euro dollar real exchange rate dynamics in an estimated two country model an assessment abstract several theoretical contributions using two country models have combined alternative forms of pricing under nominal rigidities with different asset market structures to explain real exchange rate dynamics we estimate a two country model using data for the united states and the euro area and study the importance of such alternative assumptions in fitting the data a model with local currency pricing and incomplete markets does a good job in explaining real exchange rate volatility and fits the dynamics of domestic variables well the complete markets assumption delivers a similar fit only when the structure of shocks is rich enough

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

heterogeneous market beliefs fundamentals and the sovereign debt crisis in the eurozone type main xml id ecca12155 abs 0001 the unprecedented sovereign debt crisis across the eurozone has prompted a new generation of models with self fulfilling attacks on public debt the model presented in this paper shows that multiple equilibria arise as investors have no direct information and form heterogeneous rational beliefs about the government s sustainable limit of the solvency primary balance if beliefs of insolvency are sufficiently large then the government is bound to default although initial solvency conditions are satisfied several issues are discussed concerning the role of initial conditions fiscal shocks and the policy options to escape from the default domain

sulfur dioxide control by electric utilities what are the gains from trade title iv of the 1990 clean air act amendments caaa established a market for transferable sulfur dioxide so2 emission allowances among electric utilities this market offers firms facing high marginal abatement costs the opportunity to purchase the right to emit so2 from firms with lower costs and this is expected to yield cost savings compared to a command and control approach to environmental regulation this paper uses econometrically estimated marginal abatement cost functions for power plants affected by title iv of the caaa to evaluate the performance of the so2 allowance market specifically we investigate whether the much heralded fall in the cost of abating so2 compared to original estimates can be attributed to allowance trading we demonstrate that for plants that use low sulfur coal to reduce so2 emissions technical change and the fall in prices of low sulfur coal have lowered marginal abatement cost curves by over 50 percent since 1985 the flexibility to take advantage of these chan

uncovering the common risk free rate in the european monetary union summary we introduce longitudinal factor analysis lfa to extract the common risk free crf rate from a sample of sovereign bonds of countries in a monetary union since lfa exploits the typically very large longitudinal dimension of bond data it performs better than traditional factor analysis methods that rely on the much smaller cross sectional dimension european sovereign bond yields for the period 2006 2011 are decomposed into a crf rate a default risk premium and a liquidity risk premium our empirical findings suggest that investors chase both credit quality and liquidity and that they price double default risk on credit default swaps copyright 2013 john wiley sons ltd

monetary policy and exchange rate volatility in a small open economy we lay out a small open economy version of the calvo sticky price model and show how the equilibrium dynamics can be reduced to a simple representation in domestic inflation and the output gap we use the resulting framework to analyse the macroeconomic implications of three alternative rulebased policy regimes for the small open economy domestic inflation and cpi based taylor rules and an exchange rate peg we show that a key difference among these regimes lies in the relative amount of exchange rate volatility that they entail we also discuss a special case for which domestic inflation targeting constitutes the optimal policy and where a simple second order approximation to the utility of the representative consumer can be derived and used to evaluate the welfare losses associated with the suboptimal rules

networks in conflict theory and evidence from the great war of africa we study from both a theoretical and an empirical perspective how a network of military alliances and enmities affects the intensity of a conflict the model combines elements from network theory and from the politico economic theory of conflict we obtain a closed form characterization of the nash equilibrium using the equilibrium conditions we perform an empirical analysis using data on the second congo war a conflict that involves many groups in a complex network of informal alliances and rivalries the estimates of the fighting externalities are then used to infer the extent to which the conflict intensity can be reduced through i dismantling specific fighting groups involved in the conflict ii weapon embargoes iii interventions aimed at pacifying animosity among groups finally with the aid of a random utility model we study how policy shocks can induce a reshaping of the network structure

