advertising effects in complete demand systems a rationale for including advertising in complete demand systems is presented an advertising analogue of the slutsky equation is derived and properties of the expenditure and indirect utility functions characterized empirical estimates of a complete demand system incorporating dynamic advertising effects support neoclassical restrictions we do not reject homogeneity or symmetry at the 1 level this represents surprisingly strong support for neoclassical theory relative to prior parametric studies

trade credit the financial crisis and sme access to finance mounting evidence indicates that firms particularly smes suffered from a significant credit crunch during this crisis we analyze for the first time whether trade credit provided an alternative source of external finance to smes during the crisis using firm level spanish data we find that credit constrained smes depend on trade credit but not bank loans and that the intensity of this dependence increased during the financial crisis unconstrained firms in contrast are dependent on bank loans but not on trade credit

a study of petrol consumption using spanish panel data methods are proposed for the estimation of equations for consumption categories subject to non participation and other types of censoring using an unbalanced panel data set on petrol expenditures from the spanish continuous family expenditure survey the use of panel data allows one to deal with two issues that pose econometric problems when dealing with individual budget data on one hand unobserved time invariant heterogeneity is controlled for on the other hand the problem of censoring in the dependent variable is addressed and the measurement error induced by infrequent purchases is corrected results suggest the use of probabilities of purchase estimated from the temporal pattern of expenditure records in order to carry out this correction the estimated demand system is subsequently used to simulate the effects of changes in the taxation of petrol

content protection and oligopolistic interactions in oligopolistic situations content protection can have unexpected effects as it changes the nature of interactions between input suppliers with a duopoly it does so in a manner that makes the foreign firm wish to match price increases and decreases of the domestic firm domestic input suppliers can therefore lose from such policies even when set at free trade levels the relation between input demands the form of protection and the degree of substitution between inputs is shown to define the effects of content protection and to provide the basis for understanding who might lobby for protection in different environments

trade policy subtleties with multinational firms abstract regional trade blocks must specify domestic content rules that define the conditions under which a good qualifies as domestic and so may be freely traded within the block this paper analyzes such rules focussing on oligopolistic industries in which foreign multinationals rely much more on imported intermediate inputs that do domestic firms in such a situation we argue that domestic content provisions are anti competitive reducing overall final output of the industry and shifting rents to domestic firms these ideas are examined analytically and then numerically using an applied general equilibrium model of the north american auto industry

distance constraints the limits of foreign lending in poor economies how far does mobility of multinational banks solve problems of financial development using a panel of 80 000 loans over 7 years i show that greater cultural and geographical distance between a foreign bank s headquarters and local branches leads it to further avoid lending to informationally difficult yet fundamentally sound firms requiring relational contracting greater distance also makes them less likely to bilaterally renegotiate and less successful at recovering defaults differences in bank size legal institutions risk preferences or unobserved borrower heterogeneity cannot explain these results these distance constraints can be large enough to permanently exclude certain sectors of the economy from financing by foreign banks

content protection and tariffs under monopoly and competition abstract this paper compares the relative efficiency of local content schemes and tariffs as alternative means of achieving certain non economic distributional objectives the efficiency comparison is made under the alternative assumptions that an intermediate good component is produced a competitively and b by a single firm the paper shows how the ranking of tariffs and content schemes i is sensitive to these assumptions and ii depends on the local content ratio and the elasticity of demand for components the possible implications of vertical integration in the production process and rent revenue seeking behaviour are also considered insofar as they affect the ranking of policies

cross border banking credit access and the financial crisis abstract we study the sensitivity of credit supply to bank financial conditions in 16 emerging european countries before and during the financial crisis we use survey data on 10 701 applicant and non applicant firms that enable us to disentangle effects driven by positive and negative shocks to the banking system from demand shocks that may vary across lenders we find strong evidence that firms access to credit was affected by changes in the financial conditions of their banks during the crisis firms were more credit constrained if they were dealing with banks that experienced a decline in equity and tier 1 capital as well as losses on financial assets we also find that access to credit reflects the balance sheet conditions of foreign parent banks the effect of positive and negative shocks to a bank is greater for riskier firms and firms with fewer tangible assets

the capital crunch neither a borrower nor a lender be the dramatic reduction in the growth rate of bank lending associated with the 1990 91 recession particularly in new england has evoked claims by many observers of a credit crunch however because of the difficulty in determining whether the observed slow credit growth is a demand or supply phenomenon convincing evidence of the practical importance of credit crunches for economic activity remains elusive we overcome this obstacle by examining a cross section of banks in new england that have experienced the same economic downturn effectively controlling for changes in demand we find empirical support for a capital crunch whereby poorly capitalized institutions shrink to satisfy capital requirements this alone is not a sufficient condition for a credit crunch however we find s6me additional evidence that the ca ital crunch may have limited credit availability in new england

small and medium sized enterprise financing and securitization firm level evidence from the euro area this paper analyzes the impact of securitization on access to finance for small and medium sized enterprises smes in the euro area using firm level survey data on sme financing conditions we show that an increase in securitization issuance reduces the probability of smes facing credit constraints and decreases the costs of bank financing for nonconstrained firms our results reveal that in addition to the volume of securitization its type and quality matter for credit extension to smes the paper thus provides empirical support for recent initiatives to revive securitization in europe and for effective monetary policy transmission in the euro area jel d22 e44 e51 e58 g21

proliferating regional trade arrangements why and whither this paper investigates why regional trade arrangements rtas are proliferating extensively and how the effects of multiple rtas by interacting with each other evolve over time our empirical analysis based on an extended gravity model utilising a large panel dataset of 175 countries from 1948 to 1999 shows that rtas on average increase global trade by raising intra bloc trade without damaging extra bloc trade the net trade effects however heavily depend on the types of rta strategic evolution over time which we categorise as expansionary rtas duplicate rtas or overlapping rtas we find that countries excluded from an rta can benefit more from duplicating a separate rta than from joining an existing rta this result explains why the number of bilateral trade blocs rather than the membership size of existing rtas is currently exploding we also find that the net trade creating effects of rtas are substantially lower for countries participating in overlapping rtas this result suggests that it is less likely that the currently proliferating rtas will completely merge and lead the world economy to global free trade our empirical results are robust to controlling for the characteristics of countries that may influence the impact of rtas

