modelling the transport sector fuel demand for developng economies abstract this paper concentrates on the transport sector of six developing countries with similar common denominators namely turkey thailand pakistan morocco tunisia and malaysia by using standard econometric techniques we analyse the evolution of oil demand for road transport in these countries in relation to independent variables such as income population price of gasoline and diesel etc unlike the treatment in the present literature on the subject gasoline and diesel consumption are estimated separately due to the high share of diesel in the total transport sector consumption on the basis of the estimation over the period 1970 1990 on a country by country basis we forecast the demand for these six countries until 2010 the results of this study indicate that the transport sector will be the driving force for energy and oil demand as part of economic growth in these developing countries its share in the future energy market structure is expected to grow consequently the pricing policies of oil products in this sector have a crucial role for shaping rational economic and energy strategies within the framework of rising environmental concern

problems with identifying adjustment costs from regressions of investment on q abstract most econometricians evaluate investment q regressions by using the coefficients to estimate adjustment costs however these coefficients do not uniquely identify average adjustment costs or speeds nor do they appear in the expression for marginal adjustment costs in terms of observables

international portfolio reallocation diversification benefits and european monetary union abstract we investigate the determinants of bilateral international equity and bond portfolio reallocation across a large cross section of countries spanning over two sample periods 1997 2001 and 1997 2005 we find that the strongest drivers are the marginal diversification benefits arising from the pure asset component and the initial degree of underweight this evidence suggests that global portfolio reallocations over the asset boom and bust period were determined by optimal diversification considerations we also find that due to economic and monetary union emu the weight assigned by euro area investors to investment in euro area countries increased significantly in equity and fixed income portfolios with a trade diverting effect against the british bond market

financial integration capital mobility and income convergence recent studies have found that capital moves uphill from poor to rich countries and brings little or no growth dividend when it does flow into poor economies we show that europe does not conform to this paradigm in the european experience of financial integration capital has flown from rich to poor countries and such inflows have been associated with significant acceleration of income convergence analysing broader samples of countries we find that downhill capital flows tend to be observed above certain thresholds in institutional quality and financial integration but europe remains different even when allowing for such threshold effects and its experience is similar to that of interstate flows within the united states our findings are consistent with the notion that financial diversification reduces countries incentives to save in order to self insure against specific shocks abdul abiad daniel leigh and ashoka mody

the tragedy of the commons and economic growth why does capital flow from poor to rich countries we analyze a differential game in which all interest groups have access to a common capital stock we show that the introduction of a technology that has inferior productivity but enjoys private access may ameliorate the tragedy of the commons we use this model to analyze capital flight in many poor countries property rights are not well defined since safe bank accounts in rich countries the inferior technology are available to citizens of these countries they engage in capital flight we show that the occurrence of capital flight does not imply that opening the capital account reduces growth and welfare

financial development and financing constraints international evidence from the structural investment model this article provides evidence that financial development impacts growth by reducing financing constraints that would otherwise distort efficient allocation of investment the financing constraints are inferred from the investment euler equation by assuming that the firm s stochastic discount factor is a function of the firm s financial position specifically the stock of liquid assets the magnitude of the changes in the cost of capital is twice as large in a country with a low level of financial development as in a country with an average level of financial development the size effect business cycles and legal environment effects are also considered copyright 2003 oxford university press

a cointegration analysis of gasoline demand in the united states time series estimation of gasoline demand elasticities often does not take into account the possibility of nonstationarity in the underlying data which may render the parameter estimates spurious studies have shown that the time trending variables used to explain gasoline demand could be difference stationary and therefore may require cointegration analysis to assess the relationship among the trending variables in this work we use the cointegration technique to derive long run and short run demand elasticities of noncommercial gasoline consumption using time series data for the usa from 1949 to 2004 we also attempt to incorporate the presence of a structural break in the data generation process of the time trending variables our results show that the consumption of gasoline and lifetime income have a long term stable relationship after the second oil shock of 1978 prior to the first oil shock of 1973 no such long run relationship could be established through cointegration

a flexible specification of adjustment costs in dynamic factor demand models this paper proposes a flexible form of adjustment cost function an empirical illustration shows that the flexible form can detect both convex and non convex adjustment costs furthermore the flex

a time series analysis of representative agent models of consumption andleisure choice under uncertainty this paper investigates empirically a model of aggregate consumption and leisure decisions in which utility from goods and leisure is nontime separable the nonseparability of preferences accommodates intertemporal substitution or complementarity of leisure and thereby affects the comovements in aggregate compensation and hours worked these cross relations are examined empirically using postwar monthly u s data on quantities real wages and the real return on the one month treasury bill the estimated values of the parameters governing preferences differ significantly from the values assumed in several studies of real business models several possible explanations of these discrepancies are discussed

intra industry foreign direct investment we use a new firm level data set that establishes the location ownership and activity of 650 000 multinational subsidiaries close to a comprehensive picture of global multinational activity a number of patterns emerge from the data most foreign direct investment fdi occurs between rich countries the share of vertical fdi subsidiaries which provide inputs to their parent firms is larger than commonly thought even within developed countries more than half of all vertical subsidiaries are only observable at the four digit level because the inputs they are supplying are so proximate to their parent firms final good that they appear identical at the two digit level we call these proximate subsidiaries intra industry vertical fdi and find that their location and activity are significantly different to the inter industry vertical fdi visible at the two digit level these subsidiaries are not readily explained by the comparative advantage considerations in traditional models where firms locate their low skill production stages abroad in low skill countries to take advantage of factor cost differences we find that overwhelmingly multinationals tend to own the stages of production proximate to their final production giving rise to a class of high skill intra industry vertical fdi