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

the risk in hedge fund strategies theory and evidence from trend followers hedge fund strategies typically generate option like returns linear factor models using benchmark asset indices have difficulty explaining them following the suggestions in glosten and jagannathan 1994 this article shows how to model hedge fund returns by focusing on the popular trend following strategy we use lookback straddles to model trend following strategies and show that they can explain trend following funds returns better than standard asset indices though standard straddles lead to similar empirical results lookback straddles are theoretically closer to the concept of trend following our model should be useful in the design of performance benchmarks for trend following funds

a new approach to measuring financial contagion this article proposes a new approach to evaluate contagion in financial markets our measure of contagion captures the coincidence of extreme return shocks across countries within a region and across regions we characterize the extent of contagion its economic significance and its determinants using a multinomial logistic regression model applying our approach to daily returns of emerging markets during the 1990s we find that contagion is predictable and depends on regional interest rates exchange rate changes and conditional stock return volatility evidence that contagion is stronger for extreme negative returns than for extreme positive returns is mixed

srisk a conditional capital shortfall measure of systemic risk we introduce srisk to measure the systemic risk contribution of a financial firm srisk measures the capital shortfall of a firm conditional on a severe market decline and is a function of its size leverage and risk we use the measure to study top financial institutions in the recent financial crisis srisk delivers useful rankings of systemic institutions at various stages of the crisis and identifies fannie mae freddie mac morgan stanley bear stearns and lehman brothers as top contributors as early as 2005 q1 moreover aggregate srisk provides early warning signals of distress in indicators of real activity received june 7 2011 accepted april 18 2016 by editor geert bekaert

measuring sovereign risk spillovers and assessing the role of transmission channels a spatial econometrics approach abstract we contribute to the literature on international risk spillovers by developing a unified framework based on spatial econometrics that enables us to address the following questions i what are the effective transmission channels real linkages and informational channels of international risk spillovers across countries and or regions ii what are the most dominant ones and iii which countries are most at risk for their environment and which are suffering the most from international exposure our analysis based on 41 advanced and emerging economies from 2008q1 to 2012q4 shows that among the considered channels for explaining international spillovers of sovereign bond spreads the informational channel is of utmost importance our results challenge previous findings from the literature in which the empirical strategy did not accommodate altogether important features of country spillovers such as the co existence of multiple transmission channels in the presence of contemporaneous and time lagged interactions ultimately our stress testing analysis reveals important insights on countries prone either to international spillovers international exposure or both at the regional and the worldwide level

peer effects and social networks in education this paper studies whether structural properties of friendship networks affect individual outcomes in education we first develop a model that shows that at the nash equilibrium the outcome of each individual embedded in a network is proportional to her katz bonacich centrality measure this measure takes into account both direct and indirect friends of each individual but puts less weight to her distant friends we then bring the model to the data by using a very detailed dataset of adolescent friendship networks we show that after controlling for observable individual characteristics and unobservable network specific factors the individual s position in a network as measured by her katz bonacich centrality is a key determinant of her level of activity a standard deviation increase in the katz bonacich centrality increases the pupil school performance by more than 7 percent of one standard deviation

are european sovereign bonds fairly priced the role of modelling uncertainty abstract this paper examines the extent to which large swings of sovereign yields in euro area countries during the debt crisis can be attributed to fundamentals focusing on the inherent uncertainty in bond yield models we show that the outcomes are strongly affected by modelling choices with regard to i the confidence bands for the model prediction ii the assumption whether the model coefficients are similar across countries or not iii the sample selection iv the inclusion of financial variables and v the choice of time varying coefficients these choices affect the explanatory power of macro fundamentals and the extent of mispricing