financial and legal constraints to growth does firm size matter using a unique firm level survey database covering 54 countries we investigate the effect of financial legal and corruption problems on firms growth rates whether these factors constrain growth depends on firm size it is consistently the smallest firms that are most constrained financial and institutional development weakens the constraining effects of financial legal and corruption obstacles and it is again the small firms that benefit the most there is only a weak relation between firms perception of the quality of the courts in their country and firm growth we also provide evidence that the corruption of bank officials constrains firm growth

vertical foreclosure and international trade policy international differences in the cost of production of a key intermediate product can mean that a domestic firm is dependent on supplies from a foreign vertically integrated firm this paper considers the incentives for the foreign firm and foreign country to supply the domestic firm when the firms compete in a cournot or bertrand market for the final product the vertical supply decision is significantly affected by domestic supply conditions for the input and a domestic tariff on final product imports optimal policy by the exporting country may require a tax on both exports or a subsidy on both exports countries that are dependent on imports of a key intermediate product or raw material from a dominant world supplier are often concerned about the price and the availability of imports a notable current example involves the computer industry japanese suppliers with the help of the japanese government recently restricted the exports of dram semiconductors substantially raising their price these suppliers control about 80 of the market for semiconductors and the higher prices and shortage in supply have forced u s producers of computers to curtail production and increase prices vertically integrated japanese firms such as toshiba and n e c have benefitted both from increased profits in the export market for semiconductors and from the improvement in their competitive position in the market for final computers as this example indicates the price and availability of imported supplies can depend on both public and private incentives in the exporting country in this paper we first examine the private incentives for a vertically integrated firm to export an intermediate product to a higher cost rival lowering its rival s costs the exporting firm may choose vertical foreclosure thus fully cutting off supplies we then consider the public interest of the exporting country does the exporting country gain by encouraging the export of the intermediate product or alternatively might government foreclosure occur the government is in a position to affect the quantity of exports of both the input and the final product by an appropriate choice of export tax and subsidy policies

complementarity and increasing returns in intermediate inputs abstract conventional analysis in the trade industrial organization literature suggests that when a country has some market power over an imported good some small level of protection must be welfare improving this is essentially a terms of trade argument that is reinforced if the imported goods are substitutes for domestic goods produced with increasing returns to scale goods that are initially underproduced in free trade equilibrium this paper notes that this result may not hold when 1 the imports are intermediates used in a domestic increasing returns industry and or 2 the intermediates are complements for domestic inputs produced with increasing returns we then demonstrate such an outcome with respect to mexican protection against imported auto parts using an applied general equilibrium model of the north american auto industry

credit booms and lending standards evidence from the subprime mortgage market this paper links the u s subprime mortgage crisis to demand side factors that contributed to the rapid expansion of the u s mortgage market we show that denial rates were relatively lower in areas that experienced faster credit demand growth and that lenders in these high growth areas attached less weight to applicants loan to income ratios the results are robust to controlling for supply side factors including house price appreciation mortgage securitization and other economic fundamentals and to several robustness tests controlling for endogeneity the results are consistent with the notion that a relaxation of lending standards triggered by an increased demand for loans contributed to the boom and the ensuing crisis together with other supply side explanations these findings shed new light on the relationship between credit booms and financial instability

clustered pricing in the corporate loan market theory and empirical evidence abstract existing theories explaining security price clustering as well as clustering in the retail deposit and mortgage markets are incompatible with the clustering in the corporate loan market we develop a new theoretical model that the attitude of the lender toward the uncertainty about the quality of the borrower leads to the clustering of spreads our empirical results support our theoretical model and we find that clustering increases with the degree of uncertainty between the lender and the borrower in contrast clustering is less likely when the uncertainty about the quality of the borrower has been reduced through repeated access and through prior interactions of the lender and the borrower

analysis of perfonnance standards for direct foreign investments within the framework of a duopolistic model we investigate the impact of foreign investment standards on welfare output and employment minimum local content and export requirements reduce world output world welfare and the source country s welfare under certain conditions the decline in host country s consumer surplus resulting from diminished competition outweighs the shift of monopoly rent from the source country s firm to the host country s firm minimum content standards can increase host country s employment but only to a point marginal increases in the content requirement can actually reduce employment as the magnitude of foreign investment declines

did risk based capital allocate bank credit and cause a credit crunch in the united states this paper examines the reallocation of bank credit from loans to securities in the early 1990s using data on virtually all u s banks from 1979 to 1992 the authors investigate implementation of risk based capital and other regulatory and nonregulatory changes as possible causes of a supply driven credit crunch the main empirical implication of these credit crunch hypotheses that the reallocation of credit would be most associated with low capital high risk banks generally is not consistent with the data much of the reallocation is associated with demand side factors but it is difficult to differentiate cleanly among these factors copyright 1994 by ohio state university press

dispensing with nafta rules of origin some policy options the objective of this paper is to use a computable general equilibrium cge methodology to estimate the economic gains for both canada and mexico of 1 adopting a north american customs union cu that would also liberalise rules of origin roo and 2 reviving the wto scenario of multilateral free trade thereby eliminating preferential commerce and thus the need for preferential roo across free trade agreements ftas such a cge methodology is useful as the approach permits computation of an efficiency or ex post cost of roo that might in some contexts be more relevant than the existing ex ante indices of roo restrictiveness which are unable to account for the fact that the use of preferential access in an fta and the concomitant roo compliance is an option not an obligation the paper shows that the erosion of nafta tariff preferences at the end of the 1990s and early 2000s which resulted from a different phasing of the nafta and uruguay round measures has reduced the efficiency cost of nafta roo making these rules economically less relevant especially for canada and therefore limiting somewhat the gains from liberalising them through a cu given this the wto scenario of multilateral free trade remains the approach that would deliver the largest economic gains in terms of gdp and welfare while making preferential commerce and roo obsolete

reduced cross border lending and financing costs of smes abstract this paper investigates how the withdrawal of banks from their cross border business impacted the borrowing costs of european firms since the crisis we combine aggregate information on total and cross border credit with firm level survey data for the period 2010 2014 we find that the decline in cross border lending led to a deterioration in the borrowing conditions of small firms in countries with more pronounced reductions in cross border credit inflows the likelihood of a rise in firms external financing costs increased this result is mainly driven by the interbank channel which plays a crucial role in transmitting shocks to the real sector across borders

