Supporting the free and competitive market in China and India: Differences and evolution over time

This paper analyzes the support to market competition by Indian and Chinese citizens. In particular, I study the individual preferences with respect to some characteristics of a free and competitive market. The paper aims at establishing whether preferences in these countries are different and their evolution over the time. This is an important issue, as the economic literature shows that people's preferences and policies tend to go hand in hand. This means that the analysis of today's preferences and their evolution over time can be useful to forecast tomorrow's policies. The main findings of this paper are that Indians and Chinese are different in supporting competition. The Chinese express preferences that are more in line with a free and competitive market than Indians do. The detected time path reveals that this support has been decreasing over time during the last two decades. The two populations appear to be in favour of a capitalistic, but strictly regulated market. This can mean that the future economic policies of these Asian giants will tend to this direction. Apparently there are no risks for some form of capitalism, but it is likely the two countries will not adopt completely free and competitive market institutions.     

THE EFFECTS OF FISCAL POLICY SHOCKS IN SVAR MODELS: A GRAPHICAL MODELLING APPROACH

We apply graphical modelling (GM) theory to identify fiscal policy shocks in SVAR models of the US economy. Unlike other econometric approaches – which achieve identification by relying on potentially contentious a priori assumptions – GM is a data based tool. Our results are in line with Keynesian theoretical models, being also quantitatively similar to those obtained in the recent SVAR literature à la Blanchard and Perotti (2002) , and contrast with neoclassical real business cycle predictions. Stability checks confirm that our findings are not driven by sample selection.     

Identification of lagged duration dependence in multiple-spell competing risks models

We show that lagged duration dependence is non-parametrically identified in mixed proportional hazard models for duration data, in the presence of competing risks and consecutive spells.     

A meta-analysis of satisfaction with complaint handling in services

Academics as well as managers have long been interested in the role of satisfaction with complaint handling (SATCOM) in shaping customers’ attitudes and repurchasing decisions. This interest has generated a widespread belief that SATCOM is driven by the perception that the complaint handling process is just. To test how SATCOM is modulated by distributive, interactional, or procedural justice, we performed a meta-analysis of 60 independent studies of the antecedents and consequences of SATCOM. Results indicate that SATCOM is affected most by distributive justice, then by interactional justice, and only weakly by procedural justice. We also find that SATCOM mediates the effects of justice dimensions on word-of-mouth. However, contrary to common belief, SATCOM does not mediate the effects of justice dimensions on overall satisfaction and return intent. We draw on our results to suggest several avenues for further research.     

Identifying the Independent Sources of Consumption Variation

By representing a system of budget shares as an approximate factor model we determine its rank, i.e. the number of common functional forms or factors, and we estimate a base of the factor space by means of approximate principal components. We assume that the extracted factors span the same space of basic Engel curves representing the fundamental forces driving consumers' behaviour. We identify these curves by imposing statistical independence and by studying their dependence on total expenditure using local linear regressions. We prove consistency of the estimates. Using data from the UK Family Expenditure Survey from 1977 to 2006, we find strong evidence of two common factors and mixed evidence of a third factor. These are identified as decreasing, increasing, and almost constant Engel curves. The household consumption behaviour is therefore driven by two factors respectively related to necessities (e.g. food), luxuries (e.g. vehicles), and in some cases by a third factor related to goods to which is allocated the same percentage of total budget both by rich and poor households (e.g. housing). Copyright © 2015 John Wiley & Sons, Ltd.     

Non‐Fundamentalness in Structural Econometric Models: A Review

Current economic theory typically assumes that all the macroeconomic variables belonging to a given economy are driven by a small number of structural shocks. As recently argued, apart from negligible cases, the structural shocks can be recovered if the information set contains current and past values of a large, potentially infinite, set of macroeconomic variables. However, the usual practice of estimating small size causal Vector AutoRegressions can be extremely misleading as in many cases such models could fully recover the structural shocks only if future values of the few variables considered were observable. In other words, the structural shocks may be non‐fundamental with respect to the small dimensional vector used in current macroeconomic practice. By reviewing a recent strand of econometric literature, we show that, as a solution, econometricians should enlarge the space of observations, and thus consider models able to handle very large panels of related time series. Among several alternatives, we review dynamic factor models together with their economic interpretation, and we show how non‐fundamentalness is non‐generic in this framework. Finally, using a factor model, we provide new empirical evidence on the effect of technology shocks on labour productivity and hours worked.     

Firm location and corporate debt

This study examines the influence of a firm’s geographical location on corporate debt and provides evidence that the higher cost of collecting information on firms distant from urban areas has significant implications on a wide array of corporate debt characteristics. We find that rural firms face higher debt yield spreads and attract smaller and less prestigious bank syndicates than urban firms. Rural firms attempt to reduce their informational disadvantage by relying more on relationship banking. Our results on the effect of location on corporate debt are robust to the inclusion of an extensive set of firm and issue characteristics.     

The effect of low-cost air transportation on the local economy: Evidence from Southern Italy

This paper investigates how the entry of low-cost carriers in Southern Italy has supported local and regional economic development in different ways: spreading the traffic demand during the year, increasing the rate of international tourism, generating new jobs and improving the income of the area. The evidence of traffic de-seasonality is quantified by an index, resulting in a decrease to all those airports specialized in low-cost services. Additionally, an assessment shows that the net impact driven by a low-cost route on the local economy is about €14.6 million per year.     

Evaluating the effect of monetary policy on unemployment with alternative inflation forecasts

This paper explores the role that inflation forecasts play in the uncertainty surrounding the estimated effects of alternative monetary rules on unemployment dynamics in the euro area and the US. We use the inflation forecasts of 8 competing models in a standard Bayesian VAR to analyse the size and the timing of these effects, as well as to quantify the uncertainty relative to the different inflation models under two rules. The results suggest that model uncertainty can be a serious issue and strengthen the case for a policy strategy that takes into account several sources of information. We find that combining inflation forecasts from many models not only yields more accurate forecasts than those of any specific model, but also reduces the uncertainty associated with the real effects of policy decisions. These results are in line with the model-combination approach that central banks already follow when conceiving their strategy.     

The evolution of financial intermediation: Evidence from 19th‐century Ontario microdata

Microdata for Ontario decedents in 1892 and 1902 is analyzed to help explain the dramatic growth of the Canadian banking system in the late 19th century. Combining data from probate inventories with census data at the township level, we find that the expansion of deposit banking happened at the extensive rather than intensive margin and was correlated with the expansion of the branch network of the banking system, although we cannot assign causation. Wealth and urbanization help to explain the growth of deposit banking but the significance of a dummy variable for 1902 points to other time‐correlated factors such as innovations in transportation and financial innovations that lowered costs and facilitated access to banking services.