Financial Integration, Trade Openness and International Transmission

[cat] Com afecten l’obertura comercial i financera a la volatilitat macroeconòmica? La literatura existent, tant empírica com teòrica, no ha assolit encara un consens. Aquest article usa un model microfonamentat de dos països simètrics amb entrada endògena d’empreses per estudiar-ho. L’anàlisis es du a terme per tres règims econòmics diferents amb diferents nivells d’integració internacional: una economia tancada, una autarquia financera i una integració plena. Es consideren diversos nivells d’obertura comercial, en forma de biaix domèstic de la demanda i l’economia pot patir pertorbacions en la productivitat del treball i en innovació. El model conclou que la incertesa macroeconòmica, representada principalment per la volatilitat del consum, la producció i la relació real d’intercanvi internacional, depèn del grau d’obertura i del tipus de pertorbació.

Financial Integration, Trade Openness and International Transmission

[cat] Com afecten l’obertura comercial i financera a la volatilitat macroeconòmica? La literatura existent, tant empírica com teòrica, no ha assolit encara un consens. Aquest article usa un model microfonamentat de dos països simètrics amb entrada endògena d’empreses per estudiar-ho. L’anàlisis es du a terme per tres règims econòmics diferents amb diferents nivells d’integració internacional: una economia tancada, una autarquia financera i una integració plena. Es consideren diversos nivells d’obertura comercial, en forma de biaix domèstic de la demanda i l’economia pot patir pertorbacions en la productivitat del treball i en innovació. El model conclou que la incertesa macroeconòmica, representada principalment per la volatilitat del consum, la producció i la relació real d’intercanvi internacional, depèn del grau d’obertura i del tipus de pertorbació.

Reporting of methodologic information on trial registries for quality assessment: a study of trial records retrieved from the WHO search portal

Background: Although randomized clinical trials (RCTs) are considered the gold standard of evidence, their reporting is often suboptimal. Trial registries have the potential to contribute important methodologic information for critical appraisal of study results. Methods and Findings: The objective of the study was to evaluate the reporting of key methodologic study characteristics in trial registries. We identified a random sample (n = 265) of actively recruiting RCTs using the World Health Organization International Clinical Trials Registry Platform (ICTRP) search portal in 2008. We assessed the reporting of relevant domains from the Cochrane Collaboration’s ‘Risk of bias’ tool and other key methodological aspects. Our primary outcomes were the proportion of registry records with adequate reporting of random sequence generation, allocation concealment, blinding, and trial outcomes. Two reviewers independently assessed each record. Weighted overall proportions in the ICTRP search portal for adequate reporting of sequence generation, allocation concealment, blinding (including and excluding open label RCT) and primary outcomes were 5.7% (95% CI 3.0–8.4%), 1.4% (0–2.8%), 41% (35–47%), 8.4% (4.1–13%), and 66% (60–72%), respectively. The proportion of adequately reported RCTs was higher for registries that used specific methodological fields for describing methods of randomization and allocation concealment compared to registries that did not. Concerning other key methodological aspects, weighted overall proportions of RCTs with adequately reported items were as follows: eligibility criteria (81%), secondary outcomes (46%), harm (5%) follow-up duration (62%), description of the interventions (53%) and sample size calculation (1%). Conclusions: Trial registries currently contain limited methodologic information about registered RCTs. In order to permit adequate critical appraisal of trial results reported in journals and registries, trial registries should consider requesting details on key RCT methods to complement journal publications. Full protocols remain the most comprehensive source of methodologic information and should be made publicly available.

Monetary policy rules and financial stress: does financial instability matter for monetary

We examine whether and how main central banks responded to episodes of financial stress over the last three decades. We employ a new methodology for monetary policy rules estimation, which allows for time-varying response coefficients as well as corrects for endogeneity. This flexible framework applied to the U.S., U.K., Australia, Canada and Sweden together with a new financial stress dataset developed by the International Monetary Fund allows not only testing whether the central banks responded to financial stress but also detects the periods and type of stress that were the most worrying for monetary authorities and to quantify the intensity of policy response. Our findings suggest that central banks often change policy

The building blocks of international ecological footprint inequality: a regression-based decomposition

This paper performs an empirical Decomposition of International Inequality in Ecological Footprint in order to quantify to what extent explanatory variables such as a country’s affluence, economic structure, demographic characteristics, climate and technology contributed to international differences in terms of natural resource consumption during the period 1993-2007. We use a Regression-Based Inequality Decomposition approach. As a result, the methodology extends qualitatively the results obtained in standard environmental impact regressions as it comprehends further social dimensions of the Sustainable Development concept, i.e. equity within generations. The results obtained point to prioritizing policies that take into account both future and present generations.

The Building Blocks of International Ecological Footprint inequality: A Regression-Base Decomposition

This paper performs an empirical Decomposition of International Inequality in Ecological Footprint in order to quantify to what extent explanatory variables such as a country’s affluence, economic structure, demographic characteristics, climate and technology contributed to international differences in terms of natural resource consumption during the period 1993-2007. We use a Regression- Based Inequality Decomposition approach. As a result, the methodology extends qualitatively the results obtained in standard environmental impact regressions as it comprehends further social dimensions of the Sustainable Development concept, i.e. equity within generations. The results obtained point to prioritizing policies that take into account both future and present generations. Keywords: Ecological Footprint Inequality, Regression-Based Inequality Decomposition, Intragenerational equity, Sustainable development.

