Contagion or Interdependence in the recent Global Financial Crisis? An application to the stock markets using unconditional cross-market correlations

We consider stock market contagion as a significant increase in cross-market linkages after a shock to one country or group of countries. Under this definition we study if contagion occurred from the U.S. Financial Crisis to the rest of the major stock markets in the world by using the adjusted (unconditional) correlation coefficient approach (Forbes and Rigobon, 2002) which consists of testing if average crossmarket correlations increase significantly during the relevant period of turmoil. We would not reject the null hypothesis of interdependence in favour of contagion if the increase in correlation only suggests a continuation of high linkages in all state of the world. Moreover, if contagion occurs, this would justify the intervention of the IMF and the suddenly portfolio restructuring during the period under study.

Flexible multivariate GARCH modeling with an application to international stock markets

The goal of this paper is to estimate time-varying covariance matrices.Since the covariance matrix of financial returns is known to changethrough time and is an essential ingredient in risk measurement, portfolioselection, and tests of asset pricing models, this is a very importantproblem in practice. Our model of choice is the Diagonal-Vech version ofthe Multivariate GARCH(1,1) model. The problem is that the estimation ofthe general Diagonal-Vech model model is numerically infeasible indimensions higher than 5. The common approach is to estimate more restrictive models which are tractable but may not conform to the data. Our contributionis to propose an alternative estimation method that is numerically feasible,produces positive semi-definite conditional covariance matrices, and doesnot impose unrealistic a priori restrictions. We provide an empiricalapplication in the context of international stock markets, comparing thenew estimator to a number of existing ones.

Risk-Return Trade-Off for European Stock Markets

This paper adopts dynamic factor models with macro-finance predictors to test the intertemporal risk-return relation for 13 European stock markets. We identify country specific, euro area, and global macro-finance factors to determine the conditional risk and return. Empirically, the risk- return trade-off is generally negative. However, a Markov switching model documents that there is time-variation in this trade-off that is linked to the state of the economy. Keywords: Risk-return trade-off; Dynamic factor model; Macro-finance predictors; European stock markets; Markov switching model JEL Classifications: C22; G11; G12; G17

Production and carcass quality of ten beef cattle breeds of the southwest of Europe

A sample of about 70 young bulls of each of ten beef cattle breeds reared in their typical production systems has been studied regarding growth and carcass quality traits. Breeds included were Asturiana de los Valles (AV), Asturiana de la Montaña (AM), Avileña-Negra Ibérica (A-NI), Bruna dels Pirineus (BP), Morucha (Mo), Pirenaica (Pi) and Retinta (Re) from Spain, and Aubrac (Au), Gasconne (Ga) and Salers (Sal) from France. There existed large differences between breeds and also within breeds. AV and Pi were the breeds with more muscle and less fat, whereas A-NI, Mo and Re were in the opposite side. BP and AM occupied an intermediate position. This allows to classify the Spanish breeds in three groups: AV and Pi would belong to the group of late maturity, A-NI, Mo and Re, would be early maturing breeds, whereas BP and AM, despite the small size of the last, will be of intermediate maturity. In the French populations, Au was the breed with the highest carcass weight and Ga exhibited the lowest. Sal occupied an intermediate position, showing the longer and thinner thigh. In a wide range of carcass weight, the general relationships among carcass traits have been confirmed. Animals with the better conformation were also the leaner and longer carcasses tended to be lowly associated with a poorer conformation and fatter carcasses. Bone content was clearly opposed to carcass conformation and muscle content and was associated with longer carcasses

Meat quality of ten cattle breeds of the Southwest of Europe

A sample of about 70 young bulls of each of ten beef cattle breeds reared in their typical production systems has been characterised with respect to meat quality traits. Breeds included were Asturiana de los Valles, Asturiana de la Montaña, Avileña-Negra Ibérica, Bruna dels Pirineus, Morucha, Pirenaica and Retinta from Spain, and Aubrac, Gasconne and Salers from France. As was previously showed regarding carcass traits, there exist large differences both between and within breed – systems. In general, rustic breeds tended to present darker and redder meats with higher haematin contents, whereas less precocious and more specialised breeds showed brighter meats with bigger water losses. Protein content was similar, whereas intramuscular fat presented the larger variations both between and within breeds. ICDH content was higher in the more rustic breeds, showing the predominantly oxidative character of their fibres. Texture measurements showed in general large within breed-system variations, the differences between breeds being less evident. Within breed-system, daily gain weight was positively associated with brighter and tender meats. In the range studied, increasing slaughter weight within breed did not have influence on meat quality. Conformation was related to lower water holding capacity and less dry matter and intramuscular fat, as well as to a lower haematin content giving brighter meats. The increase in fatness scores was related to an augment of toughness in meat specialised breeds, although in Avileña-Negra Ibérica breed fatness carcasses were related to more tender meats. Redness parameter a* was positively related to fatter animals and opposed to conformation, the opposite being true for the L* (lightness) parameter. There was a small trend of fatter carcasses to be related to oxidative fibres, whereas the muscular fibres of the more conformed carcasses were more glycolytic. Texture measurements maximum load, maximum stress and toughness were very closely related. Shear force was opposed to tenderness. Losses at cooking were opposed to juiciness, but only in the Spanish breeds. No consistent trends regarding relationships between carcass characteristics and tenderness could be observed. Overall acceptability was primarily related with tenderness and flavour, and later on juiciness.

