debt and financial expectations an individual and household level analysis in this article we show that optimistic financial expectations impact positively on both the quantity of debt and the growth in debt at the individual and household levels our theoretical model shows that this association is predicted under a variety of plausible scenarios in the empirical analysis we explore the determinants of debt and of growth in debt using british data we find convincing support for our theoretical priors and show that it is optimistic financial expectations per se that are important in influencing debt rather than the accuracy of individuals predictions regarding their future financial situation jel d18 d84 d91

distance globalization and international trade for a long time globalization could be seen everywhere but in gravity estimates we offer evidence how globalization affects manufacturing trade over the period 1986 2006 and show that on average the effect of distance has fallen whereas the effects of proximity and regional trade agreements have increased over time we also document substantial cross country heterogeneity in the extent to which distance elasticities have changed countries in the middle of the per capita income distribution have seen the steepest fall in distance coeffcients at the same time distance as a trade friction has not lost its bite for a number of low income countries which may jeopardize their integration into global markets we present suggestive evidence that the heterogeneous change in distance elasticities is related to secular shifts in the composition of exports

commodity price pass through and inflation regimes abstract does an increase in the energy and commodity prices drive consumer prices the energy and commodity markets affect the inflation process through international trade this poses policy implications for monetary policy to forecast inflation and also smooth the impact of international relative price movements we investigate the pass through of a broad range of agricultural and energy commodity prices to inflation across different inflation regimes our distinctive regime varying methodology captures asymmetric response of inflation to the world commodity prices we establish the first evidence of the pass through of commodity prices to inflation across different periods of low and high inflation regimes and also stable and unstable inflation regimes the results show that the duration of staying in an unstable inflation regime is smaller in the commodity markets both short run and long run pass through of agricultural food and energy commodities are higher compared to other commodities the energy commodity particularly drives the inflation process for advanced economies emerging economies and also the european union countries overall the dynamics of inflation and commodity prices change in the inflation environment pointing to implications for conducting optimal monetary policy

borrowing constraints and credit demand in a developing economy summary this paper investigates the determinants of credit demand in the presence of borrowing constraints in a developing economy we model the determinants of observed debt for chilean households while accounting for selection bias and the endogeneity of their income and specific household assets using a novel chilean dataset we estimate the relationship between household characteristics and consumer and mortgage debt we find substantial differences in the nature of these relationships across the types of debt for example we find that the income elasticity for consumer debt is greater than 1 whereas for mortgage debt it is not the results suggest the increased availability of credit combined with the aging of the chilean population is likely to drastically change the distribution and level of chilean debt these findings are particularly relevant for other developing economies currently experiencing rapid income and debt growth copyright 2015 john wiley sons ltd

labor contracts and business cycles this paper investigates the claim often put forth by real business cycle proponents that the poor performance of their models in matching real world aggregate labor market behavior is due to the fact that observed real wage payments do not correspond to the actual marginal productivity of labor but contain an insurance component that cannot be accounted for by the walrasian pricing mechanism to test this idea we dispense with the walrasian description of the labor market and introduce contractual arrangements between employees and employers assuming that employees are prevented from accessing capital markets and are more risk averse than employers we use the theory of optimal contracts to derive an equilibrium relation between aggregate states of the economy and wage labor outcomes this contractual arrangement is then embedded into a standard one sector stochastic neoclassical growth model in order to look at the business cycle implications of the contractual hypothesis the resulting dynamic equi

whose business is it anyway this article examines how gender may account for productivity gaps across enterprises first using data from six countries in sub saharan africa the article demonstrates that the extent and significance of any productivity gap by gender depends critically on the criteria used to classify an enterprise using a definition of female participation in ownership there are few differences in average performance measures however a 12 productivity gap emerges when a tighter definition based on decision making control is used second the article examines which entrepreneurial characteristics education management skills experience and the motivation for being an entrepreneur are most associated with higher productivity the findings reveal that there are some gender gaps in the prevalence of these characteristics but that these do not account for the overall gender productivity gap rather while women benefit as much as men from education and management skills there are non linear impacts by gender in the benefits of having a family background in entrepreneurship sons rather than daughters benefit from having a father that was an entrepreneur or from joining a family enterprise

constrained after college student loans and early career occupational choices abstract in the early 2000s a highly selective university introduced a no loans policy under which the loan component of financial aid awards was replaced with grants we use this natural experiment to identify the causal effect of student debt on employment outcomes in the standard life cycle model young people make optimal educational investment decisions if they are able to finance these investments by borrowing against future earnings the presence of debt has only income effects on investment decisions we find that debt causes graduates to choose substantially higher salary jobs and reduces the probability that students choose low paid public interest jobs we also find some evidence that debt affects students academic decisions during college our estimates suggest that recent college graduates are not life cycle agents two potential explanations are that young workers are credit constrained or that they are averse to holding debt we find suggestive evidence that debt reduces students donations to the institution in the years after they graduate and increases the likelihood that a graduate will default on a pledge made during her senior year we argue this result is more likely consistent with credit constraints than with debt aversion