on the explanation of the lucas paradox abstract this paper demonstrates that institutional quality provides a full explanation to the lucas paradox when country heterogeneity is controlled furthermore in terms of the explanation of the paradox quantile regression estimates reveal that foreign flows are driven by theoretical explanations at the lower tail despite that they are significantly affected by growth prospects towards the higher tail

why do investment euler equations fail this article isolates sources of misspecification in neoclassical investment euler equations without ad hoc alterations of the basic model first allowing for nonlinear marginal investment adjustment costs improves model performance slightly some further improvement results from isolating firms whose optimality conditions hold even in the presence of fixed costs of adjustment or costly reversibility finally i identify which instruments contribute to model failure via standard gmm based tests and also via the empirical likelihood estimator of imbens which allows testing overidentifying restrictions individually both methods show that financial instruments contribute to rejection of the overidentifying restrictions for all firms however only the empirical likelihood estimator shows that they are a source of failure for firms that attain an interior optimum

the institutional reforms debate and fdi flows to the mena region the best ensemble summary this paper empirically examines the theoretical debate on the adoption of a best approach to reforming institutions identified by rodrik 2008 in the context of property rights protection and fdi flows to eight mena countries the first best approach comprises strengthening domestic institutional functions only while the second best comprises in addition entering into force bilateral investment treaties and the interaction between functions and treaties empirically both approaches to reducing investment expropriation risk encourage fdi flows the positive effect of the second best approach depends on the success of the first best approach suggesting the two approaches are complementary

non convexities in the adjustment of different capital inputs a firm level investigation recent developments in investment research have highlighted the importance of non convexities and irreversibilities in firms adjustment of quasi fixed inputs aggregation across capital goods may smooth out the discontinuities associated with the adjustment of individual assets lack of suitable data is one of the reasons why empirical work has typically relied on the assumption of capital homogeneity in this paper we exploit a data set of 1539 italian firms which allows us to disaggregate capital into equipment and structures and purchases and sales of assets we construct measures of fundamental q to capture investment opportunities associated with each asset we uncover the pattern of dynamic adjustment by using non parametric techniques to relate each individual investment to its own fundamental q

north south lending and endogenous domestic capital market inefficiencies abstract we develop an open economy model of intertemporal trade under asymmetric information capital market imperfections are endogenous and depend on a country s stage of economic development relative to the perfect information benchmark north south capital flows are dampened and possibly reversed and world interest rates are lower whereas riskless rates are equalized across borders the domestic loan rate is higher in poorer countries the model can be applied to a number of policy issues including the debt overhang problem the indexation of foreign public debts and the effect of income distribution on growth

estimation of the internal adjustment costs model using longitudinal establishment data this paper develops estimates of the internal costs measured in terms of foregone current output associated with the introduction of new plant and equipment into manufacturing establishments using the census bureau s longitudinal establishment data file a very large and rich source of production and investment data our estimates provide strong support for the internal adjustment costs hypothesis they indicate that one dollar increases in expansion and replacement investment cause on the average 35and 21 cent reductions respectively in current output the internal cost of adjusting to equipment appears to be higher than the cost of adjusting to plant

does the worldwide shift of fdi from manufacturing to services accelerate economic growth a gmm estimation study abstract we examine the effect of manufacturing and service fdi foreign direct investment on their own sector growth the spillover to the other sectors and the overall economy in host countries we identify significant sectoral and inter industry spillover effects with various data classifications and types of fdi flows evidence reveals that growth effect of manufacturing fdi operates by stimulating activity in its own manufacturing sector and is prevalent in latin america caribbean in europe central asia middle to low income countries and economies with large industry share a surge of service fdi is likely to spur growth in service industries but hurt activity in manufacturing industries financial service fdi enhances growth in south east asia and the pacific high income countries and service based economies by stimulating activity in both manufacturing and service sectors however nonfinancial service fdi drains resources and hurts manufacturing industry in the same group of countries we conclude that a shift from manufacturing to service fdi is likely to lead to deindustrialization in certain regions and types of economies if this shift is spearheaded by nonfinancial fdi

quantitative easing and the post crisis surge in financial flows to developing countries abstract this paper examines gross financial inflows to developing countries between 2000 and 2013 with a focus on the potential effects of quantitative easing qe policies in the united states and other high income countries we find evidence for potential transmission of qe along observable liquidity portfolio balancing and confidence channels moreover we find that qe had an additional latent effect over and above these observable channels one that survives an array of robustness tests retains its significance across different types of financial flows and which cannot be attributed to changes in expectations or elasticity our baseline estimates place the lower bound of a qe effect at around 5 percent of gross inflows above trend for the average developing economy which is a magnitude comparable to a one standard deviation change along the traditional channels we also find evidence of heterogeneity among different types of flows portfolio especially bond flows tend to be more sensitive than fdi to our measured qe effects

