further evidence on business cycle asymmetries in g7 countries this paper tests for business cycle symmetry in g7 countries during the post world war ii period using a number of tests each reflecting alternative definitions of business cycle asymmetry the tests are applied to monthly coincident economic indicators of business cycles this found that business cycles in the us are characterized by both longitudinal deepness and transversal steepness and sharpness asymmetries further it is found that asymmetric transition probabilties and time irreversibility are due to nonlinearities on the contrary business cycles in germany exhibits a symmetric behaviour between these extremes are the other countries for which at least one of the tests here considered rejects the null of cyclical symmetry particularly business cycle is characterized by deepness and sharpness in canada asymmetry in persistence in france and japan and asymmetric transition probabilities in france and united kingdom

international taxation and the direction and volume of cross border m as we show that the parent subsidiary structure of multinational firms created by cross border mergers and acquisitions is affected by the prospect of international double taxation specifically the likelihood of parent firm location in a country following a cross border takeover is reduced by high international double taxation of foreign source income at the same time countries with high international double taxation attract smaller numbers of parent firms a unilateral elimination of worldwide taxation by the united states is simulated to increase the proportion of parent firms locating in the united states following cross border mergers and acquisitions from 53 to 58

u s and canadian industrial production indices as coupled oscillators abstract this paper uses ozaki s 1985 variable amplitude coefficient model to explore the impact of different types of dynamical linkages coupling between the indices of industrial production for the u s and canada empirical analysis reveals that for each country the requisite lag structure extends for up to six years and that the coupling linkages are functions of lagged changes in growth rates incorporating these linkages leads to an increased degree of oscillation in the equilibrium paths a marginal improvement in stability and somewhat greater synchronization between the two series the out of sample forecasts for each series are improved by the coupling

examining structural breaks and growth rates in international health expenditures over the last decade there has been a growing interest in examining health expenditures in this paper we study the behaviour of health expenditures in the g3 countries usa the uk and japan and three european countries the uk switzerland and spain over the period 1960 2000 from a different perspective in that we examine 1 whether there is a common structural break in health expenditures across the g3 and european countries 2 whether structural breaks have slowed down health expenditure growth rates in these countries or vice versa our main findings are that 1 health expenditures share a common break in both bivariate and trivariate cases and structural breaks and break intervals suggest that either one or a combination of events second oil price shock the 1987 stock market crash and or recessions have contributed to the commonality of break in health expenditures in the g3 while the oil price shocks have been instrumental in the commonality of breaks for the european countries 2 except for the uk structural breaks have slowed down growth rates in health expenditures for the usa japan switzerland and spain

conditional asymmetries in real gnp a seminonparametric approach two critical assumptions are often made in empirical research regarding the relationship between economic variables and economic disturbances linearity and gaussianity together these two assumptions place strong restrictions on the time series behavior of a model most important these restrictions imply conditional symmetry using seminonparametric snp techniques this article presents evidence that real gross national product growth displays conditional asymmetry although these results confirm related results of brock and sayers sichel and hamilton the snp approach is novel in that it emphasizes the relationship between common modeling assumptions and the restrictions that these assumptions place on data

the brevity and violence of contractions and expansions abstract early studies of business cycles argued that contractions in economic activity were briefer shorter and more violent rapid than expansions this paper systematically investigates this claim and in the process discovers a robust new business cycle fact contractions in employment are briefer and more violent than expansions but we cannot reject the null of equal brevity and violence for expansions and contractions in output the difference arises because employment typically lags output around peaks but they coincide in their troughs we discuss the performance of existing business cycle models in accounting for this fact and conclude that none can fully account for it we then show that a business cycle model with asymmetric adjustment costs on employment and a choice of when to scrap old technologies can account for the business cycle fact both qualitatively and quantitatively

further evidence on the asymmetric behavior of economic time series over the business cycle evidence has recently been presented by salih neftci to support the hypothesis that recessions in economic activity tend to be steeper and more short lived than recoveries in economic activity that evidence however was confined to the behavior of the unemployment rate in the united states in this paper it is shown that when neftci s methods are applied to analyze the behavior of real gross national product investment and productivity in the united states or when they are used to analyze industrial production abroad the asymmetry hypothesis seems to be less compelling

fiscal paradise foreign tax havens and american business the tax haven affiliates of american corporations account for more than 20 percent of u s foreign direct investment and nearly a third of the foreign profits of u s firms american companies report extraordinarily high profit rates on their tax haven investments in 1982 this behavior implies that the revenue maximizing tax rate for a typical haven is around 5 8 percent american and foreign investment in tax havens has an uncertain effect on u s tax revenue but since low tax rates encourage american companies to shift profits out of high tax foreign countries it is possible that low foreign tax rates ultimately enhance u s tax collections

modelling the dynamics of a public health care system evidence from time series data the english national health service nhs was established in 1948 and has therefore yielded some long time series data on health system performance waiting time for inpatient care have been a persistent policy concern since the creation of the nhs after developing a simple theoretical framework of the dynamic interaction between key indicators of health system performance we investigate empirically the relationship between hospital activity waiting time and population characteristics using aggregate time series data for the nhs over the period 1952 to 2003 structural vector autoregression s var suggests that in the long run higher activity is associated with lower waiting times elasticity 0 9 an increase in the elderly population is associated with higher waiting time elasticity 1 3 in the short run higher lagged waiting time leads to higher activity elasticity 0 12 we also find that shocks in waiting times are countered by higher activity so the effect is only temporary

