the collateral channel how real estate shocks affect corporate investment abstract what is the impact of real estate prices on corporate investment in the presence of financing frictions firms use pledgeable assets as collateral to finance new projects through this collateral channel shocks to the value of real estate can have a large impact on aggregate investment to compute the sensitivity of investment to collateral value we use local variations in real estate prices as shocks to the collateral value of firms that own real estate over the 1993 2007 period the representative us corporation invests 0 06 out of each 1 of collateral jel d22 g31 r30

nonmonetary effects of the financial crisis in propagation of the great depression this paper examines the effects of the financial crisis of the 1930s onthe path of aggregate output during that period our approach is complementary to that of friedman and schwartz who emphasized the monetary impact of the bank failures we focus on non monetary primarily credit related aspects of the financial sector output link and consider the problems of debtors as well as those of the banking system we argue that the financial disruptions of 1930 33 reduced the efficiency of the credit allocation process and that the resulting higher cost and reduced availability of credit acted to depress aggregate demand evidence suggests that effects of this type can help explain the unusual length and depth of the great depression this abstract was borrowed from another version of this item

the finance growth nexus evidence from bank branch deregulation this paper provides evidence that financial markets can directly affect economic growth by studying the relaxation of bank branch restrictions in the united states we find that the rates of real per capita growth in income and output increase significantly following intrastate branch reform we also argue that the observed changes in growth are the result of changes in the banking system improvements in the quality of bank lending not increased volume of bank lending appear to be responsible for faster growth

internal capital markets and the competition for corporate resources this article examines the role of corporate headquarters in allocating scarce resources to competing projects in an internal capital market unlike a bank headquarters has control rights that enable it to engage in winner picking the practice of actively shifting funds from one project to another by doing a good job in the winner picking dimension headquarters can create value even when it cannot help at all to relax overall firm wide credit constraints the model implies that internal capital markets may sometimes function more efficiently when headquarters oversees a small and focused set of projects this article analyzes the process by which internal capital markets channel limited resources to different uses inside a company in so doing it seeks to address two related sets of questions first what is the fundamental economic rationale for creating an internal capital market that is under what circumstances can it make sense to combine several technologically distinct projects under one roof and have them seek funding from corporate headquarters as opposed to setting them up as stand alone companies that each raise external financing on their own second given this rationale what is the optimal size and scope of an internal capital market should headquarters be involved in funding a large number of projects or just a few and should these projects be unrelated to one another or in similar lines of business the answers to both sets of questions flow from the insight that in a credit constrained setting where not all positive npv projects can be financed headquarters can create value by actively reallocating scarce funds across projects for example the cash flow generated by one division s activities may be taken and spent on investment in another division where the returns are higher or alternatively one division s assets may be used as collateral to raise financing that is then diverted to the other division simply put individual projects must compete for the scarce funds and headquarters job is to pick the winners and losers in this competition

when is foreign aid policy credible aid dependence and conditionality the author studies foreign aid policy within a principal agent framework he shows that one reason for foreign aid s poor overall record may be a moral hazard problem that shapes the aid recipient s incentive to undertake structural reform the model s basic prediction is a two way relationship disbursements of foreign aid are guided in part by the needs of the poor anticipating this recipients have little incentive to improve the welfare of the poor preliminary econometric work shows that the data support this hypothesis in principle conditionality could partly solve this problem but only if the donor can make a binding commitment to increase disbursements in good relative to bad states without such a commitment technology aid disbursements remain guided by the needs of the poor and recipient countries maintain a low effort to reduce poverty contrary to the conventional wisdom found in the aid literature the author shows that the welfare of all parties might be improved by using tied project aid or by delegating part of the aid budget to an international agency with less aversion to poverty

a three gap model of foreign transfers and the gdp growth rate in developing countries abstract a simplified macroeconomic framework is developed for the fiscal gap which is considered to be an important stumbling block for adjustment with growth in highly indebted developing countries distinctive characteristics of a fiscally constrained economy are compared with those of economies constrained either by the availability of savings or foreign exchange tentative implications for external conditionality accompanying debt relief measures are derived