effects of fdi flows on institutional development does it matter where the investors are from global fdi flows to and from developing countries have increased significantly since the 1990s while developing countries saw this as a positive development many economists and policy makers in developed countries have raised concerns regarding the institutional effects of developing country investments in other developing countries in this paper we explore the effects of bilateral fdi flows on institutional development gaps between countries and whether such effects are conditional on the direction of flows including south south south north north south and north north directions the empirical results using bilateral flows between 134 countries and a variety of institutional development measures during 1990 2009 suggest that the institutional development effects of fdi flows in any direction including the north south or south south directions are not significant in any case we do not find any significant convergence or divergence effect of fdi flows on the institutional distance between host and home countries we also fail to find any significant effect of aggregate north south fdi flows on host country institutions in contrast we find that aggregate south south fdi flows have a significantly negative effect on host country institutions furthermore we find some evidence that south south fdi flows may be harmful to institutional development in natural resource rich countries while the opposite is true for north south flows overall the results suggest that there is no strong evidence of any benevolent or malevolent effects of bilateral fdi flows from developed or developing countries to developing countries

asset prices news shocks and the trade balance we analyze the relationship between asset prices and the trade balance estimating a bayesian var for a broad set of 38 industrialized and emerging market countries to derive model based identifying restrictions we model asset price shocks as news shocks about future productivity in a two country dynamic stochastic general equilibrium model such shocks are found to exert sizable effects on the trade balance moreover the effects are highly heterogeneous across countries for instance following a news shock that implies on impact a 10 increase in domestic equity prices relative to the rest of the world the u s trade balance will worsen by up to 1 0 percentage points but much less so for most other economies we find that this heterogeneity appears to be linked to the financial market depth and equity home bias of countries moreover the channels via wealth effects and via the real exchange rate are important for understanding the heterogeneity in the transmission

the determinants of cross border equity flows abstract we explore a new panel data set on bilateral gross cross border equity flows between 14 countries 1989 1996 we show that a gravity model explains international transactions in financial assets at least as well as goods trade transactions gross transaction flows depend on market size in source and destination country as well as trading costs in which both information and the transaction technology play a role distance proxies some information costs and other variables explicitly represent information transmission an information asymmetry between domestic and foreign investors and the efficiency of transactions the geography of information is the main determinant of the pattern of international transactions while there is weak support in our data for the diversification motive once we control for the informational friction we broaden the scope of our results by presenting some evidence linking the results on equity transactions to equity holdings

internal net worth and the investment process an application to u s agriculture recent models of firm investment decisions stressing informational imperfections in capital markets provide a foundation for interpreting evidence that movements in internal finance can predict investment spending even after one controls for measures of firms investment opportunities while such evidence is suggestive it is often open to other interpretations we examine these models using data on equipment investment in the u s agricultural sector this sector is particularly interesting because it has experienced large fluctuations in net worth and the profitability of investment and reasonable measures of net worth can be constructed our findings provide support for a class of internal funds models of investment under asymmetric information

fdi waves waves of neglect of political risk studies of the impact of local political risk on foreign direct investment inflows overlook that worldwide fdi comes in waves using a simple model we show that the impact of political risk on fdi inflows is likely to be weaker the larger the worldwide amount of fdi which may question standard estimates and their policy implications using a large sample of developing and developed economies we estimate the sensitivity of the distribution of fdi inflows across countries to the local political risk we find that it is a decreasing function of the worldwide amount of fdi this finding has been upheld after many robustness checks

quantifying uk capital adjustment costs this paper estimates uk capital adjustment costs using manufacturing and service industry data for 19702000 there is evidence of significant adjustment costs with a 1 increase in investment reducing value added by 0 05 this implies an elasticity of investment with respect to tobin s q of 2 5 and a convergence time for capital of 12 years the results suggest that adjustment costs may have caused half of the slowdown in uk total factor productivity tfp growth during the second half of the 1990s the impact is larger than that reported for the united states reflecting larger adjustment costs and higher investment growth

net foreign asset com position does financial development matter abstract we investigate the relationship between a country s domestic financial development and the composition of its net foreign asset position using a pooled mean group estimator and data for 50 countries for the 1970 2007 period the results show that financial development reduces a country s long run net foreign asset position in addition financial development leads to higher net equity and lower net debt positions these findings confirm the theoretical predictions of mendoza et al 2009 the results are robust to using different indicators of financial development and inclusion of the level of development of a country in the cointegrating relationship

investment adjustment costs an empirical assessment we evaluate empirical evidence for costs that penalize changes in investment using us industry data in aggregate models such investment adjustment costs have been introduced to help account for a variety of business cycle and asset market phenomena so far no attempt has been made to estimate these costs directly at a disaggregated level we consider an industry model with investment adjustment costs and estimate its parameters using generalized methods of moments the ndings indicate small costs associated with changing the ow of investment at the industry level the weighted average of the industry elasticities with respect to the shadow price of capital which depends inversely on the adjustment cost parameter is more than seven times larger than the largest estimate based on aggregate data we examine potential sources which may account for the large industry aggregate dierence overall our results suggest

factor trade and goods trade world equilibria with trade in both goods and some factors are studied when international factor endowment differences are the cause of trade a generalized heckscher ohlin theorem is presented the goods trade patterns with and without factor trade are compared factor trade and goods trade tend to be substitutes complements if traded and non traded factors are cooperative non cooperative

