Causality-in-variance and causality-in-mean between the Greek sovereign bond yields and Southern European banking sector equity returns

This paper adopts the robust cross-correlation function methodology developed by Hong (J Econom 103:183–224, 2001) in order to test for volatility and mean spillovers between Greek long-term government bond yields and the banking sector stock returns of four Southern European countries, namely Greece, Portugal, Italy, and Spain. Its primary focus is on investigating the potential impacts of the recent European sovereign debt crisis. While most previous studies have focused on within-country causalities, we rather assess cross-country transmission effects. The presented results provide evidence of bidirectional volatility spillovers between Greek long-term interest rates and the banking sector equities of Portugal, Italy, and Spain that emerged during the European sovereign debt crisis. We also find significant unidirectional causality-in-mean from bank stock returns in Greece to Greek long-term bond yields during the crisis period as well as significant causality at the mean level from the bank equity returns in Portugal, Italy, and Spain to Greek bond yields.     

Greece in the European Union: policy lessons from two decades of membership

This paper examines the first two decades of Greece’s experience as a member of the European Union (EU). In evaluating the Greek experience within the EU, we derive three fundamental policy lessons that apply both to similar small peripheral countries now entering the EU and to the EU itself in terms of facilitating their integration in a large economic area. First, small peripheral countries that enter the EU must address the structural deficiencies of their economies before entry in order to minimize the impact of increased competition after the removal of trade protection, and follow domestic policies that maintain and promote their comparative advantage within the EU. Second, the Convergence Criteria have proven to be a successful mechanism for countries with a poor historical policy record to achieve macroeconomic stability, as shown by the case of Greece. Third, common EU policies can be very helpful in facilitating structural reforms in small peripheral economies. However, these policies must be continuously evaluated and improved so that their effectiveness is maximized.     

Using managers' expectations for ex-ante policy evaluation: Evidence from the COVID-19 crisis

Evaluation of the impacts of government policies during an economic crisis is often delayed until the outcomes are realized. Policies can be better guided if they can be evaluated amid a crisis, before the realization of outcomes. This study examines whether survey data on the expectations of small business managers can help evaluate two high-stake subsidies for firms amid the COVID-19 crisis in Japan, namely, Subsidy Program for Sustaining Businesses (SPSB) and Employment Adjustment Subsidy (EAS). We evaluate the accuracy of managers' expectations, estimate the impact of subsidies on the expected firm survival, and compare it with the estimated impact on realized survival. We find that the managers' expectations on their future sales, survival rate, and the possibility of receiving these subsidies predict the realized outcomes, although they were highly pessimistic about their survival rates. We find that the estimated impacts of the SPSB on the expected survival rates have the same sign as the estimated impact on the realized survival rates, but the size is more than twice because of the pessimism on survival. The estimated impacts of the EAS are both insignificant. Therefore, although its impact may be overestimated, managers' expectations are useful for selecting an effective policy.     

Planning for full European community membership the effects of changes in indirect taxation using an input-output approach and application to the Greek economy

Conclusion Our primary aim in this study has been to assess some of the economic effects of substituting VAT for a number of indirect taxes which currently exist in Greece. Such a substitution is justified not only by the special merits of VAT as a commodity tax but also by the anticipation of the country's membership of the EEC. This study has shown that the replacement of a number of indirect taxes in Greece with a VAT involving the zero-rating of five groups of consumer expenditure, the exemption of one group and the taxation of all other groups at a rate of 11% leads to a change in domestic prices and results in the increase of the cost of living by 1.09%. However, this increase in the cost of living is smaller than the increase in the cost of living under uniform VAT and fully-rated sectors.The estimations of this study may help in determining governmental policies when Greece attains the full membership of the European Community. However, they need to be interpreted with caution as their accuracy depends on the reliability of the estimated input-output coefficients, the policies of the tax authorities, the strength of the trade unions and the competitiveness of the Greek economy.The authors are indebted to Mr. S.M. Kanbur of Worcester College, Oxford, U.K., for helpful comments.     

