Business cycle measurement with some theory

A method to evaluate cyclical models not requiring knowledge of the DGP and the exact specification of the aggregate decision rules is proposed. We derive robust restrictions in a class of models; use some to identify structural shocks in the data and others to evaluate the class or contrast sub-models. The approach has good properties, even in small samples, and when the class of models is misspecified. The method is used to sort out the relevance of a certain friction (the presence of rule-of-thumb consumers) in a standard class of models.     

Business cycle implications of mortgage spreads

How do aggregate quantities at the business cycle frequency respond to shocks to the spread between residential mortgage rates and government bonds? Using a structural VAR approach, we find that mortgage spread shocks impact the real economy by both economically and statistically significant magnitudes: a 100 basis point decline in the spread causes a peak increase in consumption, residential investment and GDP by 1.6 percent, 6.2 percent and 1.9 percent, respectively. Presumably, these effects are magnified when the policy rate is held fixed, as was the case in the US during the recent implementation of unconventional monetary policy.     

Business cycle,storage, and energy prices

This study examines the effect of the state of the economy and inventory on interest-adjusted bases and expected returns for five energy commodities. We find that interest-adjusted bases and returns have a business cycle pattern. Consistent with the theory of storage, demand shocks near business cycle peaks generate negative interest-adjusted bases and positive returns. In recessions, the bases become positive, and the average returns are negative. Our regression results also show that the interest-adjusted bases of energy commodities are counter-cyclical and the expected returns are pro-cyclical. For petroleum commodities, inventory has a significant effect on interest-adjusted bases at low levels of inventory, whereas at high inventory levels the effect of inventory on the bases is weak. Finally, we find that the bases and economic conditions predict spot returns in energy commodity markets.     

Business cycle variation in the risk-return trade-off

In the United States and other Organisation for Economic Co-operation and Development (OECD) countries, the expected returns on stocks, adjusted for volatility, are much higher in recessions than in expansions. We consider feasible trading strategies that buy or sell shortly after business cycle turning points that are identifiable in real time and involve holding periods of up to 1 year. The observed business cycle changes in expected returns are not spuriously driven by changes in expected near-term dividend growth. Our findings imply that value-maximizing managers face much higher risk-adjusted costs of capital in their investment decisions during recessions than expansions.     

The cost of private debt over the credit cycle

We identify global and regional fluctuations in international private debt flows to emerging and developing countries using data on cross-border loans and international bond issuance over 1993–2009. We use micro-level data on syndicated cross-border loans and international bond placements to estimate the effects of individual borrower characteristics as well as macroeconomic conditions on the cost of foreign borrowing and test whether these effects differ across phases of the lending cycle. First, we find that borrower characteristics associated with lower loan spreads are not necessarily associated with lower bond spreads. Second, we find differential effects of borrower characteristics between cycle phases for loans and bonds separately. Third, we find strong reductions in the cost of debt finance during periods when international debt flows are more than one standard deviation above their mean, but not for expansionary periods, when the growth rate of debt flows is increasing. We also find that higher trade ratios in the borrower's home country raise loan spreads more in periods of high credit flows but have no effect on bond spreads. At the same time, borrowers residing in countries with high investment ratios pay lower spreads on bond issuance particularly during periods of high credit flows, but we find no similar effect for loan spreads. Inflation rates, real exchange rates and previous banking crises have small impacts on loan and bond spreads.     

Ownership structure and the cost of corporate borrowing

This article identifies an important channel through which excess control rights affect firm value. Using a new, hand-collected data set on corporate ownership and control of 3,468 firms in 22 countries during the 1996–2008 period, we find that the cost of debt financing is significantly higher for companies with a wider divergence between the largest ultimate owner’s control rights and cash-flow rights and investigate factors that affect this relation. Our results suggest that potential tunneling and other moral hazard activities by large shareholders are facilitated by their excess control rights. These activities increase the monitoring costs and the credit risk faced by banks and, in turn, raise the cost of debt for the borrower.     

Business cycle co-movement: Evidence from the Great Depression

Recent analysis focuses on the gold standard as a channel for the transmission of the Great Depression. Trade linkages, which loom large in the recent literature, play a smaller role. Both the gold standard and trade were associated with higher co-movement at the bilateral level during the entire interwar period. We document that fixed exchange rates and trade made a comeback after 1932, but co-movement declined. The fall after 1932 appears to be driven by the rise of smaller blocs based on monetary and trade cooperation and an accompanying fall in co-movement between blocs.     

