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on Business Economics |
| By: | Rebeca Jiménez-Rodríguez (CSEF-Department of Economics and Statistics, University of Salerno, 84084 Fisiano (SA),Italy.); Marcelo Sánchez (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.) |
| Abstract: | This paper assesses empirically the effects of oil price shocks on the real economic activity of the main industrialised countries. Multivariate VAR analysis is carried out using both linear and non-linear models. The latter category includes three approaches employed in the literature, namely, the asymmetric, scaled and net specifications. We find evidence of a non-linear impact of oil prices on real GDP. In particular, oil price increases are found to have an impact on GDP growth of a larger magnitude than that of oil price price increases are found to have a negative impact on economic activity in all cases but Japan. Moreover, the effect of oil shocks on GDP growth differs between the two oil exporting countries in our sample, with oil price increases affecting the UK negatively and Norway positively. |
| Keywords: | Macroeconomic fluctuations; Oil price shock; Non-linear models. |
| JEL: | E32 Q43 |
| Date: | 2004–05 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20040362&r=bec |
| By: | Pierre Mohnen; Pierre Therrien |
| Abstract: | This paper compares pairwise the innovation performance of Canada with France and Germany, respectively. The comparison is based on two ordered probit models with sample selection, one where innovation is measured by the introduction of new-to-the firm products and one where it is measured by the introduction of new-to-the market products. The econometric analysis attempts to explain part of the country differences as the result of the sectoral composition of output, and the effects of size, environment conditions (proximity to basic research and competition) and innovation activities (internal R&D, the number of innovation activities, cooperation and government support). The Canadian firms benefit from being larger and more numerous in receiving government support, but suffer from a lack of competition and internal R&D. These structural effects combined, while informative, are not enough to explain a lot of the basic pattern of innovation revealed by the raw data. If we take the stronger measure of first-to-market innovation as a yardstick of innovation, the observed pairwise country differences are less strong, and our model explains a little bit more of the observed differences. <P>Cette étude compare les performances d’innovation entre le Canada et la France d’une part, et entre le Canada et l’Allemagne d’autre part. La comparaison repose sur deux modèles de probit ordonné avec sélection. Le premier mesure l’innovation par l’introduction sur le marché de produits nouveaux pour la firme, le second par l’introduction de produits nouveaux pour le marché. L’analyse économétrique essaye d’expliquer une partie des différences nationales d’innovation par la composition sectorielle de la production, l’effet taille, les conditions environnementales (proximité de la recherche de base et concurrence) et les activités d’innovation (R-D interne, nombre d’activités innovantes, coopération et support gouvernemental). Les firmes canadiennes tirent avantage de leur plus grande taille et sont plus nombreuses à recevoir du support gouvernemental. Par contre, elles souffrent du manque de concurrence et de R-D interne. Au total, la prise en compte de ces effets structurels est certes révélatrice, mais n’explique qu’une faible partie des différences bilatérales dans les processus d’innovation. La mesure plus forte d’innovation par l’introduction de produits nouveaux pour le marché réduit les différences observées et les explique un peu mieux. |
| Keywords: | innovation, international comparisons, innovation, comparaison internationale |
| JEL: | O31 O51 O52 |
| Date: | 2005–09–01 |
| URL: | http://d.repec.org/n?u=RePEc:cir:cirwor:2005s-33&r=bec |
| By: | M. Hashem Pesaran; Til Schuermann; Björn-Jakob Treutler |
| Abstract: | The potential for portfolio diversification is driven broadly by two characteristics: the degree to which systematic risk factors are correlated with each other and the degree of dependence individual firms have to the different types of risk factors. Using a global vector autoregressive macroeconometric model accounting for about 80% of world output, we propose a model for exploring credit risk diversification across industry sectors and across different countries or regions. We find that full firm-level parameter heterogeneity along with credit rating information matters a great deal for capturing differences in simulated credit loss distributions. Imposing homogeneity results in overly skewed and fat-tailed loss distributions. These differences become more pronounced in the presence of systematic risk factor shocks: increased parameter heterogeneity reduces shock sensitivity. Allowing for regional parameter heterogeneity seems to better approximate the loss distributions generated by the fully heterogeneous model than allowing just for industry heterogeneity. The regional model also exhibits less shock sensitivity. |
| Keywords: | risk management, default dependence, economic interlinkages, portfolio choice |
| JEL: | C32 E17 G20 |
| Date: | 2005 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_1548&r=bec |
