Mo.Fi.R. Working Papers (2012) - Di.S.E.S.

Mo.Fi.R. Working Papers (>> Mo.Fi.R. website)

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Giulia Bettin, Riccardo Lucchetti

Intertemporal remittance behaviour by immigrants in Germany [ottobre 2012]

Keywords:

German Socio Economic Panel, Migration, Remittances

JEL Classification:

F22-

International Economics – International Factor Movements and International Business – International Migration

F24-

International Economics – International Factor Movements and International Business – Remittances

Abstract:

In this paper, we use data from the German Socio-Economic Panel (SOEP) in the 1997-2009 period for a large sample of migrants from 84 countries in order to develop an empirical model for the propensity by migrants to remit. Our model takes into full account the intertemporal aspects of the problem, which has been ignored by a large part of the applied literature, despite its theoretical and empirical importance. We find that most results already established in the empirical literature are confirmed; however, the intertemporal nature of the remittance behaviour emerges very clearly, giving rise to individual patterns which are difficult to synthesize by a simple description. Building on our framework, we find also support for theoretical models which predict different remittance time paths between return and permanent migrants.

Citations: CitEc

Adriano Giannola, Antonio Lopes, Alberto Zazzaro

La convergenza dello sviluppo finanziario tra le regioni italiane dal 1890 ad oggi [settembre 2012]

Citations: CitEc

Michele Fratianni

150 years of Italian political unity and economic dualism: An Introduction [settembre 2012]

Keywords:

debt, economic dualism, economic growth, inflation

JEL Classification:

E31-

Macroeconomics and Monetary Economics – Prices, Business Fluctuations, and Cycles – Price Level; Inflation; Deflation

N13-

Economic History – Macroeconomics and Monetary Economics; Growth and Fluctuations – Europe: Pre-1913

N14-

Economic History – Macroeconomics and Monetary Economics; Growth and Fluctuations – Europe: 1913–

O40-

Economic Development, Technological Change, and Growth – Economic Growth and Aggregate Productivity – General

Abstract:

This Special Issue of Rivista Italiana degli Economisti celebrates the 150th anniversary of Italy’s political unity. Since 1861, Italy has evolved from a poor, backward and agrarian economy to a rich and industrial economy; has gone though bouts of economic insularity and integration; has swung from massive emigration to large immigration; has experienced an inflation rate much higher than that of the reference industrial countries; has accumulated a debilitating public debt; and has blessed the demise of the lira to embrace a new currency, the euro, which now is under threat of imploding. Amidst all these changes, two features have endured: political unity and a deep economic divide between the North and the South.

Citations: CitEc

Andrea Filippo Presbitero, Matteo G. Richiardi, Alessia Amighini

Is labor flexibility a substitute to offshoring? Evidence from Italian manafacturing [agosto 2012]

Keywords:

cost saving, delocalization, labor flexibility, labor market reforms, offshoring, temporary work

JEL Classification:

F16-

International Economics – Trade – Trade and Labor Market Interactions

F23-

International Economics – International Factor Movements and International Business – Multinational Firms; International Business

J21-

Labor and Demographic Economics – Demand and Supply of Labor – Labor Force and Employment, Size, and Structure

Abstract:

We test whether labor flexibility acts as a substitute to delocalization. Using Italian survey data, we show that a higher share of temporary workers appears to reduce the likelihood of future offshoring. However, once reverse causality and spurious correlation are controlled for with IV techniques, the relationship vanishes. This finding suggests that the threat of delocalization to win support for further labor market reforms is probably misplaced.

Citations: CitEc

Michele Fratianni, John Pattison

Is international economic cooperation still alive, or merely failing? [luglio 2012]

Citations: CitEc

Francesco Nucci, Alberto Franco Pozzolo

Exchange Rate, External Orientation of Firms and Wage Adjustment [maggio 2012]

Keywords:

Exchange Rate, Firms’ Foreign Exposure, Wages

JEL Classification:

E24-

Macroeconomics and Monetary Economics – Macroeconomics: Consumption, Saving, Production, Employment, and Investment – Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital

F16-

International Economics – Trade – Trade and Labor Market Interactions

F31-

International Economics – International Finance – Foreign Exchange

Abstract:

We estimate the effect of exchange rate movements on firm-level wages, using a representative panel of manufacturing firms. We show that the direction and size of wage adjustment is shaped by the international exposure of each firm on both the sale and cost side of the balance sheet, similar to the response of employment documented in Nucci and Pozzolo (2010). Through the revenue side, wages tend to rise after a currency depreciation and the effect is more pronounced the higher is the firm’s exposure to sales from exports. Through the expenditure side, a depreciation induces a cut in the firm’s wages, and the effect is larger the higher is the incidence of imported inputs in total production costs. For a given degree of external orientation, both these effects are larger for firms with a lower market power. Moreover, we document that the effect of exchange rates on wages is shaped by (i) the extent of sectoral import penetration in the domestic market; (ii) the proportion of newly hired workers in each firm in a given year; and (iii) the composition of the firm’s workforce by occupational category.

