The Italian Banking Structure in the 1990s: Testing the Multimarket Contact Hypothesis

The multimarket contact hypothesis holds that more contacts between firms competing in the same markets may induce more collusion. This paper tests the hypothesis for the Italian banking market, analysing the behaviour of the largest Italian banks from 1990 to 1996. Market rivalry is gauged by changes in loan market shares and interest rates in each Italian province. We estimate the effects of increasing multimarket contacts, concentration indicators, banks' costs and loan demand on variations in market shares and interest rates. No support is found for the multimarket contact hypothesis. Geographical overlap in banking is positively correlated with changes in market shares, confirming the thesis of an overall increase in competition within the Italian banking system. Greater multimarket links also seem to correspond to lower lending rates.
(J.E.L.:G21, C33, L40.)     

Exchange Rate Management and the External Debt Burden: The Case of the Philippines

The paper develops a simple macroeconomic model which is then estimated for the Philippines. Econometric evidence shows that Philippines monetary authorities have been reluctant to allow a real devaluation, because of a large public external debt and for the fear of fueling inflation. Simulations show that, while an overvalued exchange rate may bring some benefits in the form of lower inflation and improved budgetary performance, its current account costs may be significant. Brady-like deals can reduce fiscal imbalances, limit the sensitivity of fiscal aggregates to the exchange rate, and increase the benefits of a more aggressive exchange rate policy.     

New firm location: An equilibrium model and its disequilibrium dynamics

This paper is centered on two basic statements: i) the birth of new firms is spatially related to location factors endowment and ii) the set of location factors can support only up to a given number of firms.The paper firstly defines the regional ex-ante demand for firms as a function of location factors set. In the following step a definition of regional equilibrium stock of firms is given and a static equilibrium model of new firms birth is built up. In a dynamic disequilibrium model the net birth of firms is a function of two disequilibrium terms: a sectoral and a regional one.The sectoral disequilibrium depends on the industry production structure, the regional disequilibrium is linked to the adaptation elasticity of location factors set to an exogenous shock.Finally, a first estimation on Italian data is performed, on the basis of which some new lines of analysis are suggested.     

The Adoption of ICT among SMEs: Evidence from an Italian Survey

In this paper, we carry out an econometric analysis on the adoption and effective use of Information and Communication Technologies (ICTs) among a sample of Italian SMEs. An important result is that, in order to understand the main factors that drive SMEs to the adoption of ICTs, it is useful to divide the available technologies according to a taxonomy based on their typical function. Along with general-use ICTs (e-mail and Internet access), we identify two groups of technologies (labelled production-integrating and market-oriented ICTs) the use of which is associated with different firm characteristics. In both cases, however, the availability of highly educated workers turns out to be a key factor. Policy implications are also discussed.     

Functions and failures: how to manage technological promises for societal challenges

Technological promises are becoming part of the way in which scientific and technological communities try to attract the attention of stakeholders, aiming at legitimation, reputation, and funding. Not all promises, however, become reality. With the increase in the use of promises comes the risk of disillusion and cynicism, which may affect negatively policy-makers and the public opinion. The paper suggests that the introduction in the field of S&T and innovation policy of a tool commonly used in engineering fields aimed at identifying and measuring all possible failures of a proposed technology. Instead of focusing on the magnitude of promises, it suggests that a useful perspective can be gained by placing systematic attention to the negative side, i.e. all reasons why a given technology may fail to deliver the promises. The paper develops the methodology, presents a case study, and illustrates the benefits of using it in policy-making.     

The Italian financial cycle: 1861–2011

In this paper, we investigate the main features of the Italian financial cycle, extracted by means of a structural trend-cycle decomposition of the credit-to-GDP ratio, using annual observations from 1861 to 2011. In order to draw conclusions based on solid historical data, we provide a thorough reconstruction of the key balance sheet time series of Italian banks, considering all the main assets and liabilities over the last 150 years. We come to three main conclusions. First, while there was close correlation between loans and deposits (relative to GDP) until the mid-1970s, over the last 30 years, this link became more tenuous and the volume of loans has increased in relation to deposits. The banks covered this “funding gap” mainly by issuing new debt securities. Second, the Italian financial cycle has a much longer duration than traditional business cycles. Third, taking into account the deviation of the credit-to-GDP ratio from its trend, an acceleration of credit preceded or accompanied a banking crisis in 8 out of the 12 episodes listed by Reinhart and Rogoff (This time is different: eight centuries of financial folly. Princeton University Press, Princeton, 2009). A Logit regression confirms a positive association between the probability of a banking crisis and a previous acceleration of the credit-to-GDP gap. However, there were also periods—such as the early 1970s—in which the growth of the credit-to-GDP ratio was not followed by a banking crisis.     

Forecasting inflation and tracking monetary policy in the euro area: does national information help?

The ECB target is set in terms of the year on year growth rate of the euro area Harmonized Index of Consumer Prices. Nonetheless, a good deal of attention is given to national data by market analysts when they try to anticipate monetary policy moves. In this paper we use the Generalized Dynamic Factor Model to develop a set of core inflation indicators that, combining national data with area wide information, allow us to answer two related questions. The first is whether country specific data actually bear any relevance for the future path of area wide price growth, over and above that already contained in area wide data. The second is whether to track ECB monetary policy decisions it is useful to take into account national information and not only area wide statistics. Within our empirical framework we find that once area wide information is properly taken into account the contribution of national idiosyncratic developments is negligible.     

Ex ante purchasing power parity: An empirical note

Conclusions In the paper, the EAPPP theory was discussed and three different tests with increasingly statistic power were proposed and implemented. The results are mixed, since the theory passed the randomness and orthogonality tests, but not the direct regression test. The impression is that EAPPP seems to hold in a weak sense, since the evidence confirms random movements of real exchange rates and an efficient use of information by agents but not the constraints on (14) postulated by EAPPP. In general, the results of the present study are in accordance with those of Cumby and Obstfeld [1984], Mishkin [1984], MacDonald [1985] and Gaab et al. [1986] who found only weak support to the EAPPP theory. Furthermore, in the case of the dollar-lira exchange rate, our findings are different from those of Tronzano [1987] according to which “although PPP holds very badly in its traditional (absolute or relative formulation), ex ante PPP (both in “weak” and in “strong” version) [is] highly supported by data”. In fact, in our case both the second orthogonality test and the regression test are unfavourable to the EAPPP.