house prices home equity based borrowing and the u s household leverage crisis us household leverage sharply increased in the years preceding the 2007 eco nomic recession the top panel of figure 1 shows the steady rise in household debt since 1975 which accelerated beginning in 2002 in just five years the household sector doubled its debt balance in comparison the contemporaneous increase in corporate debt was modest the middle panel shows that the increase in household debt from 2002 to 2007 translated into a striking rise in household leverage as mea sured by the debt to income ratio during the same time period corporate leverage declined the dramatic absolute and relative rise in us household leverage from 2002 to 2007 is unprecedented compared to the last 25 years one reason for the rapid expansion in household leverage during this period is that mortgage credit became more easily available to new home buyers mian and sufi 2009 strong house price appreciation from 2002 to 2006 however which may have been fueled by the availability of mortgage credit to a riskier set of new home buyers could also have had an important feedback effect on household lever age through existing homeowners given that 65 percent of us households already owned their primary residence before the acceleration in house prices the feedback from house prices to borrowing may be an important source of the rapid rise in household leverage that preceded the economic downturn our central goals in this study are to estimate how homeowner borrowing responded to the increase in house prices and to identify which homeowners responded most aggressively we examine this home equity based borrowing channel using a dataset consisting of anonymous individual credit files of a national consumer credit bureau agency we follow a random sample of over 74 000 us homeowners who owned their homes as of 1997 at an annual frequency from the end of 1997 until the end of 2008 the bottom panel of figure 1 plots the growth in debt of 1997 homeowners over time and shows that existing homeowners borrow significantly more debt as their house prices appreciate from 2002 to 2006 while the aggregate trend is suggestive

choosing to target what types of countries get different types of world bank projects well governed countries are more likely to make use of foreign aid for the purposes of economic development and poverty alleviation therefore if aid agencies are providing funds for the sake of development these countries should receive more aid and categorically different types of aid as compared with poorly governed countries in poorly governed countries aid should be given in forms that allow for less discretion using an original data set of all world bank projects from 1996 to 2002 the author distinguishes programmatic projects from investment projects and national from subnational investment projects if the world bank allows more discretion in well governed countries then it will choose to provide programmatic and national aid for these recipients the author presents evidence that the world bank provides a larger proportion of national investment lending in better governed countries with regard to programmatic lending he finds mixed evidence among counties eligible for international development association ida aid good governance surprisingly is associated with a lower proportion of programmatic aid whereas for international bank for reconstruction and development ibrd borrowers good governance is associated with a higher proportion the author subjects these results to a number of robustness checks although he confirms the existing result in the literature that the world bank provides larger overall amounts of aid to better governed countries his examination of the disaggregated data leads to questioning whether both lending wings of the world bank are designing aid programs in the most prodevelopment way possible

reinventing foreign aid for inclusive and sustainable development kuznets piketty and the great policy reversal this survey essay reviews over 200 papers in arguing that in order to achieve sustainable and inclusive development foreign aid should not orient developing countries towards industrialisation in the perspective of kuznets but in the view of piketty abandoning the former s view that inequality will fall with progress in industrialisation and placing more emphasis on inequality in foreign aid policy will lead to more sustainable development outcomes inter alia mitigate short term poverty address concerns of burgeoning population growth train recipient governments on inclusive development fight corruption and mismanagement and avoid the shortfalls of celebrated kuznets conjectures we discuss how the essay addresses post 2015 development challenges and provide foreign aid policy instruments with which discussed objectives can be achieved in summary the essay provides useful policy measures to avoid past pitfalls output may be growing and yet the mass of the people may be becoming poorer lewis 1955 lewis led all developing countries to water proverbially speaking some african countries have so far chosen not to drink amavilah 2014 piketty 2014 has led all developing countries to the stream again and a challenging policy syndrome of our time is how foreign aid can help them to drink

beyond capital fundamentalism harrod domar and the history of development economics the origins of capital fundamentalism the notion that physical capital accumulation is the primary determinant of economic growth have been often ascribed to harrod s and domar s proposition that the rate of growth is the product of the saving rate and of the output capital ratio it is argued here that development planners in the 1950s reinterpreted and adapted the growth formula to their agenda in order to calculate capital requirements development economists at the time lewis hirschman rostow and others were aware that harrod s and domar s growth models addressed economic instability based on keynesian multiplier analysis which differed from their concern with long run growth in developing economies harrod eventually applied his concept of the natural growth rate to economic development he claimed that the growth of developing economies was determined by their ability to implement technical progress not by capital accumulation subject to diminishing returns domar pointed out that the incremental capital output ratio was more likely a passive result of the interaction between the propensity to save and technological progress instead of a causal factor in the determination of growth

economic consequences of housing speculation by exploiting variation in state capital gains taxation as an instrument we analyze the economic consequences of housing speculation during the u s housing boom in the 2000s we find that housing speculation anchored in part on extrapolation of past housing price changes led not only to greater price appreciation economic expansions and housing construction during the boom in 2004 2006 but also to more severe economic downturns during the subsequent bust in 2007 2009 our analysis supports supply overhang and local household demand as two key channels for transmitting these adverse effects

