Stock market efficiency the evidence from FTA indices of eleven major stock markets

Summary This article presents a survey of recent literature on stock market efficiency, with special reference to the US and Dutch stock markets. Additionally, models are specified and estimated for the daily return since 1987 on FTA indices for eleven major stock markets, allowing for non-normality, heteroskedasticity, leverage effects and autocorrelation. The leverage effect and positive autocorrelation are characteristics of some of the indices investigated. The magnitude of the autocorrelation, however, is so small, that no profitable arbitrage opportunities arise and weak-form efficiency of these stock markets is not rejected.     

Exports and labor costs: evidence from a French policy

We investigate the role that labor costs hold in exporters’ performance. To do so, we exploit a large-scale French reform that granted most firms a tax credit proportional to the wagebill of their employees paid below a given threshold. This policy effectively translated into a cut in labor cost whose magnitude varies depending on firm-specific wage structures. We use the predicted treatment intensity based on pre-reform composition of the labor force as an instrument for the actual policy-induced firm-level change in labor costs. Although our point estimates are consistent with commonly estimated firm-level trade elasticities combined with reasonable labor shares in total costs, coefficients are found to be very noisy, suggesting lack of robust evidence of a causal effect of the policy. We discuss several potential explanations for our results as well as their implications.     

Impacts of common rules of origin on FTA utilization

This study empirically examines the impacts of sharing rules of origin (RoOs) with other ASEAN?+?1 free trade agreements (FTAs) on ASEAN–Korea FTA/ASEAN–China FTA utilization in Thai exports in 2011. Our detailed empirical analysis suggests that the harmonization of RoOs across FTAs plays some role in terms of reducing the costs yielded through the spaghetti bowl phenomenon. In particular, the harmonization to “change-in-tariff classification (CTC) or regional value content (RVC)” will play a relatively positive role in not seriously discouraging firms’ use of multiple FTA schemes. In contrast, harmonization to “CTC” or “CTC and RVC” hinders firms from using those schemes.     

Measuring economic localization: Evidence from Japanese firm-level data

This paper examines location patterns of Japan’s manufacturing industries using a unique firm-level dataset on the geographic location of firms. Following the point-pattern approach proposed by Duranton and Overman (2005), we find the following. First, about half of Japan’s manufacturing industries can be classified as localized and the number of localized industries is largest for a distance level of 40 km or less. Second, several industries in the textile mill products sector are among the most localized, which is similar to findings for the UK, suggesting that there exist common factors across countries determining the concentration of industrial activities. Third, the distribution of distances between entrant (exiting) firms and remaining firms is, in most industries, not significantly different from a random distribution. These results suggest that most industries in Japan neither become more localized nor more dispersed over time and are in line with similar findings by Duranton and Overman (2008) for the UK. Fourth, a comparison with the service sector indicates that the share of localized industries is higher in manufacturing than in services, although the extent of localization among the most localized manufacturing industries is smaller than that among the most localized service industries, including financial service industries.     

Labor market effects of import competition: Theory and evidence from the textile and apparel industries

Since the early 1980s, much attention has been given to the possibility of trade-related job losses and wage effects in the textile and apparel industries. This paper uses aggregate time series data from the Annual Survey of Manufacturers [Bartlesman and Gray, 1996] with import price data from the Bureau of Labor Statistics [Alterman, 1991] for 1977–91 to test the effect of imports on employment and wages in textiles and apparel. Theoretical models suggest that import competition should be a factor in the determination of employment, and possibly wages, regardless of whether the U.S. is represented as a price-setter or price-taker. The empirical analysis provides some support. The author appreciates the helpful comments of Barry T. Hirsch, participants at the Georgia Southern University economics seminar in November 1997, and the editorial assistance of a reviewer for theAtlantic Economic Journal.     

Bribery in Indonesia: some evidence from micro-level data

This paper outlines and tests a model in which firms seek to reduce the cost of taxes and regulatory compliance by offering bribes to government officials. It finds that firms' profitability (scaled by production costs) largely determines both the amounts paid and the time spent negotiating bribes with officials. Competition between arms of the bureaucracy for bribe income seems to be a result of decentralisation, but the analysis suggests that this competition would lead to a spreading of bribes among a larger number of officials rather than to a significant increase in their total amount. Local governments may be able to raise more revenue by reducing the number of taxes and regulations and using part of the increased revenue to raise the salaries of officials, while devoting more effort to restraining corrupt behaviour. But progress may be blocked by central government tax officials increasing their demands for bribes.     

