Financial market integration: Theory and empirical results

In this article, we introduce a new theoretical international asset pricing model which accounts for partial financial market segmentation. We show that if some investors do not hold all international assets because of implicit and/or explicit segmentation factors, the world market portfolio is not efficient and the classic ICAPM must be augmented by a new factor reflecting the local risk undiversifiable internationally. We test this model empirically for a sample of emerging markets. Our findings show that the degree of market integration is time-varying and that the premium associated with the domestic risk factors is the most important component of the total risk premium. However, our results also show that most of the emerging markets we study have become more integrated in the end of our sample period as a result of liberalization and reforms.     

Does foreign direct investment increase exports’ productivity? Evidence from developing and emerging countries

Raising the productivity content of exports is an important issue for developing and emerging countries. What role do foreign firms play in this process? This question has not been adequately studied. We contribute to the literature by generalizing the role of foreign direct investment (FDI) in the host country’s export productivity level. Using panel data, we present new empirical evidence suggesting that FDI boosts the overall productivity level of the developing and emerging countries’ exports.     

Consolidation in the European banking industry: how effective is it?

The European banking industry is becoming increasingly consolidated as banks engage in domestic and cross-border merger and acquisition (M&A) activities. Due to cultural differences in cross-border consolidations, the benefits of domestic and cross-border consolidations are likely to differ. This paper examines the effectiveness of merger processes, with a detailed analysis of both domestic and cross-border consolidations in Europe from 1998 to 2004. Effectiveness is measured via several criteria: improvement in costs, return on assets (ROA), and return on equity (ROE). To analyze potential cost efficiency improvement, we use a stochastic cost frontier approach. The same methodology is used for ROA and ROE to estimate efficiency in profitability. Finally, considering cross-border mergers as a form of entry, we carry out an analysis of the entry effect in response to the performance and profitability of the incumbent market participants. Results show that mergers in the European banking industry have been effective. Although domestic M&As are more common than cross-border M&As, banks involved in cross-border M&As are more efficient. Moreover, cross-border merged banks seem to outperform incumbent banks.     

Understanding what drives the purchase decision in pension and investment products

The aims of this paper are to first seek an understanding of consumer decision-making when purchasing pension and investment products, and second to ascertain how this decision-making affects the consumer's choice of distribution route. The study employed both focus groups and postal questionnaire survey methods based on the framework of a classical decision-making model that investigated problem recognition, information search, evaluation tools used and post-purchase. The findings show that the decision-making process experience differed to a lesser or greater degree depending on the distribution route. The majority of respondents had recognised the need to make a purchase decision long before seeking information. Younger respondents on all incomes believed that they must make some pension provision for themselves as opposed to relying on the government's retirement provision. Many changed channels for information searches, but tended to settle with the Independent Financial Adviser (IFA). The two main evaluation tools for pension and investment were found to be the ‘charges’ and ‘historic fund performance’. The vast majority of respondents reiterated their worry that the outcomes would not be known until retirement. In terms of analysis by the level of ‘financial literacy’, respondents who scored in the upper quartile were more inclined to be on a higher income, less inclined to evaluate on charges and more proactive in discussing the investment strategy of their pension fund. Respondents who scored in the lower quartile had opposite results. One of the implications of these findings is that the younger respondents’ recognition of pension savings favours the government's intention to reverse the existing balance of pension distribution. The other main implication is that the findings will be of help to managers in appreciating the dominance of the IFA channel by providing an explanation of why consumers choose this route, and, additionally, can assist direct marketing managers in identifying customers who will be more likely to use multichannel or single-channel shoppers. It can also help the marketing manager increase the usage of different channels by addressing the factors driving the purchase decision and distribution choice.     

Strategic interaction and aggregate incentives

We consider a model of interdependent efforts, with linear interaction and lower bound on effort. Our setting encompasses asymmetric interaction and heterogeneous agents’ characteristics. We examine the impact of a rise of cross-effects on aggregate efforts. We show that the sign of the comparative static effects is related to a condition of balancedness of the interaction. Moreover, we point out that asymmetry and heterogeneous characteristics are sources of non-monotonic variation of aggregate efforts.     