what determines the japanese firm investments real or financial in this article i test both the real and the financial frictions in the japanese firm investments using structural approach the real represents the nonconvex capital adjustment costs and the financial means the financing constraints these two factors have been studied for a long time but rarely analysed simultaneously through this analysis i find the following results first both these two factors affect japanese firm investments second convex adjustment costs parameter is estimated at a very small level third this small convex adjustment costs lead to the model introduced in wang and wen 2012 which insists that the firm investments are determined by the upper bound of the borrowing constraints

the demand for transport fuels in turkey abstract in this paper we estimate the demand for transport fuels in turkey specifically using four different models namely a partial adjustment model a distributed lag model an autoregressive distributed lag model and an error correction model we estimate gasoline and diesel demand functions with quarterly data covering the period 2003 q1 2014 q3 we find a stable long run relationship only for diesel demand income and price our results imply that gasoline demand does not respond to income and price in the long run reflecting a shift from gasoline towards diesel induced by differential tax policies furthermore we find that transport fuel demand is price inelastic making tax on fuel a perfect tool for raising budget revenues in addition our results suggest that fuel demand responds to negative and positive price changes symmetrically

short and long run elasticities of gasoline demand in india an empirical analysis using cointegration techniques abstract in developing countries like india consumption of petroleum products has implications on its balance of payments economic growth and fiscal deficit gasoline is one of the prime petroleum products in this paper the relationship between gasoline demand national income and price of gasoline is empirically examined using cointegration and error correction techniques the time frame of the analysis is from 1972 1973 to 1993 1994 it has been found that gasoline demand is likely to increase significantly for a given increase in the gross domestic product the increase will be larger in the long run 2 682 than in the short run 1 178 gasoline demand is relatively inelastic to price changes both in the long and short terms the error correction model has shown that gasoline demand adjusts to their respective long run equilibrium at a relatively slow rate with about 28 of adjustment taking place in the first year

has the lucas paradox been fully explained alfaro kalemli ozcan and volosovych 2008 argue that accounting for differences in institutional quality makes the lucas paradox disappear we show that their key finding is driven by the presence of outliers once we control for them we find that the lucas paradox remains

economic development legality and the transplant effect abstract we analyze the determinants of effective legal institutions legality using data from 49 countries we show that the way the law was initially transplanted and received is a more important determinant than the supply of law from a particular legal family countries that have developed legal orders internally adapted the transplanted law and or had a population that was already familiar with basic principles of the transplanted law have more effective legality than countries that received foreign law without any similar predispositions the transplanting process has a strong indirect effect on economic development via its impact on legality while the impact of particular legal families is weaker and not robust to alternative legality measures

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

pollution the cost of public funds and endogenous growth abstract theories of endogenous growth are used to investigate the effect of environmental policy on the rate of economic growth and the provision of public goods in a second best market outcome pollution gives rise to a negative environmental externality and is modeled as an inevitable by product of production the government faces the dual task of on the one hand internalising environmental externalities and on the other hand raising public funds to finance public spending a tougher environmental policy reduces the rate of economic growth improves environmental quality raises the optimal tax rate and changes the composition of public spending away from productive government spending towards public consumption and abatement the marginal cost of public funds falls rises if productive government spending is negligible substantial relative to public consumption and abatement

growth in the shadow of expropriation we propose a tractable variant of the open economy neoclassical growth model that emphasizes political economy and contracting frictions the political economy frictions involve a preference for immediate spending while the contracting friction is a lack of commitment regarding foreign debt and expropriation we show that the political economy frictions slow an economy s convergence to the steady state due to the endogenous evolution of capital taxation the model rationalizes why openness has different implications for growth depending on the political environment why institutions such as the treatment of capital income evolve over time why governments in countries that grow rapidly accumulate net foreign assets rather than liabilities and why foreign aid may not affect growth

a framework for assessing global imbalances since the mid 1990s and prior to the financial crisis external balances of systemically important economies widened significantly this paper takes a long run perspective and reviews the main determinants of widening global imbalances to this aim we first provide a set of newly derived statistical measures while large external imbalances are not new in economic history their persistence their concentration on one economy the united states and the specific role of emerging market economies make the present episode rather unique second we argue that the observed pattern of imbalances can be mostly understood as a result of various structural changes in the global economy which have allowed a widening trend of external positions three main features set the most recent period apart from past episodes of growing external imbalances i the emergence of new players in particular emerging market economies such as china and india which are quickly catching up with the advanced economies ii an unprecedented wave of financial globalisation with more integrated global financial markets and increasing opportunities for international portfolio diversification also characterised by considerable asymmetries in the level of market completeness across countries and iii the favourable global macroeconomic and financial environment with record high global growth rates in recent years low financial market volatility and easy global financing conditions over a long period of time running until the outburst of the financial crisis during the summer of 2007 these structural changes that have been supplemented by cyclical or policy induced factors ultimately facilitated the sudden disorderly unwinding of global imbalances that is reflected in the current financial crisis

a re examination of stationarity of energy consumption evidence from new unit root tests abstract in this paper we re examine the stochastic behaviour of per capita total primary energy consumption across 178 countries around the world for this purpose in addition to conventional unit root tests we apply newly developed tests that allow for nonlinear adjustments and structural breaks in the data generating process the results of the unit root tests show that allowing for structural breaks and nonlinearity result in more frequent rejection of the null hypothesis of unit root suggesting that most of the series under consideration follow a stationary process these findings imply that both energy economists and policy makers must be careful and take account of possible nonlinearities and structural breaks in their analyses of energy consumption in addition the results imply that government interventions into the energy markets in most countries have no effect in the long run although the short run effects of the interventions depend on the size and the direction of interventions