discussion of presbitero udell and zazzaro the paper by presbitero udell and zazzaro henceforth puz aims to investigate whether the financial crisis that in italy really hit after lehman brothers in september 2008 actually led to a credit crunch there and which types of firms suffered most puz start from the quarterly editions of a monthly survey of about 3 800 italian manufacturing firms by isae now istat to analyze credit access by 3 623 firms between 2008 q1 to 2009 q3 i e 23 140 firm quarter observations of which 12 734 came after lehman puz find suggestive evidence that there was a credit crunch in italy post lehman that firms in provinces with bank branches located further from their bank s headquarter i e with banks that are more functionally distant suffered relatively more and that in those provinces especially high quality firms were affected these findings are consistent with a home bias but not with a flight to quality interpretation this nice paper by puz is truly thought provoking as the home bias in banking that is documented is occurring within one country but before pointing out a possible broader avenue for further investigation i want to discuss a few limitations of this study most of which the authors are also aware of and candidly highlight and in this way also indicate more immediate directions for follow up research

natural disasters damage to banks and firm investment this article investigates the effect of banks lending capacity on firms investment to identify exogenous shocks to loan supply we utilize the natural experiment provided by japan s great hanshin awaji earthquake in 1995 using a unique data set that allows us to identify firms and banks in the earthquake affected areas we find that the investment ratio of firms located outside the earthquake affected areas but having a main bank inside the areas was significantly smaller than that of firms located outside the areas and having a main bank outside the areas our findings suggest that loan supply shocks affect firm investment abstract from author

firm behaviour and market access in a free trade area with rules of origin we study a free trade area with rules of origin and show that there are two distinct regimes comparative statics results for the two regimes are exact opposites and a regime switch occurs when roo become restrictive enough consequently imports into the fta of the intermediate good first fall and then rise while the opposite pattern occurs for imports of the final good and for the price of the domestic input we also show that tighter roo have opposite effects on the well being of final versus intermediate

introduction to the symposium on contemporary banking research the use of fixed effects to disentangle loan demand from loan supply with the onset of the financial crisis disentangling the effects of loan demand and supply in contemporary banking research has become vital for a proper assessment of supply related banking shocks these shocks may negatively affect the real economy through many channels such as the lending channel of monetary policy transmission the bank risk taking channel or the evaluation of macroprudential policy efficiency all these rely on separating the two lending components empirical identification has largely relied on the use of demand related fixed effects which has also been applied in several analyses within this symposium

small bank comparative advantages in alleviating financial constraints and providing liquidity insurance over time we use novel monthly survey data from 1993 to 2012 on small business managerial perceptions of financial constraints and other conditions matched with information on banks in their local markets the data suggest that small banks have comparative advantages in alleviating these constraints these advantages tend to be greater during adverse economic conditions and do not appear to decrease or increase secularly small banks also appear to have comparative advantages in providing liquidity insurance to small business customers of large banks experiencing liquidity shocks during financial crises our findings suggest a source of social costs from ongoing consolidation of the banking industry received december 28 2015 editorial decision january 13 2017 by editor philip strahan

raw materials processing activities and protectionism a country s export sector may encompass a raw material as well as a final commodity that processes that raw material a general equilibrium model is developed in a competitive setting to analyze a nation s optimal strategy in restricting raw materials exports when allowance is made for potential beneficial effects on the export price of processed goods when faced with a foreign tariff on exports of the processed commodity a country s optimal response could entail an easing of raw materials export constraints instead of retaliation illustrations are provided of the 1986 american tariff on canadian exports of cedar shakes and shingles

multinational banks in the crisis foreign affiliate lending as a mirror of funding pressure and competition on the internal capital market abstract we investigate how the lending activities abroad of a multinational bank s local and hub affiliates have been affected by funding difficulties during the financial crisis we find that affiliates local deposits and performance have been stabilizing loan supply by contrast relying on short term wholesale funding has increasingly proven to be a disadvantage in the crisis which has seen inter bank and capital markets freeze by introducing a liable approximate measure for intra bank flows we detect competition for intra bank funding between the affiliates abroad as well as an increasing focus on the parent bank s home market activities in addition the more an affiliate abroad relies on intra bank funding in the crisis the greater its dependence on its parent bank having a stable deposit and long term wholesale funding position we consider changes in long term lending to the private sectors of 40 countries by the affiliates of the 68 largest german banks to obtain a more precise picture we clean our lending data from valuation effects

local content requirements versus tariff equivalents how we measure matters this article develops a mechanism to measure the impact of local content requirements as quantitative restrictions we compare effects of the novel quantitative approach to the effects of a tariff equivalent which is more traditionally used to analyse these types of policies local content requirements increase output and value added in the affected sector but at the expense of other sectors leading to declines in gdp and trade across the economy comparing the two modelling approaches the differences in outcomes are shown to be significant

distance and private information in lending we study the effects of physical distance on the acquisition and use of private information in informationally opaque credit markets using a unique data set of all loan applications by small firms to a large bank we show that borrower proximity facilitates the collection of soft information leading to a trade off in the availability and pricing of credit which is more readily accessible to nearby firms albeit at higher interest rates ceteris paribus analyzing loan rates and firms decision to switch lenders provides further evidence for banks strategic use of private information however distance erodes our lender s ability to collect proprietary intelligence and to carve out local captive markets suggesting that the requisite soft information is primarily local the author 2010 published by oxford university press on behalf of the society for financial studies all rights reserved for permissions please e mail journals permissions oxfordjournals org oxford university press

use of region life cycle and role variables in the short run estimation of the demand for gasoline and miles travelled short run demand for miles travelled and gasoline consumed are estimated for population subgroups defined by region occupation and life cycle understanding and quantifying the different responses of subgroups to changes in income and gasoline price are important from the perspective of transport and energy policies micro data are used to investigate the effects of marginal changes in price and income among sociodemographic groups this paper demonstrates that there are significant differences in the estimated parameters between the general population and subgroups within the population further significant differences may be demonstrated between those subgroups

