Are Spectral Estimators Useful for Implementing Long-Run Restrictions in SVARs?

Using count data on the number of bank failures in US states during the 1960 to 2006 period, this paper endeavors to establish how far sources of economic risk (recessions, high interest rates, in ation) or differences in solvency and branching regulation can explain some of the fragility in banking. Assuming that variables are predetermined, lagged values provide instruments to absorb potential endogeneity between the number of bank failures and economic and regulatory conditions. Results suggest that bank failures are not merely self-fulfilling prophecies but relate systematically to inflation as well as to policy changes in banking regulation. Furthermore, in terms of statistical and economic significance, the distribution and development of bankruptcies across US states depends crucially on past bank failures suggesting that contagion provides an important channel through which banking crises emerge.

Cross-border acquisitions in the global food sector

Cross-border acquisitions constitute the main form of foreign direct investment in the world economy, the focus of this paper being to consider the determinants of the location and growth of cross-border acquisitions in the global food sector. The data relates to over 2,000 international acquisitions in the food sector from 45 source to 46 host countries. The results highlight the importance of market size, relative costs and stock market growth as important determinants. We also report differences involving acquisitions in food processing and retailing and higher and lower/middle income countries. Results involving acquisitions in European countries are also highlighte

On Discrete Location Choice Models

Within the context of the firm location choice problem, Guimara?es et al. (2003) have shown that a Poisson count regression and a conditional logit model yield identical coefficient estimates. Yet, the corresponding interpretation differs since these discrete choice models reflect polar cases as regards the degree with which the different locations are similar. Schmidheiny and Brulhart (2011) have shown that these cases can be reconciled by adding a fixed outside option to the choice set and transforming the conditional logit into a nested logit framework. This gives rise to a dissimilarity parameter that equals 1 for the Poisson count regression (where locations are completely dissimilar) and 0 for the conditional logit model (where locations are completely similar). Though intermediate values are possible, the nested logit framework does not permit the dissimilarity parameter to be pinned down. We show that, with panel data and adopting a choice consistent normalisation, the fixed outside option can also be introduced into the Poisson count framework, from which the estimation of the dissimilarity parameter is relatively straightforward. The different location choice models are illustrated with an empirical application using cross-border acquisitions data

Explaining bank failures in the United States: The role of self-fulfilling prophecies, systemic risk, banking regulation, and contagion

Using count data on the number of bank failures in US states during the 1960 to 2006 period, this paper endeavors to establish how far sources of economic risk (recessions, high interest rates, inflation) or differences in solvency and branching regulation can explain some of the fragility in banking. Assuming that variables are predetermined, lagged values provide instruments to absorb potential endogeneity between the number of bank failures and economic and regulatory conditions. Results suggest that bank failures are not merely self-fulfilling prophecies but relate systematically to inflation as well as to policy changes in banking regulation. Furthermore, in terms of statistical and economic significance, the distribution and development of bankruptcies across US states depends crucially on past bank failures suggesting that contagion provides an important channel through which banking crises emerge

Horizontal, Vertical, and Conglomerate FDI: Evidence from Cross Border Acquisitions

By using data on cross-border acquisitions (CBAs), this paper explores the distribution of the strategies pursued when multinational enterprizes integrate a foreign subsidiary into their organisational structure. Based on a measure of vertical relatedness, each of the 165,000 acquisitions in our sample covering 31 source and 58 host countries can be classified as horizontal, vertical, or conglomerate. Three novel features of CBAs are highlighted. First, horizontal and vertical CBAs are relatively stable over time. Second, substantial parts of CBAs involve conglomerate acquisitions. Third, the wave-like growth of CBAs arises primarily from changes in conglomerate activity, which responds to international valuation differences between financial markets

An uncovered interest parity condition that worked - The continental investment demand for London bills of exchange during the gold standard (1880 -1914)

This paper examines an uncovered interest parity (UIP) condition that arguably held as regards the continental investment demand for London bills of exchange during the classical gold standard. At that time, practical guide books about the foreign exchanges explained in detail how exchange and interest rates were connected. For data covering the 1880 to 1914 period, modern econometric methods uncover indeed that the interest from discounting bills of exchange in the open money markets of Paris, Amsterdam, and to a large degree also Berlin, and the return from investing in London bills followed the postulated proportional relationship. This result is remarkable given the widespread rejection of the UIP with modern data

Market Entries and Exits and the Nonlinear Behaviour of the Exchange Rate Pass-Through into Import Prices

This paper develops an empirical framework giving rise to a nonlinear behaviour of the exchange rate pass-through (ERPT). Rather than shifts between low and high inflation, the nonlinearity arises when large swings in the exchange rate trigger market entries and exits of importing firms. Switching regressions are used to distinguish between low and high pass-through regimes of the exchange rate into import prices. For the case of Switzerland, the corresponding results suggest that, though inflation has been low and stable, the ERPT still doubles in value in times of a rapid appreciation of the Swiss Franc

International Taxation and FDI Strategies: Evidence From US Cross-Border Acquisitions

While there is a well-established body of empirical research documenting the negative effect of taxation on foreign direct investment (FDI), there is scant evidence on the extent to which international tax considerations (double taxation, international tax relief stipulated in bilateral tax treaties and the effect of withholding taxes) affect the role of taxation for FDI, and how tax issues differ according to the investment strategies—‘horizontal’ and ‘vertical’—pursued by %multinational firms. This paper addresses these issues. Using data on US acquisitions over the period 1995-2005 in 18 OECD countries, it is shown that international tax relief plays a critical role in determining the impact of taxation. Regardless of the type of investment strategy, the significantly negative effect of corporate taxes disappears when accounting for the tax credits stipulated in bilateral tax treaties. It is also shown that there is considerable heterogeneity of the impact of sales taxes across investment strategies. High administrative burden to comply with taxation always reduces a country’s appeal as target for FDI.Corporate taxation; Cross-Border acquisitions; FDI strategies; Tax treaties; Tax credits

What determines Financial Development? Culture, Institutions, or Trade

This paper endeavours to explain the vast differences in the size of capital markets across countries, by drawing together theories emphasising cultural values, dysfunctional institutions, or impediments to trade as obstacles to financial development. To account for endogeneity, instrumental variables pertaining to culture, geography, and colonial history are employed. We find that trade openness and institutions constraining the political elite from expropriating financiers exhibit a strong positive effect on the size of capital markets. Conversely, cultural beliefs and the cost of enforcing financial contracts seem not to introduce significant obstacles for financial development.Financial Development, Culture, Institutional Quality, Trade