Labour costs dynamics in the Euro area: some empirical evidence

Little is known about how the introduction of a common currency and a single monetary policy has affected the labour cost dynamics in the Euro area. The literature has focused mainly on business cycle synchronisation. This paper analyses labour costs convergence in the Euro area since 1995, combining results from different data and two complementary approaches. First we present some relevant facts about wages and unit labour cost dynamics and, in a second phase, we investigate whether the physical introduction of the euro has changed the volatility and the synchronisation of labour costs cycles, in a context of globalisation. Overall, our results indicate that labour markets in the Euro area are very heterogeneous. However, some signs of labour cost convergence are beginning to emerge. After the circulation of the euro, it seems that a reduction in nominal unit labour costs differences and an increase on the degree of synchronisation has occurred, which has been strengthened in the economic and financial crisis period.     

Currency crisis and contagion: evidence from exchange rates and sectoral stock indices of the Philippines and Thailand

This paper analyzes empirically the recent Asian financial crisis by using high-frequency data of exchange rates and stock indices of the Philippines and Thailand. With time-series techniques, this study confirms that benchmark stock indices often fail to provide valuable insights into currency crises, but there is evidence that developments in some sectoral indices—including those of banking and financial sectors—seem to have caused upward pressure on exchange rates. Our evidence therefore confirms the importance of financial markets as a transmission channel during the currency crisis period.     

The determinants of poverty dynamics in Indonesia: evidence from panel data

We use the ‘spell’ approach to identifying poverty and apply an ordered logit model to examine the determinants of poverty dynamics in Indonesia, categorising households as poor, transient poor (–), transient poor (+) or non-poor. Observing the National Socio-Economic Survey (Susenas) balanced-panel data sets of 2005 and 2007, we found that 28% of poor households are classified as chronically poor (that is, remaining poor in two periods) while 7% of non-poor households are vulnerable to being transient poor (–). Our estimations confirmed that the determinants of poverty dynamics in Indonesia are educational attainment, the number of household members, physical assets, employment status, health shocks, the microcredit program, access to electricity, and changes in employment sector, employment status and the number of household members. We also found that households in Java–Bali are more vulnerable to negative shocks than those outside Java–Bali.     

Estimating transport costs and trade barriers in China: Direct evidence from Chinese agricultural traders

Using a unique survey data on agricultural traders in China in 2004, this study provides direct evidence on the significance of inter-regional trade barriers and their key components. Our major findings are as follows. (1) The trade barriers within China are fairly small, accounting for about 20% of trade value. (2) Transport and non-transport costs respectively contribute 42% and 58% to the trade barriers. (3) Labor and transport-related taxes are the two largest proportions of total transport costs, and respectively account for 35% and 30%. (4) Artificial trade barriers created by the government are not sizable as we perceived. (5) Road quality is crucial for reducing transport costs within China: increasing transport speed by 1 km per hour, the total transport costs for Chinese agricultural traders would decrease by 0.6%, mainly due to improved fuel-burning efficiency and reduced labor requirement.     

Geography and firm exports: new evidence on the nature of sunk costs

This paper presents an examination of the trading patterns of individual firms, looking at their coverage of export markets and movements into and out of destinations. This analysis is made possible by access to a new survey data set of Irish firms, which includes detailed information on firm characteristics and on the destinations of their exports over a 2-year period. In line with Eaton et al. (Am Econ Rev 94:150–154, 2004), we find that a large number of firms serve only the domestic market and many exporting firms export to a single foreign market. Although there is little movement of firms into and out of exporting, firms’ involvement in individual export markets is much more dynamic. Over one-third of firms change their market coverage, usually by entering or exiting one additional market. This is consistent with an interpretation where the bulk of any sunk cost encountered in exporting is incurred during the initial entry to the export market. Subsequent entry to additional markets may be made easier by prior export experience, which could help reduce the sunk cost of extending market coverage.     

Regional specialization and shocks in Europe: Some evidence from regional data

Regional Specialization and Shocks in Europe: Some Evidence from Regional Data. —The authors address the issue of the European Monetary Union (EMU), focusing on a comparison between EC countries and EC regions. They identify a number of homogeneous economic regions and show that in the period 1978–1989 asymmetric shocks in Europe have been regional rather than national. This derives from the fact that regional specialization in Europe is strongly diversified. They argue that cross-border regional diversification can cushion the net effects of differentiated sectoral shocks, reducing national instability. In addition, the costs of EMU associated with the loss of the exchange rate are likely to be smaller than usually thought.     

