Financial Markets and Real Ecinomy: Four Essays in International Trade

Financial markets play an important role in an economy performing various functions like mobilizing and pooling savings, producing information about investment opportunities, screening and monitoring investments, implementation of corporate governance, diversification and management of risk. These functions influence saving rates, investment decisions, technological innovation and, therefore, have important implications for welfare. In my PhD dissertation I examine the interplay of financial and product markets by looking at different channels through which financial markets may influence an economy.My dissertation consists of four chapters. The first chapter is a co-authored work with Martin Strieborny, a PhD student from the University of Lausanne. The second chapter is a co-authored work with Melise Jaud, a PhD student from the Paris School of Economics. The third chapter is co-authored with both Melise Jaud and Martin Strieborny. The last chapter of my PhD dissertation is a single author paper.Chapter 1 of my PhD thesis analyzes the effect of financial development on growth of contract intensive industries. These industries intensively use intermediate inputs that neither can be sold on organized exchange, nor are reference-priced (Levchenko, 2007; Nunn, 2007). A typical example of a contract intensive industry would be an industry where an upstream supplier has to make investments in order to customize a product for needs of a downstream buyer. After the investment is made and the product is adjusted, the buyer may refuse to meet a commitment and trigger ex post renegotiation. Since the product is customized to the buyer's needs, the supplier cannot sell the product to a different buyer at the original price. This is referred in the literature as the holdup problem. As a consequence, the individually rational suppliers will underinvest into relationship-specific assets, hurting the downstream firms with negative consequences for aggregate growth. The standard way to mitigate the hold up problem is to write a binding contract and to rely on the legal enforcement by the state. However, even the most effective contract enforcement might fail to protect the supplier in tough times when the buyer lacks a reliable source of external financing. This suggests the potential role of financial intermediaries, banks in particular, in mitigating the incomplete contract problem. First, financial products like letters of credit and letters of guarantee can substantially decrease a risk and transaction costs of parties. Second, a bank loan can serve as a signal about a buyer's true financial situation, an upstream firm will be more willing undertake relationship-specific investment knowing that the business partner is creditworthy and will abstain from myopic behavior (Fama, 1985; von Thadden, 1995). Therefore, a well-developed financial (especially banking) system should disproportionately benefit contract intensive industries.The empirical test confirms this hypothesis. Indeed, contract intensive industries seem to grow faster in countries with a well developed financial system. Furthermore, this effect comes from a more developed banking sector rather than from a deeper stock market. These results are reaffirmed examining the effect of US bank deregulation on the growth of contract intensive industries in different states. Beyond an overall pro-growth effect, the bank deregulation seems to disproportionately benefit the industries requiring relationship-specific investments from their suppliers.Chapter 2 of my PhD focuses on the role of the financial sector in promoting exports of developing countries. In particular, it investigates how credit constraints affect the ability of firms operating in agri-food sectors of developing countries to keep exporting to foreign markets.Trade in high-value agri-food products from developing countries has expanded enormously over the last two decades offering opportunities for development. However, trade in agri-food is governed by a growing array of standards. Sanitary and Phytosanitary standards (SPS) and technical regulations impose additional sunk, fixed and operating costs along the firms' export life. Such costs may be detrimental to firms' survival, "pricing out" producers that cannot comply. The existence of these costs suggests a potential role of credit constraints in shaping the duration of trade relationships on foreign markets. A well-developed financial system provides the funds to exporters necessary to adjust production processes in order to meet quality and quantity requirements in foreign markets and to maintain long-standing trade relationships. The products with higher needs for financing should benefit the most from a well functioning financial system. This differential effect calls for a difference-in-difference approach initially proposed by Rajan and Zingales (1998). As a proxy for demand for financing of agri-food products, the sanitary risk index developed by Jaud et al. (2009) is used. The empirical literature on standards and norms show high costs of compliance, both variable and fixed, for high-value food products (Garcia-Martinez and Poole, 2004; Maskus et al., 2005). The sanitary risk index reflects the propensity of products to fail health and safety controls on the European Union (EU) market. Given the high costs of compliance, the sanitary risk index captures the demand for external financing to comply with such regulations.The prediction is empirically tested examining the export