Does past performance affect mutual fund tracking error in Taiwan?

This study examines the relationship between fund past performance and manager choice of portfolio risk in Taiwan. Employing the exponential generalized autoregressive conditional heteroscedasticity and linear regression models, the results demonstrate that historically poor average performance does not increase mutual fund tracking error (TE) or portfolio risk. Additionally, yearly tournament behaviour, namely mid-year losers increasing their last-half year TEs, only appears in funds with higher management fees. This implies that managers of high management fee funds actively increase TE in response to poor historical performance, to enable them to beat the market during future months or the second half of the year.     

Do mutual fund flows affect the French corporate bond market?

We study whether investors’ withdrawals from mutual funds affect corporate bond prices. As mutual funds have become major players in the financial markets, they are likely to exert downward pressures on asset prices when facing investors’ redemptions, particularly in the less liquid markets such as corporate bonds. We use a novel dataset on the French bond funds and show that both flows in and out of mutual funds lead to a significant effect on the corporate bond yields. This effect is asymmetric as redemptions provoke a change in yields of greater magnitude than inflows. Moreover, all corporate bonds are not equally affected by investors’ withdrawals from funds: The more a bond is detained by funds, the higher the impact of redemptions on its yield. These three results are robust to various changes in econometric specifications.     

Does devaluation improve trade balance in small island economies? The case of Fiji

A number of countries, mostly small and island economies manage fixed exchange and often devalue it as a stabilisation strategy. The current paper investigates the effectiveness of devaluation in improving trade balance with reference to Fiji. A small island economy has limited exportable and hence highly depends on imports for both consumption and production purposes. A devaluation, therefore, inflates domestic price and appreciates the real exchange immediately by raising importable consumption and discouraging imports used in domestic production. The paper applies various econometric models for empirical investigation of its impact and transmission mechanism. Strong long-run relationship found between real exchange rate and trade balance explains that appreciation of currency has been responsible for the rising trade deficit in the economy. Moreover, the devaluation did not demonstrate J-curve phenomenon. The effect of devaluation strongly contributed to the domestic inflation has been while quite weak on stimulating aggregate demand.     

Does mutual recognition of qualifications stimulate services trade? The case of the European Union

This article analyses the services trade impact of recognition of professional qualifications using a unique database compiled by the European Commission. It observes that there is large variation in the number of regulated professions across the EU. The number of recognitions is small relative to total employment in regulated professions. Nevertheless, a robust positive relationship between services trade and recognition of qualifications is found. Recognition stimulates two-way trade between the source and the host country, suggesting that arms-length exports as well as cross-border outsourcing take place. Recognitions in health and education professions are most strongly related to services trade.     

Does dependence on internal finance help explain the prevailing pattern of manufacturing? The case of the Italian Mezzogiorno

The purpose of the paper is to ascertain a possible relationship between sectorial financial dependence and the regional industrialization pattern in the backward areas of Southern Italy, the so-called Italian Mezzogiorno. The analysis is based on a definition of financial dependence different to that of Rajan-Zingales in that it is determined as the contribution of internal resources to the financing of firm growth and is measured through the estimation of the LPE standard model augmented by the cash flow variable on a large sample of Italian SMEs observed from 2001–2008. The relationship between sectorial measures of financial dependence and composition of manufacturing in Italian Southern regions is then tested; the analysis shows that firms’ shares of the low financial dependence sectors tend to prevail in manufacturing in the Southern regions.     

Does PPP hold in the transition economies? The case of poland Hungary

This paper uses non-stationarity and cointegration of time series to investigate the validity of long-run purchasing power parity for Poland and Hungary for the period 1981:1-1993:2. Long-run PPP is examined vis-à-vis three countries, the United States, United Kingdom and Germany. Although the nominal exchange rates and relative price ratios between Poland and Hungary and each of the three countries are non-stationaary, they are not cointegrated indicating a rejection of the hypothesis. This conclusion is supported by the real exchange rate, which follows a random walk.     