on the conservation of distance in international trade the volume of world trade has grown more than twice as fast as real world income since 1980 surprisingly the effect of distance on trade has increased during this period it could be that countries are trading greater volumes of goods that are highly sensitive to distance an alternative explanation is that distance has become more import for a significant share of goods using highly disaggregated bilateral trade data we find that adjustment in the composition of trade has not influenced the way in which distance affects trade in contrast for about 25 percent of industries distance has become more important this implies that the increased distance sensitivity of trade is a result of a change in relative trade costs that affects many industries as opposed to a shift to more distance sensitive products we also find that homogeneous products are twice as likely to have become more distance sensitive as compared with differentiated goods this is consistent with the hypothesis that falling search costs resulting from improvements in transport and communications are relatively more important for differentiated goods the results offer no evidence of the death of distance rather they suggest that distance related relative trade costs have remained unchanged or shifted in favor of proximate markets

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

gender and rural non farm entrepreneurship despite their increasing prominence in policy debates little is known about gender inequities in non agricultural labor market outcomes in rural areas using matched household enterprise community data sets from bangladesh ethiopia indonesia and sri lanka this paper documents and analyzes gender differences in the individual portfolio choice and productivity of non farm entrepreneurship except for ethiopia women are less likely than men to become nonfarm entrepreneurs women s nonfarm entrepreneurship isn t strongly correlated with household composition or educational attainment but is especially prevalent amongst women who are the head of their household female led firms are much smaller and less productive on average though gender differences in productivity vary dramatically across countries mean differences in log output per worker suggest that male firms are roughly 10 times as productive as female firms in bangladesh three times as those in ethiopia and twice as those in sri lanka by contrast no significant differences in labor productivity were detected in indonesia differences in output per worker are overwhelmingly accounted for by sorting by sector and size they can t be explained by differences in capital intensity human capital or the local investment climate nor by increasing returns to scale

the structuralist theory of imported inflation an application to south africa this study emphasizes the importance of identifying the origin of inflation in the present context of inflation targeting by many emerging market and transition economies the analysis shows based on south african data how structural supply and demand inflation can be distinguished the results indicate that south africa s inflation experience between 1973q1 and 1998q4 is characterized by two monetary regimes during the first regime 1973q1 1984q4 the long run cause of inflation is demand pull the second regime 1987q1 1998q4 represents major changes to structural imported and cost push inflation the two year period 1985 1986 signifies structural change from the first to the second regime moreover the results in the second regime remain robust when the inflation model is subjected to new out of sample data until 2001q2 evidence of structural imported inflation in the second regime suggests that inflation should not entirely be squeezed out of the system nor should it necessarily be k

releasing constraints to growth or pushing on a string policies and performance of mexican micro firms abstract using firm level data from mexico this paper investigates the firm characteristics associated with participation in credit markets access to training tax payments and membership in business associations we find that firms which participate in these institutions exhibit significantly higher profits moreover firms that borrow from formal or informal sources and those that pay taxes are significantly more likely to stay in business but firms that received credit exhibit lower rates of income growth these results persist when firm characteristics that are arguably correlated with unobserved entrepreneurial ability are controlled for our findings suggest that the significant within country differences in firm productivity observed in developing economies are due in part to market and government failures that limit the ability of micro firms to reach their optimal sizes

the green revolution development of labor markets and poverty reduction in the rural philippines 1985 2004 using a long term household panel data set collected in three rural villages in the philippines in 1985 and 2004 this article explores how the green revolution and development of the labor markets have affected household income and poverty situation the initial rise in income associated with the green revolution and a stronger credit access has enabled the households to allocate funds for investing in children s schooling with the increased integration of the rural with the urban labor market these children are able to explore labor opportunities in the nonfarm sector that resulted in a decline in poverty by about one half the landless households who are less educated benefited too from the expansion of the nonfarm labor market because of the rise in rural wages associated with the rise in demand for the unskilled labor which is by far their most important asset

do firms get the financing they want measuring credit rationing experienced by small businesses in the u s this paper measures the extent to which small businesses in the united states in the late 1980s were able to access the external credit finance they desired we argue that a comprehensive definition of credit rationing must account for both a creditworthy firms that apply for and are denied financing and b creditworthy firms that decide not to apply for desired external financing given expectations about how long it may take to obtain financing and the evolution of investment opportunities

on the driving forces behind cyclical movements in employment and job reallocation theory restricts short run job creation and destruction responses and cumulative employment and job reallocation responses to allocative and aggregate shocks we formulate these restrictions and implement them for postwar data on u s manufacturing allocative shocks are the main driving force behind cyclical movements in job reallocation but their contribution to employment fluctuations varies greatly across alternative identification assumptions also the data compel one or both of the following inferences aggregate shocks greatly alter the shape and not just the mean of the cross sectional density of employment growth rates allocative shocks cause short run reductions in aggregate employment

