do r d tax credits work evidence from a panel of countries 1979 1997 this paper examines the impact of fiscal incentives on the level of r d investment an econometric model of r d investment is estimated using a new panel of data on tax changes and r d spending in nine oecd countries over a 19 year period 1979 1997 we find evidence that tax incentives are effective in increasing r d intensity this is true even after allowing for permanent country specific characteristics world macro shocks and other policy influences we estimate that a 10 fall in the cost of r d stimulates just over a 1 rise in the level of r d in the short run and just under a 10 rise in r d in the long run

the impact of distressed economies on the eu sovereign market financially distressed economies inside the european union eu are being blamed for producing a general increase in borrowing costs this article analyzes the channels of default risk transmission within the eu countries using the information content in the sovereign credit default swap cds market we proceed in two directions first we test the existence of cross border volatility effects between the central and the peripheral eu countries second we explore the effect of distressed economies on the default and risk premium constituents of sovereign default swaps we show a significant volatility spillover from distressed to central european economic and monetary union emu economies this causality pattern leads to a significant impact on the default swap risk premia on average the risk premium accounts for approximately 42 of central emu spreads and 56 of the spreads for those countries outside of the emu the peripheral risk also affects the default component of central economies although its impact is lower

how effective are fiscal incentives for r d a review of the evidence this paper surveys the econometric evidence on the effectiveness of fiscal incentives for r d we describe the effects of tax systems in oecd countries on the user cost of r d the current position changes over time and across different firms in different countries we describe and criticize the methodologies used to evaluate the effect of the tax system on

crisis transmission evidence from the debt tequila and asian flu crises the increasing globalization of the economy has put the issue of the international transmission of crises in the front line although the word contagion is a rather new concept in international finance it is the focus of a large number of policy oriented seminars and debates the clustering of crises by both region and time are at the heart of this discussion there are several important questions that need to be answered in this chapter we focus on a subset of them i what are the propagation channels of international crises across countries other than common shocks ii was the debt crisis contagious and iii are there useful policy instruments to shield countries from contagion in particular do capital controls exchange rate flexibility and the external debt maturity structure affect contagion we seek to answer these questions using evidence from three key events the 1982 debt crisis the 1994 mexican devaluation and the 1997 asian crisis

how responsive is business capital formation to its user cost an exploration with micro data abstract the response of business capital formation to its user cost is critical to evaluating tax reform deficit reduction and monetary policy evidence for a substantial user cost elasticity however is sparse most evidence has been based on aggregate data although several recent studies with firm level data report substantial effects with a particularly rich micro dataset containing over 26 000 observations this paper explores what can be learned about the user cost elasticity while the results depend to some extent on the specification and econometric technique various diagnostics lead us to prefer a precisely estimated but small elasticity of approximately 0 25 this paper is dedicated to the memory of robert eisner who labored early and ably on uncovering the determinants of investment spending and highlighting the importance of the question found in the title of this paper

effect of r d tax credits for smes in japan a microeconometric analysis focused on liquidity constraints this article estimates the effect of research and development r d tax credits for small and medium sized enterprises smes by utilizing the propensity score matching method to correct any possible selection bias this study also examines whether the impact of tax credits differs with firms characteristics such as their industry size and liquidity constraints empirical results show that r d tax credits induce an increase in smes r d expenditures moreover we find that the effect of r d tax credits on liquidity constrained firms is much greater than on unconstrained firms

have the gipsi settled down breaks and multivariate stochastic volatility models for and not against the european financial integration we investigate the integration of the european peripheral financial markets with germany france and the uk using a combination of tests for structural breaks and return correlations derived from several multivariate stochastic volatility models our findings suggest that financial integration intensified in anticipation of the euro further strengthened by the emu inception and amplified in response to the 2007 2008 financial crisis hence no evidence is found of decoupling of the equity markets in more troubled european countries from the core interestingly the uk despite staying outside the emu is not worse integrated with the gipsi than germany or france 2013 elsevier b v

modeling financial contagion using mutually exciting jump processes we propose a model to capture the dynamics of asset returns with periods of crises that are characterized by contagion in the model a jump in one region of the world increases the intensity of jumps both in the same region self excitation as well as in other regions cross excitation generating episodes of highly clustered jumps across world markets that mimic the observed features of the data we develop and implement moment based estimation and testing procedures for this model the estimates provide evidence of self excitation both in the us and the other world markets and of asymmetric cross excitation with the us market typically having more influence on the jump intensity of other markets than the reverse we propose filtered values of the jump intensities as a measure of market stress and examine their out of sample forecasting abilities

