the macroeconomics of fiscal consolidations in euro area countries we simulate a currency union dynamic general equilibrium model to assess the macroeconomic implications of permanently reducing the public debt to gross domestic product gdp ratio in euro area countries we obtain the following results first tax distortions are quantitatively significant second the best fiscal consolidation strategy is to permanently reduce both expenditures and tax rates third under such a consolidation strategy the transition is generally not costly as the gdp and investment would grow while private consumption would not fall finally spillovers to the rest of the euro area are generally expansionary

bank spread with uncertain deposit level and risk aversion abstract this paper derives a model of the banking firm under uncertainty and risk aversion the selection of the bank s optimal spread between loan and deposit rates is emphasized the model s results provide some implications for bank asset quality capital regulation and deposit insurance for example it is shown that increases in the level of equity capital tend to increase the bank s spread under dara this implies an improvement in bank asset quality on the other hand as the deposit supply function becomes more volatile the bank s spread narrows which implies a decline in the quality of the bank s assets

retail bank deposits as quasi fixed factors of production neoclassical models of the banking firm for example michael klein 1971 treat all deposit liabilities as fully variable factors of production banks then maximize profits minimize liability costs by equating the marginal costs of all liability types during each period the empirical relevance of these models is difficult to establish because binding deposit rate ceilings regulation q force bank competition for many retail deposits into implicit interest channels that are not readily measured it is therefore noteworthy that during two recent periods when deposit rate ceilings were not binding banks paid retail deposit rates considerably in excess of the rate at which they could borrow via large unregulated certificates of deposit such behavior seems inconsistent with the cost minimization prescribed by neoclassical bank models however if retail deposit accounts are interpreted as quasi fixed gary becker 1962 walter oi 1962 donald parsons 1972 sherwin rosen 1968 inputs to the banking firm these important historical observations can be reconciled with bank profit maximization this paper first describes two historical episodes during which the bank retail deposit rate exceeded the negotiable certificate of deposit rate for substantial periods of time while no profit maximizing cost minimizing bank would pay such a rate differential if retail deposit quantities are costlessly variable interpreting retail deposit accounts as quasi fixed inputs to the bank explains the peculiar rate structures a simple two period model of bank liability selection formalizes the analysis i two puzzling historical episodes

the determination of foreign banking location abstract in this paper we examine the determinants of foreign bank location we initially present some time series data on the postwar expansion of international banking we show that foreign branching increased very rapidly from about 1960 to the mid 1980s and slowed significantly after 1985 one interpretation of this growth in foreign branching is that it largely paralleled the increase in trade and foreign direct investment although it may also have been encouraged by the improvements in communications and the rapid financial innovation of the 1960s and 1970s to assess the role of trade and foreign direct investment on bank expansion we employ a cross sectional analysis of the pattern of foreign bank offices whereas previous studies have focused on a single parent or host country our study extends the existing literature by analyzing the location of nearly 2000 overseas offices across 37 patent and 82 host countries our results suggest a significant relationship between the pattern of bank location trade and foreign direct investment we define a banking centre as one in which there are more foreign banks than can be explained in terms of real business activity and we show that the usa uk switzerland singapore and indonesia most clearly qualify as banking centres we also provide some evidence for a sample of host countries that the abnormal number of bank offices is related to capital market activities

a test of the law of one price in retail banking this paper investigates the level and the determinants of retail banking interest rate differences among spanish banks in the period 1989 2003 we find that the interest rates of twenty five different bank loan and deposit products adjust rather rapidly to their long term values in response to external shocks as the relative version of the law of one price predicts but the evidence runs contrary to the absolute version of the law credit risk premium part of the marginal cost of the loans granted by a particular bank is an important source of interest rate dispersion across banks and loan products both before and after spain joined the euro zone therefore differences in credit risk policies across banks must be taken into account when forming expectations about european retail banking integration

government size and macroeconomic stability abstract we analyze the effects of government size on output variability in the context of a rbc model in which government size is parameterized by the income tax rate and the share of government purchases in output the model implies that i income taxes are destabilizing and ii for most specifications considered government purchases are stabilizing we compare those predictions with the results of simple cross country regressions using data for 22 oecd countries the estimated relationship between empirical indicators of government size and measures of gdp variability appears far stronger than the model predicts and often has the opposite sign