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

on crises contagion and confusion abstract since the tequila crisis of 1994 1995 the asian flu of 1997 and the russian virus of 1998 economists have been busy producing research on the subject of contagion yet few studies have examined empirically through which channels the disturbances are transmitted if there are indeed fundamental reasons for the spillovers we observe we attempt to fill this gap by analyzing how both trade links and the largely ignored financial sector links influence the pattern of fundamentals based contagion we examine the role of international bank lending the potential for cross market hedging and bilateral and third party trade in the propagation of crises

the articulation of price earnings ratios and market to book ratios and the evaluation of growth this paper interprets the price earnings ratio pie and the marketto book ratio pib and describes how they articulate it also describes the role of book rate of return on equity the ratio of their denominators in the determination of the ratios and the relation between them although both are reported regularly there is not a common understanding of these issues for example the pie ratio has been interpreted as an earnings growth indicator cragg and malkiel 1982 and litzenberger and rao 1971 a risk measure ball 1978 and an earnings capitalization rate graham dodd and cottle 1962 boatsman and baskin 1981 and alford 1992 derivations based on the gordon 1962 model describe it as determined by return on equity beaver and morse 1978 show that this ratio indicates transitory earnings the molodovsky effect from molodovsky 1953 it has also been interpreted as an indicator of mispriced stocks basu 1977 and jaffee keim and westerfield 1989 and as a product of accounting principles craig johnson and joy 1987 the p b ratio received less academic attention until fama and french 1992 traditionally it was interpreted as indicating expected return on equity see for example graham dodd and cottle 1962 this interpretation is given expression in the standard formula reconciling price to book value in preinreich 1938 edwards and bell 1961 and peasnell 1982 for example like pie p b has been modeled as a growth

determinants of sovereign yield spreads in the eurozone a bayesian approach abstract we analyze the determinants of sovereign yields spreads of emu member states applying bayesian model averaging bma to annual panel data from 1999 to 2009 bma is well suited in cases of small samples and high model uncertainty this seems to be the case in modeling sovereign yield spreads in the eurozone since the literature reports heterogeneous results with respect to significant explanatory variables we are testing a number of variables reported to be significant in the literature and find that the most likely country specific drivers of yield spreads are fiscal variables such as budget balance and government debt as well as external sector variables such as terms of trade trade balance and openness global financing conditions indicated by the us interest rate and market sentiments indicated by corporate bond spreads are likely to influence sovereign yield spreads

forecasts of the managed futures market an empirical analysis abstractalternative investments including managed futures are primarily intended for institutional investors and for very wealthy individual investors it therefore seems logical to assume that the increase of wealth on a global scale can be a factor impacting the value of transactions in individual segments of the alternative investment market the purpose of this article is to indicate the factors affecting growth of managed futures transactions another research goal is to answer the question does the increase of wealth on a global scale affect the value of the managed futures transactions the article will also present short term forecasts of the transactions on the managed futures market for the years 2015 2017 the forecasts which will be constructed are meant to present possible scenarios of the market s further development evolution of the alternative investment segment leads to development of those categories which fulfil the expectations of market participants and meet the requirement and

sovereign spreads in the eurozone which prospects for a eurobond in this paper we provide new evidence on the determinants of sovereign yield spreads and market sentiment effects in the eurozone in order to evaluate the rationale for a common eurobond jointly guaranteed by eurozone member states we find that default risk is the main driver of yield spreads suggesting small gains from greater liquidity fiscal fundamentals matter in the pricing of default risk but only as they interact with other countries yield spreads that is with the global risk that the market perceives more importantly the impact of this global risk variable is not constant over time a clear sign of contagion driven by shifts in market sentiment this evidence points to a discontinuity in the disciplinary role of financial markets if markets can stay irrational longer than a country can stay solvent then the role of yield spreads on national bonds as a fiscal discipline device is considerably weakened and issuing eurobonds can be economically justified carlo favero and alessandro missale

sovereign debt guarantees and default lessons from the uk and ireland 1920 1938 abstract we study the daily yields on irish land bonds listed on the dublin stock exchange during the years 1920 1938 we exploit irish events during the period and structural differences in land bonds to tease out a measure of investors credibility in a uk sovereign guarantee using ireland s default on intergovernmental payments in 1932 we find a premium of about 43 basis points associated with uncertainty about the uk government guarantee we discuss the economic and political forces behind the irish and uk governments decisions pertaining to the default our finding has implications for modern day proposals to issue jointly guaranteed sovereign debt further in view of all the historical circumstances it is not equitable that the irish people should be obliged to pay away these moneys eamon de valera 12 october 1932

