structural change test in duration of bull and bear markets abstract we propose a recursive test to analyze structural changes in duration of bull and bear markets using the dow jones industrial average index we detected a single structural break in the bull market duration in april 1942

growth of firms in developing countries evidence from cote d ivoire the paper presents evidence in support of a particular growth process of firms that is consistent with a missing middle in the size distribution of manufacturing firms in african countries firm growth is explained by size and age effects as a result of efficiency exploiting through scale enlargements and learning but is strongly moderated by reputation effects and formal legitimation which facilitate access to output markets and resources complementing the model with data on growth obstacles as perceived by the owners of firms medium sized firms are found to be strongly hurt by insufficient access to infrastructure and financial services

voter information and power dilution evidence from sicilian provincial elections it is generally accepted that an increase in the amount of voter information is desirable as reisman 1990 points out a well informed and committed electorate is better able to exercise rational choice and consequently is less likely to have its wishes being thwarted by elected representatives in this connection a crucial question relates to the effect of increased voter information on power of elected representatives in other words does increased voter information dilute or increase the power of political parties from the answer to this question flow numerous conclusions about the size of rents enjoyed by political parties under differing electoral systems

closeness expenditures and turnout in the 1982 u s house elections students of elections have repeatedly found that the closeness of an election is modestly correlated with turnout this may be due to a direct response of instrumentally motivated voters but recent theoretical work casts doubt on the adequacy of this explanation another possibility is that elite actors respond to closeness with greater effort at mobilization we explore the latter possibility by using fec and state data on campaign expenditures in house senate and gubernatorial races our results indicate that closeness has an effect at both the mass and elite levels we also provide quantitative estimates of the effect of senate and gubernatorial expenditure on house turnout

getting out the vote participation in gubernatorial elections scholarship on electoral turnout has long emphasized two main themes explanations of nonvoting in terms of individual characteristics and in terms of contextual variables these investigations have deeply enriched our understanding of electoral participation but their limitations have also sensitized us to the remaining problems of explanation perusal of the work on american politics exposes a rather striking tendency in studies of participation to ignore or soft pedal the effects of active political mobilization in this article we formulate two models of electoral turnout socioeconomic and political mobilization and apply them to aggregate data on voting in gubernatorial elections of 1978 and 1980 the socioeconomic model of turnout includes such influences as income age and educational attainment to assess the effects of political mobilization we have considered campaign spending partisan competition electoral margin and the presence or absence of a simultaneous race for the united states senate both of the models perform quite well individually producing significant and meaningful coefficients and adequate fits yet in the final analysis we demonstrate that quite apart from major sources of variation in gubernatorial turnout such as region and presidential versus nonpresidential years the mobilizing influences of campaign activism and competitiveness have a strong impact on electoral participation electoral law i e closing date of registration retains a small but significant effect on voting for governor and socioeconomic characteristics included in a fully specified model have little to contribute independently to an explanation of electoral turnout these findings are very much in the same vein as related cross national investigations which emphasize the crucial role of electoral law and political parties and downplay individual characteristics as determinants of electoral participation on the basis of the research reported here we argue that scholars need to pay more attention to political mobilization as an explanation of electoral turnout in the presidential election between cox and harding in 1920 only half of the eligible voters participated this relatively low turnout together with the historically minimal rates of participation in state and local elections created deep concern among those who believed that reasonably high levels of political involvement are crucial in maintaining a healthy democratic politics it was in this atmosphere of worry about low electoral turnout that charles e merriam and harold f gosnell 1924 conducted in the city of chicago the first systematic study of nonvoting subsequently gosnell 1927 went even further and executed the first experimental study in modern political science demonstrating conditions that could stimulate electoral turnout we too worry about low participation in elections today at every level of government and we believe these classic studies

willingness to consume and ability to consume abstract george katona 1960 introduced the distinction between ability to buy and willingness to buy ability to buy refers to the objective factors determining actual purchases whereas willingness to buy captures subjective factors such as attitudes or moods i show that katona s theory can be reconciled easily with standard models of intertemporal utility maximization if one allows for a time varying preference parameter that is exogenous to the consumer and determined by the social environment such a willingness to consume model is tested against standard alternatives using data from seven european countries the empirical evidence rejects the permanent income hypothesis and supports the willingness to consume model

