causality between fdi and financial market development evidence from emerging markets this paper studies the causal relationship between foreign direct investment fdi and financial market development fmd using panel data from emerging markets most studies of the relationship between fdi and fmd have focused on the role of fmd in the link between fdi and economic growth with no deep understanding of direct causality between fdi and fmd especially in emerging markets where financial markets are in the development stage we document bidirectional causality between fdi and stock market development indicators for banking sector development indicators the relationship is ambiguous and inconclusive care is therefore needed when analysing the relationship between fmd and fdi as results may depend on whether the fmd variables used to evaluate causality are stock market or banking sector development indicators

cross country evidence on the link between the level of infrastructure and capital inflows the relationship between public infrastructure and international capital flows is empirically investigated out of a sample of 30 countries a cross sectional econometric model is constructed to estimate the effects different components of infrastructure variables are tested in relation to their impact on different kinds of external capital liabilities the results suggest a positive relationship between the level of infrastructure and capital inflows however statistical significance cannot be established for all variables in question

the death of the pigovian tax policy implications from the double dividend debate recently economists appear to have abandoned a central precept of environmental policy optimal environmental taxes are equal to marginal environmental damage med as a consequence of labor market distortions optimal environmental taxes are now generally argued to typically lie below med and given realistic policy constraints on optimal tax reform sometimes well below med this new consensus is reflected in over a dozen papers published without rebuttal in prestigious economics journals in important survey articles and in policy oriented manuscripts how was it possible that such a radical transformation of economic thinking occurred with essentially no debate in the literature

macroprudential policies capital flows and the structure of the banking sector abstract using a large sample of advanced and emerging market economies over the period 1999 2012 we examine the effectiveness of macroprudential policies mpps in managing cross border bank flows conditioning on the structure of the banking sector in the mpp implementing country we find that higher regulatory quality and a higher credit to deposit ratio increase the effectiveness of mpps while a higher cost to income ratio has the opposite effect if all three financial variables are evaluated at the median the marginal effect of our preferred mpp measure leads to a reduction of international bank inflows in percent of gdp by around half a percentage point and is only marginally significant however when the more enhanced 25th 10th percentiles of their respective distributions are considered we observe as a response to the same mpp measure a reduction of bank inflows by 3 44 5 39 percentage points that is highly statistically and economically significant additionally we find that the structure of the domestic banking sector determines spillovers from mpps across asset classes while spillovers from mpps across countries are a function of banking sector conditions both at home and abroad

fiscal paradise foreign tax havens and american business the tax haven affiliates of american corporations account for more than 20 percent of u s foreign direct investment and nearly a third of the foreign profits of u s firms american companies report extraordinarily high profit rates on their tax haven investments in 1982 this behavior implies that the revenue maximizing tax rate for a typical haven is around 5 8 percent american and foreign investment in tax havens has an uncertain effect on u s tax revenue but since low tax rates encourage american companies to shift profits out of high tax foreign countries it is possible that low foreign tax rates ultimately enhance u s tax collections

fdi as an outcome of the market for corporate control theory and evidence abstract much foreign direct investment fdi takes the form of mergers and acquisitions m a it is commonplace in finance to view acquisitions as manifestations of the market for corporate control following on that insight we propose a model of fdi in which headquarters bid to control overseas assets we derive an equation for bilateral fdi stocks that resembles the recently developed fixed effects approach to modelling bilateral trade flows we estimate the model and use its parameters to construct benchmarks for evaluating multilateral inward and outward fdi

infrastructure and development a critical appraisal of the macro level literature this survey reviews the existing macro level empirical literature on the link between infrastructure and development outcomes in a critical light after providing a general framework that casts the relevant terms of the controversy on the real effect of infrastructure on growth in the context of an aggregate production function it signals what are the relevant empirical questions to be addressed this guides the systematic review of a number of empirical studies and the discussion of the main econometric challenges to the identification of the effect of infrastructure on output and productivity finally building on related research in particular in contract theory and political economy the paper spells out several promising research avenues

