special here is the so-called two-sided nature of the market. Advertising is typically a nuisance for viewers. Therefore, the amount of advertising constitutes an indirect charge to consumers. Viewers are interested in programming with little advertising; hence advertisers exert a negative external effect on viewers. Conversely, advertisers are interested in a large number of viewers; hence viewers exert a positive external effect on advertisers. Platforms compete for viewers and advertisers and the question in relation to sources of finance revolves around whether the outcomes generated by the market match preferences and promote welfare.
The effects of monetary policy shocks have been studied extensively on data for the U.S. economy, see e.g. Leeper, Sims and Zha (1996) and Christiano, Eichenbaum and Evans (1999). The consensus in this literature seems to be that a contractionary shock to monetary policy (i.e. an unanticipated increase in the fed funds rate) leads to “hump-shaped” decreases in output and inflation with peak responses after 1-2 years’ time. In empirical studies of open economies, there seems to be less consensus about the effects of monetary policy shocks, see e.g. Jacobson et al. (2002) and the references therein.
One natural question to ask is why it is interesting to study the effects of monetary policy shocks empirically. One obvious answer is that given the institutional setup in many countries where central banks have been assigned the task of stabilizing inflation using some kind of nominal interest rate as instrument, we want to understand if and how monetary policy affects the economy. In addition to establishing a nominal anchor (i.e an inflation target level), we want to know if movements in nominal interest rates matter for the short-run movements in aggregate quantities and prices. Unfortunately, theory cannot provide a clear cut answer to this question because it is possible to write down plausible theoretical models with very different implications regarding the real effects of monetary policy. This is the reason why I want to examine what the data suggest. Another answer to the question is that the data seem to reveal a lot of information that can be used to distinguish between competing theoretical models. Christiano, Eichenbaum and Evans (2001) argue that in order for a dynamic general equilibrium model to fit the estimated impulse response functions to a monetary policy shock, it needs to include adjustment costs to capital, habit persistence in consumer preferences, variable capacity utilization and sticky wages (Calvo style wage setting).
The current global financial crisis and the sharp reduction in trade flows have raised questions about the extent to which access to capital affects the ability of companies to produce and sell exports and to buy imports. There is a clearly identified channel between a crisis and a fall in export and import volumes, namely the concurrent impact on foreign and domestic output. This paper looks at whether banking and financing crises have an additional impact over and above the impact of output.
Although trade credits are self-liquidating, typically backed by receivables, with low transfer and convertibility risks, they often collapse during banking crises. One reason may be that trade credits often involve only a limited relationship between the company and the bank. In the height of a crisis, banks typically reduce overall country exposure following a decision to cap an institution’s country limit.2 Since trade credit lines are usually short-term, can be redeemed at par, and involve limited reputational risks, they are an easy asset class to cut in times of crisis. Indeed, trade credits declined by as much as 50 percent during the peak of the recent crises in Argentina and Brazil, and fell by a comparable magnitude during the Korean crisis of 1997–98.