| By: | Paul Mizen (University of Nottingham, University Park, Nottingham, NG7 2RD, England); Philip Vermeulen (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany) |
| Abstract: | The excess sensitivity of investment to cash flow has been demonstrated in numerous stud- ies. Recent research has identified differences in the degree of sensitivity across countries, which it ascribes to the nature of the lender-borrower relationship in the financial systems of those countries. In this paper we offer new methods and results to determine whether differences are associated with structural explanations such as the nature of the financial system and industrial composition, or due to other firm-specific determinants such as size or creditworthiness. Unlike previous research we are able to systematically control for competing explanations in our data from more than one country and thereby isolate what drives the relationship. We find that creditworthiness is the main driving force of cash flow sensitivity. |
| Keywords: | Corporate investment; cash flow sensitivity; cross-country investment studies. |
| JEL: | E22 D92 |
| Date: | 2005–05 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20050485&r=bec |
| By: | Acemoglu, Daron; Aghion, Philippe; Griffith, Rachel; Zilibotti, Fabrizio |
| Abstract: | This paper investigates the determinants of vertical integration. We first derive a number of predictions regarding the relationship between technology intensity and vertical integration from a simple incomplete contracts model. Then, we investigate these predictions using plant-level data for the UK manufacturing sector. Most importantly, and consistent with theory, we find that the technology intensities of downstream (producer) and upstream (supplier) industries have opposite effects on the likelihood of vertical integration. Also consistent with theory, both these effects are stronger when the supplying industry accounts for a large fraction of the producer's costs. These results are generally robust and hold with alternative measures of technology intensity, with alternative estimation strategies, and with or without controlling for a number of firm and industry-level characteristics. |
| Keywords: | hold-up; incomplete contracts; internal organisation of the firm; investment; R&D; residual rights of control; technology; UK manufacturing; vertical integration |
| JEL: | L22 L23 L24 |
| Date: | 2005–09 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:5258&r=bec |
| By: | Fabio Moneta (Finance Department, Carroll School of Management, Boston College, 140 Commonwealth Avenue, Chestnut Hill, MA 02467-3808.) |
| Abstract: | This paper studies the informational content of the slope of the yield curve as a predictor of recessions in the euro area. In particular, the historical predictive power of ten yield spreads, for different segments of the yield curve, is tested using a probit model. The yield spread between the ten-year government bond rate and the threemonth interbank rate outperforms all the other spreads in predicting recessions in the euro area. The result is confirmed when the autoregressive series of the state of the economy is added in the same model. The forecast accuracy of the spread between 10-year and 3-month interest rates is explored in an exercise of out-of-sample forecasting. This yield spread appears to contain information which goes beyond the information already available in the history of output, providing further evidence of the potential usefulness of this indicator for monetary policy purposes. |
| Keywords: | Probit model; forecasting; recessions; yield curve. |
| JEL: | E44 E52 C53 |
| Date: | 2003–12 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20030294&r=bec |
| By: | Kjell Erik Lommerud; Frode Meland; Odd Rune Straume |
| Abstract: | We analyze unionized firms’ incentives to outsource intermediate goods production to foreign (low-cost) subcontractors. Such outsourcing leads to increased wages for the remaining in-house production. We find that stronger unions, which imply higher domestic wages, reduce incentives for international outsourcing. Though somewhat surprising, this result provides a theoretical reconciliation of the empirically observed trends of deunionization and increased international outsourcing in many countries. We further show that globalization - interpreted as either market integration or increased product market competition - will increase incentives for international outsourcing. |
| Keywords: | international outsourcing, deunionization, globalization |
| JEL: | F16 J51 L24 |
| Date: | 2005 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_1545&r=bec |
| By: | Amrita Bhattacharyya (Boston College) |
| Abstract: | This paper analyzes what incentives firms have to advertise to consumers when consumption decisions are made by market experts. The study explains why only some, but not all firms choose to advertise to consumers in specialized markets with experts. The theoretical analysis finds that the observed across-class and within-class variation in consumer advertising by U.S. pharmaceuticals is due to differences in disease-familiarity and heterogeneity in patients' types. Finally, a simple game-theoretic model shows that when only some, but not all competitors in a market advertise to consumers, the crucial determinant of advertising is the number of advertising competitors. With increased competition from advertising rivals, each firm's consumer advertising decreases. Using annual, brand-level direct-to-consumer-advertising expenditure data for brand-name prescription drugs belonging to 5 therapeutic classes over the period 1996-1999, empirical study offers support for the negative relationship between consumer advertising expenditure and number of advertising rivals. |