proliferation and fragmentation transactions costs and the value of aid abstract the problem of the proliferation of the number of aid donors and aid channels continues to worsen it is widely and plausibly believed that this significantly reduces the value of aid by increasing direct and indirect transactions costs we contribute to the existing literature by a categorising the apparent adverse effects of proliferation b producing a reliable and fair indicator of the relative degree to which the main bilateral donors proliferate or concentrate their aid c giving some explanation of why some donors proliferate more than others d constructing a reliable measure of the extent to which recipients suffer from the problem of fragmentation in the sources of their aid and e demonstrating that the worst proliferators among the aid donors are especially likely to be suppliers of aid to recipients suffering most from fragmentation there are significant implications for aid policy

does foreign aid really raise per capita income a time series perspective we analyze the relationship between per capita income and foreign aid we employ annual data and five year averages and carefully examine the time series properties of the data panel estimations with dynamic feasible generalized least squares dfgls show that aid generally has an insignificant or minute negative significant impact on per capita income particularly in highly aid dependent countries this holds true for countries with different levels of human development and income as well as for different regions we also find that aid has a small positive impact on investment but a significant negative impact on domestic savings crowding out and the real exchange rate appreciation jel classification f35 o11 c23 c51 on analyse la relation entre le revenu per capita et l aide etrangere on utilise des donnees annuelles et des moyennes quinquennales et on examine les proprietes de ces series chronologiques des estimations d un modele dynamique utilisant des donnees de panel a l aide de la methode des moindres carres quasi generalises montrent que l aide a generalement un effet negatif minime ou insignifiant sur le revenu per capita particulierement dans les pays qui dependent beaucoup de l aide etrangere ce resultat tient tant pour des pays a divers niveaux de developpement et de revenus que pour differentes regions on decouvre que l aide a un petit effet positif sur l investissement mais un effet negatif significatif sur l epargne effet d encombrement et sur le taux de change reel appreciation

housing price booms and crowding out effects in bank lending analyzing the period 1988 2006 we document that banks that are active in strong housing markets increase mortgage lending and decrease commercial lending firms that borrow from these banks have significantly lower investment this is especially pronounced for firms that are more capital constrained or borrow from more constrained banks various extensions and robustness analyses are consistent with the interpretation that commercial loans were crowded out by banks responding to profitable opportunities in mortgage lending rather than with a demand based interpretation the results suggest that housing prices appreciations have negative spillovers to the real economy which were overlooked thus far received november 29 2016 editorial decision january 12 2018 by editor david hirshleifer authors have furnished an internet appendix which is available on the oxford university press web site next to the link to the final published paper online

technology and the dynamics of industrial structures an empirical mapping of dutch manufacturing this paper explores the empirical link between on the one hand innovation and on the other hand industrial structure and dynamics in the netherlands we use the concept of technological regimes as the guiding framework to interpret this relationship the data are drawn from the production statistics and the business register of manufacturing firms in the netherlands and the second community innovation survey a classification of technological regimes that refines pavitt s taxonomy is applied to the data our analysis is aimed at identifying the variables that are best able to discriminate between technological regimes for our dutch case we find that a mix of innovation related and market structure related variables account for most variability and broad differences across regimes dynamic market structure variables account for an additional share of variability and finer differences across regimes overall we conclude that the concept of technological regimes provides a useful framework that helps to shed further light on the relationship between innovation and market structure

binding constraint on economic growth under export oriented industrialization and globalization the two gap model of economic growth implies that different constraints on economic growth namely the savings and the foreign exchange availability are binding at different times this article estimates these varying binding constraints in 16 countries in east and southeast asia and latin america and explores their differences across countries regions and periods i show that the east and southeast asian countries which are recognized to be successful in export oriented industrialization are less constrained by the foreign exchange availability with reinforced export capacity than the latin american countries which had carried some inertia of import substituting industrialization policy until the 1980s in addition the economic growth turns out to be more constrained by the domestic savings in recent years which can be a reflection of capital account liberalization policies typically implemented in the late 1980s and 1990s and or a diminishing return to export led growth in either case this mi

what is the aggregate economic rate of return to foreign aid in recent years academic studies have been converging towards the view that foreign aid promotes aggregate economic growth we employ a simulation approach to i validate the coherence of empirical aid growth studies published since 2008 and ii calculate plausible ranges for the rate of return to aid our results highlight the long run nature of aid financed investments and the importance of channels other than accumulation of physical capital we find the return to aid lies in ranges commonly accepted for public investments and there is little to justify the view that aid has had a significant pernicious effect on productivity

