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on Financial Markets |
| By: | Beck, Thorsten; Hesse, Heiko |
| Abstract: | Using a unique bank-level data set on the Ugandan banking system during 1999-2005, the authors explore the factors behind consistently high interest rate spreads and margins. While foreign banks charge lower interest rate spreads, they do not find a robust and economically significant relationship between privatization, foreign bank entry, market structure, and banking efficiency. Similarly, macroeconomic variables can explain little of the over-time variation in bank spreads. Bank-level characteristics, on the other hand, such as bank size, operating costs, and composition of loan portfolio explain a large proportion of cross-bank, cross-time variation in spreads and margins. However, time-invariant bank-level fixed effects explain the largest part of bank variation in spreads and margins. Further, the authors find tentative evidence that banks targeting the low end of the market incur higher costs and therefore higher margins. |
| Keywords: | Banks & Banking Reform,Economic Theory & Research,Investment and Investment Climate,Financial Crisis Management & Restructuring,Financial Intermediation |
| Date: | 2006–10–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:4027&r=fmk |
| By: | Jordi Mondria |
| Abstract: | This paper explains financial contagion between two independent stock markets by fluctuations in international investors' attention allocation. I model the process of attention allocation that underlies portfolio investment in international markets using rationally inattentive agents. Investors optimally allocate more attention to a region hit by a financial crisis, to the detriment of other markets. The resulting endogenous increase in uncertainty causes the risk premium on all risky assets to rise. Hence, stock prices around the world collapse and there is a flight to quality. I show that the degree of (non)anticipation of a crisis is crucial for the existence of contagion. Using Financial Times coverage as a proxy for attention allocation, I find strong support for the model's predictions. |
| Keywords: | Financial Crises, Rational Inattention, Portfolio Choice |
| JEL: | F30 D83 G11 |
| Date: | 2006–09–12 |
| URL: | http://d.repec.org/n?u=RePEc:tor:tecipa:tecipa-254&r=fmk |
| By: | Adam Ashcraft; Hoyt Bleakley |
| Abstract: | Using plausibly exogenous variation in demand for federal funds created by daily shocks to reserve balances, we identify the supply curve facing a bank borrower in the interbank market and study how access to overnight credit is affected by changes in public and private measures of borrower creditworthiness. Although there is evidence that lenders respond to adverse changes in public information about credit quality by restricting access to the market in a fashion consistent with market discipline, there is also evidence that borrowers respond to adverse changes in private information about credit quality by increasing leverage so as to offset the future impact on earnings. While the responsiveness of investors to public information is comforting, we document evidence that suggests that banks are able to manage the real information content of these disclosures. In particular, public measures of loan portfolio performance have information about future loan charge-offs, but only in quarters when the bank is examined by supervisors. However, the loan supply curve is not any more sensitive to public disclosures about nonperforming loans in an exam quarter, suggesting that investors are unaware of this information management. |
| Keywords: | Federal funds market (United States) ; Bank loans ; Credit |
| Date: | 2006 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fednsr:257&r=fmk |
| By: | Dmitry Livdan; Horacio Sapriza; Lu Zhang |
| Abstract: | More financially constrained firms are riskier and earn higher expected returns than less financially constrained firms, although this effect can be subsumed by size and book-to-market. Further, because the stochastic discount factor makes capital investment more procyclical, financial constraints are more binding in economic booms. These insights arise from two dynamic models. In Model 1, firms face dividend nonnegativity constraints without any access to external funds. In Model 2, firms can retain earnings, raise debt and equity, but face collateral constraints on debt capacity. Despite their diverse structures, the two models share largely similar predictions. |
| JEL: | G12 G31 G32 |
| Date: | 2006–10 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:12555&r=fmk |
| By: | Cheng,Xiaoqiang; Degryse,Hans (Tilburg University, Center for Economic Research) |
| Abstract: | This paper provides evidence on the relationship between finance and growth in a fast growing country, such as China. Employing data of 27 Chinese provinces over the period 1995-2003, we study whether the financial development of two different types of institutions - banks and non-bank financial institutions - have a (significantly different) impact on local economic growth. Our findings indicate that only banking development shows a statistically significant and economically relevant impact on local economic growth. |
| Keywords: | growth;financial development;Chinese provinces;banks |
| JEL: | E44 G21 |
| Date: | 2006 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:kubcen:200682&r=fmk |
| By: | John D. Burger; Francis E. Warnock |
| Abstract: | Countries that cannot attract foreigners to invest in their local currency bonds run the risk of currency mismatches that can result in painful crises. We analyze foreign participation in the bond markets of over 40 countries. Bond markets in less developed countries have returns characterized by high variance and negative skewness, factors that we show are eschewed by U.S. investors. While results based on a three-moment CAPM indicate that it is diversifiable idiosyncratic risk that U.S. investors shun, our analysis suggests that countries can improve foreign participation by reducing macroeconomic instability. |
| JEL: | F3 G11 G15 O16 |
| Date: | 2006–10 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:12548&r=fmk |
| By: | Morten L. Bech; Bart Hobijn |
| Abstract: | We examine the diffusion of real-time gross settlement (RTGS) technology across all 174 central banks. RTGS reduces settlement risk and facilitates financial innovation in the settlement of foreign exchange trades. In 1985, only three central banks had implemented RTGS systems, and by year-end 2005, that number had increased to ninety. We find that the RTGS diffusion process is consistent with the standard S-curve prediction. Real GDP per capita, the relative price of capital, and trade patterns explain a significant part of the cross-country variation in RTGS adoption. These determinants are remarkably similar to those that seem to drive the cross-country adoption patterns of other technologies. |
| Keywords: | Banks and banking, Central ; Foreign exchange ; Technological innovations |
| Date: | 2006 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fednsr:260&r=fmk |
| By: | Sudipto Bhattacharya; Charles A. E. Goodhart; Pojanart Sunirand; Dimitrios P. Tsomocos |
| Abstract: | We develop a multi-period general equilibrium model of bank deposit, credit, and interim inter-bank loan markets in which banks initially specialize in their choices of debtors, leading to under-diversification, but nevertheless become entwined via inter-bank markets, leading to the fortunes of one bank affecting the profits and default rates of the other in a sequential manner. Lack of (full) diversification among credit risks arises in our model owing to a relative profit argument in each banker's utility function, which is otherwise risk- and default-averse. We examine its implications for the welfare of depositors and debtors. |
| Date: | 2006 |
| URL: | http://d.repec.org/n?u=RePEc:sbs:wpsefe:2006fe10&r=fmk |
| By: | Bayraktar, Nihal; Wang, Yan |
| Abstract: | Banking sector openness may directly affect growth by improving the access to financial services and indirectly by improving the efficiency of financial intermediaries, both of which reduce the cost of financing, and in turn, stimulate capital accumulation and economic growth. The objective of the paper is to empirically reinvestigate these direct and indirect links using a more advanced econometric technique (GMM dynamic panel estimators). An illustrative model is presented to link financial market development with investment. The empirical results confirm the presence of direct and indirect links, and thus provide support for countries planning to open their banking sector for international competition. |
| Keywords: | Banks & Banking Reform,Economic Theory & Research,Financial Intermediation,Pro-Poor Growth and Inequality,Financial Crisis Management & Restructuring |
| Date: | 2006–10–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:4019&r=fmk |
| By: | van den Hauwe, Ludwig |
| Abstract: | This article reviews the first English edition of Prof. Jesús Huerta de Soto´s book `Dinero, Crédito Bancario y Ciclos Económicos´ which first appeared in Spain in 1998. |
| Keywords: | Business Cycle Theory; Law and Economics of Money and Banking; Austrian school; new institutional economics; financial markets; history of money; credit and banking; deregulation of financial institutions; economics of transition |
| JEL: | E32 B53 P34 N23 G18 N24 E5 K39 E00 E42 G0 K0 P3 N2 H11 |
| Date: | 2006–10–02 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:49&r=fmk |
| By: | Beck, Thorsten; de la Torre, Augusto |
| Abstract: | Access to financial services, or rather the lack thereof, is often indiscriminately decried as a problem in many developing countries. The authors argue that the " problem of access " should rather be analyzed by identifying different demand and supply constraints. They use the concept of an access possibilities frontier, drawn for a given set of state variables, to distinguish between cases where a financial system settles below the constrained optimum, cases where this constrained optimum is too low, and-in credit services-cases where the observed outcome is excessively high. They distinguish between payment and savings services and fixed intermediation costs, on the one hand, and lending services and different sources of credit risk, on the other hand. The authors include both supply and demand side frictions that can lead to lower access. The analysis helps identify bankable and banked population, the binding constraint to close the gap between the two, and policies to prudently expand the bankable population. This new conceptual framework can inform the debate on adequate policies to expand access to financial services and can serve as the basis for an informed measurement of access. |
| Keywords: | Banks & Banking Reform,Economic Theory & Research,Markets and Market Access,Access to Markets,Financial Intermediation |
| Date: | 2006–10–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:4026&r=fmk |
| By: | Novy, Dennis (Department of Economics, University of Warwick) |
| Abstract: | The choice of invoicing currency for trade is crucial for the international transmission of macroeconomic policy. This paper develops a three-country model that endogenizes the choice of invoicing currency and that allows for a share of firms' costs to be denominated in foreign currency, consistent with the empirical evidence on the high degree of pass-through to import prices. Invoicing decisions are driven by firms' desire to hedge costs but also by exchange rate volatility and currency comovements. The model is tested empirically with a data set that spans ten currencies and 24 reporting countries, confirming the importance of currency comovements for the decision to invoice in vehicle currency. The findings also imply that if the U.S. share of world output continues to fall, other currencies will increasingly replace the U.S. dollar as an international vehicle currency. |
| Keywords: | Invoicing Currency ; Exchange Rate Risk ; Hedging |
| JEL: | F3 F4 |
| Date: | 2006 |
| URL: | http://d.repec.org/n?u=RePEc:wrk:warwec:765&r=fmk |
| By: | Matesanz Gómez, David; Ortega, Guillermo J. |
