Is it punishment? Sovereign defaults and the decline in trade

Sovereign defaults are associated with declines in defaulting countries trade. Are these declines the result of trade sanctions as the trade sanctions argument of sovereign borrowing would suggest? We devise an empirical strategy to evaluate this issue based on the idea that if trade sanctions are causing the declines, bilateral trade with creditor countries should fall more than trade with other countries. We find that this is not the case. The analysis does not yield much evidence of broader punishment strategies including a league of major creditors either. These results contradict the predictions of the trade sanctions theory of sovereign borrowing.     

Search Cost and Price Dispersion in Vertically Related Markets: The Case of Bank Loans and Deposits

Using data on marginal interest rates of loan and deposit products by Spanish banks, we find that the level of interest rates on loans (deposits) across geographic markets decrease (increase) with the number of banks in each market, and that the level of interest rates on loans increases with the level of interest rates of deposits. We also find that the dispersion of interest rates of both loans and deposits increase with the number of banks. This evidence is interpreted as evidence of customer’s search costs in retail banking, consistent with predictions from the Carlson and McAfee (J Polit Econ 91:480–493, 1983) model of market competition with search costs.     

IS E‐GOVERNMENT LEADING TO MORE ACCOUNTABLE AND TRANSPARENT LOCAL GOVERNMENTS? AN OVERALL VIEW

This paper seeks to assess to what extent e-government enables accountability and transparency in EU local governments. It also provides an overall view about how local governments are implementing ICTs initiatives to bring citizens closer to governments. Although the mere capacity of the Internet for the dissemination of information improves accountability and makes benchmarking easier, our results show that the expected benefits are far from being achieved because e-government projects are still in the early stages. The results also show that, at present, ICTs have not had a dramatic impact on EU local government accountability.     

Types of entrepreneurs and firms: The case of new Spanish firms

The main purpose of this paper is to present an empirical analysis of the sequence relating the performance of the firm to its behavior, which in turn depends upon the origin and personal characteristics of the entrepreneurs. The data are drawn from new Spanish firms. A typology of new entrepreneurs is constructed, based on their basic work aspirations. Each type of entrepreneur is then examined, in terms of the origin and personal characteristics of the members of the class. The results of the study show that significant differences exist among the entrepreneurs and firms of each type, especially in terms of the size of the firm (number of employees) and its evolution over time. The implications of these results, for the theory of entrepreneurship and for the design of policies towards the creation of new firms, are then derived.     

Trade Credit: Suppliers as Debt Collectors and Insurance Providers

This article examines how in a context of limited enforceabilityof contracts suppliers may have a comparative advantage overbanks in lending to customers because they are able to stopthe supply of intermediate goods. Suppliers may act also asliquidity providers, insuring against liquidity shocks thatcould endanger the survival of their customer relationships.The relatively high implicit interest rates of trade creditare the result of insurance and default premiums that are amplifiedwhenever suppliers face a relatively high cost of funds. I explorethese effects empirically for a panel of UK firms. (JEL: G30,M130, D920)     

The output and profit contribution of information technology and advertising investments in banks

This paper examines the contribution of investments in Information Technology (IT) and in advertising to the output and profits of Spanish banks, in the period 1983–2003. We find that the growth in the stock of IT capital explains one third of output growth of banks, and that an additional investment in IT of one million euros may be substituted for twenty-five workers. The paper also finds that advertising investments increase the demand for bank services with an elasticity of 0.22 for deposits and 0.11 for loans. For all the assets considered, the null hypothesis that banks use the profit-maximizing amount of services per period cannot be rejected with the data.     

An Estimated Stochastic General Equilibrium Model with Partial Dollarization: A Bayesian Approach

In this paper, we develop and estimate a dynamic stochastic, general-equilibrium New Keynesian model with partial dollarization. Bayesian techniques and Peruvian data are used to evaluate two forms of dollarization: currency substitution (CS) and price dollarization (PD). The empirical results are as follow: first, it is noted that the two forms of partial dollarization are important in explaining the significance of the Peruvian data. Second, models with both forms of dollarization dominate models without dollarization. Third, a counterfactual exercise shows that by eliminating both forms of partial dollarization, the response of both output and consumption to a monetary policy shock doubles, making the interest rate channel of monetary policy more effective. Fourth, based on the variance decomposition of the preferred model (with CS and PD), it is found that demand type shocks explain almost all the fluctuation in CPI inflation, the monetary shock being the most important (39%). Remarkably, foreign disturbances account for 34% of the output fluctuations.     

Nontradable Goods and the Real Exchange Rate

How important are nontradable goods and distribution costs to explain real exchange rate dynamics? We answer this question by estimating a general equilibrium model with intermediate and final tradable and nontradable goods. We find that the estimated model can match characteristics of the data that are relevant in international macroeconomics, such as real exchange rate persistence and volatility, and the correlation between the real exchange rate and other variables. The distinction between tradable and nontradable goods is key to understand real exchange rate fluctuations, but the introduction of distribution costs is not. Nontradable sector technology shocks explain about one third of real exchange rate volatility. We also show that, in order to explain the low correlation between the ratio of relative consumption and the real exchange rates across countries, demand shocks are necessary.