capital requirements monetary policy and aggregate bank lending theory and empirical evidence capital requirements linked solely to credit risk are shown to increase equilibrium credit rationing and lower aggregate lending the model predicts that the bank s decision to lend will cause an abnormal runup in the borrower s stock price and that this reaction will be greater the more capital constrained the bank i provide empirical support for this prediction the model explains the recent inability of the federal reserve to stimulate bank lending by increasing the money supply i show that increasing the money supply can either raise or lower lending when capital requirements are linked only to credit risk the motivation of this article is first to examine the impact of risk based capital requirements namely those that link mandatory capital to asset ratios for banks to their loans on aggregate bank lending these requirements called the basle capital rules or bis guidelines went into effect in march 1989 for banks in the leading industrialized nations these rules initially required banks to maintain capital equal to 7 25 percent of business and most consumer loans with the requirement increasing to 8 percent by the end of 1992 secondly i wish to understand the link between monetary policy and aggregate bank credit in the presence of risk based capital requirements my curiosity is sparked in part by two recent phenomena one is the experience of the u s economy which displayed sluggish growth during 1989 93 despite a monetary policy that attempted to spur bank lending and economic activity and the other is the striking decline in loans relative to security holdings mostly government bonds in the asset portfolios of u s

advertising competition and market share instability this paper tests the hypothesis that advertising reduces leading firm market share instability a proxy for interfirm rivalry by creating market power if advertising increases product differentiation and brand loyalty then it also reduces demand cross elasticities and stabilizes shares changes over time in the combined market shares of the top four firms are examined for a large sample of four digit standard industrial classification manufacturing indust ries for 1963 82 multiple regression equations are used to explain s hare instability measured as deviations both about the simple mean a nd about a linear time trend the results indicate that advertising d oes not reduce market share instability copyright 1987 by the university of chicago

the ghost of financing gap testing the growth model used in the international financial institutions abstract the harrod domar growth model supposedly died long ago still today economists in the international financial institutions ifis apply the harrod domar model to calculate short run investment requirements for a target growth rate they then calculate a financing gap between the required investment and available resources and often fill the financing gap with foreign aid the financing gap model has two simple predictions 1 aid will go into investment one for one and 2 there will be a fixed linear relationship between growth and investment in the short run the data soundly reject these two predictions of the financing gap model

banks and loan sales marketing nonmarketable assets theories of financial intermediation predict that bank loans should not be marketable because of moral hazard problems banks will not conduct credit risk analysis or monitor borrowers if they are not at risk for failing to perform these services throughout most of history bank loans have not in fact been marketable yet by the end of the 1980 s the amount of commercial and industrial loan sales outstanding had grown to over 250 billion from trivial amounts at the beginning of the decade to explain the opening of this loan sales market we present a model of incentive compatible loan sales that allows for implicit contractual features between loan sellers and loan buyers we then test for the presence of these features using a sample of over 800 recent loan sales

policy uncertainty lender of last resort and the real economy abstract a reduction in lender of last resort lolr policy uncertainty positively affects bank lending and propagates to investment and employment we exploit a unique policy that reduced uncertainty regarding the availability of future lolr funding for banks as a quasi natural experiment using micro level data on banks firms and loans in portugal we generate cross sectional variation in banks exposure to uncertainty and find that the size of the haircut subsidy the gap between private market and central bank security valuations plays a key role in the propagation of the shock to lending and the real economy

can the west save africa in the new millennium the western aid effort toward africa has surged due to writ ings by well known economists a celebrity mass advocacy campaign and decisions by western leaders to make africa a major foreign policy priority this survey contrasts the predominant transformational approach west comprehensively saves africa to occasional swings to a marginal approach west takes one small step at a time to help individual africans evaluation of one step at a time initiatives is generally easier than that of transformational ones either through controlled experiments although these have been oversold or simple case studies where it is easier to attribute outcomes to actions we see two themes emerge from the literature survey 1 escalation as each successive western transformational effort has yielded disappointing results as judged at least by stylized facts since again the econometrics are shaky the response has been to try an even more ambitious effort and 2 the cycle of ideas rather than a progressive testing and discarding of failed ideas we see a cycle in aid ideas in many areas in africa with ideas going out of fashion only to come back again later after some lapse long enough to forget the previous disappointing experience both escalation and cyclicality of ideas are symptomatic of the lack of learning that seems to be characteristic of the transfor mational approach in contrast the marginal approach has had some successes in improving the well being of individual africans such as the dramatic fall in mortality

house prices collateral and self employment this paper explores the role of the collateral lending channel to facilitate small business starts and self employment in the period before the financial crisis of 2008 we document that between 2002 and 2007 areas with a bigger run up in house prices experienced a strong increase in employment in small businesses compared to employment in large firms in the same industries this increase in small business employment was particularly pronounced in industries that need little startup capital and can thus more easily be financed out of increases in housing as collateral our results highlight the importance of the collateral lending channel during the period of the house price boom in the creation of small establishments we show that this effect is separate from the aggregate demand channel that relies on home equity based borrowing leading to increased demand and employment creation