| Abstract: | We propose a country classification of economic growth currency crisis consequences based on the entropic analysis of the real exchange rate. We show that this ranking is highly correlated with the annual minimum rate of growth, a proxy used to quantify real currency crisis effects. |
| Keywords: | currency crises; entropy; growth effects of currency crises |
| JEL: | C82 F40 F31 |
| Date: | 2005 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:211&r=fmk |
| By: | Joshua V. Rosenberg; Leah G. Traub |
| Abstract: | In this paper, we compare price discovery in the foreign exchange futures and spot markets during a period in which the spot market was less transparent but had higher volume than the futures market. We develop a foreign exchange futures order flow measure that is a proxy for the order flow observed by Chicago Mercantile Exchange pit traders. We find that both foreign currency futures and spot order flow contain unique information relevant to exchange rate determination. When we measure contributions to price discovery using the methods of Hasbrouck and of Gonzalo and Granger, we obtain results consistent with our order flow findings. Taken together, our evidence suggests that the amount of information contained in currency futures prices is much greater than one would expect based on relative market size. |
| Date: | 2006 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fednsr:262&r=fmk |
| By: | Robert Chirinko; Hisham Foad |
| Abstract: | What role does noise play in equity markets? Answering this question usually leads immediately to specifying a model of fundamentals and hence the pervasive joint hypothesis quagmire. We avoid this dilemma by measuring noise volatility directly by focusing on the behavior of country closed-end funds (CCEF’s) during foreign (i.e., non-U.S.) holidays – for example, the last days of Ramadan in Islamic countries. These holiday periods are times when the flow of fundamental information relevant to foreign equity markets is substantially reduced and hence trading of CCEF’s in U.S. markets can be responding only weakly, if at all, to fundamental information. We find that, controlling for the effects of industry and global shocks and of the overall U.S. market, there remains a substantial amount of noise in the equity returns of U.S. CCEF’s. In the absence of noise, the noise ratio statistic would be near zero. However, our results indicate statistically significant departures from zero, with values averaged over all U.S. CCEF’s ranging from 76-84% depending on assumptions about the leakage of information during holiday periods and kurtosis. Noise is negatively related to institutional ownership of U.S. CCEF’s and is much less important for U.K. CCEF's. The lower levels of noise for matched U.K. and U.S. CCEF’s suggest that the U.K. securities transaction tax is effective in reducing stock market noise. |
| Keywords: | equity market noise, inefficient markets, institutional ownership, securities transaction tax, closed-end funds |
| JEL: | G10 G14 G18 |
| Date: | 2006 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_1812&r=fmk |
| By: | Porzecanski, Arturo C. |
| Abstract: | Economists have always been interested in the workings of the financial markets, but most of them neither seek nor get the opportunity to work in a financial institution as a professional economist. Here we detail how (a minority of) economists became involved in the financial markets, and what that professional involvement has entailed, in order to come up with implications for economists who are considering working in the financial markets as well as for the universities that provide training for future economists. |
| Keywords: | Economists; financial markets; education |
| JEL: | A11 |
| Date: | 2006–05 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:106&r=fmk |
| By: | John D. Burger; Francis E. Warnock |
| Abstract: | We analyze the development of 49 local bond markets. Our main finding is that policies and laws matter: Countries with stable inflation rates and strong creditor rights have more developed local bond markets and rely less on foreign-currency-denominated bonds. The results suggest that “original sin†is a misnomer. Emerging economies are not inherently dependent upon foreign-currency debt. Rather, by improving policy performance and strengthening institutions they may develop local currency bond markets, reduce their currency mismatch, and lessen the likelihood of future crises. |
| JEL: | F30 G15 O16 |
| Date: | 2006–10 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:12552&r=fmk |
| By: | José Alberto Fuinhas (Departamento de Gestão e Economia, Universidade da Beira Interior) |
| Abstract: | This paper investigates the role of bank lending in the monetary transmission process in Portugal. We estimate a small sectoral VAR model of the Portuguese macroeconomy. This model is then used to simulate the effects of an exogenous monetary policy shock upon asset prices, bank balance sheet variables and final target variables (activity and prices), for the personal and corporate sectors. Significant sectoral differences are found among the channels of monetary transmission. In addition, the use of sectoral data facilitates the identification of distinct money and credit channels in the transmission of monetary policy. These results contrast with the ambiguous findings on the roles of money and credit in the literature to date. Our study suggests that there is a bank-lending channel in Portugal. |
| Keywords: | Credit channel; bank lending; and monetary transmission |
| JEL: | C32 E44 E51 E52 |
| Date: | 2006 |
| URL: | http://d.repec.org/n?u=RePEc:csh:wpecon:e01/2006&r=fmk |
| By: | Walter E. Beyeler; Robert J. Glass; Morten L. Bech; Kimmo Soramaki |
| Abstract: | We develop a parsimonious model of the interbank payment system to study congestion and the role of liquidity markets in alleviating congestion. The model incorporates an endogenous instruction arrival process, scale-free topology of payments between banks, fixed total liquidity that limits banks' capacity to process arriving instructions, and a global market that distributes liquidity. We find that at low liquidity, the system becomes congested and payment settlement loses correlation with payment instruction arrival, becoming coupled across the network. The onset of congestion is evidently related to the relative values of three characteristic times: the time for banks' net position to return to zero, the time for banks to exhaust their liquidity endowments, and the liquidity market relaxation time. In the congested regime, settlement takes place in cascades having a characteristic size. A global liquidity market substantially diminishes congestion, requiring only a small fraction of the payment-induced liquidity flow to achieve strong beneficial effects. |
| Keywords: | Payment systems ; Bank liquidity ; International liquidity |
| Date: | 2006 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fednsr:259&r=fmk |
| By: | Alexandra Lai; Nikil Chande; Sean O'Connor |
| Abstract: | Payments systems are typically characterized by some degree of tiering, with upstream firms (clearing agents) providing settlement accounts to downstream institutions that wish to clear and settle payments indirectly in these systems (indirect clearers). Clearing agents provide their indirect clearers with an essential input (clearing and settlement services), while also competing directly with them in the retail market for payment services. The authors construct a model of a clearing agent with an indirect clearer to examine the clearing agent's incentives to lever off its upstream position to gain a competitive advantage in the retail payment services market. The model demonstrates that a clearing agent can attain this competitive advantage by raising the indirect clearer's costs, but that the incentive to raise these costs is mitigated by credit risk to the clearing agent from the provision of uncollateralized overdrafts to its indirect clearer. The results suggest that tiered payments systems, which require clearing agents to provide overdraft facilities to their indirect clearers, may result in a more competitive retail payment services market. |
| Keywords: | Financial institutions; Financial services; Market structure and pricing; Payment, clearing, and settlement systems |
| JEL: | G21 L12 L13 L22 |
| Date: | 2006 |
| URL: | http://d.repec.org/n?u=RePEc:bca:bocawp:06-36&r=fmk |
| By: | Nenova, Tatiana |
| Abstract: | The issue of " an appropriate " legal framework, especially in the case of the takeover market, has been poorly studied in the case of emerging markets, yet it is of immediate relevance and practical policymaker interest. The study makes a first attempt to analyze takeover regulations in a comparative context across 50 countries. It proposes a methodology to create a detailed index on the most salient features of capital market laws, and illustrates the approach on the case of takeover legislation. The methodology allows better understanding of the impact of laws on markets and development, allows a detailed quantification of a given regulation, in this case takeover market rules, and helps determine relevant policy implications. Specifically, the framework permits the exploration of the effects of individual regulations, their substitutability and interplay, as well as the overall extent of friendliness of the laws to investors, or particular groups thereof (such as minority shareholders), and the links of specialized regulation with the overall legal system. Finally, the study explores the effect of the investor-friendliness of takeover laws on stock market development. |
| Keywords: | Corporate Law,Economic Theory & Research,Investment and Investment Climate,Markets and Market Access,Small Scale Enterprise |
| Date: | 2006–10–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:4029&r=fmk |
| By: | Guglielmo Maria Caporale; Christoph Hanck |
| Abstract: | We analyse whether tests of PPP exhibit erratic behaviour (as previously reported by Caporale et al., 2003) even when (possibly unwarranted) homogeneity and proportionality restrictions are not imposed, and trivariate cointegration (stage-three) tests between the nominal exchange rate, domestic and foreign price levels are carried out (instead of stationarity tests on the real exchange rate, as in stage-two tests). We examine the US dollar real exchange rate vis-à-vis 21 other currencies over a period of more than a century, and find that stage-three tests produce similar results to those for stage-two tests, namely the former also behave erratically. This confirms that neither of these traditional approaches to testing for PPP can solve the issue of PPP. |
| Keywords: | Purchasing Power Parity (PPP), real exchange rate, cointegration, stationarity, parameter instability |
| JEL: | C12 C22 F31 |
| Date: | 2006 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_1811&r=fmk |
| By: | Athanasoglou, P.; Brissimis, S.; Delis, M. |
| Abstract: | The aim of this study is to examine the effect of bank-specific, industry-specific and macroeconomic determinants of bank profitability, using an empirical framework that incorporates the traditional Structure-Conduct-Performance (SCP) hypothesis. To account for profit persistence, we apply a GMM technique to a panel of Greek banks that covers the period 1985-2001. The estimation results show that profitability persists to a moderate extent, indicating that departures from perfectly competitive market structures may not be that large. All bank-specific determinants, with the exception of size, affect bank profitability significantly in the anticipated way. However, no evidence is found in support of the SCP hypothesis. Finally, the business cycle has a positive, albeit asymmetric effect on bank profitability, being significant only in the upper phase of the cycle. |
| JEL: | G21 C23 L20 |
| Date: | 2005 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:153&r=fmk |
| By: | Andreas Lehnert; Wayne Passmore; Shane M. Sherlund |
