Search

In this paper we study how monetary policy, economic uncertainty and economic policy uncertainty impact on the dynamics of gross capital inflows in the US. Particular attention is paid to the mixed frequency-nature of the economic time series involved in the analysis. A MIDAS-SVAR model is presented and estimated over the period 1988-2013. While no relation is found when using standard quarterly data, exploiting the variability present in the series within the quarter shows that the effect of a monetary policy shock is greater the longer the time lag between the month of the shock and the end of the quarter. In general, the effects of economic and policy uncertainty on US capital inflows are negative and significant. Finally, the effect of the three shocks is different when distinguishing between financial and bank capital inflows from one side, and FDI from the other.

No abstract

The sharp rise in interest rates on loans and the concurrent phase of stagnation/recession created wide scale financial and economic difficulties for Italian households. These difficulties have raised questions as to the risk Italian households face of not being able to face the financial and economic needs of everyday life and/or loan commitments contracted with banks or other types of lenders. We conducted a survey with the aim: i) to create an index to measure households’ financial vulnerability that can be used to monitor developments in the phenomenon over time; ii) to create a panel of Italian households for periodic studies of the conditions of financial vulnerability; iii) to analyse the determinants of financial vulnerability; iv) to investigate the socio-demographic, economic and behavioural characteristics of groups of homogeneous individuals by degree of financial vulnerability. The innovative feature of this work is the creation of an indicator of financial vulnerability aimed at synthesizing different profiles of household financial instability. A total number of 3,102 Italian households make up the sample. Empirical estimates show interesting results: for the median level of the financial vulnerability index households already exhibit some important symptoms of financial vulnerability, such as problems in getting to the end of the month or an inability to face unexpected expenses., With regards the determinants of the financial vulnerability index, as expected, a mix of factors is relevant in determining household financial vulnerability. Three main findings need to be pointed out. First, the level of debt servicing is positively related to financial vulnerability and the effect is stronger for households holding unsecured debt, i.e. consumer credit. Second, financial vulnerability also increases for impulsive individuals, who may adopt impatient, short-sighted behaviour patterns which make it difficult for them to be fully aware of the consequences of their financial and spending decisions. Third, a higher level of education helps to reduce financial fragility

In this paper we propose a model for the dynamics of inflation in Italy. It is shown that both in the short and long run the inflation patterns cannot be explained by a single cause. Changes in monetary and credit markets, and in many sectors of the Italian economy suggest to split the sample period into two sub-samples and modelling inflation differently for each of the periods. Moreover, a robustness analysis rejects the hypothesis of a structural break associated with the institutional changes occurred in 1999, with the adhesion to the EMU and the adoption of the euro.

This paper analyzes price patterns and long-run relationships for both fine wine and non-fine wine, with the aim to highlight price dynamics and co-movements between series, and to exploit potential diversification benefits. Data are from Liv-Ex 100 Fine Wine for fine wine, the Mediobanca Global Wine Industry Share Price for normal wine, and the MSCI World Index as a proxy of the overall stock market. Engle-Granger and Johansen tests were used to detect whether and to what extent the series co-move in the long run and which one of the variables contributes proactively to such an equilibrium by reacting to disequilibria from the long-run path. The estimates highlight that i) the two wine indexes have a higher Sharpe ratio compared to the general stock market index, revealing wine stocks as a profitable investment per se, and ii) the absence of cointegration among the three series and the existence of possible diversification benefits. In fact, in the long-run price do not move together and, therefore, investors may be better off by including wine stocks into investment portfolios and take advantage of diversification.

In this paper we propose a new framework for modeling heteroskedastic structural vector autoregressions. Although it is general enough to find potential applications in many empirical economic fields, it reveals to be well suited in the distinction between interdependence and contagion in the literature related to the transmission of financial crises. The identification of the structural parameters is obtained by exploiting the heteroskedasticity in the data, naturally arising during crisis periods. More precisely we provide identification conditions when both heteroskedasticity and traditional restrictions on the parameters are jointly considered. Finally, this methodology is used to investigate the relationships between sovereign bond yields for some highly indebted EU countries.