survival of different agri-food products from firms operating in Ghana, Mali, Malawi, Senegal and Tanzania. The results suggest that agri-food products that require more financing to keep up with food safety regulation of the destination market, indeed sustain longer in foreign market, when they are exported from countries with better developed financial markets.Chapter 3 analyzes the link between financial markets and efficiency of resource allocation in an economy. Producing and exporting products inconsistent with a country's factor endowments constitutes a serious misallocation of funds, which undermines competitiveness of the economy and inhibits its long term growth. In this chapter, inefficient exporting patterns are analyzed through the lens of the agency theories from the corporate finance literature. Managers may pursue projects with negative net present values because their perquisites or even their job might depend on them. Exporting activities are particularly prone to this problem. Business related to foreign markets involves both high levels of additional spending and strong incentives for managers to overinvest. Rational managers might have incentives to push for exports that use country's scarce factors which is suboptimal from a social point of view. Export subsidies might further skew the incentives towards inefficient exporting. Management can divert the export subsidies into investments promoting inefficient exporting.Corporate finance literature stresses the disciplining role of outside debt in counteracting the internal pressures to divert such "free cash flow" into unprofitable investments. Managers can lose both their reputation and the control of "their" firm if the unpaid external debt triggers a bankruptcy procedure. The threat of possible failure to satisfy debt service payments pushes the managers toward an efficient use of available resources (Jensen, 1986; Stulz, 1990; Hart and Moore, 1995). The main sources of debt financing in the most countries are banks. The disciplining role of banks might be especially important in the countries suffering from insufficient judicial quality. Banks, in pursuing their rights, rely on comparatively simple legal interventions that can be implemented even by mediocre courts. In addition to their disciplining role, banks can promote efficient exporting patterns in a more direct way by relaxing credit constraints of producers, through screening, identifying and investing in the most profitable investment projects. Therefore, a well-developed domestic financial system, and particular banking system, would help to push a country's exports towards products congruent with its comparative advantage.This prediction is tested looking at the survival of different product categories exported to US market. Products are identified according to the Euclidian distance between their revealed factor intensity and the country's factor endowments. The results suggest that products suffering from a comparative disadvantage (labour-intensive products from capital-abundant countries) survive less on the competitive US market. This pattern is stronger if the exporting country has a well-developed banking system. Thus, a strong banking sector promotes exports consistent with a country comparative advantage.Chapter 4 of my PhD thesis further examines the role of financial markets in fostering efficient resource allocation in an economy. In particular, the allocative efficiency hypothesis is investigated in the context of equity market liberalization.Many empirical studies document a positive and significant effect of financial liberalization on growth (Levchenko et al. 2009; Quinn and Toyoda 2009; Bekaert et al., 2005). However, the decrease in the cost of capital and the associated growth in investment appears rather modest in comparison to the large GDP growth effect (Bekaert and Harvey, 2005; Henry, 2000, 2003). Therefore, financial liberalization may have a positive impact on growth through its effect on the allocation of funds across firms and sectors.Free access to international capital markets allows the largest and most profitable domestic firms to borrow funds in foreign markets (Rajan and Zingales, 2003). As domestic banks loose some of their best clients, they reoptimize their lending practices seeking new clients among small and younger industrial firms. These firms are likely to be more risky than large and established companies. Screening of customers becomes prevalent as the return to screening rises. Banks, ceteris paribus, tend to focus on firms operating in comparative-advantage sectors because they are better risks. Firms in comparative-disadvantage sectors finding it harder to finance their entry into or survival in export markets either exit or refrain from entering export markets. On aggregate, one should therefore expect to see less entry, more exit, and shorter survival on export markets in those sectors after financial liberalization.The paper investigates the effect of financial liberalization on a country's export pattern by comparing the dynamics of entry and exit of different products in a country export portfolio before and after financial liberalization.The results suggest that products that lie far from the country's comparative advantage set tend to disappear relatively faster from the country's export portfolio following the liberalization of financial markets. In other words, financial liberalization tends to rebalance the composition of a country's export portfolio towards the products that intensively use the economy's abundant factors.