Salvador Allende's development policy: Lessons after 50 years

Last year, 2020, was the 50th anniversary of the opening of the ‘Chilean road to socialism’ by Salvador Allende. Although the Allende government is the political reference for the 'socialism of the 21st century’ in Latin America, international supporters tend to disregard the primary cause of its downfall, focusing instead on the circumstances of Allende's death. This article explains the link between the Allende government's development policies and its macroeconomic outcomes between 1970 and 1973. It finds that Chile's economic collapse had an endogenous cause related to government policies. This supports the views of Mises and Hayek on the feasibility of socialist economic policies. Policymakers and commentators should recognise essential lessons from the Chilean experience to learn from past errors and effectively promote Latin America's economic development.     

The impact of EMU on bond yield convergence: Evidence from a time-varying dynamic factor model

This paper examines the dynamics of long term sovereign bond yields for 21 OECD countries. Following Del Negro and Otrok (2008), we estimate a dynamic factor model, with time varying parameters and stochastic volatility, that decomposes the observed variation in bond yields for each country into a common factor, a regional factor (EMU/non-EMU), and an idiosyncratic country specific factor. We find that prior to the financial crisis of 2008, the common factor played a dominant role for most countries in our sample. In the post financial crisis period there is substantial heterogeneity in the relative importance of the EMU and the idiosyncratic factors across different countries. For instance, our results suggest that there was a decoupling between the EMU and bond markets of the periphery economies of Greece, Ireland and Portugal in the post-2008 period. We find that after the onset of sovereign debt crises in these economies, the idiosyncratic factor assumed an important role in driving the bond yield variation. Thereafter, the EMU’s share in bond yield changes in Ireland and Portugal increased considerably since 2012, whereas for Greece the idiosyncratic factor continued to play a significant role in driving bond yields. In contrast, the EMU factor consistently played a dominant role in explaining bond yield changes in Italy and Spain, the other two economies that also experienced severe debt crisis during this period. We argue such differences in the importance of the EMU factor between core and periphery economies can be attributed to the systemic importance of core members for the EMU. This is indicated by our finding that bond yields and credit default swap (CDS) are less sensitive to changes in debt-GDP ratios in countries where the EMU factor played a larger role in the post-2008 period.     

Canada's Housing Bubble Story: Mortgage Securitization,the State,and the Global Financial Crisis

Canada's experience during and after the financial crisis appears to distinguish it from its international peers. Canadian real estate sales and values experienced record increases since the global financial crisis emerged in 2008, rather than declines, and Canada did not witness any bank failures. The dominant trope concerning Canada's financial and housing markets is that they are sound, prudent, appropriately regulated and ‘boring but effective’. It is widely assumed that Canadian banks did not need, nor receive, a ‘bailout’, that mortgage lending standards remained high, and that the securitization of mortgages was not widespread. The truth, however, does not accord with this mainstream view. In fact, the Canadian financial and housing markets reveal marked similarities with their international peers. Canada's banks needed, and received, a substantial ‘bailout’, while federal policies before and after the financial crisis resulted in the massive growth of mortgage securitization and record household indebtedness. This article documents the growth of Canada's housing bubble, the history of mortgage securitization, and of government policies implemented before and after the crisis. Instead of making the Canadian financial and housing sectors more resilient and sustainable, the outcomes of state responses are best understood as regressively redistributive.     

THE CHINA MODEL: IS IT A GOLDEN FORMULA?

The economic crisis is an opportunity for governments to face the fact that Keynesian interventionist policies are not the path to success. However, support for such policies is being sustained by misperceptions of China's remarkable economic progress in recent years. Its success is commonly attributed to government‐led initiatives, labelled as ‘The China Model’, which divert credit away from the true source of growth: its experience of the free market. This article examines the development of the free market in China and explains why the government's recent behaviour threatens to undermine the gains of recent decades.     