the impact of the international coffee agreement on producing countries the main objective of this article is to analyze the impact of the international coffee agreement s export system on the world coffee market focusing on increases in real export revenues transfer benefits and reductions in income variability risk benefits in each exporting country over the recent period of operation of the international coffee agreement s export quota system the authors find that the quota system had a stabilizing effect on world coffee prices the quotas reduced real export revenues for most small exporting countries but large producers gained most small countries gained however in terms of risk reduction if a brief suspension of the quota occurs from time to time caused for example by adverse weather which results in a shortfall in world supply the quota system works like a buffer stock scheme on average producing countries as a whole lose transfer benefits but gain risk benefits

aid policies and growth the authors of this paper use a new database on foreign aid to examine the relationships among foreign aid economic policies and growth of per capita gdp in panel growth regressions for 56 developing countries and 6 four year periods 1970 93 they find that the policies that have a great effect on growth are those related to fiscal surplus inflation and trade openness they construct an index for those three policies and have that index interact with foreign aid they have instruments for both aid and aid interacting with policies they find that aid has a positive impact on growth in developing countries with good fiscal monetary and trade policies in the presence of poor policies aid has no positive effect on growth this result is robust in a variety of specifications which include or exclude middle income countries include or exclude outliers and treat policies as exogenous or endogenous they examine the determinants of policy and find no evidence that aid has systematically affected policies either for good or for ill they estimate an aid allocation equation and show that any tendency for aid to reward good policies has been overwhelmed by donors pursuit of their own strategic interests in a counterfactual they reallocate aid reduce the role of donor interests and increasing the importance of policy such a reallocation would have a large positive effect on developing countries growth rates

more dollars than sense refining our knowledge of development finance using aiddata summary in this introductory essay to the special issue we introduce a new dataset of foreign assistance aiddata that covers more bilateral and multilateral donors and more types of aid than existing datasets while also improving project level information about the purposes and activities funded by aid we utilize that data to provide a brief overview of important trends in foreign aid contributors to this special issue draw on aiddata as well as other sources to analyze aid transparency new donors not previously described or analyzed aid allocation and aid effectiveness our recurring theme in this introductory essay is that aiddata and these initial academic projects refine rather than revolutionize our understanding of aid the database has added significant numbers of new projects dollar amounts donors and details about those projects though there is much more yet to add we worry that aid debates have been driven by too little information and that many claims are based on limited or very poor evidence rectifying these problems will not be instantaneous refining knowledge takes a lot of time and hard work the common feature of the papers in this special issue is their careful attention to nuance and detail in spite of what some recent authors have claimed aid is neither a simple solution nor a sufficient cause of most problems in developing countries its motivations distribution and effects are complex and shifting capturing this complexity requires detailed data careful thought and sophisticated methods that allow scholars to make conditional causal and descriptive inferences 2011 elsevier ltd all rights reserved

changes in concentration turbulence and the dynamics of market shares most previous studies of the dynamics of industry structure by emphasizing changes in concentration conceal much of the nature of underlying competitive processes here we employ a stochastic fir

financial integration housing and economic volatility abstract the great recession illustrates the sensitivity of the economy to housing this paper shows that financial integration fostered by securitization and nationwide branching amplified the positive effect of housing price shocks on the economy during the 1994 2006 period we exploit variation in credit supply subsidies across local markets from government sponsored enterprises to measure housing price changes unrelated to fundamentals using this instrument we find that house price shocks spur economic growth the effect is larger in localities more financially integrated through both secondary loan market and bank branch networks financial integration thus raised the effect of collateral shocks on local economies increasing economic volatility

corporate finance and the monetary transmission mechanism we analyze the transmission effects of monetary policy in a general equilibrium model of the financial sector with bank lending and securities markets bank lending is constrained by capital adequacy requirements and asymmetric information adds a cost to outside bank equity capital in our model monetary policy does not affect bank lending through changes in bank liquidity rather it operates through changes in the spread of bank loans over corporate bonds which induce changes in the aggregate composition of financing by firms and in banks equity capital base the model produces multiple equilibria one of which displays all the features of a credit crunch this article is concerned with the monetary transmission mechanism through the financial sector in particular the banking sector and securities markets specifically it analyzes the effects of open market operations on bank lending and securities issues in a real economy by building on recent advances in the microeconomics of banking it provides some underpinnings for the credit view of monetary policy which in its simplest form relies on an exogenously assumed limited substitutability between bank loans and bonds the macroeconomics literature distinguishes between the money view and credit view of monetary policy transmission bernanke and blinder 1988 1992 the money view takes bonds and loans to be perfect substitutes and only allows for the effects of monetary policy on aggregate investment consumption and savings through changes in interest rates the credit view allows for an additional effect on investment and economic activity operating through bank credit supply