Endogenous Credit Cycles and Financial Dampening in an Adverse Selection Economy

We propose an adverse selection framework in which the financial sector has a dual role. It amplifies or dampens exogenous shocks and also generates endogenous fluctuations. We fully characterize constrained optimal contracts in a setting in which entrepreneurs need to borrow and are privately informed about the quality of their projects. Our characterization is novel in analyzing pooling and separating allocations in a context of multi-dimensional screening: specifically, the amounts of investment undertaken and of entrepreneurial net worth are used to screen projects. We then embed these results in a dynamic competitive economy. First, we show how endogenous regime switches in financial contracts may generate fluctuations in an economy that exhibits no dynamics under full information. Unlike previous models of endogenous cycles, our result does not rely on entrepreneurial net worth being counter-cyclical or inconsequential for determining investment. Secondly, the model shows the different implications of adverse selection as opposed to pure moral hazard. In particular, and contrary to standard results in the macroeconomic literature, the financial system may dampen exogenous shocks in the presence of adverse selection.

Neglected risks, financial innovation, and financial fragility

We present a standard model of financial innovation, in which intermediaries engineer securities with cash flows that investors seek, but modify two assumptions. First, investors (and possibly intermediaries) neglect certain unlikely risks. Second, investors demand securities with safe cash flows. Financial intermediaries cater to these preferences and beliefs by engineering securities perceived to be safe but exposed to neglected risks. Because the risks are neglected, security issuance is excessive. As investors eventually recognize these risks, they fly back to safety of traditional securities and markets become fragile, even without leverage, precisely because the volume of new claims is excessive.

The monetary pillar and the great financial crisis

Since its inception, a most distinctive (and controversial) feature of the ECB monetary policy strategy has been its emphasis on money and monetary analysis, which constitute the basis of the so-called monetary pillar. The present paper examines the performance of the monetary pillar around the recent financial crisis episode, and discusses its prospects in light of the renewed emphasis on financial stability and the need for enhanced macro-prudential policies.

Theoretical notes on bubbles and the current crisis

We explore a view of the crisis as a shock to investor sentiment that led to the collapse of abubble or pyramid scheme in financial markets. We embed this view in a standard model of thefinancial accelerator and explore its empirical and policy implications. In particular, we show howthe model can account for: (i) a gradual and protracted expansionary phase followed by a suddenand sharp recession; (ii) the connection (or lack of connection!) between financial and real economicactivity and; (iii) a fast and strong transmission of shocks across countries. We also use the modelto explore the role of fiscal policy.

Contractual resolutions of financial distress

In a financial contracting model, we study the optimal debt structure to resolve financial distress. Weshow that a debt structure where two distinct debt classes co-exist - one class fully concentrated andwith control rights upon default, the other dispersed and without control rights - removes the controllingcreditor's liquidation bias when investor protection is strong. These results rationalize the use and theperformance of floating charge financing, debt financing where the controlling creditor takes the entirebusiness as collateral, in countries with strong investor protection. Our theory predicts that the efficiency ofcontractual resolutions of financial distress should increase with investor protection.

Adoption of financial technologies: Implications for money demand and monetary policy

In this paper we argue that inventory models are probably not usefulmodels of household money demand because the majority of households does nothold any interest bearing assets. The relevant decision for most people is notthe fraction of assets to be held in interest bearing form, but whether to holdany of such assets at all. The implications of this realization are interesting and important. We find that(a) the elasticity of money demand is very small when the interest rate is small,(b) the probability that a household holds any amount of interest bearing assetsis positively related to the level of financial assets, and (c) the cost ofadopting financial technologies is positively related to age and negatively relatedto the level of education. Unlike the traditional methods of money demand estimation, our methodology allowsfor the estimation of the interest--elasticity at low values of the nominalinterest rate. The finding that the elasticity is very small for interest ratesbelow 5 percent suggests that the welfare costs of inflation are small. At interest rates of 6 percent, the elasticity is close to 0.5. We find thatroughly one half of this elasticity can be attributed to the Baumol--Tobin orintensive margin and half of it can be attributed to the new adopters or extensivemargin. The intensive margin is less important at lower interest rates and moreimportant at higher interest rates.

An analysis of the accounting principles applied by the European Farm Accountancy Data Network

In spite of its relative importance in the economy of many countriesand its growing interrelationships with other sectors, agriculture has traditionally been excluded from accounting standards. Nevertheless, to support its Common Agricultural Policy, for years the European Commission has been making an effort to obtain standardized information on the financial performance and condition of farms. Through the Farm Accountancy Data Network (FADN), every year data are gathered from a rotating sample of 60.000 professional farms across all member states. FADN data collection is not structured as an accounting cycle but as an extensive questionnaire. This questionnaire refers to assets, liabilities, revenues and expenses, and seems to try to obtain a "true and fair view" of the financial performance and condition of the farms it surveys. However, the definitions used in the questionnaire and the way data is aggregated often appear flawed from an accounting perspective. The objective of this paper is to contrast the accounting principles implicit in the FADN questionnaire with generally accepted accounting principles, particularly those found in the IVth Directive of the European Union, on the one hand, and those recently proposed by the International Accounting Standards Committee’s Steering Committeeon Agriculture in its Draft Statement of Principles, on the other hand. There are two reasons why this is useful. First, it allows to make suggestions how the information provided by FADN could be more in accordance with the accepted accounting framework, and become a more valuable tool for policy makers, farmers, and other stakeholders. Second, it helps assessing the suitability of FADN to become the starting point for a European accounting standard on agriculture.

Financial liberalization, bank crises and growth: Assessing the links

This paper studies the effects of financial liberalization and banking crises on growth. It shows that financial liberalization spurs on average economic growth. Banking crises are harmful for growth, but to a lesser extent in countries with open financial systems and good institutions. The positive effect of financial liberalization is robust to different definitions. While the removal of capital account restrictions is effective by increasing financial depth, equity market liberalization affects growth directly. The empirical analysis is performed through GMM dynamic panel data estimations on a panel of 90 countries observed in the period 1975-1999.