On the distributional properties of household consumption expenditures: the case of Italy

In this paper we explore the statistical properties of the distributions of consumption expenditures for a large sample of Italian households in the period 1989–2004. Goodness-of-fit tests show that household aggregate (and age-conditioned) consumption distributions are not log-normal. Rather, their logs can be invariably characterized by asymmetric exponential-power densities. Departures from log-normality are mainly due to the presence of thick lower tails coexisting with upper tails thinner than Gaussian ones. The emergence of this irreducible heterogeneity in statistical patterns casts some doubts on the attempts to explain log-normality of household consumption patterns by means of simple models based on Gibrat’s Law applied to permanent income and marginal utility.     

Forecasting industrial production in the Euro area

The creation of the Euro area has increased the importance of obtaining timely information about short-term changes in the area's real activity. In this paper we propose a number of alternative short term forecasting models, ranging from simple ARIMA models to more complex cointegrated VAR and conditional models, to forecast the index of industrial production in the euro area. A conditional error-correction model in which the aggregate index of industrial production for the area is explained by the US industrial production index and the business confidence index from the European Commission harmonised survey on manufacturing firms achieves the best score in terms of forecasting capacity. First version received: Jan. 2000/Final version received: March 2000     

The cost of carry model and regime shifts in stock index futures markets: An empirical investigation

This article examines empirically the dynamic relationship between spot and futures prices in stock index futures markets employing a class of nonlinear, regime‐switching‐vector‐equilibrium‐correction models, which is novel in this context. Using data for the S&P 500 and the FTSE 100 over the post‐1987 crash period, it is shown that a long‐run relationship between spot and futures prices exists, which implies mean reversion of the basis. After providing strong evidence against the hypothesis of linear dynamics in the relationship under investigation, regime‐switching‐vector‐equilibrium‐correction models for spot and futures price movements are developed and shown to capture well the time‐series properties of our data, consistent with a large theoretical and empirical literature. © 2000 John Wiley & Sons, Inc. Jrl Fut Mark 20:603–624, 2000.     

Does real U.K. GDP have a unit root? Evidence from a multi-century perspective

ABSTRACT

We employ linear and nonlinear unit-root tests to examine the stationarity of five multi-century historical U.K. series of real output compiled by the Bank of England. Three series span 1270 to 2016 and two series span 1700 to 2016. These datasets represent the longest span of historical real output data available and, thus, provide the environment for which unit-root tests are most powerful. A key feature of our test is its simultaneous allowance for two types of nonlinearity: time-dependent (structural breaks) nonlinearity and state-dependent (asymmetric adjustment) nonlinearity. The key finding of the test, contrary to what other more popular nonlinear unit-root tests suggest, provides strong evidence that the main structure of the five series is a stationary process characterized by an asymmetric nonlinear adjustment and a permanent break affecting both the intercept and the trend. A major policy implication of this finding is fiscal and/or monetary stabilization policies have only temporary effects on the output levels of the United Kingdom.     

Egalitarianism: An evolutionary perspective

Two parties bargain over a pie, the size of which is determined by their previous investment decisions. Investment costs are heterogenoeus. The bargaining rule is sensitive to investment behavior. Our main result is that egalitarianism is more likely to emerge in situations in which private property over the fruits of one's own independent investment is not secured.     

The decision to invest in a low-wage country: Evidence from Italian textiles and clothing multinationals

In this paper we investigate the firm-specific factors that account for the decision to invest in low-wage countries on the part of Italian firms in the textiles and clothing sector. This analysis is motivated by the fact that our survey data show, between 1990 and 1997, a decline of average employment in parent companies, while that in subsidiaries grew substantially. However, correlation and regression analysis show that employment in parent companies that invested in low-wage countries only seems to be negatively related with employment abroad. Our hypothesis is that investments in cheap labour countries are mainly cost-driven and are undertaken by firms that focus on a low-quality, low-cost strategy. We test this hypothesis through a probit analysis. The evidence suggests that investments to cheap labour countries are more likely to be of a vertical type, being relatively more labour-intensive compared with the parent company. Our hypothesis seems to be confirmed empirically. Investments in low-wage countries are more likely to generate abundant intra-firm trade and to be undertaken by firms with low shares of skilled employment.     

External Public Debt,Trade Linkages and Contagion During the Eurozone Crisis

Against the backdrop of the contagion literature, the paper analyses the impact of financial and trade linkages on sovereign bond spreads in the Eurozone crisis. Using quarterly data for a sample of EMU countries during the period 2000–13, we estimate fixed‐effect panel models with Driscoll and Kraay standard errors that are robust to general forms of spatial and temporal dependence. Our main results can be summarised as follows: first, we suggest that the ‘sudden stop’ of capital inflow towards the peripheral sovereign debt triggered a re‐segmentation of financial markets and economic systems along national borders, with negative implications for risk‐sharing and the efficient allocation of capital. The ‘home bias’ effect – that is the increase in the share of sovereign debt held by domestic banks – worsened the country‐specific risk because the twin crisis (sovereign and banking) began to be conceived as more closely intertwined within countries than before. Second, the structure of international trade helps to account for the geographic scope of contagion, even after controlling for macroeconomic and fiscal vulnerabilities. Finally, the ‘substitution effect’ of public debt securities of stand‐alone emerging countries has affected more the sovereign spreads in the core than in the periphery.     

Fiscal Policies and Credit Regimes: A TVAR Approach

This work investigates how the state of credit markets affects the impact of fiscal policies. We estimate a threshold vector autoregression (TVAR) model on US quarterly data for the period 1984–2010. We employ the spread between BAA‐rated corporate bond yield and 10‐year treasury constant maturity rate as a proxy for credit conditions. We find that the response of output to fiscal policy shocks is stronger and more persistent when the economy is in the ‘tight’ credit regime. Fiscal multipliers are significantly different in the two regimes: they are abundantly and persistently higher than one when firms face increasing financing costs, whereas they are feebler and often lower than one in the ‘normal’ credit regime. The results appear to be robust to different model specifications, fiscal foresight, alternative threshold variables, different measure of variables and sample periods. Copyright © 2014 John Wiley & Sons, Ltd.     

Barriers to entry, deregulation and workplace training: A theoretical model with evidence from Europe

We study the impact of regulatory barriers to entry on workplace training. We develop a model of training in imperfectly competitive product and labour markets. The model indicates that there are two contrasting effects of deregulation on training. As stressed in the literature, with a given number of firms, deregulation reduces the size of rents per unit of output that firms can reap by training their employees. Yet, the number of firms increases following deregulation, thereby raising output and profit gains from training and improving investment incentives. The latter effect prevails. In line with the predictions of the theoretical model, we find that the substantial deregulation in the 1990s of heavily regulated European industries (energy, transport and communication) increased training incidence.