Loan pricing under Basel capital requirements

We analyze the loan pricing implications of the reform of bank capital regulation known as Basel II. We consider a perfectly competitive market for business loans where, as in the model underlying the internal ratings based (IRB) approach of Basel II, a single risk factor explains the correlation in defaults across firms. Our loan pricing equation implies that low risk firms will achieve reductions in their loan rates by borrowing from banks adopting the IRB approach, while high risk firms will avoid increases in their loan rates by borrowing from banks that adopt the less risk-sensitive standardized approach of Basel II. We also show that only a very high social cost of bank failure might justify the proposed IRB capital charges, partly because the net interest income from performing loans is not counted as a buffer against credit losses. A net interest income correction for IRB capital requirements is proposed.     

Macroeconomic performance and convergence in OECD countries

This paper investigates the robustness of the correlation between growth and a set of variables which comprises accumulation rates in human and physical capital and medium term macroeconomic indicators in OECD countries. We include these variables as additional regressors in the standard growth equation that comes from the human capital-augmented Solow model. Our results show that variables related to medium term macroeconomic performance affect both growth and convergence. In some periods these variables even outperform the explanatory power of the conventional growth variables such as the accumulation rates. Our results also suggest that it is difficult to analyse the contribution to growth of any particular macroeconomic indicator in an isolated way. Rather, these effects should be studied in a framework that accounts for the macroeconomic performance of a country.     

Corporate brand image in retail banking: development and validation of a scale

Recent changes in deregulation and technology have made banking one of the most competitive sectors in the global economy. Within this background, corporate image management has gained importance as a way of differentiating companies. This paper aims to develop a scale to analyse the corporate image in banking. Derived from a review of the literature, a scale with the most cited dimensions of analysis is developed. This scale is then tested by means of an empirical study of 450 individuals, where dimensionality, reliability and validity requirements are confirmed. Both theoretical and managerial implications are presented.     

Moral markets: A marginalistic interpretation of Adam Smith

The article is built upon James Otteson's analogy between the structure of moral and economic rules. In Otteson's interpretation of Adam Smith's works both of them develop from an exchange of information of interacting agents. We develop that concept about Adam Smith's Theory of Moral Sentiments, analyzing those exchanges, and considering them Moral Market processes, in the Austrian Tradition of markets as processes. We think that Smith's emphasis on graduality and his metaphor of the Impartial Spectator allows us to propose a marginalistic approach to those markets stating how, in some of them which we call moral exchanges of justice, and through a great number of exchanges, moral rules of justice emerge. Finally, we present the problems that arise when legislation tries to change the results of these exchanges, in what we called a price control in the moral market.     

Air transport demand and economic growth in Brazil: A time series analysis

We investigate the relationship between air transport demand (passenger-kilometer: PAX) and economic growth (GDP) between 1966 and 2006 in Brazil. Special attention is paid to stationary features and the existence of a long-run equilibrium between variables to work in a vector autoregressive environment. Our findings suggest that GDP and PAX are co-integrated. Impulse-response analysis indicates a strong positive reaction of PAX due to a positive change in GDP. However, GDP reacts to a change in PAX in a slower and moderated way. We interpret these findings as an empirical evidence of air transport multiplier effects in the economy.     

Effect of low-cost airlines on tourism in Spain. A dynamic panel data model

This article estimates the impact of low-cost airlines on Spanish tourism during the first decade of the 21st century looking tourist traffic from the principal EU-15 member states using a dynamic panel data. The expansion in low-cost airline activity has had significant, positive direct and indirect effects on the Spanish economy. The study also looks at some of the key elasticities of demand that have influenced this.     

Judicial Reform

A review of the evidence on judicial reform across countriesshows that those seeking to improve economic performance shouldnot focus on judicial efficiency alone but on independence aswell. It also shows that the level of resources poured intothe judicial system and the accessibility of the system havelittle impact on judicial performance. Most of the problem ofjudicial stagnation stems from inadequate incentives and overlycomplicated procedures. Incentive-oriented reforms that seekto increase accountability, competition, and choice seem tobe the most effective in tackling the problem. But incentivesalone do not correct systematic judicial failure. Chronic judicialstagnation calls for simplifying procedures and increasing theirflexibility.      

Determinants of collateral

We estimate a comprehensive model of the determinants of collateral in loans extended to business firms. We use a panel data on a sample of bank loans to Spanish firms from 1984 to 2002. Consistent with theories that view collateral as a solution to adverse selection problems, our results provide direct evidence of a negative association between collateral and a borrower's risk. We also present evidence on previously unexplored determinants of collateral such as credit market competition, lender type, and the business cycle.