Sustainability of current accounts: evidence from the quantile unit-root test

Regarding the stationarity of current accounts, previous studies used panel unit-root tests to improve the power of augmented Dickey–Fuller (ADF) test. This paper applies a quantile autoregression (QAR) approach to improve ADF test in the presence of outliers, and found that first, the stationarity was present in a QAR framework, rather than ADF test. Second, current accounts exhibited symmetric (e.g. Taiwan) and asymmetric patterns, which showed that positive shocks in larger quantiles induce current accounts to adjust towards a long-term equilibrium for Korea, Thailand, the Philippines and Singapore. Japan exhibited an asymmetric pattern in response to negative shocks in smaller quantiles.     

Long-run determinants of current accounts in OECD countries: Lessons for intra-European imbalances

In this paper we study the long-run determinants of current account balances in 21 OECD countries. We define long-run targets to determine whether actual current account balances are in line with their equilibrium values and find that, following the crisis, the United States, Japan and Spain returned towards their targets but that much remains to be done in Austria, Greece and Germany. Using linear and asymmetric panel VECM models, we find that the speed of convergence of external imbalances is much faster in deficit countries than in surplus ones. These results suggest that the adjustment of intra-European imbalances has to take place in both surplus and deficit countries and should be particularly substantial in the former. This revived the old debate of how to get the surplus countries to adjust.     

Accounting for global dispersion of current accounts

We develop a multi-country quantitative model of the global distribution of current account and external balances. Countries accumulate domestic capital and foreign assets to smooth consumption over time against exogenous productivity shocks in the presence of liquidity constraints. In equilibrium, optimal consumption and investment responses to persistent productivity shocks imply a degree of intertemporal substitution across countries that can explain up to one-third of the current account dispersion in the data.     

Banking solvency determinants in the EU: a model based on stress tests

Using a multilevel regression model, this article aims to find determinants of banking solvency in the European Union. The endogenous variable is defined as the capital ratio determined by stress tests. Both internal (financial ratios and sovereign debt exposures) and external (macroeconomic indicators) variables are proposed as covariates. The results reveal that capitalization, earnings, assets structure and exposure to PIIGS (Portugal, Italy, Ireland, Greece and Spain) sovereign debt are significant among the former, and economic growth, interest and exchange rates, and real estate prices among the latter.     

Small,young, and exporters: New evidence on the determinants of firm growth

This work investigates how the export status of the firm influences the patterns of employment growth at different age classes. We address this research question resorting to a novel set of data that links together the universe of Italian firms and detailed data on export transactions. We find that the positive relationship between export status and growth declines with firm age. Further, we also find that, even when accounting for the role of age, the negative size-growth relationship does not disappear, contrary to some recent evidence. These results suggest a positive signaling role of the export status that is stronger for young exporters or born globals. Exploiting the product-country level dimension of the customs data, we also provide, for the first time, evidence on differences in exchange rates pass-through between young and experienced exporters. In particular, we find that early exporters appear to be better equipped than established firms to face exchange rates variations as their exports decrease less following a currency appreciation.     

Structural current accounts in the European Union countries: cross-sectional exploration

This paper investigates structural determinants of the current account balance and assesses whether the current accounts in the European Union countries were consistent with the calculated structural current accounts between 1995 and 2017. We estimate current account regressions using cross-sectional data for 94 countries in 2008–2016 and confirm the main findings with panel data estimates. We document that the current account depends on the real exchange rate in a nonlinear way. The real exchange rate affects the current account at low income levels, but it ceases to be important at high income levels. Based on structural current account estimates for the European Union countries, we document that after the 2008 crisis current accounts adjusted towards structural current accounts in deficit countries, but persisted above structural current accounts in surplus countries.     

Some empirical evidence on the determinants of incomes policies in the UK

A model is proposed in which incomes policy is the endogenous variable and is explained by political and economic variables. The empirical results show that the party in power, inflation, wage change and unemployment effect the chances of an incomes policy.     

