distance bank heterogeneity and entry in local banking markets we examine the determinants of entry into italian local banking markets during the period 1991 2002 and build a simple model in which the probability of branching in a new market depends on the features of both the local market and the potential entrant econometric findings show that banks are more likely to expand into those markets that are closest to their pre entry locations large banks are also more able to cope with distance related entry costs than small banks finally banks have become increasingly able to open branches in distant markets due to the advent of information and communication technologies

credit lines and credit utilization while much is known about the characteristics of consumers or businesses that obtain credit lines relatively little is known empirically about credit line utilization after origination this study fills that gap by testing two interrelated hypotheses concerning borrower credit quality and credit line utilization the empirical analysis confirms that borrowers with higher expectations of future credit quality deterioration originate credit lines to preserve financial flexibility furthermore we estimate a competing risks model that confirms our predictions concerning changes in borrower credit line utilization in response to borrower credit quality shocks

does ict adoption improve access to credit for small enterprises using data at the bank firm level collected through the 9th unicredit survey conducted in 2012 on a large sample of small businesses we investigate the extent to which a large international bank offers better credit conditions to enterprises that use ict more extensively the results which are robust to selection and endogeneity issues show that banks tend to grant increasing volumes of credit to such enterprises we interpret this evidence as the ceteris paribus effect of ict adoption by small businesses on the quality of information transmitted to banks another possible interpretation is that banks consider ict adoption as a signal of firms willingness to innovate we also discuss implications concerning the key role that technology plays in changing the arm s length versus relationship lending paradigms

why and when does the gender gap reverse diversity goals and the pay premium for high potential women abundant research has documented a gender pay gap women earn less than men all else being equal against the backdrop of an overall female penalty we propose that the widespread adoption of dive

is there a glass ceiling over europe exploring the gender pay gap across the wages distribution using harmonised data from the european union household panel we analyse gender pay gaps by sector across the wages distribution for ten countries we find that the mean gender pay gap in the raw data typically hides large variations in the gap across the wages distribution we use quantile regression qr techniques to control for the effects of individual and job characteristics at different points of the distribution and calculate the part of the gap attributable to differing returns between men and women we find that first gender pay gaps are typically bigger at the top of the wage distribution a finding that is consistent with the existence of glass ceilings for some countries gender pay gaps are also bigger at the bottom of the wage distribution a finding that is consistent with sticky floors third the gender pay gap is typically higher at the top than the bottom end of the wage distribution suggesting that glass ceilings are more prevalent than sticky floors and that these prevail in the majority of our countries fourth the gender pay gap differs significantly across the public and the private sector wages distribution for each of our eu countries

industry growth and capital allocation does having a market or bank based system matter are market based or bank based financial systems better at financing the expansion of industries that depend heavily on external finance facilitating the formation of new establishments and improving the efficiency of capital allocation across industries we find evidence for neither the market based nor the bank based hypothesis while legal system efficiency and overall financial development boost industry growth new establishment formation and efficient capital allocation having a bank based or market based system per se does not seem to matter much

blind ambition the effects of social networks and institutional sex composition on the job search outcomes of elite coeducational and women s college graduates in this paper i develop a perspective on women s career attainment focused on how employers salary offers may be constructed based on their assumptions regarding women s access to comparative salary information therefore although the use of social networks in job search may enhance women s actual knowledge of prevailing wages i hypothesize that institutional characteristics that employers could assume to constrain women s networks and concomitant access to salary information will directly affect salary offers as well as moderating the influence of network ties on pay to test this perspective job search outcomes of women attending elite coeducational and women s colleges were examined regarding the number of offers obtained women who consulted with proportionally more male peer and employed adult male advice ties received significantly more job offers than women using fewer male advice contacts with regard to salary offers this study reveals an institutional sex composition effect women exiting single sex institutions i e women s colleges received significantly lower salary offers than women from coeducational schools even after accounting for human capital job characteristics and institutional reputation the effects of social networks on pay were moderated by institutional sex composition such that women exiting women s colleges received lower returns in the form of salary to their cross gender advice ties than did women from a matched coeducational institution implications of these results for theories of social capital and women s occupational attainment are discussed