| Abstract: | Fannie Mae and Freddie Mac are government-sponsored enterprises (GSEs) that securitize mortgages and issue mortgage-backed securities (MBS). In addition, the GSEs are active participants in the secondary mortgage market on behalf of their own investment portfolios. Because these portfolios have grown quite large, portfolio purchases (in addition to MBS issuance) are often thought to be an important force in the mortgage market. Using monthly data from 1993 to 2005 we estimate a VAR model of the relationship between GSE secondary market activities and mortgage interest rate spreads. We find that GSE portfolio purchases have no significant effects on either primary or secondary mortgage rate spreads. Further, we examine GSE activities and mortgage rate spreads in the wake of the 1998 debt crisis, and find that GSE portfolio purchases did little to affect interest rates paid by new mortgage borrowers. This empirical finding is robust to alternative identification assumptions and to alternative model and variable specifications. |
| Keywords: | Government-sponsored enterprises ; Secondary markets |
| Date: | 2006 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedgfe:2006-30&r=fmk |
| By: | O. Aspachs; C. Goodhart; M. Segoviano; D. Tsomocos; L. Zicchino |
| Abstract: | We propose a metric of financial stability that is a weighted average of the probability of default and the equity of each country. The weights are obtained in the VAR and must reflect that the welfare changes due to financial instability are produced primarily through changes of the probability of default and secondarily through changes of the equity value. The metric is based on the definition of financial instability suggested by Tsomocos (2003 a and b) and Goodhart, Sunirand and Tsomocos (2006). |
| Date: | 2006 |
| URL: | http://d.repec.org/n?u=RePEc:sbs:wpsefe:2006fe09&r=fmk |
| By: | van den Hauwe, Ludwig |
| Abstract: | Since a few decades several sub-disciplines within economics have witnessed a reorientation towards institutional analysis. This development has in particular also affected the fields of macroeconomics and monetary theory where it has led to several proposals for far-reaching financial and monetary reform. One of the more successful of these proposals advocates a fractional-reserve free banking system, that is, a system with no central bank, but with permission for the banks to operate with a fractional reserve. This article exposes several conceptual flaws in this proposal. In particular several claims of the fractional-reserve free bankers with respect to the purported working characteristics of this system are criticized from the perspective of economic theory. In particular, the claim that a fractional-reserve free banking system would lead to the disappearance of the business cycle is recognized as false. Furthermore an invisible-hand analysis is performed, reinforcing the conclusion that fractional-reserve free banking is incompatible with the ethical and juridical principles underlying a free society. |
| Keywords: | monetary and banking regimes; comparative institutional analysis; central banking versus free banking controversy; fractional-reserve free banking; Law and Economics of money and banking; |
| JEL: | E50 E32 E42 B53 K39 G18 P34 H11 |
| Date: | 2006–10–05 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:120&r=fmk |
| By: | Stephen G. Cecchetti |
| Abstract: | Modern central bankers are the risk managers of the financial system. They take actions based not only on point forecasts for growth and inflation, but based on the entire distribution of possible macroeconomic outcomes. In numerous instances monetary policymakers have acted in ways designed to avert disasters. What are the implications of this approach for managin the risks posed by asset price booms? To address this question, I study data from a cross-section of countries to examine the impact of equity and property booms on the entire distribution of deviation in output and price-level from their trends. The results suggest that housing booms worsen growth prospects, creating outsized risks of very bad outcomes. By contrast, equity booms have very little impact on the expected mean and variance of macroeconomic performance, but worsen the worst outcomes. |
| JEL: | E5 G0 |
| Date: | 2006–09 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:12542&r=fmk |
| By: | Oliver Hülsewig; Eric Mayer; Timo Wollmershäuser |
| Abstract: | This paper presents a New Keynesian model that dwells on the role of banks in the cost channel of monetary policy. Banks extend loans to firms in an environment of monopolistic competition by setting the loan rate according to a Calvo-type staggered price setting approach, which means that the adjustment of the aggregate loan rate to a monetary policy shock is sticky. We estimate the model for the Euro area by adopting a minimum distance approach. Our findings exhibit that, first, frictions on the loan market influence the propagation of monetary policy shocks as the pass-through of a change in the money market rate to the loan rate is incomplete, and, second, the cost channel is operating, but the effect is weak since inflation is driven by real unit labor costs rather than the loan rate. Our main conclusion is that the strength of the cost channel is mitigated as banks shelter firms from monetary policy shocks by smoothing lending rates. |
| Keywords: | bank behavior, cost channel, minimum distance estimation |
| JEL: | E44 E52 E58 |
| Date: | 2006 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_1813&r=fmk |
| By: | Michael Fritsch; Dirk Schilder |
| Abstract: | We investigate whether the supply of Venture Capital (VC) in Germany is driven by spatial influences. The study is based on information from more than 300 VC investments made in Germany between 2004 and 2005. We find evidence that the geographical distance between a VC company and the portfolio firm is not an important factor for German VC investments. Syndication of investments helps to overcome the problem of distance to portfolio firms if one of the investors is located close to the investment. Altogether, we find no evidence for a severe regional equity gap for young and innovative companies in Germany. |
| Keywords: | Venture Capital, regional equity gap, start-up financing |
| JEL: | G24 O16 D21 M13 R12 |
| Date: | 2006–10 |
| URL: | http://d.repec.org/n?u=RePEc:esi:egpdis:2006-25&r=fmk |
| By: | Michael D. Bordo; Owen F. Humpage; Anna J. Schwartz |
| Abstract: | The deterioration in the U.S. balance of payments after 1957 and an accelerating loss of gold reserves prompted U.S. monetary authorities to undertake foreign-exchange-market interventions beginning in 1961. We discuss the events leading up to these interventions, the institutional arrangements developed for that purpose, and the controversies that ensued. Although these interventions forestalled a loss of U.S. gold reserves, in the end, they only delayed more fundamental adjustments and, in that respect, were a failure. |
| Keywords: | Foreign exchange administration ; Bretton Woods Agreements Act |
| Date: | 2006 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedcwp:0609&r=fmk |
| By: | Truc Le (School of Finance and Economics, University of Technology, Sydney); Eckhard Platen (School of Finance and Economics, University of Technology, Sydney) |
| Abstract: | This paper constructs and compares various total return world stock indices based on daily data. Due to diversification these indices are noticeably similar. A diversification theorem identifies any diversified portfolio as a proxy for the growth optimal portfolio. The paper constructs a diversified world stock index that outperforms a number of other indices and argues that it is a good proxy for the growth optimal portfolio. This has applications to derivative pricing and investment management. |
| Keywords: | world stock index; growth optimal portfolio; diversification; mean-variance portfolio selection; enhanced index fund |
| JEL: | G10 G13 |
| Date: | 2006–09–01 |
| URL: | http://d.repec.org/n?u=RePEc:uts:rpaper:184&r=fmk |
| By: | Yunus Aksoy (School of Economics, Mathematics & Statistics, Birkbeck); Hanno Lustig |
| Abstract: | We suggest a new dynamic partial equilibrium approach that features product differentiation and endogenizes market structure at the same time. The model yields clear-cut predictions regarding the effects of small and large exchange rate shocks on the market structure, pass-through and international trade. First, we account for the asymmetric price adjustment process with respect to exchange rate shocks. Secondly, we discuss an array of conditions where short and long-run international monetary neutrality is violated. We present in detail under which conditions imperfect competition is able to generate persistent and volatile real exchange rate deviations. Most predictions survive alternative market configurations. |
| JEL: | L16 |
| Date: | 2006–10 |
| URL: | http://d.repec.org/n?u=RePEc:bbk:bbkefp:0609&r=fmk |
| By: | Francis E. Warnock; Veronica Cacdac Warnock |
| Abstract: | Foreign official purchases of U.S. government bonds have an economically large and statistically significant impact on long-term interest rates. Federal Reserve credibility, as evidenced by dramatic reductions in both long-term inflation expectations and the volatility of long rates, contributed much to the decline of long rates in the 1990s. More recently, however, foreign flows have become important. Controlling for various factors given by a standard macroeconomic model, we estimate that had there been no foreign official flows into U.S. government bonds over the past year, the 10-year Treasury yield would currently be 90 basis points higher. Our results are robust to a number of alternative specifications. |
| JEL: | E43 E44 F21 |
| Date: | 2006–10 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:12560&r=fmk |
| By: | Enrique G. Mendoza |
| Abstract: | The current account reversals, large recessions, and price collapses that define Sudden Stops contradict the predictions of a large class of models in which the current account is a vehicle for consumption smoothing and investment financing. This paper shows that the quantitative predictions of a business cycle model with collateral constraints are consistent with the key features of Sudden Stops. Standard shocks to imported input prices, the world interest rate, and productivity trigger collateral constraints on debt and working capital when borrowing levels are high relative to asset values, and these high-leverage states are endogenous outcomes. In these situations, Irving Fisher's debt-deflation mechanism causes Sudden Stops as the deflation of Tobin's Q leads to a spiraling decline in the prices and holdings of collateral assets. This has immediate effects on output and factor demands because collapsing collateral values cut access to working capital. In contrast with previous findings, collateral constraints induce significant amplification in the responses of macroaggregates to shocks. Because of precautionary saving, Sudden Stops are infrequent events nested within normal cycles in the long run, but they remain a positive probability event. |
| JEL: | D52 E44 F32 F41 |
| Date: | 2006–10 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:12564&r=fmk |
| By: | Simtowe, Franklin; Zeller, Manfred |
| Abstract: | A substantial amount of the literature has reported on the impact of access to credit on technology adoption, and many studies find that credit has a positive impact on adoption. However, most existing studies have failed to explicitly measure and analyze the amount of credit that farm households are able to borrow and whether they are credit constrained or not. They overlooked the fact that credit access can be a panacea for non-adoption only if it is targeted at households that face binding liquidity constraints. Guided by the frame work of a household model under credit market failure, this paper aims at investigating the impact of access to credit on the adoption of hybrid maize among households that vary in their credit constraints. The data used in the study is from Malawi collected by the International Food Policy Research Institute (IFPRI).Using the direct elicitation approach, households are classified into constrained and unconstrained regimes. We start by estimating the probability of being credit constrained, followed by an estimation of the impact of access to credit for the two categories of households (credit constrained and unconstrained), while accounting for selection bias. The impact of access to credit is estimated using a switching regression in a Double-Hurdle model. Results reveal that while access to credit increases adoption among credit constrained households, it has no effect among unconstrained households. Results also show that factors that affect adoption among credit constrained households are different from those that that affect adoption among unconstrained household. Landholding size, for example, has opposite effects on adoption in the two regimes of households. The policy implication is that microfinance institutions should consider scaling up their credit services to ensure that more households benefit from it, and in so doing maize adoption will be enhanced. |