last bank standing what do i gain if you fail banks are highly leveraged institutions potentially attracted to speculative lending even without deposit insurance a counterbalancing incentive to lend prudently is the risk of loss of charter value which depends on future rents we show in a dynamic model that current concentration does not reduce speculative lending and may in fact increase it in contrast a policy of temporary increases in market concentration after a bank failure by promoting a takeover of failed banks by a solvent institution is very effective by making speculative lending decisions strategic substitutes it grants bankers an incentive to remain solvent subsequent entry policy fine tunes the trade off between the social costs of reduced competition and the gain in stability

in search of substitution between foreign production and exports abstract are foreign production and exports substitutes or complements standard theory of the multinational corporation mnc assumes substitution while previous empirical work examining the relationship has generally found strong evidence of complementarity this study examines product level data which more closely fits the assumption of a single product firm often used in mnc theory and finds substantial evidence for both a substitution and a complementarity effect between affiliate production and exports with japanese automobile parts for the us market i also test for and find evidence of substitution using product level data on a set of japanese produced final consumer goods

fickle capital flows and retrenchment evidence from bilateral banking data abstract we empirically examine the response of cross border capital flows to economic uncertainty using bilateral banking flow data we show that while banks reduce their exposure to a foreign country when it becomes more risky they tend to increase their exposure to their home country in bad times a retrenchment to further understand this puzzle we examine how the differential response to foreign and domestic uncertainty is affected by country specific characteristics bilateral characteristics and crises our analysis suggests that most of the current theories based on either information asymmetries between foreign and domestic investors or institutional risk cannot explain bilateral data well on the other hand our results show that global crises have an asymmetric impact on the risk attitudes of banking institutions towards country specific uncertainty global crises make investors more risk averse towards foreign uncertainty but have no effect on the responsiveness to domestic uncertainty

firm specific assets and the link between exchange rates and foreign direct investment foreign direct investment fdi theory and empirical studies have generated mixed support for a link between exchange rates and fdi this paper argues that exchange rate movements may affect acquisition fdi because acquisitions involve firm specific assets which can generate returns in currencies other than that used for purchase using data on japanese acquisitions in the united states across three digit sic industries from 1975 to 1992 maximum likelihood estimates from discrete dependent variable models support the hypothesis that real dollar depreciations make japanese acquisitions more likely in u s industries particularly those which more likely have firm specific assets copyright 1997 by american economic association

to what extent can foreign direct investment help achieve international development goals for fdi to help alleviate absolute poverty and stimulate economic growth in developing countries two conditions have to be met first developing countries need to be attractive to foreign investors second the host country environment in which foreign investors operate must be conducive to favourable fdi effects with regard to overall investment economic spillovers and income growth this paper argues that it is more difficult to benefit from fdi than to attract fdi the widely perceived concentration of fdi in few developing countries tends to obscure that in relative terms various small and poor countries are fairly attractive to fdi yet the mobilisation of domestic resources remains by far more important than attracting fdi for financing investment and stimulating economic growth furthermore high inward fdi is no guarantee for poverty alleviation and positive growth effects in particular the empirical evidence suggests that host country conditions typically prevailing in poor countries including weak institutions and an insufficient endowment of complementary factors of production constrain the growth enhancing and poverty alleviating effects of fdi the crux is that creating an environment in which fdi may deliver social returns will take considerable time exactly where development needs are most pressing

global capital flows and financing constraints firms often cite financing constraints as one of their primary obstacles to investment global capital flows by bringing in scarce capital may ease the financing constraints of host country firms but if incoming foreign investors borrow heavily from domestic banks foreign direct investment may exacerbate financing constraints by crowding host country firms out of domestic capital markets combining a unique cross country firm level panel with time series data on restrictions on international transactions and capital flows harrison love and mcmillan find that different measures of global flows are associated with a reduction in firm level financing constraints first the authors show that one type of capital inflow foreign direct investment is associated with a reduction in financing constraints second they test whether restrictions on international transactions affects the financing constraints of firms the results suggest that only one type of restriction those on capital account transactions negatively affects firms financing constraints the authors also show that multinational firms are not financially constrained and do not appear to be sensitive to the level of foreign direct investment this implies that foreign direct investment eases financing constraints for non multinational firms finally the authors show that 1 foreign direct investment only eases financing constraints in the non g7 countries and 2 other kinds of flows such as portfolio investment have no impact on financing constraints