short run long run and cross elasticities of gasoline demand in brazil gasoline is one of the most important of the oil derived products its importance is closely related to its participation in the value of imports of many countries and in a number of cases it is one of the determinants of their balance of payment deficit fiscal deficit and economic growth as opposed to most nations brazil has had a gasoline substitute since 1985 alcohol many studies have tried to estimate the income and price elasticities of the demand for gasoline in several countries this paper extends previous studies by estimating the cross price elasticity between gasoline and alcohol our findings indicate that alcohol is an imperfect substitute for gasoline even in the long run as a consequence the need for a new fuel substitution must be initiated long before petroleum reserves vanish

this is what happened to the oil price macroeconomy relationship abstract many of the quarterly oil price increases observed since 1985 are corrections to even bigger oil price decreases the previous quarter when one looks at the net increase in oil prices over the year recent data are consistent with the historical correlation between oil shocks and recessions

factor movements and commodity trade as complements abstract several models are presented in which factor mobility leads to an increase in the volume of world trade the models share the common characteristic that the basis for trade is something other than differences in relative factor endowments these alternative bases for trade include returns to scale imperfect competition production and factor taxes and differences in production technology taken together the models suggest a more general idea the widely held notion that trade in goods and factors are substitutes is in fact a rather special result which is a general characteristic only of factor proportions models

economic performance through time prize lecture to the memory of alfred nobel december 9 1993 this abstract was borrowed from another version of this item

analysing gasoline demand elasticities a survey this paper is a survey of studies on gasoline demand although there are very many dxerent studies in this eld which sometimes appear to arrive at contradictory results we find that with proper stratification of studies by model and data type much of the contict turns to consensus in this survey we classtfy studies by data type and by ten d erent categories of model and with the exception of estimates on seasonal data which tend to be unstable and of certain inappropriate model formulations we find a fair degree of agreement concerning average short run and even long run income and price elasticities

institutional causes macroeconomic symptoms volatility crises and growth countries that have pursued distortionary macroeconomic policies including high inflation large budget deficits and misaligned exchange rates appear to have suffered more macroeconomic volatility and also grown more slowly during the postwar period does this reflect the causal effect of these macroeconomic policies on economic outcomes one reason to suspect that the answer may be no is that countries pursuing poor macroeconomic policies also have weak institutions including political institutions that do not constrain politicians and political elites ineffective enforcement of property rights for investors widespread corruption and a high degree of political instability this paper documents that countries that inherited more extractive institutions from their colonial past were more likely to experience high volatility and economic crises during the postwar period more specifically societies where european colonists faced high mortality rates more than 100 years ago are much more volatile and prone to crises based on our previous work we interpret this relationship as due to the causal effect of institutions on economic outcomes europeans did not settle and were more likely to set up extractive institutions in areas where they faced high mortality once we control for the effect of institutions macroeconomic policies appear to have only a minor impact on volatility and crises this suggests that distortionary macroeconomic policies are more likely to be symptoms of underlying institutional problems rather than the main causes of economic

do economic instruments matter wind turbine investments in the eu 15 abstract this paper analyses how governments in the eu 15 countries have succeeded in stimulating investments in wind turbines between 1985 and 2005 i use four different evaluation criteria tobin s q euler equation estimation investment accelerator model and the effective marginal tax rate to describe the observed investment patterns after a period of rapid growth in capital stock 1985 2000 a period of modest growth 2001 2005 can be observed even though the economic attractiveness of investing increases modestly this pattern cannot be explained by the evaluation criteria unless we accept economic attractiveness is a necessary condition and not a necessary and sufficient condition when analysing which policy has worked best the policies of germany denmark and spain stand out their early and consistent support has been based on feed in tariffs combined with subsidies

elasticities of transport fuels at times of economic crisis an empirical analysis for spain abstract this paper provides an updated calculation of the price and income responsiveness of spanish consumers of transport fuels with an explicit exploration of the effects of the recent economic crisis we examine separate gasoline and diesel demand models using a set of estimators on a panel of 16 spanish regions over the period 1999 2015 the paper confirms the persistence of low own price elasticities both for diesel and gasoline in the short and long runs it also shows that the crisis of 2008 2013 slightly increased the price elasticity of demand for transport fuels with a higher effect on diesel than on gasoline by contrary the crisis slightly reduced the income elasticity of transport fuel demand given the intensity and length of the economic recession in spain the results of this paper may be useful to anticipate the effects of domestic public policies that impact transport fuel prices as well as to advance some of the potential consequences of crises elsewhere

nonlinear response of firm investment to q abstract abel and eberly 1994 study optimal investment behavior in the presence of flow fixed costs proportional costs and convex costs a clear prediction is that investment will alternate between regimes of insensitivity and responsiveness to q separated by unknown threshold levels of q at the firm level we find evidence for different regimes of sensitivity to q but not for a regime of zero sensitivity our finding that investment has a nonlinear relationship to q is important because it implies an elasticity of aggregate investment to q and fundamentals that is high and variable over time