capturing the role of societal affinity in cross border mergers with the eurovision song contest this paper demonstrates the effectiveness of voting bias in the eurovision song contest as a means of capturing societal affinity more than 180 million viewers from more than 40 countries watch the eurovision song contest every year and vote for their favorite songs societal affinity between participating countries leads to systematic bias in voting patterns as each song represents a country using cross border mergers as a proxy for international business exchanges we demonstrate how voting bias provides a simple freely available and dynamic means of capturing societal affinity between countries that complements other metrics of affinity and distance

are business cycles asymmetric some european evidence economic thought has often regarded business cycles as asymmetric this study examines the existence of asymmetries over the business cycle in seven european countries france germany ireland italy luxembourg the netherlands and the united kingdom to analyse this issue industrial production in these countries from 1957 to 1998 is examined and quarterly contractions and expansions in this variable are compared the results obtained with both parametric and non parametric methods allow the existence of asymmetries in these countries to be questioned

taxes tariffs and transfer pricing in multinational corporate decision making three interrelated aspects of u s multinational corporation activity are analyzed here the ability to shift profits from high tax countries to low tax countries the impact of host country taxes and tariffs on the distribution of real capital and the influence of these policies on international trade patterns of the united states and host countries the cross sectional empirical analysis indicates that the observed pattern of reported profits in high and low tax countries is consistent with income shifting behavior and that real investment responds to host country effective tax rates and tariffs the united states appears both to import more from and export more to low tax countries where mnc investment is greater but this bilateral focus must be amplified to consider multilateral effects if trade benefits are to be projected copyright 1991 by mit press

steepness and deepness in the australian macroeconomy this study uses nonparametric tests the triples test and the bds test to examine whether key australian macroeconomic aggregates exhibit nonlinearities and important steepness and deepness asymmetries at the business cycle frequency evidence is found of nonlinearities but there is little evidence of deepness in the australian macroeconomy however there is evidence of steepness especially concerning labour market variables as well as both the cpi and m3 the evidence suggests that unemployment employment rises falls rapidly in recessions and only recovers slowly over time also positive asymmetries in m3 are reflected in similar asymmetries in the cpi but not in output consumption or investment

time irreversibility and egarch effects in us stock index returns in this paper we suggest using a modified version of the time reversibility tr test of chen chou and kuan 2000 as a complementary diagnostic test for time series models the modified cck test is easy to compute and requires weaker moment conditions than existing tests our simulations demonstrate that this test is powerful against asymmetry in volatility but the bds test is not in the empirical study of us stock index returns we first find that these returns are all time irreversible applying the garch and egarch models to these returns we also find that the q and bds tests always accept the null hypothesis and cannot distinguish between these models by contrast the modified cck test accepts only the egarch model with an order that can accommodate the underlying asymmetry in volatility our results suggest that the detected time irreversibility in these return series may be attributed to volatility asymmetry and that such asymmetry may be captured using a proper egarch model copyright 2002 john wiley sons ltd

on the nature of competition with differentiated products there is an old debate going back to bertrand 1883 and edgeworth 1925 about the fragility of market equilibrium when competition arises among a few sellers it was hotelling s belief that price instability vanishes when products are differentiated hotelling 1929 recently attention was drawn to the fact that even if product differentiation can weaken the forces leading to price instability it cannot eliminate completely the possibility of price cycles d aspremont et al 1979 the purpose of this paper is to show that vertical and horizontal product differentiation do not operate in the same manner a stable market outcome including an endogenous product specification arises more frequently with the former than with the latter horizontal product differentiation is rooted in taste differences more precisely the potential customers have heterogeneous preferences about the proportion in which the attributes of the product should be combined a wide range of substitute products can then survive in the same market simply because each of them combines the various attributes of the product in a proportion suitable to a particular segment of customers between two products in the range the level of some attributes is augmented while that of others is lowered each variety has its own circle of customers exactly as the inhabitants located around a particular shop form its potential market none the less competitors can raid these privileged market shares by adequate price cuts by contrast vertical product differentiation refers to a class of products which cohabit simultaneously on a given market even though customers agree on a unanimous ranking between them between two products in the range the level of all attributes is augmented or lowered the survival of a low quality product then rests on the seller s ability to sell it at a reduced price compensating thereby for the higher a priori attractiveness of a more desirable quality the seller of a low quality product will specialise in the segment of customers whose propensity to spend on the corresponding range of products is low either because they have relatively lower income or relatively less intensive preferences than other customers at the same time the seller of a high quality product will enjoy an absolute advantage over his competitor 2 interestingly it turns out that price and product competition does not lead to the same results in these two situations regarding the stability of the market equilibrium to stress the differences we have chosen to concentrate on two

a floor and ceiling model of us output abstract building on previous nonlinear time series models we further examine the form of nonlinearity in us output we develop a model of us output that allows for floor and ceiling effects to alter the dynamics of output growth the model estimated on post korean war quarterly data displays features similar to nonlinear trade cycle models of the 1940s and 1950s thus as predicted by many of the earlier theoretical models our empirical results suggest that the turning points of the business cycle provide new initial conditions for the ensuing growth process we also find important asymmetries in the responses of output to positive and negative shocks this history and shock dependence property is not present in linear or approximately linear models of the type that arise in the standard implementations of real business cycle theory