do capital market imperfections exacerbate output fluctuations abstract we develop a dynamic general equilibrium macroeconomic model where a proportion of firms are credit constrained due to asymmetric information in general a macroeconomic shock has additional effects created by a reallocation of funds between credit constrained and unconstrained firms as they have different marginal productivities we show however that the output response to shocks is not necessarily amplified and can be dampened by the presence of asymmetric information this depends on the impact of the shock on the composition of external and internal funds for credit constrained firms

a new global index of infrastructure construction rankings and applications we construct comprehensive and comparable indices on the most relevant components of economic infrastructure an unobserved components model is employed to cover the largest possible number of developing and developed countries over the period 1990 2010 we map major findings from the new indices of infrastructure and provide country rankings which we also compare with subjective assessments of infrastructure in the world economic forum s global competitiveness report finally we exemplify possible applications related to trade and foreign aid by overcoming several data limitations our new global index can help assess the links between infrastructure and economic development more systematically

nitrogen land substitution in corn production a reconciliation of aggregate and firm level evidence in this paper we seek to reconcile low farm level substitution elasticity between nitrogen fertilizer and land with larger industry level values for the corn sector this is accomplished with a micro simulation model which identifies twenty three heterogeneous groups of corn farmers based on survey data for indiana after controlling for soil quality slope crop rotation and natural nitrogen sources considerable variation in fertilizer application rates remains model simulations indicate that the estimated substitution elasticity at the state level 1 15 is consistent with very low farm level substitutability the difference is attributable to compositional changes in the wake of relative price shocks these compositional effects are potentially very important but they are ignored in most policy analyses

troubled banks impaired foreign direct investment the role of relative access to credit during the 1980 s theories were developed to explain the striking correlation between real exchange rates and foreign direct investment fdi however this relationship broke down for japanese fdi in the 1990 s as the real exchange rate appreciated while fdi plummeted we propose the relative access to credit hypothesis and show that unequal access to credit by japanese firms contributes to the explanation of declining japanese fdi using bank level and firm level data sets we find that financial difficulties at banks were economically and statistically important in reducing the number of fdi projects by japanese firms into the united states jel g21 f36

imperfect competition risk taking and regulation in banking abstract we asses the welfare implications of banking competition under various deposit insurance regimes in a model of imperfect competition with social failure costs and where banks are subject to limited liability we study the links between competition for deposits and risk taking incentives and conclude that the welfare performance of the market and the appropriateness of alternative regulatory measures depend on the degree of rivalry and the deposit insurance regime specifically when competition is intense and the social failure costs high deposit rates are excessive both in a free market and with risk based insurance if insurance premiums are insensitive to risk then the same is true even if there is no social cost of failure we find also that in an uninsured market with nonobservable portfolio risk or with flat premium deposit insurance deposit regulation rate regulation or deposit limits and direct asset restrictions are complementary tools to improve welfare in an uninsured market with observable portfolio risk or with risk based insurance deposit regulation may be a sufficient instrument to improve welfare

market power and banking failures abstract we investigate whether more competition in the banking industry necessarily results in a higher probability of banking failures as it is often suggested in our model borrowers face a moral hazard problem which induces banks to choose between costly monitoring and credit rationing we show that investment decreases with the lending rate and increases with monitoring effort since incentives to monitor are enhanced by market power the relationship between market structure and investment is ambiguous in the presence of non diversifiable risk and decreasing returns to scale more investment implies higher failure rates as a result the relationship between market power and banking failures is ambiguous