NF-kappaB transmits Eda A1/EdaR signalling to activate Shh and cyclin D1 expression, and controls post-initiation hair placode down growth.

A novel function of NF-kappaB in the development of most ectodermal appendages, including two types of murine pelage hair follicles, was detected in a mouse model with suppressed NF-kappaB activity (c(IkappaBalphaDeltaN)). However, the developmental processes regulated by NF-kappaB in hair follicles has remained unknown. Furthermore, the similarity between the phenotypes of c(IkappaBADeltaN) mice and mice deficient in Eda A1 (tabby) or its receptor EdaR (downless) raised the issue of whether in vivo NF-kappaB regulates or is regulated by these novel TNF family members. We now demonstrate that epidermal NF-kappaB activity is first observed in placodes of primary guard hair follicles at day E14.5, and that in vivo NF-kappaB signalling is activated downstream of Eda A1 and EdaR. Importantly, ectopic signals which activate NF-kappaB can also stimulate guard hair placode formation, suggesting a crucial role for NF-kappaB in placode development. In downless and c(IkappaBalphaDeltaN) mice, placodes start to develop, but rapidly abort in the absence of EdaR/NF-kappaB signalling. We show that NF-kappaB activation is essential for induction of Shh and cyclin D1 expression and subsequent placode down growth. However, cyclin D1 induction appears to be indirectly regulated by NF-kappaB, probably via Shh and Wnt. The strongly decreased number of hair follicles observed in c(IkappaBalphaDeltaN) mice compared with tabby mice, indicates that additional signals, such as TROY, must regulate NF-kappaB activity in specific hair follicle subtypes.

Combining molecular evolution and environmental genomics to unravel adaptive processes of MHC class IIB diversity in European minnows (Phoxinus phoxinus)

Host-pathogen interactions are a major evolutionary force promoting local adaptation. Genes of the major histocompatibility complex (MHC) represent unique candidates to investigate evolutionary processes driving local adaptation to parasite communities. The present study aimed at identifying the relative roles of neutral and adaptive processes driving the evolution of MHC class IIB (MHCIIB) genes in natural populations of European minnows (Phoxinus phoxinus). To this end, we isolated and genotyped exon 2 of two MHCIIB gene duplicates (DAB1 and DAB3) and 1665 amplified fragment length polymorphism (AFLP) markers in nine populations, and characterized local bacterial communities by 16S rDNA barcoding using 454 amplicon sequencing. Both MHCIIB loci exhibited signs of historical balancing selection. Whereas genetic differentiation exceeded that of neutral markers at both loci, the populations' genetic diversities were positively correlated with local pathogen diversities only at DAB3. Overall, our results suggest pathogen-mediated local adaptation in European minnows at both MHCIIB loci. While at DAB1 selection appears to favor different alleles among populations, this is only partially the case in DAB3, which appears to be locally adapted to pathogen communities in terms of genetic diversity. These results provide new insights into the importance of host-pathogen interactions in driving local adaptation in the European minnow, and highlight that the importance of adaptive processes driving MHCIIB gene evolution may differ among duplicates within species, presumably as a consequence of alternative selective regimes or different genomic context.

