how integrated are the money market and the bank loans market within the european union abstract this paper estimates cointegration vectors of the time series of money market interest rates and bank lending rates the study includes six member countries of the european union eu and covers a period of 10 years from 1985 to 1994 during this period significant steps were taken that intensified financial integration in the eu including the free flow of capital a system of stable exchange rate parities and the implementation of a single market for banking services we conclude that the domestic money markets are closely linked but the domestic banking markets are segmented preliminary investigation of international differences in the capital structure of firms on the one hand and of domestic business cycle conditions on the other hand do not seem to explain differences in bank spreads across countries the results point to other directions presumably to local market power and to differences in the role of lender monitoring

international real interest rate equalization a multivariate time series approach this paper investigates the dynamic behaviour of monthly ex post real interest rates from several countries over the period 1980 to 1991 it is found that real interest rates are stationary over this period and that deviations from real interest parity are significant in the short run but disappear in the long run the latter evidence is established using the concept of co dependent time series proposed by gourieroux and peaucelle 1989 for the analysis of multivariate stationary time series

targeted transfers and the fiscal response to the great recession abstract between 2007 and 2009 government expenditures increased rapidly across the oecd countries while economic research on the impact of government purchases has flourished in the data most of the increase in expenditures was in government transfers after documenting this fact we argue that future research should focus on the positive impact of transfers towards this we present a model in which there is no representative agent and ricardian equivalence does not hold because of uncertainty imperfect credit markets and nominal rigidities targeted lump sum transfers are expansionary both because of a neoclassical wealth effect and because of a keynesian aggregate demand effect

public debt and redistribution with borrowing constraints we build a model with financial imperfections and heterogeneous agents and analyse the effects of two types of fiscal policy revenue neutral intratemporal redistribution and debt financed tax cuts which we interpret as intertemporal redistribution under flexible prices the two policies are either neutral or display effects that are at odds with the empirical evidence with sticky prices ricardian equivalence always fails a robin hood revenue neutral redistribution to borrowers is expansionary on aggregate activity a uniform debt financed tax cut has a positive present value multiplier on consumption stemming from intertemporal substitution by the savers who hold the public debt

what s different about banks abstract negotiable certificates of deposit cd s trade in the capital market in competition with other securities like commercial paper and bankers acceptances if cd s must pay lenders competitive monetary interest the reserve tax on cd s is borne by bank borrowers viability of the tax means there must be something special about bank loans that makes some borrowers willing to pay higher interest rates than those on other securities of equivalent risk moreover there must be something special about banks that prevents other intermediaries from competing to assure that it never pays to finance loans with cd s

a re assessment of the relationship between real exchange rates and real interest rates 1974 1990 abstract this paper uses cointegration techniques and error correction models to re examine the link between real exchange rates and real interest rate differentials the results show that real exchange rates and real interest rates are nonstationary however they are not cointegrated with each other on the other hand the dynamic models indicate that there might be a long run relationship between these variables but this cannot be verified the final conclusion is that there is little empirical evidence in support of a systematic relationship and this result is robust across exchange rates time periods and measures of expected inflation

are real interest rates equal across countries an empirical investigation of international parity conditions this paper conducts empirical tests of the equality of real interest rates across countries the empirical evidence strongly rejects the hypothesis of real rate equality and the joint hypotheses of uncovered interest parity and ex ante relative ppp or the unbiasedness of forward rate forecasts and ex ante relative ppp the evidence suggests that it is worth studying open economy macroeconomic models which allow 1 domestic real rates to differ from world rates 2 time varying risk premiums in the forward market or 3 deviations from ex ante relative ppp the relationship of real interest rates across countries is of central importance to our understanding of open economy macroeconomics in some models where there is costless international arbitrage in goods and financial assets real interest rates for comparable securities should be equal across countries this has been a feature of much of the early research in the monetary approach to exchange rates e g frenkel 11 and bilson 2 on the other hand finance theory indicates that risk premia may well differ for comparable securities denominated in different currencies solnick 27 roll and solnick 26 stulz 28 fama and farber 7 hansen and hodrick 17 and dornbusch 6 and more recent theoretical models in the exchange rate literature such as dornbusch 5 frankel 10 and mussa 24 depend on real rates differing between countries in the short run the proposition that real rates are equal across countries is worth studying

causality cointegration and control abstract the first sections of the paper show that causality tests can be relevant when considering the effectiveness of a control mechanism rejecting some results in earlier papers the relevance comes from a more careful consideration of what information is available to whom and when compared to previous work the final section of the paper extends this analysis to cointegrated variables when causality is a necessary consequence

