development and inequality revisited three decades after the seminal article of kuznets 1955 and one decade after the empirical investigation of ahluwalia 1976b the relationship between income inequality and economic developement is still controversial this paper examines the above relationship within a time series cross section framework in a sample of countries which are representative of the non centrally planned economies of the world we use gdp per capita in real un international comparison project dollors as an indicator of a country s level of economic development the results lend support to the kuznets inverse u hypothesis although other factors relfecting the institutional setting of a country are found to affect income inequality significantly during the development process as well similar results are obtained if we exclude developed countries from the sample

incrementality of sme loan guarantees in many countries loan guarantee programs are important elements of government policy with respect to small and medium sized enterprises smes if loan guarantee schemes are to be effective a majority of firms obtaining assistance through such a scheme ought not to be able to obtain financing from existing sources a property known as incrementality or additionality this paper describes a new approach to measuring incrementality this work uses a two stage process to estimate the incrementality of loans made under the terms of the canada small business financing csbf program first a logistic regression based model of loan outcomes essentially a credit scoring model is estimated based on a large representative sample of smes the resulting model was consistent with prior expectations and exhibited high levels of goodness of fit the model was then employed to classify a sample of firms that had received loans under the terms of the loan guarantee scheme incremental loans ought to be classified as turndowns by the model hence the proportion of loan guarantee recipients that the model classified as turndowns is a direct measure of incrementality for the csbf loan guarantee program incrementality was estimated with 95 confidence as 74 8 9 0

is the dollar high because of large budget deficits abstract it is widely believed that the u s dollar has been high in recent years because of large u s budget deficits using three statistical techniques this paper shows that the belief has no empirical support ricardian equivalence may explain the lack of a positive association between the budget deficit and the dollar s exchange rate

fiscal policy and the exchange rate in the big seven abstract we isolate the aggregate demand effects of u s government spending from its asset supply effects working through increased deficits and examine the former with the help of a two country rational expectations model of the united states versus the rest of the world the simulation results suggest that even in the absence of asset supply effects the consequences of a government spending cut in the united states can be substantial a depreciation of the effective dollar rate of 4 percent and a fall in long term bond rates at home and abroad of 180 basis points in response to a sustained 50 billion cut 1982 dollars provided that the cuts are permanent and are perceived to be so by the public some multi country simulations suggest that u s fiscal shocks are not likely to cause strains within the ems if there is consistency in member countries monetary policies

u s deficits since world war i the tax smoothing theory suggests that deficits would respond particularly to recession temporarily high government spending and anticipated inflation my empirical estimates indicate that a relation of this type is reasonably stable in the u s since at least 1916 in particular the statistical evidence does not support the idea that there has been a shift toward a fiscal policy that generates either more real public debt on average or that generates larger deficits in response to recessions further the deficits for 1982 3 and popular projections formed in 1984 for 1984 5 are consistent with the previous structure the high values of these deficits reflect the customary response to substantial recession interacting with big government and to expected inflation

budget deficits money growth and causality further oecd evidence abstract this paper investigates the causal linkage between budget deficits and money growth in seven major oecd countries using multivariate granger causality tests combined with akaike s aic criterion and zellner s iterative seemingly unrelated regressions the accommodation hypothesis that deficits granger cause positive long run changes in money growth is systematically rejected across all countries the reverse hypothesis that money growth granger causes long run changes in deficits is also rejected across countries these results suggest that monetary and fiscal policies are set independently in each of the oecd countries