Intertemporal sustainability of current account imbalances: New evidence from the OECD countries

This study estimates the intertemporal model for the relationship between exports and imports and examines the sustainability of current account deficits (CADs) and the validity of intertemporal budget constraint for 24 Organisation for Economic Co‐operation and Development countries. The standard ordinary least squares (OLS)‐based two‐step Engle and Granger test, the cointegration regression Durbin–Watson (CRDW) test, and the Stock–Watson test performed on the one‐regime model with time‐invariant parameters and no structural break provide mixed support for the presence of cointegration between exports and imports. The recursive least squares‐based cumulative sum of recursive residuals (CUSUM) and the cumulative sum of squares of recursive residuals (CUSUMSQ) tests and the OLS‐based Andrews‐Quandt (AQ) and Andrews – Ploberger (AP) tests suggest the presence of structural breaks in the long‐run relationship between exports and imports for a number of countries. The end‐of‐sample new cointegration breakdown tests performed on the OLS, fully modified OLS, and full‐information maximum‐likelihood estimates of the model suggest the presence of cointegration between exports and imports for most countries. The dominant support for cointegration between trade flows points toward the sustainability of CADs and the validity of intertemporal budget constraint. The macroeconomic stabilization policies seem to have been effective in correcting the market failures and maintaining the steady‐state equilibrium relationship between trade flows in the sample countries. The findings of this study have important implications for empirical research. The structural breaks in the cointegrating vector could occur even over the short time periods and at any point in time. It is essentially important to assess the sustainability of the external position in the presence of long‐period as well as short‐period breaks in the cointegrating vector.     

Individual determinants of work attendance: evidence on the role of personality

We investigate the influence of personality as measured by the Big Five personality scale on absenteeism using the 2005 wave of the German Socio-Economic Panel (GSOEP). Estimates of a double hurdle negative binomial regression allow us to test hypotheses on the influence of the Big Five personality traits on work attendance. Our findings augment previous results on the link between personality and absenteeism by analysing representative data and including a large set of control variables typically not available in small scale surveys. We find clear negative correlations between the absence probability and Conscientiousness among women. For male employees a negative correlation with the incidence of absence is observed for the Agreeableness dimension. When looking at the length of absence occurrences Neuroticism is found to significantly influence male absenteeism despite controlling for the subjective health of the individual. Following the reasoning by Bowles et al. (2001) for the provision of effort by employees, employers might pay for incentive-enhancing preferences such as low Neuroticism among male employees because employers can only insufficiently monitor the true level of sickness of their employees and consequently want to avoid voluntary absenteeism.     

Long‐run determinants and misalignments of the real effective exchange rate in the EU

This paper explores the role of fundamentals, included in the transfer effect theory, in explaining medium/long‐run movements in the real effective exchange rates in the EU over the period 1994–2012, together with an analysis of the misalignments. We use heterogeneous, cointegrated panel frameworks in static and a dynamic setup. We find that the coefficients of the determinants are extremely different across groups and the transfer theory does not always hold. The core countries have been undervalued for almost the whole period; the periphery has experienced high rates. The misalignments in the CEECs are still wide and reflect the catching‐up process.     

Cross‐country evidence on the determinants of inclusive growth episodes

Widening income disparities and slow productivity growth in most advanced and several emerging‐market economies have rekindled interest in the empirical analysis of the determinants of inclusive growth, defined in this paper as episodes of increases in GDP per capita without a concomitant deterioration in the distribution of household disposable income. The empirical analysis is based on a chronology of inclusive growth episodes between 1980 and 2013 for a sample of 78 countries. Logit and multinomial probit estimations show that human capital accumulation, the redistributive potential of tax‐benefit systems, increases in multifactor productivity and labor force participation, as well as trade openness and a range of institutional factors, including political system durability and electoral regimes, are important determinants of the probability of occurrence of inclusive growth. This empirical evidence contributes to the policy debate about how countries can deal with efficiency–equity tradeoffs.     

On the determinants of obesity: evidence from the UAE

This article investigates the possible determinants of being overweight and obese in the United Arab Emirates (UAE), controlling for age and education status. We use a novel dataset constructed from survey responses of university undergraduate students. Using OLS, logistic and ordered logistic regressions, we find that male, affluent and nonnational students face a higher risk of being obese (or overweight). The results also show that cultural and geographical factors interact with some behavioural aspects related to lifestyle in determining weight status. Students originating from other Middle East and North Africa countries exhibit higher body mass index (BMI) and odds of being obese with higher frequency of eating out and more computer use. Unexpectedly, fast food consumption and lack of exercise do not seem to contribute to higher risks of being overweight/obese.     