on stationarity and cointegration of international health expenditure and gdp this paper examines stationarity and cointegration of health expenditure and gdp for a sample of 21 oecd countries using data for the period 1960 1997 by applying a test battery that allows robust inference to be made on the stationarity and cointegration issue trend stationarity and no cointegration are tested using new country by country and panel tests not previously applied in this setting new results for country by country and panel tests of non stationarity and cointegration are presented our unit root and trend stationarity results indicate that both health expenditure and gdp are non stationary the no cointegration and cointegration results indicate that health expenditure and gdp are cointegrated

source versus residence based taxation with international mergers and acquisitions this paper analyses tax competition and tax coordination in a model where capital flows occur in the form of mergers and acquisitions rather than greenfield investment in this framework we show that differences in residence based taxes do not necessarily distort international ownership patterns moreover tax competition yields globally efficient levels of source based corporate income taxes if residence based taxes on capital income are absent in contrast in the presence of residence based taxes on dividends source based corporate income taxes are inefficiently high the widespread view that tax coordination is less urgent if residence based taxes are available may therefore be misguided

credit and deferral as international investment incentives abstract many governments tax the foreign income of their firms using a system that grants credits for foreign taxes paid and permits tax deferral for unrepatriated income this paper shows that such tax systems encourage firms to restrict their equity stakes in new foreign investments and to finance their new investments with considerable debt these incentives exist even when transfer price regulation effectively limits the profit rates foreign subsidiaries can earn the behavior of the foreign subsidiaries of us multinationals in 1984 appears to be consistent with these incentives

international corporate tax avoidance a review of the channels magnitudes and blind spots this paper reviews the rapidly growing empirical literature on international tax avoidance by multinational corporations it surveys evidence on main channels of corporate tax avoidance including transfer mispricing international debt shifting treaty shopping tax deferral and corporate inversions moreover it performs a meta analysis of the extensive literature that estimates the overall size of profit shifting we find that the literature suggests that for the most recent year a 1 percentage point lower corporate tax rate compared to other countries will expand before tax income by 1 5 percent an effect that is larger than reported as the consensus estimate in previous surveys and tends to be increasing over time the literature on tax avoidance still has several unresolved puzzles and blind spots that require further research

slow boom sudden crash abstract many asset markets exhibit slow booms and sudden crashes this pattern is explained by an endogenous flow of information in the model agents undertake more economic activity in good times than in bad economic activity generates public information about the state of the economy if the economic state changes when times are good and information is abundant asset prices adjust quickly and a sudden crash occurs when times are bad scarce information and high uncertainty slow agents reactions as the economy improves a gradual boom ensues data from u s and emerging credit markets support the theory

a nonlinear approach to us gnp a univariate nonlinear model is estimated for us gnp that on many criteria outperforms standard linear models the estimated model is of the threshold autoregressive type and contains evidence of asymmetric effects of shocks over the business cycle in particular the nonlinear model suggests that the post 1945 us economy is significantly more stable than the pre 1945 us economy

taxing foreign profits with international mergers and acquisitions a large part of border crossing investment takes the form of international mergers and acquisitions in this article we ask how optimal repatriation tax systems look like in a world where investment involves a change of ownership instead of a reallocation of real capital we find that the standard results of international taxation do not carry over to the case of international mergers and acquisitions the deduction system is no longer optimal from a national perspective and the foreign tax credit system fails to ensure global optimality the tax exemption system is optimal if ownership advantage is a public good within the multinational firm however the cross border cash flow tax system dominates the exemption system in terms of optimality properties

a new approach to decomposition of economic time series into permanent and transitory components with particular attention to measurement of the business cycle abstract this paper introduces a general procedure for decomposition of non stationary time series into a permanent and transitory component allowing both components to be stochastic the permanent component is shown to be a random walk with drift and the transitory or cyclical component is a stationary process with mean zero the decomposition methodology which depends only on past data and therefore is computable in real time is applied to the problem of measuring and dating business cycles in the portwar u s economy we find that measured expansions and contractions are of roughly equivalent duration and that our dating of cyclical episodes tends to lead the traditional nber dating and to a lesser extent the growth cycle chronology of zarnowitz and boschan 1977

cross border acquisitions and taxes efficiency and tax revenues we develop a theoretical oligopoly model to study how international differences in profit and capital gains taxes affect foreign acquisitions reductions in foreign profit taxes tend to trigger inefficient foreign acquisitions while reductions in foreign capital gains taxes may trigger efficient foreign acquisitions foreign acquisitions can increase domestic tax revenues even when profit taxes are evaded the reason is that bidding competition between foreign firms ensures that all benefits from the acquisition including tax advantages are captured by a domestic seller paying capital gains taxes tax code issues such as the treatment of goodwill are shown to affect the pattern of foreign acquisitions jel classification f23