employee treatment and contracting with bank lenders an instrumental approach for stakeholder management adopting an instrumental approach for stakeholder management we focus on two primary stakeholder groups employees and creditors to investigate the relationship between employee treatment and loan contracts with banks we find strong evidence that fair employee treatment reduces loan price and limits the use of financial covenants in addition we document that relationship bank lenders price both the levels and changes in the quality of employee treatment whereas first time bank lenders only care about the levels of fair employee treatment taking a contingency perspective we find that industry competition and firm asset intangibility moderate the relationship between good human resource management and bank loan costs the cost reduction effect of fair employee treatment is stronger for firms operating in a more competitive industry and having higher levels of intangible assets

the impact of rules of origin on trade flows a great deal of post war trade liberalization resulted from regional preferential trade agreements preferential trade agreements cut tariffs on goods originating only in those nations that have signed the agreement therefore they need rules of origin to determine which goods benefit from the tariff cut rules of origin have long been ignored for two good reasons they are dauntingly complex and at first sight appear mind numbingly dull the third standard reason for ignoring them the assertion that they do not matter much turns out to be wrong we show that rules of origin are important barriers to trade moreover such rules are emerging as an important trade issue for three additional reasons first preferential trade deals are proliferating worldwide second the global fragmentation of production implies complex international supply chains which are particularly constrained and distorted by rules of origin third the extent to which regionalism challenges the wto based trading system depends in part on incompatibilities and rigidities built into rules of origin our empirical results exploit a natural experiment that was created by technical changes to europe s lattice of rules of origin roos in 1997 this change known as diagonal cumulation relaxed the restrictiveness of rules of origin on trade among the eu s free trade agreement fta partners without changing the degree of tariff preference our analysis allows us to establish a lower bound and upper bound estimate of trade impact of roos reduced trade among the eu s trade partners the lower bound we find is something like 10 while the upper bound is around 70 the second part of the paper draws the policy lessons that arise from considering the implications of our empirical findings the most direct lessons are for fta writers we argue that europe s implementation of cumulation is a good way of reducing the welfare reducing impact of overlapping rules of origin without gutting their fraud fighting ability we also suggest a three part procedure for establishing a more multilateral framework for rules of origin which would be more transparent flexible administratively feasible and negotiable patricia augier michael gasiorek and charles lai tong

the discriminatory nature of specific tariffs this paper quantifies the distortions from specific tariffs levied by the european union eu the most favored nation mfn specific tariffs levied by the eu translate into higher tariff barriers for poor countries exporting low price goods the author shows that for poor countries these higher tariff barriers from specific tariffs offset the gains from preferential tariffs the author apply a two stage analysis to show that the specific tariffs levied by the eu on its agricultural imports wash away more than half of the welfare benefits enjoyed by the sub saharan african countries from eu preferential tariffs the results provide the first quantitative estimate of the distortions associated with specific tariffs

multinational banks and the global financial crisis weathering the perfect storm we use data on the 48 largest multinational banking groups to compare the lending of their 199 foreign subsidiaries during the great recession with lending by a benchmark group of 202 domestic banks contrary to earlier more contained crises parent banks were not a significant source of strength to their subsidiaries during the 2008 09 crisis as a result multinational bank subsidiaries had to slow down credit growth about twice as fast as domestic banks this was particularly the case for subsidiaries of banking groups that relied more on wholesale market funding domestic banks were better equipped to continue lending because of their greater use of deposits a relatively stable funding source during the crisis we conclude that while multinational banks may contribute to financial stability during local bouts of financial turmoil they also increase the risk of importing instability from abroad

the effect of borrowing constraints on consumer liabilities this paper explores the effects of liquidity constraints on consumer liabilities while much empirical evidence attests to the importance of liquidity constraints in the u s economy evidence about the effects of borrowing constraints on consumer balance sheets is scarce using the 1983 survey of consumer finances data we estimate desired borrowing for unconstrained households we then evaluate the gap between predicted and observed debt for the sample of liquidity constrained consumers predicted debt is 75 percent higher than actual debt in the liquidity constrained sample thus the effect of removing borrowing constraints has quantitatively important implications for the allocation of debt in the household portfolio the removal of borrowing constraints would raise aggregate household liabilities by 9 percent copyright 1993 by ohio state university press

trade and protection in vertically related markets abstract we consider home country tariff and subsidy policies in a setting where a home firm is partially dependent on a foreign vertically integrated firm for supplies of a key input the firms are cournot competitors in the home market for the final product we show that a tariff on final product imports may cause the foreign vertically integrated firm to reduce the price charged for the input under circumstances where a simple monopoly supplier of the input would increase its price supply conditions for the input significantly affect whether imports of the input should be taxed or subsidized

a cointegration analysis of gasoline demand in the united states time series estimation of gasoline demand elasticities often does not take into account the possibility of nonstationarity in the underlying data which may render the parameter estimates spurious studies have shown that the time trending variables used to explain gasoline demand could be difference stationary and therefore may require cointegration analysis to assess the relationship among the trending variables in this work we use the cointegration technique to derive long run and short run demand elasticities of noncommercial gasoline consumption using time series data for the usa from 1949 to 2004 we also attempt to incorporate the presence of a structural break in the data generation process of the time trending variables our results show that the consumption of gasoline and lifetime income have a long term stable relationship after the second oil shock of 1978 prior to the first oil shock of 1973 no such long run relationship could be established through cointegration

economic integration and rules of origin under international oligopoly free trade agreements ftas have rules of origin roos to prevent tariff circumvention by firms of non member countries this paper points out that in imperfectly competitive markets roos have another role overlooked in the existing literature instead of focusing on the impacts of roos in the intermediate good markets we draw our attention to the final good markets to examine the effects of roos we find that under some conditions roos benefi tb othfirms at the expense of consumers under some other conditions roos benefi tt hefirm producing outside the fta and hurt the firm producing inside the fta