always vote for principle though you may vote alone explaining united states political support for multilateral development loans summary what motivates the u s when casting votes and to what degree does its formal influence matter in final outcomes in multilateral development banks we first assess the formal influence of the u s on final decisions and find that 64 of projects lacking u s support were nevertheless approved suggesting u s influence is not as strong as previously thought we then test several hypotheses explaining how the u s votes on projects in mdbs we find recipient need is strongly related to u s support and some evidence for both economic and political factors such as trade relations and human rights

comprehensive wealth and future consumption accounting for population growth economic theory predicts that the current change in national wealth broadly defined to include natural and human capital as well as produced capital genuine savings determines whether the present value of future changes in consumption is positive or negative theoretical research has focused on the effects of population growth on this relation but no rigorous empirical investigation has been conducted panel data for 64 developing countries during 1970 82 are used to test the effects of three adjustments for population growth including one that controls for omitted wealth although the adjustments have substantial impacts on estimates of genuine savings they lead to only limited improvements in the relation between those estimates and subsequent consumption changes even without adjustments for population growth adjustments for natural resource depletion improve the relation significantly policymakers and economists can interpret published estimates of genuine savings as signals of future consumption paths if and only if the estimates include adjustments for natural resource depletion but better estimates of capital stocks are needed before it can be confidently said that adjustments for population growth significantly improve the accuracy of those signals

the dynamic implications of foreign aid and its variability abstract the paper examines the effects of aid and its volatility on consumption investment and the structure of production in the context of an intertemporal two sector general equilibrium model calibrated using data for aid dependent countries in africa a permanent flow of aid mainly finances consumption rather than investment consistent with the historical failure of aid inflows to translate into sustained growth large aid flows are associated with higher real exchange rates and smaller tradable sectors because aid is a substitute for tradable consumption aid volatility results in substantial welfare losses providing a motivation for recent discussions of aid architecture stressing the need for greater predictability of aid these results are also consistent with evidence from cross country regressions of manufactured exports presented later in the paper

bank capital and lending relationships this paper investigates the mechanisms behind the matching of banks and firms in the loan market and the implications of this matching for lending relationships bank capital and the provision of credit i find that bank dependent firms borrow from well capitalized banks while firms with access to the bond market borrow from banks with less capital this matching of bank dependent firms with stable banks smooths cyclicality in aggregate credit provision and mitigates the effects of bank shocks on the real economy

governance and growth in sub saharan africa real income per head in much of sub saharan africa grew rapidly in the 1960s but faltered following the first opec oil price shock in 1973 74 and then stagnated or fell from the late 1970s to the early 1990s africa also saw a broad wave of authoritarian rule sweep the continent in the 1960s and early 1970s since 1990 however the african political landscape has experienced significant changes many in the direction of greater pluralism and democracy moreover where civil strife has been avoided africa has seen a broad tendency towards rapid growth for several years after 1995 this sequence of events suggests that political economy may offer useful perspectives on africa s growth record over the last several decades we begin with a summary of africa s growth patterns and the evolution of african political regimes we then examine models of authoritarian rule for insights into the conditions under which elites may sacrifice the general interest to extract rents and retain power or in which leaders may find ways of making growth enhancing policy politically acceptable it would be premature to conclude that africa s political reforms of the 1990s have helped to generate economic progress however we do believe that the increase in political pluralism in combination with greater unity among african aid donors bodes well for a continuation of africa s growth recovery

competing at home to win abroad evidence from japanese industry the study explores the influence of domestic competition on international trade performance using data from a broad sample of japanese industries domestic rivalry is measured directly using market share instability rather than employing structural variables such as seller concentration we find robust evidence that domestic rivalry has a positive and significant relationship with trade performance measured by world export share particularly when r d intensity reveals opportunities for dynamic improvement and innovation conversely trade protection reduces export performance these findings support the view that local competition not monopoly collusion or a sheltered home market pressures dynamic improvement that leads to international competitiveness

loan sales and the cost of bank capital this paper considers a model where banks may improve the returns on loans by monitoring borrowers bank regulation together with competitive deposit and equity financing can give banks an incentive to sell loans but the extent of their loan selling is limited by a moral hazard problem a solution is given for the optimal design of the bank loan buyer contract that alleviates this moral hazard problem an explanation is also given as to why some banks might buy loans and why loan sales volume has recently increased banks practice of making loans and then selling them to other institutions and individuals has grown in popularity an important example in the development of loan selling has been the increase in banks mortgage loans that are insured and pooled under the authority of the government national mortgage association gnma and then sold to secondary market investors recently however there has been a dramatic rise in the volume of other types of loans being sold especially by money center banks portions of commercial loans originated by these larger banks are being sold to smaller banks foreign banks and other financial and nonfinancial institutions in addition banks car loans and credit card receivables have also been pooled and sold to institutions and individuals selling loans that were once considered nonmarketable assets a process that has been termed asset securitization may be signalling the start of a fundamental change in the commercial banking business the leading banks in loan selling operations now view themselves more as originators and distributors of loans rather than as institutions holding loans as assets the potentially large impact of loan sales on the future of commercial banking naturally evokes the question of what incentives exist for banks to sell loans in this paper we show that loan sales allow some banks to finance loans less expensively than by traditional deposit or equity issue because bank funds received via loan sales can avoid costs associated with required reserves and

