Federal Dynamics in Times of Economic and Financial Crisis

The global economic and financial crisis is a challenge for all governments, but particularly for federal states because divided and/or shared territorial powers make federations susceptible to coordination problems in fiscal policy making. This article explores the effects of the ongoing crisis on federal relations. Three kinds of problems that may become the cause of federal tensions and conflicts are evoked: opportunism of subgovernments, centralisation and erosion of solidarity among members of the federation. Our analysis of fiscal policies and federal conflicts of 11 federations between 2007 and the present reveals three kinds of coordination problems: shirking in the use of federal government grants, rent-seeking in equalisation payments, and over-borrowing and over-spending. Our results show that shirking remained limited to few cases and occurred only in the first part of the crisis. However, rent-seeking and over-borrowing and over-spending led to a reduction of solidarity among subgovernments and to increased regulation of the fiscal discretion of the members of the federation. Subsequently, tensions in federal relations increased - although only in one case did this challenged the federal order.

Information, learning, and risk in financial markets

Cette thèse comprend trois essais qui abordent l'information le processus d'ap-prentissage ainsi que le risque dans les marchés finances. Elle se concentre d'abord sur les implications à l'équilibre de l'hétérogénéité des agents à travers un processus d'apprentissage comprtemental et de mise à jour de l'information. De plus, elle examine les effets du partage des risques dans un reseau entreprise-fournisseur. Le premier chapitre étudie les effets du biais de disponibili sur l'évaluation des actifs. Ce biais décrit le fait que les agents surestiment l'importance de l'information acquise via l'expérience personnelle. L'hétérogénéité restante des différentes perceptions individuelles amène à une volonté d'échanges. Conformé¬ment aux données empiriques, les jeunes agents échangent plus mais en même temps souffrent d'une performance inférieure. Le deuxième chapitre se penche sur l'impact qu'ont les différences de modelisation entre les agents sur leurs percevons individuelles du processus de prix, dans le contexte des projections de modèles. Les agents sujets à un biais de projection pensent être représentatifs et interprètent les opinions des autres agents comme du bruit. Les agents, avec des modèles plus persistants, perçoivent que les prix réagissent de façon excessive lors des périodes de turbulence. Le troisième chapitre analyse l'impact du partage des risques dans la relation entreprise-fournisseur sur la décision optimale de financement de l'entreprise. Il étudie l'impact sur l'optimisation de la structure du capital ainsi que sur le coût du capital. Les résultats indiquent en particulier qu'un fournisseur avec un effet de levier faible est utile pour le financement d'un nouveau projet d'investissement. Pour des projets très rentables et des fournisseurs à faible effet de levier, le coût des capitaux propres de l'entreprise peut diminuer.

How useful is consolidation of public sector entities' financial statements ?

Whether or not to consolidate financial statements is dealt with in IPSAS#6. This standard is by and large based on IAS#27. It deals with the criterion according to which an entity's financial statements should be considered and which consolidation technique should be used. However, it remains silent when it comes to exposing the reason why a public sector entity should consolidate its financial statements. The literature is almost as silent as IPSAS on this issue. Which means that there is a lack of both theoretical and empirical knowledge on this subject. This paper explores the usefulness of the consolidation of financial statements (CFS) for different categories of users. It aims at investigating for which purposes consolidation is most useful and whether enlarging the scope of the consolidate group serves these purposes. Five purposes are considered: information, decision- making, accountability, risk-assessment, statistics improvement. The paper also aims at investigating if some categories of users consider CFS more useful than others. The issue is essentially empirical. Therefore it is examined in light of the results of an in-person interviews. We surveyed 25members of parliament, officials, creditors, and consultants of the Swiss central government. The results show that consolidating FS is considered especially important and useful for risk- assessment, information and accountability and to a somewhat lesser extent for decision-making and statistics improvement. Extending the scope of CFS may improve the situation when it comes to statistics but it would only marginally make CFS more relevant for decision making. Consultants and, to a lesser extent, members of the finance ministry are those respondents who deem the scope enlargement to be the most useful.

Financial integration, capital misallocation and global imbalances

This paper shows that in a stylized model with two countries, characterized by different levels of financial development, the following facts can be replicated: 1) persistent current account surpluses and 2) high TFP growth in China. Under autarky, entrepreneurs in the emerging country overinvest in short-term projects and underinvest in long-term projects because short-term assets help them secure long-term investments in the presence of credit constraints. This creates an aggregate misallocation of capital. When financial markets integrate, entrepreneurs with long-term projects can have access to cheaper short-term assets abroad, which leaves them more resources to invest in their projects. This both reduces capital misallocations and generates capital outflows.

Managing the crises : how did local governments react to the financial crisis in 2008 and what explains the differences ? The case of Swiss municipalities

Swiss municipalities are, to a large extent, responsible for their financial resources. Since these resources primarily depend on income and property taxes from individuals and enterprises, municipality budgets are likely to be directly affected by the current crisis in the financial sector and the economy. This article investigates how municipalities perceived this threat and how they reacted to it. In a nationwide survey conducted at the end of 2009 in all 2596 Swiss municipalities, we asked local secretaries which measures had been launched in order to cope with expected losses in tax income and a possible increase in welfare spending. Did the municipalities rely on Keynesian measures increasing public spending and accepting greater deficits, or did they try to avoid further deficits by using austerity measures and a withdrawal of planned investments? Our results show that only a few municipalities - mainly the bigger ones - expected to be greatly affected by the crisis. Their reactions, however, did not reveal any clear patterns that theory would lead one to expect. Preferences for austerity measures and deficit spending become visible but many municipalities took measures from both theories. The strongest explanatory factors for determining how/why municipalities react are: the municipality's level of affectedness followed by whether or not the municipality belongs to the French-speaking part of the country. Size also has an impact, whereas the strength of the Social Democrat party is negligible. Explaining what kind of measures municipalities are likely to take is more difficult. However, the more a municipality is affected, the more likely it is to stick to austerity measures.