Assessing Macroprudential Policies: Case of South Korea*

In this paper, we develop methods for assessing the sensitivity of capital flows to global financial conditions. We use these methods to assess the impact of macroprudential policies introduced by South Korea in 2010. Relative to a comparison group of countries, we find that the sensitivity of capital flows into South Korea to global conditions decreased in the period following the introduction of macroprudential policies.     

The impact of China's imports on European Union industrial employment

As the EU's biggest supplier of imported goods and a second trading partner, China has become an increasingly important actor on the global economic scene. This paper reports new evidence through analyzing whether the EU labour market is affected by exposure to imports from China. Drawing on a panel dataset of 27 EU countries, over the 2003–2013 period, and using the pooled mean group estimator, the results show that imports from China have a negative effect on industrial employment. This result holds separately for the all analyzed categories: all products, manufactured products as well as for the sub‐groups.     

Convergence in per-capita GDP across European regions: a reappraisal

This paper studies convergence in per-capita GDP across European regions over the period 1980–2000. We use median unbiased estimators of the rate of convergence to the steady-state growth path, while allowing for unrestricted patterns of heterogeneity and spatial correlation across regions. By permitting the model parameters to be completely different across regions, not only we avoid imposing strong a priori assumptions but we are also able to analyze the spatial patterns in the estimated coefficients. Our results differ from those found using conventional estimators. The main differences are: i) the mean rate of convergence is much lower; ii) for most regions this rate is zero; iii) the number of regions for which we reject equality in trend growth rates is substantially lower. We also find significant evidence of correlation of growth rates across neighbor regions and across regions belonging to the same country.     

Asymptotic Revenue Equivalence in Auctions

We study the revenue in auctions of a single object when the number of bidders becomes large. We show that all sequences of auctions belonging to a class of mechanisms have limiting expected revenue equal to the expected best-use value of the object. An important special case that is covered is common value auctions, but more generally not even affiliation of values is assumed. This provides an asymptotic revenue equivalence result for settings beyond that of private values. Journal of Economic Literature Classification Numbers: D44, C72.     

Market Access Asymmetry in Food Trade

Using a bilateral trade equation derived from a monopolistic competition model, we investigate market access reciprocity in food trade among the United States, Canada, the European Union and Japan. We explore country- and industry-specific market access asymmetry through a border effect approach. Our findings reveal marked asymmetries in reciprocal border effects, both across countries and industries. Trade policy measures, particularly non-tariff barriers (NTBs), the degree of product differentiation and a ‘home bias’ in preferences, are important factors in explaining levels in border effects. Asymmetries in border effects are mainly explained by trade policies. JEL no.  F13, F14, Q17     

Agricultural market integration in the OECD: A gravity-border effect approach

This paper uses the border effect estimate from a gravity model to assess the level of agricultural market trade integration among 22 OECD countries for the 1994–2003 period. Empirical analysis confirms that the use of a gravity equation derived from theory, in the estimation of border effect, matters. A representative estimate of the border effect shows that crossing a national border within the OECD induces an average trade-reduction effect of a factor 13. This average value masks differences that are quite substantial in market integration, with value for intra-EU trade being higher while that for trade between the Central and Eastern European Countries (CEECs) is lower. The data show a process of strong integration in all the country-trade combinations involving CEECs. However, quite surprisingly, the intra-CEEC and OECD-CEEC integration processes are almost twice as strong as those in the EU-CEEC combination. Finally, the equivalent tariffs implied by the estimated border effects are not implausible compared to the actual range of direct protection measures.     

Scope economies from rural and urban microfinance services

Microfinance institutions (MFIs) operate in both rural and urban credit markets and provide financial services to the poor not served by commercial banks. MFIs must keep operating costs low to better serve their clients. We evaluate whether MFIs can lower their costs by exploiting economies of diversification from serving both rural and urban markets rather than specializing in only one. We apply a novel method to estimate scope economies that minimizes the well-known “excessive extrapolation” and accommodates MFIs' heterogeneity. Analyzing panel data on MFIs from 105 countries over 2008–2018, we find that about half of loan-only MFIs benefited from diversification and enjoyed scope economies of 16.6% while over two thirds of savings-and-loan MFIs experienced scope diseconomies of 11.7% suggesting advantages from specialization. Over time, the declining magnitudes and the prevalence of scope (dis)economies in both groups suggest that loan-only MFIs have been able to serve costlier marginal clients while savings-and-loan MFIs have been learning and decreasing their scope diseconomies. Stakeholders encouraging the transformation of MFIs into regulated savings-and-loan institutions that serve both rural and urban markets should be aware of the presence of scope diseconomies for that business type and offer adequate support.     

Systemic liquidity contagion in the European interbank market

Systemic liquidity risk, defined by the International Monetary Fund as “the risk of simultaneous liquidity difficulties at multiple financial institutions,” is a key topic in financial stability studies and macroprudential policy-making. In this context, the complex web of interconnections of the interbank market plays the crucial role of allowing funding liquidity shortages to propagate between financial institutions. Here, we introduce a simple yet effective model of the interbank market in which liquidity shortages propagate through an epidemic-like contagion mechanism on the network of interbank loans. The model is defined by using aggregate balance sheet information of European banks, and it exploits country and bank-specific risk features to account for the heterogeneity of financial institutions. Moreover, in order to obtain the European-wide topology of the interbank network, we define a block reconstruction method based on the exchange flows between the various countries. We show that the proposed contagion model is able to estimate systemic liquidity risk across different years and countries. Results suggest that our effective contagion approach can be successfully used as a viable alternative to more realistic but complicated models, which not only require more specific balance sheet variables with high time resolution but also need assumptions on how banks respond to liquidity shocks.

     

Managers' compassionate goals,innovation, and firm performance: an examination of mediating processes,and boundary conditions in small- and medium-sized enterprises

This study aims to examine the relationships of managers' compassionate goals with innovation and performance in small- and medium-sized enterprises (SMEs). By integrating social exchange theory with social information processing theory, we hypothesize a serial mediation model in which organizational cooperation and firm innovation sequentially mediate a positive relationship between managers' compassionate goals and firm performance. However, we predict that this positive indirect effect would occur only when managers have low self-image goals and there is a high innovation-supportive work environment. Based on survey data from a sample of 116 SMEs in France, our results provide support for our predictions. This study contributes to the literature by disclosing the mechanisms and boundary conditions of the relationship of managers' compassionate goals with SMEs' innovation and performance. Theoretical and managerial implications of this study are discussed.