credit constraints and productivity in peruvian agriculture this article evaluates the performance of a rural credit market in peru we develop a model that shows that collateral requirements imposed by lenders in response to asymmetric information can lead not just to quantity rationing but also to transaction cost rationing and risk rationing just like quantity rationing these two additional forms of nonprice rationing adversely affect farm resource allocation and productivity we test the insights of the model using a panel data set from northern peru we estimate the returns to productive endowments for constrained and unconstrained households using a switching regression model we find that consistent with the theory productivity is independent of endowments for unconstrained households but is tightly linked to endowments for constrained households we estimate that credit constraints lower the value of agricultural output in the study region by 26

inflation and imported input prices in some inflationary latin american economies this paper first updates to 1980 the estimates of the harberger inflation model for argentina brazil chile colombia and uruguay and shows that all the hypotheses of this model hold and the reaction to monetary growth is fairly rapid an aggregate supply function including imported inputs is then hypothesized following recent theoretical work this yields two testable propositions on the reduced form estimates of inflation a the relation between inflation and monetary growth should be less than proportional and the income coefficient should be insignificant contrary to the harberger model and b inflation should be a weighted average of monetary growth and imported inflation assuming the underlying aggregate production function is homogenous of degree zero in prices tests on the same data base support both hypotheses these results also explain the similar results of many of the previous estimates of the harberger inflation equation which included the rate of devaluation in an ad hoc fashion

excess sensitivity of consumption to current income liquidity constraints or myopia this paper asks whether the empirical rejection of the rational expectations permanent income hypothesis occurs because agents are myopic in the sense that the marginal propensity to consume out of transitory income is non zero or because some agents face liquidity constraints the finding that the estimate of the mpc out of transitory income is dramatically affected in both magnitude and statistical significance by the inclusion of a proxy for liquidity constraints suggests that liquidity constraints are an important part of the explanation of the observed excess sensitivity of consumption to current income la sensibilite excessive de la consommation au revenu courant contraintes sur la liquidite ou myopie ce memoire examine la question a savoir pourquoi l hypothese du revenu permanent avec anticipations rationnelles n est pas v6rifiee empiriquement est ce parce que les agents economiques sont myopes i e que leur propension marginale a consommer a partir de leur revenu transitoire n est pas nulle ou bien est ce que certains agents economiques font face a des contraintes sur leur liquidite le fait que l estimation de la propension marginale a consommer le revenue transitoire est affectee par l inclusion d une variable qui tente de capturer l importance des contraintes sur la liquidit6 tant dans l 6valuation de sa taille que dans sa signification statistique suggere que ces contraintes jouent un role important dans l explication de cette sensibilite excessive qu on observe de la consommation aux changements dans le niveau de revenu courant almost all the recent empirical tests of the rational expectations permanent income hypothesis re pih have rejected the hypothesis using a rich variety of data sets and estimation methods the empirical work indicates that the failure of the re pih is significant both statistically and quantitatively the null hypothesis in this empirical literature typically consists of the joint hypothesis that 1 agents expectations are formed rationally 2 desired consumption is determined by permanent income and 3 capital markets are perfect in the sense that agents can lend or borrow against 1 studies rejecting the re pih include blinder 1981 flavin 1981 hall and mishkin 1982 hayashi 1982 and sargent 1978 in his original paper hall 1978 did not reject the re pih decisively however flavin 1981 showed that with a minor alteration in the specification of the alternative hypothesis the re pih could be rejected using hall s test and data set bernanke 1981 studying panel data on automobile expenditures did not find evidence against the hypothesis for an extensive survey of the empirical literature on the rational expectations permanent income hypothesis see king 1983 canadian journal of economics revue canadienne d economique xviii no 1 february fevrier 1985 printed in canada imprime au canada 0008 4085 85 117 36 1 50 canadian economics association this content downloaded from 157 55 39 17 on wed 31 aug 2016 05 08 58 utc all use subject to http about jstor org terms

sme credit constraints in asia s rising economic star fresh empirical evidence from vietnam this study provides a fresh look at the sme sector s economic backbone vis a vis credit constraint dichotomy in vietnam asia s rising economic star the study uses data from the survey of manufactu

subprime consumer credit demand evidence from a lender s pricing experiment using a unique panel data set from a u k credit card company we analyze the interest rate sensitivity of subprime credit card borrowers in addition to all individual transactions and loan terms we have access to details of a randomized interest rate experiment conducted by the lender on existing inframarginal loans for the whole sample we estimate a statistically significant 3 4 reduction in monthly credit demand in response to a five percentage point increase in interest rates this aggregate response is small but it masks very interesting heterogeneity in the sample we find that only low risk borrowers who fully utilize their credit cards lower their credit demand significantly when faced with an increase in interest rates we also document that a five percentage point increase in interest rates generates significant additional revenue for the lender without inducing delinquency over a short horizon 2013 the author