Testing new identity models and processes in French-speaking adolescents and emerging adults students

Developing a sense of identity is a crucial psychosocial task for young people. The purpose of this study was to evaluate identity development in French-speaking adolescents and emerging adults (in France and Switzerland) using a process-oriented model of identity formation including five dimensions (i.e., exploration in breadth, commitment making, exploration in depth, identification with commitment, and ruminative exploration). The study included participants from three different samples (total N = 2239, 66.7% women): two samples of emerging adult student and one sample of adolescents. Results confirmed the hypothesized five-factor dimensional model of identity in our three samples and provided evidence for convergent validity of the model. The results also indicated that exploration in depth might be subdivided in two aspects: a first form of exploration in depth leading to a better understanding and to an increase of the strength of current commitments and a second form of exploration in depth leading to a re-evaluation and a reconsideration of current commitments. Further, the identity status cluster solution that emerged is globally in line with previous literature (i.e., achievement, foreclosure, moratorium, carefree diffusion, diffused diffusion, undifferentiated). However, despite a structural similarity, we found variations in identity profiles because identity development is shaped by cultural context. These specific variations are discussed in light of social, educational and economic differences between France and the French-speaking part of Switzerland. Implications and suggestions for future research are offered.

On the term structure of Interbank interest rates: Jump-diffusion processes and option pricing

In this paper we study the dynamic behavior of the term structureof Interbank interest rates and the pricing of options on interest ratesensitive securities. We posit a generalized single factor model withjumps to take into account external influences in the market. Daily datais used to test for jump effects. Qualitative examination of the linkagebetween Monetary Authorities' interventions and jumps are studied. Pricingresults suggests a systematic underpricing in bonds and call options ifthe jumps component is not included. However, the pricing of put optionson bonds presents indeterminacies.

Unravelling the enigmatic origin of calcitic nanofibres in soils and caves: purely physicochemical or biogenic processes?

Calcitic nanofibres are ubiquitous habits of sec- ondary calcium carbonate (CaCO3 ) accumulations observed in calcareous vadose environments. Despite their widespread occurrence, the origin of these nanofeatures remains enig- matic. Three possible mechanisms fuel the debate: (i) purely physicochemical processes, (ii) mineralization of rod-shaped bacteria, and (iii) crystal precipitation on organic templates. Nanofibres can be either mineral (calcitic) or organic in na- ture. They are very often observed in association with needle fibre calcite (NFC), another typical secondary CaCO3 habit in terrestrial environments. This association has contributed to some confusion between both habits, however they are truly two distinct calcitic features and their recurrent asso- ciation is likely to be an important fact to help understanding the origin of nanofibres. In this paper the different hypotheses that currently exist to explain the origin of calcitic nanofibres are critically reviewed. In addition to this, a new hypothe- sis for the origin of nanofibres is proposed based on the fact that current knowledge attributes a fungal origin to NFC. As this feature and nanofibres are recurrently observed together, a possible fungal origin for nanofibres which are associated with NFC is investigated. Sequential enzymatic digestion of the fungal cell wall of selected fungal species demonstrates that the fungal cell wall can be a source of organic nanofibres. The obtained organic nanofibres show a striking morpho- logical resemblance when compared to their natural coun- terparts, emphasizing a fungal origin for part of the organic nanofibres observed in association with NFC. It is further hy- pothesized that these organic nanofibres may act as templates for calcite nucleation in a biologically influenced mineraliza- tion process, generating calcitic nanofibres. This highlights the possible involvement of fungi in CaCO3 biomineraliza- tion processes, a role still poorly documented. Moreover, on a global scale, the organomineralization of organic nanofi- bres into calcitic nanofibres might be an overlooked process deserving more attention to specify its impact on the biogeo- chemical cycles of both Ca and C.

On moments and tail behaviors of storage processes

We study the existence of moments and the tail behaviour of the densitiesof storage processes. We give sufficient conditions for existence andnon-existence of moments using the integrability conditions ofsubmultiplicative functions with respect to Lévy measures. Then, we studythe asymptotical behavior of the tails of these processes using the concaveor convex envelope of the release rate function.

