REAL-FINANCIAL LINKAGES IN THE CANADIAN ECONOMY: AN INPUT–OUTPUT APPROACH

The recent financial crisis highlighted the importance of better understanding the interaction between macroeconomic and financial conditions. In this paper, we provide a financial social accounting matrix for the Canadian economy and use it to assess the strength of real-financial linkages by calculating and comparing multipliers with and without endogenous financial flows. It is found that taking into account financial flows increases the impact of a final demand shock on output by 4–11%. Moreover, between 2008 and 2009H1, the investment decisions of financial institutions together with the fact that non-financial institutions were unwilling or unable to increase their financial liabilities led to estimated declines in all GDP multipliers. The impact of a final demand shock on GDP declined 3–5%, while the impact of an increase in the availability of investment funds fell 30% and 55% for financial and non-financial corporations, respectively.? ^?The views expressed in this paper are those of the authors. No responsibility for them should be attributed to Statistics Canada. View all notes     

A Social Network Analysis of Overseas Tourist Movement Patterns in Beijing: the Impact of the Olympic Games

The 2008 Beijing Olympic Games had a great impact on the tourism industry in Beijing, especially on tourism flows and movements. This study used content analysis and social network analysis methods to examine 500 online trip diaries and analyze overseas tourist movement patterns in Beijing during the Olympics. The result revealed that overseas tourists were most interested in famous traditional attractions, and their movements were focused in the central city area of Beijing. The study identified the diversity of tourist attractions and the expansion of main visiting areas as the two main changes during the Olympics. Copyright © 2011 John Wiley & Sons, Ltd.     

Do exchange rates affect the capital–labour ratio? Panel evidence from Canadian manufacturing industries

Using industry-level data for Canadian manufacturing industries from 1981 to 1997, we find empirical evidence of a negative relationship between the capital–labour ratio and the user cost of capital relative to the price of labour. A 10% increase in the user cost of the Machinery and Equipment (M&E) relative to the price of labour results in a 3.3% decrease in the M&E–labour ratio in the long run. Assuming complete exchange rate pass-through into imported M&E prices, the maximum effect of a permanent 10% depreciation in the exchange rate is a 1.7% decline in the M&E–labour ratio. This result implies that the cumulative growth of the M&E–labour ratio during the 1991 to 1997 period would have been 2.3 percentage points higher had the dollar not depreciated. This may appear to be significant, but considering both M&E as a share of total capital and the capital share of nominal output are both approximately one-third, in terms of a simple growth accounting framework, the effect on labour productivity is small.     

Cluster-Based Advantages in the Innovation Process: The Diffusion of Nanotechnology in Two Chinese Cities

Researchers have shown that “cluster” is a more useful unit of analysis than “nation” in innovation studies. Clusters are characterized by interconnected organizations, shared resources and frequent knowledge flows. Within national boundaries, multiple clusters with different relative advantages may coexist, and exhibit very different innovation patterns. Yet, in studies of innovation in emerging economies, there remains little attention on cluster-based advantages, and how these advantages generate distinct patterns of innovation. To bridge this gap, this study analyzes the diffusion patterns of nanotechnology in two Chinese clusters—Beijing and Shanghai. With different relative advantages, the diffusion of nanotechnology has been oriented by different levels of “imitation” and “innovation” forces in the two Chinese clusters. This study applies the Bass Model to quantify imitation and innovation forces, and compare the resultant diffusion patterns of nanotechnology in the two clusters with other technologies. Supplementary qualitative data is also provided to show how Chinese scientists perceive their relative advantages in different clusters. Among other things, the findings suggest that scientists of emerging economies favor the learning-by-doing principle while utilizing external networks.     

Asymmetric Correlation and Volatility Dynamics among Stock, Bond, and Securitized Real Estate Markets

We apply a multivariate asymmetric generalized dynamic conditional correlation GARCH model to daily index returns of S&P500, US corporate bonds, and their real estate counterparts (REITs and CMBS) from 1999 to 2008. We document, for the first time, evidence for asymmetric volatilities and correlations in CMBS and REITs. Due to their high levels of leverage, REIT returns exhibit stronger asymmetric volatilities. Also, both REIT and stock returns show strong evidence of asymmetries in their conditional correlation, suggesting reduced hedging potential of REITs against the stock market downturn during the sample period. There is also evidence that corporate bonds and CMBS may provide diversification benefits for stocks and REITs. Furthermore, we demonstrate that default spread and stock market volatility play a significant role in driving dynamics of these conditional correlations and that there is a significant structural break in the correlations caused by the recent financial crisis.     

Real Estate,the External Finance Premium and Business Investment: A Quantitative Dynamic General Equilibrium Analysis

This article studies the connection between the capital market and the real estate market. Empirically, we find that positive real house price shocks lower the external finance premium and stimulate nonresidential investment and real gross domestic product (GDP). Our theoretical framework is able to mimic the volatility of the external finance premium, the relative price of real estate and capital and the investment in real estate and capital. It also captures the cyclicality of the external finance premium and of real estate prices. The contribution of real estate price fluctuations to the variability of the external finance premium and the GDP is confirmed to be significant.     

ENDOGENOUS HEALTH CARE, LIFE EXPECTANCY AND ECONOMIC GROWTH

We study the endogenous relationship between health care, life expectancy and output in a neoclassical growth model. Although health care directly diverts resources away from goods production, it prolongs life expectancy, which in turn leads to higher savings and, hence, capital formation through a private annuity market. We show that savings and health care are complements in equilibrium, with both rising with economic development. Our model is therefore consistent with several observed stylized development patterns across countries. Moreover, through the longevity-enhancing channel, health care and health production technology are found by simulation to be growth and welfare promoting.     

The Influence of Culture on Organizational Design and Planning and Control in Australia and the United States Compared with Singapore and Hong Kong

This study draws on the national cultural dimensions of power distance, individualism, and Confucian dynamism to predict and explain differences in philosophies for, and approaches to organizational design and management planning and control systems in Australia and the US, representing Anglo-American nations, and Singapore and Hong Kong, representing the 'five dragons' of East Asia. Data were gathered by survey questionnaires mailed to senior accounting and finance executives in 800 organizations.
The results were largely as predicted and, in general, provide support for the importance of national culture in influencing organizational design and management planning and control systems. In particular, the cultural values of Anglo-American society relative to East Asian society are associated with a greater emphasis on decentralization and responsibility centres in organizational design, and a greater emphasis on quantitative and analytical techniques in planning and control. By contrast, the cultural values of East Asian society are associated with a greater emphasis on long-term planning and on group centred decision-making. The results are important to managers in global organizations who need to understand the cultural bases of observed differences in organizational and management planning and control practices in Anglo-American and East Asian nations.