the drivers of foreign bank lending in central and eastern europe the roles of parent subsidiary and host market traits we analyze the relative roles of subsidiary and parent banking group traits in driving foreign banks lending patterns in the central and eastern european cee region before and during the crisis we use a bank level dataset on western european banking groups and their cee subsidiaries over the 2002 2013 period we find that lower capital to asset ratios and higher non performing loans npl ratios at either the subsidiary or the parent bank level significantly lowered subsidiary lending growth before and during the crisis the onset of the crisis not only lowered subsidiary lending growth in the cee countries but also has altered the relationship between balance sheet conditions and lending growth however we also find strong evidence that this crisis effect is significantly less pronounced for subsidiaries participating in the vienna initiative our results policy implications include purging banks of npls enhanced regulatory coordination and the inclusion of parent bank traits in countercyclical capital buffer calculations

rules of origin and the eu med partnership the case of textiles this paper analyses the impact of rules of origin on patterns of trade in the context of the pan european system of diagonal cumulation the paper first highlights the importance of rules of origin in all preferential trading arrangements while arguing that those rules can easily lead to trade suppression and or trade diversion we then focus on the introduction of the pan european system in 1997 and show evidence to suggest that the introduction of the system materially impacted on trade between the eu and its cefta efta and baltic states partner countries the main body of the paper then empirically explores the impact of the lack of cumulation in the textile industry on the countries of the southern mediterranean the results suggest that rules of origin may indeed substantially constrain trade between non cumulating countries possibly by as much as 70 80 per cent in aggregate while preferential trading agreements thus serve to increase intra pta trade through the liberalisation of trade barriers they may also be doing so by effectively raising external barriers to trade through the use of constraining rules of origin to the extent that they do so increases the likelihood of trade diversion and trade suppresion

singapore and the new regionalism bilateral trade linkages with japan and the us free trade areas ftas have recently become an integral part of singapore trade policy this paper discusses the reasons behind singapore s recent embracement of new regionalism with particular reference to the proposals to form ftas with japan and the us the paper goes on to examine various aspects of singapore s trade linkages with the two economic superpowers in some detail popular discussion of ftas gives one the appearance that such a trade policy is entirely benign the paper sounds a cautionary note highlighting some reasons to be concerned with singapore s recent embracement of the new regionalism

in search of capital crunch supply factors behind the credit slowdown in japan the seeming failure of loose monetary policy to reactivate japan s economy has led some observers to suggest that the usual credit channels through which monetary policy affects the real economy are blocked and this is because of a pervasive shortage of bank capital that has induced a leftward shift in the supply of bank credit this is the so called capital crunch hypothesis this paper finds support for the hypothesis in the bank data for 1997 a year during which the landscape of the japanese financial system underwent some fundamental changes

the effects of a content requirement on a foreign duopsonist abstract this paper considers the operation of a local content requirement in a duopsony between domestic and foreign firms and demonstrates its consequences for the domestic producer of a final good it is shown that content protection may have perverse effects on a foreign firm s profits and may be welfare improving overall shifting profits from the domestic firm to both the foreign firm and domestic input producers

trade and protection with multistage production this paper analyses trade in manuf acutured goods that are produced via a vertical production structure with many stages where some value is added at each to an intermediate product to yield a good in process ready for the next stage we consider the stage at which a good is traded to be an economically endogenous variable with comparative advantage determining the pattern of production specialization by stages across countries we study how endowment changes and policy shifts move the margin of comparative advantage which thus provides a channel for resource allocation adjustment that is additional to the usual ones of factor substitution and changes in the quantity of output

liquidity management of u s global banks internal capital markets in the great recession abstract the recent crisis highlighted the importance of globally active banks in linking markets one channel for this linkage is through how these banks manage liquidity across their entire banking organization we document that funds regularly flow between parent banks and their affiliates in diverse foreign markets we show that parent banks when hit by a funding shock reallocate liquidity in the organization according to a locational pecking order affiliate locations that are important for the parent bank revenue streams are relatively protected from liquidity reallocations in the organization while traditional funding locations are more extensively used to buffer shocks to the parent bank balance sheets

when arm s length is too far relationship banking over the credit cycle we conduct face to face interviews with bank ceos to classify 397 banks across 21 countries as either relationship or transaction lenders we then use the geographic coordinates of these banks branches and of 14 100 businesses to analyze how the lending techniques of banks in the vicinity of firms are related to credit constraints at two contrasting points of the credit cycle we find that while relationship lending is not associated with credit constraints during a credit boom it alleviates such constraints during a downturn this positive role of relationship lending is stronger for small and opaque firms and in regions with a more severe economic downturn moreover our evidence suggests thatrelationship lending mitigates the impact of a downturn on firm growth and does not constitute evergreening of loans

commercial policy and intra industry trade abstract this paper constructs a model of intra industry trade within a multi product industry whose output range is limited to that obtainable from a particular type of capital intra industry trade is a natural outcome in this structure without requiring increasing returns to scale or imperfectly competitive markets and with its pattern determined along traditional relative factor abundance lines the volume of this trade will vary inversely with the level of trade restrictions as observed empirically other policies are then considered for their influence on the range rather than the level of domestic production since the former is the more likely policy objective under these circumstances

do smes benefit from unconventional monetary policy and how microevidence from the eurozone we study the impact of the announcement of the european central bank s ecb s outright monetary transactions program on small firms access to finance using a matched firm bank data set from eight eurozone countries we find that following the announcement credit access improved relatively more for firms borrowing from banks with high balance sheet exposures to impaired sovereign debt with such firms less likely to be refused a loan or to be price rationed loan terms also improved as manifested by lengthening of loan maturities unconventional monetary policy has a positive impact on firms investment and profitability while its effect on firm innovation is weaker

founded in adversity operations based survival strategies of ventures founded during a recession abstract we examine the survival of 404 new ventures founded during the 2008 recession we find that industry explains a significant but small percentage of variance in survival 2 81 percent and therefore focus on which operations related actions could enhance ventures odds of survival we find marginally significant support for our hypotheses that a venture founded during a recession is more likely to survive if it increases its production efficiency increases both its production efficiency and variable costs or increases both its production efficiency and fixed costs in property plant and equipment our findings demonstrate that operational decisions are key determinants of survival for ventures founded during a recession