Reconstruction of metal pollution and recent sedimentation processes in Havana Bay (Cuba): A tool for coastal ecosystem management.

Since 1998 the highly polluted Havana Bay ecosystem has been the subject of a mitigation program. In order to determine whether pollution-reduction strategies were effective, we have evaluated the historical trends of pollution recorded in sediments of the Bay. A sediment core was dated radiometrically using natural and artificial fallout radionuclides. An irregularity in the (210)Pb record was caused by an episode of accelerated sedimentation. This episode was dated to occur in 1982, a year coincident with the heaviest rains reported in Havana over the XX century. Peaks of mass accumulation rates (MAR) were associated with hurricanes and intensive rains. In the past 60 years, these maxima are related to strong El Niño periods, which are known to increase rainfall in the north Caribbean region. We observed a steady increase of pollution (mainly Pb, Zn, Sn, and Hg) since the beginning of the century to the mid 90s, with enrichment factors as high as 6. MAR and pollution decreased rapidly after the mid 90s, although some trace metal levels remain high. This reduction was due to the integrated coastal zone management program introduced in the late 90s, which dismissed catchment erosion and pollution.

Early attentional processes distinguish selective from global motor inhibitory control : An electrical neuroimaging study

The rapid stopping of specific parts of movements is frequently required in daily life. Yet, whether selective inhibitory control of movements is mediated by a specific neural pathway or by the combination between a global stopping of all ongoing motor activity followed by the re-initiation of task-relevant movements remains unclear. To address this question, we applied time-wise statistical analyses of the topography, global field power and electrical sources of the event-related potentials to the global vs selective inhibition stimuli presented during a Go/NoGo task. Participants (n = 18) had to respond as fast as possible with their two hands to Go stimuli and to withhold the response from the two hands (global inhibition condition, GNG) or from only one hand (selective inhibition condition, SNG) when specific NoGo stimuli were presented. Behaviorally, we replicated previous evidence for slower response times in the SNG than in the Go condition. Electrophysiologically, there were two distinct phases of event-related potentials modulations between the GNG and the SNG conditions. At 110âeuro"150 ms post-stimulus onset, there was a difference in the strength of the electric field without concomitant topographic modulation, indicating the differential engagement of statistically indistinguishable configurations of neural generators for selective and global inhibitory control. At 150âeuro"200 ms, there was topographic modulation, indicating the engagement of distinct brain networks. Source estimations localized these effects within bilateral temporo-parieto-occipital and within parieto-central networks, respectively. Our results suggest that while both types of motor inhibitory control depend on global stopping mechanisms, selective and global inhibition still differ quantitatively at early attention-related processing phases.

Minimum distance estimation of stationary and non-stationary ARFIMA processes

A new parametric minimum distance time-domain estimator for ARFIMA processes is introduced in this paper. The proposed estimator minimizes the sum of squared correlations of residuals obtained after filtering a series through ARFIMA parameters. The estimator iseasy to compute and is consistent and asymptotically normally distributed for fractionallyintegrated (FI) processes with an integration order d strictly greater than -0.75. Therefore, it can be applied to both stationary and non-stationary processes. Deterministic components are also allowed in the DGP. Furthermore, as a by-product, the estimation procedure provides an immediate check on the adequacy of the specified model. This is so because the criterion function, when evaluated at the estimated values, coincides with the Box-Pierce goodness of fit statistic. Empirical applications and Monte-Carlo simulations supporting the analytical results and showing the good performance of the estimator in finite samples are also provided.