firm growth and liquidity constraints a dynamic analysis using a large unbalanced panel data set of portuguese manufacturing firms surviving over the period from 1990 to 2001 the purpose of this paper is to examine whether liquidity constraints faced by business firms affect firm growth we use a gmm system to estimate a dynamic panel data model of firm growth that incorporates cash flow as a measure of liquidity constraints and persistence of growth the model is estimated for all size classes including micro firms our findings reveal that smaller and younger firms have higher growth cash flow sensitivities than larger and more mature firms this is consistent with the suggestion that financial constraints on firm growth may be relatively more severe for small and young firms nevertheless the same finding can be interpreted in a different way if we consider the more recent literature which interpret the higher investment cash flow sensitivity of younger and smaller firm in absence of financial market imperfection as the outcome of these firms reaction to the fact that realisation of their cash flows reveals them the direction to go in presence of uncertainty of their growth prospect besides firms that were small and young at the beginning of the sample period exhibited more persistent growth than those that were large and old finally these results have significant policy implications

a critique of the proposed tests of the natural rate rational expectations hypothesis the failure of the governments of most industrialised countries over the past decade to deal successfully with the problems of rising unemployment and high and often accelerating rates of price and wage inflation has revived interest in the pre keynesian macro economics of sound money and has renewed the controversy of the 1930 s over what governments should or should not do if they wish to achieve full employment with reasonable price stability in democratic societies keynesian economics has come under attack both by those who primarily oppose interventionist policies on ideological grounds and by the so called new classical macro economists who adhere to the natural rate of unemployment hypothesis nrh advanced by phelps i967 and friedman i 968 and the hypothesis of rational formation of expectations reh originally due to muth i96i armed with this joint natural rate rational expectations nr re hypothesis the new classical macro economists have argued that in a world capable of being represented by linear or log linear relations with a unique and stable equilibrium and no information discrepancy between the government and the private sector no government macro economic policy whether monetary or fiscal no matter how ingeniously formulated and how effectively implemented can have any systematic or lasting impact upon the level of output or the rate of unemployment 2 clearly this fundamental policy

collateral loan quality and bank risk abstract most commercial loans are made on a secured basis yet little is known about the relationship between collateral and credit risk several theoretical studies find that when borrowers have private information about risk the lowest risk borrowers tend to pledge collateral in contrast conventional wisdom holds that when risk is observable the highest risk borrowers tend to pledge collateral an additional issue is whether secured loans as opposed to secured borrowers tend to be safer or riskier than unsecured loans empirical evidence presented here strongly suggests that collateral is most often associated with riskier borrowers riskier loans and riskier banks

is relationship lending special evidence from credit file data in germany the german financial market is often characterized as a bank based system with strong bank customer relationships the corresponding notion of a housebank is closely related to the theoretical idea of relationship lending it is the objective of this paper to provide a direct comparison between housebanks and normal banks as to their credit policy therefore we analyze a new data set representing a random sample of borrowers drawn from the credit portfolios of five leading german banks over a period of five years we use credit file data rather than industry survey data and thus focus the analysis on information that is directly related to actual credit decisions in particular we use bank internal borrower rating data to evaluate borrower quality and the bank s own assessment of its housebank status to control for information intensive relationships the major results of our study support the view that housebanks are able to establish a distinct behavioral pattern consistent with the idea of long term commitment we find that housebanks do provide liquidity insurance in situations of unexpected deterioration of borrower ratings with respect to loan pricing we find no evidence for intra or intertemporal price differentiation related to housebanking