Does state-mandated reporting work? The case of surgical site infection in CABG patients

This paper is the first empirical study to explore the relationship between the state-mandated reporting of surgical site infections (SSIs) and changes in infection rates, length of stay and costs among coronary artery bypass grafting (CABG) patients. This paper uses generalized difference-in-difference (DID) methods to analyze patient discharge data from the Nationwide Inpatient Sample (NIS) from January 2004 to December 2011 merged with state-level data on mandatory reporting status. After controlling patient and hospital characteristics, and state and year fixed effects, we do not find empirical evidence that state-mandated reporting leads to lower odds of SSIs in CABG procedure. Although it is associated with shorter length of stay and lower costs, the effect is not significant. These results suggest that merely requiring hospitals to report outcomes may not lead to significant changes at least in the case of SSIs among CABG patients.     

Does complexity explain the structure of trade?

This paper analyzes whether complexity, measured by the number of skilled tasks that are performed in production, explains countries’ commodity trade structure. We modify the Romalis ( 2004 ) model to incorporate advantage differences in complexity across commodities together with differences in the number of mistakes made by workers in the production process in developed and developing countries as a source of comparative advantage. Our model predicts that the share of developed countries in world trade increases with products’ complexity. Empirical tests confirm this prediction. Moreover, we find that complexity complements the explanation provided by skill‐intensity on countries’ commodity trade structure.     

Does competition cause government decentralization? The case of state-owned enterprises

This paper examines the causal effects of competition on governments’ incentives in decentralizing state-owned enterprises (SOEs). By using the shocks to product market competition caused by China's trade liberalization, we find that competition substantially improves SOEs’ decentralization. Furthermore, we also provide evidence of the incentive to exploit local information and roll out an alternative interpretation that government divests itself of SOEs because they become burdensome. Finally, we find that the effect of competition on decentralization is augmented when governments are geographically distant from their SOEs or when SOEs are located in regions characterized by low social trust, high dialect diversity, or heavy pressure for economic growth.     

Does deflation affect household spending? The case of the Netherlands

This article investigates the impact of deflation on real private consumption and residential investment by Dutch households during the 1980–2013 period. We estimate theoretically founded consumption and investment equations and show that a fall in the general price level significantly negatively affects both growth in real consumption and residential investment. The impact on residential investment is more delayed, but stronger.     

Does Foreign Presence Induce Host Country Firms’ Exit? The Case of Portugal

International Advances in Economic Research - This paper analyzes the impact of foreign presence on the probability of exit of host country firms, based on a significant sample of Portuguese...     

Does the quality of institutions enhance savings? The case of Sub-Saharan Africa

Over the last three decades, there has been increasing disparity in savings across regions and income groupings globally. In this paper, we investigate whether the quality of institutions explains the saving disparities in Sub-Saharan Africa (SSA). Utilizing comprehensive panel data and spanning the period 1980–2015, we estimate a savings model using the two-step instrumental variable generalized method of moment (2SIV-GMM) estimator. Our results show that the impact of institutions on savings behaviour differs across regions and income groupings, and in SSA, in aggregate. We find that the level and growth of per capita income and terms of trade enhance savings whereas government consumption expenditure, financial sector development and the elderly dependency rate are savings impeding. The findings are robust to alternative model specification and highlight the importance of institutions in influencing savings behaviour in SSA.     

Does student employment really impact academic achievement? The case of France

Student employment is usually thought to curb academic achievement. Our research relating to a survey at a French university in 2012 emphasizes the significance of the intensity of student working hours. Allowance for the endogeneity of student employment reinforces the negative effects, particularly for young people working more than 16 hours a week. However, the academic achievement of those working fewer than 8 hours per week seems unaffected. The type of employment also affects the chances of success: students with public sector jobs appear to be less prone to failure, possibly because of more flexible working hours.     

Does speculation Granger cause return in Chinese commodity markets?

We test the Granger causal relations between speculation and returns in Chinese commodity markets using quantile regression method. We find that speculation Granger causes returns in rebar, bean pulp and rapeseed oil markets. At lower quantiles, estimates are negative; but estimates are positive at upper quantiles. This indicates that larger speculation results in larger return volatility.     

