the impact of uncertainty shocks in emerging economies abstract a recent strand of research proposes that sudden jumps in uncertainty generate rapid drops and recoveries in real macroeconomic variables that drive the business cycle using an empirical model we find substantial heterogeneity in reactions to these shocks across countries in comparison to the u s and other developed countries emerging economies suffer much more severe falls in investment and private consumption following an exogenous uncertainty shock take significantly longer to recover and do not experience a subsequent overshoot in activity we provide evidence that the dynamics of investment and consumption are correlated with the depth of financial markets we control for the potential role of a credit channel and estimate that it can account for up to one half of the increased fall in investment generated by uncertainty shocks among emerging economies with less developed financial markets in this context monetary and fiscal policy actions that alleviate the impact of credit constraints facing firms may reduce the impact of uncertainty shocks in these economies

on corporate borrowing credit spreads and economic activity in emerging economies an empirical investigation abstract we document a considerable increase in foreign financing by the corporate sector in emerging economies emes since the early 2000s mainly in the form of bond issuance and claim that it has opened up an important channel by which external financial factors can drive economic activity in these economies such claim is substantiated by a strong negative relationship between economic activity and an external financial indicator that we construct for several emes using micro level data on spreads of bonds issued by emes corporations in foreign capital markets three salient features characterize such a negative relationship first the financial indicator has considerable predictive power on future economic activity in these economies even after controlling for other potential drivers of business cycles such as movements in sovereign spreads and global financial risk among others second on average an identified adverse shock to the financial indicator generates a large and protracted fall of real output growth in these economies and up to 14 of its forecast error variance is associated to this shock lastly fluctuations in this indicator also respond strongly to shocks in global financial risk emanating from world capital markets thereby implying that changes in corporate spreads also serve as a powerful propagating mechanism of the effect of changes in global investors risk appetite in emerging markets

financial shocks and corporate investment in emerging markets we examine how cross firm and cross country heterogeneity shapes the responses of corporate investment in emerging markets to changes in u s monetary policy and financial market volatility the latter proxying for uncertainty we find that in response to increases in u s monetary policy rates or financial market volatility financially weaker firms reduce investment by more than financially strong firms we also show that firms with stronger balance sheets delay investment voluntarily when faced with higher uncertainty finally we find that stronger macroeconomic fundamentals lower public debt or higher international reserves help to buffer corporate investment from increases in u s monetary policy rates

the two freedoms economic growth and development an empirical study log linear methods are applied to categorical data containing economic freedom political freedom the level of income and the rate of economic growth for a panel of about 100 countries from 1975 to 1992 the main results are given economic freedom the rate of economic growth is independent of political freedom and the level of income given the level of income political freedom is independent of economic freedom and the growth rate the analysis suggests the fundamental effects of economic freedom in fostering economic growth and a high level of income as the condition of a high degree of political freedom

global financial shocks and foreign asset repatriation do local investors play a stabilizing role we study the dynamic response of gross capital flows in emerging market economies to different global financial shocks using a panel vector autoregressive pvar approach our focus lies primarily on the potentially stabilizing role played by domestic investors in offsetting the response of foreign investors to adverse global shocks we find that while foreign investors tend to retrench from emerging markets in response to global risk aversion and monetary policy shocks foreign asset repatriation by resident investors does not always follow suit local investors play a meaningful stabilizing role in the face of global risk aversion shocks with sizeable asset repatriation largely offsetting the retrenchment of non residents in contrast foreign investor retrenchment in response to global monetary policy shocks is not mirrored by asset repatriation finally we find robust evidence that positive global real shocks tend to have a positive impact on net capital inflows to emerging markets our results shed light on the likely impact of the fed s qe tapering on capital flows to emerging market economies

volatility and financial intermediation abstract we consider an economy where risk neutral banks provide intermediation services and risk neutral producers demand credit to finance their working capital needs our model blends costly state verification with imperfect enforcement power we show that a weak legal system combined with high information verification costs leads to large first order effects of volatility on production employment and welfare a calibration illustrates that a 1 increase in the coefficient of variation of productivity shocks would reduce welfare by more than 1 we suggest that legal and information problems explains why volatility has profound effects on emerging market economies

investment prices and exchange rates some basic facts this paper documents four basic facts about investment goods and investment prices first investment has a very significant nontradable component in the form of construction services second distributions services wholesaling retailing and transportation are much less important for investment than for consumption third the import content of investment is much larger than that of consumption finally in the aftermath of three large devaluations the rate of exchange rate pass through is perhaps not surprisingly highest for imported equipment and lowest for construction services jel f41