an alternative approach to monetary aggregation in dea this paper proposes a set of alternative dea based money indices that are proved to be both theoretically and empirically competing monetary aggregates since they perform as good as the divisia aggregates based on all the results concerning causality forecasting and money demand we conclude that dea money aggregates prove to be at least competing alternatives to the divisia aggregates and hence suggest that these new aggregates may be considered along with the existing weighted monetary aggregates like the divisia ones given the inherent benefit of the doubt weighting mechanism underlying the dea models where the optimal weight assigned by dea to each monetary asset reflects the ongoing financial innovation and the reserve bank of india s policy priority in the distribution of total liquidity we feel that the dea money indices can truly capture the liquidity better with ongoing financial innovations in the economy

term structure of interest rates and the expectation hypothesis the euro area abstract this paper investigates the informational content of the yield curve in the european market using data on the italian term structures according to the expectation hypothesis theory eht the current forward rate equals the future short rate plus a constant risk premium that is time invariant but maturity dependent this theory has been widely tested in the empirical literature providing various findings according to the country where it has been applied and to the segment of the yield curve examined or the period under study the standard approach to test the eht uses the regression techniques assuming data on spot rates and their first differences to be stationary recently an increasing number of studies evidenced the non stationarity of interest rates time series and some tests of the eht are formulated using term spread and forward spot spread which are stationary a new strand of literature suggests to investigate the eht using a restricted var framework in this paper following jondeau e ricart r 1999 the expectations hypothesis of the term structure tests on us german french and uk euro rates journal of international money and finance 18 725 750 ghazali n a low s w 2002 the expectations hypothesis in emerging financial markets the case of malaysia applied economics 34 1147 1156 and seo b 2003 non linear mean reversion in the term structure of interest rates journal of economic dynamics and control 27 2243 2265 we test if the expectation hypothesis holds using cointegration and error correction analysis for the period under study results suggest that the long and short term interest rates are cointegrated and therefore subject to a long equilibrium path providing evidence that the eht holds for the italian and the european market

bad news and dow jones make the spanish stocks go round this paper is a data based attempt to analyse what kind of information basically affects close to open returns open to close returns volatility and volume in actively traded individual securities on the spanish stock market specifically we are interested in detecting how these variables react to specific pieces of news considered as exogenous information however as volume itself could be interpreted as a proxy of the information flow we first apply the linear and nonlinear granger causality tests from volume to return and to volatility we do not find evidence supporting this latter hypothesis furthermore we only find significant evidence of linear causality from volume to volatility the other major finding is that both bad news and the dow jones play a significant informational role in explaining price changes and volatility as a consequence of these findings we also test the residual role of volume as a proxy for noise liquidity trading after filtering for news although we do not find evidence in favour of this argument

financial and legal constraints to growth does firm size matter using a unique firm level survey database covering 54 countries we investigate the effect of financial legal and corruption problems on firms growth rates whether these factors constrain growth depends on firm size it is consistently the smallest firms that are most constrained financial and institutional development weakens the constraining effects of financial legal and corruption obstacles and it is again the small firms that benefit the most there is only a weak relation between firms perception of the quality of the courts in their country and firm growth we also provide evidence that the corruption of bank officials constrains firm growth

testing for multiple regimes in the tail behavior of emerging currency returns it is by now generally accepted that foreign exchange returns exhibit heavy tails as measured by the so called tail index however it is unclear whether the tail behavior remains stationary in the presence of recurrent switches in the exchange rate regime we therefore test the null hypothesis of tail index constancy by applying a single breaks test in rounds which enables the detection of multiple breakpoints we are able to identify multiple jumps in the tail index of currency returns moreover some breaks coincide with documented shifts in monetary and exchange rate policies

a more complete conceptual framework for sme finance abstract we propose a more complete conceptual framework for analysis of sme credit availability issues in this framework lending technologies are the key conduit through which government policies and national financial structures affect credit availability we emphasize a causal chain from policy to financial structures which affect the feasibility and profitability of different lending technologies these technologies in turn have important effects on sme credit availability financial structures include the presence of different financial institution types and the conditions under which they operate lending technologies include several transactions technologies plus relationship lending we argue that the framework implicit in most of the literature is oversimplified neglects key elements of the chain and often yields misleading conclusions a common oversimplification is the treatment of transactions technologies as a homogeneous group unsuitable for serving informationally opaque smes and a frequent misleading conclusion is that large institutions are disadvantaged in lending to opaque smes