fixed capital stock depreciation in developing countries some evidence from firm level data previous growth accounting studies suggest severe capital underutilisation and mismeasurement of the stocks of capital in some developing countries using the firm level data sets from the world ba

are banks really special new evidence from the fdic induced failure of healthy banks the fdic used cross guarantees in order to close 38 subsidiaries of first republicbank corporation in 1988 and 18 subsidiaries of first city bankcorporation in 1992 when lead banks from each of these texas based bank holding companies were declared insolvent i use this plausibly exogenous failure of otherwise healthy subsidiary banks as a natural experiment in order to study the impact of bank failure on local area real economic activity the resolution of these institutions was associated with a significant decline in failed bank lending that led to a permanent reduction in real county income of about 3 percent jel codes e5 g18 g33 keywords bank failures cross guarantee uniqueness of banks

testing a model of exploration and exploitation as innovation strategies we suggest a structural model that specifies firm growth as a function of firm specific parameters market specific parameters and competition for purchasing power the model distinguishes between two firm innovation strategies exploration and exploitation on the basis of a set of simulations of this model we derive a number of empirically testable hypotheses a subset of these have already found support in the empirical literature we take these as evidence in favor of the explanatory power of the model in addition we are able to derive further testable propositions on the interaction of firm demographic processes innovative behavior and market structure that go beyond the existing literature and that we suggest for further research we conclude that the approach chosen here provides a fruitful pathway for further research

curse or blessing has the impact of debt relief lived up to expectations a review of the effects of the multilateral debt relief initiatives for low income countries as the multilateral debt relief initiatives draw to a close this article reviews the impacts of debt relief to low income countries lics building on both the theoretical and empirical literature

aid intensity in africa abstract aid to sub saharan africa ssa is falling rapidly after reaching historically high levels in the early 1990s we provide a critical review of aid data and place the resource intensity of current flows in crosscountry and intertemporal perspective aid to ssa is not unusually high given the structural characteristics of african countries but it rose more rapidly than predicted until the mid 1990s we introduce the concept of transactions intensity and show that by some measures the management costs accompanying each dollar of aid to africa are comparatively high

loan sales and relationship banking firms raise money from banks and the bond market banks sell loans in a secondary market to recycle their funds or to trade on private information liquidity in the loan market depends on the relative likelihood of each motive for trade and affects firms optimal financial structure the endogenous degree of liquidity is not always socially optimal there is excessive trade in highly rated names and insufficient liquidity in riskier bonds we provide testable implications for prices and quantities in primary and secondary loan markets and bond markets further we posit that risk based capital requirements may be socially desirable the term collateralized loan obligations clos was coined in 1989 when corporate loans were first used as collateral in collateralized debt obligations cdos 1 since then the growth in loan sales has been enormous according to lucas et al 2006 1 1 trillion of cdos were outstanding as of 2005 and 50 of their collateral was comprised of loans in addition to pooled securities banks also trade first loss positions on single names through direct sales of individual loans in the united states loan sales have grown from 8 billion in 1991 to 154 8 billion by 2004 2 if a bank securitizes or sells a loan that it originated it is buying insurance on credit events over which it has either more control or more information than the buyer in the face of this informational friction why did the secondary market for corporate loans develop in the 1990s what effect has this had on relationship banking in this paper we characterize when a liquid secondary market for loans arises when a liquid secondary loan market is socially desirable and we provide testable predictions on the effect of the emergence of this market on prices and quantities in bond and primary loan markets our predictions are based on both changes in the parameters that lead to higher loan liquidity and changes in the contracts that are written between banks and firms given this higher liquidity

the persistence of market leadership evidence from japan this article explores the persistence of market leadership in japanese manufacturing industries over the period 1975 2004 by applying survival data techniques we examine how long market leadership persists and how the duration of market leadership varies according to industry specific characteristics our findings indicate that market leaders maintain their leadership positions for on average 20 years from 1975 in japanese manufacturing industries we provide evidence that market leadership tends to persist in capital intensive and legally cartelized industries whereas it is less likely to persist in demand volatile r d intensive and import intensive industries copyright 2009 the author 2009 published by oxford university press on behalf of associazione icc all rights reserved oxford university press