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

a note on the risk adjusted price concentration relationship in banking abstract price concentration studies in banking typically find a significant and negative relationship between consumer deposit rates i e prices and market concentration this implies highly concentrated banking markets are bad for depositors it also provides support for the structure conduct performance hypothesis and rejects the efficient structure hypothesis however these studies have focused almost exclusively on supply side control variables and neglected demand side variables when estimating the reduced form price concentration relationship for example previous studies have not included in their analysis bank specific risk variables as measures of cross sectional derived deposit demand we find that when bank specific risk variables are included in the analysis the magnitude of the relationship between deposit rates and market concentration decreases by over 50 we offer an explanation for these results based on the correlation between a bank s risk profile and the structure of the market in which it operates these results suggest that it may be necessary to reconsider the well established assumption that higher market concentration necessarily leads to anticompetitive deposit pricing behavior by commercial banks this has direct implications for the antitrust evaluations of bank merger and acquisition proposals by regulatory agencies and in a more general sense these results suggest that any structure conduct performance based study that does not explicitly consider the possibility of very different risk profiles of the firms analyzed may indeed miss a very important set of explanatory variables and thus the results from those studies may be spurious

keynesian government spending multipliers and spillovers in the euro area the global financial crisis has led to a renewed interest in discretionary fiscal stimulus advocates of discretionary measures emphasize that government spending can stimulate additional private spending the keynesian multiplier effect thus we investigate whether the spending package announced by euro area governments for 2009 and 2010 is likely to boost gdp by more than one for one because of modelling uncertainty it is essential that such policy evaluations be robust to alternative modelling assumptions and parameterizations we use five different empirical macroeconomic models with keynesian features such as price and wage rigidities to evaluate the impact of the fiscal stimulus four of them suggest that the planned increase in government spending will reduce private consumption and investment significantly only a model that largely ignores the forward looking behavioural response of consumers and firms implies crowding in of private spending we review a range of issues that may play a role in the recession of 2008 2009 implementation lags are found to reinforce crowding out and may even cause an initial contraction zero bound effects may lead the central bank to abstain from interest rate hikes and increase the gdp impact of government spending crowding in however requires an immediate anticipation of at least two years at the zero bound using a multi country model we find that spillovers between euro area countries are negligible or even negative because direct demand effects are offset by the indirect effect of a euro appreciation new keynesian dynamic stochastic general equilibrium dsge models provide a strong case for government savings packages announced with sufficient lead time spending cuts induce a significant short run stimulus and crowding in of private spending tobias cwik and volker wieland

explaining bank market to book ratios evidence from 2006 to 2009 abstract this paper examines the market price to book value ratio for 6604 bank stock observations from december 31 2006 through june 30 2009 we relate each bank s market price to book value ratio to several fundamental ratios and whether the bank took funds from the us treasury under the troubled asset relief program tarp the results of this study show that banks who took tarp funds have lower market price to book value ratios in addition lower relative costs higher non interest income and lower assets in non accrual or foreclosed status are associated with higher market price to book value ratios while controlling for size and other bank attributes

scale and scope economies in the multi product banking firm abstract the multi product nature of the banking firm is examined utilizing the translog cost function this analysis indicates that contrary to conventional wisdom natural monopoly scale economies and product specific decreasing costs are not robust characterizations of the banking industry there is however evidence that the cost function is characterized by economies of scope the implications of these results are discussed and extensions of this approach suggested

a study of bank efficiency taking into account risk preferences abstract i use the stochastic cost frontier approach to investigate efficiency of banks operating in the third federal reserve district accounting for the quality and riskiness of bank output in addition to the mean and mode of the conditional distribution of the one sided error term i calculate confidence intervals for the inefficiency measures based on the conditional distribution the results indicate that third district banks are operating at cost efficient output levels and product mixes but are not efficiently using their inputs the second part of the article relates the inefficiency measures to several correlates

international fiscal spillovers a two country business cycle model featuring nominal rigidities countercyclical mark ups rule of thumb consumers and government spending reversals is used to identify inequality predictions that are robust across a range of empirically plausible parameterizations these robust inequality restrictions are imposed onto a regime change factor model for the united states and its main trade partners to estimate the international fiscal spillovers the effects of u s government spending on foreign real activity are found to be sizable and significant operating mainly by lowering real interest rates rather than boosting trade balances in contrast there seems to be only limited evidence of state dependence in the international transmission of fiscal policy

why does private consumption rise after a government spending shock recent empirical evidence suggests that private consumption is crowded in by government spending this outcome violates existing macroeconomic theory according to which the negative wealth effect brought about by a rise in public expenditure should decrease consumption

the entry and the activity level of foreign banks in italy an analysis of the determinants abstract although the theory of multinational banking has pointed out the importance of local profit opportunities the empirical evidence is still poor and deserves further investigation to this end we analyse entry decisions and activity levels of foreign banks operating in italy between 1983 and 1998 we consider 22 oecd countries 10 of which had at least one bank branch or subsidiary in italy entries and activity levels were related to the degree of economic integration as well as to the financial market features of the home country relative to italy unlike other studies besides economic integration the relative profitability of the banking activity proves to be a significant variable in that it highlights the importance of local market conditions in the past decade increased competition in the italian banking sector has reduced these profit opportunities driving foreign banks towards more innovative sectors of financial intermediation

