Credit lines as monitored liquidity insurance: Theory and evidence

We propose a theory of credit lines provided by banks to firms as a form of monitored liquidity insurance. Bank monitoring and resulting revocations help control illiquidity-seeking behavior of firms insured by credit lines. The cost of credit lines is thus greater for firms with high liquidity risk, which in turn are likely to use cash instead of credit lines. We test this implication for corporate liquidity management by identifying exogenous shocks to liquidity risk of firms in corporate bond and equity markets. Firms experiencing increases in liquidity risk move out of credit lines and into cash holdings.     

Estimating Sectoral Disinflation Cost in India: Some Structural VAR Evidence

This paper attempts a sectoral estimation of sacrifice ratios for India. Two Structural VAR models are estimated using quarterly data for the period 1997–98 Q1 to 2016–17 Q1. The empirical findings suggest that the real cost of disinflation policy is not negligible in India. The estimate of sacrifice ratios in terms of real GDP range from 0.16 to 0.17 depending upon the model employed. The calculation of sectoral sacrifice ratios show that all the three sectors are affected negatively and the largest impact is found in the manufacturing sector followed by the other two sectors, i.e., agriculture sector and service sector. The sacrifice ratio in the manufacturing sector is found to be 1.10 and 0.72 indicating huge negative impact of tight monetary policy. Similarly, for the agriculture sector the sacrifice ratios are 0.40 and the service sector shows sacrifice ratios of 0.36 and 0.37 respectively for different models. Further, from 10-year rolling estimation, we find that sacrifice ratios are time varying. The sacrifice ratio is declining in the last few quarters at the aggregate and sectoral levels indicating that disinflation could be less costly in recent times. However, the high disinflation cost experienced prior to the year 2015 can’t be neglected. So, it is important to take caution while interpreting the results of disinflation cost in India.

     

Endogenous trade policy in general equilibrium: An interaction of redistribution rule,trade openness,and labor market condition

Using a general equilibrium framework, the paper derives trade policy endogenously for a small country. It shows that, contrary to the existing literature, a lobbying industry is not guaranteed trade protection; it may even face trade taxes. Besides lobbying, trade policy depends on other factors such as the trade revenue distribution rule, income distribution across groups, trade openness, factor substitutability in production, industry employment size, and labor market flexibility. The paper also shows that the observed phenomenon of government preference for import tariffs over export subsidies—a long overdue puzzle—is an inherent outcome of lobbying equilibrium. It also shows that trade policies such as import tariffs and export taxes that have the same impact on economic market—Lerner symmetry (1936)—are driven by the same forces in the political market.     

Multinationals and market structure in an open developing economy: The case of Malaysia

Zusammenfassung Multinationale Unternehmen und Marktstruktur in einem offenen Entwicklungsland: Der Fall Malaysia. — Dieser Aufsatz versucht die Wirkung von Auslandsinvestitionen auf die Marktstruktur der malaiischen Halbinsel zu ermitteln. Zensusdaten für einen Querschnitt von 46 verarbeitenden Industrien werden benutzt, um ein Modell zur Bestimmung der Verk?ufer-Konzentration zu konstruieren — wobei das Konzentrationsma\ auf die vier gr?\ten Werke abstellt. Die unabh?ngigen Variablen umfassen — neben der Aktivit?t der Ausl?nder — Skalenertr?ge (drei Ma\e), Produktdifferenzierung, Kapitalintensit?t, Mindest-Kapitalerfordernisse und eine Kontrollvariable für das oben erw?hnte Konzentrationsma\ im Vereinigten K?nigreich. Die Ergebnisse zeigen, da\ Skalenertr?ge, Kapitalbedarf und Produktdifferenzierung mit der Konzentration positiv korreliert sind und da\ die Aktivit?t der Ausl?nder den Konzentrationsgrad erh?ht, und zwar sowohl für sich allein genommen als auch wegen der Erh?hung anderer Zugangsbeschr?nkungen (wie Kapitalerfordernisse und Mindest-Losgr?\en). Ausl?ndische Investitionen erh?hen die Konzentration st?rker in Nicht-Konsumgüterindustrien als in Konsumgüterindustrien, vermutlich weil sie im erstgenannten Sektor einen gr?\eren Einflu\ auf die Einführung neuer Technologien ausüben. Ein erster Versuch, zwischen den gro\en multinationalen Firmen und den ausl?ndischen Investoren aus anderen Entwicklungsl?ndern zu unterscheiden, deutet darauf hin, da\ beide Investoren ?hnliche Wirkungen auf die Wirtschaftsstruktur haben, da\ aber die ?wirklichen? multinationalen Firmen in st?rkerem Ma\e die Konzentration in Nicht-Konsumgüterindustrien erh?hen. Diese Befunde lassen als solche kein Urteil darüber zu, ob die Wirkung ausl?ndischer Investitionen auf die Struktur vom Effizienzgesichtspunkt aus wünschenswert ist oder nicht: ?gute? und ?schlechte? Wirkungen scheinen gemischt zu sein.