| Keywords: | Advertising, Competition, Pharmaceutical, Expert, Nash equilibrium |
| JEL: | L0 M3 I0 |
| Date: | 2005–09–29 |
| URL: | http://d.repec.org/n?u=RePEc:boc:bocoec:624&r=bec |
| By: | Donald A R George |
| Abstract: | This paper is concerned with product quality, defined as a kind of durability. Existing models of product quality (in the sense considered here) depend on the idea of signalling, itself driven by an informational asymmetry dictated by “Nature”. The paper proposes an alternative approach, which endogenises the quality managment process. A model is developed which is applicable to the markets for consumer durables and for some intermediate goods. Both competitive and monopolistic markets are considered, and some comparative static results are obtained. |
| URL: | http://d.repec.org/n?u=RePEc:edn:esedps:5&r=bec |
| By: | James Vickery |
| Abstract: | Although small firms are most sensitive to interest rate and other shocks, empirical work on corporate risk management has focused instead on large public companies. This paper studies fixed-rate and adjustable-rate loans to see how small firms manage their exposure to interest rate risk. The cross-sectional findings are as follows: credit-constrained firms consistently favor fixed-rate loans, minimizing their exposure to rising interest rates; firms adjust their exposure depending on how interest rate shocks covary with industry output; and "fixed versus adjustable" outcomes are correlated with lender characteristics. In a twenty-eight-year time series, the aggregate share of fixed-rate bank loans moves with interest rates in a manner consistent with recent evidence on debt market timing. I conclude that the "fixed versus adjustable" dimension of financial contracting helps small U.S. firms ameliorate interest rate risk, and discuss the implications for risk management theories and the credit channel of monetary policy. |
| Keywords: | Interest rates ; Risk management ; Commercial loans |
| Date: | 2005 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fednsr:215&r=bec |
| By: | Ulrike Muehlberger |
| Abstract: | We observe that economic restructuring is significantly changing organizational governance. On the one hand, we witness an increase in mergers & acquisitions, which substitutes markets for hierarchies and, on the other hand, we see an increase in outsourcing and subcontracting activities, appearing to replace hierarchies by markets. However, there is evidence that an increasing part of outsourcing activities mix hierarchies with market forms of governance. The key argument of this paper is that firms have established governance structures based on markets, hierarchies and self-enforcing relational contracts so that they are able to keep a substantial amount of control despite of sourcing out labour. Furthermore, we argue that such hierarchical forms of outsourcing produce dependency. Using empirical evidence of the Austrian insurance industry, it is demonstrated that dependency is created, firstly, by the contractual restriction of alternative uses of resources, secondly, by support measures that bind the upstream party closely to the downstream party, thirdly, by relationship-specific investments made by the upstream party, and fourthly, by authority elements. |
| Date: | 2005–09 |
| URL: | http://d.repec.org/n?u=RePEc:icr:wpicer:22-2005&r=bec |
| By: | Nina Smith (Department of Economics, Aarhus School of Business); Valdemar Smith (Department of Economics, Aarhus School of Business); Mette Verner (Department of Economics, Aarhus School of Business) |
| Abstract: | Corporate governance literature argues that board diversity is potentially positively related to firm performance. This study examines the relationship in the case of women in top executive jobs and on boards of directors. We use data for the 2500 largest Danish firms observed during the period 1993–2001 and find that the proportion of women in top management jobs tends to have positive effects on firm performance, even after controlling for numerous characteristics of the firm and direction of causality. The results show that the positive effects of women in top management depend on the qualifications of female top managers. |
| Keywords: | firm performance; female CEOs; gender diversity |
| JEL: | G38 J16 M14 |
| Date: | 2005–09 |
| URL: | http://d.repec.org/n?u=RePEc:kud:kuieci:2005-03&r=bec |
| By: | Zhang Guoying (school of manangement of Tianjin university); Zheng Pi-e (school of manangement of Tianjin university) |
| Abstract: | The paper introduces the Relationship between energy and economic development first£¬then through analyzing characters of energy consumption all over the world and the basic facts about China¡¯s energy resources, drawing the conclusion that the energy and resources of China is hardly able to meet demand,and puts forward the policy orientation for china¡¯s energy development accordingly. At last, points out the prospect of China¡¯s energy industry. |
| JEL: | E |
| Date: | 2005–09–22 |
| URL: | http://d.repec.org/n?u=RePEc:wpa:wuwpma:0509024&r=bec |