uncertainty matters evidence from close elections abstract this paper uses a data rich environment to produce direct econometric estimates of macroeconomic and financial uncertainty for 11 advanced nations these indices exhibit significant independent variation from popular proxies and provide a refinement of the influential work of jurado et al 2015 that results in improved real time performance we use this new data in combination with narrative evidence to jointly identify macro uncertainty and financial shocks macro uncertainty shocks are identified with close elections and financial shocks with financial stress during financial crises we find that macro uncertainty shocks matter for the majority of countries and that the real effects of macro uncertainty shocks are generally larger conditioning on close elections these results are robust to controlling for news shocks and global uncertainty as well as a variety of shocks considered to be important drivers of the business cycle

experimentation with strategy and the evolution of dynamic capability in the indian pharmaceutical sector this paper demonstrates that radical regulatory changes can be tantamount to technological revolutions by studying indian pharmaceutical firms it shows that radical regulatory changes such as the indian patent act of 1970 the new industrial policy of 1991 and the signing of trips trade related intellectual property rights system in 1995 served to open up new economic opportunities and constraints in the wake of which the winners and losers were selected as a function of the dynamic firm capabilities most appropriate for the new market environment

income hedging and portfolio decisions we examine whether the decision to participate in the stock market and other related portfolio decisions are influenced by income hedging motives economic theory predicts that the market participation propensity should increase as the correlation between income growth and stock market returns decreases surprisingly empirical studies find limited support for the income hedging motive using a rich unique dutch data set and the national longitudinal survey of the youth nlsy from the united states we show that when the income return correlation is low individuals exhibit a greater propensity to participate in the market and allocate a larger proportion of their wealth to risky assets even when the income risk is high individuals exhibit a higher propensity to participate in the market when the hedging potential is high these findings suggest that income hedging is an important determinant of stock market participation and asset allocation decisions

the effects of economic policy uncertainty on china s economy evidence from time varying parameter favar this article explores the effects of china s economic policy uncertainty epu on its fiscal policy monetary policy and a wide range of macro economic variables using a time varying parameter fava

the two faces of competition dynamic resourcefulness and the hypercompetitive shift competition in the american economy has fundamentally changed over the last few decades from static to dynamic this study labels this important change the hypercompetitive shift and documents it across 200 industries of the us manufacturing sector during i958 to 1991 for industries that undergo a hypercompetitive shift there is an increase in the cross firm variance in performance and a rotation in the value rivalry relationship from a negative association to an inverted u as a consequence of these competitive changes the strategic focus of firms shifts from careful exploitation of given highly durable strategic assets to the steady creation of many new rapidly depreciable ones the key driver of hypercompetitive shift is the dynamic resourcefulness of an industry or the ease with which new strategic assets can be created determinants of dynamic resourcefulness include the dynamism of related transactors notably consumers and suppliers the knowledge base of the industry and structural condi

international risk cycles abstract recent work in international finance suggests that exchange rate puzzles can be accounted for if 1 aggregate uncertainty is time varying and 2 countries have heterogeneous exposures to a world aggregate shock we embed these features in a standard two country real business cycle framework and calibrate the model to equity risk premia in low and high interest rates countries unlike traditional real business cycle models our model generates volatile exchange rates a large currency forward premium excess comovement of asset prices relative to quantities and an imperfect correlation between relative consumption growth and exchange rates our model implies however that high interest rate countries have smoother quantities equity returns and interest rates than low interest rate countries contrary to the data

macroeconomic disasters and the equity premium puzzle are emerging countries riskier abstract not necessarily i provide evidence that advanced countries equity premium and consumption growth differ significantly from those of emerging countries i then estimate distinct disaster risk parameters for these two country groups my bayesian analysis demonstrates that in some aspects advanced countries are more exposed to disaster risk while in others their exposure is smaller disasters are estimated to be more severe and uncertain in advanced countries but are on average less persistent advanced countries are also more likely to experience a global disaster whereas disasters in emerging countries tend to be more idiosyncratic i show that country group heterogeneity in disaster length and magnitude has the largest impact on equity premium

impact of economic uncertainty in a small open economy the case of chile we construct the first news based economic uncertainty index for chile which allowed us to rebuild 23 years of the history of economic uncertainty in the country and quantify its impact on the eco

new evidence on the relationship between democracy and economic growth it is often maintained that democracy is a luxury which comes at a price in terms of subsequent slower increases in national living standards however various recent cross section studies on economic growth have found evidence that lack of civil and political liberties is negatively correlated with economic growth using a new measure of democracy which is based upon the number of years that a country can be regarded as a democracy the robustness of this relationship is examined both direct and indirect effects of lack of democratic liberties are analysed our main conclusion is that the relationship between democracy and economic growth is not rubust