| Keywords: | credit constraints; double-hurdle; hybrid maize; adoption; Malawi |
| JEL: | Q12 |
| Date: | 2006–09–30 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:45&r=fmk |
| By: | Brys,Bert; Bovenberg,A. Lans (Tilburg University, Center for Economic Research) |
| Abstract: | This paper analyses the impact of capital income taxes on financial and investment decisions of corporations. Extending Sinn's (1991) nucleus theory of the firm with debt finance, the model determines the optimal sources of finance (debt, newly issued equity or retained earnings), the optimal use of the investment's earnings (dividends, retentions, interest payments or debt redemption), and the optimal capital accumulation throughout the life cycle of the firm. |
| Keywords: | tax burden;capital income taxation;firm behaviour |
| JEL: | H32 G32 D21 |
| Date: | 2006 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:kubcen:200691&r=fmk |
| By: | Clive Bowsher (Nuffield College, University of Oxford); Roland Meeks (Nuffield College, University of Oxford) |
| Abstract: | Functional Signal plus Noise (FSN) models are proposed for analysing the dynamics of a large cross-section of yields or asset prices in which contemporaneous observations are functionally related. The FSN models are used to forecast high dimensional yield curves for US Treasury bonds at the one month ahead horizon. The models achieve large reductions in mean square forecast errors relative to a random walk for yields and readily dominate both the Diebold and Li (2006) and random walk forecasts across all maturities studied. We show that the Expectations Theory (ET) of the term structure completely determines the conditional mean of any zero-coupon yield curve. This enables a novel evaluation of the ET in which its 1-step ahead forecasts are compared with those of rival methods such as the FSN models, with the results strongly supporting the growing body of empirical evidence against the ET. Yield spreads do provide important information for forecasting the yield curve, especially in the case of shorter maturities, but not in the manner prescribed by the Expectations Theory. |
| Keywords: | Yield curve, term structure, expectations theory, FSN models, functional time series, forecasting, state space form, cubic spline. |
| JEL: | C33 C51 C53 E47 G12 |
| Date: | 2006–10–02 |
| URL: | http://d.repec.org/n?u=RePEc:nuf:econwp:0612&r=fmk |
| By: | María Angélica Arbeláez Restrepo; Andrés Flórez; Natalia Salazar Ferro |
| Abstract: | This study presents an analysis of the financial services chapter of the Free Trade Agreement (FTA) between Colombia and the United States. It evaluates the negotiation process, its results, and its expected impacts on Colombia’s financial sector during the next few years. After Colombia’s unilateral financial liberalization in he early 90’s, the FTA is the more recent step towards greater openness of the domestic financial system. Even though the financial system is not expected to face any great changes, the agreement will have mplications in specific areas such as insurance and changes in the current operation of collective investment chemes, as well as broader indirect effects on foreign investment. The study concludes that with the FTA, the ountry took advantage of the opportunity to start an internal reform process aimed at financial sector modernization and its greater efficiency, in order to deepen financial consolidation in favor of a productive ector more open to foreign competition. |
| Date: | 2006–08–01 |
| URL: | http://d.repec.org/n?u=RePEc:col:001018:002673&r=fmk |
| By: | Philippe Desbrières (Université de Bourgogne) |
| Abstract: | (VF)Ces dernières années, les stock-options ont été au cœur de scandales financiers dans plusieurs pays qui ont entraîné une forte demande de transparence, en particulier sur ce mode de rémunération destiné aux dirigeants. L’objectif de cet article est de présenter, dans une première partie, les modalités de comptabilisation des stock-options selon la norme européenne IFRS 2 et la norme américaine FAS 123. La seconde partie est consacrée aux incidences et à une analyse critique de la comptabilisation des stock-options, notamment au regard de l’exigence de comptabilisation de ce mécanisme incitatif à sa juste valeur. (VA) In many countries, executive stock options (ESOs) have been subject to financial scandals during these last years, that encountered for a deep need of transparency, particularly about this compensation device for managers. The aim of this paper is to present, in a first part, the ways of expensing ESOs in through the European IRFS 2 and the American FAS 123 standards. The second part analyses ESOs accounting and its consequences, namely regarding the requirements about measuring this incentive mechanism at its fair value. |
| Keywords: | normes comptables;stock-options;rémunération des dirigeants. |
| JEL: | G30 M40 |
| Date: | 2006–10 |
| URL: | http://d.repec.org/n?u=RePEc:dij:wpfarg:1061002&r=fmk |
| By: | M.Utku Unver; Alvin E. Roth; Tayfun Sonmez |
| Date: | 2005–01 |
| URL: | http://d.repec.org/n?u=RePEc:pit:wpaper:263&r=fmk |
| By: | Roc Armenter; Martin Bodenstein |
| Abstract: | The Barro-Gordon inflation bias has provided the most influential argument for fixed exchange rate regimes. However, with low inflation rates now widespread, credibility concerns seem no longer relevant. Why give up independent monetary policy to contain an inflation bias that is already under control? We argue that credibility problems do not end with the inflation bias and they are a larger drawback for flexible exchange rates than usually thought. Absent commitment, independent monetary policy can induce expectation traps---that is, welfare ranked multiple equilibria---and perverse policy responses to real shocks, i.e., an equilibrium policy response that is welfare inferior to policy inaction. Both possibilities imply that flexible exchange rates feature unnecessary macroeconomic volatility. |
| Keywords: | Foreign exchange rates ; Inflation (Finance) ; Monetary policy |
| Date: | 2006 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedgif:865&r=fmk |
| By: | Fernandez, Pablo (IESE Business School); Carabias, Jose M. (IESE Business School) |
| Abstract: | En este documento se cuantifica la creación de valor para los accionistas de BBVA entre diciembre de 1991 y diciembre de 2005. En ese período, el aumento de la capitalización de BBVA fue de 47.386 millones de euros, el aumento del valor para los accionistas fue de 35.001 millones de euros, y la creación de valor para los accionistas fue de 15.617 millones de euros (expresado en euros de 2005). La rentabilidad media anual de BBVA fue del 19,8%, sensiblemente superior a la del IBEX 35 (14,0%). La rentabilidad de BBVA en estos catorce años fue del 1.151,1% (cada euro invertido en acciones de BBV en diciembre de 1991 se convirtió en 12,51 euros en diciembre de 2005), mientras que la rentabilidad del IBEX 35 en estos catorce años fue del 526,3%. La inflación acumulada fue del 58,8%. La rentabilidad media de todas las empresas del IBEX, exceptuando BBVA, fue del 13,5%. La capitalización de BBVA durante estos años osciló entre el 5,6% y el 16,5% sobre el total de la capitalización del IBEX 35. En diciembre de 1993, BBV fue la séptima empresa por capitalización (tras Telefónica, Endesa, Repsol, Iberdrola, Argentaria y Banco Santander). En diciembre de 2005, BBVA fue latercera. |
| Keywords: | creación valor para accionistas; aumento valor para accionistas; rentabilidad para accionistas; |
| JEL: | G12 G31 M21 |
| Date: | 2006–06–18 |
| URL: | http://d.repec.org/n?u=RePEc:ebg:iesewp:d-0638&r=fmk |
| By: | Andrew Ching; Fumiko Hayashi |
| Abstract: | Card payments have been growing very rapidly. To continue the growth, payment card networks keep adding new merchants and card issuers try to stimulate their existing customers’ card usage by providing rewards. This paper seeks to analyze the effects of payment card rewards programs on consumer payment choice, by using consumer survey data. Specifically, we examine whether credit/debit reward receivers use credit/debit cards relatively more often than other consumers, if so how much more often, and which payment methods are replaced by reward card payments. Our results suggest that (i) consumers with credit card rewards use credit cards much more exclusively than those without credit card rewards; (ii) even among those who carry a credit card balance, consumers with credit card rewards use a credit card more often than those without rewards; (iii) among consumers who receive credit card rewards, those who receive credit card rewards as well as debit card rewards tend to use debit cards more often than those who receive credit card rewards only; and (iv) reward card transactions seem to replace not only paper-based transactions but also non-reward card transactions. |
| Date: | 2006 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedkpw:psrwp06-02&r=fmk |
| By: | Kirdan Lees (Reserve Bank of New Zealand) |
| Abstract: | Typical New Keynesian open economy models suggest a limited response to the exchange rate. This paper examines the role of the open economy in determining robust rules when the central bank fears various model misspecification errors. The paper calibrates a hybrid New Keynesian model to broadly fit the economies of three archetypal open economy inflation targeters - Australia, Canada, and New Zealand - and seeks robust time-consistent policy. We find that policies robust to model misspecification react more aggressively to not only the exchange rate, but also inflation, the output gap and their associated shocks. This result generalizes to the context of a flexible inflation targeting central bank that cares about the volatility of the real exchange rate. However, when the central bank places only a small weight on interest rate smoothing and fears misspecification in only exchange rate determination, a more cautious policy is recommended for all but an exchange rate shock. It is also shown that the benefits of an exchange rate channel far outweigh the concomitant costs of uncertain exchange rate determination. |
| JEL: | C51 E52 F41 |
| Date: | 2006–09 |
| URL: | http://d.repec.org/n?u=RePEc:nzb:nzbdps:2006/08&r=fmk |
| By: | Fernandez, Pablo (IESE Business School); Carabias, Jose M. (IESE Business School) |
| Abstract: | En este documento se cuantifica la creación de valor para los accionistas del Banco Santander (BSCH) entre diciembre de 1991 y diciembre de 2005. En ese período, el aumento de la capitalización de BSCH fue de 67.070 millones de euros, el aumento del valor para los accionistas fue de 32.114 millones de euros, y la creación de valor para los accionistas fue de 4.158 millones de euros (expresado en euros de 2005). La rentabilidad media anual de BSCH fue del 17,9%, sensiblemente superior a la del IBEX 35 (14,0%): cada euro invertido en acciones de BS en diciembre de 1991 se convirtió en 10,06 euros en diciembre de 2005, mientras que 1 euro invertido en el IBEX 35 se convirtió en 6,26 euros. La inflación media fue del 3,4%, y la rentabilidad media de todas las empresas del IBEX, exceptuando BSCH, fue del 13,6%. La capitalización de BSCH durante estos años osciló entre el 5,2% y el 17,4% de la capitalización del IBEX 35. En diciembre de 1991, BS fue la séptima empresa por capitalización (tras Telefónica, Endesa, Repsol, BBV, Iberdrola y Banco Central). En diciembre de 2005, BSCH fue la empresa con mayor capitalización del IBEX 35. BSCH pasó de ser la 35ª empresa del EuroStoxx50 por capitalización en 1996 a ser la 4ª en 2005. |