relationship lending during a financial crisis this paper studies whether relationship lending mitigates the transmission of the lehman default shock to the supply of credit in italy exploiting the presence of multiple banking relationships we control for banks and firms unobserved characteristics results show that the growth of credit itself is higher and its cost lower the shorter the distance between the bank and the firm the longer the relationship and the higher the share of credit held by the bank credit growth by relationship lenders is 4 6 higher than that by transactional lenders the increase in the cost of credit is 50 basis points lower the positive effect of relationship lending on credit supply increased during the crisis compared to a pre crisis period the beneficial effect of relationship lending is weaker if the relationship lender is more exposed to the financial crisis especially when lending to weaker borrowers

a macroeconomic model with a financial sector this paper studies a macroeconomic model in which financial experts borrow from less productive agents we pursue four sets of results i the economy is prone to instability and occasionally enters volatile episodes as volatility spikes agents precautionary motive increases depressing prices even further log linear approximations fail to capture these non linear effects that can cause economies to be significantly depressed for long periods of time ii endogenous risk during volatile episodes increases asset price correlations iii financial experts impose a negative externality on each other and on the labor sector by not maintaining adequate capital cushion and funding structure iv while risk sharing within the financial sector through securitization and derivatives contracts reduces many inefficiencies it can also amlify systemic risks

optimal labour contracts under asymmetric information an introduction the review of economic studies has instituted a new series of lectures to be given annually by a younger british economist at the association of university teachers of economics meetings the choice of lecturer is determined by a panel whose members are currently professors hahn mirrlees and nobay this paper is a revised version of the first lecture in the series it was presented at the aute meeting held at the university of surrey in april 1982 and was refereed in the usual way mak

policy watch the repeal of glass steagall and the advent of broad banking enactment of the gramm leach bliley act glba in november 1999 effectively repealed the long standing prohibitions on the mixing of banking with securities or insurance businesses and thus permits broad banking we attribute repeal of these prohibitions to the increasingly persuasive evidence from academic studies of the pre glass steagall era the recent favorable experience in the united states following partial deregulation of banking activities the experience of banking systems abroad with broader scopes for banking activities and rapid technological change in telecommunications and data processing how regulators will in practice coordinate their efforts so that the safety and soundness of the banking system is maintained efficiently remains to be seen

banking scope and financial innovation we explore the implications of financial system design for financial innovation we begin with assumptions about the investment opportunities of firms their observable attributes and the roles of commercial banks investment banks and the financial market we examine the borrower s choice between bank and financial market funding the commercial bank s choice of monitoring capacity and the investment bank s choice of whether to invest in financial innovation our main result is that financial innovation in a universal banking system is stochastically lower than innovation in a financial system in which commercial and investment banks are functionally separated article published by oxford university press on behalf of the society for financial studies in its journal the review of financial studies

creditor concentration an empirical investigation most of the literature on multiple banking assumes equal financing shares however unequal asymmetric or concentrated bank borrowing is widespread and creditor concentration is only weakly correlated with the number of bank relationships this paper therefore investigates the determinants of creditor concentration for german firms using a comprehensive firm bank level dataset for the time period between 1993 and 2003 we document that corporate borrowing from banks is very often concentrated even for the largest firms in our sample leveraged firms and firms with more redeployable assets concentrate their borrowing from banks as are firms dealing with a relationship lender that is profitable that has lower monitoring costs or that operates in a concentrated regional lending market

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

the gender pay gap beyond human capital heterogeneity in noncognitive skills and in labor market tastes abstract focused on human capital economists typically explain about half of the gender earnings gap for a national sample of mbas we account for 82 percent of the gap by incorporating noncognitive skills for example confidence and assertiveness and preferences regarding family career and jobs those two sources of gender heterogeneity account for a quarter of the explained pay gap with half due to human capital variables and the other quarter due to hours worked and current job characteristics female mbas appear to pay a penalty for good citizen behavior choosing jobs that contribute to society and characteristics higher ethical standards