budget deficits and the current account an intertemporal disequilibrium approach the objective of the present paper is to develop an intertemporal disequilibrium model of a monetary economy to explain the effects of fiscal policy on the current account we wish to emphasize the role of aggregate demand determined output fluctuations and flexible exchange rates within a microtheoretic optimizing framework furthermore the differing effects of monetary versus non monetary i e tax or bond finance of government expenditures are considered

international banking a survey two distinct sets of issues are involved in the analysis of international banking one set the industrial organization issues centers on the patterns of expansion of foreign branches and subsidiaries of banks headquartered in the united states great britain japan and a few other industrial countries and on the nature of the advantage that these branches and subsidiaries have in relation to their host country competitors the second set the international finance issues involves the role of banks in cross border and cross currency financial flows both from their head offices and from their foreign branches and subsidiaries despite the attention to international banking there are few uniquely international institutions rather international banks are a subset of domestic banks with significant numbers of foreign branches and subsidiaries moreover there are few uniquely international banking activities although foreign exchange trading may seem to be one in many countries most or all foreign exchange trading involves domestic banks with few if any foreign branches the growth of foreign branches and subsidiaries of major banks occurred in two waves the first occurred in the decades before world war i when the war started

the value of risk measuring the service output of u s commercial banks rather than charging direct fees banks often charge implicitly for their services via interest spreads as a result much of bank output has to be estimated indirectly in contrast to current statistical practice dynamic optimizing models of banks argue that compensation for bearing systematic risk is not part of bank output we apply these models and find that between 1997 and 2007 in the u s national accounts on average bank output is overestimated by 21 percent and gdp is overestimated by 0 3 percent moreover compared with current methods our new estimates imply more plausible estimates of the share of capital in income and the return on fixed capital

a study on long run inefficiency levels of a panel dynamic cost frontier under the framework of forward looking rational expectations abstract this paper aims to provide a theoretical underpinning of the dynamic efficiency model pioneered by ahn s c good d h sickles r c 2000 estimation of long run inefficiency levels a dynamic frontier approach econometric reviews 19 461 492 in the context of a quadratic loss function this paper formulates a multi period forward looking rational expectations model on the evolution of the technical inefficiency level which correctly produces a dynamic panel data model the model is illustrated using panel data of 112 french banks encouraging evidence of superiority in favor of the model is reached substantial cost inefficiency prevails in this industry where the constituent banks are characterized as having volatile adjustment speeds toward their long run steady states the sample banks exhibit increasing returns to scale and product mix economies

dynamic effects in inefficiency evidence from the colombian banking sector firms face a continuous process of technological and environmental changes that requires them to make managerial decisions in a dynamic context however costs and constraints prevent firms from making instant adjustments towards optimal conditions and may cause inefficiency to persist in time we propose a dynamic inefficiency specification that captures differences in the adjustment costs among firms and non persistent effects of inefficiency heterogeneity the model is fitted to a ten year sample of colombian banks the new specification improves model fit and have effects on efficiency estimations overall colombian banks present high inefficiency persistence but important differences between institutions are found in particular merged banks present low adjustment costs that allow them to recover rapidly efficiency losses derived from merging processes

some fiscal calculus what is the impact of fiscal policy on the econ omy how large are the multipliers of govern ment spending and tax cuts this old question has recently received considerable attention in par ticular in the context of the american recovery and reinvestment act arra of 2009 i contribute to answering that question by calculating fiscal multipliers in a baseline neo classical growth model with endogenous labor supply and fiscal policy allowing for govern ment spending transfers government debt and distortionary taxes on labor and capital income the policy experiments are conducted holding transfers consumption taxes and capital income taxes fixed i e changes in taxation require changes in the distortionary labor tax the model is simple and fairly standard as an additional contribution i provide the model in an elegant and tractable form starting from a fairly general formulation and pointing out the key functional form properties for characterizing the dynamics the formulation of the model here or versions

the general equilibrium effects of fiscal policy estimates for the euro area abstract this paper describes a dynamic stochastic general equilibrium model featuring a fraction of non ricardian agents in order to estimate the effects of fiscal policy in the euro area the model takes into account distortionary taxation on labor and capital income and on consumption while expenditures are broken down into purchases of goods and services compensation of public employees and transfers to households a newly computed quarterly data set of fiscal variables is used our results point to the prevalence of mild keynesian effects of public expenditures in particular although innovations in fiscal policy variables tend to be rather persistent government purchases of goods and services and compensations for public employees have small and short lived expansionary effects on private consumption while innovations in transfers to households show a slightly more sizeable and lasting effect the effects are more significant on the revenue side decreases in labor income and consumption tax rates have sizeable effects on consumption and output while a reduction in capital income tax favors investment and output in the medium run finally our estimates suggest that fiscal policy variables contribute little to the cyclical variability of the main macro variables