The policy mix in the US and EMU: Evidence from a SVAR analysis

We use a SVAR approach to the effects of fiscal and monetary policies, as well as their interactions (policy mix) for the US and the Euro Area (EMU). Overall, our results show that these two cases are different from each other. First, while in the case of the US there is evidence of Keynesian monetary policy, the same is not true in the case of the EMU. Second, considering the effects of the global economic and financial crisis, there is evidence of non-Keynesian fiscal policy in the case of the EMU (expansionary fiscal consolidation), while it does not hold in the case of the US. Third, there is evidence supporting the traditional inverse relationship between monetary policy interest rates and inflation in the case of the US, whereas in the case of the EMU there is a price puzzle (frequent in SVAR studies). Fourth, the baseline model seems to be robust in the case of the US, when considering the effects of the economic and financial crisis 2007–2009, while the opposite holds in the case of the EMU. However, in both cases, the policies seem to act as complements. Another similarity appears when analysing the relationship between public spending and taxation, where there is evidence supporting a fiscal retrenchment.     

Public service restructuring in the UK: the case of the English National Health Service

This article overviews welfare state retrenchment in the UK under the Conservative‐led coalition government that formed in May 2010 and has centred its response to economic crisis on rapid public deficit reduction through public expenditure austerity targeted increasingly on the welfare benefits budget. It locates the coalition's reforms of public services and public sector employment relations in the long trajectory of public sector restructuring in the UK: the policies of New Right governments in the 1980s and New Labour from 1997 to 2010 that installed marketisation and privatisation in a permutation of forms, intensifying challenges for trade union organising. Focusing on the English NHS, the article identifies the respects in which the coalition's reforms continue and depart from New Labour's.     

Economic downturns and compositional effects in regional population structures by age: a multi-temporal analysis in Greek regions, 1981–2017

Population movements (international and internal migration) and changing fertility and mortality patterns have significantly affected demographic structures. Investigation of the relationship between (evolving) population structures and economic downturns is a key issue in economic demography. Analysis of compositional changes in regional population structures over a sufficiently long time interval may provide an informed knowledge to better understanding of this relationship and the underlying socioeconomic context in European countries. Based on these premises, Greece was considered a paradigmatic case of sequential economic expansions and recessions, impacting the structure of resident population in the last four decades. In this work, changes over time in population structures by age in Greek regions were explored (1981–2017) using a multi-temporal principal component analysis. A diachronic analysis of compositional effects of economic downturns on regional population structures indicates spatially-heterogeneous demographic processes in Greece. The subsequent recession has represented a turning point in Greek demography, consolidating changes in traditional family structures, while stimulating out-migration at younger ages to Northern and Western European regions and containing immigration from developing countries. Metropolitan areas and coastal districts had more rapid population dynamics, while peripheral rural regions experienced more rapid changes towards aging. Population aging had a short-term impact on regional population structures in Greece, with possibly negative consequences for the ability of the country’s economy to recover from crisis.

     

The impact of government financial support on the performance of new firms: the role of competitive advantage as an intermediate outcome

This research examines the influence of government financial support on new firms' performance. Extant empirical research on the topic has found mixed results, which warrants an exploration of the theoretical basis for the impact of support policies on new firms' performance. Grounding the theoretical model in the resource-based view and institutional theories, this study contends that performance outcomes – e.g. revenues or profits – should not be the first outcomes of public policies to be examined. Instead, competitive advantage formation is suggested as a link between support policies and new firms' performance. Using new firms from the USA, we examine the impact of government financial support measures – government loans, guarantees and government equity – on firms' overall competitive advantage and more specific types of competitive advantage based on innovation, licensing-in, marketing and human capital. Controlling for family funding, bank financing, equity of business angels and venture capitalists, industry, size as well as entrepreneur's characteristics, the results reveal that government guarantees and government equity have a direct effect on new firms' competitive advantage and only an indirect impact on performance. Our results suggest to policy-makers to focus on helping new firms build the necessary capabilities to compete successfully in the marketplace.     

