Finding Closest Targets in Non-Oriented DEA Models: The Case of Convex and Non-Convex Technologies

This paper draws attention for the fact that traditional Data Envelopment Analysis (DEA) models do not provide the closest possible targets (or peers) to inefficient units, and presents a procedure to obtain such targets.It focuses on non-oriented efficiency measures (which assume that production units are able to control, and thus change, inputs and outputs simultaneously) both measured in relation to a Free Disposal Hull (FDH) technology and in relation to a convex technology. The approaches developed for finding close targets are applied to a sample of Portuguese bank branches.     

Why are some people (and countries) more protectionist than others?

We analyze two cross-country data sets that contain information on attitudes toward trade as well as a broad range of socio-demographic and other indicators. We find that pro-trade preferences are significantly and robustly correlated with an individual's level of human capital, in the manner predicted by the factor endowments model. Preferences over trade are also correlated with the trade exposure of the sector in which an individual is employed: individuals in non-traded sectors tend to be the most pro-trade, while individuals in sectors with a revealed comparative disadvantage are the most protectionist. Third, an individual's relative economic status has a very strong positive association with pro-trade attitudes. Finally, non-economic determinants, in the form of values, identities, and attachments, play an important role in explaining the variation in preferences over trade. High degrees of neighborhood attachment and nationalism/patriotism are associated with protectionist tendencies.     

Is Private R & D Spending Sensitive to Its Price? Empirical Evidence on Panel Data for Italy

In this paper empirical evidence is presented on theelasticity of private R & D spending on its price. Acensored panel-data regression model with random effectsis applied to a balanced panel of 726 Italian firms overthe 1992–1997 period. Implied estimates point out thatItalian firms' response to policy measures (including taxcredits), aimed at reducing the user cost of R & D capital,is likely to be substantial (1.50–1.77). Furthermore, wealso find that the elasticity of R & D spending is higherin recession (2.01) than in expansion (0.87).     

Endogenous Growth Models and Stock Market Development: Evidence from Four Countries

This paper re‐examines the relationship between stock market development and economic growth. It provides a theoretical basis for establishing the channel through which stock markets affect economic growth in the long run. It examines the hypothesis of endogenous growth models that financial development causes higher growth through its influence on the level of investment and its productivity. The empirical part of this study exploits techniques recently developed to test for causality in VARs. The evidence obtained from a sample of four countries suggests that investment productivity is the channel through which stock market development enhances the growth rate in the long run.     

Growth at the EU periphery: the next enlargement

In 2004, 75 million people are scheduled to become EU citizens, making this the largest round of expansion of the Western European club to date. Of the 10 new entrants, 8 are former socialist economies, for which membership in the EU represents the coronation of an effort began with the fall of the Berlin wall in 1989. Based on their recent economic performance, the Central and Eastern European countries appear to be well on their way to successfully integrate in the Western European club, while the Baltic Republics still lag behind. The gap between the two groups emerges when we consider the adjustment of the production structure, the composition of trade and FDI flows, and income distribution. The evidence we review appears to support the role of institutional quality to facilitate integration in the world market and overall economic performance.     

Interest rate convergence, capital controls, risk premia and foreign exchange market efficiency in the EMS

This paper examines interest rate convergence between Germany and the other EMS countries. We argue that earlier tests of convergence based on cointegration are not informative, because cointegration only implies that a linear combination of interest rates is stationary. We show that a conclusive judgment about convergence can be made if interest rate differentials exhibit a trend towards zero during the period when convergence occurred, and if the cointegrating vector has unit coefficients. We then establish that convergence has taken place in the “hard” EMS period. We also attempt to identify the sources of nonstationarities in interest differentials by examining the existence of stochastic or deterministic trends in the expected rate of depreciation and in the risk premium. Finally, the possibility of market inefficiencies is discussed.     

DEALING WITH UNCERTAINTY: ROBUST RULES IN MONETARY POLICY

We argue that in seeking to insure against model uncertainty, monetary policy makers are often ready to trade ex post performance for greater certainty in the outcome. They thus look for rules that although not optimal ex post, have certain properties that qualify them as robust. We apply first, Gul's approach of ‘disappointment’ aversion to describe policy makers' aversion to uncertainty and then define the properties the notion of ‘robustness’ entails. With these two tools we then link the desirability of such robust rules to the degree of policy makers' aversion to uncertainty. We thus show that provided such robust rules exist, a larger degree of disappointment aversion leads to a greater emphasis on robustness in policy implementation.     

External wealth, the trade balance, and the real exchange rate

We examine the link between the net foreign asset position, the trade balance and the real exchange rate. In particular, we decompose the impact of a country's net foreign asset position (‘external wealth’) on its long-run real exchange rate into two mechanisms: the relation between external wealth and the trade balance; and, holding fixed other determinants, a negative relation between the trade balance and the real exchange rate. We also provide additional evidence that the relative price of nontradables is an important channel linking the trade balance and the real exchange rate.