loan guarantees costs of default and benefits to small firms abstract governments of most countries seek to encourage small and medium sized enterprise sme growth and the job creation that many believe is fostered by such growth substantive growth usually requires expansion capital it is often perceived that compared with larger firms smes face disproportionately less access to the debt capital they need for start up growth and survival consequently governments and trade associations have often intervened in credit markets by taking on the role of guarantor of loans that financial institutions advance to smes for example the small business administration in the united states provides guarantees of loans made by banks to qualifying small firms similar schemes are in effect in among other countries canada japan the u k korea and germany trade associations take on such roles in france spain and other nations loans that support the expansion of small enterprises may convey significant benefits to the borrowing firms and through job creation and retention to the rest of society however to the extent that some borrowers are unable to meet the repayment obligations of their debt guarantors also face material real costs of honoring their guarantee to the lenders loan guarantee programs are designed in a variety of ways often these programs do not appear to reflect guidance from economic theory or experience this paper draws on empirical evidence to compare costs with benefits in addition it uses the results and economic theory to provide some guidance for the design of loan guarantee programs finally the study shows that loan guarantee programs can be an effective means of supporting start up growth and survival of new and risky enterprises the work finds that substantial total and incremental job creation may be attributed to the canadian loan guarantee program the paper reviews previous attempts to conduct cost benefit analyses of loan guarantee programs it finds wide variation internationally in default rates published data suggests default rates vary from less than 5 germany to more than 40 u k the empirical analysis reported here focuses on the canadian implementation of loan guarantees the small business loans act sbla findings include 1 loan guarantees granted under the terms of the sbla provide an extremely efficient means of job creation with very low estimated costs per job 2 default rates are higher for newer firms increase with the amount of funds borrowed and vary widely by sector borrowers in the retail and accommodation and food and beverage sectors were significantly more likely to default than borrowers in other sectors and 3 the widening eligibility to larger firms and to larger loans may not be well advised and is inconsistent with the goals of the program moreover reducing the loan ceiling would arguably discourage fraudulent applications while servicing those smes most in need of early stage capital in addition analysis of the lenders motives suggests that default rates on the portfolio of guaranteed loans and therefore the costs of honoring guarantees are particularly sensitive to the level of the guarantee small reductions in the level of the guarantee for example guaranteeing 80 of principal and accrued interest instead of 85 could lead to substantial reductions in default rates debate persists in economic theory about whether or not government intervention in the credit market is warranted in spite of the findings that loan guarantees seem to make positive contributions further analysis of these issues is advised

information asymmetry in small and medium enterprise credit guarantee schemes evidence from japan in this article we investigate whether there is adverse selection and or moral hazard in credit guarantee schemes for small and medium enterprises smes in japan as credit guarantee corporations

r d in smes a paradox this paper has three objectives 1 to survey the relevant literature addressing the apparent paradox of research development investments carried out within small and medium enterprises 2 to provide focused summaries of the articles in this special issue 3 to draw some general conclusions in terms of policy implications

introduction funding gaps theoretical and empirical foundations of government policies to plug alleged business funding gaps are highly controversial but rarely subject to wide ranging in depth debate this symposium from major scholars in the field provides a counterbalance topics addressed cover the theory of lending under asymmetric information its implications for overlending relationship lending as a market solution to information asymmetries government emulation of private sector decision making to eliminate underprovision of high tech equity and theoretically based empirical work testing for funding deficiencies in the high tech sector despite the very different and potentially contradictory contributions the result is surprisingly a set of mutually agreed policy conclusions

monetary policy and central bank financing of government budget deficits we examine the relationship between monetary policy objectives and the central bank financing of the government deficit in eight countries under fixed and flexible exchange rates we find using seasonally adjusted data that only the bundesbank and the federal reserve do not accommodate the government deficit in either exchange rate period furthermore the movement to monetary targeting reduces the linkage between monetary policy and government deficits using seasonally adjusted data only the banca d italia and the nederlandse bank possess significant accommodation of the government deficit during flexible exchange rates additional results are derived for other monetary policy objectives

loan guarantee schemes in the uk the natural experiment of the enterprise finance guarantee and the 5 year rule loan guarantee schemes have existed since 1953 in the us and are widely used throughout the world to provide financial support to smaller firms by guaranteeing loans from commercial banks the uk government has been an active supporter of loan guarantees since 1981 and has a long track record of modifying its scheme to reflect changing market conditions and the financing needs of its sme sector arguably the two most significant changes occurred in 2008 when the 5 year rule on eligibility was removed and in 2009 when the long standing small firms loan guarantee scheme was replaced by the enterprise finance guarantee scheme we treat the removal of the 5 year rule as a natural policy experiment and empirically question whether on economic grounds this was a sensible policy our findings suggest that the 5 year rule was a better policy choice with regard to employment but had no impact on sales growth