| Keywords: | creación valor para accionistas; aumento valor para accionistas; rentabilidad para accionistas; |
| JEL: | G12 G31 M21 |
| Date: | 2006–05–15 |
| URL: | http://d.repec.org/n?u=RePEc:ebg:iesewp:d-0637&r=fmk |
| By: | Fernandez, Pablo (IESE Business School); Carabias, Jose M. (IESE Business School) |
| Abstract: | En este documento se cuantifica la creación de valor para los accionistas del Banco Popular entre diciembre de 1991 y diciembre de 2005. En ese período, el aumento de la capitalización del Banco Popular fue de 10.713 millones de euros, el aumento del valor para los accionistas fue de 12.682 millones de euros, y la creación de valor para los accionistas fue de 9.027 millones de euros (expresado en euros de 2005). La rentabilidad media anual para los accionistas del Banco Popular fue del 18,1%, sensiblemente superior a la del IBEX 35 (14,0%): cada euro invertido en acciones del Banco Popular en diciembre de 1991 se convirtió en 10,66 euros en diciembre de 2005, mientras que 1 euro invertido en el IBEX 35 se convirtió en 6,26 euros. La inflación media fue del 3,4%, y la rentabilidad media de todas las empresas del IBEX, exceptuando el Banco Popular, fue del 13,9%. La rentabilidad para los accionistas del Banco Popular fue positiva todos los años. La capitalización del Banco Popular durante estos años osciló entre el 2,4% y el 4,6% de la capitalización del IBEX 35. En diciembre de 1991, el Banco Popular fue la octava empresa por capitalización (tras Telefónica, Endesa, Repsol, BBV, Iberdrola, Banco Central y Banco Santander). En junio de 2006, el Banco Popular fue laséptima empresa por capitalización del IBEX 35 (tras BSCH, Telefónica, BBVA, Endesa, Repsol e Iberdrola). |
| Keywords: | creación valor para accionistas; aumento valor para accionistas; rentabilidad para accionistas; |
| JEL: | G12 G31 M21 |
| Date: | 2006–06–19 |
| URL: | http://d.repec.org/n?u=RePEc:ebg:iesewp:d-0639&r=fmk |
| By: | Fernandez, Pablo (IESE Business School); Carabias, Jose M. (IESE Business School) |
| Abstract: | En este documento se cuantifica la creación de valor para los accionistas de Iberdrola entre diciembre de 1991 y diciembre de 2005. En ese período, el aumento de la capitalización de Iberdrola fue de 17.279 millones de euros; el aumento del valor para los accionistas fue de 22.535 millones de euros, y la creación de valor para los accionistas fue de 14.424 millones de euros (expresado en euros de 2005). La rentabilidad media anual para los accionistas de Iberdrola fue del 17,3%, sensiblemente superior a la del IBEX 35 (14,0%): cada euro invertido en acciones de Iberdrola en diciembre de 1991 se convirtió en 9,31 euros en diciembre de 2005, mientras que 1 euro invertido en el IBEX 35 se convirtió en 6,26 euros. La inflación media fue del 3,4%, y la rentabilidad media de todas las empresas del IBEX, exceptuando Iberdrola, fue del 13,8%. La rentabilidad para los accionistas de Iberdrola fue positiva todos los años, excepto en 1994, 1999 y 2002. La capitalización de Iberdrola durante estos años osciló entre el 3,9% y el 8,5% de la capitalización del IBEX 35. En diciembre de 1991, Iberdrola fue la quinta empresa por capitalización (tras Telefónica, Endesa, Repsol y BBV). En junio de 2006, Iberdrola fue la sexta empresa por capitalización del IBEX 35 (tras BSCH, Telefónica, BBVA, Endesa y Repsol). |
| Keywords: | creación valor para accionistas; aumento valor para accionistas; rentabilidad para accionistas; |
| JEL: | G12 G31 M21 |
| Date: | 2006–07–10 |
| URL: | http://d.repec.org/n?u=RePEc:ebg:iesewp:d-0640&r=fmk |
| By: | Eckhard Platen (School of Finance and Economics, University of Technology, Sydney) |
| Abstract: | The pricing and hedging of long dated derivative contracts is a challenging area of research. As a result of utility indifference pricing for general payoffs the growth optimal portfolio turns out to be the appropriate numeraire or benchmark with the real world probability measure as corresponding pricing measure. This concept of real world pricing can be applied for valuing long dated derivatives. An equivalent risk neutral probability measure does not need to exist under this benchmark approach. This paper develops a parsimonious model for a stock index dynamics, which is based on a time transformed squared Bessel process. It uses a diversified world stock index as proxy for the growth optimal portfolio. Surprisingly low prices result for long dated zero coupon bonds that can be replicated using historical data. Such prices and hedges are difficult to explain under the prevailing risk neutral approach. |
| Keywords: | growth optimal portfolio; benckmark approach; real world pricing; expected utility maximization; utility indifference pricing; long dated zero coupon bonds; minimal market model |
| JEL: | G10 G13 |
| Date: | 2006–09–01 |
| URL: | http://d.repec.org/n?u=RePEc:uts:rpaper:185&r=fmk |
| By: | Christine Marsal (Université de Bourgogne) |
| Abstract: | (VF)S’il est courant d’opposer capital financier et capital humain les organisations mettent en place des mécanismes de coordination afin de faire converger les intérêts des deux catégories de partenaires que sont les salariés et les actionnaires. La théorie de l’architecture organisationnelle permet de fournir un cadre d’analyse pertinent pour rendre compte de ces mécanismes. Dans ce cadre nous pouvons constater la pluralité des mécanismes d’incitation. Parmi eux, les incitations financières et le pouvoir de délégation accordé au niveau local figurent en bonne place. Ce qui garantit l’efficacité de ces mécanismes est la complémentarité et la cohérence des différentes composantes de l’architecture organisationnelle. Nous illustrons notre propos par une étude conduite dans le secteur bancaire français.(VA)If financial and human capital are commonly opposed, organization internal coordination used to align both employee and stockholder interest. Organizational architecure theory provides a conceptual framework to study thoses mecanisms. In this framework, we can notice incitative plurality mecanisms. We particularly study financial compensation and decision right allocation. Value creation comes from complemenarity between thoses mecanisms, an illustration is given in french retail banking sector. |
| Keywords: | incitations financières;marge de manœuvre;pouvoir de délégation;capital humain;capital financier;banques de réseau;architecture organisationnelle. |
| JEL: | D20 M10 |
| Date: | 2006–05 |
| URL: | http://d.repec.org/n?u=RePEc:dij:wpfarg:1060501&r=fmk |
| By: | Alan M. Taylor; Janine L. F. Wilson |
| Abstract: | Do international trade and finance flow together? In theory, trade and finance can be substitutes or complements, so the matter must be resolved empirically. We study trade and financial flows from the United Kingdom from 1870 to 1913 and the United States in the interwar years. Trade and finance are robustly correlated, even after allowing for simultaneity. Evidence from the British Empire casts doubt on the idea that trade is a punishment device in the event of a default. |
| JEL: | F10 F30 F40 N10 N20 N70 |
| Date: | 2006–09 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:12543&r=fmk |
| By: | Fernandez, Pablo (IESE Business School); Carabias, Jose M. (IESE Business School) |
| Abstract: | En este documento se cuantifica la creación de valor para los accionistas de Unión Fenosa entre diciembre de 1991 y diciembre de 2005. En ese período, el aumento de la capitalización de Unión Fenosa fue de 8.600 millones de euros; el aumento del valor para los accionistas fue de 9.972 millones de euros, y la creación de valor para los accionistas fue de 7.678 millones de euros (expresado en euros de 2005). La rentabilidad media anual para los accionistas de Unión Fenosa fue del 21,6%, sensiblemente superior a la del IBEX 35 (14,0%): cada euro invertido en acciones de Unión Fenosa en diciembre de 1991 se convirtió en 15,37 euros en diciembre de 2005, mientras que 1 euro invertido en el IBEX 35 se convirtió en 6,26 euros. La inflación media fue del 3,4%, y la rentabilidad media de todas las empresas del IBEX, exceptuando Unión Fenosa, fue del 13,9%. La rentabilidad para los accionistas de Unión Fenosa fue positiva todos los años, excepto en 1992, 1994 y 2001-2002. La capitalización de Unión Fenosa durante estos años osciló entre el 1,3% y el 2,4% de la capitalización del IBEX 35. En diciembre de 1991, Unión Fenosa fue la decimocuarta empresa por capitalización (tras Telefónica, Endesa, Repsol, BBV, Iberdrola, Banco Central, Banco Santander, Popular, Banesto, Hispano, Cepsa, Tabacalera y Acesa). En junio de 2006, Unión Fenosa fue la duodécima empresa por capitalización del IBEX 35 (tras BSCH, Telefónica, BBVA, Endesa, Repsol, Iberdrola, Popular, Arcelor, Inditex, ACS y Altadis). |
| Keywords: | creación valor para accionistas; aumento valor para accionistas; rentabilidad para accionistas; |
| JEL: | G12 G31 M21 |
| Date: | 2006–07–17 |
| URL: | http://d.repec.org/n?u=RePEc:ebg:iesewp:d-0642&r=fmk |
| By: | Fernandez, Pablo (IESE Business School); Carabias, Jose M. (IESE Business School) |
| Abstract: | En este documento se cuantifica la creación de valor para los accionistas de Repsol entre diciembre de 1991 y diciembre de 2005. En ese período, el aumento de la capitalización de Repsol fue de 25.611 millones de euros; el aumento del valor para los accionistas fue de 22.790 millones de euros, y la creación de valor para los accionistas fue de 6.736 millones de euros (expresado en euros de 2005). La rentabilidad media anual para los accionistas de Repsol fue del 14,5%, sensiblemente superior a la del IBEX 35 (14,0%): cada euro invertido en acciones de Repsol en diciembre de 1991 se convirtió en 6,69 euros en diciembre de 2005, mientras que 1 euro invertido en el IBEX 35 se convirtió en 6,26 euros. La inflación media fue del 3,4%. La rentabilidad para los accionistas de Repsol fue positiva todos los años, excepto en 1994 y en 2000-2002. La capitalización de Repsol durante estos años osciló entre el 6% y el 10,8% de la capitalización del IBEX 35. En diciembre de 1991, Repsol fue la tercera empresa por capitalización (tras Telefónica y Endesa). En junio de 2006, Repsol fue la quinta empresa por capitalización del IBEX 35 (tras BSCH, Telefónica, BBVA y Endesa). |
| Keywords: | creación valor para accionistas; aumento valor para accionistas; rentabilidad para accionistas; |
| JEL: | G12 G31 M21 |
| Date: | 2006–07–19 |
| URL: | http://d.repec.org/n?u=RePEc:ebg:iesewp:d-0643&r=fmk |
| By: | Jacob Bikker; Laura Spierdijk; Paul Finnie |
| Abstract: | This paper demonstrates that the level of competition in the existing Panzar Rosse (P-R) literature is systematically overestimated and that the tests on both monopoly and perfect competition are distorted. This is due to the use of bank revenues divided by total assets as dependent variable in the P-R model instead of unscaled bank revenues. We provide both theoretical and empirical evidence to illustrate the impact of the misspecification on the estimation of competition and the statistical tests on the market structure. Inclusion of scale variables as explanatory variables, which is commonpractice in the current literature, has a similar distorting effect. Our overview of the extensive P-R literature reveals that all 28 studies considered suffer from these types of misspecification. The empirical evidence provided in this paper is based on a large sample of more than 18,000 banks in 101 countries over 16 years. We find that monopoly cannot be rejected in 28% of the countries (against 0% under misspecification) and that perfect competition cannot be rejected in 38% of the cases (against 20-30% under misspecification). |
| Keywords: | competition; banking industry; Panzar-Rosse model; misspecification; market structure |
| JEL: | C52 G21 L11 L13 |
| Date: | 2006–09 |
| URL: | http://d.repec.org/n?u=RePEc:dnb:dnbwpp:114&r=fmk |
| By: | Enrico Prinz (Université de Bourgogne) |