cointegration and threshold adjustment this article proposes an extension to the engle granger testing strategy by permitting asymmetry in the adjustment toward equilibrium in two different ways we demonstrate that our test has good power and size properties over the engle granger test when there are asymmetric departures from equilibrium we consider an application namely whether there exists cointegration among interest rates for instruments with different maturities this issue has been widely tested with mixed results we argue that either cautious policy or possibly opportunistic behavior on the part of the federal reserve implies that an equilibrium relationship between short and long term interest rates exists but that adjustments from disequilibrium are asymmetric in nature empirical tests using u s yields confirm the asymmetric nature of error correction among interest rates of different maturities

long run purchasing power parity with asymmetric adjustment further evidence from african countries this study applies threshold cointegration test advanced by enders and siklos 2001 to investigate the properties of asymmetric adjustment in long run purchasing power parity ppp in 22 selected african countries during the period of january 1980 to december 2003 although there is evidence of long run ppp for most african countries the adjustment mechanism is asymmetric these results have particularly important policy implications for african countries

health care expenditure and gdp are they broken stationary in this paper we analyse the stationarity of the real per capita health care expenditure hce and real per capita gdp for a sample of oecd countries allowing for the presence of multiple structural breaks one novelty of the paper is that it permits the presence of structural breaks that affect both the level and the slope of the time series after the cross section dependence is accounted for we have found that these variables can be characterised as stationary processes evolving around a broken trend

firm specific assets and the link between exchange rates and foreign direct investment foreign direct investment fdi theory and empirical studies have generated mixed support for a link between exchange rates and fdi this paper argues that exchange rate movements may affect acquisition fdi because acquisitions involve firm specific assets which can generate returns in currencies other than that used for purchase using data on japanese acquisitions in the united states across three digit sic industries from 1975 to 1992 maximum likelihood estimates from discrete dependent variable models support the hypothesis that real dollar depreciations make japanese acquisitions more likely in u s industries particularly those which more likely have firm specific assets copyright 1997 by american economic association

international taxation and multinational firm location decisions using a large international firm level data set we examine the separate effects of host and additional parent country taxation on the location decisions of multinational firms both types of taxation are estimated to have a negative impact on the location of new foreign subsidiaries the impact of parent country taxation is estimated to be sizeable consistent with its international discriminatory nature our results show that international double taxation by the parent country despite the general possibility of deferral of taxation until income repatriation is instrumental in shaping the structure of multinational enterprise

relocation of headquarters and international taxation about 6 of multinationals relocated their headquarters to another country in the 1997 2007 period this paper presents empirical evidence on the role of taxes in these relocation decisions it considers a sample of 140 multinationals that relocated their headquarters over the past decade and compares them to a control group of 1943 multinationals that did not relocate it is found that the additional tax due in the home country upon repatriation of foreign profits has a positive effect on the probability of relocation the empirical results suggest that an increase in the repatriation tax by 10 percentage points would raise the share of relocating multinationals by 2 2 percentage points equivalent to an increase in the number of relocations by more than one third furthermore the presence of controlled foreign corporation legislation also has a positive effect on the number of relocations

one money one market the effect of common currencies on trade currency unions their dramatic effect on international trade a gravity model is used to assess the separate effects of exchange rate volatility and currency unions on international trade the panel data bilateral observations for five years during 1970 90 covering 186 countries includes 300 observations in which both countries use the same currency i find a large positive effect of a currency union on international trade and a small negative effect of exchange rate volatility even after controlling for a host of features including the endogenous nature of the exchange rate regime these effects statistically significant imply that two countries sharing the same currency trade three times as much as they would with different currencies currency unions like the european emu may thus lead to a large increase in international trade with all that that entails andrew rose

the impact of regional financial depth on outbound cross border mergers and acquisitions abstract drawing on china s experience this study examines the role of source province credit conditions and its interplay with host country financial openness in determining the intensity of cross border mergers and acquisitions m as we first show that improved credit conditions in source provinces of china measured by the number of newly established bank branches boost the volume and frequency of their firms cross border m as the effect is stronger for deals where cash is mainly used as the payment method then we identify a complementary effect between the financial openness in host countries and the improved financial depth in source regions more importantly by defining the members of china s the belt and road initiative as countries with higher political openness to china we find that acquirers in china especially the firms affiliated to central government are more political oriented than market oriented when choosing target countries additionally we show that acquirers facing lower political uncertainty from source province benefit more from the enhanced bank access

the determinants of cross border equity flows abstract we explore a new panel data set on bilateral gross cross border equity flows between 14 countries 1989 1996 we show that a gravity model explains international transactions in financial assets at least as well as goods trade transactions gross transaction flows depend on market size in source and destination country as well as trading costs in which both information and the transaction technology play a role distance proxies some information costs and other variables explicitly represent information transmission an information asymmetry between domestic and foreign investors and the efficiency of transactions the geography of information is the main determinant of the pattern of international transactions while there is weak support in our data for the diversification motive once we control for the informational friction we broaden the scope of our results by presenting some evidence linking the results on equity transactions to equity holdings

a nonlinear approach to testing the unit root null hypothesis an application to international health expenditures in this article we examine the unit root null hypothesis for per capita total health expenditures hes per capita private hes and per capita public hes for 29 organization for economic co operation and development oecd countries the novelty of our work is that we use a new nonlinear unit root test that allows for one structural break in the data series we find that for around 45 of the countries we are able to reject the unit root hypothesis for each of the three he series moreover using monte carlo simulations we show that our proposed unit root model has better size and power properties than the widely used augmented dickey fuller adf and lagrange multiplier lm type tests