the erosion of colonial trade linkages after independence high trade between countries with colonial ties may be explained by government policies that establish preferential access or as a consequence of networks formed through social interactions using bilateral trade data from 1948 to 2003 we examine the eect of independence on post colonial trade the severing of formal colonial relations can lead to an immediate reduction in trade as preferential access is eliminated as well as a gradual reduction corresponding to the deterioration of trading networks our results reveal that independence reduces colonial trade with its colonizer metropole the reduction cumulates over a 30 year period and the disruption is particularly severe for hostile separations we also find that overall colonial trade falls subsequent to independence but to a lesser extent than trade with the metropole

bank competition and financial stability much ado about nothing the theoretical literature gives conflicting predictions on how bank competition should affect financial stability and dozens of researchers have attempted to evaluate the relationship empirically we collect 598 estimates of the competition stability nexus reported in 31 studies and analyze the literature using meta analysis methods we control for 35 aspects of study design and employ bayesian model averaging to tackle the resulting model uncertainty our findings suggest that the definition of financial stability and bank competition used by researchers influences their results in a systematic way the choice of data estimation methodology and control variables also affects the reported coefficient we find evidence for moderate publication bias taken together the estimates reported in the literature suggest little interplay between competition and stability even when corrected for publication bias and potential misspecifications this abstract was borrowed from another version of this item

welfare impacts of alternative public policies for agricultural pollution control in an open economy a general equilibrium framework a general equilibrium approach is used to evaluate the welfare impacts of alternative policies for reducing agricultural pollution in an open economy with preexisting distortions caused by income taxes and agricultural subsidies the policies examined here include the removal of distortionary agricultural subsidies we find that even though these distortions are small compared to others in the economy removing them and imposing nitrogen reduction subsidies and or output taxes can enhance welfare and reduce nitrogen pollution thereby leading to a substantial double dividend the relative efficiency of the alternative policies examined here depends on the level of the nitrogen reduction target copyright 2008 oxford university press

telecommunications infrastructure and economic development a simultaneous approach in diesem beitrag wird untersucht welchen einflus die telekommunikations infrastruktur auf die wirtschaftliche entwicklung ausubt diese wichtige frage hat im zusammenhang mit der diskussion um informationsautobahnen aktualitat erlangt in der vorliegenden studie wird der einflus der telekommunikations infrastruktur fur 21 oecdlander fur die vergangenen 20 jahre analysiert es wird ein strukturgleichungsmodell geschatzt in dem investitionen in die telekommunikations infrastruktur als endogene variable erfast werden und in einem mikromodell angebot und nachfrage nach telekommunikations investitionen spezifiziert werden das mikromodell wird dann zusammen mit der makro wachstumsgleichung geschatzt als ergebnis stellen die autoren dann eine positive kausalbeziehung zwischen telekommunikations investitionen und wirtschaftlicher entwicklung fest wenn eine kritische masse an telekommunikations infrastruktur existiert

history gravity and international finance abstract we analyse patterns of bilateral financial investment using data on us holdings of foreign bonds we document a history effect in which holdings seven decades ago continue to influence holdings today 10 15 of the cross country variation in us investors foreign bond holdings is explained by holdings 70 years ago plausibly reflecting fixed costs of market entry and exit and endogenous learning this effect is twice as large for bonds denominated in currencies other than the dollar suggesting the existence of even higher fixed costs of initiating us foreign investment in such currencies our findings point to history and path dependence as key sources of financial market segmentation

the double dividend hypothesis in a cge model specific factors and the carbon base abstract we use a computable general equilibrium model to empirically examine the double dividend dd hypothesis using the gtap model data for australia we examine three environmental taxes on the production of energy goods following bento and jacobsen 2007 we examine the role played by specific factors in the production of energy goods our results provide support for the existence of a strong dd in australia when revenue is recycled through reductions in consumption taxes the strong dd is larger when the share of specific factors is higher and is much more pronounced when carbon taxes are charged on the production origin based accounting rather than the usage destination based accounting of carbon these results draw attention to the importance of the definition of the carbon base and have implications for the scale of carbon leakage