macroeconomic effects from government purchases and taxes for u s annual data that include world war ii the estimated multiplier for temporary defense spending is 0 4 0 5 contemporaneously and 0 6 0 7 over 2 years if the change in defense spending is permanent gauged by ramey s defense news variable the multipliers are higher by 0 1 0 2 since all estimated multipliers are significantly less than 1 greater spending crowds out other components of gdp particularly investment the lack of good instruments prevents estimation of reliable multipliers for nondefense purchases multipliers in the literature of two or more likely reflect reverse causation from gdp to nondefense purchases increases in average marginal income tax rates measured by a newly constructed time series have significantly negative effects on gdp when interpreted as a tax multiplier the magnitude is around 1 1 the combination of the estimated spending and tax multipliers implies that the balanced budget multiplier for defense spending is negative we have some evidence that tax changes affect gdp mainly through substitution effects rather than wealth effects

oil price shocks and chinese banking performance do country risks matter abstract this paper contributes to the existing literature by investigating the impacts of oil prices on bank performance through a broad array of camel capital adequacy asset quality management earnings and liquidity indicators in china over the period 2000 2014 to gain further insights into this issue we also discuss whether the correlations change with different dimensions of country risk i e economic financial and political which extant studies ignored the results reveal that oil prices have a significant impact on banking performance as their increase triggers a reduction in banking performance in terms of capitalization management efficiency earning power and liquidity however these adverse effects are mitigated by country stability especially economic stability and political stability these results are important for policy makers who should be cautious when formulating a strategy for macroeconomic stability from the managerial perspective bank managers should consider establishing early warning and response mechanisms on the back of oil price shocks in order to operate under better performance

factors affecting the performance of foreign owned banks in australia a cross sectional study abstract this study extends the existing literature of international banking by constructing a model of foreign intermediaries in australia an unresolved question is establishing those factors that result in banking across borders while a variety of theories attempt to explain international banking empirical tests are sparse mahajan a rangan n zardkoohi a 1996 journal of banking and finance 20 283 306 this study considers if the results to date apply in non us settings foreign bank size was found to be a positive function of bank licence parent size and time in australia and a negative function of australian net interest margins and fees the negative sign on net interest margins and fees is consistent with de young r nolle d 1996 journal of money credit and banking 28 622 636 foreign bank profits were a positive function of australian net interest margins and fees there was limited evidence of defensive expansion this paper concludes that foreign bank size is explained well by the existing theories of international banking but a wider model is appropriate for foreign bank profits

the effects of fiscal shocks on employment and the real wage we study the transmission of fiscal shocks in the labor market we employ a structural var and base identification on the restrictions that shocks to government consumption investment and employment must raise output and deficits these restrictions hold in both prototype real business cycle rbc and new keynesian models shocks to government consumption and investment increase real wages and employment contemporaneously both at state level and in the aggregate the dynamics in response to employment shocks are mixed increases in government employment raise the real wage and total employment in the aggregate however in one third of the states they reduce total employment

comment on what drives bank competition some international evidence the question of bank competition is vitally important for a number of reasons the essential role of bank credit and other financial services as an input in the production of most other goods and services places banks in a unique and influential position such that any allocative inefficiency or other market distortions in banking are almost certain to be felt throughout the economy moreover recent history has provided numerous instances where the textbook paradigm of atomistic competition has proven inadequate as a policy guide for efficient banking either because there are simply too few banks to rely on sheer numbers as a guarantee of vigorous competition as in canada or because of evidence that there can be such a thing as too much competition in banking as suggested by several studies or because of instances where nearly competitive pricing has been observed in markets containing only one or two banks or because conversely substantially noncompetitive pricing has sometimes been deduced in banking products such as credit cardswith thousands of suppliers thus the study of bank competition remains an urgent field of research claessens and laeven 2004 this issue of jmcb make two key contributions here first they extend a proven empirical method to an unprecedentedly large and varied crosscountry sample second they offer the logical and policy relevant additional step of seeking to identify factors associated with variations in measured conduct this step is needed to assess the empirical validity of the traditional structure conductperformance paradigm in their sample and is especially important where that paradigm is found lacking as a predictor of bank conduct indeed although the authors