note competitive price and positioning strategies brand positioning and brand pricing are important strategic decisions for marketing managers such decisions are interrelated and depend upon competitive brand positions and prices however any unilateral decisions may encourage repositioning and price adjustment by competitors thus leading to either new market equilibria or a price positioning war this paper examines such price and positioning decisions in a competitive environment by extending the defender consumer model to more complex equilibria we assume that the brands are already in the market and that positions are sticky in the sense that brands cannot leapfrog one another among the insights for such incumbent brands are if prices are symmetric and held constant firms seek to reposition toward the center of the market but price advantages by central firms can mediate that central tendency such that an equilibrium exists with positive profits if brand positions are held constant the nash equilibria for prices exist and are unique and category profits the sum of brand profits are maximized for maximum brand differentiation for two and three brand markets the subgame perfect nash equilibrium where positioning decisions are made with foresight on the price equilibria causes firms to unilaterally seek maximum brand differentiation but for four or more brands greater foresight and or cooperation appears necessary to reach the point of maximum brand differentiation these results apply where the defender consumer model is an exact description of consumer response and where the competitive reaction assumptions hold in any empirical situation such forces might be softened resulting in differentiated but not maximally differentiated brands

taxing away m a capital gains taxation and acquisition activity abstract capital gains taxation distorts the market for corporate control by imposing a cost on selling shareholders in acquisitions this lock in effect increases premiums required for deal completion preventing some m as from taking place at all we estimate the effect of capital gains taxation on the quantity of realized m a deals and compute the deadweight loss related to taxing these transactions we find that a one percentage point increase in the capital gains tax rate reduces acquisition activity by around 1 annually for the united states this implies unrealized synergy gains of 9 3 billion each year due to capital gains taxes

lost in translation the effect of cultural values on mergers around the world we find strong evidence that three key dimensions of national culture trust hierarchy and individualism affect merger volume and synergy gains the volume of cross border mergers is lower when countries are more culturally distant in addition greater cultural distance in trust and individualism leads to lower combined announcement returns these findings are robust to year and country level fixed effects time varying country pair and deal level variables as well as instrumental variables for cultural differences based on genetic and somatic differences the results are the first large scale evidence that cultural differences have substantial impacts on multiple aspects of cross border mergers

nonlinear permanent temporary decompositions in macroeconomics and finance we suggest a method of decomposing univariate and multivariate nonlinear processes into their permanent and temporary components extending the analysis of beveridge and nelson 1981 and stock and watson 1987 we provide applications in the univariate nonlinear case to recent work on nonlinearities in the us business cycle and in the multivariate nonlinear case to recent work on asymmetric nonlinear adjustment in the term structure of interest rates for the us the business cycle results suggest that the method may be particularly useful in future research on output fluctuations

government expenditures and revenues evidence from asymmetric modeling 1 introductionexamining the empirical relationship between government revenues and expenditures is a crucial step in understanding the future path of the budget deficit four alternative explanations have been used to describe the relationship between these variables in the budgetary process i the tax and spend hypothesis ii the spend and tax hypothesis iii the fiscal synchronization hypothesis and iv the institutional separation hypothesis the issue of which hypothesis best describes the nature of the budgetary process has yet to be resolved in the literature however existing research has implicitly assumed that the state of the budget and whether or not the budget deficit or surplus is worsening or improving does not matter we argue that government decision makers may take these factors into account when determining expenditures and tax policy as such this article reexamines the tax spend debate by using a more robust econometric technique that allows for asymmetry in the relationship between revenues and expenditures until now the empirical evidence on the tax spend debate has focused almost exclusively on two conventional econometric techniques depending on the cointegrating properties between revenues and expenditures these techniques are based on either variations of the unrestricted vector autoregression uvar or the vector autoregression error correction model ecm 1 if for example the two budgetary variables are not cointegrated then the application of causality2 tests requires the use of stationary variables in the uvar model 3 on the other hand if the two budgetary variables are cointegrated then the application of causality tests requires an ecm specification it is important to note that the ecm specification implicitly assumes that the adjustment process of expenditures and revenues due to disequilibrium between the variables is strictly symmetric indeed if the adjustment is asymmetric then the symmetric adjustment implicitly assumed in the conventional techniques to ascertain causality implies model misspecification this specification error may lead to misguided and perhaps inappropriate fiscal policy decisions accurate estimation of the revenue and expenditure process is especially important as changes in taxes and spending alter incentives for work investment and productive activity cea 2004 thus the anticipated behavioral responses of households and businesses may be better captured by more general models that allow for asymmetry in the tax spend relationship to this end this article examines the existence of cointegration between revenues and expenditures and the corresponding ecm specification by using the recently developed techniques of asymmetric modeling in particular we employ the threshold autoregression tar and momentum threshold autoregression m tar models developed by enders and granger 1998 and enders and siklos 2001 within the context of these models we shed new light on whether budget surpluses versus budget deficits or an improving budget versus a worsening budget have asymmetric effects on the dynamic behavior of expenditures and revenues there is an a priori rationale for modeling asymmetry in the budget and for the response of its components to disequilibrium this rationale can be categorized into four factors first the fiscal policymakers may respond differently to a deviation of the deficit or surplus from its long run trend one would expect for example that the response would be more aggressive if the deficit was greater than its long run trend than if it was less than its trend second it is widely acknowledged that there is a very close connection between the budget and the business cycle through automatic fiscal stabilizers and discretionary fiscal measures to the extent that the business cycle is asymmetric the associated change in the budget may also be asymmetric