gasoline demand in the oecd an application of pooling and testing procedures abstract this study utilizes a pooled inter country data set finding the long run price elasticity falls in the range 0 55 to 0 9 depending on the choice of pooled estimators the estimators included the ols within and between country estimators plus five feasible gls estimators even allowing for a ten year distributed lag on price to reflect changes in auto efficiency characteristics the within country estimator yields appreciably more inelastic estimates than did the o s estimator which was heavily influenced by the between or inter country variation this difference raises intriguing questions for future research

what drives long term capital flows a theoretical and empirical investigation abstract what drives capital inflows in the long run this paper illustrates how capital movements conform surprisingly well to the predictions of a neoclassical model with credit constraints the most intriguing prediction of this class of models is that contrary to a pure neoclassical model domestic saving should act as a complement rather than a substitute to capital inflows nevertheless this class of models keeps the neoclassical prediction that capital should flow to countries where it is most scarce using foreign debt data from 1970 to 1998 i find qualitative and quantitative evidence that supports these predictions

money and growth revisited abstract conventional wisdom is that if public policy can affect the growth rate of the economy the welfare implications of alternative policies will be large in this paper a stochastic dynamic general equilibrium model with endogenous growth and money is examined in this setting inflation lowers growth through its effect on the return to work however the welfare costs of higher inflation are modest the endogenous labor supply is important in producing this result

the external wealth of nations measures of foreign assets and liabilities for industrial and developing countries abstract although capital flows are closely monitored surprisingly little is known about the accumulated stocks of foreign assets and liabilities held by various countries especially in the developing world this paper constructs estimates of foreign assets and liabilities and their equity and debt subcomponents for a sample of 67 industrial and developing countries it characterizes the stylized facts of international balance sheets and asks whether there are trends in net foreign asset positions and shifts in debt equity ratios over time finally it explores the sensitivity of estimated stock positions to the treatment of valuation effects not captured in balance of payments data

financial capacity and output fluctuations in an economy with multi period financial relationships this paper motivates a financial propagation mechanism in the context of an intertemporal production economy with asymmetric information and with borrowers and lenders who enter multi period financial relationships a key feature is that aggregate output and borrowers financial capacity the maximum overhang of past debt they may feasibly carry are determined jointly much in the spirit of gurley and shaw 1955 expectations of future economic conditions govern financial capacity which in turn may constrain current production especially in bad times a small but persistent shift in aggregate conditions may have a large impact on financial capacity making the framework capable of motivating large endogenous fluctuations in financial constraints understanding how small disturbances can induce large output fluctuations is an on going quest in macroeconomics this paper develops a simple framework in which shifts in aggregate economic fundamentals are amplified through their impact on financial conditions a distinguishing feature is that output and borrowers financial capacity the maximum overhang of past debt they may feasibly carry are determined jointly much in the spirit of gurley and shaw 1955 expectations of future economic conditions govern financial capacity and financial capacity may constrain current production especially in bad times a number of recent papers have resurrected the view that financial factors may play a part in propagating business fluctuations the underlying theories exploit the idea that with asymmetric information between borrowers and lenders agency costs may drive the price of uncollateralized external funds above the price of internal funds in this kind of setting a borrower s financial position is a key determinant of the terms of credit she faces in the aggregate swings in borrower balance sheets over the cycle amplify fluctuations in investment and output essentially by inducing counter cyclical movements in the required premium for external finance this simple mechanism is broadly consistent with informal descriptions of how financial and real variables interacted in the great depression bernanke 1983 and in the postwar business cycles eckstein and sinai 1986 in addition numerous recent panel data studies beginning with fazzari hubbard and peterson 1988 support the notion of a financial investment accelerator mechanism

estimating the euler equation for aggregate investment with endogenous capital depreciation this article looks at the empirical consequences of introducing endogenous capital depreciation in the standard neoclassical model with quadratic adjustment costs to this end we formulate an empirical specification that accommodates capital maintenance and utilization in the euler equations for aggregate investment the empirical estimates with data from the canadian survey on capital and repair expenditures show that in contrast to the existing literature the performance of the euler equations is improved when we account for the impact of variable capital depreciation

the management of political risk we explore a long standing prediction in the international business literature that managers subjective perceptions of political risk not just the level of risk are important for how firms manage political risk the importance attributed to political risk by corporate executives has increased over the last 15 years and our results show that political risk is now considered more important than commodity input risk our analysis suggests that nearly 50 of firms avoid not simply reduce foreign direct investment because of political risk using a unique survey based psychometric evaluation of manager risk aversion we show that firms with risk averse executives are more likely to avoid investment in politically risky countries a key implication of behavioral models this relation is economically stronger when agency problems are more likely to be severe for example when executives are less aligned with shareholder value maximization and when executives are younger and therefore might put their personal career concerns in front of shareholders interests while numerous studies have shown that political risk affects foreign direct investment using objective measures of such risk electoral uncertainty conflicts etc our study documents that executives subjective perceptions of political risk are also important for political risk management

transitional dynamics and economic growth in the neoclassical model neoclassical transitional dynamics are a central element of standard macroeconomic theory quantitative experiments with the fixed savings rate models of the 1960s showed lengthy transitions thus potentially rationalizing sustained differences in growth rates across countries the authors investigate quantitative transitional dynamics in various neoclassical models with intertemporally optimizing households lengthy transitions occur only with very low intertemporal substitution generally when one tries to explain sustained economic growth with transitional dynamics there are extremely counterfactual implications these result from the fact that implied marginal products are extraordinarily high in the early stages of development copyright 1993 by american economic association