Business cycles,financial cycles and capital structure

We perform peridogram based cycle analysis of firm capital structure and find evidence that firms’ leverage is both persistent and cyclical. The cyclicality of leverage is supported by the trade-off, pecking order and market timing capital structure theories (Korajczyk and Levy in J Financ Econ 68:75–109, 2003; Bhamra et al. in Rev Financ Stud 23:645–703, 2010). Although market timing theory research supports persistence, previous literature dictates that the trade-off and pecking order theories may predict either persistent or mean reverting leverage. Our tests reject mean reversion in favor of persistent and cyclical leverage. We corroborate pecking order theory literature that predicts leverage is persistent. In these models, when firms’ investment spending is below earnings, leverage decreases. In addition, we examine whether firms change their capital structure as a result of business and financial cycles. Since financial cycles last longer than business cycles, financial cycles should have a long term effect on leverage. Our findings confirm the persistent leverage business cycle models that suggest firms change their capital structure due to financial and credit cycles (Jermann and Quadrini in Am Econ Rev 102:238–271, 2012; Azariadis et al. in Rev Econ Stud 83:1364–1405, 2016). We conclude that leverage is persistent due to the cyclicality of the financing decision.     

Business structure,economic cycles,and national policy

A system dynamics model of the national economy is now being assembled. Preliminary studies show that the production sectors can generate three different modes of fluctuation in the economy similar to the 3-to-7-year business cycle, the 15-to-25-year Kuznets cycle, and the 45-to-60-year Kondratieff cycle. These several modes arise from the basic physical processes of production and the managerial policies governing inventory, employment, and capital investment. The three modes of economic fluctuation are easily confused, and have tended to be interpreted as if they belonged only to the business cycle, perhaps leading to inappropriate policies. The work is still in progress, but results to date have important implications for many areas, including capital investment and its effect on the business cycle, monetary policy, fine tuning the economy, the severity of future recessions, the Phillips curve, factors affecting unemployment, and the trade-off between unemployment and inflation.     

Implications of FIRREA for thrift industry cost structure

The effects on thrift cost structure from more stringent capital standards and a higher qualified thrift lender (QTL) test imposed by FIRREA are investigated. Cost effects from asset sales by undercapitalized thrifts to meet these new standards are examined from scale economy estimates derived from a cost structure model. Whether diversification conveys any cost advantage over specialized mortgage lenders is also reviewed empirically by testing for subadditivity. Diversified thrifts unable to meet the QTL requirements are shown to enjoy no particular cost advantage over mortgage-specializing thrifts. Recent initiatives to scale back the QTL test do not appear to raise industry costs. The strategy of shrinking assets to meet the QTL test or capital standards appears to be more costly for undercapitalized mutual thrifts than for other thrifts.     

A note on cost structure and economies of scale in Greek banking

This note studies the Greek banking industry in 1980–1989 in order to estimate a representative cost structure functional form and search for economies of scale. The constructed model uses a translogarithmic cost function that includes the size of assets, capital, labor and technological progress. By using this model, which has been used by Benston et al. (1982), Hunter and Timme (1986) and others, we have been able to estimate for the first time an econometric form of the costs in Greek banking, and we have been able to investigate economies of scale in the Greek banking industry. Although operating-cost scale economies do exist, total-cost scale economies were not present. This has been shown through the utilization of a large sample of pooled data of all Greek banks for a period of ten years, and the use of two other samples of large and small banks. Moreover, by exploiting the properties of the model, we shall be able to show whether technological progress has been a factor which lowers bank costs.     

Firm life cycle and debt maturity structure: evidence from China

This study examines the effect of firm life cycle on debt maturity structure (DMS) in China. We reveal that DMS is relatively low in the introduction and recession periods, while long‐term debt ratio of growth companies is high. Companies in booming industries need funds but have difficulty obtaining long‐term loans, whereas companies in recession can use more long‐term loans. The Chow test shows that DMS changed markedly before and after the new normal of China’s economy and the implementation of the ‘mass entrepreneurship and innovation campaign’. It is urgent to address sunset industries to improve the efficiency of resource allocation.     