Citations: CitEc

Mohamed Azzim Gulamhussen, Carlos Pinheiro, Alberto Franco Pozzolo

Were multinational banks taking excessive risks before the recent financial crisis? [maggio 2012]

Keywords:

Banks, Economic integration, Market structure, Multinational banking, Risk

JEL Classification:

F23-

International Economics – International Factor Movements and International Business – Multinational Firms; International Business

F36-

International Economics – International Finance – Financial Aspects of Economic Integration

G21-

Financial Economics – Financial Institutions and Services – Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

G32-

Financial Economics – Corporate Finance and Governance – Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure

L22-

Industrial Organization – Firm Objectives, Organization, and Behavior – Firm Organization and Market Structure

Abstract:

The recent financial crisis has clearly shown that the relationship between bank internationalization and risk is complex. Multinational banks can benefit from portfolio diversification, reducing their overall riskiness, but this effect can be offset by incentives going in the opposite direction, leading them to take on excessive risks. Since both effects are grounded on solid theoretical arguments, the answer of what is the actual relationship between bank internationalization and risk is left to the empirical analysis. In this paper, we study such relationship in the period leading to the financial crisis of 2007-2008. For a sample of 384 listed banks from 56 countries, we calculate two measures of risk for the period from 2001 to 2007 – the expected default frequency (EDF), a market-based and forward-looking indicator, and the Z-score, a balance-sheet-based and backward-looking measure – and relate them to their degree of internationalization. We find robust evidence that international diversification increases bank risk.

Citations: CitEc

Riccardo De Bonis, Matteo Piazza, Roberto Tedeschi

The perverse effect of government credit subsidies on banking risk [maggio 2012]

Keywords:

banks, credit risk, government subsidies

JEL Classification:

E44-

Macroeconomics and Monetary Economics – Money and Interest Rates – Financial Markets and the Macroeconomy

G21-

Financial Economics – Financial Institutions and Services – Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

Abstract:

Government intervention in credit markets has been criticized as potentially conducive to distortions in the behaviour of both banks and firms. We argue that credit subsidies may lead to a decline in the level of screening performed by banks. This effect was at work in Italy in the early 1990s when subsidized lending was still important and several intermediaries experienced a deterioration in their loan portfolios. The novelty of the paper is to show that the share of government subsidized credit on a bank’s loan portfolio contributes to explaining the overall credit risk of the intermediary.

Citations: CitEc

Martin Brown, Matthias Schaller, Simone Westerfeld, Markus Heusler

Information or Insurance? On the Role of Loan Officer Discretion in Credit Assessment [maggio 2012]

Keywords:

Asymmetric information, Credit rating, Implicit contracts, Relationship banking

JEL Classification:

D82-

Microeconomics – Information, Knowledge, and Uncertainty – Asymmetric and Private Information

G21-

Financial Economics – Financial Institutions and Services – Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

L14-

Industrial Organization – Market Structure, Firm Strategy, and Market Performance – Transactional Relationships; Contracts and Reputation; Networks

Abstract:

We employ a unique dataset of 6,669 credit assessments for 3,542 small businesses by nine banks using an identical rating model over the period 2006-2011 to examine (i) to what extent loan officers use their discretion to smooth credit ratings of their clients, and (ii) to assess whether this use of discretion is driven by information about the creditworthiness of the borrower or by the insurance of clients against fluctuations in lending conditions. Our results show that loan officers make extensive use of their discretion to smooth clients’ credit ratings: One in five rating shocks induced by changes in the quantitative assessment of a client is reversed by the loan officer. This smoothing of credit ratings is prevalent across all rating classes, is independent of whether the borrower experiences a positive or a negative rating shock, and is independent of whether the shock is firm-specific or market-related. We find that discretionary rating changes have limited power in predicting future loan performance, indicating that the smoothing of credit ratings is only partially driven by information about creditworthiness. Instead, in line with the implicit contract view of credit relationships loan officers are more likely to smooth ratings when rating shocks have stronger implications for interest rates.