macroeconomic effects from government purchases and taxes for u s annual data that include world war ii the estimated multiplier for temporary defense spending is 0 4 0 5 contemporaneously and 0 6 0 7 over 2 years if the change in defense spending is permanent gauged by ramey s defense news variable the multipliers are higher by 0 1 0 2 since all estimated multipliers are significantly less than 1 greater spending crowds out other components of gdp particularly investment the lack of good instruments prevents estimation of reliable multipliers for nondefense purchases multipliers in the literature of two or more likely reflect reverse causation from gdp to nondefense purchases increases in average marginal income tax rates measured by a newly constructed time series have significantly negative effects on gdp when interpreted as a tax multiplier the magnitude is around 1 1 the combination of the estimated spending and tax multipliers implies that the balanced budget multiplier for defense spending is negative we have some evidence that tax changes affect gdp mainly through substitution effects rather than wealth effects

real interest rate equalization and the integration of international financial markets abstract this paper argues that conventional regression tests of real interest rate equality may be misleading because they neglect to consider transactions costs a transactions cost band may inhibit the one to one correspondence between changes in real rates in alternative countries that is presumed by conventional tests statistical problems which may lead to incorrect inferences in conventional tests are also discussed alternative tests which overcome these limitations are developed and applied to real interest rates for ten different countries the alternative tests generate much stronger support for interest parity than is found in the existing literature

estimating the impact of welfare programs on agricultural output evidence from india rural welfare programs are implemented for a variety of reasons however of key importance is to understand how government spending under such programs affects local agricultural output which is a key measure of economic activity in developing economies this article estimates the local multiplicative effects of transfer spending by the government using a novel data set of state level expenditure under rural welfare programs in india using government records as narrative evidence i use the motivation to implement new programs at the national level to construct changes in transfer spending that are largely exogenous to fluctuations in agricultural output at the state level i estimate local multipliers using this narrative shock series and find government transfers to be quite consequential for local economic activity

demand and supply side determinants of conditional cash transfer program effectiveness summary the programa nacional de becas estudiantiles is a conditional cash transfer program designed to promote human capital accumulation and reduce poverty among argentine youth this study follows a 1999 cohort of students for five years and uses matching methods with a comparison group of students excluded due to quotas to estimate average and marginal program impacts multilevel methods are used to explore the role of program management and execution in explaining variation between schools in student outcomes the results suggest that the becas program improved students attendance and performance in part through program conditions requiring good attendance and academic progress for continued scholarship receipt

searching for a break in gnp it has been suggested that existing estimates of the long run impact of a surprise move in income may have a substantial upward bias due to the presence of a trend break in postwar u s gross national product data this article shows that the statistical evidence does not warrant abandoning the no trend break null hypothesis a key part of the argument is that conventionally computed p values overstate the likelihood of the trend break alternative hypothesis this is because they do not take into account that in practice the date is chosen based on pretest examination of the data

the real interest rate a multi country empirical study how real interest rates behave over time is critical to our understanding of many macroeconomic issues and much recent research has pursued this question very little of the research however has focused on real interest rates outside the united states this paper is an empirical exploration of real interest rate movements in seven oecd countries from 1967 ii to 1979 ii further research is needed on real rates in other countries for several reasons not only are measures of foreign real rates of interest in their ownright but extending an analysis of real rates to other countries also has the following additional benefits it can generate more powerful statistical tests of propositions previously tested on u s data and yield information on whether results found for the u s hold up in other countries this study pursues several questions that have arisen naturally from this earlier work is the hypothesis that the real rate is constant rejected when the analysis is extended to other countries does the real rate decline with increased inflation and money growth in other countries besides the united states how reliable is the fisher effect in which nominal interestrates reflect changes in expected inflation are movements in nominal interest rates a reliable indicator of movements in real rates what kind of variationsin real interest rates are there in different countries have real rates declined from the 60s to the 70s for other countries besides the u s this abstract was borrowed from another version of this item

monetary policy targets and the stabilization objective a source of tension in the ems abstract this paper evaluates two different monetary regimes in the ems an asymmetric regime with ems monetary policy oriented towards german targets and a symmetric regime with ems wide targets deterministic and stochastic simulations of a macroeconometric model are used to study spillovers adjustment and stabilization in ems economies they show that there exists a significant trade off between the two regimes in terms of output and price deviations from target while germany enjoys more stability under the asymmetric regime the other ems economies are stabilized more effectively by a symmetric target the resulting tension must have been at least partly responsible for the recent ems crises

real interest rate parity new measures and tests abstract international financial theory implies that for international comparisons the appropriate measure of the real interest rate is one defined in terms of traded goods prices alone new measures of the real interest rate are constructed using changes in price indexes for traded goods as deflators these new measures are tested for international real rate equality and the results are compared to those of similar tests using measures based on the change in the cpi and the wpi there are important differences between the traded goods real rate measures and those based on either the cpi or the wpi however in general the tests support the hypothesis that the real interest rate is approximately measured in terms of traded goods jel f30