inflation and government deficits there is a pronounced positive correlation of inflation andgovernment deficits in the united states since world war ii the purpose of this paper is to test the three leading explanationsof this correlation these three explanations are a a deficitincreases prices through a wealth effect b a deficit results inthe federal reserve purchasing debt thus increasing the moneysupply and prices and c expected inflation increases the deficit which is the change in the nominal value of bonds no supportis found for either of the first two hypotheses the results indi cate that expected government deficits have no significance forfuture inflation since world war ii the united states has experienced large federal government deficits and a sustained peacetime inflation three differentconnections between the deficits and inflation are prominent in theliterature the most direct connection between government deficits and inflationis that by increasing the real value of outstanding bonds and perceived netwealth a deficit can raise total spending and the price level this connec tion is also the most long standing and is suggested by metzler 1951 andpatinkin 1965 for example monetarists generally and buchanan and wagner 1977 in particularhave emphasized a different link between deficits and inflation they sug gest that the federal reserve purchases government bonds when the trea sury sells bonds thus increasing high powered money the money supply and the price level the federal reserve might behave this way for exam ple because it is attempting to hold down interest rates on governmentsecurities when deficits occur recently barro 1978 1979 has put forward a hypothesis that deficitsare a result of inflation rather than inflation being a result of deficits thegovernment deficit is the change in the nominal value of outstanding gov ernment bonds if the anticipated inflation rate increases then the nomi nal value of bonds must increase i e the government will run a deficit tokeep the same anticipated real amount of bonds all three of these possible connections between government deficitsand inflation are consistent with the observed positive correlation of defi cits and inflation the implications however are strikingly different con

the transmission of inflation in a small economy an empirical analysis of the influence of us monetary disturbances on canadian inflation 1962 1980 abstract the paper examines the transmission of inflation in canada during 1962 1980 using an empirical methodology which is very flexible in determining the direction of casuality and the shape of distributed lag effects the paper finds that us monetary growth exerted an important effect on canadian inflation during both fixed and flexible exchange rate periods the evidence also shows that canadian monetary growth has remained linked to us monetary growth under the present flexible exchange rate regime

is the small firms loan guarantee scheme hazardous for banks or helpful to small business loan guarantee schemes are an integral part of sme policy in both developed and developing countries yet little has been done to evaluate such programmes particularly in terms of their ability to correct for capital market imperfections this paper uses individual loan data from some 42 000 uk sflgs backed debt contracts to empirically test the default specification outlined in the seminal credit rationing paper of stiglitz and weiss 1981 the results show that default failure does increase with the banks cost of capital but not with the government premium in addition default appears to be determined by a whole host of other factors not typically considered in the credit rationing literature

presidential politics budget deficits and monetary policy in the united states 1960 1976 this paper has focused on the extent to which the traditional tools of macroeconomic management in the united states monetary and fiscal policy have contributed to a political business cycle regardless of whether politicians can successfully influence real economic variables to their own ends the evidence presented here suggests that they tried and that they enjoyed some at least indirect aid from their independent monetary authorities in doing so several major conclusions emerge

the economic impact of the canada small business financing program this paper investigates the economic impact of the canada small business financing program csbfp using the 2004 edition of the survey on financing of small and medium enterprises to avoid the usual self selection problem associated with voluntary participation in such programs the financing behavior of the business and its intention to grow are used as control variables based on this analysis participation in the csbfp would have increased growth in salary employment and revenues by 12 12 and 7 percentage points respectively between 2004 and 2006 furthermore csbfp would have induced around 5 000 jobs approximately 3 8 of those created in that time span by small private businesses

spanish smes subsidized and guaranteed credit during economic crisis a regional perspective briozzo a and cardone riportella c spanish smes subsidized and guaranteed credit during economic crisis a regional perspective regional studies this study analyses the effects of two spanish public programmes that provide financial support to small and medium sized enterprises smes 1 subsidized credit by the official credit institute and 2 bank credit guaranteed by a mutual guarantee society the study was conducted from a regional perspective and it compares the effects of the two programmes during normal times with the effects during economic crisis during stable periods these programmes affect the growth of assets sales and the sales to assets ratio however during recession the effects extend to the growth of employment and the sales to employee ratio moreover there are significant regional differences

international transmission of us macroeconomic policy and the inflation record of western europe abstract the interaction between monetary policy government budget deficits and inflation is examined for the four largest western european economies comprising france italy the united kingdom and west germany in order to assess the possible impact of us macroeconomic policy past us monetary base growth deficits and inflation rates are included in the set of explanatory variables for each of the european countries empirical results for the 1962 2 1985 4 sample period reveal interplay between domestic monetary and fiscal policy to be augmented by a significant impact of the us variables across all four countries in the sample