Does risk aversion explain behavior in a lemon market?

Siegenthaler proposes an ingenious solution to the lemon market adverse selection problem. He incorporates ‘‘cheap talk’’ in which sellers send out costless and nonbinding messages informing potential buyers of the quality of their goods; these messages could be true or false. This segments the market into several submarkets. Potential buyers need to decide which submarket to enter and what price to bid for the goods. Sellers then decide whether to accept the bid or not. He experimentally tests his model and finds that the comparative static results align with his theory, although the data do not exactly fit the model. Indeed, he does not fit the model to the data. His theory assumes risk-neutral decision-makers (DMs). Two reasons why the fit is not perfect may be that the DMs are not risk neutral and not perfectly rational. In this note, we report the results of fitting an asymmetric risk averse quantal response equilibrium (QRE) extension of his model to his data, and we find that the extension fits well. We show that the results are consistent with the market evidence and shed light on future research on lemon markets.     

Momentum in global equity markets in times of troubles: Does the economic state matter?

This paper investigates the profitability of momentum-based trading strategies pursued during the most recent economic downturns in global equity markets. In contrast to previous studies, it reveals that such strategies generated statistically significant negative returns during the most recent recessions. These “momentum crashes” happen during market reversals following exceptionally large market declines, as occurred in March and April 2009.     

Does the introduction of stock exchange markets boost economic growth in African countries?

We assess whether the introduction of private equity capital markets affects economic growth in African countries. We address this issue by focussing on stock exchange markets as the predominant type of new equity markets, using a Diff-in-Diff regression method. The analysis uses a panel data set from 48 Sub-Saharan countries over the time range of 1970–2018. 23 countries are part of the “treated” group – which introduced international stock exchanges – and 25 “untreated” countries serve as the control group. Our results show that when compared with the time period prior to the introduction of stock exchange markets, GDP per capita rises by the amount of 532 US$ (around 40% of the Sub-Saharan average) after the introduction of equity capital markets in the treated countries. Over the ten years post introduction, the effect is hump-shaped, with effects becoming statistically significant from the first year after implementation, with a peak in the 5th year, and it then becomes statistically insignificant from then onwards.     

How Do Household Tasks Shape Employment Contracts? The Provision of Care in Portugal

This study illustrates the complexities involved in outsourcing domestic work to the market. It draws on an original dataset of paid domestic workers in Portugal to examine how specific tasks interact with and explain contractual arrangements. A fuzzy cluster analysis categorizes paid domestic workers into caregivers and cleaners; however, a great degree of overlap implies that caring also entails cleaning tasks necessary for the care receiver’s well-being. A subsequent Tobit regression analysis shows that caregivers have more formal and stable contracts but earn lower wages and have longer working hours relative to cleaners. The study finds a segmentation of national origin and that some migrants are at a disadvantage in care work. The study also examines how employers deal with the idiosyncrasies of domestic work such as navigating trust-related issues.     

Are the kinship networks a resource or a curse for small firms in post-communist countries? The case of Albania

Cross-sectional data are compiled from the 2002, 2005, 2008 and 2012 World Bank Living Standards Measurement Study databases for Albania. Based on responses from 1169 firms, the entrepreneurs’ kinship networks are found to influence firm activity in a positive and negative way. The positive contribution occurs through employment, be it formal or informal. The persisting impact of the kinship networks fades away, and business and friendship networks have gained importance in recent years.     

The impact of monetary policy on financial markets in small open economies: More or less effective during the global financial crisis?

This paper estimates the impact of monetary policy on exchange rates and stock prices of eight small open economies: Australia, Canada, the Republic of Korea, New Zealand, the United Kingdom, Indonesia, Malaysia, and Thailand. On average across these countries in the full sample, a one percentage point surprise rise in official interest rates leads to a 1% appreciation of the exchange rate and a 0.5–1% fall in stock prices, with somewhat stronger effects in OECD countries than non-OECD countries (though differences are sometimes not significant). We find little robust evidence of a change in the effect of monetary policy surprises during the recent financial crisis.