transmission of government default risk in the eurozone abstract this paper analyzes the reasons behind the rising ten year government bond spreads in the eurozone during the recent euro debt crisis we develop a structural vector autoregressive model that allows us to test whether the upsurges in the spreads reflect breaks in the instantaneous shock propagation mechanisms between the spreads contagion changing dynamical effects or changing country specific risk factors especially a new approach to test the stability of the instantaneous shock propagation mechanisms is introduced our results show that although contagion appears as the single most important reason for the increasing spreads there are notable differences between the countries for example and ireland spain and italy see statistically significant increases in their country specific risk factors

effectiveness of r d tax incentives in small and large enterprises in quebec in this paper we evaluate the effectiveness of r d tax incentives in quebec using manufacturing firm data from 1997 to 2003 originating from r d surveys annual surveys of manufactures and administrative data the estimated price elasticity of r d is 0 10 in the short run and 0 14 in the long run with slightly higher elasticities for small firms than for large firms we show that there is a deadweight loss associated with level based r d tax incentives that is particularly acute for large firms for small firms it is not sizeable enough to suppress the r d additionality at least not for quite a number of years after the initial tax change incremental r d tax credits do not suffer from this deadweight loss and are from that perspective preferable to level based tax incentives

on the measurement of the international propagation of shocks is the transmission stable abstract the empirical literature on contagion focuses mainly on two questions 1 what are the channels through which shocks are transmitted across countries trade macro similarities financial weaknesses or investor behavior 2 is there a shift in the transmission of shocks during crises are crises spread with higher intensity if so why this paper concentrates on the econometric problems that arise in dealing with the second question the data where most of these issues are raised are plagued with problems of simultaneous equations omitted variables and heteroskedasticity the standard methodologies used in the literature are inappropriate if all three are present this paper applies a new procedure that allows one to test for parameter stability taking into account all three predicaments the paper tests for the stability of the transmission mechanisms among 36 stock markets during the last three major international financial crises mexico 1994 asia 1997 and russia 1998

price and prospects for oil carrying the burden of excess capacity in the 1980s and beyond abstract the continuing decline in world oil prices will not be halted in the short term and prospects for the long run are not encouraging there is a problem of unprecedented gravity in the surplus capacity of the oil industry a glut of 10 million bbl day of crude oil remains unsold the cohesion of the opec cartel is becoming more strained and a sizeable proportion of refinery plant has been taken off stream the basic difficulty is that high interest rates have curbed international capital formation and depressed demand upward pressures on the us dollar have been created by the deficit on us domestic and external accounts and have retarded the recovery of the global economy today the cost of money exceeds the factor price of oil and the market is highly unstable the devastating costs of carrying surplus capacity are likely to survive through the 1980s

outlook for the international oil market and options for opec abstract a fundamental misinterpretation of post 1970 events in the international oil market has severely curbed oil demand and led to conditions in which much of the world s lowest cost reserves of energy are in danger of remaining unexploited there is instead an increasing use of inherently higher cost sources of energy so undermining world economic growth prospects a return to the preferential use of low cost oil and gas without further exacerbating already strained north south relationships can now only be achieved in the context of a difficult to negotiate opec oecd agreement on a long term development strategy

effectiveness and efficiency of sme innovation policy this paper assesses uk innovation policy impact on a large population weighted sample of both service and manufacturing smes by focussing on self reported innovation the study achieves a wider coverage of the effects of sme innovation policy than possible with more traditional indicators propensity score matching indicates that smes receiving uk state support for innovation were more likely to innovate than unsupported comparable enterprises innovating enterprises are shown to have grown significantly faster over the years 2002 2004 when other growth influences are appropriately controlled combining these two results and comparing the outlays on sme innovation policy with the estimated effects suggests that policy was efficient as well as effective there is evidence that sme tax credits were expensive compared with earlier support instruments but the overall high returns estimated suggest that even in times of public spending cuts persisting with sme innovation policy would be prudent

the effectiveness of tax incentives for r d i in developing countries the case of argentina abstract there is increasing interest in developing countries in granting tax incentives in order to encourage private investment in research development and innovation r d i however evidence on the effectiveness of such schemes in achieving policy goals in weak innovation systems contexts is still very scarce this paper aims at narrowing this knowledge gap by focusing on the effects of a tax credit scheme for promoting firm level innovation investment in argentina the analysis applies dynamic panel data techniques to a novel dataset merging several waves of the national innovation survey collected by the national institute of statistics and censuses the results suggest that the elasticity of r d i investment to its user cost of capital is a greater than 1 in absolute terms which implies that the intervention has been effective in increasing firms innovation efforts however effects vary depending on the type of innovation investment being subsidized industrial sector and size of the firm moreover when innovation investment is divided into innovation related capital goods expenditures and only r d the results suggest that the absolute value of the elasticity for the r d component of the innovation investment is less than 1 these heterogeneous effects should be exploited for further policy design

