Interest rate dynamics and volatility transmission in the European short term interest rate market

This paper investigates the price and volatility relationship in European short-term interest rate markets. Cointegration analysis is used to analyse the long and short run relationship and a GARCH BEKK model is estimated to analyse the volatility transmission between the markets. The stability of the long run relationship is also examined using Bai and Perron (Econometrica 66(1),47–78, 1998, J Appl Econ 18(1):1–22, 2003) structural break methodology. The results show that the relationship between the EURIBOR spot deposit rate and the EURIBOR future contract has changed significantly since 2001 and several structural breaks are present in the 13 year sample period. During periods where there is a long run relationship present the spot deposit rate generally leads the future rate in price discovery. In the short run there is bi-directional causality present between the markets. There is also significant evidence of volatility transmission from the spot market to the futures market throughout the sample period.     

Firm size,credit scoring accuracy and banks’ production of soft information

Research on SME bank financing generally assumes that smaller firms are more opaque from a lender’s perspective. We propose that the discriminatory power of credit scoring models can be thought of as a proxy for firm opaqueness, given that when these models perform poorly, lenders must invest in the production of ‘soft information’ to supplement the financial data used in these models. Measuring the discriminatory power of probit default models across quintiles of the Irish SME size distribution, we show that our proxy for firm opaqueness increases monotonically as firms get smaller. This finding supports an assumption that is the starting point to a wide strand of literature on SME bank financing. Our findings can also be interpreted as providing an insight to the literature on the determinants of banks’ choice of lending technology. While smaller banks may, as found in a substantial previous literature, produce larger amounts of ‘soft information’ due to their organizational advantages, they may also do so out of necessity: hard-information-based default modelling is less effective among smaller firms, thereby forcing banks that lend to these borrowers to invest more in relationship banking technologies to retain competitiveness.     

Factor Utilization and Adjusted Productivity Estimates for the UK*

This paper derives series for capital utilization, labour effort and total factor productivity (TFP) for the UK from a general equilibrium model with variable utilization and labour adjustment costs. Capital utilization tracks survey‐based measures closely, but persistent movements in total hours worked mean our labour effort series is not as highly correlated with its comparators. Our estimated TFP series is less cyclical than the traditional Solow residual, although a weighted average of capital utilization and labour effort – aggregate factor utilization – and the Solow residual are not closely related.     

Are gold bugs coherent?

We use wavelet models to surface the relationship between gold miners stock prices and the price of gold. We find that there is little relationship in the short run but some significant and long-standing long-run relationships. Gold prices appear to lead gold miner stock prices.     

Democratic Accountability,Regulation and Inward Investment Policy

We examine the effect of domestic political accountability on leaders' strategies for attracting foreign direct investment to less developed countries. We consider two policy areas: the tax burden imposed on firms and the regulatory environment in which they operate. We find that democratic governments are more likely to offer relatively lower tax rates to foreign investors, whereas autocratic governments are more likely to offer relatively lax regulation. This result is driven by the greater elasticity of the political survival function to environmental and labor regulations in more democratic countries. Analyses of firm‐level survey data confirm our main theoretical conclusions.     

Point De Vue:Time to Re-Think Rural Development?