who is credit constrained in the u s economy an important assumption of the life cycle model of consumption is the postulate of perfect capital markets this hypothesis has recently been challenged by substantial empirical evidence hall and mishkin 1982 using the panel study of income dynamics estimate that 20 percent of united states families are liquidity constrained mariger 1986 derives a life cycle model with endogenous liquidity constraints and using a cross section estimates this fraction to be 19 4 percent hubbard and judd 1986 simulate a model with a constraint on net worth which shows that with reasonable assumptions about preferences 19 0 percent of united states consumers are liquidity constrained the emerging consensus points therefore to a fraction of approximately 20 percent of the population behaving in a manner that is inconsistent with the pure life cycle model in addition hayashi 1985 and zeldes 1989 investigate the correlation among consumption wealth and income for various population groups and infer that liquidity constraints are more important for younger families with low levels of wealth and saving the main limitation of these studies is that in their data sets constrained consumers are not observable and have to be identified via indirect evidence thus there is as yet little firm evidence about the characteristics of the consumers who are likely to be credit constrained this paper adopts an approach that differs from previous tests for liquidity constraints because it makes use of data where constrained consumers are observable and explicitly links their existence to credit market imperfections and personal characteristics the data drawn from the 1983 survey of consumer finances scf and described in section ii provide information on individuals whose request for credit has been rejected by financial intermediaries in section iii a model is developed in which consumers and lenders behavior jointly determines the probability that a consumer is rationed in the credit market this probability is then

who are china s entrepreneurs it has been increasingly recognized that entrepreneurship plays a crucial role in successful economies the schumpeterian approach to growth aghion and howitt 1997 advances the view that entrepreneurial dynamism is the key to innovation and growth a growing body of policy work emphasizes the important role of entrepreneurs in economic development world bank 2003 yet research on entrepreneurship in economics is rather limited there are three distinct perspectives on entrepreneurship in social sciences the first perspective focuses on the role of economic political and legal institutions in fostering or restricting entrepreneurship institutional problems are seen in credit constraints that make it impossible to borrow and set up businesses insecurity of property rights that provides insufficient incentives for entrepreneurs and regulatory burdens that make setting up new enterprises difficult the second perspective focuses on the sociological variables shaping entrepreneurship for example sociologists study the role of values and social networks in promoting or discouraging entrepreneurial activities social networks may work through a variety of channels such as family friends or ethnic groups the third perspective emphasizes individual characteristics of entrepreneurs psychologists have studied the traits associated with entrepreneurship such as a personal need for achievement belief in the effect of personal effort on outcomes attitudes towards risk and individual self confidence although there are studies on each perspective little work looks at each of these factors taking the other into account this is precisely what we do in this paper using a new data set of chinese entrepreneurs and a matching sample of non entrepreneurs with similar age gender and educational characteristics the survey covers both entrepreneurs and non entrepreneurs in order to understand how they differ in individual characteristics family background social networks values and beliefs and perceptions of the institutional environment the data further allow us to separate chinese entrepreneurs into two groups by necessity and by opportunity and to differentiate non entrepreneurs in three groups those who never thought to be entrepreneurs those who thought but never became entrepreneurs and those who became entrepreneurs but eventually failed this is a richer data set than a previous survey in russia

using model selection algorithms to obtain reliable coefficient estimates this review surveys a number of common model selection algorithms msas discusses how they relate to each other and identifies factors that explain their relative performances at the heart of msa performance is the trade off between type i and type ii errors some relevant variables will be mistakenly excluded and some irrelevant variables will be retained by chance a successful msa will find the optimal trade off between the two types of errors for a given data environment whether a given msa will be successful in a given environment depends on the relative costs of these two types of errors we use monte carlo experimentation to illustrate these issues we confirm that no msa does best in all circumstances even the worst msa in terms of overall performance the strategy of including all candidate variables sometimes performs best viz when all candidate variables are relevant we also show how 1 the ratio of relevant to total candidate variables and 2 data generating process noise affect relative msa performance finally we discuss a number of issues complicating the task of msas in producing reliable coefficient estimates

subprime borrowers securitization and the transmission of business cycles a growing literature i e jaffee lynch richardson and van nieuwerburgh 2009 acharya and schnabl 2009 argues that securitization improves financial stability if the securitized assets are held by capital market participants rather than financial intermediaries i construct a quantitative macroeconomic model with a novel specification for mortgage backed securities mbs to evaluate this claim my findings suggest that the existence of the securitization market stabilizes the economy under the condition that financial intermediaries do not engage in the acquisition of securitized assets in the presence of large negative housing preference shocks the drop in output in the first year after the shock is halved if subprime mbs are purchased by non financial agents rather than held by banks less

intertemporal consumption durables and liquidity constraints a cohort analysis we provide a theoretical framework to analyse the response of life time maximizing consumers to intertemporal prices of non durable goods and durable goods when the borrowing limit depends on the market value of the stock of durables owned by the consumer we use pseudo panel data on purchases of non durables and durable goods cars and demographic characteristics from the uk family expenditure survey as well as estimates of the durable stock constructed using the uk national travel survey to estimate the equations derived in the first part of the paper we evaluate the shadow prices of these restrictions which were significantly positive for younger consumers in the mid seventies and immediately prior to the 1982 financial liberalisation

the dynamics of chronic inflation in brazil 1968 1985 this article develops an error correction model with the aim of analyzing the behavior of prices during a period of chronic inflation in brazil the degree of inflationary inertia is estimated and tests for the importance of disequilibria in the domestic money foreign goods labor and domestic goods markets on inflation are carried out