the equilibrium relationship among money income prices and interest rates evidence from a threshold cointegration test the long run equilibrium relationship among money income prices and interest rates in japan is investigated by the threshold cointegration test which allows for asymmetric adjustment introduced by enders and siklos 2001 the threshold cointegration approach provides clear evidence of the cointegration relationship characterized by asymmetric adjustment by allowing for asymmetric adjustment results are obtained showing the stability of the money demand function similar to lucas 1988 who pointed out that the money demand function is stable if unit income elasticity is imposed in particular the estimated results show that the adjustment process toward equilibrium is highly persistent above an appropriately estimated threshold whereas the adjustment process toward equilibrium quickly converges below it this finding indicates that deviations from equilibrium resulting from increases in money or decreases in income and prices are highly persistent

are economic time series asymmetric over the business cycle it has long been argued that major cyclical variables such as the unemployment rate display an asymmetric behavior over various phases of the business cycle the paper provides a statistical test for this hypothesis using the framework of finite state markov processes i implement a test to see if the behavior of the unemployment rate is characterized by sudden jumps and slower drops it is argued that the framework provided in the paper can also be used to test other sample path properties of economic time series

same as it ever was europe s national borders and the market for corporate control abstract national borders continue to be strong barriers for mergers and acquisitions in europe using regional data we construct a gravity model and find that the restraining impact of national borders decreased by more than 17 percent between 1991 and 2007 however no significant change has occurred since the mid 1990s i e four years before the introduction of the euro in comparison we run a corresponding analysis in the united states using the 10 federal regions as country equivalents the resulting quasi border effect in the united states is weaker than that in the european union yet its decline by 43 percent is much stronger in the same period we conclude that european integration policy has had little effect on fostering m a cross border transactions

do recessions permanently change output abstract this paper examines whether negative innovations to gnp are more or less persistent than positive innovations we find that once we allow for the impulse response of gnp to be asymmetric negative innovations to gnp are observed to be much less persistent than positive ones in particular the effect of a recession on the forecast of output is found to be negligible after only eight to twelve quarters while the effect of a positive shock is estimated to be persistent and amplified over time our results may therefore help reconcile two antagonistic views about the nature of business cycle fluctuations

capital market integration and fiscal sustainability abstract by constructing a two country endogenous growth model with a debt financing government this paper studies the relationship between the sustainability of public finance and increases in inter regional factor mobility to this end it identifies the minimum tax rate that ensures fiscal sustainability against the backdrop of capital tax competition and studies whether competition for mobile capital lowers or improves fiscal sustainability the main findings are as follows i when countries are symmetric increasing capital flows promotes economic growth through the expansion of romer type knowledge spillovers resulting in increased fiscal sustainability in all countries and ii when a marked difference exists between countries tax competition caused by capital movements might lower fiscal sustainability in a country with abundant capital and large outstanding debt

are there asymmetries of nonlinearities in uk output this paper investigates whether quarterly post war uk output growth contains either asymmetries or nonlinearities through subjecting the series to a variety of diagnostic testa and by fiting various nonlinear business cycle models no evidence is uncovered of any form of asymetric or nonlinear departure from the pure random walk with drift model of output

time irreversibility and business cycle asymmetry the problem of business cycle symmetry is addressed within the context of time reversibility to this effect the authors introduce a time domain test of time reversibility the tr test in an application they show that time irreversibility is the rule rather than the exception for two well known representative macroeconomic data sets this shows that many components of the business cycle have asymmetric fluctuations the characterization of asymmetry provided by the tr test shows that many series exhibit steepness asymmetry a few series appear to be either deep or sharp copyright 1996 by ohio state university press

asymmetry in business fluctuations international evidence on friedman s plucking model abstract friedman s plucking model of business fluctuations suggests that output cannot exceed a ceiling level and it is occasionally plucked downward by recession output has depth and steepness this study uses a sample of 12 industrial and emerging economies and finds some evidence that negative shocks are largely transitory while positive shocks are mostly permanent in a few cases as implied by the plucking model output fluctuations tend to be asymmetric recessions are transitory and duration dependent although expansions are not there is however serial correlation in almost all cases international evidence on friedman s plucking model is far from robust

on the dynamic properties of asymmetric models of real gnp there is now a substantial body of evidence that suggests business cycles are asymmetric however the evidence has been accumulated using a wide array of statistical techniques and consequently is based on various definitions of asymmetry this paper examines several parametric models that have been used to study asymmetries in real gnp although these models capture asymmetries in very different ways their dynamic properties are remarkably similar

going to haven corporate social responsibility and tax avoidance this study examines the endogenous relation between corporate social responsibility csr and tax avoidance by focusing on a common strategy of corporate tax avoidance i e establishing entities in offshore tax havens using hand collected data on a sample of u s firms we find that firms csr ratings increase substantially in the two years after they first open tax haven affiliates we provide evidence by using the controlled foreign corporations cfc look through rule enacted by congress in 2006 that facilitates offshore profit shifting we find that firms that are affected by the cfc legislation increase their csr practices in response overall our results are consistent with the risk management theory which argues that firms hedge against the potential negative consequences of aggressive tax avoidance practices through an increase in positive csr activities