| Abstract: | This article deals with interlocking directorates and the increasing attention this topic has been attracting in recent years. Financial theory tends to regard the subject of directorship interlocks generally negative, even if theoretical argumentation also allows speaking favoura-bly of the effects personnel relations have in a firm's perspective. At this point of time, em-pirical findings are contradictory and do not allow making concluding remarks on the impact director ties have on corporate performance. In order to fill this gap, we analyse interlocks between the 30 largest listed German companies from 2001 to 2005 for testing their impact on corporate performance. Our findings indicate that board appointments of executives harm firm performance. However, those interlocks seem to lower managing director compensation of the appointing firm. Interlocks between supervisory board members do not have any influ-ence, neither on financial performance, nor on management payment levels. |
| Keywords: | corporate governance;interlocking directorates;board of directors;firm performance;executive compensation. |
| JEL: | G30 |
| Date: | 2006–10 |
| URL: | http://d.repec.org/n?u=RePEc:dij:wpfarg:1061001&r=fmk |
| By: | Michael D. Bordo; David C. Wheelock |
| Abstract: | This paper studies the macroeconomic conditions and policy environments under which stock market booms occurred among ten developed countries during the 20th Century. We find that booms tended to occur during periods of above-average growth of real output, and below-average and falling inflation. We also find that booms often ended within a few months of an increase in inflation and monetary policy tightening. The evidence suggests that booms reflect both real macroeconomic phenomena and monetary policy, as well as the extant regulatory environment. |
| Keywords: | Monetary policy ; Stock exchanges |
| Date: | 2006 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedlwp:2006-051&r=fmk |
| By: | Szilárd Benk; Max Gillman; Michal Kejak |
| Abstract: | The explanation of velocity has been based in substitution and income effects, since Keynes’s (1923) interest rate explanation and Friedman’s (1956) application of the permanent income hypothesis to money demand. Modern real business cycle theory relies on a goods productivity shocks to mimic the data’s procyclic velocity feature, as in Friedman’s explanation, while finding money shocks unimportant and not integrating financial innovation explanations. This paper sets the model within endogenous growth and adds credit shocks. It models velocity more closely, with significant roles for money shocks and credit shocks, along with the goods productivity shocks. Endogenous growth is key to the construction of the money and credit shocks since they have similar effects on velocity, through substitution effects from changes in the nominal interest rate and in the cost of financial intermediation, but opposite effects upon growth, through permanent income effects that are absent with exogenous growth. |
| Keywords: | Velocity, business cycle, credit shocks, endogenous growth. |
| JEL: | E13 E32 E44 |
| Date: | 2006–09 |
| URL: | http://d.repec.org/n?u=RePEc:san:cdmacp:0604&r=fmk |
| By: | Dirk Krueger (University of Frankfurt, CEPR, CFS and NBER); Hanno Lustig (University of California Los Angeles and NBER); Fabrizio Perri (University of Minnesota, Federal Reserve Bank of Minneapolis, CEPR and NBER) |
| Abstract: | We evaluate the asset pricing implications of a class of models in which risk sharing is imperfect because of the limited enforcement of intertemporal contracts. Lustig (2004) has shown that in such a model the asset pricing kernel can be written as a simple function of the aggregate consumption growth rate and the growth rate of consumption of the set of households that do not face binding enforcement constraints in that state of the world. These unconstrained households have lower consumption growth rates than constrained households, i.e. they are located in the lower tail of the crosssectional consumption growth distribution. We use household consumption data from the U.S. Consumer Expenditure Survey to estimate the pricing kernel implied by the model and to evaluate its performance in pricing aggregate risk. We employ the same data to construct aggregate consumption and to derive the standard complete markets pricing kernel. We find that the limited enforcement pricing kernel generates a market price of risk that is substantially larger than the standard complete markets asset pricing kernel. |
| Keywords: | Limited Commitment, Equity Premium, Stochastic Discount Factor, Household Consumption Data |
| JEL: | G12 D52 E44 |
| Date: | 2006–10–06 |
| URL: | http://d.repec.org/n?u=RePEc:cfs:cfswop:wp2000622&r=fmk |
| By: | Jose Manuel Campa; Linda S. Goldberg |
| Abstract: | In this paper, we use cross-county and time series evidence to argue that retail price sensitivity to exchange rates may have increased over the past decade. This finding applies to traded goods, as well as to non-traded goods. We highlight three reasons for changing pass through at the level of retail prices of goods. First, pass through may have declined at the level of import prices, but the evidence is mixed over types of goods and countries. Second, there has been a large expansion of imported input use across sectors. This means that the costs of imported goods as well as home tradable goods have heightened sensitivity to import prices and exchange rates. The final channel we consider is whether there have been changing sectoral expenditures on distribution services, with the direction of change negatively correlated with pass through into final consumption prices. We find that this channel, which has been a means of insulating consumption prices from import content and exchange rates, has not systematically changed in recent years. The balance of effects weighs in favor of increased sensitivity of consumption prices to exchange rates, even if exchange-rate pass-through into import prices has declined for some types of goods. |
| JEL: | F3 F4 |
| Date: | 2006–10 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:12547&r=fmk |
| By: | James Feigenbaum |
| Date: | 2006–01 |
| URL: | http://d.repec.org/n?u=RePEc:pit:wpaper:227&r=fmk |
| By: | Rajagopal (Tecnológico de Monterrey, Campus Ciudad de México) |
| Abstract: | This paper attempts to critically examine the available literature on the subject, discuss a model that provides a framework for analyzing the variables associated with customer value, and to identify potential research areas. The paper argues through a set of linear equations that maximizing customer value which is interdependent factor for technology adoption and profit optimization in the banks need to be backed with appropriate economic parameters for attaining competitive efficiency and optimizing profit. The framework of the construct is laid on the theory of competitive advantage and customer lifetime value, so as to maximize the potential of the organization and all its subsystems to create and sustain satisfied customers. The paper draws theoretical impetus from new technologies in banking services such as mobile banking in the North American region and discusses the technology led marketing process towards optimizing profit. The discussion in the paper also analyzes the main criteria for successful internet-banking strategy and brings out benefits of e-banking from the point of view of banks, their technology and customer values and tentatively concludes that there is increasing returns to scale in the bank services in relation to the banking products, new technology and customer value. |
| Keywords: | Banking technology, customer value, profit optimization, diffusion and adoption process |
| JEL: | C21 C51 D21 D91 G21 O14 O33 |
| Date: | 2006–08 |
| URL: | http://d.repec.org/n?u=RePEc:ega:wpaper:200607&r=fmk |
| By: | Fleten, Stein-Erik; Lindset, Snorre |
| Abstract: | Multi-period guarantees are often embedded in life insurance contracts. In this paper we consider the problem of hedging these multi-period guarantees in the presence of transaction costs. We derive the hedging strategies for the cheapest hedge portfolio for a multi-period guarantee that with certainty makes the insurance company able to meet the obligations from the insurance policies it has issued. We find that by imposing transaction costs, the insurance company reduces the rebalancing of the hedge portfolio. The cost of establishing the hedge portfolio also increases as the transaction cost increases. For the multi-period guarantee there is a rather large rebalancing of the hedge portfolio as we go from one period to the next. By introducing transaction costs we find the size of this rebalancing to be reduced. Transaction costs may therefore be one possible explanation for why we do not see the insurance companies performing a large rebalancing of their investment portfolio at the end of each year. |
| Keywords: | Multi-period guarantee; Optimal hedging strategies; Transaction costs; Stochastic programming |
| JEL: | G22 G13 C61 |
| Date: | 2004–10 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:220&r=fmk |
| By: | Stephen Quinn; William Roberds |
| Abstract: | The Bank of Amsterdam, founded in 1609, was the first public bank to offer accounts not directly convertible to coin. As such, it can be described as the first true central bank. The debut of central bank money did not result from any conscious policy decision, however, but instead arose almost by accident, in response to the chaotic monetary conditions during the early years of the Dutch Republic. This paper examines the history of this momentous development from the perspective of modern monetary theory. |
| Date: | 2006 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedawp:2006-13&r=fmk |
| By: | Zon, Adriaan van (UNU-MERIT); Fuss, Sabine (UNU-MERIT) |
| Abstract: | UK climate change policy has long been concerned with the transition to a more sustainable energy mix. The degree of competition in electricity markets rises as these markets become more and more liberalized. In order to survive in such an increasingly competitive setting, electricity producers have to handle as efficiently as possible the uncertainties associated with the volatility of fuel prices, but also uncertainties regarding the technological evolution of electricity production (including the development of renewable technologies). Technological uncertainty in combination with high capital costs are likely to deter investors from adopting renewable technologies on a larger scale than they are doing right now, even though they have to accept a higher degree of fuel price risk by doing so. By carefully composing a portfolio of technologies with different (co-)variances in the respective prices and rates of technical progress, risk-averse producers can effectively hedge the uncertainties mentioned above. In order to model this type of investment behaviour, we use an extended version of the van Zon and Fuss (2005) clay-clay-vintage-portfolio model that starts from the notion that investment in electricity production equipment is irreversible. However, a physical capital portfolio - in contrast to a portfolio of financial assets - can only be adjusted at the margin. This implies that it becomes extremely important to look ahead, and act on not just expectations themselves, but also their reliability. Using the extended model, we implement several features of present UK policy in order to illustrate the principles involved. We find that the reduction of risk goes together with an increase in total costs. We also find that for increasing values of risk-aversion, investors would be willing to adopt nuclear energy at earlier dates than otherwise would have been the case. In addition to this, we find that the embodiment of technical change, in combination with the expectation of a future switch towards another technology, may actually reduce current investment in that technology (while temporarily increasing current investment in competing technologies). The latter enables rational but risk-averse investors to maximise their productivity gain by waiting for ongoing embodied technical change to take place until the moment they plan to make the switch and then investing more heavily in the newest vintages associated with that technology at the time of the switch. |
