The recent financial crisis shows that financial markets can impact the real economy. We investigate whether access to finance typically time-varies and, if so, what are the real effects. Consistent ...with time-varying external finance costs, both investment and employment are less sensitive to Tobin's q and more sensitive to cash flow during recessions and low investor sentiment periods. Share issuance plays a bigger role than debt issuance in causing these effects. Alternative tests that do not rely on q and cash flow sensitivities suggest that recessions and low sentiment increase external finance costs, thereby limiting investment and employment.
This paper finds that lending by state banks is less procyclical than lending by private banks, especially in countries with good governance. Lending by state banks in high income countries is even ...countercyclical. On the liability side, state banks expand their total liabilities and, in particular, their non-deposit liabilities relatively little during booms. Public banks also report loan non-performance more evenly over the business cycle. Overall our results suggest that state banks can play a useful role in stabilizing credit over the business cycle as well as during periods of financial instability. However, the track record of state banks in credit allocation remains quite poor, questioning the wisdom of using state banks as a short term countercyclical tool.
In this paper, we analyze the implications of macroprudential and monetary policies for business cycles, welfare, and financial stability. We consider a dynamic stochastic general equilibrium (DSGE) ...model with housing and collateral constraints. A macroprudential rule for the loan-to-value ratio (LTV), which responds to credit growth, interacts with a traditional Taylor rule for monetary policy. We compute the optimal parameters of these rules both when monetary and macroprudential policies act in a coordinated and in a non-coordinated way. We find that both policies acting together unambiguously improves the stability of the system. In both cases, this interaction is welfare improving for the society, especially in the case of the non-coordinated game. There is though a trade-off between borrowers and savers. However, borrowers can compensate the saver’s welfare loss àla Kaldor–Hicks to achieve a Pareto-superior outcome.
We survey 1,050 Chief Financial Officers (CFOs) in the U.S., Europe, and Asia to directly assess whether their firms are credit constrained during the global financial crisis of 2008. We study ...whether corporate spending plans differ conditional on this survey-based measure of financial constraint. Our evidence indicates that constrained firms planned deeper cuts in tech spending, employment, and capital spending. Constrained firms also burned through more cash, drew more heavily on lines of credit for fear banks would restrict access in the future, and sold more assets to fund their operations. We also find that the inability to borrow externally caused many firms to bypass attractive investment opportunities, with 86% of constrained U.S. CFOs saying their investment in attractive projects was restricted during the credit crisis of 2008. More than half of the respondents said they canceled or postponed their planned investments. Our results also hold in Europe and Asia, and in many cases are stronger in those economies. Our analysis adds to the portfolio of approaches and knowledge about the impact of credit constraints on real firm behavior.
•Analyzes whether the impact of natural resource rents on productivity growth depends on economic freedom.•Uses aggregated as well as disaggregated economic freedom indices.•Shows that resource-rich ...countries can increase their growth by improving the quality of economic freedom.•Cross-country evidence for a long panel of 99 countries including 63 developing countries over the period 1970–2010.
The focus of this paper is to test whether free market institutions that protect property rights and support freedom of choice and voluntary exchange can change the curse of natural resources into a blessing. To examine the above question, this paper uses the Fraser Institute’s economic freedom index and its five sub-indices, namely government size, property rights, access to sound money, freedom to trade, and setting proper regulations. Using data from 99 sample countries over the period 1970–2010, the system GMM estimates suggest that the negative growth effects of resource rents may turn positive in countries with greater economic freedom.
This article incorporates a time-varying severity of disasters into the hypothesis proposed by Rietz (1988) and Barro (2006) that risk premia result from the possibility of rare large disasters. ...During a disaster an asset's fundamental value falls by a time-varying amount. This in turn generates time-varying risk premia and, thus, volatile asset prices and return predictability. Using the recent technique of linearity-generating processes, the model is tractable and all prices are exactly solved in closed form. In this article's framework, the following empirical regularities can be understood quantitatively: (i) equity premium puzzle; (ii) risk-free rate puzzle; (iii) excess volatility puzzle; (iv) predictability of aggregate stock market returns with price-dividend ratios; (v) often greater explanatory power of characteristics than covariances for asset returns; (vi) upward-sloping nominal yield curve; (vii) predictability of future bond excess returns and long-term rates via the slope of the yield curve; (viii) corporate bond spread puzzle; (ix) high price of deep out-of-the-money puts; and (x) high put prices being followed by high stock returns. The calibration passes a variance bound test, as normal-times market volatility is consistent with the wide dispersion of disaster outcomes in the historical record. The model extends to a setting with many factors and to Epstein-Zin preferences.
