The mix of international banks’ foreign claims: Determinants and implications

We analyze the cross-country determinants and financial stability implications of the mix of international banks’ foreign claims. We distinguish between local claims – extended by host country affiliates – and cross-border claims – booked outside the receiving country. Using data on Italian, Spanish, and US banks’ foreign claims, we find that the share of local claims is driven by restrictions on banking sector openness and by local scale economies/business opportunities. The impact of limits on property rights, entry requirements, start-up and informational costs is less robust. Finally, foreign claim volatility is lower in countries with a larger share of local claims.     

Evaluating Industrial Relations Systems of OECD Countries from 1993 to 2005: A Two‐Dimensional Approach

This article uses both cross‐sectional and longitudinal methods to evaluate the national industrial relations systems of 30 Organisation for Economic Co‐operation and Development (OECD) countries from 1993 to 2005. We adopt a pluralistic view of industrial relations that gives equal weight to efficiency and equity, along with a general systems model consisting of input, process and output. We rank each country in terms of a combined score of efficiency and equity. We find that the 30 OECD countries can be separated into three distinct groups (high on both equity and efficiency; high on efficiency but low on equity; moderate on equity and low on efficiency), and that these groups exhibit considerable stability over time.     

Identifying the Transition from Efficient-Market to Herding Behavior: Using a Method from Econophysics

We test whether “detrended fluctuation analysis” (DFA)—an econophysics method—identifies the transition from efficient-market trading to herding behavior and the rise of the NASDAQ dot.com stock market bubble. DFA divides a time series into “segments” of varying lengths and then tests whether power-law distributions exist within the segments. A power-law distribution of stock-price changes within a segment indicates herding behavior and the start of the dot.com bubble. The clarity of the transition indication depends on both segment lengths and segment starting dates. Our findings show that DFA can be used to identify the beginning of stock-market bubbles but not the beginning of crashes.     

Mixed Duopoly,Merger and Multiproduct Firms

The literature on mergers has extensively analyzed the decision to merge by private firms, but it has not considered the decision to merge by private and public firms. We assume that when a private firm and a public firm merge (or when one of them acquires the other), they set up a multiproduct firm in which the government owns an exogenous percentage stake. In this framework, we show that the decision to merge by firms depends on the degree to which goods are substitutes and on the percentage of the shares owned by the government in the multiproduct firm.     

Existence of a Condorcet Winner When Voters Have Other‐Regarding Preferences

In standard political economy models, voters are “self‐interested” that is, care only about “own” utility. However, the emerging evidence indicates that voters often have “other‐regarding preferences” (ORP), that is, in deciding among alternative policies voters care about their payoffs relative to others. We extend a widely used general equilibrium framework in political economy to allow for voters with ORP, as in Fehr and Schmidt (1999) . In line with the evidence, these preferences allow voters to exhibit “envy” and “altruism,” in addition to the standard concern for “own utility.” We give sufficient conditions for the existence of a Condorcet winner when voters have ORP. This could open the way for an incorporation of ORP in a variety of political economy models. Furthermore, as a corollary, we give more general conditions for the existence of a Condorcet winner when voters have purely selfish preferences.     

NONLINEAR AUTOREGRESSIVE DISTRIBUTED LAG APPROACH AND BILATERAL J‐CURVE: INDIA VERSUS HER TRADING PARTNERS

The J‐curve studies related to India have mostly either used aggregate trade flows of India with the rest of the world or between India and its trading partners. They have all assumed exchange rate changes have symmetric effects on Indian trade balance. In this article, we use partial sum concept combined with the nonlinear autoregressive distributed lag approach of Shin et al. to show that indeed in some instances, there are evidences of asymmetry effects of currency depreciation. This new nonlinear approach provides more support for the J‐curve than the previous linear approaches. (JEL F31)     

Learning by doing,spillovers and shakeouts

This paper studies industry evolution driven by non strategic learning by doing and spillovers. We characterize a dynamic process of cost and output changes and its effect on welfare and industry profits. The paper gives conditions for shakeouts to occur and analyzes the key factors affecting these conditions. Since shakeouts could lead to a long-run social loss due to higher market concentration, there is a role for a government to play in limiting unnecessary shakeouts. The most effective way to do so is to enhance spillovers.JEL Classification: L11, L13, O31Correspondence to: Michael TroegeWe would like to thank Hans Mewis, Christophe Moussu and an anonymous referee for valuable comments and suggestions. We also benefited from comments of seminar participants at WZB, Humboldt University, Northwestern University and the EEA/ESEM 1999 meetings. Part of the research was carried out while Michael Tröge was visiting Northwestern University. Financial support by the German Research Council (DFG) is gratefully acknowledged.     

Optimal designs for generalized linear models with biased response

This paper is concerned with the search for locally optimal designs when the observations of the response variable arise from a weighted distribution in the exponential family. Locally optimal designs are derived for regression models in which the response follows a weighted version of Normal, Gamma, Inverse Gaussian, Poisson or Binomial distributions. Some conditions are given under which the optimal designs for the weighted and original (non-weighted) distributions are the same. An efficiency study is performed to find out the behavior of the D-optimal designs for the original distribution when they are used to estimate models with weighted distributions.     

Does foreign aid really raise per capita income? A time series perspective

Abstract. We analyze the relationship between per capita income and foreign aid. We employ annual data and five‐year averages and carefully examine the time‐series properties of the data. Panel estimations with dynamic feasible generalized least‐squares (DFGLS) show that aid generally has an insignificant or minute negative significant impact on per capita income (particularly in highly aid‐dependent countries). This holds true for countries with different levels of human development and income, as well as for different regions. We also find that aid has a small positive impact on investment, but a significant negative impact on domestic savings (crowding out) and the real exchange rate (appreciation). JEL classification: F35, O11, C23, C51