Perceptions of Europe in political and economic elites: a geographical compared analysis of Germany, Spain and Poland

Elite perceptions about Europe are a very important point in order to understand the current European integration process, as well as the future perspectives for the continent. This study makes a comparison between the perceptions which political and economical elites in some European countries have about the European Union process and its mechanisms. The main goal is to identify the differences in positions of each type of elites, as well as the variations among three key countries. The database built thanks to the INTUNE (Integrated and United? A quest for Citizenship in an ¨ever closer Europe¨) Project Survey on European Elites and Masses, funded by the Sixth Framework Programme of the EU [Contract CIT 3-CT-2005-513421] have being used. The questionnaire was applied between February and May 2007, in a total of 18 European countries. The national teams got a total of almost 2000 valid responses at European level. In the analysis we have showed some general descriptive statistics about the perception of Europe taking as a reference two dimensions of the INTUNE project: identity (attachment to the national level, the meaning of being a truly national, and the threats from Turkey that EU is facing at this moment) and representation (trust in European and national institutions, preferences for a national or an European army). The results are presented distinguishing between political (national MP’s in low chambers) and economical elites (presidents of corporations, general managers…) and, at the same time, among three countries: Germany as an original member of the European Union; Spain, incorporated in 1986; and a new member, Poland, joining the EU in 2004.

The CFSP/ESDP, Parliamentary Accountability, and the ´Future of Europe´ Convention debate

This paper examines the importance that the current Convention on the Future of Europe is giving (or not) to the question of democratic accountability in European foreign and defence policy. As all European Union (EU) member states are parliamentary democracies1, and as there is a European Parliament (EP) which also covers CFSP (Common Foreign and Security Policy) and ESDP (European Security and Defence Policy2) matters, I will concentrate on parliamentary accountability rather than democratic accountability more widely defined. Where appropriate, I will also refer to the work of other transnational parliamentary bodies such as the North Atlantic Assembly or NAA (NATO´s Parliamentary Assembly) or the Western European Union (WEU) Parliamentary Assembly3. The article will consist of three sections. First, I will briefly put the question under study within its wider context (section 1). Then, I will examine the current level of parliamentary accountability in CFSP and defence matters (section 2). Finally, I will consider the current Convention debate and assess how much attention is being given to the question of accountability in foreign and defence policies (section 3). This study basically argues that, once again, there is very little interest in an issue that should be considered as vital for the future democratic development of a European foreign and defence policy. It is important to note however that this paper does not cover the wider debate about how to democratise and make the EU more transparent and closer to its citizens. It concentrates on its Second Pillar because its claim is that very little if any attention is being given to this question

Malthusian dynamism and the rise of Europe: Make war, not love

This paper argues that Malthusian regimes are capable of sustained changes in per capita incomes. Shifting mortality and fertility schedules can lead to different steady-state income levels, with long periods of growth during the transition. Europe checked the downward pressure on wages through late marriage, which reduced fertility, and a mortality regime that combined high death rates with high incomes. We argue that both emerged as a result of the Black Death.

Stock market integration between new EU member states and the Euro-zone

This paper measures the degree in stock market integration between five Eastern European countries and the Euro-zone. A potentially gradual transition in correlations is accommodated by smooth transition conditional correlation models. We find that the correlation between stock markets has increased from 2001 to 2007. In particular, the Czech and Polish markets show a higher correlation to the Euro-zone. However, this is not a broad-based phenomenon across Eastern Europe. We also find that the increase in correlations is not a reflection of a world-wide phenomenon of financial integration but appears to be specific to the European market. JEL classifications: C32; C51; F36; G15 Keywords: Multivariate GARCH; Smooth Transition Conditional Correlation; Stock Return Comovement; New EU Members.

Implications of dynamic trading for insurance markets

We study the interaction between insurance and capital markets within singlebut general framework.We show that capital markets greatly enhance the risksharing capacity of insurance markets and the scope of risks that areinsurable because efficiency does not depend on the number of agents atrisk, nor on risks being independent, nor on the preferences and endowmentsof agents at risk being the same. We show that agents share risks by buyingfull coverage for their individual risks and provide insurance capitalthrough stock markets.We show that aggregate risk enters private insuranceas positive loading on insurance prices and despite that agents will buyfull coverage. The loading is determined by the risk premium of investorsin the stock market and hence does not depend on the agent s willingnessto pay. Agents provide insurance capital by trading an equally weightedportfolio of insurance company shares and riskless asset. We are able toconstruct agents optimal trading strategies explicitly and for verygeneral preferences.