does institutional quality resolve the lucas paradox the lucas paradox observes that capital flows predominantly to relatively rich countries contradicting the neoclassical prediction that it should flow to poorer capital scarce countries in an inf

institutions and the external capital structure of countries abstract a widespread view holds that countries that finance themselves through foreign direct investment and portfolio equity rather than bonds and loans are less prone to crises but what determines countries external capital structures in a cross section of advanced economies emerging markets and developing countries we find that equity like liabilities as a share of countries total external liabilities are positively and significantly associated with indicators of educational attainment openness natural resource abundance and especially institutional quality these relationships are robust to attempts to control for possible endogeneity suggesting that better institutional quality may help improve countries external capital structures

resource nationalism meets the market political risk and the value of petroleum reserves this paper investigates the effect of resource nationalism on the value of petroleum crude oil and natural gas reserves we develop a framework for treating resource nationalism as political risk and utilize data on reserve transactions from john s herold and political risk ratings from international country risk guide and institutional investor for the period 2000 2006 controlling for other factors that affect reserve value we demonstrate the value destruction of political risk and estimate the political risk discount for 37 countries the paper contributes to both the international business literature and practitioner approaches to political risk analysis in demonstrating use of publicly available market data from real asset transactions to measure the cost of political risk we also show that the discount depends on market conditions the higher expected future petroleum prices are the larger is the discount at any level of political risk this insight adds a new dimension to analysis of political risk which is typically measured and examined without regard to market conditions

the relation between firm growth and q with multiple capital goods theory and evidence from panel data on japanese firms we derive from a model of investment with multiple capital goods a one to one relation between the growth rate of the capital aggregate and the stock market based q we estimate the growth q relation using a panel of japanese manufacturing firms taking into account the endogeneity of q identification is achieved by combining the theoretical structure of the q model and an assumed serial correlation structure of the technology shock which is the error term in the growth q equation for early years of our sample cash flow has significant explanatory power over and above q the significance of cash flow disappears for more recent years for the heavy industry when japanese capital markets was liberalized the estimated q coefficient implies that the adjustment cost is less than a half of gross profits net of the adjustment cost

measuring global gasoline and diesel price and income elasticities abstract price and income elasticities of transport fuel demand have numerous applications they help forecast increases in fuel consumption as countries get richer they help develop appropriate tax policies to curtail consumption help determine how the transport fuel mix might evolve and show the price response to a fuel disruption given their usefulness it is understandable why hundreds of studies have focused on measuring such elasticities for gasoline and diesel fuel consumption in this paper i focus my attention on price and income elasticities in the existing studies to see what can be learned from them i summarize the elasticities from these historical studies i use statistical analysis to investigate whether income and price elasticities seem to be constant across countries with different incomes and prices although income and price elasticities for gasoline and diesel fuel are not found to be the same at high and low incomes and at high and low prices patterns emerge that allow me to develop suggested price and income elasticities for gasoline and diesel demand for over one hundred countries i adjust these elasticities for recent fuel mix policies and suggest an agenda of future research topics

determinants of biofuel oriented land acquisitions in sub saharan africa abstract the recent surge of investors interest for african land has triggered the debate about the drivers and effects of the so called land grabbing after a review of the relationship between investment in land and biofuel development in sub saharan africa we contribute to the existing literature in four dimensions we use the updated version of land matrix whose potentialities are currently underexploited we concentrate on land deals for cultivating biofuel crops which are emblematic of the food land energy nexus we focus on fdi to the african continent the most targeted region for land grabbing finally we delve deeper into the influence of institutional quality by testing the role of different institutional dimensions we find that abundance of water resources and general business conditions security and regulatory quality facilitate the investment in land for biofuels as for land governance what matters is the strength and security of land tenure rights rather than the type of tenure system

what lies beneath the euro s effect on financial integration currency risk legal harmonization or trade abstract although recent research shows that the euro has spurred cross border financial integration the exact mechanisms remain unknown we investigate the underlying channels of the euro s effect on financial integration using data on bilateral banking linkages among twenty industrial countries in the past thirty years we also construct a dataset that records the timing of legislative regulatory harmonization policies in financial services across the european union we find that the euro s impact on financial integration is primarily driven by eliminating the currency risk legislative regulatory convergence has also contributed to the spur of cross border financial transactions trade in goods while highly correlated with bilateral financial activities does not play a key role in explaining the euro s positive effect on financial integration

income elasticity of gasoline demand a meta analysis abstract in this paper we quantitatively synthesize empirical estimates of the income elasticity of gasoline demand reported in previous studies the studies cover many countries and report a mean elasticity of 0 28 for the short run and 0 66 for the long run we show however that these mean estimates are biased upwards because of publication bias the tendency to suppress negative and insignificant estimates of the elasticity we employ mixed effects multilevel meta regression to filter out publication bias from the literature our results suggest that the income elasticity of gasoline demand is on average much smaller than reported in previous surveys the mean corrected for publication bias is 0 1 for the short run and 0 23 for the long run

the asymmetric effects of oil price and monetary policy shocks a nonlinear var approach in this paper we investigate the asymmetric effects of oil price shocks and monetary policy on macroeconomic activity using monthly data for the united states over the period from 1983 1 to 2008 12 in doing so we use a logistic smooth transition vector autoregression var as detailed in terasvirta and anderson 1992 and weise 1999 and make a distinction between two oil price volatility regimes high and low using the realized oil price volatility as a switching variable we isolate the effects of oil price and monetary policy shocks and their asymmetry on output growth and following koop et al 1996 and weise 1999 we employ simulation methods to calculate generalized impulse response functions girfs to trace the effects of independent shocks on the conditional means of the variables our results suggest that in addition to the price of oil oil price volatility has an impact on macroeconomic activity and that monetary policy is not only reinforcing the effects of oil price shocks on output it is also contributing to the asymmetric response of output to oil price shocks

