Reduced Tax Progressivity in Norway in the Nineties: The Effect from Tax Changes

The inequality in pre-tax income increased in Norway in the 1990s, while the concentration of taxes remained largely unaltered. This means that tax progressivity has decreased in the period, as measured by summary indices of tax progressivity. In this paper I analyze individual income data to ascertain whether tax changes in the period can explain the observed decrease in tax progressivity. As marginal tax rates at high income levels have been substantially reduced in the period, for instance through the tax reform of 1992, it is expected that tax changes may have influenced the degree of inequality in pre-tax incomes. This behavioral effect is examined by deriving estimates of the elasticity of gross income with respect to the net-of-tax rate, obtained from various panel data regressions. The tax changes may also have shifted the distributional burden of taxes for unaltered level of pre-tax income inequality. In order to identify this (direct) effect of tax-law alterations, the same fixed distribution of pre-tax income is exposed to various tax-laws in the period.     

Industry aspects of takeovers and divestitures: Evidence from the UK

This paper examines takeover and divestiture activity at the industry level for the population of UK firms over the period 1986–2000. Consistent with US research, takeovers in the UK cluster both across industries and over time. The evidence for divestitures indicates clustering across industries only. The paper further investigates whether broad and specific industry shocks (e.g., growth, free cash flow, concentration, deregulation, foreign competition, technology, stock market performance) explain takeover and divestiture clustering at the industry level. The results suggest that broad shocks increase (decrease) the likelihood of takeovers (divestitures), although not significantly for takeovers. Specific industry shocks that increase the likelihood of takeover activity include low growth, the threat of foreign competition and high stock market performance. For divestitures, high industry concentration and deregulation increase activity. Little evidence is found for deregulation as a significant factor in explaining takeover activity.     

Corporate Governance,Social Responsibility,and Data Breaches

We study whether corporate governance and social responsibility are related to data breaches. We find that socially responsible companies with smaller boards and greater financial expertise are less likely to be breached. The financial impact of a breach is visible in the long term. Specifically, data‐breach firms have –3.5% one‐year buy‐and‐hold abnormal returns. Additionally, banks with breaches have significant declines in deposits and nonbanks have significant declines in sales in the long run. Finally, we find that following a data breach, companies are more likely to replace their chief executive officer and chief technology officer as well as improve their governance and social responsibility.     

Machine learning in individual claims reserving

Machine learning techniques make it feasible to calculate claims reserves on individual claims data. This paper illustrates how these techniques can be used by providing an explicit example in individual claims reserving.     

Bank net interest margins,the yield curve,and the 2007–2009 financial crisis

Using quarterly call report data from 2000 to 2016, we reexamine the relationship between net interest margins (NIM) and the yield curve for more than 5,500 U.S. commercial banks. In the full sample, yield curve and RGDP growth have positive effects on NIM, while inflation and deposit‐to‐loan ratios (D/L) have negative effects. Splitting the sample around the 2007–2009 crisis, we show the impact of yield curve and RGDP growth on NIM increasing during the “recovery” (2009Q3 to 2016Q4), and inflation and D/L changing signs. Positive effects of yield curve on profits vary with bank size and change over time.     

Financial System and Housing Price

The 2007/2008 US financial crisis is related to the securitization of mortgage loans and the housing-price boom and bust. In this article, we test the hypothesis that housing-price change is related to the development of the financial system. Using panel data for 23 countries from 1988 to 2012, we have found that the housing-price growth rate increases as the financial system moves a bank orientation to a market orientation. The policy implication is that the government should beware sudden increases in the capital market relative to the banking sector. Especially, more sophisticated financial supervision with respect to housing-price movement is required when a bank-based financial system progresses quickly to a market-oriented financial system.     

Dynamic Currency Linkages and Their Determinants: An Empirical Study for East Asian Economic Community Region

In this article, Copula GARCH models have been employed to study the inter-temporal process of currency market co-movements between ASEAN+6 countries (referred to in this study as East Asian Economic Community) and ASEAN+6 currency market index. Empirical results show that the sample countries of the region exhibit varying levels of currency co-movements with the Asian benchmark. Markov regime switching results show that many of the countries which had high dependences with the regional currency index as was found in copula estimations had also overlapping currency market cycles. Using Principal Component Analysis, we find that three statistical factors explain exchange rate co-movements which came out to be trade linkages, economic risk, and currency market openness in our dynamic panel data estimation.     

Export Sophistication: A Dynamic Panel Data Approach

In this article, we analyze export sophistication based on a large panel dataset (2001–2015; 101 countries) and using various estimation algorithms. Using Monte Carlo simulations, we evaluate the bias properties of estimators and show that GMM-type estimators outperform instrumental-variable and fixed-effects estimators. Based on our analysis we document that GDP per capita and the size of the economy exhibit significant and positive effects on export sophistication; weak institutional quality exhibits negative effect. We also show that export sophistication is path-dependent and stable even during a major economic crisis, which is especially important for emerging and developing economies.     

Purchasing power parity in ASEAN-5 countries: revisit with cross-sectional dependence and structural breaks

This paper re-examines the purchasing power parity (PPP) hypothesis for a panel of ASEAN-5 countries. The panel unit root and cointegration tests, which incorporate cross-sectional dependence and multiple structural breaks, are innovatively used for testing the PPP hypothesis. We could not find evidence that supports the existence of a long-run equilibrium between the relative price ratio and the nominal exchange rate for the whole period. Nevertheless, there is evidence of a cointegrating relationship for the post-crisis period. Our finding implies that a flexible exchange rate regime is suitable for the individual ASEAN countries.