We develop a new structural Vector Autoregressive (SVAR) model for analysis with mixed-frequency data. The MIDAS-SVAR model allows to identify structural dynamic links exploiting the information contained in variables sampled at different frequencies. It also provides a general framework to test homogeneous frequency-based representations versus mixed-frequency data models. A set of Monte Carlo experiments suggests that the test performs well both in terms of size and power. The MIDAS-SVAR is then used to study how monetary policy and financial uncertainty impact on the dynamics of gross capital inflows to the US. While no relation is found when using standard quarterly data, mixed frequency analysis exploiting the variability present in the series within the quarter shows that the effect of an interest rate shock is greater the longer the time lag between the month of the shock and the end of the quarter.

We study the pre-deal characteristics of state-owned banks acquiring other companies, relative to their private counterparts. We build a unique international data-set of 3682 deals in the years 2003–2013. Econometric results highlight that those state-owned banks that are acting as acquirers have an ex-ante performance similar to their private benchmarks. The results are driven by the role of development banks. This new finding points to the recent evolution of some types of contemporary state-owned financial players.

We employ a novel identification scheme to quantify the macroeconomic effects of monetary policy shocks in the United States. The identification of the shocks is achieved by exploiting the instabilities in the contemporaneous coefficients of the structural VAR (SVAR) and in the covariance matrix of the reduced-form residuals. Different volatility regimes can be associated with different transmission mechanisms of the identified structural shocks. We formally test and reject the stability of our impulse responses estimated with post-WWII U.S. data by working with a break in macroeconomic volatilities occurred in the mid-1980s. We show that the impulse responses obtained with our non-recursive identification scheme are quite similar to those conditional on a standard Cholesky-SVARs estimated with pre-1984 data. In contrast, recursive vs. non-recursive identification schemes return substantially different macroeconomic reactions conditional on Great Moderation data, in particular as for inflation and a long-term interest rate. Using our non-recursive SVARs as auxiliary models to estimate a small-scale new-Keynesian model of the business cycle with an impulse response function matching approach, we show that the instabilities in the estimated VAR impulse responses are informative as for the calibration of some key-structural parameters.

Using survey data, we investigate household financial distress. Specifically, we propose an indicator of financial vulnerability to jointly analyse different features of household financial distress, analysing its socio-demographic and economic determinants. A total number of 3102 Italian households make up the sample. The empirical analysis highlights that for the median level of the financial vulnerability index households already exhibit some important symptoms of financial vulnerability, such as problems in getting to the end of the month or an inability to face unexpected expenses. As regards the determinants of the financial vulnerability index, three findings need to be pointed out. First, the level of debt servicing is positively related to financial vulnerability and the effect is stronger for households holding unsecured debt, i.e. consumer credit. Second, financial vulnerability also increases for impulsive individuals, who may adopt impatient, short-sighted behaviour patterns which make it difficult for them to be fully aware of the consequences of their financial and spending decisions. Third, a higher level of education helps to reduce financial fragility.

The paper shows the impact of privatization and liberalization on consumers in the telecommunication sector for 15 EU countries. Policy reforms are summarized by the OECD regulatory indicators (REGREF) that consider the extent of privatization, vertical disintegration, and market entry. After controlling for other country variables, first, a test of the impact of ownership and regulatory changes on consumer prices is given. In the second step, the Eurobarometer data on consumers' satisfaction about quality and prices of the telecommunication service are considered. The analysis confirms the importance of market regulation in reducing prices but minimizes the role played by privatization per se. Overall, the findings offer only mixed evidence, and somehow contradict, the hypothesis that all the reforms work in a similar way across the EU countries.

In this paper we examine empirically the impact of privatisation on output in the UK, through macroeconomic transmission channels. While most privatisation studies focus on microeconomic shocks, namely at the firm level, we are interested to see whether a large scale privatisation policy, as the one pursued in the UK in the 1980 and 1990s, had a measurable impact on output. This may contribute to the ex post evaluation of this policy and complement the microeconomic evidence. We use quarterly data from 1979 to 1998 of privatisation proceeds, as our impulse policy variable, and of private consumption, gross fixed capital formation, net government expenditures, as transmission channels, and aggregate output as our final response variable. The econometric methodology is based on Structural Vector Auto-regressive models and Impulse Response Functions. Non-stationarity and cointegration properties of the time series have also been considered. We find that privatisation shocks do not have an impact in the consumption-output model, but have a moderate and transitory impact in the investment and the public expenditures models. Such positive demand effects, however, have not been completely matched by supply side effects, and, consequently, privatisation in the UK did not contribute to a sustained economic growth.

