financial markets and growth the last five years have witnessed a resurgence of interest in the relationship between financial intermediation and economic growth this issue had been extensively studied nearly two decades earlier by goldsmith 1969 mckinnon 1973 shaw 1973 and others who produced considerable evidence that financial development correlates with growth but their work though insightful lacked analytical foundations in traditional growth theory financial intermediation could be related to the level of the capital stock per worker or to the level of productivity but not to their respective growth rates the latter were ascribed to exogenous technical progress the recent revival of interest in the link between financial development and growth stems mainly from the insights and techniques of endogenous growth models which have shown that there can be self sustaining growth without exogenous technical progress and that the growth rate can be related to preferences technology income distribution and institutional arrangements this provides the theoretical underpinning that early contributors lacked tinancial intermediation can be shown to have not only level effects but also growth effects the resulting models have offered important insights into the effect of financial development on growth and vice versa they have also provided new impetus to empirical research on these issues this paper reviews the ground covered so far on the theoretical and empirical front and points to some still unresolved issues

are consumers spending decisions in line with an euler equation evaluating a new survey of german consumers we test whether individual consumption spending decisions are formed according to an euler equation model we find that consumers are more likely to inc

are supply shocks contractionary at the zlb evidence from utilization adjusted tfp data abstract the basic new keynesian model predicts that positive supply shocks are less expansionary at the zero lower bound zlb compared to periods of active monetary policy we test this prediction empirically using fernald s 2014 utilization adjusted total factor productivity series which we take as a measure of exogenous productivity in contrast to the predictions of the model positive productivity shocks are estimated to be more expansionary at the zlb compared to normal times we find that there is no significant difference in the response of expected inflation to a productivity shock at the zlb compared to normal times

test of c capm for japan 1980 1988 abstract this paper empirically analyzes the c capm for the japanese assets market the results calculated in this paper is totally different from the results in the existing literature the model is accepted at the conventional significance level and the estimated parameter values are also reasonable these results show that c capm is a useful model in order to analyze the assets market in japan

on the performance of differently regulated financial institutions some empirical evidence abstract the paper raises two questions about the industrial economics of banking first why are financial market configurations so different across nations we discuss the theoretical arguments by following the sequence regulation structure performance section 2 second do the differences in regulation and structure matter section 3 provides empirical evidence pertaining to that question throughout the paper we refer to two polar cases of financial systems market m and bank b based systems as for banks we distinguish between specialised and universal banks universal banking is a particular institutional representation of b systems a first empirical test relating macroeconomic growth to financial variables suggests that these variables matter we then test with a set of 88 banks the effects of regulatory and structural variables on the level and variability of bank performance we conclude that universal banks achieve a better risk return trade off due to superior monitoring and information collection capacity

inflation expectations and consumer spending at the zero bound micro evidence i introduction many theoretical studies suggest that policy makers can generate greater current spending by making people believe in higher future inflation when nominal interest rates are stuck at the zero lower bound zlb krugman 1998 using a simple two period model and with japan s low interest rate environment in the 1990s in mind was the first to show that a central bank s commitment to high inflation is effective eggertsson and woodford 2003 show that this proposition is relevant even in a standard dynamic stochastic general equilibrium dsge model more recently with many central banks such as the federal reserve starting to face the zlb and to cope with weak economic demand many policy proposals have been made based on the perception that an increase in expected inflation is a good thing to stimulate economic activity 1 the logic for these suggestions is based on the fisher equation and the intertemporal substitution effect if nominal interest rates are fixed higher inflation expectations lead to lower real interest rates creating an incentive to spend now rather than in the future however according to basic economic theory lower real interest rates may suppress current spending if adverse forces such as the income effect dominate the intertemporal substitution effect thus the consequences of low real interest rates are an empirical matter therefore the question arises why standard dsge models somewhat confidently suggest that the substitution effect dominates other effects a large number of empirical studies which typically use vector autoregression var models show that if central banks unexpectedly reduce nominal short term interest rates or if a negative monetary shock occurs spending is stimulated standard dsge models are constructed to match such findings for example christiano eichenbaum and evans 2005 show that their dsge model can replicate the var estimates of impulse responses following a monetary policy shock in such models given that prices and thus expected inflation are sticky a lower nominal interest rate leads to a lower real interest rate which generates greater current spending based on the implicit assumption that the intertemporal substitution effect dominates other adverse effects several studies including eggertsson and woodford 2003 incorporate the zlb into such dsge models and suggest that even the expectation of a modest inflationary boom in the future has a dramatic effect on current spending by lowering real interest rates however as mentioned above the justification of standard dsge models largely depends on empirical results about the effects of changes in nominal interest rates rather than changes in expected inflation and these results are obtained using the data of major industrialized countries that did not face the zlb constraint until very recently in fact there are only few studies that directly examine the effects of inflation expectations on consumer spending using data in a zlb environment bachmann berg and sims 2014 examine this issue using the micro data from the michigan survey of consumers conducted in the united states the michigan survey collects repeated cross sectional data on quantitative measures of expected inflation as well as qualitative measures of readiness to spend namely responses to questions about whether now is a good or bad time to buy durable goods the data are available at a monthly frequency and cover the period from january 1984 to december 2012 bachmann berg and sims 2014 regard the period from december 2008 onward as the zlb period the estimation result of their baseline ordered probit model is the opposite of the prediction of standard theoretical models the impact of expected inflation on the readiness to spend on durables is negative and statistically significant although small in absolute value at the zlb they then consider several potential explanations underlying these results including nominal money illusion that is households understand how nominal interest rates impact the intertemporal relative prices between spending now and spending in the future but they may not understand how inflation expectations do