yield spreads on emu government bonds government bond spreads we provide evidence that the movements in yield differentials between euro zone government bonds explained by changes in international risk factors as measured by banking and corporate risk premiums in the united states are more pronounced for bonds issued by italy and spain liquidity factors play a smaller role so policies meant to increase financial market efficiency do not appear sufficient to deliver a seamless bond market in the euro area the risk of default is a small but important component of yield differentials movements which signal market perceptions of fiscal vulnerability impose market discipline on national fiscal policies and may be reduced only by further convergence in debt ratios lorenzo codogno carlo favero and alessandro missale

economic policy uncertainty and risk spillovers in the eurozone this paper focuses on the impact of economic policy uncertainty on risk spillovers within the eurozone and contributes to these two growing literatures to this end we adapt the two step procedure developed by adrian and brunnermeier forthcoming in the framework of financial systemic risk to the sovereign bond market accordingly we attempt i to measure the extent to which distress affecting one given country s sovereign spreads can affect the eurozone s bond market as a whole and then ii to identify the determinants of risk spillovers by estimating a panel data model with macroeconomic state variables and economic policy uncertainty epu indices introduced by baker et al 2013 as regressors epu indices considered concern the four largest eurozone countries i e germany france italy and spain as well as the united states the model is estimated with quarterly data for ten countries representing the bulk of debt issuances within the eurozone over a period ranging from q4 2008 to q2 2013 which is characterized by historically high dispersion of sovereign bond spreads either across time or across countries our results support the idea that economic policy uncertainty in the core economies of the eurozone i e germany and france as well as in the largest periphery countries i e italy and spain can create an environment likely to exacerbate the transmission of risk arising from abnormal developments of individual countries sovereign spreads to the eurozone bond market as a whole in this respect our results plead for larger effort of eurozone leaders to reduce the uncertainty surrounding their economic policy in periods of crisis not only to avoid adverse effects on their own economies but also to reduce the risk of a destabilization of the eurozone sovereign bond market as a whole

finance and international business cycles abstract business cycles are more correlated among countries that have similar financial structures we first document this empirical regularity using oecd data and then build a two country dsge model with financial frictions that replicates it alternative monetary policy regimes and parameter values are explored output co movements increase when the countries involved are linked by a credible exchange rate peg and when they open up to trade they decrease when their financial openness increases the model also accounts for a number of stylized facts of international business cycles such as the positive international correlation of output investment and employment

discussion of who is my peer a valuation based approach to the selection of comparable firms bhojraj and lee present a new approach to deriving warranted valuation multiples and selecting comparable firms conference participants comments centered on two key issues first participants questioned the motivation for deriving warranted valuation multiples and selecting comparable firms second participants questioned the procedure through which valuation theory was incorporated in the valuation multiple forecasting process

liaisons dangereuses increasing connectivity risk sharing and systemic risk the recent financial crisis poses the challenge to understand how systemic risk arises endogenously and what architecture can make the financial system more resilient to global crises this paper shows that a financial network can be most resilient for intermediate levels of risk diversification and not when this is maximal as generally thought so far this finding holds in the presence of the financial accelerator i e when negative variations in the financial robustness of an agent tend to persist in time because they have adverse effects on the agent s subsequent performance through the reaction of the agent s counterparties 2012 elsevier b v all rights reserved

how does liquidity affect government bond yields the paper explores the determinants of yield differentials between sovereign bonds using euro area data there is a common trend in yield differentials which is correlated with a measure of aggregate risk in contrast liquidity differentials display sizeable heterogeneity and no common factor we propose a simple model with endogenous liquidity demand where a bond s liquidity premium depends both on its transaction cost and on investment opportunities the model predicts that yield differentials should increase in both liquidity and risk with an interaction term of the opposite sign testing these predictions on daily data we find that the aggregate risk factor is consistently priced liquidity differentials are priced for a subset of countries and their interaction with the risk factor is in line with the model s prediction and crucial to detect their effect

p e p b and the present value of future dividends 1994 p e p b and the present value of future dividends financial analysts journal vol 50 no 4 pp 23 31