| By: | Gilles Mourre (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.) |
| Abstract: | The paper examines whether the pattern of growth in euro area employment seen in the period 1997- 2001 differed from that recorded in the past and what could be the reasons for that. First, a standard employment equation is estimated for the euro area as a whole. This shows that the lagged impact of both output growth and real labour cost growth, together with a productivity trend and employment “inertia”, can account for most of the employment developments between 1970 and the early 1990s. Conversely, these traditional determinants can only explain part of the employment development seen in recent years (1997-2001). Second, the paper shows sound evidence of a structural break in the aggregate employment equation in the late 1990s. Third, the paper provides some tentative explanations for this change in aggregate employment developments, using in particular country panels of institutional variables and of active labour market policies but also cross-sectional analyses. Among the relevant factors likely to have contributed to rising aggregate employment in recent years are changes in the sectoral composition of euro area employment, the strong development of part-time jobs, lower labour tax rates and possibly less stringent employment protection legislation and greater subsidies to private employment. |
| Keywords: | Euro area; Aggregate employment; Demand for labour; Labour market institutions; Active labour market policies. |
| JEL: | C2 E24 H50 J23 |
| Date: | 2004–05 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20040358&r=bec |
| By: | El?d Takáts (Department of Economics, Princeton University, Fisher Hall, Princeton, 08544-1021 NJ, USA.) |
| Abstract: | The paper investigates small business lending as an information problem. It models the effects of information asymmetries within the bank combined with fixed wages. Two kinds of inefficiencies arise in equilibrium: the credit officer either sometimes shirks or he is occasionally fired. In both cases lending falls below the first-best level. The solution, when the bank accepts the information asymmetries, is called the centralized structure. Under decentralized structure the bank employs additional supervisors to mitigate the information asymmetries within its organization. Decentralized banks manage to finance more small firms, but incur higher costs than centralized ones. Small banks are interpreted as a bank with relatively few credit officers, whom can be monitored without information asymmetries. The specification allows for investigating the effects of banking consolidation and technological change on small business lending. The model suggests that not banking size, but organizational structure is decisive in small business lending. |
| Keywords: | Corporate governance; banking; small business lending; efficiency wage. |
| JEL: | G21 G34 J30 |
| Date: | 2004–11 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20040407&r=bec |
| By: | Véronique Genre; Ramón Gómez Salvador; Ana Lamo (Corresponding author: European Central Bank, Directorate General Research, Kaiserstrasse 29, D-60311 Frankfurt am Main, Germany.) |
| Abstract: | This paper provides an empirical study of the determinants of female participation decisions in the European Union. The analysis is performed by estimating participation equations for different age groups (i.e. young, prime-age and older females), using annual data for a panel of 12 EU-15 countries over the period 1980- 2000. Our findings show that the strictness of labour market institutions negatively affects the participation rate. Decisions linked to individual preferences with regards to education or fertility are also found relevant to participation of the youngest and prime-age females respectively. The inclusion of a proxy to capture cohort effects is crucial in order to explain the oldest females’ participation. |
| Keywords: | Labour force participation; labour market institutions. |
| JEL: | J21 |
| Date: | 2005–03 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20050454&r=bec |
| By: | Christian Growitsch |
| Abstract: | Quality of service is of major economic significance in natural monopoly infrastructure industries and is increasingly addressed in regulatory schemes. However, this important aspect is generally not reflected in efficiency analysis of these industries. In this paper we present an efficiency analysis of electricity distribution networks using a sample of about 500 electricity distribution utilities from seven European countries. We apply the stochastic frontier analysis (SFA) method on multi-output translog input distance function models to estimate cost and scale efficiency with and without incorporating quality of service. We show that introducing the quality dimension into the analysis affects estimated efficiency significantly. In contrast to previous research, smaller utilities seem to indicate lower technical efficiency when incorporating quality. We also show that incorporating quality of service does not alter scale economy measures. Our results emphasise that quality of service should be an integrated part of efficiency analysis and incentive regulation regimes, as well as in the economic review of market concentration in regulated natural monopolies. |
| Date: | 2005–07 |
| URL: | http://d.repec.org/n?u=RePEc:iwh:dispap:3-05&r=bec |