can consumer confidence forecast household spending evidence from the european commission business and consumer surveys 1 introductionthe analysis of the impact of consumer attitudes on consumer spending has been an area of sustained interest in the macroeconomics literature this interest in consumer attitudes reflects a popular belief that macroeconomic outcomes depend heavily on consumers expectations of future economic conditions reinforcing this belief is the fact that consumer spending accounts for 60 to 70 of the gross domestic product of highly industrialized countries such as the g 7 during the past few decades a number of single country investigations have attempted to assess the predictive power of consumer confidence in forecasting household spending for example in the united states mishkin 1978 reports that the index of consumer sentiment ics published by the university of michigan possesses good explanatory power for changes in durable goods carroll fuhrer and wilcox 1994 also find that the michigan ics has good predictive capability with regard to household expenditure but that its forecasting power decreases considerably when the index is used along with other macroeconomic variables 1 kwan and cotsomitis 2004 examine the robustness of carroll fuhrer and wilcox s 1994 findings when alternative measures of consumer confidence are used in their prediction equations they report that use of the michigan index of consumer expectations improves on the estimation results of carroll fuhrer and wilcox 1994 bram and ludvigson 1998 and ludvigson 2004 compare the forecasting performance of the michigan ics and the u s conference board s index of consumer confidence icc their findings indicate that the conference board s index provides additional information about future consumer consumption that is not captured by the michigan index however chopin and darrat 2000 utilizing a multivariate causality framework report that the conference board s icc is an unreliable predictor of u s retail sales as regards other studies using non u s data acemoglu and scott 1994 employ granger causality and regression analyses to determine if consumer confidence as measured by the gallup poll in the united kingdom can predict future consumption they find that consumer confidence is a leading indicator of future consumption growth in a subsequent study delorme kamerschen and voeks 2002 examine whether consumer confidence and rational expectations are the same in the united kingdom as they are in the united states they report that the predictive ability of the u k consumer confidence index is greater than that of the united states belessiotis 1996 using french data also reports that the consumer confidence index provides decent explanatory power for future consumer spending in canada kwan and cotsomitis 2005 find that although consumer sentiment is a reliable predictor of consumer expenditures at the national level results obtained using regional data are quite mixed fan and wong 1998 find that unlike the case in the united states or the united kingdom confidence indicators in hong kong have little or no explanatory power in forecasting household spending the existing studies on the ability of consumer confidence to predict household spending have produced mixed results the results vary depending on the sample period chosen the frequency of observations monthly or quarterly and the different survey methodologies employed to gauge consumer attitudes moreover most of these studies confine their attention to single country investigations given the diversity of results it is important to investigate the predictive power of consumer confidence on the basis of comparable time series data for as many countries as possible this paper presents a first formal attempt to study the ability of consumer confidence to forecast household spending within a multicountry framework to this end we use two confidence indices namely the consumer confidence indicator cci and the economic sentiment indicator esi both of which are derived from the european commission business and consumer survey ecbcs

african smes networks and manufacturing performance abstract this paper examines the role of private support institutions in determining small and medium enterprise smes growth and performance in sub saharan africa ssa it finds that smes in ssa get around market failures and lack of formal institutions by creating private governance systems in the form of long term business relationships and tight ethnically based business networks there are important links between these informal governance institutions and sme performance networks raise the performance of insiders and in the sparse business environments of the ssa region have attendant negative consequences for market participation of outsiders such as indigenous african smes this is indicated through the determinants of access to supplier credit policy interventions will be needed to improve the platform for relation based governance mechanisms and to address the exclusionary effects of tight networks

multivariate cointegration analysis of the finnish japanese stock markets abstract in this paper evidence on the cointegration between the finnish and japanese financial markets is provided the results obtained by multivariate cointegration analysis indicate that changes in the nikkei financial market have an impact on the error correction mechanism of the finnish stock market

a simple framework for analysing bull and bear markets bull and bear markets are a common way of describing cycles in equity prices to fully describe such cycles one would need to know the data generating process dgp for equity prices we begin with a definition of bull and bear markets and use an algorithm based on it to sort a given time series of equity prices into periods that can be designated as bull and bear markets the rule to do this is then studied analytically and it is shown that bull and bear market characteristics depend upon the dgp for capital gains by simulation methods we examine a number of dgps that are known to fit the data quite well random walks garch models and models with duration dependence we find that a pure random walk provides as good an explanation of bull and bear markets as the more complex statistical models in the final section of the paper we look at some asset pricing models that appear in the literature from the viewpoint of their success in producing bull and bear markets which resemble those in the data copyright 2002 john wiley sons ltd

uk bank services for small business how competitive is the market abstract this study is the first to employ an econometric model to examine the pricing behaviour of british financial institutions with respect to key bank products services offered to small and medium sized enterprises smes including current accounts investment accounts business loans and mortgages a mean group approach is used on a panel of monthly data to gauge individual banks reactions to identify factors influencing the setting of deposit and loan rates and to assess the competitive structure that best describes the uks sme banking market though the results should be interpreted with caution the empirical evidence is suggestive of a complex oligopoly policies directed at improving information and making it easier for small businesses to change banks accounts would reduce inertia and improve competition among financial institutions