global implications of national unconventional policies abstract financial integration in the markets for banks assets and liabilities makes balance sheet constraints highly correlated across countries resulting in a high degree of financial and macroeconomic interdependence likewise under financial integration unconventional policies aimed at stabilizing domestic financial and credit conditions could entail large international spillovers therefore stabilization by one country will also benefit other countries reducing incentives to implement credit policies in a classic free riding problem especially when these policies entail domestic costs we show that this outcome can emerge in an open economy model featuring financial intermediaries that face endogenously determined balance sheet constraints

fiscal policy and interest rates in europe the appetite for fiscal discipline has been steadily declining among most industrial countries in the past fiscal profligacy would have been punished by markets with higher interest rates and in some cases also exchange rate depreciation however in post emu europe exchange rate markets no longer discipline the fiscal behaviour of national governments perhaps more crucially even the interest rate punishment to fiscal indiscipline is highly uncertain with academic opinions being quite divided on this issue this paper takes a close look at the link between fiscal policy and interest rates in the european context the key finding is that an expansionary fiscal policy in one emu member will have an effect both on its spreads and on the overall level of interest rates for the currency union as a whole with the second effect however being quantitatively much more significant this suggests that there are indeed substantial spillovers through the interest rate channel among fiscal policies of member countries to limit countries incentive to run expansionary fiscal policies a set of rules like those embedded in the stability and growth pact is then needed some weak evidence is also found that after emu interest rate spillovers seem to be more significant for high debt countries with unsustainable fiscal policies reflecting perhaps market concerns about a possible sovereign bail out or the impact of financial distress there may be a case then for imposing tighter rules on high debt countries riccardo faini

the european sovereign debt crisis the origin and propagation of the european sovereign debt crisis can be attributed to the flawed original design of the euro in particular there was an incomplete understanding of the fragility of a monetary union under crisis conditions especially in the absence of banking union and other european level buffer mechanisms moreover the inherent messiness involved in proposing and implementing incremental multicountry crisis management responses on the fly has been an important destabilizing factor throughout the crisis after diagnosing the situation we consider reforms that might improve the resilience of the euro area to future fiscal shocks

sovereign bond yield spreads a time varying coefficient approach abstract we study the determinants of sovereign bond yield spreads across 10 emu countries between q1 1999 and q1 2010 we apply a semiparametric time varying coefficient model to identify to what extent an observed change in the yield spread is due to a shift in macroeconomic fundamentals or due to altering risk pricing we find that at the beginning of emu the government debt level and the general investors risk aversion had a significant impact on interest differentials in the subsequent years however financial markets paid less attention to the fiscal position of a country and the safe haven status of germany diminished in importance by the end of 2006 two years before the fall of lehman brothers financial markets began to grant germany safe haven status again one year later when financial turmoil began the market reaction to fiscal loosening increased considerably the altering in risk pricing over time period confirms the need of time varying coefficient models in this context

regionality revisited an examination of the direction of spread of currency crises abstract what determines the direction of spread of currency crises we examine data on waves of currency crises in 1992 1994 1997 and 1998 to evaluate several hypotheses on the determinants of contagion we simultaneously consider trade competition financial links and institutional similarity to the ground zero country as potential drivers of contagion to overcome data limitations and account for model uncertainty we utilize bayesian methodologies hitherto unused in the empirical literature on contagion in particular we use the bayesian averaging of binary models that allows us to take into account the uncertainty regarding the appropriate set of regressors we find that institutional similarity to the ground zero country plays an important role in determining the direction of contagion in all the emerging market currency crises in our dataset we thus provide persuasive evidence in favour of the wake up call hypothesis for financial contagion trade and financial links may also play a role in determining the direction of contagion but their importance varies amongst the crisis periods

