ALICE: Composite leading indicators for euro area inflation cycles

This paper develops Area-wide Leading Inflation CyclE (ALICE) indicators with the aim to provide early signals for turning points in the euro area headline and core inflation cycles. The headline (core) ALICE leads the reference cycle by three (four) months and the lead times extend to five (nine) months based on longer-leading series. Both ALICE indicators signalled turning points in the inflation cycles ex post and also performed well in a simulated real-time exercise. Moreover, in particular the headline ALICE also appeared to be useful for quantitative forecasting of the direction and level of inflation.     

Passive Firm Learning and Employment Projection Error

This paper analyzes establishment error in estimating employment targets in business startups and expansions. Passive firm learning models provide a testable hypothesis that, other things being equal, old establishments more accurately predict future employment targets than young businesses. Empirical evidence from 442 Ohio establishments implies that an increase of ten years in establishment age is associated with a decrease in employment projection error rate of between 11 and 13 percentage points.     

The influence of debt management on the term-structure of interest rates

Summary This article focuses onthe influence of debt management on the term-structure of interest rates. Four theories are discussed which try to explain the factors influencing the term-structure. It proved that the four theories could be distinguished according to three aspects which have been investigated by means of analysis of variance and of the estiamtion of two reduced form equations with Dutch data during the period 1950 through 1973. It could be concluded that the liquidity preference theory and to a smaller extent the preferred habitat theory fitted the data relatively well. From this it followed that the influence of debt management on the term-structure of interest rates is rather small. This article is an elaboration of a paper written at the end of the author’s study at Groningen State University. He thanks Dr. S. K. Kuipers, Mr. P. W. Otter and Mr. B. S. Wilpstra, all connected with the Groningen State University, for their advice during the writing of the paper. He also thanks Mr. A. van der Veen, who took care of all the calculation which was necessary for the elaboration. He further thanks Dr. M. M. G. Fase for the comments he made on a previous version of this article. The author works at the Central Bureau of Statistics in The Hague.     

Determinants of corporate debt securities in the Euro area

Abstract

This study examines the macroeconomic determinants of corporate debt securities in the euro area. The financing costs, as approximated by the cost of debt securities vis-à-vis other sources of corporate finance, and financing needs, as captured by mergers and acquisitions and gross domestic product, are found to be significant determinants in the short and long run. The empirical results are also supportive of substitution between debt security and internal financing unrelated to cost of differentials in the short run and of differences in the determination of long- and short-term debt securities. These findings are robust across different samples and specifications.     