non nested tests of new classical versus keynesian models further evidence this paper re runs the experiment conducted by dadkhah and valbuena 1985 using data generated by the australian canadian japanese swiss and swedish economies the aim of this exercise is to discriminate between new classical and keynesian accounts of the business cycle the results obtained in the present study are broadly supportive of dadkhah and valbuena s earlier findings in that the keynesian model generally outperforms the new classical alternative

a new database on the structure and development of the financial sector this article introduces a new database of indicators of financial structure and financial development across countries and over time the database is unique in that it combines a wide variety of indicators that measure the size activity and efficiency of financial intermediaries and markets it improves on previous efforts by presenting data on the public share of commercial banks introducing indicators of the size and activity of nonbank financial institutions and constructing measures of the size of bond and primary equity markets this article introduces a new database the first to provide comprehensive measures of the development structure and performance of the financial sector this database is the first to define and construct indicators of the size and activity of nonbank financial intermediaries such as insurance companies pension funds and non deposit money banks it is also the first to include indicators of the size of primary equity markets and primary and secondary bond markets in constructing the database authors carefully deflate measures and match stock and flow variables

a quarterly model of unanticipated monetary growth output and the price level in the u k 1963 1978 abstract this paper develops and estimates using quarterly data from 1963 to 1978 a three equation model of the u k economy in which output is affected only by unanticipated monetary growth whereas the price level is influenced by both anticipated and unanticipated changes in the money supply expectations of monetary growth are assumed to be muth rational the model was estimated using efficient procedures and tests of the over identifying restrictions were favourable to the model specification in particular anticipated monetary growth was found to have no significant effect on output

bank interest rates and credit relationships in italy abstract when evaluating the performance of a financial system in supporting the investment activity of the corporate sector a distinction is usually drawn between banking economies and market economies the former being characterized by long term relations between banks and the industrial sector although theoretical studies and empirical results seem to agree that lending relationships increase the available quantity of capital to firms they have little to say on the cost of bank credit it is not clear whether a close relationship with a main bank would allow the borrower to pay a lower interest rate or expose him to a monopolistic rent using a unique data set reporting detailed information on the evolution over time of individual bank borrower relationships in italy we show evidence that a main bank provides credit at a lower cost and that some competition helps to reinforce the commitment between the borrower and the bank

capital shortfall a new approach to ranking and regulating systemic risks the financial crisis of 2007 2009 has given way to the sovereign debt crisis of 2010 2012 yet many of the banking issues remain the same we discuss a method to estimate the capital that a financial firm would need to raise if we have another financial crisis this measure of capital shortfall is based on publicly available information but is conceptually similar to the stress tests conducted by us and european regulators we argue that this measure summarizes the major characteristics of systemic risk and provides a reliable interpretation of the past and current financial crises

competitive models with keynesian features the notion of an equilibrium with quantity rationing has been with us for a long time in a rudimentary form it was found in all those early keynesian models which explained unemployment by positing a fixed money wage the advantage of the more recent disequilibrium theory models apart from ushering in a degree of rigour undreamt of in earlier days is that they explain how the firm comes to be off its supply curve with a fixed money wage but flexible prices the level of employment is determined by the marginal productof labour curve which is the firm s competitive demand for labour curve an increase in employment can only be obtained at the cost of a fall in the real wage much as the classical economists had insisted if there is quantityrationing in the goods market however an increase in demand resulting from increased government expenditure say will increase demand for labour without a change in the real wage and this initial increase in employment and income will have multiplier effects just as in the original keynesian stories while all prices remain fixed this is the economic importance of the innovation suggested by clower 1965 and developed by barro grossman 1971 benassy 1975 and grandmont laroque 1977 but the key assumption that prices are fixed or at least predetermined or determined exogenously to the model is also the weakest point of the theory it has two chief defects first there are too many equilibria for any arbitrarily given vector of prices there exists an equilibrium with quantity rationing without a theory to tell us how prices are determined the model has only weak predictive power second without a theory of price setting there is no explanation of how and when prices change and hence there is no way of saying in what sense a fix price equilibrium is an equilibrium whether these states are persistent or merely transitory is clearly crucial to the theory if the fixprice assumption is taken to mean as it often is that over a sufficiently short time period prices may be treated as approximately fixed then the theory runs the risk of being tautologous and not being taken seriously this sort of consideration appears to be what motivated oliver hart 1982 to take a rather different approach his starting point was the observation that the most important part of keynesian economics was the role it assigned to economic policy and not a particular model of the keynesian economy he therefore devised a model of imperfect competition which generated the traditional keynesian conclusions about the impact of economic policy without appealing to the fix price assumption for example under certain assumptions the government deficit multiplier is given by the usual formula 17