foreign banks trends and impact over the past two decades foreign banks have become much more important in domestic financial intermediation heightening the need to understand their behavior we introduce a new comprehensive database made publicly available on bank ownership including the home country of foreign banks for 5 324 banks in 137 countries over the period 1995 2009 we document large increases in foreign bank presence in many countries but with substantial heterogeneity in terms of host and banks home countries bilateral investment patterns and bank characteristics in terms of impact we document that the relation between private credit and foreign bank presence importantly depends on host country and banks characteristics specifically foreign banks only seem to have a negative impact on credit in low income countries in countries where they have a limited market share where enforcing contracts is costly and where credit information is limited available and when they come from distant home countries this shows that accounting for heterogeneity including bilateral ownership is crucial to better understand the implications of foreign bank ownership

industrial targeting in free trade areas with policy independence we investigate the limits of a mechanism for free trade area fta formation that simultaneously satisfies internal industrialization targets for arbitrary targets we find necessary and sufficient conditions that guarantee that the mechanism is efficient for member countries individually even if other members do not implement the efficient policy when the objective is conservative designed to protect the level of industrialization previously achieved by the target industry member countries are guaranteed gains from the efficient policy and their fta participation the analysis covers cases with transportation costs and explains why minimally restrictive rules of origin support efficiency and policy independence on etudie les limites d un mecanisme de formation d une zone de libre echange zle qui simultanement rencontre certains objectifs internes d industrialisation pour des cibles arbitraires on definit les conditions necessaires et suffisantes qui garantissent que le mecanisme est efficient pour les pays membres individuellement meme si d autres membres ne mettent pas en place la politique efficiente quand les objectifs sont conservateurs tentant seulement de proteger le niveau d industrialisation auquel on s est donne acces anterieurement dans l industrie ciblee on peut garantir des gains pour les pays membres decoulant de la politique efficiente et de la participation a la zle l analyse examine aussi des situations avec couts de transport positifs et explique pourquoi des restrictions minimales sur l origine des produits assurent l efficacite et l independance des politiques

local versus international crises and bank stability does bank foreign expansion make a difference abstractwe investigate the impact of global and local crises on bank stability in the mena region and examine the effect of owning bank subsidiaries in other countries we consider banks that experienced both types of crises during our sample period our findings highlight a negative impact of the global financial crisis of 2007 2008 on bank stability but on the whole no negative impact of the local crisis a deeper investigation shows that owning bank subsidiaries outside the home country is a source of increased fragility during normal times yet a source of higher stability during the local crisis but not during the international crisis moreover owning foreign subsidiaries in one or two world regions is insufficient to neutralize both types of crises while being present in three or more regions is more stabilizing during a local crisis but also more destabilizing during an international crisis our findings contribute to the literature examining bank stability and have several policy implications

preference utilisation and tariff reduction in eu imports from acp countries textabstractdespite the long relationship between the eu and the african caribbean and pacific acp countries aimed at encouraging their exports while stimulating growth and investment the acp states still face difficulties in integrating into the world economy this paper examines the non least developed acp countries preferential trade with the eu the objective is to explain the determinants of preferential exports of acp countries towards the eu and to assess the impact of preferences on trade volumes we also investigate the existence of a threshold in the offered duty reduction under which traders have no incentives to ask for preferences

foreign bank behavior during financial crises one of the persistent policy problems faced by governments contemplating financial liberalizations is the question of whether to allow foreign banks entry into the domestic economy this question has become ever more urgent in recent times due to rapid financial globalization coupled with the credit contractions experienced as a result of the 2007 08 financial crisis this paper examines the question of whether opening the financial sector to foreign participation is a good idea for developing countries using a unique bank level database of foreign ownership in particular the authors examine whether the credit supply of majority foreign owned financial institutions differ systematically conditional on a crisis event in their home economies they show that foreign banks that were exposed to crises in their home countries exhibit changes in lending patterns that are lower by between 13 and 42 percent than their non crisis counterparts

gender bias and credit access we extract an exogenous measure of gender bias from survey responses by descendants of u s immigrants on questions about the role of women in society we then use data on around 6 000 small business firms from 17 countries and find that in high gender bias countries female entrepreneurs are more likely to opt out of the loan application process and to resort to informal finance even though banks do not appear to actively discriminate against them these results are not driven by credit risk differences between female and male owned firms or by any idiosyncrasies in the set of countries in our sample

why voluntary export restraints are voluntary the paper presents an analysis of the effect upon an oligopolistic equilibrium of introducing a voluntary export restraint ver upon an importing firm a ver set at the free trade level of imports is shown to raise the profits of all firms within the industry the result follows as the imposition of a ver upon a free trade nash price competition forces the domestic firm to become an industry price leader the ver raises industry prices by facilitating collusion and lowers consumer welfare pourquoi les restrictions volontaires d 1 exportation sont volontaires ce memoire presente une analyse des effets de l introduction de restrictions volontaires a l exportation rve sur une entreprise qui importe dans un monde en equilibre oligopolistique on montre que l introduction de rve approximant le niveau des importations en regime de libre echange devrait augmenter les profits de toutes les entreprises dans l industrie cela decoule du fait que l imposition de rve sur un univers de concurrence par les prix a la nash en regime de libre echange force l entreprise domestique a devenir le leader en prix l introduction de rve augmente le niveau des prix de l industrie en facilitant la collusion et de ce fait reduit le niveau de bien etre des consomrnateurs

the finance growth nexus evidence from bank branch deregulation this paper provides evidence that financial markets can directly affect economic growth by studying the relaxation of bank branch restrictions in the united states we find that the rates of real per capita growth in income and output increase significantly following intrastate branch reform we also argue that the observed changes in growth are the result of changes in the banking system improvements in the quality of bank lending not increased volume of bank lending appear to be responsible for faster growth

internal capital markets and the competition for corporate resources this article examines the role of corporate headquarters in allocating scarce resources to competing projects in an internal capital market unlike a bank headquarters has control rights that enable it to engage in winner picking the practice of actively shifting funds from one project to another by doing a good job in the winner picking dimension headquarters can create value even when it cannot help at all to relax overall firm wide credit constraints the model implies that internal capital markets may sometimes function more efficiently when headquarters oversees a small and focused set of projects this article analyzes the process by which internal capital markets channel limited resources to different uses inside a company in so doing it seeks to address two related sets of questions first what is the fundamental economic rationale for creating an internal capital market that is under what circumstances can it make sense to combine several technologically distinct projects under one roof and have them seek funding from corporate headquarters as opposed to setting them up as stand alone companies that each raise external financing on their own second given this rationale what is the optimal size and scope of an internal capital market should headquarters be involved in funding a large number of projects or just a few and should these projects be unrelated to one another or in similar lines of business the answers to both sets of questions flow from the insight that in a credit constrained setting where not all positive npv projects can be financed headquarters can create value by actively reallocating scarce funds across projects for example the cash flow generated by one division s activities may be taken and spent on investment in another division where the returns are higher or alternatively one division s assets may be used as collateral to raise financing that is then diverted to the other division simply put individual projects must compete for the scarce funds and headquarters job is to pick the winners and losers in this competition