Financial Distress with Family Farm Transfer in Six European Countries

Financial Distress with Family Farm Transfer in Six European Countries Many potential young farmers face the difficult choice between farming or a city career. An important criterion in this decision is the financial distress that goes with farming. We compared the financial distress after take-over of family farms by the next generation, in six European countries: Denmark, France, Germany, Spain, the Netherlands and the United Kingdom. The principles of inheritance and succession and the fiscally appraised value of the farm have a large impact on the transfer price, and therefore on the installation costs. A transfer price below the fiscally appraised value results in gift taxes. The financial distress ratio is a ratio of the yearly interest and rent burden of the installation costs to agricultural income. Besides the installation costs, rent prices and the average interest rate determine the differences in the ratio among countries. The combination of high transfer prices with a high interest rate, together with the lowest agricultural income of the six countries, resulted in the hardest situation for Danish successors. A policy to reduce the fiscally appraised value of the farm would most aid successors. Such a policy would reduce transfer prices and reduce or avoid gift taxes and thereby cut installation costs for successors. La pression financeère sur les exploitations familiales dans six pays de la communauté européenne La plgpart des jeunes agriculteurs potentiels se trouvent confrpntés entre l'agriculture et une carrière urbaine. Au moment de prendre cette décision, un critère de choix important est la pression financeère qui est associée à l'agriculture. Nous avons compareé la pression financeère consécutive à un changement de génération dans des exploitations familiales de six pays européens:Danemark, France, Allemagne, Espagne, Pays-Bas et Grande Bretagne. Les régimes successoraux auxquels sont soumis les héritages et l'accroissement de la valeur fiscale de la terre ont un impact important sur les droits de mutation, ainsi que, par conséquent, sur les coûts d'installation. Un transfert pour une valeur infèrieure à la valeur fiscale conduit à payer un impôt sur les donations. Le coefficient de pression financeère mesure le rapport entre le revenu agricole et les charges financeères liées à l'installation, intérêt et annuityés de remboursement confondus. Les variations de ce coefficient d'un pays à l'autre dépendent du prix du fermage et du taux d'intérêt, en plus évidemment des frais d'installation. La conjonction entre d'un côté des frais de mutation et d'intérêt élevés, de l'autre les revenus agricoles les plus bas des six pays place les jeunes successeurs danois dans la situation la moins favorable. Une politique qui consisterait à réduire la valeur fiscale des exploitations serait de nature a favoriser les successions. Elle réduirait les coûts de transfert, et éviterait ou allegèrait les impôts sur les donations, diminuant par là les charges liées aux mutations. Finanzielle Notlage bei der Hofübergabe von Familienbetrieben in sechs europäischen Ländern iele designierte Hofnachfolger sehen ich in der schwierigen Lage, sich der Landwirtschaft und einer außerlandwirtschaftlichen Tätigkeit entscheiden zu müssen. Ein bedeutendes Kriterium bei der Entscheidungsfindung ist die finanzielle Notlage, welche die Landwirtschaft mit sich bringt. Wir verglichen die finanzielle Notlage nach Übernahme des Familienbetriebs von der nachfolgenden Generation in den folgenden sechs europäischen Ländern: Dänemark, Frankreich, Deutschland, Spanien, die Niederlande und Großbritannien. Die Grundsätze der Erbfolge und die steuerliche Bewertung des landwirtschaftlichen Betriebes haben großen Einfluss auf den Übernahmepreis und somit auf die Betriebseinrichtungskosten, Bei einem Übernahmepreis unterhalb der steuerlichen Bewertung fallen Schenkungssteuern an. Die Verhältniszahl der finanziellen Notlage sei definiert als das Verhältnis der jährlichen Zinsen der Betriebseinrichtungskosten und der Pachten zum landwirtschaftlichen Einkommen. Außer den Betriebseinrich tungskosten bestimmen Pachtpreise und durchschnittlicher Zinssatz die Unterschiede in dieser Verhältniszahl zwischen den einzelnen Ländern. Die Kombination aus hohen Übernahmepreisen und einem hohen Zinssatz in Verbindung mit dem geringsten landwirtschaftlichen Einkommen aller sechs Länder führte dazu, dass sich für dänische Hoferben die schwierigste Situation ergab. Eine Politik, welche die steuerliche Bewertung der landwirtschaftlichen Betriebe verringert, käme den meisten Hoferben zu Gute. Eine solche Politik würde die Übernahmepreise senken und die Schenkungssteuern verringern odergar vermeiden und somit die Betriebseinrichtun gskosten für Hoferben verringern.     

Financial Structure: Theories and Stylized Facts for Six Eu Countries

The article provides a survey of one of the most important elements of financial structure, namely credit to firms and households, by means of five distinguished theoretical issues. It is complemented by a survey of relevant stylized facts for six European countries. A cross-country comparison across Europe shows that indirect credit markets with banks as the main players are far more important than direct credit markets, and that the most striking difference in financial structure among the countries considered relates to debt maturity.     

Interest Rate Pass-Through: Empirical Results for the Euro Area

Abstract. This paper empirically examines the interest rate pass‐through at the euro area level. The focus is on the pass‐through of official interest rates, approximated by the overnight interest rate, to longer‐term market interest rates, which, in turn, are a proxy for the marginal costs for banks to attract deposits or grant loans, and therefore passed through to retail bank interest rates. Empirical results, on the basis of a (vector) error‐correction and vector autoregressive model, suggest that the pass‐through of official interest to market interest rates is complete for money market interest rates up to three months, but not for market interest rates with longer maturities. Furthermore, the immediate pass‐through of changes in market interest rates to bank deposit and lending rates is found to be at most 50%, whereas the final pass‐through is typically found to be close to 100%, in particular for lending rates. Empirical results for a sub‐sample starting in January 1999 show qualitatively similar findings and are supportive of a quicker interest rate pass‐through since the introduction of the euro. It is shown that the difference between the adjustment speed of bank deposit and lending rates (typically around one versus three months since the common monetary policy) can to a large extent significantly be explained by credit risk considerations.     

The prophecy of Ulrich Beck: signposts for the social sciences

Abstract

This special issue on the legacy of Ulrich Beck is aimed to stimulate reflection both on the specific uses to which Beck’s conceptual and theoretical apparatus can be put within risk studies and the wider significance of his academic project for the social sciences. In this end-piece, we draw out the key themes which surface in the different contributions relating to five particular areas: the nature of risk; advancements in methods; issues of non-knowledge and uncertainty; the development of cosmopolitan risk communities; and the situated character of individualization. We discuss the implications of the accounts contained in this special issue and reflect on the impact and influence of Beck’s sustained engagement with colleagues around the globe, concluding that the concepts and methods that Beck bequeathed the social sciences are set to live on and thrive.