New light on the 'impressionistic view' of the balancing item in Australia's balance of payments accounts

Recently, Fausten and Brooks offered (what they refer to as) an ‘impressionistic view’ of the temporal evolution of Australia's balancing item, which is a measure of the accuracy of the balance of payments accounts. They claim that the balancing item ‘has been increasing in magnitude and volatility, violating with increasing frequency internationally agreed acceptability criteria for smallness. In the present paper it is shown that Fausten and Brooks results derive from data that incorporates excessively a dynamically asymmetric concentration of revisions and is therefore unsuitable for statistical analysis. This paper develops, and empirically evaluates, a model of the process of revisions of balance of payments data. This model illustrates that dynamically inconsistent time series of the balancing item, such as that employed by Fausten and Brooks, are bound to generate an artificial impression that it follows an ‘explosive’ time trend. Subsequently, it is illustrated that when alternative, dynamically consistent editions of the balancing item data for the same period as that examined by Fausten and Brooks are employed, their results are reversed. Indeed, the findings here contradict diametrically the conclusions of these authors by suggesting that the decline in the frequency of balancing item ‘violations’ observed in the latter portion of the relevant time period is unparalleled in the history of the balance of payments accounts.     

A simple theory and evidence on the determinants of firm R&D

This paper derives a simple, but informative, model of firm R&D to figure out key factors that determine firm R&D effort. The model suggests a demand-pull, technology-push theory of R&D by showing that a firm's profit-maximizing R&D expenditure is determined jointly by both demand-side factors and technology-side factors. The former includes demand size (firm sales) and consumer preference over quality and price and the latter includes R&D cost structure or the production-cost effect of product R&D and firm-specific technological competence. In addition, the model shows that other things being equal, the stock of exogenous technological knowledge, including the firm's previously accumulated technological knowledge, relevant to current R&D which is negatively related with current R&D effort. An empirical analysis of firm R&D intensities and technological capabilities of more than 1600 firms in nine industries across six countries provides supportive evidence for the theory. Further, the theory implies that R&D intensity or the R&D-to-sales ratio is independent of firm size unless firm size affects technological competence and that given consumer preference and R&D cost structure facing all firms in the same industry, the distribution of firm-specific technological competence among firms determines the distribution of firm R&D intensities within the industry.     

On the determinants of trade in services: evidence from the MENA region

This article examines the determinants of aggregate flows of service trade in MENA countries using an adapted version of the gravity model and a panel data set covering the 2000 to 2009 period for 21 countries and 10 sectors. A new determinant of trade performance is introduced: the number of bound commitments undertaken by a sector in the WTO as well as the availability of those commitments by mode of supply. The results show that being a WTO member boosts trade in services. In addition, the number of bound commitments increases exports, imports and trade in services. This positive and significant effect remains robust even after controlling for several econometric issues, namely, the selection bias related to the WTO membership and the endogeneity of commitments.¹1. We are grateful to the editor Mark Taylor and two anonymous referees for providing valuable comments and suggestions. We would also like to thank the participants to the ERF 18th Annual Conference and to the 32nd Annual Meeting of the Middle East Economic Association (MEEA). This work benefited from the financial support of Economics Research Forum (ERF). It does not reflect the Forum’s opinion.     

Non-linearity in the determinants of capital structure: evidence from UK firms

We demonstrate that, by exploiting more fully the distribution of leverage, conditional quantile regression methods yield new insights into the choice of leverage ratio. For UK listed companies we find that not only is the estimated effect of the explanatory variables different at different quantiles of the distribution, but also that the effect of a variable changes sign between low leveraged and high leveraged firms.      

EU Enlargement, Migration and the New Constitution

The paper deals with the effects of migration resulting fromEU Eastern enlargement on the welfare states of Western Europe.Although migration is good in principle, as it yields gainsfrom trade and specialization for all countries involved, itdoes so only if it meets with flexible labour markets and ifit is not artificially induced by gifts of the welfare state.This is not the present state of affairs in Western Europe.In addition to measures that make labour markets more flexible,the introduction of delayed integration of working migrantsand the home country principle for nonworking migrants is arational reaction of the state. The proposed new EU constitution,which contains far-reaching rules for a European social union,should be amended accordingly. (JEL E2, F2, H0, J3, J6)     

Macroeconomic determinants of remittances: evidence from Romania

Given the globalization of the labour market and the promotion of free movement for work, young people are looking for employment opportunities from at least two perspectives – professional careers and socio-economic benefits from employment. In developing countries, such as Romania, the labour market is less attractive, which has led to profound, numerical and structural imbalances, due to external mobility for work. Both new generations of graduates and young people aged up to 40 years, decide to work abroad as a more beneficial individual solution, i.e. remittances. The purpose of this paper is to examine the macroeconomic determinants of remittances to Romania, in order to substantiate public policies on diaspora, to adjust employment policy on the national labour market by promoting incentives to create decent, youth-friendly jobs. Using panel data model we selected several variables with potential influence on remittances level. The results demonstrate that traditional influence’s factors as distance, migration routes diaspora concentration or unemployment rate are, at present, less important than wage gap or tax rate at least for developing origin countries.