the value of human and social capital investments for the business performance of startups we investigate the manifold posed question to what extent does investment in human and social capital besides the effect of talent enhance entrepreneurial performance we distinguish between three different performance measures survival profits and generated employment on the basis of the empirical analysis of a rich dutch longitudinal data set of firm founders we conclude that specific investments indeed affect the three performance measures substantially and significantly specific attention is paid to the unobserved talent bias moreover the effect of the emergence of so called knowledge industries is explored

the effect of liquidity constraints on consumption a cross sectional analysis this paper examines the effect of liquidity constraints on consumption expenditures using a single year cross section data set a reduced form equation for consumption is estimated on high saving households by the tobit procedure to account for the selectivity bias since high saving households are not likely to be liquidity constrained the estimated equation is an appropriate description of how desired consumption that would be forthcoming without liquidity constraints is related to the variables available in the cross section data when the reduced form equation is used to predict desired consumption the gap between desired consumption and measured consumption is most evident for young households

the reaction of consumer spending and debt to tax rebates evidence from consumer credit data we use a new panel data set of credit card accounts to analyze how consumers responded to the 2001 federal income tax rebates we estimate the monthly response of credit card payments spending and debt exploiting the unique randomized timing of the rebate disbursement we find that on average consumers initially saved some of the rebate by increasing their credit card payments and thereby paying down debt but soon afterward their spending increased counter to the permanent income model spending rose most for consumers who were initially most likely to be liquidity constrained whereas debt declined most so saving rose most for unconstrained consumers

capital market imperfections international credit markets and nonconvergence abstract we consider a two country growth model with international capital markets these markets fund capital investment in both countries and operate subject to a costly state verification csv problem investors in each country require some external finance but also provide internal finance which mitigates the csv problem when two identical except for their initial capital stocks economies are closed they necessarily convergemonotonicallyto the same steady state output level unrestricted international financial tradeprecludesotherwise identical economies from converging and poor countries are necessarily net lenders to rich countries oscillation in real activity and international capital flows can occur journal of economic literatureclassification numbers e00 f00 f34 g14

credit constraints and agricultural productivity evidence from rural rwanda while potentially negative impacts of credit constraints on economic development have long been discussed conceptually empirical evidence for africa remains limited we use a direct elicitation approach on a national sample of rwandan rural households to empirically assess the extent and nature of credit rationing in the semi formal sector and its impact using an endogenous switching model elimination of all constraints could increase output by some 17 per cent implications for policy and research are spelled out

money and inflation in the euro area a case for monetary indicators abstract this paper examines inflation indicators for the euro area by studying the relationship between inflation output money and interest rates using data spanning 1980 2001 the central finding is that both the output gap and the real money gap the difference between the real money stock and the long run equilibrium real money stock contain considerable information regarding future inflation in contrast the eurosystem s money growth indicator the difference between nominal money growth and a reference value the prominent first pillar in its monetary strategy contains little information about future inflation and no information beyond that contained in the output and real money gaps the predictive performance of the output gap has improved compared to that in a previous version of this paper most likely because of better estimation methods

exchange rate mean reversion from real shocks within an intertemporal equilibrium model abstract the post bretton woods era has been characterized by real exchange rates that exhibit mean reversion with mixed evidence as to whether this reversion is partial ppp never holds or essentially complete this paper generates these stylized facts theoretically by synthesizing a simple intertemporal open economy model with the elasticities approach to the current account a central feature of the model is the existence of non traded goods the model can generate partial or approximately complete mean reversion for the real exchange rate depending on parameter values if innovations in output are made up of permanent and temporary components in addition temporary output shocks generate a type of hysteresis wherein the short run path for the exchange rate permanently alters its long run equilibrium value

access to credit by firms in sub saharan africa how relevant is gender the literature on the determinants of firms financing constraints has paid little attention to gender as a determinant of access to finance using data for 34 342 firms from 90 developing countries the paper analyzes the determinants of firms financing constraints and assesses whether female owned firms are more financially constrained than male owned businesses the results show that female owned firms in sub saharan africa are more likely to be financially constrained than male owned firms but there is no gender gap in other developing regions the gender gap in sub saharan africa is robust to variations in specifications and econometric estimation procedures

homeownership in the 1980s and 1990s aggregate trends and racial gaps abstract housing policy under the clinton and bush administrations has sought to boost homeownership while also narrowing racial gaps in owner occupancy rates against that backdrop homeownership rose sharply in the 1990s but white minority gaps remain in excess of 25 percentage points we analyze these patterns using data from the 1983 to 2001 survey of consumer finances results indicate that household characteristics explain most of the increase in homeownership and roughly two thirds of the white minority homeownership gap credit barriers account for no more than 5 percentage points of the remaining gap this suggests that policy makers will need to look beyond innovations in mortgage finance if their goal is to further expand homeownership