are statistical reporting agencies getting it right data rationality and business cycle asymmetry this article provides new evidence on the rationality of early releases of industrial production ip and producer price index ppi data rather than following the usual practice of examining only first available and fully revised data we examine the entire revision history for each variable thus we are able to assess for example whether earlier releases of data are in any sense less rational than later releases and when data become rational our findings suggest that seasonally unadjusted ip and ppi become rational after approximately 3 4 months whereas seasonally adjusted versions of these series remain irrational for at least 6 12 months after initial release for all variables examined we find evidence that the remaining revision is predictable from its own past or from publicly available information in other economic and financial variables in addition we find a clear increase in the volatility of revisions during recessions suggesting that early data releases are less reliable in toughe

altered states taxes and the location of foreign direct investment in america this paper compares the distribution between u s states of investment from countries that grant foreign tax credits with investment from all other countries the ability to apply foreign tax credits against home country tax liabilities reduces an investor s incentive to avoid high tax foreign locations state corporate tax rate differences of 1 percent are associated with differences of 9 11 percent between the investment shares of foreign tax credit investors and the investment shares of all others suggesting that state taxes significantly influence the pattern of foreign direct investment in the united states copyright 1996 by american economic association

on the international stability of health care expenditure functions are government and private functions similar this paper studies the stability of health care expenditure functions in a sample of oecd countries we adopt the cointegration approach and the results show that there is a long term relationship between total health care expenditure hce and gross domestic product gdp however the existence of cointegration is only shown when we admit the presence of some changes in the elasticities of the model our results also provide evidence against the existence of a unique relationship between health and gdp for the sample thus we can conclude that the differences in health systems may cause differences in the aggregate functions additionally we examine aggregate health functions for government ghce and private expenditures phce again finding evidence of different patterns of behaviour finally we open a discussion on the character of health as a necessary or luxury good in this context we find differences between the government and the private function in order to illustrate these findings we propose a theoretical model as an example of the influence of political decisions on income elasticity

non linearities in the dynamics of oil prices abstract examining stationarity is of particular importance and represents the first step in empirical time series research non stationarity invalidates many of the results obtained from standard techniques and therefore requires special treatment because oil prices play an important role in affecting economic variables this paper examines the stationarity of real oil prices brent dubai wti and the world over the period 1973 2 2011 2 real oil prices are expressed in the currencies of seven asian countries indonesia japan korea malaysia the philippines singapore and thailand and in the u s dollar while using linear unit root tests without structural breaks shows no evidence of stationarity allowing for breaks shows very limited evidence of stationarity we argue that these results are attributed to the presence of nonlinearities in the behavior of oil prices testing for nonlinearity shows significant evidence of nonlinearity in all the cases with evidence of exponential smooth transition autoregression estar nonlinearity type in most cases applying unit root tests that account for two types of nonlinearities smooth transition and nonlinear deterministic trends reveals evidence of stationarity in all the cases

an empirical characterization of the dynamic effects of police spending on violent and property crime the study estimates the dynamic effects of shocks to police expenditures on measures of violent and property crime rates using annual u s state level data for the period 1960 2015 we employ a structural panel var model and achieve identification by imposing the restriction that police spending responds to structural shocks to crime with at least a lag of 1 year results indicate that a shock to police spending leads to a persistent and significant decreases in violent and property crime rates and b significant and persistent negative impacts on crime rates in periods of high crime but little impacts in periods of low crime variance decompositions show that shocks to police spending account for moderate to large proportions of the variability of u s state level crime rates our findings are robust across separate measures of violent and property crime rates as well as to the inclusion of additional variables to the baseline panel var model jel k42

who bears the burden of international taxation evidence from cross border m as cross border m as can trigger additional taxation of the target s income in the form of non resident dividend withholding taxes and acquirer country corporate income taxation this paper finds that this additional international taxation is fully capitalized into lower takeover premiums in contrast acquirer excess stock market returns around the bid announcement date do not appear to reflect additional taxation of the target s income these findings suggest that international taxation is considered to be burdensome and that the incidence of this taxation is primarily on target firm shareholders

models a la lancaster and a la hotelling when they are the same abstract consumer behaviour in differentiated product markets can be specified following the lancastrian characteristics approach or following hotelling s approach of spatial competition in the case of unit demand i present a class of models of heterogeneous consumer behaviour which can be written as models a la lancaster as well as models a la hotelling

repatriation taxes and outbound m as repatriation taxes reduce the competitiveness of multinational firms from tax credit countries when bidding for targets in low tax countries this comparative disadvantage with respect to bidders from exemption countries violates ownership neutrality which results in production inefficiencies due to second best ownership structures this paper empirically estimates the magnitude of these effects the abolishment of repatriation taxes in japan and in the u k in 2009 has increased the number of acquisitions abroad by japanese and british firms by 16 1 and 1 6 respectively a similar policy switch in the u s is simulated to increase the number of u s cross border acquisition by 11 0 the yearly gain in efficiency is estimated to be 108 9 million dollar due to the japanese reform and 3 9 million dollar due to the u k reform simulating such a reform for the u s results in a yearly efficiency gain of 537 0 million dollar