Heterogeneity in lending and sectoral growth: evidence from German bank-level data

This paper investigates whether heterogeneity across firms and banks matters for the impact of domestic sectoral growth on bank lending. We use several bank-level datasets provided by the Deutsche Bundesbank for the 1996–2002 period. Our results show that firm heterogeneity and bank heterogeneity affect how lending responds to domestic sectoral growth. We document that banks’ total lending to German firms reacts pro-cyclically to domestic sectoral growth, while lending exceeding a threshold of €1.5 million to German and foreign firms does not. Moreover, we document that the response of lending depends on bank characteristics such as the banking groups, the banks’ asset size, and the degree of sectoral specialization. We find that total domestic lending by savings banks and credit cooperatives (including their regional institutions), smaller banks, and banks that are highly specialized in specific sectors responds positively and, in relevant cases, more strongly to domestic sectoral growth.

Indexation and household saving behavior: Some empirical evidence from finnish data

Zusammenfassung Indexierung und das Sparverhalten der privaten Haushalte: Empirische Evidenz aus Finnland. - In diesem Aufsatz werden finnische Daten über indexierte Depositenkonten benutzt, um die Wirkungen der Indexierung auf das Sparverhalten der privaten Haushalte empirisch zu belegen. Die Ergebnisse best?tigen, da\ bei Unsicherheit über die Inflationsrate die Absicherungsmóglichkeit einer voll indexierten Finanzanlage dazu führt, da\ sich der Anteil der indexierten Anlage am gesamten Sparkapital vergró\ert. Diese Folgerung scheint ziemlich stabil zu sein gegenüber verschiedenen N?herungswerten für das private Vermógen, Modifikationen des Grundmodells und der Sch?tzmethoden. W?hrend die Indexierung das Banksparen positiv beeinflu\t hat, konnte kein me\barer Einflu\ auf die Sparquote insgesamt nachgewiesen werden.

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Résumé Indexation et le comportement d’épargne des ménages: Quelque évidence empirique des données finnoises. - Dans cet article des données finnoises concernant des comptes de dépót indexés sont utilisées pour trouver l’évidence empirique sur les effets de l’indexation sur le comportement d’épargne des ménages. Les résultats supportent la vue que la ?hedging? capabilité d’un actif complètement indexé favorise en présence de l’incertitude sur le taux d’inflation l’actif indexé. Cette conclusion semble être assez robuste après qu’ on a utilisé d’autres variables approximatives pour la richesse de ménage et modifié le modèle de base et les méthodes d’estimation. Pendant que l’indexation a fait monter la portion de l’épargne bancaire, il n’y a pas d’effet mesurable sur l’épargne total.

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Resumen Indexación y ahorro de los hogares: evidencia empírica de datos finlandeses. - En este trabajo se utilizan datos de Finlandia sobre depósitos bancarios indizados para obtener evidencia empírica de los efectos de la indexación sobre el ahorro los hogares. Los resultados confirman la noción de que la capacidad de “hedging” de un activo integramente indizado bajo condiciones de inflación incierta causa una realocación através de una demanda de ?hedging? en favor de una parte mayor del activo indizado. Esta conclusión parece bastante robusta con respecto a las ?proxies? para el patrimonio de los hogares, modificaciones del modelo básico y los métodos de estimación. Los resultados empíricos con respecto al efecto sobre la cuota de ahorro no revelaron ning?n impacto mensurable. El ahorro bancario, por otro lado, resultó afectado positivamente.

     

Foreign direct investment-led growth: evidence from time series and panel data

This paper estimates the impact of foreign direct investment(FDI) on capital accumulation, and output and total factor productivity(TFP) growth in the recipient economy. Time series and paneldata evidence are provided for a sample of OECD and non-OECDcountries in the period 1970-90. Although FDI is expected toboost long-run growth in the recipient economy via technologicalupgrading and knowledge spillovers, it is shown that the extentto which FDI is growth-enhancing depends on the degree of complementarityand substitution between FDI and domestic investment.     

The pitfalls of estimating transactions costs from price data: Evidence from trans-Atlantic gold-point arbitrage, 1886-1905

This paper argues that bilateral spatial price models do not estimate bilateral transactions costs when trade with third cities is important. The paper examines trans-Atlantic gold arbitrage during the gold standard era by assembling a database indicating when trans-Atlantic gold shipments occurred. It shows that two-way gold shipments between New York and London frequently occurred prior to 1901. However, in 1901 gold shipments to London ceased and were replaced by triangular arbitrage shipments through Paris. Consequently, New York and London gold price data cannot be used to estimate New York-London transactions costs after 1901, as no trade took place.