the dynamics of micro and small enterprises in developing countries abstract the number of people engaged in micro and small enterprises increases as a result of new enterprises being started and through an expansion of existing activities as a partial offset to these increases employment declines when existing businesses cease operations this article draws on recent survey work to examine the magnitude and determinants of enterprise births closures and expansions it explores the ways in which these different sources of change are influenced by the state of the macroeconomy and examines policy and project implications

consumption volatility liquidity constraints and household welfare we evaluate the impact of increased income uncertainty and financial liberalisation in the us on consumption volatility and household welfare we estimate euler equations and measure the volatility of unpredictable changes in consumption as the squared residuals we directly control for liquidity constraints using survey of consumer finances data on access to credit and document that despite the increase in household debt between 1983 and 2007 there was no decline in the proportion of liquidity constrained households consumption volatility increased significantly over this period especially for liquidity constrained households indicating substantial welfare losses

does inflation kill exposure to food inflation and child mortality abstract unlike extreme malnutrition shocks such as famine and drought which grab the attention of the media international aid organizations and policymakers malnutrition due to food price hikes are often neglected and their impacts on children are not well known it is well established that malnutrition during the critical periods of early life between conception and the first 1000 days after birth has lasting consequences on health and mortality in this paper using a uniquely constructed data from ethiopia that takes advantage of high frequency local retail food prices we examine the impact of early life exposure to food price inflation on child mortality following survival events since conception we estimate the causal impact of exposure to inflation during in utero and infancy the results show that exposure to a 10 percent inflation in staple food prices during in utero decreases the survival of children under the age of five by about 5 4 percent we also find that the impacts are non linear depending on the specific month of exposure and substantially vary by observable characteristics and the type of staple food

the sensitivity of consumption to transitory income estimates from panel data on households we investigate the stochastic relation between income and consumption specifically consumption of food within a panel of about 2 000 households our major findings are 1 consumption responds much more strongly to permanent than to transitory movements of income 2 the response to transitory income is nonetheless clearly positive 3 a simple test independent of our model of consumption rejects a central implication of the pure life cycle permanent income hypothesis the observed covariation of income and consumption is compatible with pure life cycle permanent income behavior on the part of80 percent of families and simple proportionality of consumption and income among the remaining 20 percent as a general matter our findings support the view that families respond differently to different sources of income variations in particular temporary income tax policies have smaller effects on consumption than do other more permanent changes in income of the same magnitude this abstract was borrowed from another version of this item

a simple solution to the distance puzzle in international trade abstract i propose a simple solution to the distance puzzle in international trade contrary to existing estimates of persistent or increasing distance effects on trade i offer robust evidence that the impact of distance on trade has fallen steadily over time

further evidence of excess sensitivity of consumption nonseparability among goods and heterogeneity across households the standard theoretical framework for analysing households intertemporal decisions is the life cycle permanent income model among its implications testing the model allows to analyse the response of consumption to fiscal policy however the empirical literature with microdata has yielded mixed results this article examines the sensitivity of the results to the assumption of separability among goods and of homogeneity across households for that purpose we test a rational expectations permanent income model with household data drawn from the spanish family expenditure survey this survey contains detailed information on total expenditure and the income presents large exogenous quarterly changes due to an institutional feature the article shows that assuming separability among commodities biases the test against the model when separability is not imposed we show that the rejection of the model depends on heterogeneity across households in terms of their members being unemployed or not for those

fiscal policy with heterogeneous agents and incomplete markets i undertake a quantitative investigation into the short run effects of changes in the timing of proportional income taxes for model economies in which heterogeneous households face a borrowing constraint temporary tax changes are found to have large real effects in the benchmark model a temporary tax cut increases aggregate consumption on impact by around 29 cents for every dollar of tax revenue lost comparing the benchmark incomplete markets model to a complete markets economy income tax cuts provide a larger boost to consumption and a smaller investment stimulus when asset markets are incomplete copyright 2005 wiley blackwell

access to finance in sub saharan africa is there a gender gap we show the existence of an unconditional gender gap in sub saharan africa however when key observable characteristics of the enterprises or individuals are taken into account the gender gap disappears in the case of enterprises we explain our finding with differences in key characteristics and a potential selection bias in the case of individuals the lower use of formal financial services by women can be explained by gender gaps in other dimensions related to the use of financial services such as their lower level of income and education and by their household and employment status

modeling spatial price transmission in the grain markets of ethiopia with an application of ardl approach to white teff following the agricultural market liberalization policy there is an emerging grain market structure in ethiopia in which the central wholesale market exhibits concentration of power and spatial integration with the local markets due to this it is hypothesized that the central wholesale market influences the long run price movements in the local markets the relationship can be modeled as spatial price equilibrium with the aim to guide subsequent policy decisions with regard to public intervention in the post liberalization period in this study we modeled the spatial equilibrium relationship between the producer and the wholesale prices of white teff a major staple in ethiopia using the autoregressive distributed lag modeling approach to cointegration analysis first the existence of a nonspurious long run relationship in levels between the producer prices in the local market and the wholesale prices in the central market is confirmed second the long run relationship and the error correction model for the producer price are estimated the results reveal that the wholesale price of white teff in the central consumer market is a major short and long run determinant of the producer price in the local supply markets therefore the institutional role of the government with the aim of improving producers marketing margin and the overall performance of the grain markets in the post liberalization period can be influenced through targeted interventions at the central wholesale market