impact of global uncertainty on the global economy and large developed and developing economies global uncertainty shocks are associated with a sharp decline in global inflation growth and interest rate global uncertainty shocks have more protracted statistically significant and substantia

financial stress economic activity and monetary policy in the asean 5 economies this article uses a structural vector autoregression approach to analyse the impact of financial stress on the economy and the relationship between monetary policy and financial stress in the asean 5 economies indonesia malaysia philippines singapore and thailand we find that an increase in financial stress leads to tighter credit conditions and lower economic activity in all five countries the estimated impact on the real economy displays an initial rapid decline followed by a gradual dissipation in malaysia the philippines and thailand the central banks tend to reduce policy interest rates irs when financial stress increases although there is substantial cross country variation in the magnitude and time dynamics the lower policy irs are found to have little significant effects in lowering financial stress but are still effective in stimulating economic activity through other channels these findings imply that easing monetary policy is likely necessary but insufficient to address growth s

inertia and change in the early years employment relations in young high technology firms this paper considers processes of organizational imprinting in a sample of 100 young high technology companies it examines the effects of a pair of initial conditions the founders models of the employment relation and their business strategies our analyses indicate that these two features were well aligned when the firms were founded however the alignment has deteriorated over time due to changes in the distribution of employment models in particular the star model and commitment model are less stable than the engineering model and the factory model despite their instability these two blueprints for the employment relation have strong effects in shaping the early evolution of these firms in particular firms that embark with these models have significantly higher rates of replacing the founder chief executive with a non founder as well as higher rates of completing an initial public stock offering some implications of these findings for future studies of imprinting and inertia in organizations are discussed

market oriented institutions and policies and economic growth a critical survey this paper surveys recent evidence suggesting that market oriented institutions and policies are strongly related to economic growth focusing on studies using the economic freedom ef indicator of the fraser institute this index is critically discussed also various serious shortcomings of empirical studies using this index are identified nevertheless there are strong indications that liberalization i e an increase in the ef index stimulates economic growth this paper also reviews studies on the determinants of ef political liberalization is often found to enhance economic liberalization whereas there is less evidence for causality running in the other direction

symposium on democracy and development academic fashions often follow the public political mood in a period when euphoric public commentators have announced the end of history in the triumph of capitalist democracy one sees an increasing number of scholarly studies attempting to show often on the basis of crosscountry statistical evidence and a bit of wishful thinking a positive effect of democracy on development it is in this context refreshing to see the agnostic results reported by adam przeworski and fernando limongi in their paper on the basis of their review of the theoretical arguments and statistical studies they conclude rather bluntly we do not know whether democracy fosters or hinders economic growth their brief but fairly exhaustive examination of the various statistical studies of the last few decades shows the studies to be hopelessly inconclusive and beset with serious methodological problems at the analytical level they argue that it is not at all clear if democracy with its slow empowerment of the less wealthy secures growth fostering capitalist property rights better than dictatorships democracies may actually be more susceptible to pressures for immediate consumption and other particularistic demands that may hamper long run investment on the other hand authoritarian rulers who have the capacity to resist such pressures may instead be self aggrandi zing plundering the surplus of the economy in fact authoritarian regimes may come in different kinds some deriving their legitimacy from providing order and stability some from rapid growth sah 1991 has argued that authoritarian regimes exhibit a larger variance in economic performance than democracies

pharmaceutical price controls and entry strategies abstract this paper finds that the use of price controls has a statistically and quantitatively important effect on the extent and timing of the launch of new drugs firms headquartered in countries that regulate price reach fewer markets than those in countries without price controls companies avoid price controlled markets and are less likely to introduce products in additional markets after entering a price controlled country launches into low price european countries are further delayed following legalization of parallel imports the results suggest that price regulation in one country affects entry into other countries and may affect the strategies of domestic firms

the international effects of global financial uncertainty shocks abstract in this paper we study the impact of sudden rises in global financial uncertainty on small open economies to this end we extract a global factor from the realised volatilities of about 1000 risky asset returns from around the world we then analyse how shocks to this factor affect economic activity in 44 advanced and emerging small open economies by estimating local projections in a panel regression framework we find that shocks increasing global financial uncertainty have adverse consequences on output trade and unemployment while their impact on nominal variables is more heterogeneous across countries furthermore the effects are more severe in countries with a higher degree of trade or financial openness higher levels of vulnerabilities weaker institutions or during economic downturns

global spillover effects of us uncertainty abstract spillover effects of us uncertainty shocks are studied in a panel var of fifteen emerging market economies emes a us uncertainty shock negatively affects eme stock prices and exchange rates raises eme country spreads and decreases capital inflows into them it decreases eme output and consumer prices while increasing net exports negative effects on output and asset prices are weaker but effects on external balance stronger for latin american emes we attribute such heterogeneity to differential eme monetary policy response to us uncertainty shocks analysis of central bank minutes shows latin american emes pay less attention to smoothing capital flows