The objective of the paper is to test the effect of firm size and business experience on export performance. In fact, despite a growing number of empirical studies, the question of the relationship between these variables is not clearly established. This research aims at contributing to a better understanding of these complex relationships with a special focus on small and medium-sized enterprises (SMEs). The authors develop a general model and test it using a sample of Italian manufacturing firms that spans the 1997–2001 period. Combining a time-series with a cross-sectional analysis, they use an econometric model in order to test the relationships. Their findings provide a strong support for both relationships. The results show that it is not business experience per se which is important but that it is the relative change in experience that truly impacts upon export performance. The model also reveals that industry effects are relevant.

This paper shows that there are asymmetric effects of regulatory reforms within two country groups in the EU. We consider the EU27 countries, and update and enlarge the OECD/ETCR regulatory country indicators up to year 2011. When distinguishing between EU15 countries and New Member States (NMS), we find that market liberalization reduces the price of energy in the EU15 countries, while having the opposite effect for the NMS. The paper concludes that the uniform electricity market reforms in the EU apparently have had different effects between the EU15 and the NMS. This asymmetric shock is not at variance with the principles of market opening, given the different starting points, but may in turn call for different policy responses, as consumers in some NMS have faced significant price increases in a relatively short period of time.

We study the potential for introducing indexation on loans provided by multilateral lenders to low income countries (LICs), and thus whether a reform of their lending policy is feasible and economically justified. To this end, we provide new evidence for a group of 40 international development association (IDA) countries over the 1990–2010 period for three types of debt: (i) foreign currency loans indexed to real gross domestic product (GDP); (ii) foreign currency loans indexed to the dollar value of exports; and (iii) inflation-indexed loans denominated in local currency. We find that both GDP indexation and domestic currency lending are feasible policies, since individual country risk could be easily diversified in a portfolio of loans to IDA countries. The estimation of capital asset pricing model (CAPM) beta coefficients suggests that, while the risk of export-indexed loans is difficult to hedge, loans indexed to GDP or denominated in local currencies could be introduced at current interest rates; their risk premium is no greater than one per cent. The insurance that indexed debt might offer to LICs against macroeconomic shocks threatening their debt sustainability depends on the conditional covariances of GDP growth, real exchange-rate depreciation and net exports that we estimate as the covariances of the forecast errors obtained from a VAR model. The analysis shows that GDP-indexed or export-indexed loans would help to stabilize the debt ratio of the majority of IDA countries in our sample, but a larger number of them would benefit from a re-denomination of loans in local currency. A main lesson from our analysis is that a ‘one size fits all solution’ does not exist to the problem of stabilizing the debt ratio. This suggests that a reform of multilateral lending that is desirable to all LICs would be difficult to implement.

In this paper we focus on the determinants of internationalization and, in particular, on the specific role played by the agglomeration of small and medium sized enterprises (SMEs) through their proximity to a large firm. We study the characteristics of the internationalization process in a representative sample of 786 firms in the Italian automotive supply chain. After building an Internationalization Strategy Index (ISI), we perform a multinomial logit econometric analysis. The main findings of the empirical analysis are: (a) Italian automotive supplier firms mainly go in the foreign markets through export, i.e. the simplest internationalization mode; (b) as predicted in the literature, individual firm characteristics play a significant role in the probability of internationalization; (c) firms located in the province of Turin, where the dominant car assembler (Fiat) in Italy has its headquarters, or more generally, in large automotive industry districts, enjoy a clear localization advantage; (d) interestingly, we also find that internationalization is negatively correlated with the share of Fiat in suppliers’ sales, and that suppliers located in a district and less dependent on Fiat are also those adopting the most advanced internationalization strategies.