investor valuation of the abandonment option abstract we investigate whether investors price the option to abandon a firm at its exit value theory prices this real option as an american put with both a stochastic strike price exit value and a stochastic value of the underlying security the value of cash flows the empirical implications are that firm value increases in exit value after controlling for expected going concern cash flows and that more generalizable assets produce more abandonment option value using discounted earnings forecasts to proxy for expected cash flows and prior literature to categorize asset generalizability we find strong support for the predictions of abandonment option theory

on a tight leash does bank organizational structure matter for macroprudential spillovers abstract this paper examines whether the organizational form of multinational banks foreign affiliates affects cross border spillovers of macroprudential regulation we compare changes in the growth of lending provided by foreign banks branches versus subsidiaries in the united kingdom in response to changes in capital requirements lending standards and reserve requirements in foreign banks home countries our results suggest that a tightening of capital requirements at home reduces uk branches interbank lending growth by 5 7 pp more relative to subsidiaries we link this effect to the higher degree of control which parent banks hold over operations of their foreign branches compared to subsidiaries supporting this hypothesis a set of further tests illustrates that the response of foreign affiliates operating under a branch structure is stronger where parent banks are more likely to delegate more decision making authority to the board of directors of their subsidiaries

the theory of domestic content protection and content preference this paper investigates the resource reallocation effected by content protection and content preference schemes under alternative assumptions regarding the definition of domestic content the number of intermediate goods and the market structure of the domestic intermediate good industry content protection is shown to be equivalent to a combination of more familiar commercial policies however the extent of application of these policies is determined endogenously by parameters of the production functions for intermediate and final goods a number of anomalous and undesirable outcomes that may result from content protection and content preference are discussed

protecting free trade the political economy of rules of origin the design of rules of origin in free trade agreements ftas arouses spirited lobbying campaigns that mostly escape public attention this article argues that the domestic groups generally most favorable to ftas differ in their preferences over rules of origin industries with large returns to scale favor strict rules of origin to gain scale economies in an fta while industries with multinational supply chains prefer lenient rules of origin to accommodate offshore procurement an econometric analysis of rules of origin in the north american free trade agreement nafta finds tougher rules of origin the higher the external trade protection and the larger the returns to scale and more permissive rules of origin the greater the involvement in foreign sourcing the results suggest that rules of origin may be critical to building domestic coalitions for ftas industry preferences toward rules of origin therefore have important implications for the politics of fta ratification

contagion and banking crisis international evidence for 2007 2009 abstract policy makers aim to avoid banking crises and although they can to some extent control domestic conditions internationally transmitted crises are difficult to tackle this paper identifies international contagion in banking during the 2007 2009 crisis for 54 economies we identify three channels of contagion systematic idiosyncratic and volatility and find evidence for these in 45 countries banking crises are overwhelmingly associated with the presence of both systematic and idiosyncratic contagion the results reveal that crisis shocks transmitted from a foreign jurisdiction via idiosyncratic contagion increase the likelihood of a systemic crisis in the domestic banking system by almost 37 percent whereas increased exposure via systematic contagion does not necessarily destabilize the domestic banking system thus while policy makers and regulatory authorities are rightly concerned with the systematic transmission of banking crises reducing the potential for idiosyncratic contagion can importantly reduce the consequences for the domestic economy

foreign activities of u s banks since 1997 the roles of regulations and market conditions in crises and normal times abstract using a unique newly constructed dataset on u s banks foreign activities since 1997 this paper examines how bank market and regulatory conditions in the u s and host countries affect u s banks choices of which foreign markets to enter and how much claims and liabilities to take on there using a two stage structural estimation framework the determinants of foreign market entry exit cross border claims and foreign affiliate claims and liabilities choices are examined in 107 host countries around the world it is shown that 1 the health of the balance sheet is the primary driver of foreign market entry exit choices especially so during the subprime crisis while host market and regulatory conditions play important roles in the choice of claims liabilities volumes 2 banks choose their foreign activities during banking and market crises differently than they do in normal times and 3 in addition to bank size previous experience with managing a global lending network significantly increases the intensity of banks foreign involvement structural estimates of the costs of foreign market entry exit and host market regulatory stringency are also derived

financial crises and cross border banking new evidence the surge in cross border banking prior to global financial crises took place not only in the interbank market but also in the retail market e g between banks and their private customers abroad we utilize confidential data to estimate for the first time the effects of banking currency and twin crises on the geography of cross border deposits and loans we show that each crisis type has its own specific effects that these effects themselves lead to sustained increases in cross border banking and that they are different for cross border loans and deposits respectively

sovereign stress and smes access to finance evidence from the ecb s safe survey abstract we study the effect of sovereign stress on smes capital structure using restricted access data from the european central bank we find that during the sovereign debt crisis and controlling for borrowers quality firms in stressed countries became more likely to be denied credit to be credit rationed and to face higher loan rates less creditworthy firms were not more likely to become credit constrained suggesting no flight to quality in lending we also find that in order to make up for the decline in bank credit firms in stressed countries began relying considerably more on retained earnings and government subsidies

estimates of price elasticity of demand for urban freeway use with high frequency control variables the case of santiago chile estimates are presented of toll and fuel price elasticities of demand for urban freeway use in santiago chile high frequency toll and vehicle data were collected from four urban freeways for different route segments and times of day estimation was performed using log linear regression models whose explanatory variables were tolls fuel prices city traffic levels and sets of dichotomous variables to control for daily weekly and monthly seasonality city traffic is a high frequency control of the activity level of the city the elasticities to changes in tolls and fuel were all low in absolute value the toll elasticities were below 0 05 for two freeways and 0 16 for the third while for the fourth which had more alternative routes it was 0 47 the fuel price elasticities were also heterogeneous with values of approximately 0 45 for two freeways and 0 21 for the third whereas for the fourth which had the fewest alternatives it was 0 07