innovation and market structure in the dynamics of the pharmaceutical industry and biotechnology towards a history friendly model this paper is a first attempt at modelling the long term dynamics of market structure and innovation in the pharmaceutical industry in a history friendly way the model examines the relationships between the nature of the search space demand the patterns of competition and industry evolution in the age of random screening and in the age of molecular biology and shows that concentration in the pharmaceutical industry is shaped by lack of cumulativeness in innovative activities and market fragmentation the model conforms to our appreciative understanding and responds to changes in parameters concerning demand costs economies of scale opportunity conditions and the relative advantages of new biotechnology firms nbfs vis a vis incumbents with the exception of cost increases the model is quite robust to these changes in its essential features it is quite difficult to raise substantially concentration and to have nbfs displacing incumbents

organizational environments in flux the impact of regulatory punctuations on organizational domains ceo succession and performance a central debate in organizational theory concerns how organizations evolve there are two diametrically opposing viewpoints adaptation theories predict that change occurs as fluid organizations adjust to meet shifting environmental demands while selection theories predict that change occurs through the differential selection and replacement of inert organizations as environmental demands vary over time our paper bridges these polar opposites by using a punctuated equilibrium framework to examine organizations responses to discontinuous industry level change this framework recognizes that the histories of many industries are occasionally punctuated by dramatic exogenous shocks such as radical technological innovation social and political turmoil major changes in government regulation and economic crashes our central thesis is that such environmental punctuations dramatically reduce pressures and rewards for organizational inertia and thereby alter both organizations propensities for change and their survival chances following change we focus on one form of punctuation major regulatory change and study firms in two industries general hospitals and savings and loan associations for organizations in both industries we examine three important outcomes shifts in organizational domain ceo succession and changes in financial performance our analyses show that punctuational regulatory change prompts shifts in organizational domains and executive leadership additionally post punctuation domain change and post punctuation ceo succession both affect subsequent performance we discuss our results in light of current thinking about the content and process effects of core organizational change which has been developed in the context of stable environments finally we argue for the development of more temporally sensitive theories of organizational action

political regimes and economic growth arguments that relate regimes to growth focus on property rights pressures for immediate consumption and the autonomy of dictators while everyone seems to agree that secure property rights foster growth it is controversial whether democracies or dictatorships better secure these rights the main mechanism by which democracy is thought to hinder growth is pressure for immediate consumption which reduces investment only states that are institutionally insulated from such pressures can resist them and democratic states are not the main argument against dictatorships is that authoritarian rulers have no interest in maximizing total output these views are summarized in turn

the rising resilience of emerging market and developing economies summary economic performance in many emerging market and developing economies emdes improved substantially over the past 20 years in the past decade emdes spent more time in expansion and had smaller downturns than advanced economies for the first time we document the history of emdes resilience over the past 60 years and investigate what factors have been associated with it we find that their improved performance since the 2000s is accounted for by both good policies and a lower incidence of external and domestic shocks better policies account for about three fifths of their improved resilience while less frequent shocks account for the remainder

policy uncertainty and the sequence of entry by japanese firms 1980 1998 we extend the stages model of internationalization to incorporate a sophisticated consideration of temporal and cross national variation in the uncertainty of the policy environment using a sample of 6465 international expansions of 665 japanese manufacturing firms in 49 countries we develop arguments from internationalization and bargaining power perspectives to show how japanese firms manage policy uncertainty in host country environments through the within country sequencing of investments although a distribution to manufacturing entry sequence tends to prevail in countries with low levels of policy uncertainty as uncertainty in the policy environment increases initial entry by distribution is increasingly likely to be eschewed in favor of an initial entry by a joint venture manufacturing plant we suggest that this change in investment sequence occurs as firms shift from an emphasis on developing knowledge about local markets and consumers in low hazards markets to an international expansion strategy in uncertain policy environments that places knowledge development of the policy environment at the forefront of a firm s strategy

financial freedom and bank efficiency evidence from the european union this paper investigates the dynamics between the financial freedom counterparts of the economic freedom index drawn from the heritage foundation database and bank efficiency levels we rely on a large sample of commercial banks operating in the 27 european union member states over the 2000s after estimating bank specific efficiency scores using data envelopment analysis dea we develop a truncated regression model combined with bootstrapped confidence intervals to test our main hypotheses results suggest that the higher the degree of an economy s financial freedom the higher the benefits for banks in terms of cost advantages and overall efficiency our results also show that the effects of financial freedom on bank efficiency tend to be more pronounced in countries with freer political systems in which governments formulate and implement sound policies and higher quality governance