foreign banks trends and impact over the past two decades foreign banks have become much more important in domestic financial intermediation heightening the need to understand their behavior we introduce a new comprehensive database made publicly available on bank ownership including the home country of foreign banks for 5 324 banks in 137 countries over the period 1995 2009 we document large increases in foreign bank presence in many countries but with substantial heterogeneity in terms of host and banks home countries bilateral investment patterns and bank characteristics in terms of impact we document that the relation between private credit and foreign bank presence importantly depends on host country and banks characteristics specifically foreign banks only seem to have a negative impact on credit in low income countries in countries where they have a limited market share where enforcing contracts is costly and where credit information is limited available and when they come from distant home countries this shows that accounting for heterogeneity including bilateral ownership is crucial to better understand the implications of foreign bank ownership

when can carbon abatement policies increase welfare the fundamental role of distorted factor markets abstract this paper employs analytical and numerical models to assess the welfare effects of a revenue neutral carbon tax and nonauctioned carbon emissions permits taking into account preexisting tax distortions in factor markets the presence of preexisting taxes significantly raises the general equilibrium costs of both policies this cost increase is much greater under emissions permits since this policy does not generate revenues to reduce distortionary taxes under our central estimates emissions permits cannot increase welfare unless environmental damages exceed about 18 per ton of carbon in contrast an appropriately scaled carbon tax is welfare improving so long as environmental damages are positive

on the implications of market power in banking evidence from developing countries abstract this paper investigates how different degrees of market power affect bank efficiency and stability in the context of developing economies it sheds light on the competition stability nexus by documenting and analyzing the complex interactions between a tripod of variables that are central for regulators the degree of market power bank cost and profit efficiency and overall firm stability the results show that an increase in the degree of market power leads to greater bank stability and enhanced profit efficiency despite significant cost efficiency losses the findings lend empirical justification to the traditional view that increased competition may undermine bank stability and may bear significant implications for stressed banking systems in developing economies

financial market development in host and source countries and their effects on bilateral foreign direct investment we study an underexplored research question namely whether financial market development in both host and source countries has an effect on bilateral stocks of foreign direct investment fdi and particularly whether the effect of financial market development in one member of the country pair conditions the effect of financial market development in the other member we estimate gravity type models in a global sample of 43 source and 137 host countries over the period 2001 12 we address reverse causality concerns by restricting the sample to observations where reverse causality if existent should be less relevant our major and robust findings are that bilateral fdi increases with better developed financial markets in both the host and the source country and that for developing host countries financial market development in source and host countries functions as substitutes for each other

the efficiency value of effluent tax revenues the concept of the efficiency value of effluent tax revenues is developed it is defined as the reduction in excess burden resulting from the substitution of these revenues for current or future resource distorting tax revenues such as those raised from federal corporate and personal income taxes the annual efficiency value of revenues raised by national effluent taxes on two major air pollutants is estimated to range from 0 63 to 3 05 billion if substituted for federal personal income tax revenue and from 1 to 4 87 billion if substituted for corporate income tax revenue expressed in 1982 dollars thus previous estimates of the efficiency gain from substitution of an effluent tax scheme for current pollution regulation policy have been too low because the efficiency value of the tax revenues has been excluded

does foreign direct investment promote growth exploring the role of financial markets on linkages abstract do multinational companies generate positive externalities for the host country the evidence so far is mixed varying from beneficial to detrimental effects of foreign direct investment fdi on growth with many studies that find no effect in order to provide an explanation for this empirical ambiguity we formalize a mechanism that emphasizes the role of local financial markets in enabling fdi to promote growth through backward linkages using realistic parameter values we quantify the response of growth to fdi and show that an increase in the share of fdi leads to higher additional growth in financially developed economies relative to financially under developed ones