stock market cycles financial liberalization and volatility in this paper we analyze the cycles of the stock markets in four latin american and two asian countries and we compare their characteristics we divide our sample in two subperiods in order to account for differences induced by the financial liberalization processes of the early 1990s we find that cycles in emerging countries tend to have shorter duration and larger amplitude and volatility than in developed countries however after financial liberalization latin american stock markets have behaved more similarly to stock markets in developed countries whereas asian countries have become more dissimilar concordance of cycles across markets has increased significantly over time especially for latin american countries after liberalization

agriculture in an export boom economy a comparative analysis of policy and performance in indonesia mexico and nigeria abstract the 1970s oil boom was accompanied for most developing country exporters by stagnating agricultural production high rural emigration and high levels of food imports this paper evaluates the experiences of indonesia mexico and nigeria dutch disease and other macroeconomic phenomena had important effects on agricultural performance but equally if not more important were microeconomic factors including agricultural price policies changing patterns of food demand based on distribution of petroleum income and public investment structural characteristics of the agricultural sector factor intensity of different subsectors labor availability and migration patterns and geographical concentration of agricultural activity and strategies of agricultural development and investment

evaluation of contagion or interdependence in the financial crises of asia and latin america considering the macroeconomic fundamentals this article investigates the existence of contagion between countries on the basis of an analysis of returns for stock indices over the period 1994 to 2003 the econometrics methodology used is that of multivariate generalized autoregressive conditional heteroscedasticity garch family volatility models particularly the dynamic conditional correlation dcc models in the form proposed by engle and sheppard 2001 the returns were duly corrected for a series of country specific fundamentals the relevance of this procedure is highlighted in the literature by the work of pesaran and pick 2003 the results obtained in this article provide evidence favourable for the hypothesis of regional contagion in both latin america and asia as a rule contagion spread from the asian crisis to latin america but not in the opposite direction

contagion and trade why are currency crises regional abstract currency crises tend to be regional they affect countries in geographic proximity this suggests that patterns of international trade are important in understanding how currency crises spread above and beyond any macroeconomic phenomena we provide empirical support for this hypothesis using data for five different currency crises in 1971 1973 1992 1994 and 1997 we show that currency crises affect clusters of countries tied together by international trade by way of contrast macroeconomic and financial influences are not closely associated with the cross country incidence of speculative attacks

do the effects of r d tax credits vary across industries a meta regression analysis this paper presents a survey of the micro econometric literature on the effects of r d tax credits on firms innovation activities we focus on one specific aspect that has not received sufficient attention in previous research the sectoral dimension our meta regression analysis mra sets up a new database collecting a large number of firm level studies on the effects of r d tax credits and investigates the factors that may explain differences in the estimated effects that are reported in the literature the main result of the mra analysis is indeed that sectors matter specifically the additionality effect of r d tax credits is on average stronger for smes firms in the service sectors and firms in low tech sectors in countries with an incremental scheme the paper proposes a simple framework to investigate why the innovation and economic effects of r d tax credits vary across sectors and points out new directions and hypotheses for future research

rational and self fulfilling balance of payments crises speculative attacks on a pegged exchange rate must sometimes occur ifasset price paths are to be free of abnormal profit opportunities suchattacks are fully rational as they reflect the market s response to aregime breakdown that is inevitable the authors shows that under someexpectations about policy balance of payments crises can also be purely self fulfilling events in such cases even a permanently viableregime may collapse and the economy will possess multiple equilibriacorresponding to different subjective assessments of the probability ofa crisis the behavior of the domestic interest rate will naturally reflect the possibility of a speculative attack copyright 1986 by american economic association

assessment of the public tools used to promote r d investment in spanish smes in this paper we identify the potential determinants of firm r d to understand the effectiveness of public policies our results suggest a considerably low impact of tax credits and public grants on the r d investment of the spanish manufacturing firms tax credits are mainly considered by large firms that use them as a reduction in the tax burden in the corporate tax while smes use public grants to alleviate financial constraints this evidence leads to discuss alternatives to the current design of the public policies analyzed