the institutional framework and economic development the compound growth rates of per capita output and farrell type efficiency measures for 115 market economies over the period 1960 80 were compared with measures of political civil and economic liberty it was found that the institutional framework has significant and large effects on the efficiency and growth rate of economies politically open societies which subscribe to the rule of law to private property and to the market allocation of resources grow at three times the rate and are two and one half times as efficient as societies in which these freedoms are abridged

on the link between the us economic policy uncertainty and exchange rates employing dynamic conditional correlation garch dcc garch model this paper analyzes spillover effects of the us economic policy uncertainty shock on real effective exchange rates with the data from january 2000 to december 2014 we find that the correlations between the us epu and the returns of the high yielding currencies are consistently negative throughout the sample period while the correlation between the us epu and the returns of japanese yen is consistently positive moreover we find that the correlations tend to be intensified during two post 2000 recession episodes

income risk borrowing constraints and portfolio choice economic theory suggests that uninsurable income risk and the expectation of future borrowing constraints can reduce the share of risky assets in a household s portfolio if the utility function exhibits decreasing absolute risk aversion and decreasing prudence an individual will reduce his exposure to rate of return risks when confronted with other independent risks if there are transaction costs the expectation of future borrowing constraints should induce individuals to keep a lower proportion of their wealth in the form of illiquid and risky assets the authors find support for these propositions in a cross section of italian households copyright 1996 by american economic association

rational contagion and the globalization of securities markets this paper argues that globalization may promote contagion by weakening incentives for gathering costly information and by strengthening incentives for imitating arbitrary market portfolios in the presence of short selling constraints the gain of gathering information at a fixed cost may diminish as markets grow moreover if a portfolio manager s marginal cost for yielding below market returns exceeds the marginal gain for above market returns there is a range of optimal portfolios in which all investors imitate arbitrary market portfolios and this range widens as the market grows numerical simulations suggest that these frictions can have significant implications for capital flows in emerging markets

the big push deja vu a review of jeffrey sachs s the end of poverty economic possibilities for our time jeffrey sachs s new book the end of poverty economic possibilities for our time penguin press new york 2005 advocates a big push featuring large increases in aid to finance a package of complementary investments in order to end world poverty these recommendations are remarkably similar to those first made in the 1950s and 1960s in development economics today as then the big push recommendation overlooks the unsolvable information and incentive problems facing any large scale planning exercise a more promising approach would be to design incentives for aid agents to implement interventions piecemeal whenever they deliver large benefits for the poor relative to costs

macroprudential policy in the presence of external risks abstract we document the relevance of external risks shocks to the level and volatility of world interest rates in shaping economic activity in emerging market economies emes and characterize optimal macroprudential policy in response to these risks in a small open economy subject to financial crises low and stable interest rates reinforce overborrowing arising from a pecuniary externality generated by collateral constraints that depend on asset prices we show that this mechanism leads to greater exposure to crises typically accompanied by abrupt increases in interest rates and a persistent rise in their volatility as observed during sudden stops in emes a tax on international borrowing that implements a social planner s optimal policy can be decomposed into three factors the severity of future crises the ability of the planner to dampen future crises and the incidence of future crises we show that the effects of interest rate volatility on these factors implies that qualitatively the tax responds non monotonically with respect to the direction of volatility shocks and that quantitatively increasing macroprudential taxes is seldom the optimal response to an increase in interest rate volatility

how the chinese government promoted a global automobile industry the claim by china experts that the chinese state lacks the capability to practice pro active industrial policy throws china s future into doubt this article argues the contrary by examining the development of the chinese automobile industry and the evolution of its industrial policy since 1978 the central state s policy may have been ineffective at first but continued to improve layer by layer by taking into account results of local experiments and being propelled by a strong catch up consensus providing performance standards to establish national industries china s learning process thus renders its industrial policy model effective in the long term copyright 2011 the author 2011 published by oxford university press on behalf of associazione icc all rights reserved oxford university press

economic development as self discovery in the presence of uncertainty about what a country can be good at producing there can be great social value to discovering costs of domestic activities because such discoveries can be easily imitated we develop a general equilibrium framework for a small open economy to clarify the analytical and normative issues we highlight two failures of the laissez faire outcome there is too little investment and entrepreneurship ex ante and too much production diversification ex post optimal policy consists of counteracting these distortions to encourage investments in the modern sector ex ante but to rationalize production ex post we provide some informal evidence on the building blocks of our model