optimum pricing of mutual guarantees for credit the main finding of this paper is that under financial market impediments and asymmetric information a mutually guaranteed and correctly schemed and priced insurance credit contract should have an abnormal actuarial profit such a contract improves welfare by simultaneously eliminating underinvestment ui and overinvestment oi and by reducing the probability of the insurer s ruin this solution is relevant for mutual credit insurance agencies and international or governmental agencies interested in increasing the value creation of small and medium enterprises that suffer from limited access to equity and debt markets

innovation accounting for the impact of fluctuations in u s variables on the canadian economy innovation accounting is conducted on a nine variable vector autoregression estimated using u s and canadian monthly data for january 1971 to december 1983 this reveals inter alia a positive impact of the u s interest rate on the canadian rate with the role the exchange rate plays in cushioning this impact being clearly apparent a positive effect of the u s money supply on both u s and canadian interest rates a positive albeit muted response of canadian production to a shock in u s production and a persistent influence of u s prices on production negatively and prices positively in canada are also detected l impact des fluctuations dans les variables americaines sur l eonomie canadienne une analyse utilisant la technique d innovation accounting les auteurs utilisent la technique d innovation accounting dans le cadre d un systeme a neuf variables estime comme autoregression vectorielle a l aide de donnees mensuelles canadiennes et americaines couvrant la periode de janvier 1971 a decembre 1983 cette analyse revl un effet positif de la masse monetaire americaine a la fois sur les taux d interet canadiens et americains une reaction positive mais en sourdine du niveau de production au canada a un choc dans le niveau de production americaine et une influence persistence des niveaux de prix americains sur le niveau de production au canada influence negative ainsi que sur les niveaux de prix canadiens influence positive we should like to thank gordon anderson douglas clarke john kennan john kuszczak angelo melino and stanely winer for a number of helpful discussions earlier versions of the paper were presented at the meetings of the canadian economics association in vancouver in june 1983 at the winter meetings of the econometric society in san francisco in december 1983 and in a session of invited papers at the meetings of the canadian economics association in guelph in june 1984 our discussants jacques raynauld in vancouver thomas doan and stephen king in san francisco and allan gregory in guelph offered many useful comments as too did the members of the money macro workshop at the university of western ontario alan harrison also thanks the economics department at the university of warwick for its hospitality and the social science and humanities research council of canada for financial support canadian journal of economics revue canadienne d economique xviii no 4 november novembre 1985 printed in canada imprime au canada 0008 4085 85 784 98 1 50 canadian economics association this content downloaded from 40 77 167 14 on fri 16 sep 2016 06 02 12 utc all use subject to http about jstor org terms impact of fluctuations in us variables 785

collateral and rationing sorting equilibria in monopolistic and competitive credit markets the authors examine how market structure affects credit allocation under universal risk neutrality and asymmetric information about borrowers they consider both monopolistic and perf ectly competitive banks and examine the role of collateral in each ca se when a bank is a monopolist on the loan side they find collatera l is never used and asymmetric information results in reduced bank le nding under perfect competition collateral has a useful sorting rol e moreover rationing is possible even with collateral availability and perfectly elastic deposit supply in this setting the authors sh ow co signers are valuable social welfare properties of the monopoly and competitive equilibria are also compared copyright 1987 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

are money growth and inflation related to government deficits evidence from ten industrialized economies abstract we present empirical evidence on the relation between the government debt growth money growth and inflation for ten industrialized countries over the post world war ii period non parametric and parametric tests reveal little evidence that government debt growth is either related to money growth or permanently related to inflation over periods of a decade or less but the level of debt is significantly associated with subsequent inflation from 1974 to 1983 these results are consistent with the hypothesis that central banks in developed economies can conduct independent monetary policy over long periods notwithstanding government deficits

the cost of growth small firms and the pricing of bank loans drawing upon data from the 2007 uk survey of sme finance the current analysis is concerned with the extent to which growth firms are discriminated on price in loan markets or more simply the extent to which growth firms pay more for credit given relatively small turndown rates historically vos et al in j bank finance 31 9 2648 2672 2007 higher credit prices may be a more substantial growth constraint than the access to finance issues that have dominated the academic literature to date to this end we observe inter alia that firms who have recorded recent high growth are more likely to pay higher interest rates for the loan they obtained moreover small sized firms who intend to grow through the introduction of new products exhibit a higher probability of paying more for credit than their peers finally acknowledging that banks are not risk funders we discuss the potential policy implications of these findings

