Discontinuous innovation capability accumulation in latecomer natural resource-processing firms

Most of the studies that describe the building of innovation capability in emerging and developing economies have focused on the ways in which latecomer firms develop continuously towards advanced capability levels along existing technological trajectories, particularly for the assembled products industries, especially in Asia. A slightly different approach is adopted herein by focusing on pathways of discontinuous capability building of firms in natural resource-processing industries. By drawing on evidence from a variety of case studies taken from 13 forestry, pulp, and paper firms in Brazil in the period 1950-2007, it was found that: (1) in contrast with the majority of case studies reported in the literature, the pathways followed by firms in their accumulation of innovation capability involved a qualitative departure from the established technological trajectory at an early stage in the development of their capability; (2) the pathways of firms along the new technological trajectories were nevertheless characterised by a high degree of variability (from intermediate to world leading innovators) in terms of the levels and speeds of the accumulation of innovation capability; (3) firms that have attained progressively higher levels of innovative performance have more rapidly developed a combination of internal and external research-based arrangements in order to undertake increasingly complex, but firm-centred innovation efforts. This paper sheds some light on some of the discussions that relate to the role of natural resources in the patterns of industrial progress and growth in those countries endowed with particular natural resource-based industries. It also provides a methodological contribution to the study of the long-term innovation strategies that make use of the dynamics of capability building, especially within natural resource-processing industries.     

Indeterminacy with no-income-effect preferences and sector-specific externalities

We examine a two-sector real business cycle (RBC) model with sector-specific externalities in which household utility exhibits no income effect on the demand for leisure. Unlike in the one-sector counterpart, indeterminacy can result with sufficiently high returns-to-scale in the investment sector. Moreover, the smaller the labor supply elasticity, the lower the level of externalities needed for indeterminacy. This finding is the opposite of that in all existing RBC-based indeterminacy studies. Finally, in contrast to previous sunspot-driven two-sector RBC models, our economy is able to match the stylized facts that sectoral labor inputs are positively correlated and consumption is procyclical.     

A Pearson's test for symmetry with an application to the Spanish business cycle

In this paper, we look for asymmetries in the Spanish business cycle. To that end, we firstly propose an easy nonparametric testing procedure to test for symmetry based on a Pearson's chi-squared statistic, which we call P-test. Then, we test for two popular forms of asymmetry, deepness and steepness, using a battery of nonparametric tests. In addition, we analyse possible complementarities between the tests used in this paper, and we compute p-value adjustments for multiple tests.     

Globalization, rent protection institutions, and going alone in freeing trade

We construct a two-country North-South Product-cycle model of trade with endogenous growth and trade barriers. We remove the scale effects on growth by incorporating rent protection activities by Northern incumbents. We examine the effects of two forms of globalization - an expansion of the relative size of the South and unilateral trade liberalization by either country. We find that the location of rent protection institutions and the sectoral trade structure determine whether or not globalization raises steady-state economic growth. We demonstrate that for accelerating worldwide economic growth, contrary to conventional wisdom, unilateral Northern trade liberalization is preferable to bilateral trade liberalization.     

Bank ownership type and temporal evolution of long‐term bank funding in the period 2005–2017

This study uses a large panel dataset of Western European banks to examine the determinants of bank funding stability. Banks are divided into three categories by bank ownership type; the ownership types in this study are commercial banks, cooperative banks and savings banks. Three sources of stable bank funding are investigated: customer deposits, equity, and long‐term liabilities. Furthermore, the sum of these funding components is used as a proxy variable for a bank's total available stable funding (ASF). A special focus is on the temporal evolution of these funding types. The regression results show that commercial banks’ funding became much more stable in the period 2005–2017. However, that funding remains, on average, less stable than does cooperative and savings banks’ funding. In addition, funding stability has remained at the pre‐crisis level in cooperative and savings banks, despite a steep dip in cooperative banks’ ASF during the sovereign debt crisis. Furthermore, banks substantially decreased financing from long‐term liabilities after the financial crisis, replacing it with customer deposits and equity.     

European economic integration and (a)symmetry of macroeconomic fluctuations

This paper empirically investigates output and consumption asymmetries in the Eurozone and enlarged EU over the period 1992–2007, and their consequences for monetary policy. Our results reveal that in the Eurozone output asymmetry has remained practically unaltered; however, there is some indication of greater consumption smoothing. The UK, Denmark and Sweden are no less asymmetric than the average Eurozone member state and could probably enter the EMU without significant macroeconomic costs. New EU member states are diverse but display higher output and, in particular, consumption asymmetries. This warrants some caution against too quick expansion of the EMU.     

Are valuation effects desirable from a global perspective?

Recent studies have emphasized the role of valuation effects due to exchange rate movements in easing the process of adjustment of the external balance of a country. This paper asks to what extent valuation effects are desirable from a global perspective as a mean to achieve an efficient allocation of resources. In a frictionless world, it is desirable to have large movements in prices and exchange rates. But once a small degree of price rigidity is introduced not only should prices be stabilized but also the response of the exchange rate should be muted. There is a minor role for valuation effects that depends both on the size and composition of assets and liabilities.     

Divestitures,privatization and corporate performance in emerging markets

We use new firm‐level data to examine the effects of firm divestitures and privatization on corporate performance in a rapidly emerging market economy. Unlike the existing literature, we control for accompanying ownership changes and the fact that divestitures and ownership are potentially endogenous variables. We find that divestitures increase the firm's profitability but do not alter its scale of operations, while the effect of privatization depends on the resulting ownership structure – sometimes improving performance and sometimes bringing about decline. The effects of privatization are thus more nuanced than suggested in earlier studies. Methodologically, our study provides evidence that it is important to control for changes in ownership when analyzing divestitures and to control for endogeneity, selection and data attrition when analyzing the effects of divestitures and privatization.     

Stabilizing and destabilizing mechanisms: A new perspective to understand business cycles

Economists believe that economic fluctuations can be smoothed by stabilization mechanisms, such as price adjustment, embedded in the economy. While price adjustment can be seen as a stabilization mechanism, are there mechanisms that can destabilize an economy? We find that as early as 1939, Harrod discussed a destabilization mechanism, the firm's investment adjustment, illustrated in his knife-edge puzzle. We build a macro-dynamic model with investment and price as the core macroeconomic variables. Our analysis shows that the interaction between the stabilization mechanism (price adjustment) and the destabilization mechanism (investment adjustment) generates fluctuations and cycles. However, due to price stickiness, the price adjustment mechanism may not be enough to stabilize the economy. In this case, a government stabilization policy is necessary for further stabilization. As this paper also addresses the microfoundations of Keynesian quantity theory, including the choice of output and investment in optimization, it can be related to traditional Keynesian economics, with a new perspective to understand business cycles.