coordination failures and government policy a model with applications to east asia and eastern europe abstract poor countries must specialize in standardized labor intensive commodities middle income countries may have a richer menu of options if their labor force is reasonably well educated and skilled the multiplicity of equilibria is due to a coordination problem inherent in activities that require specialized inputs if no intermediate inputs are presently produced there may be little incentive for any single firm to do so on its own the economy may get stuck in a low wage low tech equilibrium an investment subsidy or a minimum wage policy can enhance welfare by moving the economy to a superior equilibrium

the dynamics of rapid industrial growth evidence from sweden s information technology industry 1990 2004 sweden s information technology it industry expanded through an inflow of new entrants during the 1990s its evolution was analyzed using ecological models of organizational founding and disbanding controlling for the effects of economic conditions this study analyzed the effects of density dependence age imprinting rate dependence and the origin of new entrants on the industry the results indicate that the inflow was comprised of start ups that proved to be relatively short lived in contrast new entrants that originated as part of incumbent firms that were diversifying in it stabilized the industry by depressing its disbanding rate and facilitating the entry of new firms in explaining the dynamics of the industry the analysis supports the established models of density dependence age dependence imprinting and organizational origin copyright 2009 the author 2009 published by oxford university press on behalf of associazione icc all rights reserved oxford university press

determinants of democracy a panel study of over 100 countries from 1960 to 1995 finds that improvements in the standard of living predict increase in democracy as measured by a subjective indicator of electoral rights the propensity for democracy rises with per capita gdp primary schooling and a smaller gap between male and female primary attainment for a given standard of living democaracy tends to fall with urbnization and with a greater reliance on natrual resources democracy has little relation to country size but rises with the middle class share of income the apparently strong relation of democracy to colonial heritage mostly disappears when the economic variables are held constant similarly the allowance for these economic variables weakens the interplay between democracy and religious affiliation however negative effects from muslim and non religious affiliations remain intact

financial development and the instability of open economies this paper introduces a framework for analyzing the role of financial factors as a source of instability in small open economies our basic model is a dynamic open economy model with a tradeable good produced with capital and a country specific factor we also assume that firms face credit constraints with the constraint being tighter at a lower level of financial development a basic implication of this model is that economies at an intermediate level of financial development are more unstable than either very developed or very underdeveloped economies this is true both in the sense that temporary shocks have large and persistent effects and also in the sense that these economies can exhibit cycles thus countries that are going through a phase of financial development may become more unstable in the short run similarly full capital account liberalization may destabilize the economy in economies at an intermediate level of financial development phases of growth with capital inflows are followed by collapse with capital outflows on the other hand foreign direct investment does not destabilize

industrial policy and the creation of new industries evidence from brazil s bioethanol industry industrial policy programs are frequently used by governments to stimulate economic activity in particular sectors of the economy this study explores how an industrial policy program can affect the creation and evolution of an industry and ultimately the long term performance of firms we examine the history of the brazilian bioethanol industry focusing on the industrial policy program implemented by the brazilian government in the 1970s to develop the industry we put together a novel data set containing detailed information about the history of bioethanol producers our findings show that plants founded during the industrial policy program tend to be in the long run more productive than those founded before the program was in place based on additional analyses and complementary fieldwork we infer that the wave of acquisitions that occurred after the end of the industrial policy program had an important effect on the performance of the plants founded when the program was in place industrial policy especially in conjunction with a competitive post industrial policy business landscape can succeed in nurturing competitive firms

japanese research consortia a microeconometric analysis of industrial policy despite the existence of much theoretical research analyzing the potential benefits and costs of r d consortia there has been little corresponding empirical work on their efficacy in this paper we undertake a large sample econometric study of japanese government sponsored research consortia we find evidence that frequent participation in these consortia has a positive impact on research expenditure and research productivity these results hold after controlling for the potential endogeneity of intensity of participation in consortia to participating firms research productivity furthermore we find evidence that part of this impact arises from the increased knowledge spillovers that take place within these consortia

political freedom economic freedom and income convergence do stages of economic development matter in the literature theory and empirical evidence on the nexus of political freedom economic freedom and economic growth are mixed in this paper we test the hypothesis that the effect of political freedom on promoting economic growth is realized and detectable at later stages of social and economic development using panel data for a sample of 104 countries between 1970 and 2003 we find strong support for our hypothesis while economic freedom has greater effects on income convergence in the oecd countries political freedom clearly promotes the convergence among those oecd countries

macroeconomic policy uncertainty shocks on the chinese economy a gvar analysis abstractthis article studies the spillovers of economic policy uncertainty epu from developed economies to china in terms of the source extent and persistence by estimating a global vector autoregressive gvar model with both financial and trade variables acting as the transmission channels our findings confirm the existence of international transmissions of policy uncertainty while the patterns differ markedly the us epu appears to be the most significant cause of the fall of export industrial production equity price and exchange rate meanwhile the eu epu is also to be blamed for the depreciation of rmb in contrast to industrial production which shows the largest negative impact chinese inflation increases to a relatively smaller extent with the epu shocks ranking as the us japanese and the eu regardless of the minor impact on a long term interest rate the short term interest rate in china reacts positively to the european and us epu shocks despite the independent national monetary poli