financial opening deposit insurance and risk in a model of banking competition abstract we study the impact of competition on banks risk taking behavior under different assumptions about deposit insurance and the dissemination of information while financial opening increases banks riskiness a risk based deposit insurance or alternatively the public disclosure of financial information are likely to mitigate this effect moreover the limiting cases of uninsured but fully informed depositors and risk based full deposit insurance yield the same equilibrium risk level although the welfare consequences of increased competition depend on its impact on risk financial opening unambiguously improves welfare as we approach the limiting cases

aid infrastructure and fdi assessing the transmission channel with a new index of infrastructure official development assistance oda and foreign direct investment fdi are widely perceived to be alternative means of supplementing domestic savings and promoting economic development in low and middle income countries however possible complementarities of aid and fdi have received limited attention so far it remains open to debate whether aid could render recipient countries more attractive to fdi by removing specific bottlenecks that prevent higher fdi inflows in particular we raise the hypothesis that aid specifically targeted at economic infrastructure helps developing countries attract higher fdi inflows through improving their endowment with infrastructure in transportation communication energy and finance by performing 3sls estimations we explicitly account for dependencies between three structural equations on the allocation of sector specific aid the determinants of infrastructure and the determinants of fdi we find strong and robust evidence that aid in infrastructure is effective in improving the recipient countries endowment with infrastructure in sharp contrast other aid is not effective in improving infrastructure infrastructure consistently proves to be an important determinant of developing countries attractiveness to fdi consequently only targeted aid promotes fdi indirectly through the infrastructure channel in addition aid in infrastructure has direct effects on fdi it appears that foreign investors anticipate longer term effects of aid on the country s endowment with infrastructure and expect aid financed infrastructure to serve them particularly well

is fairly priced deposit insurance possible we analyze risk sensitive incentive compatible deposit insurance in the presence of private information and moral hazard without deposit linked subsidies it is impossible to implement risk sensitive incentive compatible deposit insurance pricing in a competitive deregulated environment except when the deposit insurer is the least risk averse agent in the economy we establish this formally in the context of an insurance scheme in which privately informed depository institutions are offered deposit insurance premia contingent on reported capital the result holds for alternative sorting instruments as well this suggests a contradiction between deregulation and fairly priced risk sensitive deposit insurance this paper exposes a conflict between a deregulated competitive financial services industry on the one hand and fairly priced risk sensitive deposit insurance on the other we show that if depository institutions dis are perfectly competitive i e each makes zero profits on average then it is impossible to implement incentive compatible risk sensitive deposit insurance pricing recent distress among dis has fueled debate about reform of the existing deposit insurance system many believe that the prevailing risk insensitive premium structure encourages dis to choose excessively risky assets and that it should be replaced by deposit insurance premia linked to the dis choices of risk 2 risk sensitive deposit insurance pricing however imposes greater informational demands on the deposit insurer and runs afoul of both

fdi and financial market development in africa the literature on the relationship between foreign direct investment fdi financial market development fmd and economic growth focuses mainly on two aspects the relationship between fdi and economic growth and the role played by fmd in that linkage the literature is almost silent on the relationship and the direction of causality between fdi and fmd although it has been established that fdi contributes more to growth in countries with a more developed financial market it is not clear how fdi and fmd interact with each other the aim of this paper is to fill this gap in the african context particularly in africa where stock markets experience low liquidity and less transparency fdi can be an impetus for financial market reforms and serve as a mechanism to improve the transparency and the depth of the financial markets also well functioning financial markets can help channel foreign investments more efficiently into productive sectors and therefore create more value for investors hence making the countries more attractive to fdi in short both fdi and fmd will impact each other simultaneously which is confirmed by our findings we document a bidirectional causality between fdi and fmd furthermore the multivariate regression results of the system of simultaneous equations also confirm the positive relationship between fdi and fmd in africa we also find that fdi contributes to economic growth in africa after controlling for endogeneity between fdi fmd and economic growth

the effect of the euro on foreign direct investment abstract in this paper the recent effect of the european monetary union on inward fdi flows is examined using a difference in differences approach the estimated results show that the introduction of the euro raised inward fdi flows by approximately 16 within the euro area by approximately 11 to non members and weakly by around 8 from non member countries into the euro area moreover the geographical effects of the euro are explored the results show partial agglomeration tendencies for the euro area there are also some indications of increased importance of vertical specialization in the sample