The new member states (NMS) of the European Union must comply with the Stability and Growth Pact (SGP) and the investment goals implied by the Lisbon Agenda. However, the SGP rules may result in underinvestment or distortions in the allocation of public expenditure. This paper provides new evidence on the effects of debt sustainability and the SGP fiscal constraints on government expenditure on fixed capital, education and health in OECD countries by estimating government expenditure reaction functions to public debt and cyclical conditions. We find that, at high levels of debt, government capital expenditure and education expenditure are significantly reduced as the debt ratio increases in all OECD countries independently of EMU (or EU) membership. By contrast, neither capital expenditure nor education expenditure is affected by the debt ratio in low-debt countries. These findings are robust to the inclusion of the government deficit in the estimated reaction functions. Hence, it appears that EU countries have been constrained in their investment decisions more by the need to ensure debt sustainability than by the rules of the SGP. In low-debt NMS countries, public investment even increases with the debt ratio, a finding that is reassuring for their growth prospects. However, a less optimistic picture emerges when we focus on expenditures on public health and education, as it appears that NMS governments cut such expenditures – even at low levels of debt – as the deficit increases. Problems in controlling total expenditure together with the preventive arm of the SGP may have penalised investment in human capital in the NMS while leaving fixed capital investment unaffected

This paper estimates the international diffusion of technical knowledge using patent citations. We control for self-citations and for procedural differences between patent offices using equivalent patents. We find that (1) there are clear biases in patent examination processes that generate citations in the two offices; (2) at the EPO there is a strong localization effect at the country level, and the size is comparable to that found at the USPTO; (3) technological fields have different properties of diffusion in the two patent offices that do not depend on a patent office bias; (4) using EPO data, the US is not the leading country in terms of citations made and received, as occurs at the USPTO.

This paper estimates the process of diffusion and decay of knowledge from university, public laboratories and corporate patents in six countries and tests the differences across countries and across technological fields using data from the European Patent Office. It finds that university and public research patents are more cited relatively to companies' patents. However these results are mainly driven by the Chemical, Drugs & Medical, and Mechanical fields and US universities. In Europe and Japan, where the great majority of patents from public research come from national agencies, there is no evidence of a superior fertility of university and public laboratory patents vis à vis corporate patents. The distribution of the citation lags shows that knowledge embedded in university and public research patents tends to diffuse more rapidly relative to corporate ones in particular in the US, Germany, France and Japan.

In this article we propose a two step procedure for modeling the propagation of financial shocks. The first step consists in the estimation, by means of SWARCH models, of the conditional probability of being in a period of high volatility, while in the second step such indicators are included in a structural simultaneous equations models for interdependences among different countries. The results show that episodes of financial crisis effectively happened during periods of high volatility and that such measures of instability are important in explaining the propagation of devaluation expectations between six European Countries during the ERM period.

This paper contributes to the empirical literature on the purchasing power parity (PPP) over the post-Bretton Woods period by providing a time-series based interpretation of the controversial evidence characterizing the dynamics of real exchange rates. It is shown that the persistence of deviations from the PPP between a set of European countries and the United States may be empirically attributed to the presence of I(2) stochastic trends in prices using Consumer Price Indices. Interestingly, the slow adjustment towards the equilibrium can be modelled through ‘integral-proportional’ equilibrium correction models and this evidence can be partly reconciled with theories where the inflation rate reduces the markup of profit-maximizing firms acting on imperfectly competitive markets. Copyright © 2005 John Wiley & Sons, Ltd.

The aim of this paper is to study the internationalisation process in a representative sample of 786 firms operating in the Italian automotive industry, a paradigmatic example of a producer driven global value chain. Building on the global value chain literature, the contribution this paper makes is by taking into account the agglomeration and the chain governance dimension (vertical linkages with a leader automotive firm) together in order to investigate what is their respective role in enhancing internationalisation of supplier firms in the automotive industry. After performing a probit regression analysis, we find that being located in a high-density industrial district and producing more research-intensive automotive-specific goods, increase the probability of internationalisation of the supplier firm. High dependency from domestic sales to FIAT, the dominant firm in the Italian market, and being a subcontractor of generic goods has the opposite effect.