This paper examines the link between financial development and economic growth in Pakistan by considering important role of natural resources in production function for the period of 1972–2017. ...Capital and labour are additional contributing factors of economic growth. To determine the integrating properties of the variables, we apply SOR unit root test containing information for sharp and smooth structural breaks in the series. We also employ the bootstrapping ARDL bounds testing approach to examine the cointegration between the factors of production. The causal relationship between financial development, natural resources, capital, labour and economic growth is tested by applying the VECM Granger causality test in the presence of structural breaks.
The empirical findings indicate that financial development, natural resources, capital, labour and economic growth are cointegrated for long-run association. Additionally, financial development enhances domestic production as well as economic growth. Natural resources as blessings hypothesis is validated. Capital and labour also add to economic growth. The VECM Granger causality test results show the bidirectional causal relationship between financial development and economic growth. The feedback effect also exists between natural resources and economic growth. This paper helps policy makers in designing a comprehensive policy for strengthening finance-growth by using natural resources as an economic tool.
•The role of natural resources in finance-growth nexus is analyzed using bootstrap ARDL modelling.•Annual data for Pakistan over the 1972–2017 period are used.•Financial development, natural resources, capital, labour and economic growth are cointegrated for long-run association.•Financial development enhances domestic production in Pakistan.•The feedback also exists between natural resources and economic growth.
The Market for Used Capital Lanteri, Andrea
The American economic review,
09/2018, Letnik:
108, Številka:
9
Journal Article
Recenzirano
Odprti dostop
This paper studies the business-cycle dynamics of secondary markets for physical capital and their effects on the macroeconomy. In the data, both capital reallocation and the price of used capital ...are procyclical. To rationalize these facts, I propose a model with endogenous partial irreversibility, where used investment goods are imperfect substitutes for new ones because of firm-level capital specificity. Equilibrium dynamics in the market for used capital induce countercyclical dispersion of marginal products of capital, propagate movements in aggregate TFP, and provide a microfoundation for state-dependent nonconvex capital adjustment costs.
PurposeThe study aims to empirically estimate the role of public supports for energy efficiency financing and presents the way forward to mitigate the energy financing barriers that incurred during ...the COVID-19 crisis.Design/methodology/approachUsing the G7 countries data, the study estimated the nexus between the constructs. Generalized method of moments (GMM) and conventional increasing-smoothing asymptotic of GMM are applied to justify the study findings. Wald econometric technique is also used to robust the results.FindingsThe study findings reported a consistent role of public support on energy efficiency financing indicators, during the COVID-19 crisis period. G7 countries raised funds around 17% through public supports for energy efficiency financing, and it raised 4% of per unit energy usage to GDP, accelerated 16% energy efficiency and 24% output of renewable energy sources, during COVID-19. By this, study findings warrant a maximum support from public offices, energy ministries and other allied departments for energy efficiency optimization.Practical implicationsThe study presents multiple policy implications to enhance energy efficiency through different alternative sources, such as, on-bill financing, direct energy efficiency grant, guaranteed financial contracts for energy efficiency and energy efficiency credit lines. If suggested policy recommendations are applied effectively, this holds the potential to diminish the influence of the COVID-19 crisis and can probably uplift the energy efficiency financing during structural crisis.Originality/valueThe originality of the recent study exists in a novel framework of study topicality. Despite growing literature, the empirical discussion in the field of energy efficiency financing and COVID-19 is still shattered and less studied, which is contributed by this study.
The aim of this study is to investigate the long-run and causal relationships between renewable and non-renewable energy consumption and economic growth by using classical and augmented production ...functions, and making a comparison between renewable and non-renewable energy sources in order to determine which type of energy consumption is more important for economic growth in G7 countries for 1980–2009 period. Autoregressive Distributed Lag approach to cointegration was employed for this purpose. Also, causality among energy consumption and economic growth was investigated by employing a recently developed causality test by Hatemi-J (2012). The long-run estimates showed that either renewable or non-renewable energy consumption matters for economic growth and augmented production function is more effective on explaining the considered relationship. On the other hand, although bidirectional causality is found for all countries in case of classical production function, mixed results are found for each country when the production function is augmented.
► Causality between renewable and non-renewable energy consumption and growth is examined. ► Autoregressive Distributed Lag approach to cointegration was employed. ► Causality was investigated by employing a causality test of Hatemi-J. ► Bidirectional causality is found for all countries in case of classical production function. ► Mixed results are found for each country when augmented production function is estimated.
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