Institutions,banking structure and the cost of debt: new international evidence

This paper analyses the effect of institutions and the structure of the banking system on the cost of debt for a sample of firms from 37 countries. The cost of debt decreases with the rule of law, the protection of creditors’ rights and the weight of banks in the economy. Bank financing and bank concentration have a positive differential effect on the cost of debt in those countries where the financial difficulties of banks are greater. Legal enforcement, the protection of creditors’ rights and the weight of bank financing have a greater influence in countries with a lower degree of economic development.     

Pension fund manager skills over the economic cycle: the (non-)specialization cost

We study whether pension fund managers, as professionals of important social and financial products, are able to add value for their clients and adapt to economic changes. To this end, we analyze the performance and skills (market timing and stock picking) over the economic cycle from both pension fund and manager perspectives. This double analysis allows examining whether skills reside in managers and/or funds and control for manager substitutions. Despite the long-term nature of pension funds, we find that both fund and manager skills vary with market conditions, showing better evidence of stock-picking in booms, and of market timing in recessions. Nonetheless, top (bottom) funds and managers exhibit both (incorrect) skills in booms and in recessions. Some of the top (bottom) funds and managers are the best (worst) in both abilities in the same periods, but not in different periods, showing that not all managers have the ability to adapt to market conditions. Additionally, managers with limited skills tend to specialize because diversification requires multi-task skills and the non-specialization of these managers usually results in incorrect skills.     

Match your sales force structure to your business life cycle

Although companies devote considerable time and money to managing their sales forces, few focus much thought on how the structure of the sales force needs to change over the life cycle of a product or a business. However, the organization and goals of a sales operation have to evolve as businesses start up, grow, mature, and decline if a company wants to keep winning the race for customers. Specifically, firms must consider and alter four factors over time: the differing roles that internal salespeople and external selling partners should play, the size of the sales force, its degree of specialization, and how salespeople apportion their efforts among different customers, products, and activities. These variables are critical because they determine how quickly sales forces respond to market opportunities, they influence sales reps' performance, and they affect companies' revenues, costs, and profitability. In this article, the authors use timeseries data and cases to explain how, at each stage, firms can best tackle the relevant issues and get the most out of their sales forces. During start-up, smart companies focus on how big their sales staff should be and on whether they can depend upon selling partners. In the growth phase, they concentrate on getting the sales force's degree of specialization and size right. When businesses hit maturity, companies should better allocate existing resources and hire more general-purpose salespeople. Finally, as organizations go into decline, wise sales leaders reduce sales force size and use partners to keep the business afloat for as long as possible.     

The impact of regulatory reforms on cost structure,ownership and competition in Indian banking

This paper evaluates the impact of financial sector reforms on the cost structure characteristics and on the ownership–cost efficiency relationship in Indian banking. It also examines the impact of reforms on the dynamics of competition in the lending market. We find evidence that deregulation improves banks performance and fosters competition in the lending market. Results suggest technological progress, once Indian commercial banks have adjusted to the new regulatory environment. This, however, does not translate in efficiency gains. There is also evidence of an ownership effect on the level and pattern of efficiency change. Finally, competition keeps building pace even in the re-regulation period and technological improvements are not hampered by the tightening of prudential norms.     

Product life cycle cost analysis: the impact of customer profiling, competitive advantage, and quality of IS information

Life cycle cost analysis is considered in the literature to be of increasing importance to firms as international competition intensifies and technological change continues. The literature increasingly emphasizes that rapid technological change and shortened life cycles have made product life cycle cost analysis critical to organizations. Although significant benefits are attributed to life cycle cost analysis, there is little evidence regarding the extent of its application in organizational settings. Moreover, there is scant systematic evidence available with respect to the array of factors that may influence its use. However, a review of the literature suggests that customer profiling, competitive advantage, and quality of information system information are three factors potentially impacting the extent to which life cycle cost analysis is used in firms. The results of the study illustrate first, the degree to which product life cycle cost analysis is used across a random sample of organizations. Second, that all three independent variables play a positive role in affecting the extent to which product life cycle costing is used in firms.     

商业银行商户融资的市场分析及业务建议

商户融资的目标客户群及其融资需求 商户融资目标客户群的基本情况 商户指个体工商户及规模较小的私营企业主,商户融资是指以自然人为授信主体,单户授信金额不超过500万元的私营企业、个体工商户贷款业务, 又称小商户,小业主和小企业贷款.