How do fiscal and technology shocks affect real exchange rates?: New evidence for the United States

Using vector autoregressions on U.S. time series relative to an aggregate of industrialized countries, this paper provides new evidence on the dynamic effects of government spending and technology shocks on the real exchange rate and the terms of trade. To achieve identification, we derive robust restrictions on the sign of several impulse responses from a two-country general equilibrium model. We find that both the real exchange rate and the terms of trade—whose responses are left unrestricted—depreciate in response to expansionary government spending shocks and appreciate in response to positive technology shocks.     

The Sources of Risk Spillovers among U.S. REITs: Financial Characteristics and Regional Proximity

In this article, we estimate the risk spillovers among 74 U.S. Real Estate Investment Trusts (REITs) using the state‐dependent sensitivity value‐at‐risk approach. This methodology allows for the quantification of the spillover size as a function of a company's financial condition. We show that the size of risk spillovers is more than twice as large when REITs are in financial distress and find evidence for the impact of geographical proximity. Our results provide new insights concerning the relevance of geographical diversification for REITs and have important implications for the investment and risk management decisions of real estate investors, mortgage lenders, home suppliers and policy makers.     

Lessons from the ECB Experience: Frankfurt Still Matters!

This paper compares the European Central Bank's (ECB) conduct of monetary policy (1999–2005) with that of the Bundesbank (after the German Unification: 1990–1998) in order to test the hypothesis of an ECB with 'Bundesbank's preferences' put forward in the theoretical literature ( Alesina and Grilli, 1993 ; Fatum, 2006 ). Econometric tests and simulations based on monetary policy reaction functions show that the continuation of the former Bundesbank regime is supported by the data. Given this empirical evidence we discuss the lessons for future Monetary Unions stemming from the ECB experience.     

European Universities as Complete Organizations? Understanding Identity,Hierarchy and Rationality in Public Organizations

Abstract

This article investigates the form of European universities to determine the extent to which they resemble the characteristics of complete organizations and whether the forms are associated with modernization policy pressure, national institutional frames and organizational characteristics. An original data set of twenty-six universities from eight countries was used. Specialist universities have a stronger identity, whereas the level of hierarchy and rationality is clearly associated with the intensity of modernization policies. At the same time, evidence suggests limitations for universities to become complete, as mechanisms allowing the development of some dimensions seemingly constrain the capability to develop others.     

IV threshold cointegration tests and the Taylor rule

The usual cointegration tests often entail nuisance parameters that hinder precise inference. This problem is even more pronounced in a nonlinear threshold framework when stationary covariates are included. In this paper, we propose new threshold cointegration tests based on instrumental variables estimation. The newly suggested IV threshold cointegration tests have standard distributions that do not depend on any stationary covariates. These desirable properties allow us to formally test for threshold cointegration in a nonlinear Taylor rule. We perform this analysis using real-time U.S. data for several sample periods from 1970 to 2005. In contrast to the linear model, we find strong evidence of cointegration in a nonlinear Taylor rule with threshold effects. Overall, we find that the Federal Reserve is far more policy active when inflation is high than when inflation is low. In addition, we reaffirm the notion that the response to counteract high inflation was weakest in the 1970s and strongest in the Greenspan era.     

On the international transmission of technology shocks

Using vector autoregressions on U.S. time series and an aggregate of industrialized countries, we find that technology shocks appreciate the terms of trade and lower the trade balance; they induce an ‘S’-shaped cross-correlation function for both variables (the S-curve). In calibrating a prototypical international business cycle model under complete and incomplete financial markets, we find two distinct sets of parameter values. While both model specifications deliver the S-curve, the underlying transmission mechanism of technology shocks is fundamentally different. Most importantly, only in the incomplete markets economy the terms of trade appreciate and thus amplify the relative wealth effects of technology shocks—as suggested by the evidence.     

Bank support and export: evidence from small Italian firms

The ability of a country and its businesses to grow is tightly related to the possibility of exporting and penetrating into foreign markets. The aim of this article is to study whether bank support can help small businesses (SBs) exporting at the extensive as well as the intensive margin. We address this issue by using a large database on small Italian firms. We provide an empirical analysis of the role of bank support in affecting the firms’ export decisions. Our results show that among the exporting SBs those using bank services to support their exports have a higher probability of being better placed in both the intensive and the extensive margin. Moreover, these positive impacts on export are statistically significant only when the main bank of the firm is an internationalized bank. These results have relevant policy implications as well as consequences for the business models of internationalized banks.     

Monetary policy and financial stability: What role for the futures market?

This paper examines interactions between monetary policy and financial stability. There is a general view that central banks smooth interest rate changes to enhance the stability of financial markets. But might this induce a moral hazard problem, and induce financial institutions to maintain riskier portfolios, the presence of which would further inhibit active monetary policy? Hedging activities of financial institutions, such as the use of interest rate futures and swap markets to reduce risk, should further protect markets against consequences of unforeseen interest rate changes. Thus, smoothing may be both unnecessary and undesirable. The paper shows by a theoretical argument that smoothing interest rates may lead to indeterminacy of the economy's rational expectations equilibrium. Nevertheless, our empirical analysis supports the view that the Federal Reserve smoothes interest rates and reacts to interest rate futures. We add new evidence on the importance for policy of alternative indicators of financial markets stress.     

Threshold cointegration and purchasing power parity in the pacific nations

The paper uses a threshold cointegration methodology to explore the properties of long-run purchasing power parity (PPP) in the Pacific nations. Using Japan and the USA as base countries, it is shown that long-run PPP holds for most Asian countries but that the adjustment mechanism is asymmetric. In contrast to symmetric error-correction models, it is found that asymmetric adjustments of nominal exchange rates play an important role in eliminating deviations from long-run PPP.