housework and fiscal expansions in an otherwise standard business cycle model with housework calibrated consistently with data on time use we discipline complementarity between consumption and hours worked and relate its strength to the size of fiscal multipliers evidence on the substitutability between home and market goods confirms that complementarity is an empirically relevant driver of fiscal multipliers however in a housework model substantial complementarity can be generated without imposing a low wealth effect which contradicts the microeconomic evidence also explicitly modeling housework matters for assessing the welfare effects of government spending which are understated by theories that neglect substitutability between home produced and market goods

macroeconomic effects of government spending the great recession was really different we estimate the effect of government spending shocks on the u s economy with a time varying parameter vector autoregression the recent great recession period appears to be characterized by uniquely large impulse responses of output to fiscal shocks moreover the particularity of this period is underlined by highly unusual responses of several other variables the pattern of fiscal shock responses neither completely fits the predictions of the new keynesian model of an economy subject to the zero lower bound on nominal interest rates nor does it suggest regular variation of fiscal policy effects depending on the state of the business cycle rather the great recession period seems special in that government spending shocks had a strongly negative effect on the spread between corporate and government bond yields and a strongly positive effect on consumer confidence and private consumption spending

bank size collateral and net purchase behavior in the federal funds market empirical evidence differences between large and small banks net purchase behavior in the uncollaterized federal funds and collateralized repurchase agreements markets are documented the larger a bank s asset size the larger ceteris paribus its federal funds purchases the threshold asset size is in the region of 1 billion to 2 5 billion for any size class banks located in major banking centers are more likely to be net federal funds purchasers than are banks located outside money centers in the collateralized repurchases agreements market there appears to be no size of locational discrimination indeed the smallest banks are the largest net purchasers as a fraction of assets of funds on the repurchases agreements market copyright 1989 by the university of chicago

short run cost inefficiency of commercial banks a flexible stochastic frontier approach we adopt the intermediation approach and use a flexible stochastic frontier to examine the cost efficiency of united states commercial banks with total assets in excess of million we find an average overall inefficiency of just under 10 percent a level somewhat lower than found in previous work our analysis of intra industry variation concludes that inefficiency generally rises with bank size further banks that have branching networks either domestic or foreign have higher inefficiency on average but at the same time inefficiency falls as the number of offices in the branch network expands state level data on the ease of serviceing the market competition from savings institutions and the financial sophistication of depositors significantly affect bank inefficiency generally with the expected signs finally our findings suggest that regulatory changes that increase capital requirements may lead to increased bank efficiency in the short run copyright 1994 by ohio state university press

what are the effects of fiscal policy shocks we propose and apply a new approach for analyzing the effects of fiscal policy using vector autoregressions specifically we use sign restrictions to identify a government revenue shock as well as a government spending shock while controlling for a generic business cycle shock and a monetary policy shock we explicitly allow for the possibility of announcement effects i e that a current fiscal policy shock changes fiscal policy variables in the future but not at present we construct the impulse responses to three linear combinations of these fiscal shocks corresponding to the three scenarios of deficit spending deficit financed tax cuts and a balanced budget spending expansion we apply the method to us quarterly data from 1955 to 2000 we find that deficit financed tax cuts work best among these three scenarios to improve gdp with a maximal present value multiplier of five dollars of total additional gdp per each dollar of the total cut in government revenue 5 years after the shock copyright 2009 john wiley sons ltd

central bank secrecy interest rates and monetary control we construct a dynamic rational expectations model of the federal funds and deposit market that provides a rationale for central bank secrecy about current monetary aggregate objectives in this analysis the trading desk values secrecy because it reduces the influence of monetary control policy on interest rates we then examine actual u s experience with monetary control and determine that the reserve bias predicted by the model is present in the data from 1978 to 1985 finally we demonstrate that central bank secrecy may not lower the value of commercial banks

do cross country differences in bank efficiency support a policy of national champions abstract as banking consolidation proceeds and europe moves toward a single market cross country differences in banking efficiency can affect the future competitive position of a country s financial market helping to determine which european money centers may expand or contract looking at large banks across 10 countries we find they are roughly equally efficient after controlling for differences in business environment banking costs and bank productivity as no country seems to have a strong efficiency advantage it seems likely that state efforts to promote national champions through favorable mergers which expand scale and market share may determine the outcome

a note on the location choice of multinational banks the case of japanese financial institutions abstract there are many studies investigating the location choice of foreign direct investment fdi of us banks nigh et al journal of international business studies 17 1986 59 72 find that the choice does not depend on local banking opportunity this paper examines what factors affect the location choice of japanese multinational financial institutions our results are consistent with previous studies analyzing us banks in that the fdi of the manufacturing industry is an important determinant of the location choice of japanese financial institutions however our results differ from nigh et al in that japanese financial institutions choose their locations at least partially based on the local banking opportunity in the host countries