environmental regulation in an open economy abstract environmental regulation by a large trading country affects the world price of traded commodities a series of second best environmental taxes are derived which explicitly incorporate trade effects for cases which depend on the type of externality the regulating country s commodity trade balance and the presence or absence of trade taxes in the regulated market a coordinated policy solution using both tax and tariff instruments also is derived the practical implications for domestic environmental policy making which emerge from the theoretical results are evaluated

bank competition and financial stability in asia pacific the impact of bank competition on financial stability has been a focus of academic and policy debate over the last two decades and particularly since the 2007 08 global financial crises beck 2008 oecd 2011 under the traditional competition fragility view banks cannot earn monopoly rents in competitive markets and this results in lower profits capital ratios and charter values this makes banks less able to withstand demand or supply side shocks and encourages excessive risk taking marcus 1984 alternatively the competition stability view suggests that competition leads to greater stability a less competitive banking market may lead to more risk taking if the big banks are deemed too important to fail and as such obtain implicit or explicit subsidies via government safety nets mishkin 1999 in addition banks with more market power tend to charge higher loan rates which may induce borrowers to assume greater risk leading to greater default in competitive banking markets loan rates are lower too big to fail issues and safety net subsidies are smaller and this results in a positive link between bank competition and stability boyd and de nicolo 2005 it could also be the case as noted by martinez miera and repullo 2010 that bank competition and stability are linked in a non linear manner and in a similar vein berger et al 2009 argue that competition and concentration may coexist and can simultaneously induce stability or fragility

does aid for trade enhance export performance investigating on the infrastructure channel today there are few empirical studies assessing the effectiveness of aid for trade on trade pe rformance furthermore existing works do not test channels by which this impact is transiting we address this question using an empirical analysis constructed in two steps following a model of export performance we first test if institutions and infrastructure our two potential channels of transmission are indeed determinants of export performance secondly we test the impact of aid for trade sectoral flows on the determinants that were highlighted in the first part we show that the infrastructure channel appears to be highly significant in the first step whereas the institutional one turns out to have limited impact on developing countries exports furthermore in our second step aid for infrastructure seems once instrumented to have a strong and positive impact on the infrastructure level our results indicate that a 10 increase in aid to infrastructure commitments per capita leads to an average increase of the exports over gdp ratio for a developing country of 2 34 it is also equivalent to a 2 71 reduction of the tariff and non tariff barriers this highlights the very high economic impact of aid for trade throughout the channel of infrastructures

competition and stability in modern banking a post crisis perspective abstract competition has been suppressed for extended periods in banking and when it has been unleashed financial stability has suffered this paper elucidates the relationship between competition and stability in modern banking with particular attention to the impact of digital technologies and derives the policy consequences for regulation and competition policy

systemic risk and bank consolidation international evidence abstract this paper analyzes the systemic risk effects of bank mergers to test the concentration fragility hypothesis we use the marginal expected shortfall as well as the lower tail dependence between a bank s stock returns and a relevant bank sector index to capture the merger related change in an acquirer s contribution to systemic risk in our empirical analysis of a dataset of international domestic and cross border mergers we find clear evidence for a significant increase in the merging banks the combined banks as well as their competitors contribution to systemic risk following mergers thus confirming the concentration fragility hypothesis

induced bias of technical change in agriculture the united states and japan 1880 1980 because of extreme differences in factor endowments and price ratios among factors between the united states and japan both countries have experienced sharply different patterns of factor use and productivity growth in agriculture for the past 100 years of modern economic growth in this study the method of testing the hicksian hypothesis of induced innovation was developed using the two level ces production function the model was applied to the historical data of u s and japanese agricultural development for 1880 1980 the results were consistent with the hypothesis that different patterns of technical change in the two countries were induced by differences in the levels and the movements in relative factor prices