Citations: CitEc

Pietro Alessandrini, Michele Fratianni, Andrew Hughes Hallett, Andrea Filippo Presbitero

External imbalances and financial fragility in the euro area [maggio 2012]

Keywords:

Sovereign yield spreads, adjustment burden, external imbalances, monetary union

JEL Classification:

F32-

International Economics – International Finance – Current Account Adjustment; Short-Term Capital Movements

F42-

International Economics – Macroeconomic Aspects of International Trade and Finance – International Policy Coordination and Transmission

G12-

Financial Economics – General Financial Markets – Asset Pricing; Trading volume; Bond Interest Rates

H63-

Public Economics – National Budget, Deficit, and Debt – Debt; Debt Management; Sovereign Debt

Abstract:

This paper presents two views of the European sovereign debt crisis. The first is that the South in the euro zone has been fiscally irresponsible, and has failed to implement supply-side policies such as liberalizing labor markets and the market for services. The second view holds that the crisis reflects a deep divide between the external surpluses of the North and external deficits of the South. Basic stylized facts raise some doubt about the validity of the thesis that the debt crisis in the Eurozone is driven primarily by fiscal fragility in the South. A relatively simple model shows how poor fundamentals can create a debt problem independently of fiscal responsibility. The empirical analysis of the determinants of government bond yield spreads relative to Germany suggests that both views in fact provide useful insights into the roots of the current sovereign crisis. Fiscal fragility and external imbalances explain a significant share of the widening spreads since the onset of the global financial crisis. However, differences in labor productivity growth between North and South assume a much relevant role since the Greek crisis erupted in 2010.

Citations: CitEc

Ugo Panizza, Andrea Filippo Presbitero

Public Debt and Economic Growth: Is There a Causal Effect? [aprile 2012]

Keywords:

Government Debt, Growth, OECD countries

JEL Classification:

F33-

International Economics – International Finance – International Monetary Arrangements and Institutions

F34-

International Economics – International Finance – International Lending and Debt Problems

F35-

International Economics – International Finance – Foreign Aid

O11-

Economic Development, Technological Change, and Growth – Economic Development – Macroeconomic Analyses of Economic Development

Abstract:

This paper uses an instrumental variable approach to study whether public debt has a causal effect on economic growth in a sample of OECD countries. The results are consistent with the existing literature that has found a negative correlation between debt and growth. However, the link between debt and growth disappears once we instrument debt with a variable that captures valuation effects brought about by the interaction between foreign currency debt and exchange rate volatility. We conduct a battery of robustness tests and show that our results are not affected by weak instrument problems and are robust to relaxing our exclusion restriction.

Citations: CitEc

Maik Dierkes, Carsten Erner, Thomas Langer, Lars Norden

Business credit information sharing and default risk of private firms [marzo 2012]

Keywords:

Asymmetric information, Credit bureau, Credit risk, Hard and soft information, Private firms

JEL Classification:

D82-

Microeconomics – Information, Knowledge, and Uncertainty – Asymmetric and Private Information

G21-

Financial Economics – Financial Institutions and Services – Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

G32-

Financial Economics – Corporate Finance and Governance – Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure

G33-

Financial Economics – Corporate Finance and Governance – Bankruptcy; Liquidation

Abstract:

We investigate whether and how business credit information sharing helps to better assess the default risk of private firms. Private firms represent an ideal testing ground because they are smaller, more informationally opaque, riskier, and more dependent on trade credit and bank loans than public firms. Based on a representative panel dataset that comprises private firms from all major industries, we find that business credit information sharing substantially improves the quality of default predictions. The improvement is stronger for older firms and those with limited liability, and depends on the sharing of firms’ payment history and the number of firms covered by the local credit bureau office. The value of soft business credit information is higher for smaller and less distant firms. Furthermore, in spatial and industry analyses we show that the higher the value of business credit information the lower the realized default rates. Our study highlights the channel through which business credit information sharing adds value and the factors that influence its strength.

Citations: CitEc

Alessandro Gambini, Emma Sarno, Alberto Zazzaro

Composizione e struttura di rete tra le società quotate in Italia [marzo 2012]

Citations: CitEc

Ralph De Haas, Yevgeniya Korniyenko, Elena Loukoianova, Alexander Pivovarsky

Foreign Banks and the Vienna Initiative: Turning Sinners into Saints? [marzo 2012]

Keywords:

Foreign banks, Vienna Initiative, financial crisis, state support

JEL Classification:

C23-

Mathematical and Quantitative Methods – Single Equation Models; Single Variables – Models with Panel Data; Longitudinal Data; Spatial Time Series

F36-

International Economics – International Finance – Financial Aspects of Economic Integration

G21-

Financial Economics – Financial Institutions and Services – Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

P34-

Economic Systems – Socialist Institutions and Their Transitions – Financial Economics

Abstract:

We use data on 1,294 banks in Emerging Europe to analyze how bank ownership and the so-called Vienna Initiative impacted credit growth during the 2008-09 crisis. As part of the Vienna Initiative western European banks signed country-specific commitment letters in which they pledged to maintain exposures and to support their subsidiaries in Emerging Europe. We show that in general both domestic and foreign banks sharply curtailed credit during the crisis, but that foreign banks that participated in the Vienna Initiative were relatively stable lenders. We find no evidence of negative spillovers from countries where banks signed commitment letters to countries where they did not.