alternative modes of deficit financing and endogneous monetary and fiscal policy in the u s a 1923 1982 this paper first investigates the effects of alternative modes of deficit financing on the unemployment rate the inflation rate and the real interest rate within the framework of a small complete macroeconomic model secondly it examines the nature of monetary and fiscal reaction functions the two periods 1923 1960 and 1961 1982 are considered with substantial differences in behaviour and policy being shown to exist between them the most important conclusion is that long run monetary neutrality properties shown to exist over the latter period are not intrinsic to the u s economy but rather are the result of the stabilization policies being conducted over that period

the international liquidity explosion and worldwide inflation the evidence from sterilization coefficient estimates abstract many commentators have pointed to the huge us payments deficits and international liquidity explosion of the early 1980s as the major cause of the concomitant rapid rates of monetary expansion abroad and subsequent acceleration of worldwide inflation this international monetarist interpretation rests however on the assumption of only limited sterilization of reserve inflows by foreign monetary authorities this paper uses the major econometric estimates of sterilization coefficients to calculate the implied contributions of the reserve increases of this period to foreign monetary expansion these suggest that the reserve increases did in fact make a non trivial contribution to global monetary expansion but that for most countries they were not the dominant cause

deficits and money growth in the united states 1872 1983 abstract this paper reports empirical evidence on the relation between government budget deficits and the growth of high powered money in the united states high powered money growth appears to be positively related to war spending during periods when such spending is a substantial fraction of gnp there is little evidence that the growth of high powered money is related to the non war government deficit measured either in cash or in real terms after controlling for the level of overall 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

political rights and income inequality a cross national test among contemporary nations the relationship between income equality and national wealth exhibits an inverted u shape low among the richest and poorest nations and high for nations with intermediate wealth to examine the reasons for this relationship i hypothesize that both political democracy and educational enrollment are related in a similar way to income inequality two data sets are used in this analysis modified version of muller s set of 62 nations circa 1965 1975 and hoover s data set multiple regression reveals that measures of political democracy and the educational enrollment levels have an inverted u relationship with income inequality national wealth gnp had no consistent direct effect on income inequality a satisfactory specification of national levels of income inequality must include the polynomial functions of political democracy and education

international macroeconomic policy coordination when policymakers do not agree on the true model the authors relax the assumption of the literature on international coordination that policymakers know the true model t wo countries will still be able to agree on a cooperative policy pack age that each believes will improve the objective function relative t o the nash noncooperative solution however the bargaining solution may move the target variables in the wrong direction these points ar e illustrated with monetary and fiscal multipliers taken from simulat ions of ten leading econometric models out of 1 000 possible combina tions of models that could represent u s beliefs non u s beliefs and the true model monetary coordination improves u s welfare in on ly 546 cases copyright 1988 by american economic association

further evidence on the relationship between federal government debt and inflation does an increase in the federal debt cause inflation dwyer 1982 using a par value measure of debt finds no support for such a causal link cox 1985 using a market value measure finds evidence that increases in debt produce higher inflation rates we reconcile these results by demonstrating that failure to capture the interest rate effects inherent in the market value measure accounts for the finding that debt causes inflation incorporating interest rates into our test equations using the market value series leads us to conclude that like the par value series results increases in federal debt do not cause higher rates of inflation

interaction between central bank behaviour and fiscal policy the us case federal reserve behaviour is analysed using a model which incorporates an effect an effect of iscal pressure on monetary policy formulation incentive structures are hypothesized to be such that the central bank plans over a longer horizan than that relevant to the administration with the cyclically adjusted deficit proxying for fiscal pressure from the administration the response to the deficit then plays an interactive role in affecting the trade off weights applied to the competing goals of monetary policy the model performs well for the usa and provides a pattern of policy that is stable over the full 1961ndash 83 period

causal effect of credit guarantees for small and medium sized enterprises evidence from italy we evaluate the effectiveness of a partial credit guarantee program implemented in a large italian region that aimed to improve the access to credit of small and medium enterprises using unique microdata from a broad set of firms we show that the policy increased the long term loans for beneficiary firms while the total volume of bank loans was unaffected furthermore targeted firms benefited from a substantial decrease in interest rates however there is some evidence that firms are more likely to default as a consequence of the treatment conversely the results do not point to any significant effect on investments