heterogeneous beliefs and housing market boom bust cycles abstract this paper presents a business cycle model capturing the stylized features of housing market boom bust cycles in developed countries the model implies that over optimism of mortgage borrowers generates housing market boom bust cycles if mortgage borrowers are credit constrained and savers do not share their optimism this result holds without price stickiness if price stickiness is introduced into the model then the model replicates a low policy interest rate during a housing boom as an endogenous reaction to a low inflation rate given a taylor rule thus monetary easing observed during housing booms are consistent with the presence of over optimism causing boom bust cycles

the latent demand for bank debt characterizing discouraged borrowers concerns that small firms encounter credit constraints are well entrenched in the literature despite widespread empirical evidence that a relatively small proportion of small firms have their loan applications rejected however many firms may be discouraged from applying for fear of rejection these businesses are the focus of this paper based on responses to a large scale postal survey of uk small and medium sized enterprises smes we find that twice as many businesses were discouraged from applying for a bank loan than had their loan request denied more particularly we observe a number of distinguishing characteristics of discouraged borrowers relative to applicants these include strategy sector prior entrepreneurial experience and banking relationships the implications of our findings for policy and future research are briefly discussed

poverty transition and persistence in ethiopia 1994 2004 summary this study analyzes the persistence of poverty in both rural and urban areas in ethiopia during 1994 2004 the key finding is that households move frequently in and out of poverty but the difficulty of exiting from poverty like the chance of avoiding slipping back increases with the time spent in that state and varies considerably between male and female headed households our results imply that it is important to design anti poverty policies both to hinder households from slipping into extreme poverty and to minimize the length of the poverty spell for households once they have fallen into it

the response of household consumption to income tax refunds a central implication of the life cycle or permanent income theory is that consumption should not respond to predictable fluctuations in income tests of this implication have yielded mixed results especially on micro data angus deaton 1992 martin browning and annamaria lusardi 1996 in large part this might be due to the difficulties of isolating the predictable component of income at the micro level most tests proceed by instrumenting for income but since the available instruments are typically poor such tests might be prejudiced against finding significant excess sensitivity of consumption to income john shea 1995 also it is not clear how closely the resulting econometric predictions of income coincide with agents actual expectations of income to avoid these difficulties this paper examines the response of household consumption to a particular type of income that is both predictable and transitory income tax refunds since a refund depends on events in the previous calendar year it is predictable income as regards consumption in the year of its receipt consequently under the life cycle theory consumption should not increase on receipt of a refund 2 in addition to testing the canonical model of consumption this paper provides estimates interpretable as the marginal propensity to consume mpc out of refunds since federal tax refunds now amount to over 80 billion per year averaging well over 1 000 per refund these estimates are of interest in themselves more generally they bear on the impact of even preannounced and temporary changes in fiscal policy the paper begins by surveying related studies in section i section ii describes the data the consumer expenditure survey cex which of the leading u s micro data sets has the most comprehensive coverage of expenditure the empirical specification is set out in section hi section iv reports the results and section v concludes

the impact of mortgage interest rate subsidies on household borrowing abstract the responsiveness of household borrowing to changes in the interest rate is a crucial parameter for assessing public policies aimed at promoting saving we estimate the effect on household borrowing of a reform of a program that subsidized interest rates on mortgages signed by medium and low income households the reform established a ceiling in the price of the house that could be financed with the program first we use triple difference estimators exploiting the fact that the reform should affect most the borrowing behavior of eligible individuals living in high price areas and estimate that the elasticity of the probability getting a loan to the interest rate lies between 2 8 and 1 3 second we document that after the reform the distribution of loan sizes became more concentrated at the discontinuity point of the budget constraint of eligible individuals both findings are consistent with a negative response of household borrowing to increases in interest rates

household level consumption in urban ethiopia the effects of a large food price shock summary we use survey data to investigate how urban households in ethiopia coped with the food price shock in 2008 qualitative data indicate that the high food price inflation was by far the most adverse economic shock between 2004 and 2008 and that a significant proportion of households had to adjust food consumption in response regression results indicate that households with low asset levels and casual workers were particularly adversely affected by high food prices we interpret the results as pointing to the importance of growth in the formal sector so as to generate more well paid and stable jobs

access to credit by small businesses how relevant are race ethnicity and gender this paper employs data from the 1998 and 2003 survey of small business finances to analyze whether after controlling for observable factors that influence loan decisions there is a significant difference in the loan approval rate and the interest rate charged on approved loans for businesses owned by minority or white females and firms owned by white males

microenterprise lending to female entrepreneurs sacrificing economic growth for poverty alleviation abstract this research compares the performance of female and male entrepreneurs in a microenterprise credit program in guatemala previous research and field practice has suggested that targeting credit at female borrowers allows for greater increases in household welfare but that male entrepreneurs may more aggressively expand enterprises when given access to credit in this paper we develop a model that shows that increases in value of home time during childbearing years for women may substantially account for gender differences in responses to credit access empirical results from guatemalan survey data yield estimations consistent with the predictions from our model

