PERSONALITY TRAITS AND THE PERCEPTION OF MACROECONOMIC INDICATORS: SURVEY EVIDENCE

I examine the determinants of both perceived inflation and unemployment in one single survey and include Big Five traits in the analysis. This is the first survey on this topic in Germany. My sample consists of 1771 students from different fields and levels. Using PhD students’ estimates as a reference, I create categories for underestimation and overestimation of both variables. Multinomial logit regressions show that females overestimate both variables. Education and news consumption reduce misestimation. A higher level of Neuroticism is related with a higher probability to overestimate unemployment. Overstating (understating) one indicator is associated with overstating (understating) the other.     

The Bertrand Paradox,the Useless Auctioneer and the Launhardt Model

We revisit the Cournot–Bertrand debate in the light of Cournot, Edgeworth and Launhardt, tracing back to Launhardt the origin of price competition in duopoly models with constant returns to scale. Then, we discuss the formalisation of consumer utility function for differentiated products, first appearing in Launhardt and then in Bowley. This allows us to point out that assuming that firms know the demand function(s) is equivalent to assuming that they know the structure of consumer preferences. Therefore, we argue that there is no role for the auctioneer, either in Cournot or in Walras.     

The long-term role of non-traditional banking in profitability and risk profiles: Evidence from a panel of U.S. banking institutions

The goal of this empirical study is to identify empirically and on a panel basis how non-traditional bank activities affect directly the profitability and risk profiles of the financial institutions involved in such activities. Through a dataset that covers 1725 U.S. financial institutions involved in non-traditional bank activities spanning the period 2000–2013 and the methodology of panel cointegration, the empirical findings document that non-traditional bank activities exert a positive effect on both the profitability and the insolvency risk. The results could be important for regulators given they could serve as a pre-warning signal that sends a clear message to regulators about the potential systemic risk that exists within the financial markets.     

Financial stress,sovereign debt and economic activity in industrialized countries: Evidence from dynamic threshold regressions

We analyze how the impact of a change in the sovereign debt-to-GDP ratio on economic growth depends on the level of debt, the stress level on the financial market and the membership in a monetary union. A dynamic growth model is put forward demonstrating that debt affects macroeconomic activity in a non-linear manner due to amplifications from the financial sector. Employing dynamic country-specific and dynamic panel threshold regression methods, we study the non-linear relation between the growth rate and the debt-to-GDP ratio using quarterly data for sixteen industrialized countries for the period 1981Q1-2013Q2. We find that the debt-to-GDP ratio has impaired economic growth primarily during times of high financial stress and only for countries of the European Monetary Union and not for the stand-alone countries in our sample. A high debt-to-GDP ratio by itself does not seem to necessarily negatively affect growth if financial markets are calm.     

Do Spillovers Stimulate Incremental or Drastic Product Innovations? Evidence from German Establishment Data*

Despite the generally recognized importance of knowledge spillovers, the empirical literature is essentially silent on the type of innovation stimulated by spillovers. We estimate the determinants of product innovations differing in their degree of newness to the adopting firm. Knowledge spillovers from rivals have a positive impact on incremental innovations. This impact is largely independent of participation in R&D cooperation. Spillovers exert no such independent influence on drastic innovation activities. The results support the hypothesis that establishments face difficulties in using knowledge that comes from areas they are not familiar with. Establishments exploit spillovers for incremental innovations rather than for drastic innovations. To some degree R&D cooperation can help to overcome the difficulties in using spillovers for drastic innovations. Furthermore, our estimates provide evidence that the firm's own R&D effort and the use of outside information are substitutes.     

On the size of fiscal multipliers: A counterfactual analysis

We point out that fiscal multipliers derived from SVAR-models include the predicted future path of policy instruments. After the initial shock, net taxes and government expenditures react to each other and are autocorrelated. In a counterfactual simulation, we report fiscal multipliers that abstract from these dynamic responses.     

Socioeconomic Determinants of Child Health: Empirical Evidence from Indonesia

This paper characterizes the socioeconomic determinants of child health using height‐for‐age z‐score (HAZ), a long‐run measure of chronic nutritional deficiency. We construct a panel data that follows children between ages 3 and 59 months in 1993 through the 1997 and 2000 waves of the Indonesian Family Life Survey. We use this data to identify the various child‐level, household‐level and community‐level factors that affect children's health. Our findings indicate that household income has a large and statistically significant role in explaining improvements in HAZ. We also find a strong positive association between parental height and HAZ. At the community level, we find that provision of electricity and the availability of paved roads are positively associated with improvements in HAZ. Finally, in comparison to community‐level factors, household‐level characteristics play a large role in explaining the variation in HAZ. These findings suggest that policies that address the demand‐side constraints have greater potential to improve children's health outcomes in the future.     

CORRUPTION AND FOREIGN DIRECT INVESTMENT: A PANEL GRAVITY MODEL APPROACH

This paper investigates the relationship between corruption and foreign direct investment (FDI) in the case of 15 transition countries by using a panel gravity model approach and suggests that corruption does not deter FDI.     

SME performance in transition economies: The financial regulation and firm-level corruption nexus

Using a general equilibrium endogenous growth model we explain underperformance in the small and medium enterprise sector as an effect of corruption and non-competitive banking. Limited competition in the banking sector causes a high loan-deposit spread, worsens the initial effect of corruption, and depresses growth. Fostering bank competition, for instance, by allowing foreign bank entry, would be a simple solution to this problem, but frequently, authorities choose to hamper bank competition. Therefore, we explain the persistence of non-competitive banking as a result of governments’ regulatory choice. If the government has a stake in the banking sector there exists a trade-off between current benefits from bank profits and future growth. Firm-level corruption affects intertemporal optimization and distorts the government’s choice towards more restrictive regulation, i.e., less bank competition, even if the deciding institution itself is not corrupt. These results show that the two prominent problems for small and medium enterprises, corruption and finance, are mutually reinforcing.