the value of the voting right a study of the milan stock exchange experience i study the large premium 82 percent attributed to voting shares on the milan stock exchange the premium varies according to the ownership structare and the concentration of the voting rights and it can be rationalized in the presence of enormous private benefits of control a case study seems to indicate that in italy private benefits of control can easily be worth more than 60 percent of the value of nonvoting equity a tentative explanation for these findings is provided traditional finance theory disregards the value of voting rights in pricing common stock in most cases this omission does not seem harmful many studies of differential voting stocks in different countries have indicated that voting rights are generally worth between 10 percent and 20 percent of the value of common stock the italian evidence i present differs sharply from this view in italy voting shares that have inferior dividend rights trade at an average premium

product aggregation market integration and relationships between prices an application to world salmon markets relationships between prices of goods offer motives of interest in at least two areas market integration and product aggregation there is a close relationship between market integration and aggregation which may increase the usefulness of market integration studies in this article these relationships are developed and illustrated by an application to the world salmon market it is shown that the law of one price holds for an international market with five salmon species this result has significant implications for the world salmon market regarding both product aggregation in demand analyses and international trade policy

some evidence on the international inequality of real interest rates abstract this paper undertakes econometric tests of the hypothesis that ex ante real interest rates are equal across countries with highly integrated capital markets the issue is of practical importance because the violation of real rate equality is a necessary condition for monetary policy to influence the open economy through the real interest rate channel although an empirical literature concerning real rate equality already exists previous investigators have focused on pre tax real rates this paper contributes to the literature by attempting to incorporate the effects of taxation into the analysis

mafia and public spending evidence on the fiscal multiplier from a quasi experiment a law issued to combat political corruption and mafia infiltration of city councils in italy has resulted in episodes of large unanticipated temporary contractions in local public spending using these episodes as instruments we estimate the output multiplier of spending cuts at provincial level controlling for national monetary and fiscal policy and holding the tax burden of local residents constant to be 1 5 assuming that lagged spending is exogenous to current output brings the estimate of the overall multiplier up to 1 9 these results suggest that local spending adjustment may be quite consequential for local activity jel d72 e62 h71 k42 the widespread resort to fiscal stimulus at the onset of the global crisis and more recently the emerging need to consolidate deficits in response to rising fiscal imbalances have revitalized the empirical debate on the transmission of fiscal policy the multiplier while the literature has mostly focused on aggregate effects at a national level several recent contributions reviewed below have called attention to the local dimension this shift in focus is motivated by specific policy questions combined with the opportunity to exploit institutional information to address econometric issues in identification 1

building state capacity evidence from biometric smartcards in india anti poverty programs in developing countries are often dicult to implement in particular many governments lack the capacity to deliver payments securely to targeted beneciaries we evaluate the impact of biometrically authenticated payments infrastructure smartcards on beneciaries of employment nregs and pension ssp programs in the indian state of andhra pradesh using a large scale experiment that randomized the rollout of smartcards over 158 subdistricts and 19 million people we nd that while incompletely implemented the new system delivered a faster more predictable and less corrupt nregs payments process without adversely aecting program access for each of these outcomes treatment group distributions rst order stochastically dominated those of the control group the investment was cost eective as time savings to nregs beneciaries alone were equal to the cost of the intervention and there was also a signicant reduction in the leakage of funds between the government and beneciaries in both nregs and ssp programs beneciaries overwhelmingly preferred the new system for both programs overall our results suggest that investing in secure payments infrastructure can signicantly enhance state capacity to implement welfare programs in developing countries

the international linkage of real interest rates the european us connection abstract in this paper we present evidence on several questions regarding the movement in short term real interest rates in eight countries have ex ante real estates in the united states and europe been high during recent years has there been a link between us real rates and those in other countries can this link be quantified the basic finding in this paper is that real rates have climbed dramatically from the 1970s to the 1980s in both the european countries and the united states there is also strong evidence that there is a positive association between movements in us real rates and those in europe however european real rates typically do not move one for one with us real rates still leaving open the possibility that european monetary policy can influence domestic economic activity

international expected real interest rates new tests of the parity hypothesis and u s fiscal policy effects abstract this paper investigates the links among expected real interest rates across countries and also those between international expected real interest rates and u s fiscal policy we analyze the cross sectional mean of international ex post real interest rates as an estimator for the mean international expected real interest rate our results strongly reject the international expected real interest rate parity hypothesis reveal that u s budget deficits have no independent effects on international real rates given the impact of u s government defense spending and suggest that forces other than u s fiscal policy account for the post 1980 rise in international real rates

testing for the lop under nonlinearity an application to four major eu pork markets this article develops an econometric procedure to test the validity of the law of one price lop under nonlinearity and to distinguish between its strong and its weak version the procedure is applied to four major eu pork markets using weekly prices from 1991 to 2008 the empirical results suggest that the markets are well integrated with deviations from the steady state price differentials corrected nonlinearly the lop is valid for all market pairs and for the pair germany spain it holds in its strong version