inefficiency persistence and heterogeneity in colombian electricity utilities abstract the electricity reform in colombia has exhibited gains in terms of reliability but its effects on firm efficiency and service quality have not been clear previous studies evaluating the performance of distribution companies after the reform have not found evidence of improvements although large differences in efficiency have been found among firms this suggests high inefficiency persistence and heterogeneity in the colombian distribution sector in this paper we propose an extension of dynamic stochastic frontier models that accounts for unobserved heterogeneity in the inefficiency persistence and in the technology the model incorporates total expenses service quality and energy losses in an efficiency analysis of colombian distributors over fifteen years after the reform we identify the presence of high inefficiency persistence in the sector and important differences between firms in particular rural companies and firms with small customers present low persistence and evidence the largest gains in efficiency during the period however increases in efficiency are only manifested during thelast five years when the main improvements in service quality and energy losses are presented overall inefficiency persistence customer density and consumption density are found to be important criteria to be considered for regulatory purposes

economies of scale and economies of scope in multiproduct financial institutions further evidence from credit unions recently murray and white 1983 have analyzed economies of scale economies of production due to output expansion and economies of scope economies due to joint production of output for credit unions of british columbia by explicitly recognizing the multiproduct nature of the credit union unfortunately their analysis of scale and scope economies is limited in view of recent advances in the theory of the multiproduct firm for example in multiproduct firms there exist two economies of scale economies arising from overall production activity and economies arising from the production of a particular product or a product set estimates of scale economies obtained by murray and white hereafter mw are overall scale economies but no discussion of product specific scale economies is provided in their analysis further mw employ the cost complementarity concept as a measure of economies of scope however cost complementarity is a local not global test for the existence of economies of scope in addition it is necessary to distinguish overall scope economies from product specific scope economies this paper reexamines the issue of economies of scale and scope in credit unions extending the model developed by mw and providing some new empirical evidence section 1 extends the model developed by mw to reexamine the issue of scale and scope in multiproduct credit unions section 2 contains a description of empirical results section 3 completes the paper with a conclusion

mafia and public spending evidence on the fiscal multiplier from a quasi experiment a law issued to combat political corruption and mafia infiltration of city councils in italy has resulted in episodes of large unanticipated temporary contractions in local public spending using these episodes as instruments we estimate the output multiplier of spending cuts at provincial level controlling for national monetary and fiscal policy and holding the tax burden of local residents constant to be 1 5 assuming that lagged spending is exogenous to current output brings the estimate of the overall multiplier up to 1 9 these results suggest that local spending adjustment may be quite consequential for local activity jel d72 e62 h71 k42 the widespread resort to fiscal stimulus at the onset of the global crisis and more recently the emerging need to consolidate deficits in response to rising fiscal imbalances have revitalized the empirical debate on the transmission of fiscal policy the multiplier while the literature has mostly focused on aggregate effects at a national level several recent contributions reviewed below have called attention to the local dimension this shift in focus is motivated by specific policy questions combined with the opportunity to exploit institutional information to address econometric issues in identification 1

is there a single frontier in a single european banking market abstract this paper attempts to estimate comparable efficiency scores for european banks operating in the single market in the eu using a data set of more than 5000 large commercial banks from all major european banking markets over the period 1993 2004 the application of meta frontiers enables us to assess the existence of a single and integrated european banking market we find evidence in favor of a single european banking market characterized by cost and profit meta frontiers however compared to the meta frontier estimations pooled frontier estimations tend to underestimate efficiency levels and correlate poorly with country specific frontier efficiency ranks

positive theories of multinational banking eclectic theory versus internalisation theory the choice of an appropriate paradigm to consider banks motivation to enter a new market and their subsequent performance is an important issue in multinational banking this paper discusses this issue within the context of two competing theories of the multinational enterprise and the special theories of banking as applied to the multinational enterprise the conclusion of this paper is that while it may not be possible to empirically distinguish between the propositions of eclectic theory and internalisation theory intemalisation theory offers a framework with greater internal consistency for the study of the multinational bank further any empirical studies must be conducted within the framework of the appropriate special theories consistent with internalisation theory these special theories have developed over time in an unstructured fashion and the application of internalisation theory provides a cohesive framework within which to analyse these theories

fiscal policy in general equilibrium this paper studies four classic fiscal policy experiments within a quantitatively restricted neoclassical model the authors main findings are as follows 1 permanent changes in government purchases can lead to short run and long run output multipliers that exceed one 2 permanent changes in government purchases induce larger effects than temporary changes 3 the financing decision is quantitatively more important than the resource cost of changes in government purchases and 4 public investment has dramatic effects on private output and investment these findings stem from important dynamic interactions of capital and labor absent in earlier equilibrium analyses of fiscal policy copyright 1993 by american economic association