| Keywords: | Investment, Energy Industry, Electric Utilities, Technology, Mathematical Modelling, Environmental Policy, United Kingdom |
| JEL: | O16 L94 C67 O13 |
| Date: | 2006 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:unumer:2006035&r=fmk |
| By: | José Manuel Campa; Linda S. Goldberg |
| Abstract: | In this paper, we use cross-country and time-series evidence to argue that retail price sensitivity to exchange rates may have increased over the past decade. This finding applies to traded goods as well as to non-traded goods. We highlight three reasons for the change in pass-through into the retail prices of goods. First, pass-through may have declined at the level of import prices, but the evidence is mixed over types of goods and countries. Second, there has been a large expansion of imported input use across sectors, meaning that the costs of imported goods as well as home-tradable goods have heightened sensitivity to import prices and exchange rates. Finally, we consider whether there have been changing sectoral expenditures on distribution services, with the direction of change negatively correlated with pass-through into final consumption prices. We find that this channel, which has been a means of insulating consumption prices from import content and exchange rates, has not systematically changed in recent years. On balance, these effects support increased sensitivity of consumption prices to exchange rates, even if exchange rate pass-through into import prices has declined for some types of goods. |
| Date: | 2006 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fednsr:261&r=fmk |
| By: | Jianhuai Shi |
| Abstract: | The Chinese economy has been in a state of external and internal imbalances for some years, which has something to do with the undervaluation of renminbi (RMB). But the Chinese Government hesitates to allow RMB to appreciate because of the worry that RMB appreciations are contractionary thus have negative impact on China's economic growth and employment. The purpose of this paper is to empirically assess the effects of RMB real exchange rate on China's output. The econometric results of the paper show that (1) even after source of spurious correlation is controlled for, RMB appreciation has led to a decline in China’s output, suggesting that RMB appreciations are contractionary, and that (2) once the international finance linkage of Chinese economy is accounted for, the effect of RMB real exchange rate shocks on China’s output and the power of the shocks in explaining the change of China’s output are diminished. The paper gives some possible explanations to those findings, and points out that the findings do not necessarily imply that China should continue maintaining the undervaluation of RMB. |
| JEL: | F31 F41 O53 |
| Date: | 2006–10 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:12551&r=fmk |
| By: | David N. DeJong; Marla Ripoll |
| Date: | 2006–01 |
| URL: | http://d.repec.org/n?u=RePEc:pit:wpaper:216&r=fmk |
| By: | Matesanz Gómez, David; Fugarolas Álvarez-Ude, Guadalupe |
| Abstract: | Using multivariate cointegration tests for non-stationary data and vector error correction models, this paper examines the determinants of trade balance for Argentina over the last forty to fifty years. Our investigation confirms the existence of long-run relationships among trade balance, Real Exchange Rate (RER) and foreign and domestic incomes for Argentina during different real exchange rate management policies. Based on the estimations, the Marshall-Lerner condition is examined and, by means of impulse response functions, we trace the effect of a one-time shock to the RER on the trade balance checking the J-curve pattern. |
| Keywords: | Argentina; Marshall-Lerner; J-Curve; cointegration and impulse response analysis |
| JEL: | C22 F43 C32 F31 |
| Date: | 2006 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:151&r=fmk |
| By: | Allard Bruinshoofd; Sybille Grob |
| Abstract: | The empirical connection between financial incentives and retirement decisions largely derives from revealed preferences in cross-sectional settings. This raises the issue to what extent unobserved tastes for retirement – which may correlate with job selection and through that route with financial incentives – play a role and can be controlled for. Using a stated rather than a revealed preferences approach, we contribute to this debate. Fielding a survey questionnaire in the Dutch DNB Household Survey we derive empirical estimates of pension adjustment and pension wealth effects. Our main finding is that retrenchments of pension arrangements to the effect of raising the standard retirement age by 1 year induce people on average to postpone retirement by about half a year. Retirement postponement varies across people, depending prominently on earnings and non-pension wealth; affluent people are more likely to capitalize on increased pension wealth through earlier retirement, whereas they more readily accept a lower pension benefit in case of a decrease in pension wealth. |
| Keywords: | (Early) retirement; Financial incentives; Survey results |
| JEL: | D12 D80 J26 |
| Date: | 2006–10 |
| URL: | http://d.repec.org/n?u=RePEc:dnb:dnbwpp:115&r=fmk |
| By: | Christopher Gust; Sylvain Leduc; Robert J. Vigfusson |
| Abstract: | Over the past twenty years, U.S. import prices have become less responsive to the exchange rate. We propose that a significant portion of this decline is a result of increased trade integration. To illustrate this effect, we develop an open economy DGE model in which trade occurs along both the intensive and extensive margins. The key element we introduce into this environment is strategic complementarity in price setting. As a result, a firm's pricing decision depends on the prices set by its competitors. This feature implies that a foreign exporter finds it optimal to vary its markup in response to shocks that change the exchange rate, insulating import prices from exchange rate movements. With increased trade integration, exporters have become more responsive to the prices of their competitors and this change in pricing behavior accounts for a significant portion of the observed decline in the sensitivity of U.S import prices to the exchange rate. |
| Keywords: | Foreign exchange rates ; Imports - Prices |
| Date: | 2006 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedgif:864&r=fmk |
| By: | David Cobham |
| Abstract: | This paper attempts to assess the relative activism of these three central banks, with reference to the debate on interest rate smoothing. It investigates smoothing in terms of the pattern of interest rate changes, and estimates a series of Taylor-type policy rules for each bank, using quarterly and monthly data, with ‘backward’ and ‘forward’-looking arguments, and with and without lagged dependent variables. It also examines the effect of introducing an auto-correlated error term. There is some (non-robust) evidence that the FRB is more activist, but it also seems to be more smooth; the ECB seems to adjust faster but less strongly in the long run; and the BoE’s behaviour is more difficult to identify. However, these standard policy rules are out of kilter with central banks’ own descriptions of what they do, while the long lags involved raise questions about the relevance of the Taylor principle as conventionally applied. It is therefore suggested that researchers should pay more attention to the institutional context of central banks’ behaviour, in order to produce better estimates of their policy rules which would in turn shed more light on the issues of activism and smoothing. |
| Keywords: | Monetary policy, activism, interest rate smoothing, central banks. |
| JEL: | E43 E52 |
| Date: | 2006–09 |
| URL: | http://d.repec.org/n?u=RePEc:san:cdmacp:0602&r=fmk |
| By: | Fabrice Hervé (Université de Bourgogne) |
| Abstract: | (VF)De plus en plus de fonds de retraite à cotisations définies appartiennent à des familles. Une famille de fonds comprend tous les fonds gérés par la même société. Le fait d’appartenir à une famille soulève des interrogations sur l’adéquation entre l’objectif d’un fonds (procurer à ses détenteurs la performance la plus élevée possible) et l’objectif de sa famille (rapporter à la société offrant une gamme de fonds le profit le plus élevé possible). Les grandes familles sont plus à même de manipuler les ressources dont elles disposent et, partant, d’influencer la performance et la persistance de la performance de leurs fonds. Nous montrons que les fonds appartenant aux plus grandes familles produisent des performances plus stables à moyen terme, mais réalisent des performances similaires à celles de leurs homologues de petites familles et enfin, que les fonds les meilleurs des grandes familles ne voient pas leurs performances persister. Les implications de ces résultats sont doubles : 1. si les grandes familles semblent posséder les moyens d’assurer une plus grande régularité dans les performances de leurs fonds, ceci ne se fait apparemment pas au détriment de certains de leurs fonds ; autrement dit, les familles de fonds de retraite ne constituent pas des entités coordonnées 2. les actuels cotisants ont intérêt à confier la gestion de leur épargne-retraite à des fonds de grandes familles afin de se voir confronté à un moindre risque de trajectoire. (VA) More and more defined contribution pension funds belong to families. A family of funds includes all the funds managed by the same company. Family affiliation raises interrogations on the adequacy between the objective of the fund (to produce the highest performance for its contributors) and the objective of its family (to maximize profit of the pension funds selling firm). Big families are more able to handle their resources and, therefore, to influence the performance and the performance persistence of their funds. We show that funds belonging to largest families produce more stable performance in the medium term, but carry out performance similar to those of their counterparts of small families. Moreover, the best performing funds within families do not exhibit performance persistence. The implications of these results are the following: 1. If big families can ensure a greater performance persistence of their funds, this is apparently not done to the detriment of some of their funds; in other words, the families of pension funds do not constitute coordinated entities 2. Actual contributors may find beneficial to invest their retirement savings in big families funds in order to support less path dependency in the evolution of their savings. |
| Keywords: | fonds de pension;famille de fonds;performance;persistance de la performance;cotisations définies;Royaume-Uni. |
| JEL: | G12 G23 |
| Date: | 2006–09 |
| URL: | http://d.repec.org/n?u=RePEc:dij:wpfarg:1060903&r=fmk |
| By: | Arnold, Ivo (Nyenrode Business Universiteit) |
| Abstract: | Index-linked bonds (ILBs) constitute a small but growing segment of the eurozone bond market. Issuers of index-linked bonds face a choice between linking to either a eurozone or a national price index. This paper examines this choice both theoretically and empirically and ends up with the following conclusions. First, ILBs linked to eurozone inflation are much less useful for diversification purposes than nationally indexed ILBs. This is hard to square with the intended use of these bonds. Second, ILBs linked to national price indices are imperfect hedges for national inflation. The latter finding is counterintuitive and arises because of monetary union. |
| Keywords: | Index-linked bonds; inflation; EMU |
| Date: | 2006 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:nijrep:2006-10&r=fmk |
| By: | Paul Söderlind |
| Abstract: | Survey and option data are used to take a fresh look at the equity premium puzzle. Survey data on equity returns (Livingston survey) shows much lower expected excess returns than ex post data. At the same time, option data suggests that investors perhaps overestimate the volatility of equity returns. Both facts reduce the puzzle. However, data on beliefs about output volatility (Survey of Professional Forecasters) shows marked overconfidence. On balance, the equity premium is somewhat less of a puzzle than in ex post data. |