Pooling surveys in the estimation of income and price elasticities: An application to Tunisian households

This paper presents a methodological extension of Deaton's (1990) model for estimating price elasticities, by pooling Tunisian data from several surveys to improve the inter-cluster variability of unit values which is one of the key elements used in the derivation of these elasticities. Since the surveys cover a relatively long period, possible structural changes in consumption behaviour occurring over time are accounted for by postulating that certain response coefficients of the basic model vary from one survey to the other. The own price and cross price elasticities calculated using appropriate estimates of the extended model are satisfactory both from the economic point of view of their sign and the statistical point of view of their significance and superior to those obtained using a single survey. First version received: April 2000/Final version received: June 2001 RID="*" ID="*"  The authors would like to thank Angus Deaton and anonymous referees for useful comments and suggestions.     

Schumpeterian competition and efficiency among commercial banks

In this paper, we aim to fill the gap in the banking literature by quantifying the impact that the Schumpeterian competition mode – i.e. competition through the launch of new products (or new varieties of products) – has on the cost and profit efficiency of a sample of commercial banks based in the United Kingdom. We estimate both a cost and an alternative profit frontier on an unbalanced panel of UK commercial banks over the period 2001–2012. The intensity of competition through product innovation is proxied by the trademark intensity (i.e. the ratio between the number of trademarks registered in a given year by all the commercial banks – net of the trademarks registered by the bank under observation – and the employment in the sector) in the commercial banking sector. Our results show that the (lagged) trademark intensity in the commercial banking sector does affect negatively the mean cost and profit efficiency in the sector but there is evidence that as trademark intensity increases in the sector, commercial banks react by improving their cost and profit efficiency.     

The pyramids plateau: A dream searching for survival

Recognized as one of the most unique archaeological sites in the world, the Giza pyramids plateau is the location of the three great pyramids and the Sphinx, tombs, seven smaller pyramids, and other monuments. Over the centuries the plateau has been instrumental in introducing Egyptian civilization to the world, and was recently declared as one of the most iconic travel spots on the planet.In recent years, the location of the new Grand Egyptian Museum (GEM) within the site of the plateau re-ignited the debate between scholars, practitioners and activists over development activities within and around this unique site. Consequently, a growing conflict re-emerged between conserving the plateau and developing the surrounding areas. Additionally, this invaluable site is threatened by urban expansion and development, pollution, rising groundwater and extensive tourism. Yet, currently there are neither tourism management nor development plans for the site.Building on national and international conservation conventions and charters, this paper explores analyses and documents the current gap between ideal conservation management sittings within and around the pyramids plateau and the reality of urban development trends and tourism activities.     

Exchange Rates and Stock Prices in the MENA Countries: What Role for Oil?

This paper considers the linkage between stock prices and exchange rates in four MENA (Middle East and North Africa) emerging markets. In contrast to the existing evidence that uses a global market index to uncover such a relationship it is found that for the sample countries oil prices emerge as the dominant factor in the above relationship. The paper considers the presence of regime shifts and evidence is found of cointegration only for the period following the 1999 oil price shock. Readjustment towards equilibrium in each stock market occurs via oil price changes. Finally, a number of robustness checks are performed and persistence profiles produced.     

The economics of the Syrian refugee crisis in neighbouring countries: The case of Lebanon

In this article, we investigate the effects of a massive displacement of workers from a war‐torn economy on the economy of a neighbouring country. Applying a general equilibrium approach to the Lebanese economy, we explore effects from various components of the crisis on the labour market, the production apparatus and macroeconomic indicators. Along with previous literature, our findings suggest limited or no adverse effects on high‐skilled native workers, but a negative impact on the most vulnerable Lebanese workers. When aid takes the form of investment subsidies, significantly better growth and labour market prospects arise, recalling the necessity of complementing humanitarian aid with development aid to succeed in achieving long‐term objectives. This may however not be politically viable in a context where refugees are considered as temporary.