fiscal stimulus with spending reversals abstract the short run effects of fiscal policy depend not only on current tax and spending choices but also on expectations about future policy adjustment while general equilibrium models typically restrict medium term adjustment to taxation we highlight the importance of government spending dynamics first we provide time series evidence for the united states suggesting that an exogenous increase in government spending prompts a rise in public debt followed over time by a reduction in spending below trend second we show how expected spending reversals alter the short run impact of fiscal policy in a new keynesian model bringing it closer in line with the evidence

incorporating risk input into the analysis of bank productivity application to the taiwanese banking industry abstract this study reappraises banks productivity by using 42 taiwanese banks during 1999 2007 as observations it introduces an input oriented generalized metafrontier malmquist productivity index i gmmpi while considering the latent effect of risk taking behavior in the analytic framework we learn that public and private banks should face separate short term technological frontiers while the econometric model considering risk input can portray banks operating frontiers better moreover neglecting the influence of risk input would bring about distortions of efficiency technology and tfp dynamic estimations for banks meanwhile the degree of scale economies would also be overestimated the paper concludes that neglecting the risk taking essence in bank performance evaluation is equal to allowing banks to barter risk bearing as the term for further output growth consequently the potential cost is that banks may excessively aggrandize their scales of business implying the possibility of another financial crisis

patterns in the expansion of u s banks foreign operations combining foreign direct investment theory with data on 32 countries from the federal reserve board we examined u s banks patterns of foreign operations including their levels of banking services and choice of organizational forms in host countries results generally supported predictions but only in developed countries the lack of support in rapidly growing markets of asia and latin america raises serious theoretical concerns and presents fresh research opportunities into the global banking industry

the determinants of us banking activity abroad abstract the banking industry provides an excellent example of the internationalization of world business and economic interdependencies across countries analysis of the past growth of international banking operations can also prove useful to banks interested in augmenting their current business or expanding their international coverage and to banks who anticipated future competition in their markets from new or strengthened foreign competitors this study provides the most comprehensive examination of the development of us bank branches in other countries is presented and tested in order to facilitate the understanding of the expansion of international banking

is there a fiscal free lunch in a liquidity trap this paper uses a dsge model to examine the eects of an expansion in government spending in a liquidity trap the spending multiplier can be much larger than in the normal situation if the liquidity trap is very persistent and scal stimulus can be rapidly implemented moreover the budgetary costs may be minimal as the large response of output boosts tax revenues allowing for something close to a scal free lunch however we caution that the multiplier may be much smaller under plausible implementation lags for many types of public spending and or if the liquidity trap lasts less than two years in addition because the marginal impact of scal expansion decreases in the scale of the outlay it is crucial to distinguish between average and marginal multipliers

fiscal shocks and their consequences this paper investigates the response of hours worked and real wages to fiscal policy shocks in the post world war ii us we identify these shocks with exogenous changes in military purchases and argue that they lead to a persistent increase in government purchases and tax rates on capital and labor income and a persistent rise in aggregate hours worked as well as declines in real wages the shocks are also associated with short lived rises in aggregate investment and small movements in private consumption we describe and implement a methodology for assessing whether standard neoclassical models can account for the consequences of a fiscal policy shock simple versions of the neoclassical model can account for the qualitative effects of a fiscal shock once we allow for habit formation and investment adjustment costs the model can also account reasonably well for the quantitative effects of a fiscal shock

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

a fiscal stimulus and jobless recovery we analyze the effects of a government spending expansion in a dynamic stochastic general equilibrium model with mortensen pissarides labor market frictions deep habits in private and public consumption investment adjustment costs a constant elasticity of substitution ces production function and adjustments in employment at both intensive and extensive margins the combination of deep habits and ces technology is crucial the presence of deep habits magnifies the responses of macroeconomic variables to a fiscal stimulus while an elasticity of substitution between capital and labor in the range of available estimates allows the model to produce a scenario compatible with the observed jobless recovery

determinants of the performance of japanese financial institutions in australia 1987 1992 this paper constructs a model that attempts to explain the performance of japanese financial institutions in australia in general the model proposed performs well for size measures but comparatively poorly for measures of profitability size as measured by home country equity was found to increase both australian assets and australian profitability institutional features in both australia and japan were found to have their greatest impact upon size measures net interest margin differences were found to have no significant relationship with any performance measure used however the results are not sufficiently conclusive to produce a definitive model to explain the performance of foreign owned banks in australia

retail bank deposit pricing an intertemporal asset pricing approach fundamentally spreads between market and deposit interest rates increase when interest rates rise and decline when rates fall recent empirical studies have found this phenomenon to be related to market concentration static equilibrium models are poorly equipped to explain this behavior in this paper the author applies an intertemporal asset pricing model incorporating bank deposits as a form of money in order to analyze the pricing behavior of a banking sector exercising market power his results extend the theoretical literature on deposit pricing and provide some insights into the behavior of interest rate spreads through time copyright 1995 by ohio state university press