the myth of female credit discrimination in african manufacturing abstractwe examine credit constraint differentials between male and female manufacturing entrepreneurs using firm data from 16 sub saharan africa countries small enterprises owned by female entrepreneurs are less likely to be credit constrained compared to their male counterparts while this is reversed for medium sized enterprises a generalised oaxaca blinder decomposition shows that the gap is predominantly a pure gender effect we argue that this finding is mainly due to female favouritism in loans to micro and small firms because the gap is reversed for medium sized enterprises and because we find no sign of superior female entrepreneurial performance in observable indicators

barking up the wrong tree measuring gender gaps in firm s access to finance abstractthe literature on gender based discrimination in credit markets is recently expanding but the results are not yet definitive and have not been generally agreed upon this paper exploits a new dataset on barbados jamaica and trinidad and tobago which provides detailed information about female ownership and management in firms for investigating the existence of a gender gap in access to finance the evidence presented herein suggests that more precise measures of the gender composition of the firm show that women led businesses are more likely to be financially constrained than other comparable firms

inflation dynamics and food prices in ethiopia during the global food crisis ethiopia experienced an unprecedented increase in inflation among the highest in africa using monthly data over the past decade we estimate models of inflation to identify the importance of the factors contributing to cpi inflation and three of its major components cereal prices food prices and non food prices our main finding is that movements in international food and goods prices measured in domestic currency determined the long run evolution of domestic prices in the short run agricultural supply shocks affected food inflation causing large deviations from long run price trends monetary policy seems to have accommodated price shocks but money supply growth affected short run non food price inflation our results suggest that when analyzing inflation in developing economies with a large food share in consumer prices world food prices and domestic agricultural production should be considered omitting these factors can lead to biased results and misguided policy decisions

racial and gender discrimination in the micro firms credit market evidence from trinidad and tobago this paper examines the market for loans from banks to micro and small enterprises in trinidad and tobago it tests for the presence of racial and gender discrimination it takes the reported refusal to grant loans to groups when all other indicators of credit worthiness are taken into account as evidence of discrimination the paper distinguishes between application and denial rates it finds that once all other indicators of credit worthiness are taken into account neither application nor denial rates differ significantly by gender reported denial rates are however higher for africans compared with other ethnic groups implying the possible presence of discrimination

the distance effect in banking and trade abstract the empirical gravity literature finds geographical distance to be a large and growing obstacle to trade contradicting the popular notion that globalization heralds the end of geography this distance puzzle disappears however when measuring the effect of cross border distance relative to that of domestic distance yotov 2012 we uncover the same result for banking when comparing cross border positions with domestic credit using the most extensive dataset on global bank linkages between countries the role of distance remains substantial for trade as well as for banking where transport cost is immaterial pointing to the role of information frictions as a common driver a second contribution is to show that the forces of globalization are also evident in other less prominent parts of the gravity framework

death of distance and the distance puzzle abstract despite the onset of globalization year by year cross country regressions of the gravity model usually suggest that the impediment of geographical distance on bilateral trade is rising and not declining over time this effect of distance is dubbed the distance puzzle in this paper we argue that prima facie evidence of the distance effect from the year by year regressions may not be a good indicator of the true impact of distance on trade

the behavior of commodity prices in ethiopia in an attempt to identify price stabilization strategies and rationalize public intervention in buffering markets this article investigates the intertemporal dynamics of commodity prices in ethiopia a classical rational expectation model is modified to account for seasonal correlation of shocks model predictions are reduced to computable periodic threshold autoregression several nonlinearity tests are applied to detect threshold effects a regime switching normalized maximum likelihood method is formulated to estimate thresholds and threshold autoregression parameters using monthly data from ethiopia for the period 1996 2006 the result indicates the presence of periodic price thresholds that could be formed as a result of speculative storage comparison of price movements below and above thresholds indicates that prices are more correlated below the thresholds than above them however the effect on error variance is not very strong temporal arbitrage which is the gross return from speculative storage appears to be modest the long and short term implications of the findings are discussed within the context of ongoing policy debates

on the death of distance and borders evidence from the nineteenth century abstract we investigate time dependent border and distance effects in the nineteenth century and document clear declines in these variables over time this suggests that trade costs may have not declined as dramatically in the late twentieth century as has been supposed

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

market news in commodity price theory application to the ethiopian grain market this paper examines the effect of news or advance information about future production on competitive storage behaviour and prices using a structural model of commodity markets in particular it generalizes the neoclassical storage model to incorporate information on future harvests while allowing for seasonal production two features important to african and other developing country grain markets the model is first developed to suit the case of the ethiopian grain markets and a general model is then stated the effects on welfare and price variability of the addition of news are discussed as well as changes in key demand and uncertainty parameters the model is shown to replicate some features of the data better than the model without news particularly the high autocorrelation in price and performs better in formal estimation however it appears that the incorporation of news still fails to explain the extreme seasonal price movements observed copyright 2004 wiley blackwell