Does democracy affect trade? There are several channels by which democracy may affect trade, with differing implications. First, democratization in the exporting country can improve product quality ...and reduce trade costs, increasing bilateral trade. Second, democratization in the importing country may increase trade barriers and thus reduce imports. In this paper, I analyze the effect of democracy on trade by augmenting the gravity equation with democracy. Using a rich panel data set and controlling for the endogeneity of democracy, I find empirical evidence consistent with the hypothesis that democracy fosters trade. This finding is robust to various econometric methods and to the use of disaggregated specifications.
The Venture Capital Revolution Gompers, Paul; Lerner, Josh
The Journal of economic perspectives,
04/2001, Volume:
15, Issue:
2
Journal Article
Peer reviewed
Open access
Venture capital has emerged as an important intermediary in financial markets, providing capital to young high-technology firms that might have otherwise gone unfunded. Venture capitalists have ...developed a variety of mechanisms to overcome the problems that emerge at each stage of the investment process. At the same time, the venture capital process is also subject to various pathologies from time to time, which can create problems for investors or entrepreneurs. This article reviews the recent empirical literature on these organizations and points out area where further research is needed.
Quantitative dynamic stochastic general equilibrium (DSGE) models often admit that the zero bound on nominal interest rates does not constrain (optimal) monetary policy. Recent economic events, ...however, have reinforced the relevance of the zero bound. This paper sheds some light on this disconnect by studying a broad range of shocks within a standard DSGE model. In contrast to earlier studies, we find that risk premium shocks are key to building quantitative models where the zero bound is relevant for monetary policy design. Other commonly included shocks, such as productivity, government spending, and money demand shocks, are unable to push nominal rates close to zero.
This paper proposes an analysis of changes in the US manufacturing energy intensity between 1974 and 1998. The starting point is a three-term decomposition of an intensity index which evaluates ...annually the respective contributions of changes in industrial structure, efficiency gains at the sectoral level and substitution between energy resources to aggregate productivity improvements. Then, we study the time paths followed by each of these three components: using spectral analysis techniques, we show that they behave very differently as the structural influence plays a part mainly in the short-run, substitution between energy resources acts principally in the long-run and the changes in sectoral intensity cause both trend-variations and cyclical ones. Finally, we focus on the effect of energy price evolution on each of the three components. Allowing energy price rises and decreases to have asymmetric effects, we estimate both the long-run impacts and the short-run adjustments.
This paper reviews the research literature on age discrimination in the employment interview and related contexts. Twenty one studies were identified which explored whether age discrimination occurs ...within the context of the employment interview since the Age Discrimination in Employment Act was put into law. Sixteen studies were conducted in laboratory settings. It was concluded that evidence of age discrimination in the employment interview is commonly observed in laboratory studies which do not assess the influence of other job-relevant characteristics. Laboratory studies may create too much artificiality, where the impact of qualifications is artificially minimized and the impact of irrelevant factors like age are maximized. Only 5 of the 21 studies were conducted in the field, but they found far less consequential age discrimination in the employment interview.
In this paper, we investigate existence of long-run equilibrium relationships among the aggregate stock price, industrial production, real exchange rate, interest rate, and inflation in the United ...States. Applying Johansen's cointegration analysis to monthly data for the 1974:01–1998:12 period, we find that the S&P 500 stock price is positively related to the industrial production but negatively to the real exchange rate, interest rate, and inflation. Analysis of error correction mechanism reveals that the stock price, industrial production, and inflation adjust to correct disequilibrium among the five variables, while variance decompositions indicate that the stock price is driven to a considerable extent by innovations in the interest rate. Structural stability tests show that the parameters of the cointegrating system and the error correction term are stationary.
This paper studies the role of business cycles in the phenomenon of increasing government-spending/GDP ratios in the OECD countries. An empirical framework that includes both long-run and cyclical ...considerations in the determination of government spending is applied to panel data covering 1975-1998. The main finding is that the prolonged rise in the spending/GDP ratio is partially explained by cyclical upward ratcheting due to asymmetric fiscal behavior: the ratio increases during recessions and is only partially reduced in expansions. The long-run ratcheting effect is estimated as approximately 2% of GDP Also analyzed are the cyclical changes in the composition of government spending (government consumption, transfers and subsidies, and capital expenditure), as well as a possible link between cyclical ratcheting and government weakness.
The paper provides SVAR estimates for the UK, Canada, Sweden and Denmark, making explicit a monetary policy reaction function and taking account of exchange rate targeting practices. It examines the ...role of the exchange rate as shock-absorber as opposed to a source of its own, and destabilizing, shocks. We find that in all countries but the UK, real shocks are predominantly symmetric relative to the neighbor, implying little need for the exchange rate to act as shock-absorber. The shocks arising in the exchange market appear to have played a more important role in Denmark than in the other countries.
We estimate a small model of the euro area to be used for evaluating alternative monetary policy strategies. Starting with the relationship between output and inflation we compare the fit of the ...nominal wage contracting model due to Taylor (J. Political Econom. 88 (1980) 1) and the relative real wage contracting model proposed by Buiter and Jewitt (The Manchester School 49 (1981) 211; reprinted in Buiter (Ed.), Macroeconomic Theory and Stabilization Policy, Manchester University Press, Manchester, 1989) and estimated with U.S. data by Fuhrer and Moore (Quart. J. Econom. 110 (1995) 127). While Fuhrer and Moore reject nominal contracts in favor of relative contracts, which induce more inflation persistence, we find that both specifications fit euro area data reasonably well. When considering France, Germany and Italy separately, however, we find that nominal contracts fit German data better, while the relative contracting model does well with respect to formerly high inflation countries such as France and Italy. We close the model by estimating an aggregate demand relationship and investigate the implications of nominal versus relative contracts for the inflation-output variability tradeoff when monetary policy follows Taylor's rule.
This paper analyses the effects of trade openness on budget balances by distinguishing the effects of natural openness from those of trade policy. Revealed indicators of natural openness and trade ...policy are computed. Using GMM-system estimator, the econometric analysis focuses on 66 developing countries over 1974-98. The results show that trade openness increases a country's exposure to external shocks. This enforces the negative impact on budget balances of terms of trade instability. Additionally, trade openness influences budget balances through several other channels: corruption, income inequalities, etc. Then natural openness and trade policy have opposite effects: the former deteriorates budget balances whereas the latter enhances them.
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