Towards a Union of Citizens and States: Negotiating Transnational Democracy in Europe

Aquest article dóna un cop d'ull més de prop com les qüestions de legitimitat democràtica es van negociar durant la primera de les tres etapes de la redacció de la Constitució, en la Convenció sobre el Futur d'Europa (febrer de 2002-juliol 2003), i per la posterior Conferència Intergovernamental (juliol de 2003 a juny de 2004). L'objectiu d'aquesta anàlisi és avaluar el grau en què els redactors de la Comissió Europea s'han resolt els problemes de disputes sobre la democràcia postnacional que es van debatre en la Convenció

The Nationalism of stateless nations and Europe. The Catalan case

This paper analyzes how the ideas and concepts of Europe have developed in Catalonia, under the conditions of a decentralizing “nation-state” (Spain) on one hand, and the European integration process on the other. It analyzes the programmes, manifestations of political leaders, and political actions of the Catalan political parties, specially the nationalists, from the setting up of the Spanish state of autonomies (1977-1982) until today. The paper tries to show how, in multilevel governance, holistic and enthusiastic visions of an economically and political integrating Europe as a “natural ally” of a Catalan nationalism were partially replaced by more pragmatic and even more critical assessments.

On the impact of leverage constraints on asset prices and trading volume

Researchers have used stylized facts on asset prices and trading volumein stock markets (in particular, the mean reversion of asset returnsand the correlations between trading volume, price changes and pricelevels) to support theories where agents are not rational expected utilitymaximizers. This paper shows that this empirical evidence is in factconsistent with a standard infite horizon perfect information expectedutility economy where some agents face leverage constraints similar tothose found in todays financial markets. In addition, and in sharpcontrast to the theories above, we explain some qualitative differencesthat are observed in the price-volume relation on stock and on futuresmarkets. We consider a continuous-time economy where agents maximize theintegral of their discounted utility from consumption under both budgetand leverage con-straints. Building on the work by Vila and Zariphopoulou(1997), we find a closed form solution, up to a negative constant, for theequilibrium prices and demands in the region of the state space where theconstraint is non-binding. We show that, at the equilibrium, stock holdingsvolatility as well as its ratio to stock price volatility are increasingfunctions of the stock price and interpret this finding in terms of theprice-volume relation.

The three horsemen of riches: Plague, war and urbanization in early modern Europe

How did Europe escape the "Iron Law of Wages?" We construct a simple Malthusian model withtwo sectors and multiple steady states, and use it to explain why European per capita incomes andurbanization rates increased during the period 1350-1700. Productivity growth can only explain a smallfraction of the rise in output per capita. Population dynamics changes of the birth and death schedules were far more important determinants of steady states. We show how a major shock to population cantrigger a transition to a new steady state with higher per-capita income. The Black Death was such ashock, raising wages substantially. Because of Engel's Law, demand for urban products increased, andurban centers grew in size. European cities were unhealthy, and rising urbanization pushed up aggregatedeath rates. This effect was reinforced by diseases spread through war, financed by higher tax revenues.In addition, rising trade also spread diseases. In this way higher wages themselves reduced populationpressure. We show in a calibration exercise that our model can account for the sustained rise in Europeanurbanization as well as permanently higher per capita incomes in 1700, without technological change.Wars contributed importantly to the "Rise of Europe", even if they had negative short-run effects. We thustrace Europe s precocious rise to economic riches to interactions of the plague shock with the belligerentpolitical environment and the nature of cities.

Is bank debt special for the transmission of monetary policy? Evidence from the stock market

We combine existing balance sheet and stock market data with two new datasets to studywhether, how much, and why bank lending to firms matters for the transmission of monetarypolicy. The first new dataset enables us to quantify the bank dependence of firms precisely,as the ratio of bank debt to total assets. We show that a two standard deviation increase inthe bank dependence of a firm makes its stock price about 25% more responsive to monetarypolicy shocks. We explore the channels through which this effect occurs, and find that thestock prices of bank-dependent firms that borrow from financially weaker banks display astronger sensitivity to monetary policy shocks. This finding is consistent with the banklending channel, a theory according to which the strength of bank balance sheets mattersfor monetary policy transmission. We construct a new database of hedging activities andshow that the stock prices of bank-dependent firms that hedge against interest rate riskdisplay a lower sensitivity to monetary policy shocks. This finding is consistent with aninterest rate pass-through channel that operates via the direct transmission of policy ratesto lending rates associated with the widespread use of floating-rates in bank loans and creditline agreements.