do all countries grow alike abstract this paper investigates the driving forces of output change in 77 countries during the period 1970 2000 a flexible modeling strategy is adopted that accounts for i the inefficient use of resources and ii different production technologies across countries the proposed model can identify technical efficiency and input change for each of three endogenously determined regimes membership in these regimes is estimated rather than determined ex ante this framework enables explorations into the determinants of output growth and convergence issues in each regime

adjustment with growth abstract this paper describes and examines simple versions of the analytical approaches employed by the international monetary fund and the world bank in designing adjustment programs that support their lending activities in the case of the bank this means essentially a variant of the two gap growth model and for the fund a model derived from the monetary approach to the balance of payments an attempt is also made to merge the fund and bank approaches within a consistent framework to demonstrate their complementarity

dynamic aid allocation abstract this paper introduces a framework for studying the optimal dynamic allocation of foreign aid among multiple recipients we pose the problem as one of weighted global welfare maximization a donor in the north chooses an optimal path for international transfers anticipating that consumption and investment decisions will be made by optimizing households in the south and accounting for limits in the extent to which recipients can effectively absorb aid we present quantitative results on optimal aid policy by applying our approach to a neoclassical growth model where the scope for aid funded growth is determined by the recipients distance from steady state

politics and the effectiveness of foreign aid abstract critics of foreign aid programs have long argued that poverty reflects government failure in this paper i test predictions for aid effectiveness based on an analytical framework that relates aid effectiveness to political regimes i find that aid does not significantly increase investment nor benefit the poor as measured by improvements in human development indicators but it does increase the size of government the impact of aid does not vary according to whether recipient governments are liberal democratic or highly repressive but liberal political regimes and democracies ceteris paribus have on average 30 lower infant mortality than the least free regimes this may be due to greater empowerment of the poor under liberal regimes even though the political elite continues to receive the benefits of aid programs an implication is that short term aid targeted to support new liberal regimes may be a more successful means of reducing poverty than current programs

aid proliferation and economic growth a cross country analysis summary we examine whether aid proliferation hinders economic growth by applying the standard aid growth regression to roodman s 2007 dataset with proper correction for possible biases arising from omitted variable and endogeneity problems specifically we include a donor concentration index to capture a low degree of donor proliferation and its interaction terms with aid variables as additional independent variables our empirical results show that the effect of aid concentration on economic growth is positive and favors the hypothesis that aid proliferation has a negative effect on the economic growth of recipient countries especially in africa

does the source of capital affect capital structure prior work on leverage implicitly assumes capital availability depends solely on firm characteristics however market frictions that make capital structure relevant may also be associated with a firm s source of capital examining this intuition we find firms that have access to the public bond markets as measured by having a debt rating have significantly more leverage although firms with a rating are fundamentally different these differences do not explain our findings even after controlling for firm characteristics that determine observed capital structure and instrumenting for the possible endogeneity of having a rating firms with access have 35 more debt copyright 2006 oxford university press

reasonable expectations and the first millennium development goal how much can aid achieve summary using a calibrated neoclassical growth model we address three questions i how much growth should aid flows have produced in sub saharan africa over the last three decades ii how much aid would be needed to attain the first millennium development goal mdg 1 of cutting poverty in half by 2015 iii taking proposed aid flows as given how much would structural characteristics such as domestic savings rates and productivity have to change in order to reach the mdg 1 our analysis indicates that past and future expectations for aid in fostering growth and poverty reduction have been too high

aid growth and devolution summary this paper examines whether the degree of fiscal decentralization in aid receiving countries matters in explaining aid effectiveness the decentralization theorem predicts that the devolution of powers should increase aid effectiveness since local decision makers are better informed about local needs thereby decentralization may also have reverse effects e g through coordination problems excessive regulation administrative costs and local capture we use panel data for up to 60 countries and find that aid contributes to economic growth in centralized developing economies whereas it is less effective or even harmful in decentralized countries the cases of indonesia the philippines and uganda support our findings our results imply that donor countries should carefully consider how the two development instruments foreign aid and decentralization interact

the effects of advertising prices and distribution on market share volatility although the influence of marketing decision variables on market share has received ample attention in the literature less is known about their effects on volatility this study attempts to shed light on this issue by empirically examining the effects of advertising pricing and distribution not only on market share but also on its volatility using an egarch model we argue that establishing a link between management controlled actions such as advertising pricing and distribution and market share volatility may benefit firms seeking to reduce uncertainty in their market share performance application of the proposed model to data on two markets suvs and minivans suggested that advertising pricing and distribution significantly influence market share volatility