the predictive power of the business and bank sentiment of firms a high dimensional granger causality approach we study the predictive power of industry specific economic sentiment indicators for future macro economic developments in addition to the sentiment of firms towards their own business situation we study their sentiment with respect to the banking sector their main credit providers the use of industry specific sentiment indicators results in a high dimensional forecasting problem to identify the most predictive industries we present a bootstrap granger causality test based on the adaptive lasso this test is more powerful than the standard wald test in such high dimensional settings forecast accuracy is improved by using only the most predictive industries rather than all industries

is political rivalry an incentive to vote according to the theory of the rational voter s behavior riker and ordeshook 1968 the decision to vote depends among other things on the expected effectiveness of his vote to bring to power his preferred candidate or party though this hypothesis is valid in the case of a two party political system in the case of a multi party system one has to take into consideration the influence of the competition2 between parties upon the vote s efficiency and on the distribution of the votes among parties3 in a multi party system quite often no one party is in a position to win an overal majority and the result is a governmental coalition therefore the voter is in more doubt about the effectiveness of his vote for a given number of parties the closer the outcome of the election the more likely people would be to vote see tullock 1972 110 an increase in the number of parties might be considered as contributing to a better representation of the electorate s preferences and therefore as an incentive to vote on the other hand when parties become too numerous there could be a weakening of power among them and that in turn would cancel out the incentive to vote therefore an optimal degree of competition encouraging electoral participation as shown in figure 1 must exist4 this paper will concentrate on the assessment of the explanatory power of the competition among parties upon the rate of electoral participation it should however not be overlooked that in practice there are many factors of an institutional as well as of a psychological nature which prevent such an ideal balance being attained factors affecting the voter s behavior such as compulsory participation tend to reduce considerably the margin between the expected benefit from voting and the costs the development of efficient lobbies considered by the voter to be more likely to support his preferences in parliament tend to reduce the

the real effect of banking crises finance or asset allocation effects some international evidence abstract this paper analyzes whether the decline in economic growth that follows a banking crisis occurs because of a reduction in the amount of credit available finance effect or a worsening in the allocation of investable resources asset allocation effect we use a sample of more than 2500 industrial firms in 18 developed and developing countries that experienced 19 systemic banking crises between 1989 and 2007 the results indicate that banking crises negatively affect firms intangible investments which intensifies the economic downturn the negative growth effect produced by the worsening of the investment allocation is stronger in countries with highly developed financial systems and institutions

business cycle durations and postwar stabilization of the u s economy average postwar expansions are twice as long as prewar expansions and contractions are one half as long this paper investigates three possible explanations the first explanation is that shocks to the economy have been smaller in the postwar period the second explanation is that the composition of output has shifted from very cyclical sectors to less cyclical sectors the third explanation is that the apparent stabilization is largely spurious and is caused by differences in the way that prewar and postwar business cycle reference dates were chosen by the national bureau of economic research the evidence presented in this paper favors this third explanation copyright 1994 by american economic association

small and medium size enterprises access to finance as a growth constraint abstract this paper presents recent research on access to finance by small and medium size enterprises smes smes form a large part of private sector in many developed and developing countries while cross country research sheds doubt on a causal link between smes and economic development there is substantial evidence that small firms face larger growth constraints and have less access to formal sources of external finance potentially explaining the lack of smes contribution to growth financial and institutional development helps alleviate smes growth constraints and increase their access to external finance and thus levels the playing field between firms of different sizes specific financing tools such as leasing and factoring can be useful in facilitating greater access to finance even in the absence of well developed institutions as can systems of credit information sharing and a more competitive banking structure

macroeconomic forecasting using diffusion indexes this article studies forecasting a macroeconomic time series variable using a large number of predictors the predictors are summarized using a small number of indexes constructed by principal component analysis an approximate dynamic factor model serves as the statistical framework for the estimation of the indexes and construction of the forecasts the method is used to construct 6 12 and 24 monthahead forecasts for eight monthly u s macroeconomic time series using 215 predictors in simulated real time from 1970 through 1998 during this sample period these new forecasts outperformed univariate autoregressions small vector autoregressions and leading indicator models

plurality versus proportional representation an analysis of sicilian elections the competing merits of plurality and proportional representation have intrigued political economists and political scientists for quite some time of primary interest is whether one or the other system is better in serving the interests of the electorate since theoreticians are unable to unambiguously determine the answer to this question the issue must ultimately be decided empirically