Financial Development and Economic Growth in Africa

We revisit in this paper the debate between financial development and economic growth. In contrast to previous studies examining banking related measures, we focus on the capital account and the depth of African stock markets. We examine 15 African countries from 1995 to 2010 and employ both static and dynamic panel data methods. While the former suggest weak results overall, portfolio flows and Foreign Direct Investment (FDI) have consistently positive effects on economic growth under endogenous stock market capitalization. These findings reinforce the view that African countries should open their equity markets to international investors and encourage FDI.     

Financial globalization and stock market risk

This paper examines stock market volatility measured by either “beta-volatility” or by the standard deviation of stock returns over 1995-2007. In our dynamic panel data framework, after controlling for size, turnover, and real output growth, we find some support to increases in financial integration reducing total stock return volatility for representative emerging markets, with almost no impact for industrial economies. Allowing for feedback effects from stock volatility to stock turnover, we obtain a richer interpretation for the broadening of investor basis hypothesis: more integrated financial markets leads to lower stock volatility, yet these are not so strong as found previously and are not accompanied by more turnover.     

Dynamic responses and tail-dependence among commodities,the US real interest rate and the dollar

Theoretical models suggest monetary policy is transmitted to commodity prices. We quantify this channel using several empirical methods under daily data. In early 2009, the US real interest rate became negative, with sample mean varying from 1.75 % (in the mid-1997 to January 28, 2009, subsample) to \(-1.50\,\%\) (in January 29, 2009, to mid-September 2013 subsample). Gold displays higher risk-adjusted returns earlier, while copper and oil have higher risk-adjusted returns more recently. Shocks to the exchange rate and the real interest rate in VARs explain almost 30 % for oil and 32 % for copper more recently when impulse responses are more significant. The time-varying correlation of oil with the real interest rate in the more recent period is \(-0.462\), and its correlation with the exchange rate is \(-0.460\), compared to \(-0.089\) and \(-0.120\), respectively, in the earlier period. Vine copula methods identify a dependence pattern of C-vine copula with t-copula in almost every pair among commodity prices, the real value of the US dollar and the US real interest rate.     

People and process,suits and innovators: the role of individuals in firm performance

Performance differences between firms are generally attributed to organizational factors rather than to differences among the individuals who make up firms. As a result, little is known about the part that individual firm members play in explaining the variance in performance among firms. This paper employs a multiple membership cross‐classified multilevel model to test the degree to which organizational or individual factors explain firm performance. The analysis also examines whether individual differences among middle managers or innovators best explain firm performance variation. The results indicate that variation among individuals matter far more in organizational performance than is generally assumed. Further, variation among middle managers has a particularly large impact on firm performance, much larger than that of those individuals who are assigned innovative roles. Copyright © 2012 John Wiley & Sons, Ltd.     

The world elasticity of labor substitution across education levels

We estimate the world elasticity of substitution between labor types on a very well-known data set. Using enrollment ratios and government expenditures on education as instruments, the plausible elasticities varying from 2.00 to 3.21 for the “college-completed” definition suggests imperfect substitution between skilled and unskilled labor. Considerably higher values are found for the “secondary” and “primary-completed” definitions. Overall, the higher the threshold for defining skilled labor, the lower the elasticity and less likely is the switch between types of labor. These findings complement micro-evidence and support stronger links between productivity and output for the “college educated” labor definition.     

Commonalities in investment strategy and the determinants of performance in mutual fund mergers

This paper examines the determinants of cross-sectional variation in post-merger mutual fund performance. Mergers between funds with similar management objectives, as reflected by average portfolio book-to-market ratio, price–earnings ratio, beta and market capitalization values, outperform mergers between funds with dissimilar strategies. This superior performance transcends lower portfolio rebalancing costs which might be realized between merging funds which hold more assets in common. These results suggest that mutual fund mergers create collaborative benefits between funds with similar strategies. We also examine if fund governance structures influence the fund pairing process, testing if stronger fund oversight mitigates pairing mismatches. We find that less independent boards of trustees and boards with higher compensation are related to greater strategic mismatches between funds. These results suggest that more entrenched boards are more tolerant of fund mismatches which benefit the investment company, yet are not in investor’s best interests.     

I used to work at Goldman Sachs! How firms benefit from organizational status in the market for human capital

How does employer status benefit firms in the market for general human capital? On the one hand, high status employers are better able to attract workers, who value the signal of ability that employment at those firms provides. On the other hand, that same signal can help workers bid up wages and capture the value of employers' status. Exploring this tension, we argue that high status firms are able to hire higher ability workers than other firms, and do not need to pay them the full value of their ability early in the career, but must raise wages more rapidly than other firms as those workers accrue experience. We test our arguments using unique survey data on careers in investment banking. Copyright © 2014 John Wiley & Sons, Ltd.     

Do central banks affect Tobin's q?

Previous work has documented inflation effects on Tobin's q in the long run. This paper examines whether the FED's different policies and chairmen tenure have an impact on Tobin's q, after a modified stylized AD-AS model shows that central banks affect q. We do find changing responses of q depending on the pre-Volcker and post-Volcker periods.     

Are returns to research quality lower in agricultural economics than in economics?

We compare effects of research quality and quantity on the salary of academics in agricultural economics and economics departments of the same universities. Agricultural economists get a significantly lower payoff to research quality, whether measured by quality‐weighted journal articles (based on nine different weighting schemes) or by citations. Instead, salary depends on the quantity of journal articles, while article counts have no independent effect on economist salaries. These differences in the reward structure for research are not due to either the extension focus of agricultural economists or to disciplinary differences in publishing with students and instead may reflect institutional factors that govern incentives within universities. One‐third of academics in the agricultural economics departments studied here have doctoral training in economics; the very different disciplinary reward structures may cause frustration for these faculty due to the muted returns to research quality that agricultural economics departments seem to offer.