The European Monetary Union break-up: an economic experiment on the return of the deutsche mark

By using the macro-econometric input–output model INFORGE, this paper investigates the economic effects of a unilateral break-up of Germany from the European Monetary Union (EMU). The results show that a return to a national currency lowers Germany's growth path. Positive effects of a break-up due to lower domestic prices, increasing real wages and lower imports are fully compensated by the loss in international competitiveness. On industrial level, the negative implications are the strongest in those industries that depend strongly on exports. Strong indirect implications are expected for the business-related service sector. Although the results of this economic experiment depend strongly on its underlying assumptions, it can be shown that a break-up of the EMU would result in a heavy welfare loss for Germany.     

Is corruption bad for economic growth? Evidence from Asia-Pacific countries

This study utilizes the bootstrap panel Granger causality approach, which incorporates both cross-sectional dependence and heterogeneity across countries, to investigate whether corruption negatively impacts economic growth in thirteen Asia-Pacific countries over the 1997–2013 period. The empirical results show that there is a significantly positive causality running from corruption to economic growth in South Korea, a significantly positive causality running from economic growth to corruption in China and no significant causality between corruption and economic growth for the remaining countries. According to the empirical results, we do not support the common perception that corruption is bad for economic growth for all thirteen Asia-Pacific. On the contrary, results of this study suggest that the “grease the wheels” hypothesis is supported for South Korea. Additionally, results of this study indicate that for most Asia-Pacific countries, policy makers’ use of anti-corruption policies to promote a country's economic development may not be effective. Finally, results of this study also suggest that for China, increase in economic growth leads to an increase in corruption.     

Assessing the impact of liberalisation policies on the Greek labour market: an insider–experts' view from the perspective of the varieties of liberalisation

During the recent Great Recession (2008–2018), Greece has become the prototype example of the implementation of austerity policies in Europe. Contrary to public discourse, these austerity policies were complemented by substantial labour market reforms that promoted employment and wage flexibility. This article aims to present a theory-driven understanding of the implementation and the effects of these reforms. For this purpose, we employ a qualitative study consisting of semi-structured interviews with 50 labour market experts—government officials and labour lawyers, academics, labour union representatives and employer association representatives. Using Thelen's framework on the Varieties of Liberalization, we conclude that, contrary to the initial aims of the reforms, Greece followed a trajectory of direct deregulation, reducing considerably the level of both coordination between employers and workers, and coverage of employment protection. The interviews show that the dismantling of collective bargaining system was the most decisive move in this path.     

Deregulation and institutional conversion in the Greek hotel industry: an employment relations model in transition

Before the debt crisis of 2010 forced Greece into almost permanent austerity, its hotel workers enjoyed wages and conditions (through a sector collective agreement) similar to those in other economic sectors. This was against the international trend where low wages and poor conditions were standard. Sweeping deregulation by Greek governments has brought much of the hotel industry into line with other countries. The sector agreement, now covering a much smaller proportion of the workforce, survived but has experienced ‘institutional conversion’, delivering a much poorer outcome. Despite buoyant tourism, institutional deregulation and derogation have delivered the employers' major objective of matching the workforce to the fluctuating demand for labour.     