financial networks and contagion we study cascades of failures in a network of interdependent financial organizations how discontinuous changes in asset values e g defaults and shutdowns trigger further failures and how this depends on network structure integration greater dependence on counterparties and diversification more counterparties per organization have different nonmonotonic effects on the extent of cascades diversification connects the network initially permitting cascades to travel but as it increases further organizations are better insured against one another s failures integration also faces trade offs increased dependence on other organizations versus less sensitivity to own investments finally we illustrate the model with data on european debt cross holdings jel d85 f15 f34 f36 f65 g15 g32 g33 g38 globalization brings with it increased financial interdependencies among many kinds of organizations governments central banks investment banks firms etc that hold each other s shares debts and other obligations such interdependencies can lead to cascading defaults and failures which are often avoided through massive bailouts of institutions deemed too big to fail recent examples include the us government s interventions in aig fannie mae freddie mac and general motors and the european commission s interventions in greece and spain although such bailouts circumvent the widespread failures that were more prevalent in the nineteenth and early twentieth centuries they emphasize the need to study the risks created by a network of interdependencies understanding these risks is crucial to designing incentives and regulatory responses which defuse cascades before they are imminent in this paper we develop a general model that produces new insights regarding financial contagions and cascades of failures among organizations linked through a network of financial interdependencies organizations values depend on each other e g through cross holdings of shares debt or other liabilities if an

the dark side of global integration increasing tail dependence abstract we measure stock market coexceedances using the methodology of cappiello gerard and manganelli 2005 ecb working paper 501 this method enables us to measure comovement at each point of the return distribution first we construct annual coexceedance probabilities for both lower and upper tail return quantiles using daily data from 1974 2006 next we explain these probabilities in a panel gravity model framework results show that macroeconomic variables asymmetrically impact stock market comovement across the return distribution financial liberalization significantly increases left tail comovement whereas trade integration significantly increases comovement across all quantiles decreasing exchange rate volatility results in increasing lower tail comovement the introduction of the euro increases comovement across the entire return distribution thereby significantly reducing the benefits of portfolio diversification within the euro area

tactical allocation in commodity futures markets combining momentum and term structure signals this paper examines the combined role of momentum and term structure signals for the design of profitable trading strategies in commodity futures markets with significant annualized alphas of 10 14 and 12 66 respectively the momentum and term structure strategies appear profitable when implemented individually with an abnormal return of 21 02 our double sort strategy that exploits both momentum and term structure signals clearly outperforms the single sort strategies this double sort strategy can additionally be utilized as a portfolio diversification tool the abnormal performance of the combined portfolios cannot be explained by a lack of liquidity data mining or transaction costs

determinants of sovereign bond yield spreads in the emu an optimal currency area perspective in the light of the recent financial crisis we take a panel cointegration approach that allows for structural breaks to the analysis of the determinants of sovereign bond yield spreads in nine economies of the european monetary union we find evidence for a level break in the cointegrating relationship moreover results show that i fiscal imbalances namely expected government debt to gdp differentials are the main long run drivers of sovereign spreads ii liquidity risks and cumulated inflation differentials have non negligible weights but iii all conclusions are ultimately connected to whether or not the sample of countries is composed of members of an optimal currency area oca in particular we establish i that results are overall driven by those countries not passing the oca test and ii that investors closely monitor and severely punish the deterioration of expected debt positions of those economies exhibiting significant gaps in competitiveness

revisiting the new normal hypothesis abstract the paper estimates the impact of crises on output growth augmenting cerra and saxena s 2008 analysis by extending the data until 2010 and by taking into account globalization and contagion effects the paper finds that the decline in output growth rates following currency banking and stock market crises are much larger in the sample ending in 2010 than in the one ending in 2001 the results are robust across different specifications and crisis databases the paper finds that globalization estimated using a factor augmented panel has benefitted economic growth in the long run but those gains have been diminishing in the new millennium moreover globalization also amplifies the negative effects of crises especially for upper middle and high income oecd countries starting with the new millenium as such lower output growth is to be expected as the new norm especially in these more advanced economies for a lot longer than what would have been expected in an usual cyclical recovery confirming el erian and pimco s 2009 statement of a new normal last but not least the estimation using a factor augmented panel leads to results consistent with thresholds effects of finance and growth and of globalization on growth