Local risk factors in emerging markets: Are they separately priced?

We provide new evidence on the pricing of local risk factors in emerging stock markets. We investigate whether there is a significant local currency premium together with a domestic market risk premium in equity returns within a partial integration asset pricing model. Given previous evidence on currency risk, we conduct empirical tests in a conditional setting with time-varying prices of risk. Our main results support the hypothesis of a significant exchange risk premium related to the local currency risk. Exchange rate and domestic market risks are priced separately for our sample of seven emerging markets. The empirical evidence also suggests that although statistically significant, local currency risk is on average smaller than domestic market risk but it increases substantially during crises periods, when it can be almost as large as market risk. Disentangling these two factors is thus important in tests of international asset pricing for emerging markets.     

Innovation in the Retail Banking Industry: The Diffusion of Credit Scoring

We study technology diffusion in the retail banking industry. Our contribution to the empirical literature is twofold: Firstly, we explore technology diffusion in the financial sector, whose relevance has often been neglected; secondly we focus on credit scoring adoption, a relevant process innovation still under-explored. Estimating a set of duration models, we analyze the patterns of diffusion of this technology among Italian banks. We find that credit scoring is firstly introduced by large banks with broad branch networks, which can fully exploit scale economies. We present robust evidence that banks with large market shares operating in more concentrated markets are early adopters, providing a direct support of the Schumpeterian hypothesis that market power enhances innovation.The views expressed here are those of the authors and do not necessarily reflect those of the Bank of Italy.     

Reimbursing Preventive Care

The paper focuses on secondary prevention, such as diagnostic screening, medical examinations and checks-up, which refers to the early detection of disease. Secondary prevention is analyzed as a self-insurance activity reducing the negative shock of illness and can be either complement or substitute to illness treatment. This paper analyses the optimal reimbursement scheme for both prevention and treatment when each activity receives either a linear subsidy (i.e. cost sharing) or tax. Although optimal reimbursement systematically encourages treatment, it positively affects prevention if and only if prevention reduces the cost of treatment, that is in the case the two activities are substitutes.     

US dollar/Euro exchange rate: a monthly econometric model for forecasting

The intent of this paper is the construction of an econometric model able to produce reliable and reasonable forecasts for the US dollar/Euro real exchange rate. In order to achieve this aim, an area-wide model is analysed. The aggregation is motivated by the fact that the Euro-zone is under a single monetary policy. Furthermore, a more parsimonious parametric model enables one to consider an important source of non-stationarity given by the presence of structural breaks using the multivariate cointegration analysis. Against the Meese-Rogoff critique, the out-of-sample one-step-ahead forecasts using actual values of the exogenous produced by the estimated VECM are reasonably satisfactory.     

Comparing Care Regimes in Europe

Throughout Europe, the family is still an important provider of care, but welfare state policies of individual countries may support and/or supplement the family in different ways, generating different social and economic outcomes. This article compares and categorizes care strategies for children and elderly persons in different member states of the European Union, while also taking into account the varied modalities for providing care, like leave arrangements, financial provisions, and social services. In EU countries, care regimes function as “social joins” ensuring complementarity between economic and demographic institutions and processes. As these processes and institutions change, they provide impetus for care regimes to change as well. However, because ideas and ideals about care are at the core of individual national identities, care regimes also act as independent incentive structures that impinge on patterns of women's labor market participation and fertility.     

The business history of the preindustrial world: Towards a comparative historical analysis

The organisation of business transactions in the preindustrial period, once a central concern in scholarly debates about the rise of capitalism, currently plays only a marginal role in the literature on long-run economic development. Our survey of the contents of five top-tier business and economic history journals published in the United Kingdom and the United States from 2000 to 2016 finds that only 20 per cent of the articles concern the entire period before 1800 and that, among those articles, most are national or regional in scope, with a disproportionate focus on Europe, and on England in particular. At the same time, our survey suggests that a strong theoretical foundation and rich empirical data exist on the basis of which we can develop a comparative business history of the preindustrial world. We identify four areas of enquiry that are especially conducive to further comparisons within and beyond Europe: the corporation, the family firms, the economic role of women, and the funding of private businesses.     

Antonio Genovesi and Italian economic thought: when ethics matters in economics

Abstract

The renewed interest in studies of Italian Enlightenment after the Second World War has enabled a complex new understanding of the Italian contribution to political economy. In particular, a new line of research that brings together the analysis of commercial society developed by Italian economists, and the canon of « civil life » elaborated within classical civic humanism and the natural legal tradition, has explained the deep ethical and social concerns inherent in the Italian approach to economic studies. This collection of articles takes stock of some of these achievements in scholarship and, at the same time, offers some new elements about the hermeneutical role played by these fundamental relationships between economics and ethics in identifying a more complex and multidimensional structure of scientific discourse. The articles are a selection of those presented at three conferences held in 2013, thanks to the support of the Luigi Sturzo Institute and Milan-Bicocca University, in Naples (Banco di Roma Foundation), Rome (Lumsa University) and Milan (Istituto Lombardo - Accademia di Scienze e Lettere), and they explore the thought of Antonio Genovesi as well as Eighteenth-Century Italian economic thought.     

Entry Decisions and Adverse Selection: An Empirical Analysis of Local Credit Markets

During the last decades there has been a widespread relaxation of legal entry barriers into the banking industry, with potential benefits for financial integration and competition. Obstacles to banks geographical and business expansion have been removed and branching has been substantially liberalized. This paper analyses the determinants of entry decisions into local credit markets using a unique data set before and after deregulation of the Italian banking industry. We estimate an entry model à la Poisson and find evidence that spreads between loan and deposit rates drive entry only for newly chartered banks, but does not affect the decision to open branches of banks operating in other markets. Branching by outside banks is instead positively correlated with business opportunities in the provision of financial services which do not require the acquisition of substantial proprietary information. Both these results are consistent with the hypothesis that in credit markets incumbents have an informational advantage over new entrants.     

Golden Opportunities: Jewelry Making in Birmingham between Mass Production and Specialty

Narratives of flexible specialization as an alternative to massproduction are largely absent from the industrial history oftwentieth-century Britain. In this article, I challenge thenotion that we should relegate small firms and industrial districtsto a marginal place in the historiography of this period. Drawingfrom a range of sources, I explore the history of Birmingham'sjewelry makers to show how they adapted the traditional productivesystem of the district to respond in a dynamic way to the challengesof rapid product market differentiation. As jewelry increasinglybecame a commodity for mass consumption, the firms in the Birminghamdistrict used a combination of specialty and mass productionas a strategy to both satisfy and create demand.     

Bitcoin mining: converting computing power into cash flow

Bitcoin is the world’s leading cryptocurrency, with a market capitalization briefly exceeding $300 billion. This hints at Bitcoin’s amorphous nature: Is this a monetary or a corporate measure? Hard values become explicit in the processing of transactions and the digital mining of Bitcoins. Electricity is a primary input cost. Bitcoins earned are often used to circumvent local currency controls and acquire US dollars. For the period August 2010 to February 2018, we examine the financial components of Bitcoin mining revenues, their statistical contribution to daily changes, and to its variance. We provide empirical evidence that Bitcoin transaction processing is capacity constrained.