credit and efficiency in centralized and decentralized economies we study a credit model where because of adverse selection unprofitable projects may nevertheless be financed indeed they may continue to be financed even when shown to be low quality if sunk costs have already been incurred we show that credit decentralization offers a way for creditors to commit not to refinance such projects thereby discouraging entrepreneurs from undertaking them initially thus decentralization provides financial discipline nevertheless we argue that it puts too high a premium on short term returns the model seems pertinent to two issues soft budget constraint problems in centralized economies and differences between anglo saxon and german japanese financing practices

domestic credit growth and international capital flows during the pre crisis period europe experienced substantial cross country variation in domestic credit growth and cross border capital flows we investigate the inter relations between domestic credit growth and international capital flows during the period 1993 2008 with a special focus on the boom period of 2003 2008 we establish that domestic credit growth in european countries is strongly related to net debt inflows but not to net equity inflows this pattern also holds for an extended sample of 54 advanced and emerging economies

bank bias in europe effects on systemic risk and growth europe s financial structure has become strongly bank based far more so than in other economies we document that an increase in the size of the banking system relative to equity and private bond markets is associated with more systemic risk and lower economic growth particularly during housing market crises we argue that these two phenomena arise owing to an amplification mechanism by which banks overextend and misallocate credit when asset prices rise and ration it when they drop the paper concludes by discussing policy solutions to europe s bank bias which include reducing regulatory favouritism towards banks while simultaneously supporting the development of securities markets

non nested tests of three competing theories of business cycles this paper tests the keynesian new classical and real business cycle theories against each other as non nested hypotheses using quarterly data for the us covering the period 1959 1 1989 2 the results indicate that no one theory stands out as the dominant explanation of the business cycle this contrasts with the findings of earlier work which is mostly concerned with testing the keynesian against the new classical theory we find that the introduction of a third theory the real business cycle theory which accounts of real factors blurs the distinction between the demand sided keynesian and the new classical theories

information sharing in credit markets we present a model with adverse selection where information sharing between lenders arises endogenously lenders incentives to share information about borrowers are positively related to the mobility and heterogeneity of borrowers to the size of the credit market and to advances in information technology such incentives are instead reduced by the fear of competition from potential entrants in addition information sharing increases the volume of lending when adverse selection is so severe that safe borrowers drop out of the market these predictions are supported by international and historical evidence in the context of the consumer credit market a large body of literature on credit markets has shown that asymmetric information may prevent the efficient allocation of lending leading to credit rationing e g jaffee and russell 1976 stiglitz and weiss 1981 or to a wedge between lending and borrowing rates e g king 1986 in this literature informational asymmetries are taken to be exogenous lenders fail to observe some relevant characteristic or action of potential borrowers and have no way of learning about it in some countries however lenders can improve their knowledge about new customers by exchanging information with other lenders through information brokers generally known as credit bureaus the latter collect file and distribute the information voluntarily supplied by their members and operate on the principle of reciprocity lenders who do not provide data are denied access to the bureau s files in other countries instead these institutions do not exist the literature offers no guide to identify the factors that lead to endogenous communication between lenders this paper is an attempt to fill the gap information sharing is important for a number of reasons it may increase the degree of competitiveness within credit markets vives 1990 improve