inflation expectations and firm decisions new causal evidence author s coibion o gorodnichenko y ropele t abstract 2019 the author s we use a unique design feature of a survey of italian firms to study the causal effect of inflation expectations on firms economic decisions in the survey a randomly chosen subset of firms is repeatedly treated with information about recent inflation whereas other firms are not this information treatment generates exogenous variation in inflation expectations we find that higher inflation expectations on the part of firms leads them to raise their prices increase demand for credit and reduce their employment and capital however when policy rates are constrained by the effective lower bound demand effects are stronger leading firms to raise their prices more and no longer reduce their employment

market power productivity and the eu single market program evidence from a panel of italian firms abstract this paper provides empirical evidence on the impact the eu single market program has exerted on market power and total factor productivity in a large sample of italian firms both market power and total factor productivity are estimated by applying several extensions of the methodology developed by hall main findings can be summarised as follows firstly for the sample of 1992 most sensitive firms market power decreases by 50 in the smp implementation period compared to previous years whereas no clear pattern emerges for the other sub samples of firms secondly and less conclusively only for the sub sample of 1992 most sensitive firms a positive transitory shock to productivity growth rates is observed immediately after the announcement of the reform project overall these results are consistent with the long standing view that economic integration reduces firms market power and increases productivity via the removal of non tariff barriers

the financial and operating performance of newly privatized firms an international empirical analysis this study compares the pre and postprivatization financial and operating performance of 61 companies from 18 countries and 32 industries that experience full or partial privatization through public share offerings during the period 1961 to 1990 our results document strong performance improvements achieved surprisingly without sacrificing employment security specifically after being privatized firms increase real sales become more profitable increase their capital investment spending improve their operating efficiency and increase their work forces furthermore these companies significantly lower their debt levels and increase dividend payout finally we document significant changes in the size and composition of corporate boards of directors after privatization the last fifteen years have witnessed a significant global shift away from state socialism towards entrepreneurial capitalism one of the most important and visible aspects of this trend has been the enthusiasm with which governments of all political persuasions have sold their state owned enterprises soes to private investors in hopes that the generally unsatisfactory economic performance of these firms can be improved by the discipline of private ownership this denationalization process given its current title of privatization by the conservative government of margaret thatcher in

financial regulation and financial system architecture in central europe abstract at the beginning of the transition advice to central european countries with respect to how to set up their financial systems was based on models used in western economies this paper analyzes the experiences to set up a financial system in central europe the experience in the first transition years 1990 1996 with financial system architecture shows that changes are slow but that the central european countries tend to catch up more quickly with the western ones in the case of their banking systems than with respect to their stock markets

financial development and economic growth abstract this paper examines the empirical relationship between long run growth and financial development proxied by the ratio between bank credit to the private sector and gdp we find that this proxy is positively correlated with growth in a large cross country sample but its impact changes across countries and is negative in a panel data for latin america we argue that the latter findings is the result of financial liberalization in a poor regulatory environment our findings also show that the main channel of transmission from financial development to growth is the efficiency rather than the volume of investment