how does financial development alter the impact of uncertainty abstract how does the impact of uncertainty on output vary with financial development levels we investigate this question empirically using a quarterly panel data set of 50 countries between 1971 and 2009 and an instrumental variables model the results support the conjecture that financial development mitigates the negative impact of uncertainty on output at the lower end of the distribution of the financial development levels one standard deviation increase in uncertainty decreases output by more than two standard deviations at the higher end of financial development the impact on output is statistically insignificant these results suggest that strengthening the financial system and increasing liquidity and credit availability improce the robustness of growth performance during periods of uncertainty

the evolution of new industries and the determinants of market structure several empirical regularities concerning firm growth rates and industry firm size distributions have been developed by studying primarily mature industries the primary purpose of this article is to bring together and extend empirical regularities on the evolution of new industries and to use these regularities to gain further insight into the forces governing industry evolution to explain these regularities a model is constructed which emphasizes how factors governing the early evolution of industries may shape their market structure at maturity it stresses how chance events and exogenous factors that influence the number of potential entrants to the industry the growth rate of incumbents and the ease of imitation of industry leaders will influence the ultimate number and size distribution of firms in the industry

measuring international uncertainty the case of korea we leverage a data rich environment to construct and study a measure of macroeconomic uncertainty for the korean economy we provide several stylized facts about uncertainty in korea from 1991m10 2016m5 we compare and contrast this measure of uncertainty with two other popular uncertainty proxies financial and policy uncertainty proxies as well as the u s measure constructed by jurado et al 2015 we find that neither financial nor policy uncertainty proxies capture economy wide uncertainty unlike our measure or financial uncertainty policy uncertainty does not have much effect on real variables in korea

regime switching in emerging market business cycles interest rate volatility and sudden stops abstract we document the presence of discrete regime switching in emerging market business cycles particularly in the volatility of interest rates at which countries borrow internationally using a multi country regime switching vector autoregressive model we study the statistical relationship of such business cycle regimes with episodes of sudden stops periods of high volatility tend to be persistent and are associated with high interest rates the occurrence of sudden stops in external financing and large declines in economic activity most strikingly we show that regime switches drive the countercyclicality of interest rates in emerging markets documented in previous literature neumeyer and perri 2005 and that high volatility regimes forecast sudden stops 6 and 12 months ahead

is subsidizing entry an optimal policy public subsidies in support of new firm foundation are among the most frequently used instruments of industrial policy in the euro zone this paper analyses their effectiveness and efficiency vis a vis some features of the overall process of industry dynamics in italian manufacturing to this end the survival and growth patterns of new small firms are investigated using a unique dataset on electrical and electronic engineering in italy as regards survival our results confirm the findings of other studies namely that the hazard rates are particularly high in the early stages of firm s life cycle as far as growth is concerned the study s main finding is that gibrat s law fails to hold in the years immediately following start up when smaller firms must rush in order to achieve a size large enough to enhance their likelihood of survival conversely in later stages of firm s life cycle the law cannot be rejected these results radically question the use of subsidies as an optimal policy for the support of new entries since the subsidy brings about a major bias in the process of market selection including substitution and deadweight effects and hampers the post entry scale adjustment of newborn firms

income risk and portfolio choice an empirical study this paper investigates the relationship between portfolio choice and labor income risk in the national longitudinal survey of youth 1979 cohort permanent income risk variability of shocks to income that have permanent effect significantly reduces the share of risky assets in the household s portfolio while transitory income risk variability of shocks with no lasting effect does not this result provides strong evidence that households portfolio choices respond to labor income risks in a manner consistent with economic theory theoretical work has shown that uninsurable labor income risk is likely to reduce the share of risky assets in an investor s portfolio pratt and zeckhauser 1987 kimball 1993 bertaut and haliassos 1997 koo 1998 1999 elmendorf and kimball 2000 in a dynamic context when labor in come consists of components of different persistence the magnitude of this effect should depend on the persistence associated with the risk the risk to a persistent component should have a larger effect than the risk to a transi tory component surprisingly however empirical work has not examined this interesting implication of the theory this paper uses the rich information con tained in the national longitudinal survey of youth 1979 cohort nlsy79 to examine this implication we assume that labor income has two components permanent and transitory we then measure the risks of the components for a sample of households in the survey and estimate their effects on the risky asset share previous empirical

