This paper sheds light on the macroeconomic impact of financialization in the banking sector. We develop a new stock-flow consistent model, which reveals that excessive leverage increases financial fragility, lowers wages, and slows down real sector investment and GDP growth. Using a panel of 29 high income countries, we then construct indicators of banking financialization and investigate the impact of the latter on the wage share, gross capital formation and GDP growth, using a Bayesian structural VAR framework, as well as a set of fixed effect regressions. Our results highlight that financialization has had a detrimental impact on real sector growth. Finally, we discuss the implications of our results to propose reforms to the international financial system.
The article studies the main determinants of European football clubs’ stock returns and volatility. A panel-data analysis of a sample of 24 European football clubs was conducted to test the influence of several variables, based on a matrix of internal/external and real/financial dimensions, on both stock returns and their volatility. The results show that clubs’ stock returns are influenced by the real and financial context and by a set of internal variables such as profit considered as a reflection of accounting discipline, capitalization as an indicator of size and stadium attendance as a proxy indicator of reputation. The volatility of stock returns seems particularly vulnerable to the overall instability on stock markets and dependent on clubs’ profit and net players’ transfers and, to a lesser extent, on sporting outcomes.
The last financial crises have revealed the vulnerability of many emerging countries. Yet, within an economically integrated area, some groups of countries have been spared the disastrous consequences of these crises. The purpose of this article is to underline the similarities between these countries in order to draw up a set of regional criteria that would protect an area against speculative attacks. Using a probit analysis, we show that the convergence of some banking and financial indicators towards reference levels guarantees the confidence of international lenders, which in turn limits financial contagion. A narrow margin between the amount of external debt, in particular the short-term debt of the country and a reference level constitutes a protection against the risk of illiquidity. Similarly, a low domestic credit in comparison with the international reserves of the economy is also an indicator of the sustainability of an area for international lenders that ensures its stock exchange stability.
This paper evaluates the domestic and international impacts of lowering short-term interest rates and increasing budget spending on several indicators of liquidity, volatility, credit and economic activity. Data from the 2003–2011 period in the United States, the Euro zone and Canada were used to develop two SVAR models for assessing the national effectiveness and the international spillovers of monetary and budgetary policies during the credit freeze crisis. While monetary policies caused a temporary decrease in volatility and increase in liquidity in North American stock markets, the shocks were mainly domestic and ineffective at generating liquidity in the banking sector. In contrast, government spending shocks had a positive impact on credit and consumption, especially in Europe and Canada. Moreover, budgetary policies also had a positive international spillover effect on consumption and credit, especially for smaller economies such as Canada.
Our analysis of US state-level data on an annual frequency, from 1976 to 2008, sheds new light on a plausible causal link between infrastructure investments, namely public spending on highways, and income inequality. This causal relationship is drawn out using the number of seats in the US House of Representatives Committee on Appropriations (HRCA) as an instrument to identify quasi-random variations in state-level spending on highways. An exogenous pattern which emerges when a state gains an additional member to the HRCA is that it is allocated with new federal grants. This increase in federal transfers for infrastructure financing results in slashing of expenditures on highways and a crowding-out effect of federal funding for state investments on highways. Spending cuts on highways produced by a new HRCA member being attained by a state can unwittingly cause income inequality to rise over a short 2-year time horizon. Similar challenges with decentralized development to finance infrastructure via federal transfers to state and sub-national governments may be encountered by other industrially advanced, emerging and low-income developing economies. US data over the mentioned period reveal a strong positive correlation with state spending on highways and wages paid for construction jobs. Suggestive evidence indicates that the construction sector also plays an important role in the transmission channel from a rise in state spending on highways to lowering income inequality, albeit during specific intervals, as opposed to on a long-term basis.
This article establishes an equivalence between four incomplete rankings of distributions of income among agents who are vertically differentiated with respect to some nonincome characteristic (health, household size, etc.). The first ranking is the possibility of going from one distribution to the other by a finite sequence of income transfers from richer and more highly ranked agents to poorer and less highly ranked ones. The second ranking is the unanimity among utilitarian planners who assume that agents' marginal utility of income is decreasing with respect to both income and the source of vertical differentiation. The third ranking is the Bourguignon (Journal of Econometrics, 42 (1989), 67-80) Ordered Poverty Gap dominance criterion. The fourth ranking is a new dominance criterion based on cumulative lowest incomes.
The liberated company—a company where employees are fully autonomous and accountable for the decisions they take—is a concept about which much has been said and written. Some observers portray it as a major managerial innovation and even as a fully-fledged organizational model for the future. Yet, despite constituting an interesting attempt to address issues related to the changing values and expectations of employees at work, the concept seems more cosmetic than something that will have a significant managerial effect. A clearly better approach is to ask what role managers should adopt, rather than fomenting the idea that the need for management is on the cusp of disappearing altogether. Adopting a more anthropological vision of the company, we suggest instead that a conceptual revision informed by a postmodern reading of this issue, suggests a new way of rethinking managerial attitudes. The main idea here being to no longer try and liberate companies, but instead to lay the foundations so that they themselves become liberating.
This paper assesses the effectiveness of risk sharing mechanisms in Europe by breaking down the factor income components into their sub-components, and aims to further examine whether financial integration and international portfolio diversification boosts or dampens risk sharing. Using a panel of European countries, we compare the years before and after the 2008 financial crisis. We extend the literature by properly taking into account the heterogeneity (in both country and time dimensions) in the panel through new econometric models. Our results show that financial income has become a major channel of risk sharing in recent years and that a higher integration in the bond and equity markets significantly improves risk sharing in the long term.
In this paper, we consider an abstract optimal control problem with state constraint. The methodology relies on the employment of the classical dynamic programming tool considered in the infinite dimensional context. We are able to identify a closed-form solution to the induced Hamilton-Jacobi-Bellman (HJB) equation in infinite dimension and to prove a verification theorem, also providing the optimal control in closed loop form. The abstract problem can be seen an abstract formulation of a PDE optimal control problem and is motivated by an economic application in the context of continuous spatiotemporal growth models with capital di usion, where a social planner chooses the optimal location of economic activity across space by maximization of an utilitarian social welfare function. From the economic point of view, we generalize previous works by considering a continuum of social welfare functions ranging from Benthamite to Millian functions. We prove that the Benthamite case is the unique case for which the optimal stationary detrended consumption spatial distribution is uniform. Interestingly enough, we also find that as the social welfare function gets closer to the Millian case, the optimal spatiotemporal dynamics amplify the typical neoclassical dilution population size effect, even in the long-run.