the value of private sector business credit information sharing the us case this paper investigates the value added by private information exchanges that share information on business payment performance we discuss how this information is collected and disseminated by the worlds largest private information broker dun bradstreet we provide the first empirical examination of the importance of this information at the lending decision level our findings indicate that exchange generated information provides significant explanatory power in failure prediction models controlling for other credit information that is easily available to lenders our study complements the work of jappelli and pagano information sharing lending and defaults cross country evidence centre for economic policy research discussion paper 2184 1999 who find in cross country macro level tests that information exchanges add value 2003 elsevier science b v all rights reserved

ict adoption and income diversification among rural households in china although the determinants of income diversification have been widely examined in the literature little is known about whether and how information and communication technology ict adoption affect

a model of imperfect competition with keynesian features the recent literature on the reappraisal of keynes has viewed keynesian equilibria as arising when prices are fixed and effective demands and supplies are equilibrated through the adjustment of quantities one problem with this approach is that it lacks a theory of price determination in particular of why prices are fixed in the present paper we show that a number of keynesian features arise in a model in which prices are fully flexible but where agents have some monopoly power one advantage of this approach is that it provides a theory of the determination of both prices and quantities

does mobile money use increase firms investment evidence from enterprise surveys in kenya uganda and tanzania private investment can be an important engine of economic growth in east african countries which despite recent growth rates are still plagued with adverse economic conditions against this backdrop there has been substantial penetration of mobile money moving beyond simple person to person exchanges toward adoption by private firms this study explores whether there is a relationship between firm adoption of mobile money and firm investment using firm level data that are nationally representative of the private sector in three east african countries kenya tanzania and uganda a positive relationship is found between mobile money use and the probability of a firm s purchase of fixed assets this relationship is attributed to reduced transaction costs increased liquidity and increased credit worthiness associated with the use of mobile phone financial services

increasing returns and the foundations of unemployment theory current approaches to macroeconomic theory divide roughly into two basic schools of thought one approach typically associated with rational expectations views the economy as basically at or near walrasian market clearing equilibrium in which case it becomes very difficult to explain away convincingly the undeniable persistence at times of involuntary unemployment another approach views the underemployed economy as being in a state of temporary fixed price disequilibrium in which case aside from having to repress suspicions that the essence of effective demand failure might not have to do with prices fixed at wrong values there is a lot of rationalising to be done about why profitable adjustments are so slow this paper argues that something like an internally consistent theory of steady state involuntary unemployment is possible and even plausible the cornerstone of this third approach is increasing returns to scale which blocks unemployed agents from breaking out of a low level equilibrium trap unless there is overall coordination or stimulation a simple model is presented which contains the basic ideas

the benefits of lending relationships evidence from small business data this paper empirically examines how ties between a firm and its creditors affect the availability and cost of funds to the firm we analyze data collected in a survey of small firms by the small business administration the primary benefit of building close ties with an institutional creditor is that the availability of financing increases we find smaller effects on the price of credit attempts to widen the circle of relationships by borrowing from multiple lenders increases the price and reduces the availability of credit in sum relationships are valuable and appear to operate more through quantities rather than prices

growing firms and the credit constraint restricted access to finance either debt or equity or both is potentially a significant constraint on the growth of small businesses financing problems arise primarily as a consequence of information asymmetries the adverse effects of these may in part be counteracted by the use of collateral as a signalling and bonding mechanism and or by the development of a good working relationship between lender and borrower if the form of information asymmetry differs for growth firms or if the effects of information asymmetries are less easily ameliorated then growing firms may be more adversely affected by credit constraints if growth is contingent upon access to credit then the generalised implications for the economy may be significant and detrimental using evidence from a survery of over 6 000 firms conducted in 1992 this paper addresses the extent to which growth firms are adversely affected by a credit constraint the results suggest that the credit constraint for growing firms per se is no greater but growth firms may still experience a credit constraint as a consequence of their relative youth however there is evidence to suggest that firms expecting to grow in the future do perceive a rather tighter credit constraint but this may be partly or wholly offset by a generally better relationship with their bank