growth distribution and politics we start by arguing that to understand growth differences across countries and time one needs to understand differences in public policies that affect the incentives for productive accumulation of capital human capital or technically useful knowledge and to understand policy differences one needs to understand how political institutions aggregate conflicting interests into public policies we then survey some recent work along these lines which argues that more inequality leads to slower growth next we illustrate some of the basic ideas of this work by help of a simple model of taxation we also present some econometric cross country evidence which is largely supportive of the basic ideas we end by suggestions for further work this abstract was borrowed from another version of this item

legitimacy vacuum structural imprinting and the first mover disadvantage unfavorable conditions at founding may result in consistently lower survival chances for new firms we focus on the effect of market entry in the early years of an industry when clarity about the

aggregate volatility and international dynamics the role of credit supply abstract changes in country specific aggregate volatility are positively correlated with the current account but negatively correlated with investment output and credit flows an international real business cycle model with time varying aggregate uncertainty through a precautionary savings channel can account for the positive correlation but implies counterfactual comovements for the other variables adding a credit supply channel with default and lenders exposed to aggregate risk allows the model to match all the facts higher volatility contracts credit supply and lowers investment and output the current account turns to a surplus because savings increase but also because investment collapses

assessing international commonality in macroeconomic uncertainty and its effects this paper uses a large vector autoregression var to measure international macroeconomic uncertainty and its effects on major economies using two datasets one with gdp growth rates for 19 industrialized countries and the other with a larger set of macroeconomic indicators for the u s euro area and u k using basic factor model diagnostics we first provide evidence of significant commonality in international macroeconomic volatility with one common factor accounting for strong comovement across economies and variables we then turn to measuring uncertainty and its effects with a large var in which the error volatilities evolve over time according to a factor structure the volatility of each variable in the system reflects time varying common global components and idiosyncratic components in this model global uncertainty is allowed to contemporaneously affect the macroeconomies of the included nations both the levels and volatilities of the included variables in this setup uncertainty and its effects are estimated in a single step within the same model our estimates yield new measures of international macroeconomic uncertainty and indicate that uncertainty shocks surprise increases lower gdp and many of its components adversely affect labor market conditions lower stock prices and in some economies lead to an easing of monetary policy

uncertainty shocks and asymmetric dynamics in korea a non linear approach this study investigates the impact of uncertainty shocks on macroeconomic activity in korea for this purpose a smooth transition var model is employed to document the state dependent dynamics of

fragility and the effect of international uncertainty shocks abstract when economic systems are fragile even modest shocks for example a shock to international capital movements can have strong negative effects on key macroeconomic fundamentals this paper proposes a large scale bayesian vector autoregression with factor stochastic volatility to investigate the macroeconomic consequences of international uncertainty shocks in g7 countries and shows that uncertainty increases fragility the factor structure enables us to identify an international uncertainty shock by assuming that it is the joint volatility process that determines the dynamics of the variance covariance matrix of the common factors to allow for first and second moment shocks we moreover assume that the uncertainty factor enters the var equation as an additional regressor our findings suggest that an international uncertainty shock has negative effects across all economies and variables under consideration leading to strong declines in output prices exports interest rates and equity prices the precise degree of fragility varies across countries a simple correlation exercise suggests that structural differences may be partially responsible for the observed differences

uncertainty and household portfolio choice evidence from south korea abstract we examine the effect of policy uncertainty on household portfolio choice using the korea labor and income panel study klips policy uncertainty significantly reduces the amount of risky assets in a household s portfolio on both extensive and intensive margins individual heterogeneity is controlled using a risk tolerance variable furthermore we estimate heterogeneous effects of the policy uncertainty on portfolio choices of households across different levels of income volatility it turns out that households with higher levels of labor income volatility tend to respond less to aggregate policy uncertainty

cross country evidence on the link between volatility and growth this paper presents empirical evidence against the standard dichotomy in macroeconomics that separates growth from the volatility of economic fluctuations in a sample of ninety two countries as well as a sample of oecd countries the authors find that countries with higher volatility have lower growth the addition of standard control variables strengthens the negative relationship the authors also find that government spending induced volatility is negatively associated with growth even after controlling for both time and country fixed effects copyright 1995 by american economic association

the korean system of innovation and the semiconductor industry a governance perspective1 this paper explores in detail the political institutional processes and governance aspects of the korean system of innovation it shows i how the specific form of corporate governance chaebol evolved out of korea s national political institutional arrangements such as the state firm relationship based on reciprocal subsidy and ii how the dramatic emergence of korean semiconductor firms in world memory chip markets resulted from the subtle and changing interactions of state world market conditions and chaebol governance copyright 1998 by oxford university press