escape from the usa government debt to gdp ratio country tax competitiveness and us oecd cross border m as statutory tax rates of a country do not reflect a country s true tax competitiveness we propose and show that government debt to gdp ratio govdebt of a country is a better proxy for its tax competitiveness using a comprehensive sample of 1 884 completed cross border acquisition transactions from the u s to other oecd countries we document that the u s target country govdebt difference is significantly and positively related to both deal announcement return and post deal tax saving of the acquirer the govdebt difference is also significantly and positively related to u s target country deal flow the findings remain robust when we control for the potential endogeneity of govdebt difference our findings strongly suggest that tax avoidance is an important driver of u s oecd cross border deal flow and it increases shareholder wealth for u s acquirers

is investment time irreversible some empirical evidence for disaggregated uk manufacturing data it has long been suggested that investment may be time irreversible and consideration of the option value of waiting to invest has aroused renewed interest in this issue this study tests for time irreversibility in uk investment according to disaggregation by type of investment expenditure and across manufacturing sector groupings the test results reported indicate that the irreversibility of investment patterns varies not only from industry to industry but also according to the type of capital being purchased with significant time irreversibility detected in gross fixed capital formation and aggregate vehicles expenditure and industrial sector groupings comprising fuels and oil refining engineering and vehicles and textiles and leather however only in the first and last of these series is time irreversibility attributable to non linearities in the underlying data generating process and consistent with threshold effects which may be associated with s s type models of investment dynamics

aggregation and imperfect competition on the existence of equilibrium we present a new approach to the theory of imperfect competition and apply it to study price competition among differentiated products the central result provides general conditions under which there exists a pure strategy price equilibrium for any number of firms producing any set of products this includes products with multi dimen sional attributes in addition to the proof of existence we provide conditions for uniqueness our analysis covers location models the characteristics approach and probabilistic choice together in a unified framework to prove existence we employ aggregation theorems due to prekopa 1971 and borell 1975 our companion paper caplin and nalebuff 1991 introduces these theorems and develops the application to super majority voting rules we present a new approach to the theory of imperfect competition and apply it to study price competition among differentiated products the central result is that there exists a pure strategy price equilibrium for any number of firms producing any set of products in addition to the proof of existence we provide conditions for uniqueness our model both unites diverse strands of the earlier literature and opens up uncharted areas for future analysis in particular we expand the traditional one dimensional framework to allow for multi dimen sional product differentiation our approach involves twin restrictions on consumer preferences one on individuals preferences the other on the distribution of preferences across society these are generalizations of the restrictions supporting 64 majority rule presented in caplin and nalebuff 1988 to prove existence we apply a new technique of aggregation this technique is valuable in a variety of other problems in the companion paper we use the aggregation result to generalize our earlier work on 64 majority rule and to characterize the relationship between the distribution of human capital and the distribution of income caplin and nalebuff 1991 there are additional applications in statistics and in search theory we begin with a brief review of the early literature on imperfect competition describing in more detail the existence problem and previous solutions section 3 presents our twin assumptions and shows that they cover many standard cases in section 4 we introduce the aggregation theorem and use it in the analysis of demand functions the proof of existence of equilibrium is in section

business cycle asymmetry a deeper look this paper distinguishes two types of asymmetry in business cycles deepness and steepness deepness is defined as the characteristic that troughs are further below trend than peaks are above most previous research has focused exclusively on steepness which refers to cycles in which contractions are steeper than expansions a test for deepness is proposed and applied to u s post war quarterly unemployment real gnp and industrial production evidence of deepness is found for unemployment and industrial production while the evidence for real gnp is weaker previous evidence of steepness in unemployment is confirmed

robust measures of skewness and kurtosis for macroeconomic and financial time series abstractthe sample skewness and kurtosis of macroeconomic and financial time series are routinely scrutinized in the early stages of model building and are often the central topic of studies in eco

are health expenditures and gdp characterized by asymmetric behaviour evidence from 11 oecd countries in this article we examine whether per capita health expenditures and per capita gdp for 11 oecd countries can be characterized by asymmetric behaviour we achieve this goal by using the nonparametric triples test suggested by randles et al 1980 we examine two forms of asymmetries namely deepness and steepness our main finding is that for 6 out of 11 countries namely for the usa the uk japan spain finland and iceland either per capita health expenditures or per capita gdp are characterized by asymmetric behaviour this finding to some extent casts doubt on those studies that model the relationship between health and gdp using unit root and cointegration tests that assume symmetric disturbances

time reversibility tests of volume volatility dynamics for stock returns abstract non parametric tests based on the concept of time reversibility in statistical mechanics are applied to assess the dynamic implications of the mixture of distributions hypothesis mdh the tests show that shocks to volume and volatility are dynamically asymmetric thus rejecting the one factor mdh

stationarity of health expenditures and gdp evidence from panel unit root tests with heterogeneous structural breaks this paper re examines the stationarity of national health care expenditures and gdp in a panel setting utilizing data from 20 oecd countries over the period from 1960 to 1997 previous research in this area has recognized the drawback of not allowing for structural breaks in their unit root tests and noted that their empirical results may not be robust we advance the literature by utilizing a recently developed panel lm unit root test that allows for heterogeneous level shifts in contrast to previous analyses that did not consider breaks our results reject the unit root null hypothesis for both series