An experimental study of discharge partitioning and flow structure at symmetrical bifurcations

Recent research has examined the factors controlling the geometrical configuration of bifurcations, determined the range of stability conditions for a number of bifurcation types and assessed the impact of perturbations on bifurcation evolution. However, the flow division process and the parameters that influence flow and sediment partitioning are still poorly characterized. To identify and isolate these parameters, three-dimensional velocities were measured at 11 cross-sections in a fixed-walled experimental bifurcation. Water surface gradients were controlled, and systematically varied, using a weir in each distributary. As may be expected, the steepest distributary conveyed the most discharge ( was dominant) while the mildest distributary conveyed the least discharge ( was subordinate). A zone of water surface super-elevation was co-located with the bifurcation in symmetric cases or displaced into the subordinate branch in asymmetric cases. Downstream of a relatively acute-angled bifurcation, primary velocity cores were near to the water surface and against the inner banks, with near-bed zones of lower primary velocity at the outer banks. Downstream of an obtuse-angled bifurcation, velocity cores were initially at the outer banks, with near-bed zones of lower velocities at the inner banks, but patterns soon reverted to match the acute-angled case. A single secondary flow cell was generated in each distributary, with water flowing inwards at the water surface and outwards at the bed. Circulation was relatively enhanced within the subordinate branch, which may help explain why subordinate distributaries remain open, may play a role in determining the size of commonly-observed topographic features, and may thus exert some control on the stability of asymmetric bifurcations. Further, because larger values of circulation result from larger gradient disadvantages, the length of confluence-diffluence units in braided rivers or between diffluences within delta distributary networks may vary depending upon flow structures inherited from upstream and whether, and how, they are fed by dominant or subordinate distributaries. Copyright (C) 2011 John Wiley & Sons, Ltd.

Dispersion of natural arsenic in the Malcantone watershed, Southern Switzerland: field evidence for repeated sorption-desorption and oxidation-reduction processes

In recent years, elevated arsenic concentrations have been found in waters and soils of many, countries, often resulting in a health threat for the local population. Switzerland is not an exception and this paper deals with the release and subsequent fate of arsenic in a 200-km(2) mountainous watershed, characterized by crystalline silicate rocks (gneisses, schists, amphibolites) that contain abundant As-bearing sulfide ore deposits, some of which have been mined for iron and gold in the past. Using analytical methods common for mineralogical, ground water and soil studies (XRD, XRF, XAS-XANES and -EXAFS, electron microprobe, extraction, ICP, AAS with hydride generator, ion chromatography), seven different field situations and related dispersion processes of natural arsenic have been studied: (1) release by rock weathering, (2) transport and deposition by water and ice; (3) release of As to the ground and surface water due to increasing pH; (4) accumulation in humic soil horizons; (5) remobilization by reduction in water-saturated soils and stagnant ground waters; (6) remobilization by using P-rich fertilizers or dung and (7) oxidation, precipitation and dilution in surface waters. Comparison of the results with experimental adsorption studies and speciation diagrams from the literature allows us to reconstruct and identify the typical behavior of arsenic in a natural environment under temperate climatic conditions. The main parameters identified are: (a) once liberated from the primary minerals, sorption processes on Fe-oxy-hydroxides dominate over Al-phases, such as Al-hydroxides or clay minerals and limit the As concentrations in the spring and well waters between 20 and 300 mug/l. (b) Precipitation as secondary minerals is limited to the weathering domain, where the As concentrations are still high and not yet too diluted by rain and soils waters. (c) Although neutral and alkaline pH conditions clearly increase the mobility of As, the main factor to mobilize As is a low redox potential (Eh close or below 0 mV), which favors the dissolution of the Fe-oxy-hydroxides on which the As is sorbed. (d) X-ray absorption spectroscopy (XAS) of As in water-logged humic forest soils indicates that the reduction to As III only occurs at the solid-water interface and that the solid contains As as As V (e) A and Bh horizons of humic cambisols can effectively capture As when As-rich waters flow through them. Complex spatial and temporal variation of the various parameters in a watershed results in repeated mobilization and immobilization of As, which continuously transports As from the upper to the lower part of a watershed and ultimately to the ocean. (C) 2004 Elsevier B.V. All rights reserved.