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Résumé Les multinationales et la structure de marché dans une ouverte économie développante: le cas de la Malaisie. — Cet article essaie d’estimer l’effet d’investissement étranger sur la structure de marché dans la Malaisie Peninsulaire. Les données de recensement d’une section transversale des 46 industries manufacturières sont appliquées à construire un modèle des déterminants de la concentration de vendeur (representée par le rapport de concentration de quatre usines); les variables indépendantes incluent, abstraction faite de la présence étrangère, les économies d’échelle (trois mesures), la différenciation de produit, l’intensite de capital, les exigences minimum de capital et une variable de contr?le pour les degrés de concentration de quatre usines dans le Royaume Uni. Les résultats démontrent que les économies d’échelle, les exigences de capital et la différenciation de capital sont positivement associées avec le degré de concentration, et que la présence étrangère agit en élevant ces degrés indépendamment aussi bien qu’en élevant des autres barrières d’entrée (comme les exigences de capital et les minimum échelles efficientes. La présence étrangère a un effet plus grand sur l’augmentation de la concentration dans les industries des biens de non-consommation que dans les industries des biens de consommation, probablement parce qu’elle agit comme un agent plus puissant pour l’introduction d’une technologie nouvelle dans le secteur susdit. Un essai brut de distinguer entre les grandes multinationales et les investisseurs étrangers d’autres PVD suggère que les deux ont de similaires effets generaux sur la structure, mais les CMN réelles ont des effets plus puissants concernant l’augmentation de la concentration dans les industries des biens de non-consommation. Ces résultats ne rendent pas possible par eux-mêmes un jugement de manière que si l’effet de l’entrée étrangère sur la structure soit désirable ou pas désirable du point de vue d’efficience: une mixture des effets ?bons? et ?mauvais? semble être existante.

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Resumen Empresas multinationales y estructura del mercado en una economía en desarrollo abierta: el caso de Malasia. — En este artículo se pretende determinar el impacto de inversiones extranjeras sobre la estructura del mercado en Malasia Peninsular. Se utilizan datos censales en un análisis de corte transversal de 46 industrias manufactureras para construir un modelo de las determinantes de la concentratión de ventas (representada por la relatión de concentratión de 4 plantas); las variables independientes incluyen, fuera de la presencia extranjera, economías de escala (tres medidas), diferenciación de productos, intensidad de capital, requerimientos mínimos de capital y una variable de control para niveles de concentratión de 4 plantas en el Reino Unido. Los resultados muestran que las economías de escala, los requerimientos de capital a la diferenciación de productos están positivamente asociados con los niveles de concentratión, y que la presencia extranjera actúa elevando estos niveles independientemente, como también elevando otras barreras para la entrada (tales como requerimientos de capital y escalas mínimas de eficiencia). La presencia extranjera tiene un impacto mayor en elevar la concentratión en industrias no productoras de bienes de consumo que en industrias productoras de bienes de consumo, probablemente porque actúa como agente más poderosa para introducir nuevas tecnologías en el primer sector. Un intento aproximado para distinguir entre empresas multinationales grandes e inversores extranjeros de otros países en desarrollo, sugiere que ambos tienen un efecto similar sobre la estructura, pero que las verdaderas multinationales tienen efectos más poderosos para elevar la concentratión en las industrias productoras de bienes distintos a los de consumo. Estos resultados no permitten por sí solos emitir un juicio sobre si el impacto de la entrada extranjera sobre la estructura es deseable o no desde el punto de vista de la eficiencia: una mezcla de ?buenos? y ?malos? efectos parece estar envuelta.

     

Transfer pricing and developing countries: Some problems of investigation

This paper reviews some of the main problems which arise for developing host countries in the investigation of transfer pricing of commodity trade by transnational corporations in manufacturing industry. The paper deals in turn with the following: the problems raised by the fact that the extent of intra-firm trade and the potential for manipulating transfer prices from case to case, especially because of the nature of technological innovation; the main handicaps faced by host developing country governments in collecting data on transfer pricing; and, the difficult conceptual issues that arise in defining the correct reference prices by which transfer prices may be judged. It concludes with the suggestion that intercountry cooperation is the most promising course of action in order to surmount these problems.     

Monetary Policy and Financial Stability: The Role of Inflation Targeting

This article examines the relationship between Inflation targeting (IT) and financial instability from 1990 to 2015 for Asian economies. To measure financial instability, a multidimensional financial conditioning index is calculated following the ECB's approach. Using a fixed effects panel data model the study finds that adoption of IT policy in Asian economies has an adverse impact on financial stability, thus rejecting the ‘conventional wisdom’ hypothesis. Further, the Vector Autoregression (VAR) result shows that an IT regime increases housing returns and encourages investors to take higher risks.     

Answering key questions on green consumption: A qualitative study among Indian youth

The main objectives of this study are to (a) comprehend the definition of green consumption, (b) identify the products that are considered green by consumers, (c) understand the reasons behind green product consumption, and (d) decipher the possible implications of consuming green. To achieve these objectives, information‐rich young consumers were depth interviewed. Subsequently, thematic maps were developed using thematic analysis technique. In that, three major themes emerged as (a) personal factors, (b) social factors, and (c) environmental factors. These findings have implications primarily for scholars as this paper advances prior literature on the theory of planned behavior by looking at green consumption through the lens of young Indians. Also, it has implications for marketers as they may formulate strategies to market their green products on the basis of the factors identified in the paper.