Dynamics of group grievances from a global cohesion perspective

Grievances are vulnerable to state development and harmony; however, some factors provoke the masses and groups to vulnerability and state fragility (SF) by disturbing social cohesion. Under the grievance assumptions on the political process, this study has been designed to gauge the nexus of group grievances (GG), an essential parameter of social cohesion, institutional governance (IG), government legitimacy (GL), economic growth (EcG), and population growth (POPG) from the global perspective from 2008 to 2022 in a global panel of 158 countries considering the critical aspect of SF. The statistics reveal that PS is essential in controlling and managing the GG in the state. PS is the most significant factor in harmonizing the state's ethnic minorities, focus, and religious groups with stable policies and their grievances issues. It also states that apart from PS, another aspect of IG, Control of Corruption (CoC), helps mitigate malpractices and provides a transparent environment supporting grievances. It further demonstrates that EcG provokes grievances instead of lessening them among the key groups in the state, especially in the processing of industrialization. Because of the government's partiality to provide benefits to specific groups or sectors, that partiality and injustice hype the grievances among the public. Moreover, POPG is also a significant factor in increasing GG, along with government illegitimacy and untrust. The study concludes that to make the country agile and prosperous, the government should balance developing industrialization without compromising agricultural and domestic industries. It helps states gain public trust in the IG framework and GL. The government should harmonize its policies by tackling all minorities, ethnic, and religious groups coherently to maintain social cohesion in the country. Finally, One of the significant factors in natural resources and the scarcity of global resources is population. It stated that prudent population control measures better assist in resource scarcity and conflict management, such as in EU countries compared to Asia and Africa. Recent grievance movements in Brazil, China, India, Nigeria, Pakistan, and the US, are the practical application of this study because these countries fall in the list of the top 10 most populous countries. So, population control policies should be effectively implemented to support economic and social parity and mitigate GG.     

Does political propaganda matter in mitigating climate change? Insights from the United States of America

Some research on climate change has been the basis of climate change denialism (hereafter, CCD is used to refer to denial, denialism, and deniers). There is formative knowledge about the role of political propaganda in climate policies and resulting outcomes. To contribute to the understanding of political ideology and the extent of CCD, we adopt econometric techniques to study the impact of the United States of America's withdrawal from the Paris Agreement. The results show that ideological political propaganda has psychological and philosophical consequences that impact climate change policies. In addition, we find that the effect of a state's economic growth on climate change is mediated by CCD. In particular, low-income capitalist states have a higher propensity to become CCDs because they are more likely to engage in economic expansion even at the expense of environmental sustainability. Global climate change policies depend on high-income nations and industries' willingness to adopt economic policies to achieve sustainable future development. Thus, this study fills the literature gap on the relationship between political ideology and climate change. The findings show that CCD significantly influences voting patterns and socioeconomic outcomes. It impedes states from achieving net-zero emissions and carbon neutrality and it is used as a political propaganda. Subject to these findings, relevant policy suggestions are offered.     

Unemployed Chinese workers: the survivors,the worried young and the discouraged old

The forces of globalization and the wave of economic reform in the People's Republic of China have led to government policies to downsize state-owned enterprises and support a competitive labour market. Chinese workers who have been laid off ( xiagang ) are leaving the 'iron rice-bowl' security of the socialist state. Unemployment produces personal challenges for laid-off workers and human resource policy challenges for the government. For workers, xiagang and unemployment status mean they must cope with the unfamiliar challenges of job search and the threat of economic hardship. But how unemployment influences workers' lives is strikingly diverse in its impacts. Distinctly different patterns emerge for workers depending on: 1) their position in the social structure and stage of life, 2) their available skills and coping resources, and 3) their experience of economic and psychological distress. The present study reports survey responses of a sample of 2,412 laid-off Chinese workers in seven cities in China and identifies three distinct sub-groups of unemployed workers: 1) 'Survivors': more confident and better educated workers, 2) 'The Worried Young': distressed younger workers with few coping resources, and 3) 'The Discouraged Old': older workers with less education looking towards retirement. Each of these groups of workers views their circumstances and life prospects in quite different ways. Our results are examined in the context of the literature on social change and the life course. Our findings also suggest different human resource policies for each of these groups of workers.     

Capital flows and the boom–bust cycle: The case of Estonia

During 2000–2007, Estonia was among the fastest growing emerging market economies, but in late-2008 entered a deep recession. This paper examines shocks, institutions, and policies that have made Estonia's boom–bust cycle so severe. It finds that an open capital account, the prospect for EU entry, and the currency board facilitated massive capital inflows, which led to credit and real estate booms. In late-2008 a domestic slowdown was greatly amplified by the global financial and economic crisis. To resume sustainable growth, the country will need to regain competitiveness and rebalance resources to exports. Estonia's experience underscores the importance for other emerging market economies to retain some flexibility in their macroeconomic frameworks and approach capital account liberalization cautiously.