| Keywords: | equity premium puzzle, Livingston survey, S&P 500 options, Survey of Professional Forecasters |
| JEL: | G12 E13 E32 |
| Date: | 2006–09 |
| URL: | http://d.repec.org/n?u=RePEc:usg:dp2006:2006-22&r=fmk |
| By: | James Feigenbaum |
| Date: | 2005–01 |
| URL: | http://d.repec.org/n?u=RePEc:pit:wpaper:231&r=fmk |
| By: | Plantinga, Auke (Groningen University) |
| Date: | 2006 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:rugsom:06e10&r=fmk |
| By: | Roland Meeks (Nuffield College, University of Oxford) |
| Abstract: | This paper asks how well a general equilibrium agency cost model describes the dynamic relationship between credit variables and the business cycle. A Bayesian VAR is used to obtain probability intervals for empirical correlations. The agency cost model is found to predict the leading, countercyclical correlation of spreads with output when shocks arising from the credit market contribute to output fluctuations. The contribution of technology shocks is held at conventional RBC levels. Sensitivity analysis shows that moderate prior calibration uncertainty leads to significant dispersion in predictedcorrelations. Most predictive uncertainty arises from a single parameter. |
| Keywords: | agency costs, credit cycles, calibration, shocks. |
| JEL: | C11 C32 E32 E37 E44 |
| Date: | 2006–08–25 |
| URL: | http://d.repec.org/n?u=RePEc:nuf:econwp:0611&r=fmk |
| By: | Evelyne Poincelot (Université de Bourgogne); Grégory Wegmann (Université de Bourgogne) |
| Abstract: | In this article, we present the evolution of management accounting and the strategic management accounting (SMA) concept. The balanced scorecard (BSC), a SMA tool, is quite famous in European countries. Its principle objective is to articulate planning decisions with control ones thanks to non-financial indicators. Contractual theories constitute the foundations of this tool. But in Northern Europe, some specific BSC are designed in the framework of knowledge-based theories.We describe here the results of an inquiry conducted in France. Its aims are mainly to test the usefulness of non-financial indicators in driving a firm’s objectives and the link between the use of non-financial indicators and the performance. We demonstrate that the French managers associate non-financial indicators with strategic objectives. But we also conclude that they believe that there is no direct link between the use of non-financial metrics and the performance. |
| Keywords: | Management accounting;Strategic management accounting;Balanced Scorecard;Non-financial indicators;Contractual and knowledge-based theories;Survey questionnaire. |
| JEL: | M10 M40 |
| Date: | 2006–09 |
| URL: | http://d.repec.org/n?u=RePEc:dij:wpfarg:1060905&r=fmk |
| By: | Dirk Bergemann (Dept. of Economics, Yale University); Juuso Valimaki (Helsinki School of Economics and University of Southampton) |
| Abstract: | We consider the truthful implementation of the socially efficient allocation in a dynamic private value environment in which agents receive private information over time. We show that a suitable generalization of the Vickrey-Clark-Groves mechanism, based on the marginal contribution of each agent, leads to truthtelling in every period. A leading example of a dynamic allocation model is the sequential auction of a single good in which the current winner of the object receives additional information about her valuation. We show that a modified sequential second price auction in which only the current winner makes a positive payment leads to truthtelling. In general allocation problems, the marginal contribution mechanism continues to induce truthtelling in every period but may now include positive transfers for many agents. |
| Keywords: | Vickrey Auction, Marginal Contribution, Dynamic Allocation Index, Multi-Armed Bandit, Bayesian Learning, Experimentation, Matching |
| JEL: | C72 C73 D43 D83 |
| Date: | 2006–10 |
| URL: | http://d.repec.org/n?u=RePEc:cwl:cwldpp:1584&r=fmk |
| By: | James Feigenbaum |
| Date: | 2005–01 |
| URL: | http://d.repec.org/n?u=RePEc:pit:wpaper:230&r=fmk |
| By: | Bouwens,Jan; Lent,Laurens van (Tilburg University, Center for Economic Research) |
| Abstract: | Using a sample of 140 managers, we investigate the use of various performance metrics in determining the periodic assessment, bonus decisions, and career paths of business unit managers. We show that the weight on accounting return measures is associated with the authority of these managers, and we document that both disaggregated measures (expenses and revenues), and non-financial measures play a greater role as interdependencies between business units increase. The results suggest separate and distinct roles for different types of performance measures. Accounting return measures are used to create the proper incentives for managers with greater authority, while disaggregated and non-financial measures are employed in response to interdependencies. |
| Keywords: | performance measures;business units;managerial performance |
| JEL: | M41 |
| Date: | 2006 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:kubcen:200692&r=fmk |
| By: | Cambell Leith; Simon Wren-Lewis |
| Abstract: | A common feature of exchange rate misalignments is that they produce a divergence between traded and non-traded goods sectors, which appears to pose a dilemma for policy makers. In this paper we develop a small open economy model which features traded and non-traded goods sectors with which to assess the extent to which monetary policy should respond to exchange rate misalignments. To do so we initially contrast the efficient outcome of the model with that under flexible prices and find that the flex price equilibrium exhibits an excessive exchange rate appreciation in the face of a positive UIP shock. By introducing sticky prices in both sectors we provide a role for policy in the face of UIP shocks. We then derive a quadratic approximation to welfare which comprises quadratic terms in the output gaps in both sectors as well as sectoral rates of inflation. These can be rewritten in terms of the usual aggregate variables, but only after including terms in relative sectoral prices and/or the terms of trade to capture the sectoral composition of aggregates. We derive optimal policy analytically before giving numerical examples of the optimal response to UIP shocks. Finally, we contrast the optimal policy with a number of alternative policy stances and assess the robustness of results to changes in model parameters. |
| Date: | 2006–09 |
| URL: | http://d.repec.org/n?u=RePEc:san:cdmacp:0605&r=fmk |
| By: | Helyette Geman (School of Economics, Mathematics & Statistics, Birkbeck); Steve Ohana |
| Date: | 2006–10 |
| URL: | http://d.repec.org/n?u=RePEc:bbk:bbkefp:0610&r=fmk |
| By: | Harry Garretsen; Jolanda Peeters |
| Abstract: | Based on a data set for 19 OECD countries for the period 1981-2001, we estimate the impact of capital mobility (FDI) on corporate tax rates. So far the literature has been concerned with the related but rather different question as to the sensitivity of FDI to tax rates. Our paper takes an opposite perspective and asks what the impact of capital mobility is on corporate tax rates. In doing so, we explicitly take the role of agglomeration into account. In theory, core countries can afford a higher tax rate compared to peripheral countries. In our estimation strategy, we instrument capital mobility to deal with reverse causality. The main conclusion isthat increased international capital mobility implies a lower corporate tax rate. But we also find that agglomeration matters: core countries have a higher corporate tax rate. If there is a race to the bottom, it seems that it is more real for some countries than others. |
| Keywords: | new economic geography; corporate income taxation; capital mobility |
| JEL: | F12 F20 H32 |
| Date: | 2006–09 |
| URL: | http://d.repec.org/n?u=RePEc:dnb:dnbwpp:113&r=fmk |
| By: | Per Hogselius |
| Abstract: | This paper investigates the process of creative destruction and creative destuction management in the Baltic Sea region through a series of case studies of conrete technologies that both Eastern and Western countries in the region have tried to get rid of during the past decade or so. The cases are: old-style banking technologies, old-generation nuclear power, copper-wire telephone lines and fossil-fuel energy production. It is shown that it in general it has been extremely difficult for countries to creatively destroy these outdated technologies, but that it is also possible to point at a number of success stories. The paper identifies several factors underlying successful creative destruction in the Baltic Sea region, concluding that these factors differ between Eastern and Western countries. It also discusses the ways in which the corresponding processes have - and have not - been actively managed at the political level. |
| Date: | 2006–09 |
| URL: | http://d.repec.org/n?u=RePEc:tth:wpaper:10&r=fmk |
| By: | M.Utku Unver; John Dufffy |
| Date: | 2005–01 |
| URL: | http://d.repec.org/n?u=RePEc:pit:wpaper:260&r=fmk |
| By: | Aristovnik, Aleksander |
| Abstract: | The article investigates the main factors of current account deficits in order to assess the potential excessiveness of current account deficits in selected countries of Eastern Europe and former Soviet Union. According to the simulated benchmark calculated on the basis of selected determinants (in period 1992-2003), the results confirm that the actual current account balances are generally close to their estimated levels in the 2000-2003 period in the transition region. This notion is in line with the intertemporal approach to the current account balance, suggesting that higher external deficits are a natural outcome when permanent domestic output exceeds the current one and when current investments and government consumption exceed their permanent levels. Hence, the results suggest that most countries in Eastern Europe and former Soviet Union are justified in running relatively high current account deficits. |
| Keywords: | transition countries; current account deficits; excessiveness; determinants; dynamic panel data |
| JEL: | F32 C33 |
| Date: | 2006–06–05 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:121&r=fmk |
| By: | Aude Hubrecht (Université de Bourgogne); Michel Dietsch (Université de Strasbourg 3); Fabienne Guerra (FUCAM - Mons) |
| Abstract: | (VF)Dans le cadre de l’approche DEA («Data Envelopment Analysis») nous développons de nouveaux indicateurs de la performance pour les réseaux de distribution intégrés. Nous détaillons les développements méthodologiques utiles à la construction d’un indicateur de productivité des points de vente qui respecte les critères de contrôlabilité, de cohérence transversale. Ensuite, nous modélisons le lien entre un indicateur de performance de la tête de réseau et l’indicateur de productivité des points de vente pour garantir la cohérence hiérarchique. Et enfin, nous insérons ces indicateurs dans un outil d’aide à la décision conforme à l’organisation verticale des réseaux de distribution : un système de tableau de bord prospectif.(VA)In a DEA framework («Data Envelopment Analysis»), we develop new performance indicators for the integer retail network. We detail the methodological improvement to propose a productivity indicator which respects the criteria of controllability and transversal coherence. Next, we formalise the relation between a performance indicator of the headquarter and the productivity of the retailers. Finally, we insert these new indicators into a making help decision tool modified to be in accordance with the vertical organisation of the retail network: a system of balanced scorecard. |
| Keywords: | Data Envelopment Analysis;agences bancaires;système de tableaux de bord prospectifs;contrôlabilité; cohérence transversale;cohérence hiérarchique;bank branches;balanced scorecards system;controllability;transversal coherence;hierarchical coherence. |
| JEL: | G21 L11 D21 D24 M42 |
| Date: | 2005–06 |
| URL: | http://d.repec.org/n?u=RePEc:dij:wpfarg:1050602&r=fmk |
| By: | Guillaume Daudin (Observatoire Français des Conjonctures Économiques) |
| Date: | 2006 |
| URL: | http://d.repec.org/n?u=RePEc:fce:doctra:0614&r=fmk |