firing costs employment fluctuations and average employment an examination of germany west germany s employment promotion act of 1985 facilitated the use of fixed term contracts and increased the number of dismissals above which the employer is required to establish a social plan involving severance payments i assess the effect of this reduction in firing costs on movements in employment using monthly data on a panel of detailed manufacturing industries for 1977 92 i also examine the effect of introducing flexible hours of work in certain industries beginning in 1985 i find that employment adjustment was unaffected by the lower firing costs but slowed by the greater working hours flexibility

are adjustment costs for labor asymmetric an econometric test on panel data for italy in this paper we analyze the structure of adjustment costs for labor in particular the question whether hiring and firing costs are asymmetric is addressed we maintain the standard assumption of quadratic adjustment costs but allow the multiplicative coefficient to differ for the firing and hiring regime the euler equations for this problem can be combined into a general model that nests the one with symmetric adjustment costs the model can be conveniently estimated and the parameter restrictions implied by symmetry easily tested we also extend the model to allow for variable adjustment coefficients in the empirical application we use a panel data collected by ceris on 52 large italian firms for the period 1958 1988 the general conclusion from the econometric testing is that the hypothesis of symmetric adjustment costs is rejected by the data copyright 1993 by mit press

inflation expectations consumption and the lower bound micro evidence from a large multi country survey abstract using a large multi country survey and new pseudo panel dataset we investigate the spending response of consumers to their beliefs about future inflation the analysis exploits the deviation of expected inflation from the currently perceived inflation rate a choice motivated by local approximation of the traditional euler equation this helps control for unobserved heterogeneity and highlights a positive and economically relevant spending response that is generalised in the population and across countries also a stronger positive response is observed when the lower bound is binding thus lending credence to the stabilisation properties of higher inflation expectations during such episodes

asymmetric adjustment of dynamic factors at the firm level presents a study which addressed the deficiencies of previous studies the specification and estimation in the modeling of asymmetry and zero gross investment in the agricultural industry reference to previous studies on asymmetry information on the standard dual model results of the study

fixed term contracts and the dynamics of labour demand abstract we estimate a model of labour demand that accounts for dynamics arising from the relative costs of hiring and firing workers on either indefinite term contract itc or fixed term contract ftc we use a panel of 1000 french firms for which we can measure the number of entries and exits for each type of contract between 1988 and 1992 our estimates suggest that 1 it is much more costly to lay off workers under itc than to hire them 2 it is much less costly to adjust the number of ftc than to adjust the number of itc 3 the asymmetry between hiring and layoff costs is more important for non production than for production workers

transactions costs technological choice and endogenous growth abstract hicks a theory of economic history clarendon press oxford 1969 argues that an important aspect of industrial development is the adoption of technologies requiring highly illiquid capital investments the adoption of such technologies becomes economically viable in the presence of low cost financial markets that provide liquidity to investors this observation provides a mechanism by which the costs of transacting in financial markets affect the equilibrium choice of technology productive efficiency and by implication growth we analyze how the costs of financial market transactions affect the set of technologies in use and the equilibrium growth rate transactions cost reductions may depending on the capital structure enhance or reduce growth journal of economic literature classification numbers d90 e13 g14

the permanent income hypothesis and consumption durability analysis based on japanese panel data the permanent income hypothesis with durability of commodities is tested on a panel of about 2 000 japanese households for several commodity groups under static expectations about real interest rates and for some class of utility functions consumption which is a distributed lag function of current and past expenditure follows a martingale main empirical results are i the durability of commodities usually classified as services is substantial ii the hypothesis applies to about 85 percent of the population consisting of wage earners and iii income changes explain only a small fraction of the movements in expenditure

effective lower bound risk abstract even when the policy rate is currently not constrained by its effective lower bound elb the possibility that the policy rate will become constrained in the future lowers today s inflation by creating tail risk in future inflation and thus reducing expected inflation in an empirically rich model calibrated to match key features of the u s economy we find that the tail risk induced by the elb causes inflation to undershoot the target rate of 2 by as much as 50 basis points at the economy s risky steady state our model suggests that achieving the inflation target may be more difficult now than before the great recession if the likely decline in long run neutral rates has led households and firms to revise up their estimate of the frequency of future elb events