Estimating semi-parametric output distance functions with neural-based reduced form equations using LIML

Efficiency analysis is an important tool for evaluating firms' performance. This paper introduces a novel approach for measuring technical efficiency (TE) in the case of technologies with multiple outputs which deals with the endogeneity of outputs issue. The proposed approach uses Artificial Neural Networks (ANNs) and the method of Limited Information Maximum Likelihood (LIML). The validity of the proposed approach is illustrated by fitting it to a large US data set for all commercial banks in the 1989–2000 time span. Meanwhile, we compare the proposed approach to the single-equation Translog output distance function and the proposed approach was found to yield very satisfactory results, while dealing with the issue of the endogeneity of outputs.     

Emil Lederer and Joseph Schumpeter on Economic Growth,Technology and Business Cycles

This paper compares Joseph Schumpeter and Emil Lederer with respect to their visions concerning the notions of economic growth, technology and business cycles. Their theoretical investigations in a number of thematic areas seem to converge to similar views. More precisely, both Schumpeter and Lederer regard the capitalist economy as a dynamic system where the introduction of innovations is its distinctive characteristic. In such a system, static analysis based on the concept of equilibrium is useful as an expository device to describe the adjustment mechanisms of the economic system. They also paid attention to the emergence of large oligopolistic firms and considered this development as being interwoven with technological progress. Both economists used similar arguments to emphasize the link between economic development and technological change. In their analyses, Schumpeter and Lederer referred to psychological factors motivating the entrepreneur, in order to explain the forces that set in motion the process of innovation and thus economic development. The concept of technological unemployment is also described in a similar manner by both of them. Regarding the issue of business cycles, Schumpeter and Lederer considered them to be a result of endogenous processes within a capitalist economy. Lederer in his late works, argued in a way analogous to Schumpeter, that economic fluctuations are caused from the disruptions created by innovations, which are introduced discontinuously into the economic system. Conclusively, Schumpeter and Lederer delivered theses which are similar in scope and conclusions probably because they were developed in the same social, political, theoretical and ideological environment and were also well acquainted with each other’s ideas.     

Semi-parametric real exchange rates dynamics

Review of Quantitative Finance and Accounting - A flexible semi-parametric augmented Dickey Fuller (ADF) regression is proposed to explore real exchange rate dynamics for 16 countries over the...     

Systemic risk-shifting in U.S. commercial banking

Review of Quantitative Finance and Accounting - This paper puts forward the proposition that U.S. commercial banks use dividends as a mechanism to shift systemic risk to debt-holders and the...     

Bank dividends,risk, and regulatory regimes

This paper investigates the relation between bank dividends and bank risk over the period 1984–2011, and assesses the existence of risk-taking and risk-shifting in the US commercial banking sector subject to regulatory regime changes. The introduction of PCA in 1992 and TARP in 2008 constitute significant regulatory regime changes, and provide the necessary framework to explore whether regime-dependent risk-shifting or risk-taking is present. We find strong evidence of risk-shifting and risk-taking over the post-PCA regime spanning the period 1992–2008. We interpret this evidence as indication of ineffectiveness of PCA in controlling risk-taking and risk-shifting. The finding of risk-taking just prior to the recent financial crisis suggests that risk-taking may be a factor contributing to this crisis. As risk-taking and risk-shifting are important aspects of bank behavior (Basel Committee on Banking Supervision, 2009), these results are of interest to bank regulators and important to Basel III.     

Do Financial Systems Converge?

We apply the new panel convergence methodology developed by Phillips and Sul (2007a ) on 13 financial development indices from the World Bank's Financial Development and Structure database, to test for financial system convergence across a large set of industrial and developing countries. Our results indicate that there is no convergence for either the financial systems as a whole or their main segments. Far from decreasing, the differences in the financial systems of the sample countries seemingly persist or even increase over time. These differences are more pronounced for the stock market segment and private credit by banks, and less so for the bond market segment and bank deposits. Moreover, the convergent clubs for most indices transcend the distinction industrial vs developing countries, as well as the distinction bank‐based vs capital‐market‐based financial systems.     

Coming home to Europe: Greece and the Euro

The European Council’s recent decision that Greece is ready to join EMU at the beginning of 2001 raises a number of questions. How was Greece able to comply with the convergence criteria? What are the costs and benefits of its accession from both the Greek and the present EMU members’ perspectives? Is the current process of economic reform in Greece sustainable?