Time to Re-Think Rural Development? his article challenges the fashionable ural development policy paradigm that decentralisation through local partnerships results in superior governance and outcomes for people at the local level. Drawing on case study evidence from Northern Ireland, two specific aspects of rural development practice are examined. Firstly, the emphasis given to social and civic development alongside economic development. Secondly, the idea that partnerships represent increased democracy and civic participation. It examines these questions within the framework of the social capital concept, with particular reference to the work of Robert Putnam. It is argued that the appeal of the social capital debate in policy circles confuses the importance of economic goals vis-à-vis social and civic goals. It is further argued that the social capital debate gives renewed impetus to partnership structures of dubious democratic legitimacy, which are often subject to power struggles, exclusionary tactics by privileged groups, or ideological conflicts. It is suggested that the problems posed by rural development practice do not represent questions for local partnerships to address - given their limited capacity for example to tackle social exclusion - but rather ones that must be taken up by national governments. Progress towards a more inclusive civil society could be enhanced by in-depth sociological analysis of these structures, to improve our knowledge of how they function. Serait-ce le moment de repenser le développement rural? Cet article remet en question idée à la mode en matière de aeveioppement rural, selon lequel la décentralisation et les coopérations locales sont à l'origine d'une meilleure gouvernance et donnent de meilleurs résultats pour tout le monde au niveau local. Deux aspects spécifiques des pratiques de développement rural sont analysés à partir d'une série d'études de cas en Irlande du Nord. La première concerne l'accentmis, à côté du développement économique, sur les questions sociales et municipales. La seconde, l'idée que le partenariat est toujours associéà plus de démocratic et de participation citoyenne. Ces questions sont examinées dans le cadre du concept de capital social, en référence à l'œuvre de Robert Putnam. La thèse centrale est que, dans les cercles politiques, l'attrait du débat sur le capital social aboutit à confondre les objectifs économiques avec ceux qui concernent le social et le politique. De plus, le débat sur le capital social accentue le rôle de certaines structures de concertation dont la légitimité démocratique est douteuse, parce qu'elles sont l'objet de luttes de pouvoir, de tactiques d'exclusion mises en œuvre par des groupes privilégiés, ou de conflits idéologiques. Tout ceci suggère done l'idée que, du fait de l'incapacité des partenariats locaux à aborder l'exclusion sociale, les problèmes posés par les pratiques de développement rural ne sont pas de leur compétence etrelèvent plutôt de celle des gouvernements nationaux. Des études sociologiques approfondies de ces structures, de manière à en mieux comprendre le fonctionnement, pourraient améliorer la progression vers une société civile conçue de façon plus large. Ist es an der Zeit, die Entwicklung des ländlichen Raums noch einmal zu überdenken? Dieser Artikel stellt das in Mode gekommene Paradigma für die zur Entwicklung des ländlichen Raums in Frage, welches besagt, dass eine Dezentralisierung durch ortsänsassige Partnerschaften zu Verbesserungen für die Governance und für die Bevölkerung vor Ort mit sich bringt. Auf der Grundlage von Forschungsergebnissen einer nordirischen Fallstudie werden zwei bestimmte Aspekte aus der Praxis der ländlichen Entwicklung untersucht; Die Gewichtung der sozialen und zivilen Entwicklung neben der wirtschaftlichen Entwicklung und der Grundgedanke, dass Partnerschaften ein erhöhtes Maß an Demokratie und ziviler Mitbestimmung darstellen. Diese Aspekte werden im Rahmen des Konzepts des Sozialkapitals untersucht, wobei insbesondere auf die Arbeit Robert Putnams Bezug genommen wird. Es wird argumentiert, dass die Anziehungskraft der Debatte um das Sozialkapital in politischen Kreisen die Wichtigkeit der wirtschaftlichen Ziele gegenüber den sozialen und zivilen Zielen verschleiere. Weiterhin wird der Standpunkt vertreten, dass die Debatte um das Sozialkapital Partnerschaftsstrukturen von fragwürdiger demokratischer Legitimität neue Impulse verleihe, in denen es häufig zu Machtkämpfen, Ausschlusstaktiken privilegierter Gruppen und ideologischen Konflikten kommt. Es wird nahe gelegt, dass die in der Praxis der ländlichen Entwicklung vorhandenen Probleme nicht von ortsänsassigen Partnerschaften, sondern besser von den nationalen Regierungen geloust werden müssen, da diese Partnerschaften nur über begrenzte Kapazitäten verfügen, um beispielsweise das Problem der sozialen Ausgrenzung zu bewältigen. Die Entwicklung hin zu einer umfassenderen Zivilgesellschaft könnte durch eine eingehende soziologische Analyse dieser Strukturen und somit durch das Wissen um deren Funktionsweise vorangetrieben werden.     

The heterogeneous effect of international outsourcing on firm productivity

This paper analyses how international outsourcing affects plant total factor productivity (TFP) using a census of Irish manufacturing firms. The results point to a striking pattern: the status of being or becoming an outsourcer matters strongly for firms that are indigenous and not exporting, while for exporters and foreign affiliates, TFP increases are lower, insignificant and sometimes negative. On the other hand, higher intensity of outsourcing matters for both exporters and foreign affiliates. The message is clear: international outsourcing’s initial learning effect on TFP is most pronounced when it serves as a first exposure to international markets, while the “scale effect” of outsourcing en masse only occurs to larger, already internationalised firms.     

Indirect Exporters

Indirect exporters are defined as firms exporting through a trade intermediary. These firms have received rapidly expanding empirical and theoretical attention recently. I show that in Eastern Europe and Central Asia these firms do, as predicted by the theoretical literature, lie between domestic firms and direct exporters for a range of performance measures. Multi-product firms, despite their generally higher productivity, are shown to be more likely to use intermediaries than single-product firms, suggesting that “mixed exporting strategies” that use intermediaries are important for these firms. Analysis using a small panel subsample of the data suggests the sunk costs of indirect exporting are significantly lower than those for direct exporting, pointing to a role for intermediaries in “greasing the wheel” of entry to export markets.