the international transmission of financial shocks the case of japan one of the more dramatic financial events of the late 1980s and early 1990s was the surge in japanese stock prices that was immediately followed by a very sharp decline of more than 50 percent while the unprecedented fluctuations in japanese stock prices were domestic financial shocks the unique institutional characteristics of the japanese economy produce a framework that is particularly suited to the transmission of such shocks to other countries through the behavior of the japanese banking system the large size of japanese bank lending operations in the united states enables us to use u s banking data to investigate the extent to which this domestic japanese financial shock was transmitted to the united states as well as to identify a supply shock to u s bank lending that is independent of u s loan demand we find that binding risk based capital requirements associated with the decline in the japanese stock market resulted in a decline in commercial lending by japanese banks in the united states that was both economically and statistically significant this finding has added importance given the severe real estate loan problems currently faced by japanese banks how japanese bank regulators decide to resolve these problems will have significant implications for credit availability in the united states as well as in other countries with a significant japanese bank presence

offshore production and the base of import taxation the scheme is designed to encourage the maximum use of australian made fabrics which are cut or knitted to shape in australia textiles clothing and footwear development authority 1993 p 4 when an australian firm sets up production in south east asia it often attracts criticism because it means losing jobs to low cost labour in the region however our study shows that such criticism is not wholly justified for many firms offshore production is critical to establishing a long term position as an insider in the market and therefore is critical to exports from an australian base different methods have been used to determine origin but none has proved totally unsatisfactory and none is likely to do so

decomposing the determinants of road traffic demand this study presents a decomposition of the basic fundamental determinants of road traffic and fuel demand a general framework is proposed as a means of analysing the impacts of changes in prices and income on the demand for fuel and traffic volume the objective is to provide a general basis for comparing different road traffic elasticity estimates and for understanding how a variety of different factors work together to create overall road traffic and fuel demand responses the study emphasizes relationships between different price and income elasticity measures and uses estimates from the literature to evaluate the main determinants of demand including some previously unobserved effects

trade restrictions as facilitating practices abstract the effect of quantitative restrictions in oligopolistic markets is shown to depend on whether imports are substitutes or complements for domestic products in the former case they have profound effects even when set at free trade levels because they impede the ability of the foreign firm to compete in the domestic market thereby acting to facilitate collusion and raise prices and profits for this reason tariffs and quotas are fundamentally non equivalent with substitute goods when goods are complements a voluntary export restriction ver at the free trade level has no effect and tariffs and quotas are equivalent

do banking shocks affect borrowing firm performance an analysis of the japanese experience from 1990 to 1993 the typical firm on the tokyo stock exchange lost more than half of its value and banks experienced severe adverse shocks we show that firms whose debt had a higher fraction of bank loans in 1989 performed worse from 1990 to 1993 and also invested less than other firms did this effect holds when we control for variables that affect firm performance we show further that exogenous shocks to banks during the negotiations leading to the basle accord affected bank borrowers significantly copyright 2000 by university of chicago press

foreign bank lending evidence from the global financial crisis abstract we exploit highly disaggregated bank firm data to investigate the dynamics of foreign vs domestic credit supply in italy around the period of the lehman collapse which brought a sudden and unexpected deterioration of economic conditions and a sharp increase in credit risk taking advantage of the presence of multiple lending relationships to control for credit demand and risk at the individual firm level we show that foreign lenders restricted credit supply to the same firm more sharply than their domestic counterparts a number of exercises testing alternative explanations for this result suggest that such more intense restriction also reflects the functional distance between a foreign bank s headquarter and the italian credit market

impact of the dedicated infrastructure on bus service quality an empirical analysis abstractan econometric analysis is conducted to quantify the impact of different variables on the service quality of the santiago chile bus system the indicators tested as measures of service qua

the location of financial sector fdi tax and regulation policy abstract this paper analyzes how corporate taxation and regulatory requirements affect the location of financial sector fdi we use novel information on new financial services entities established by multinational firms in 83 host countries we find a negative effect of host country taxes on the probability of choosing a particular host location we can also confirm a significant influence of the regulatory environment for example stricter equity capital requirements negatively affect location probabilities our empirical approach allows us to provide new insight in how a policy measure of a given country affects other countries by estimating cross country tax and regulation elasticities

the determinants of u s banks international activities abstract this paper develops a model and structural dynamic estimation of bank behavior to map the relationship between u s banks choices of foreign banking activities and bank and foreign market traits this estimation framework is applied to a unique bank level dataset compiled from regulatory sources covering u s banks foreign activities in 83 host markets over the 2003 2013 period bank traits are better able to explain the evolving patterns of foreign banking than host market characteristics after controlling for these traits the post financial crisis period shows a structural shift away from cross border claims towards foreign affiliate activities structural estimates of foreign market entry costs and regulatory attitudes towards risk are derived simulation exercises confirm the strong impact of banks and regulators risk stance on bank profits and portfolio composition

trade deflection trade distortions and pareto inefficiencies under the restricted origin principle abstract this paper shows that trade deflection is not the administrative aspect of the restricted origin principle as suggested in the literature but an important analytical issue that bears on resource allocation when deflection is taken into account trade distortions are avoided only when either domestic or at least border tax adjustment rates are equal in the member countries and trade balances are in bilateral equilibrium the control of deflection via rules of destination causes trade distortions and sometimes pareto inefficiencies the paper further shows that when the vat is calculated according to the credit method and trade is conducted by registered traders trade distortions are prevented when tax rates are set in inverse relation to bilateral trade balances

rules of origin as commercial policy instruments this article examines the role of rules of origin as a commercial policy instrument that targets the input composition of imports using a three country partial equilibrium structure we demonstrate conditions under which the imposition of a binding rule will be welfare improving for an importer facing competitive export suppliers we further show that employing rules of origin in this way would be complementary to rather than a substitute for conventional optimal tariffs copyright economics department of the university of pennsylvania and the osaka university institute of social and economic research association