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

why is capital so immobile internationally possible explanations and implications for capital income taxation the evidence on international capital immobility is extensive including the lack of international portfolio diversification real interest differentials across countries and the high correlation between domestic savings and investment the authors develop a model with asymmetric information between countries that helps rationalize all the above observations and then examine the implications of this model for optimal domestic tax policy without asymmetric information past work showed that small open economies should not impose corporate income taxes with asymmetric information the optimal policy instead involves government subsidies to capital imports some omitted factors that argue against subsidizing capital imports are explored briefly copyright 1996 by american economic association

risk sharing and industrial specialization regional and international evidence the authors provide empirical evidence that risk sharing enhances specialization in production to the best of their knowledge this well established and important theoretical proposition has not been tested before the empirical procedure is summarized as follows first the authors construct a measure of specialization in production and calculate an index of specialization for each of the european community ec and non ec oecd countries u s states canadian provinces japanese prefectures latin american countries and regions of italy spain and the united kingdom then they estimate the degree of capital market integration a measure of risk sharing within each of these groups of regions the ec countries the non ec oecd countries the united states canada japan italy spain and the united kingdom and rely on another author s estimate for latin america finally they perform a regression of the specialization index on the degree of risk sharing controlling for relevant economic variables they find a positive and significant relation between the degree of specialization of individual members of a group of countries provinces states or prefectures and the amount of risk that is shared within the group the authors perform regressions using variables such as shareholder rights and the size of the financial sector relative to gdp as instruments for the amount of inter regional risk sharing these regressions confirm that risk sharing facilitated by a favorable legal environment and a developed financial system is a direct causal determinant of industrial specialization this abstract was borrowed from another version of this item

why doesn t capital flow from rich to poor countries an empirical investigation we examine the empirical role of difierent explanations for the lack of ows of capital from rich to poor countries the lucas paradox the theoretical explanations include difierences in fundamentals across countries and capital market imperfections we show that during 1970i2000 low institutional quality is the leading explanation for example improving peru s institutional quality to australia s level implies a quadrupling of foreign investment recent studies emphasize the role of institutions for achieving higher levels of income but remain silent on the speciflc mechanisms our results indicate that foreign investment might be a channel through which institutions afiect long run development

why does capital flow to rich states abstract the magnitude and the direction of net international capital flows do not fit neoclassical models the fifty u s states comprise an integrated capital market with very low barriers to cap

motor fuel prices in turkey the world s most expensive motor fuel gasoline diesel and lpg is sold most likely in the republic of turkey this paper investigates the key issues related to the motor fuel prices in turkey first of all the paper analyses the main reason behind high prices namely motor fuel taxes in turkey then it estimates the elasticity of motor fuel demand in turkey using an econometric analysis the findings indicate that motor fuel demand in turkey is quite inelastic and therefore not responsive to price increases caused by an increase in either pre tax prices or taxes therefore fuel market in turkey is open to opportunistic behaviour by firms through excessive profits and the government through excessive taxes besides the paper focuses on the impact of high motor fuel prices on road transport associated activities including the pattern of passenger transportation motorization rate fuel use total kilometers travelled and co2 emissions from road transportation the impact of motor fuel prices on income distribution in turkey and turkish public opinion about high motor fuel prices are also among the subjects investigated in the course of the study

optimal departures from marginal cost pricing focuses on departures from marginal cost pricing optimal allocation or resources level of tax revenue that will be collected by the government theorems developed for resource allocation ebsco

effects of transitory shocks to aggregate output on consumption in poor countries this paper provides instrumental variables estimates of the response of aggregate private consumption to transitory output shocks in poor countries to identify exogenous unanticipated idiosyncratic and transitory variations in national output we use year to year variations in rainfall as an instrumental variable in a panel of 39 sub saharan african countries during the period 1980 2009 our estimates yield a marginal propensity to consume out of transitory output of around 0 2 to explain this result we show using instrumental variables techniques that there is a significant negative effect of transitory output shocks on net current transfers and a significant positive and quantitatively large effect on the trade balance an important implication is that frictions to private financial flows do not necessarily imply large effects of transitory shocks to aggregate output on private consumption in poor countries

what drives international financial flows politics institutions and other determinants abstract this paper uses a large panel of financial flow data from banks to assess how institutions affect international lending first employing a time varying composite institutional quality index in a fixed effects framework the paper shows that institutional improvements are followed by significant increases in international finance second cross sectional models also show a strong effect of initial levels of institutional quality on future bank lending third instrumental variable estimates further show that the historically predetermined component of institutional development is also a significant correlate of international bank inflows the results thus suggest that institutional underdeveloped can explain a significant part of lucas lucas robert e 1990 why doesn t capital flow from rich to poor countries american economic review papers and proceedings 80 2 92 96 1990 paradox of why doesn t capital flow from rich to poor countries the analysis also does a first step towards understanding which institutional features affect international banking