substituting pollution taxation for general taxation some implications for efficiency in pollutions taxation abstract earlier papers have recognized that nonenvironmental benefits will be realized if pollution taxes are substituted for other taxes which impose efficiency losses on society the purpose of this paper is to investigate the importance of these nonenvironmental benefits for the design of an efficient pollution tax it is found that the efficient tax may be higher or lower than that conventionally defined as optimal and that the net benefit from unrestrained pollution can have important implications for the size of the tax

the two part instrument in a second best world abstract standard pigovian tax theory has been extended in two directions first many polluting activities are difficult to tax because they are not market transactions and so recent papers have shown that the same effects can be achieved by use of a two part instrument 2pi a tax on output or income and a subsidy for clean alternatives to pollution it is a generalization of a deposit refund system drs second a different literature concerns the second best pollution tax in the presence of other tax distortions here we combine the two extensions by looking at the second best 2pi when government needs revenue is the deposit larger and the rebate smaller we find explicit solutions for each tax and subsidy in a general equilibrium model with other tax distortions and we compare these to the rates in a first best model the tax subsidy combination is explained in terms of a tax effect an environmental effect and a revenue effect the model allows for flexible interpretation to show various applications of the 2pi we also discuss important caveats

fdi productivity and financial development this paper examines the effect of foreign direct investment fdi on growth factor accumulation physical and human capital does not seem to be the main channel through which countries benefit f rom fdi instead we f ind that countries with well developed financial markets gain significantly

does the single currency affect foreign direct investment does the creation of the euro partly explain the sharp increase in european investments to address this question we derive a simple gravity like model for bilateral foreign direct investment fdi using this model we find that the economic and monetary union emu has increased intra emu fdi stocks on average by around 30 percent this effect varies over time and across emu members it is found to be larger for the outward investments of the less developed emu members moreover contrary to early expectations of fdi diversion effects emu countries have invested more in non emu countries since the launch of the euro

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

competition policy in banking this paper summarizes some of the arguments relating competition and banking instability draws connections between regulation and competition policy and surveys and analyses the role of competition policy in the banking sector in a financial crisis it is argued that a trade off between competition and stability is bound to persist despite improvements in regulation that the banking sector specificity should be recognized by competition policy and that competition policy and regulation need close coordination copyright 2011 oxford university press

revenue raising vs other approaches to environmental protection the critical significance of pre existing tax distortions using analytical and numerical general equilibrium models we show that preexisting factor taxes produce a tax interaction effect that increases the costs of pollution taxes and quotas under policies that raise revenue and recycle it through cuts in marginal factor tax rates this effect is partially offset by a revenue recycling effect grandfathered pollution quotas such as those used under the 1990 clean air act amendments to regulate electric utilities so2 emissions do not benefit from this offset preexisting taxes raise this regulation s cost by over 70 more than half of this additional cost could be avoided by auctioning quotas and exploiting the revenue recycling effect

has distance died evidence from a panel gravity model the estimated coefficient of distance on the volume of trade is generally found to increase rather than decrease through time using the traditional gravity model of trade this distance puzzle proved robust to several ad hoc versions of the model using data for 1962 96 for a large sample of 130 countries the introduction of an augmented barrier to trade function removes the paradox yielding a decline in the estimate of the elasticity of trade to distance of about 11 percent over the 35 year period for the whole sample however the death of distance is shown to be largely confined to bilateral trade between rich countries with poor countries becoming marginalized

the marginal efficiency effects of taxes and subsidies in the presence of externalities a computational general equilibrium approach abstract using 1983 data we develop a 19 sector computational general equilibrium model incorporating producer producer externalities and producer consumer externalities simulation results indicate that when additional government expenditure is financed by pigouvian taxes the marginal cost of public funds is substantially below one labor sales and output taxes also affect the output of the polluting industries and thus have indirect pigouvian effects which tend to reduce the associated marginal costs of public funds pigouvian taxes are usually more efficient than pigouvian subsidies since the tax revenue can be used to reduce other taxes