core deposits and physical capital a reexamination of bank scale economies and efficiency with quasi fixed inputs this paper compares measures of bank production efficiency assuming all bank inputs are completely variable with measures obtained from specifications which take account of the quasi fixed nature of core deposits and bank physical capital and the treatment of certain deposits as outputs the empirical results imply that scale economy measures vary substantially for small to medium sized banks whereas those for the largest banks are fairly robust to the different specifications estimates of economies of scope were found to be invariant to different input output specifications whereas efficiency measures varied significantly with changes in the specification of the cost function and with the definition of outputs and inputs copyright 1995 by ohio state university press

estimating fiscal multipliers news from a non linear world we estimate non linear vars to assess to what extent fiscal spending multipliers are countercyclical in the us we deal with the issue of non fundamentalness due to fiscal foresight by appealing to sums of revisions of expectations of fiscal expenditures this measure of anticipated fiscal shocks is shown to carry valuable information about future dynamics of public spending results based on generalised impulse responses suggest that fiscal spending multipliers in recessions are greater than one but not statistically larger than those in expansions however non linearities arise when focusing on extreme events that is deep recessions versus strong expansionary periods

new keynesian versus old keynesian government spending multipliers renewed interest in fiscal policy has increased the use of quantitative models to evaluate policy because of modelling uncertainty it is essential that policy evaluations be robust to alternative assumptions we find that models currently being used in practice to evaluate fiscal policy stimulus proposals are not robust government spending multipliers in an alternative empirically estimated and widely cited new keynesian model are much smaller than in these old keynesian models the estimated stimulus is extremely small with gdp and employment effects only one sixth as large and with private sector employment impacts likely to be even smaller we investigate the sensitivity of our findings with regard to the response of monetary policy the zero bound on nominal interest rates and the inclusion of an empirically relevant degree of rule of thumb behaviour in the new keynesian model in addition we relate our findings using estimated structural macroeconomic models to the recent literature using reduced form regression techniques

fiscal policy pricing frictions and monetary accommodation this paper empirically investigates whether the theoretical conditions for government expenditure expansions to be effective hold for the data we ask whether the necessary conditions for fiscal effectiveness are relevant on average and in special circumstances that capture features of the recent crisis fiscal policy can be an effective countercyclical tool if monetary policy accommodates the fiscal expansion if expectations about future output growth and inflation are constant and if structural relationships are invariant to the policy change recent expansions are unlikely to produce large output multipliers or have important debt or inflation effects credible deficit and debt reduction schemes can produce sizeable output multipliers fabio canova and evi pappa

twin deficits squaring theory evidence and common sense in this paper we reconsider the twin deficit hypothesis that fiscal shocks generating budget deficits also worsen external trade both from a theoretical point of view and by analyzing data for australia canada the uk and the us first we assess the joint dynamics of budget and trade deficits along the business cycle uncovering a strikingly recurrent s shaped relation between the two the correlation is actually negative suggesting twin divergence this observation however cannot rule out the possibility that government spending expansions and or tax cuts may cause trade deficits as the overall correlation is likely to be dominated by cyclical factors second we reconsider the transmission of government spending in a standard two country two good model we find that openness and the persistence of fiscal shocks are major determinants of the magnitude or even sign of the response of the trade balance to fiscal shocks for a given persistence of the fiscal shock the closer an economy the larger the crowding out effect on investment the lower the deterioration of the trade balance third we take this insight to the data investigating the transmission of fiscal shocks in a var framework in the four countries in our sample our empirical findings tend to support our view in the us and australia which are relatively less open than canada and the uk and where government spending shocks are less persistent we find that the external impact of fiscal policy is rather limited instead private investment responds substantially the reverse is true for canada and the uk these findings confirm and put into perspective earlier results whereas fiscal expansions in the us are found to have on average a negligible effect on the country s trade balance however we emphasize that these results are consistent with a call for a us fiscal retrenchment to address global imbalances the impact of budget cuts on the us external trade is muted by their positive effect on domestic investment strengthening the us ability to generate resources against future interest and debt repayment

fiscal policy and lending relationships this paper studies how fiscal policy affects loan market conditions in the us first it conducts a structural vector autoregression analysis showing that the bank spread responds negatively to an expansionary government spending shock while lending increases second it illustrates that these results are mimicked by a dynamic stochastic general equilibrium model where the bank spread is endogenized via the inclusion of a banking sector exploiting lending relationships third it shows that lending relationships represent a friction that generates a financial accelerator effect in the transmission of the fiscal shock