financial contagion on the international trade network we combine data on international trade linkages with a network approach to map the global trading system as an interdependent complex network this enables us to obtain indicators of how well connected a country is into the global trading system we use these network based measures of connectedness to explain stock market returns during recent episodes of financial crisis we find that a crisis is amplified if the epicenter country is better integrated into the trade network however target countries affected by such a shock are in turn better able to dissipate the impact if they are well integrated into the network a network approach can help explain why the mexican asian and russian financial crises were highly contagious while the crises that originated in venezuela and argentina did not have such a virulent effect we suggest that a network approach incorporating the cascading and diffusion of interdependent ripples when a shock hits a specific part of the global trade network provides us with an improved explanation of financial contagion jel f10 f36 f40 g15

public support for innovation and the openness of firms innovation activities this study explores empirically the relationship between publicly funded schemes to support innovation and the openness of firms innovation practices using survey data from more than 5000 firms in 29 european countries we find that support policies for innovation both monetary and non monetary are related to an increase in the degree of openness of individual firms both in terms of the number of external partners with whom they collaborate and the number of open innovation activities they perform however the relationship between support and openness seems to be negatively moderated by the existence of previous innovative activity within the firm public support has more impact on less innovative firms and less influence when the firm is already innovative which could potentially indicate the existence of crowding out effects additionally our results suggest that non financial support is more strongly linked to openness than financial support for policy makers facing salient budgetary constraints this implies that institutions and government policies could potentially play a more important role than money in fostering open innovation this article contributes to the open innovation literature by tapping into the underexplored question of the role of public policies and has crucial implications for academics and policy makers

adjustment and energy dangers of a demand side obsession abstract short term energy adjustment based on the now dominant imf model is in strong conflict with that required for longer term development and growth the world economic recovery is threatened by structural cyclical and other factors including the debt problem of developing countries commodity price surges and potential energy problems short term adjustment impacts on longer term policy and investment in the energy sector assuring that economic recovery will demand rapid increases in oil imports for oil importer developing countries national policies in industrial countries to squeeze energy have been very successful but have likely deepened the recession and intensified some cyclic aspects of investment and development oil supply is still strongly influenced by opec and only through heightened appreciation of recession recovery cycles will the tremendous importance of the potential resources of oil importer developing countries be recognized a first step towards the inevitably multilateral framework needed for their development

r d tax incentives in eu countries does the impact vary with firm size this paper studies the effect of r d tax incentives on the research activity of manufacturing firms based in france italy spain and the uk over the period 2007 2009 using a matching procedure we show that in all the examined countries but spain r d tax incentives induced a statistically significant increase in the intensity of r d expenses over sales however this effect is driven only by the behaviour of small firms by assessing the benefit cost ratio of r d tax policies we find evidence of substantial additional effects in italy and the uk

tax incentives and r d activity firm level evidence from taiwan this paper investigates the effect of tax incentives on r d activities in taiwanese manufacturing firms specifically we assess the potential r d enhancing effect on recipients of r d tax credits compared with their non recipient counterparts moreover the potential difference in the r d enhancing effect between high tech and non high tech firms is also examined utilizing a firm level panel dataset during 2001 and 2005 empirical results obtained by propensity score matching show that recipients of r d tax credits appear on average to have 93 53 higher r d expenditures and a 14 47 higher growth rate for r d expenditures than non recipients with similar characteristics the r d enhancing effect of r d tax credits is not found to be particularly relevant to high tech or non high tech firms we further employ a generalized method of moment gmm of the panel fixed model to control for the endogeneity of r d tax credits and firm heterogeneity in determining r d expenditure various estimates based on the entire sample and high tech firms are quite similar and there is a significantly r d enhancing effect of r d tax credits this result suggests that the r d preferential policy has induced more r d expenditure by firms in taiwan while the existence of the r d enhancing effect brought on by tax incentives is intuitive the estimates can provide insightful implications for the r d tax policy

coping with terms of trade shocks pegs versus floats the choice of the exchange rate regime has always been an area of great controversy and debate the discussion has once again taken center stage in the developing world the sequence of currency crises in the 1990 s the success of cultency board arrangements the dollarization plan of ecuador and the apparent swing toward flexible regimes of many emerging economies has revived interest in this debate milton friedman 1953 argued that one of the most important advantages of flexible regimes over fixed regimes is that they can smooth adjustment to real shocks even in the presence of nominal rigidities ever since this has been one of the least disputed benefits attributed to fully flexible exchange rate regimes subsequent to friedman many theories of the international transmission of real shocks have confirmed the original intuition that the shortrun responses to terms of trade shocks should be different across exchange rate regimes here i look at a post bretton woods sample of 74 developing countries to test whether flexible regimes can buffer terms of trade shocks better than fixed regimes