Citations: CitEc

Luis Araujo, Raoul Minetti

Credit Crunches, Asset Prices and Technological Change [marzo 2012]

Keywords:

Aggregate Restructuring, Collateral, Credit Crunch, Credit Relationships

JEL Classification:

E44-

Macroeconomics and Monetary Economics – Money and Interest Rates – Financial Markets and the Macroeconomy

Abstract:

We investigate the effects of a credit crunch in an economy where firms can operate a mature technology or restructure their activity and adopt a new technology. We show that firms’ collateral and credit relationships ease firms’ access to credit and investment but can also inhibit firms’ restructuring. When this occurs, negative collateral or productivity shocks and the resulting drop in the price of collateral assets squeeze collateral-poor firms out of the credit market but foster the restructuring of collateral-rich firms. We characterize conditions under which such an increase in firms’ restructuring occurs within existing credit relationships or through their breakdown. The analysis reveals that the credit and asset market policies adopted during the recent credit crunch can promote investment but might also slow down a process of Shumpeterian restructuring in the credit market.

Citations: CitEc

Andrea Filippo Presbitero, Gregory F. Udell, Alberto Zazzaro

The Home Bias and the Credit Crunch: A Regional Perspective [marzo 2012]

Keywords:

Banking, Credit crunch, Distance, Flight to quality, Home bias

JEL Classification:

F33-

International Economics – International Finance – International Monetary Arrangements and Institutions

F34-

International Economics – International Finance – International Lending and Debt Problems

F35-

International Economics – International Finance – Foreign Aid

O11-

Economic Development, Technological Change, and Growth – Economic Development – Macroeconomic Analyses of Economic Development

Abstract:

A major policy issue is whether troubles in the banking system re ected in the bankruptcy of Lehman Brothers in September 2008 have spurred a credit crunch and, if so, how and why its severity has been different across markets and firms. In this paper, we tackle this issue by looking at the Italian case. We take advantage of a dataset on a large sample of manufacturing firms, observed quarterly between January 2008 and September 2009. Thanks to detailed information about loan applications and lending decisions, we are able to identify the occurrence of a credit crunch in Italy which has been found to be harsher in provinces with a large share of branches owned by distantly-managed banks. Inconsistent with the flight to quality hypothesis, however, we do not find evidence that economically weaker and smaller firms suffered more during the crisis period than during tranquil periods. By contrast, we find that large and healthy firms, the segment of borrowers which, according to theoretical predictions, are cream-skimmed by distantly-headquartered banks, were more intensely hit by the credit tightening in functionally distant credit markets than in the ones populated by less distant banks. This last result is consistent with the hypothesis of a home bias on the part of nationwide banks.

Citations: CitEc

Giorgio Gobbi, Enrico Sette

Relationship lending in a financial turmoil [marzo 2012]

Keywords:

cost of credit, credit supply, financial crisis, relationship lending

Abstract:

This paper sheds new light on the value of relationship lending by studying whether, after Lehman’s default, banks provided a steadier flow of credit and charged lower interest rates, to those firms they established a closer relation with. By exploiting the presence of multiple banking relationships, we are able to control for firms’ and banks’ unobserved characteristics. Results show that credit growth has been higher if: i) the lending relation was longer; ii) the distance between the bank and the firm shorter; iii) the bank held a larger share of total credit. Similarly, banks increased the cost of credit less to firms they had a longer relation with and they were closer to. We also explore whether the e¤ect of relationship lending depended upon bank or firm characteristics, or on the concentration of the local credit market. Finally, we test whether the e¤ect of relationship lending changed during the crisis with respect to a pre-crisis period.

Citations: CitEc

Andrea Filippo Presbitero, Roberta Rabellotti

Geographical Distance and Moral Hazard in Microcredit: Evidence from Colombia [gennaio 2012]

Keywords:

Colombia, Distance, Microcredit, Relationship Lending

JEL Classification:

G21-

Financial Economics – Financial Institutions and Services – Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

G29-

Financial Economics – Financial Institutions and Services – Other

O16-

Economic Development, Technological Change, and Growth – Economic Development – Economic Development: Financial Markets; Saving and Capital Investment; Corporate Finance and Govern

Abstract:

Recent years have seen an intense and critical debate about the impact of microcredit on entrepreneurial activities and poor households’ welfare. This paper suggests that information asymmetries in the ex-post loan arrangement between the microfinance institution (MFI) and local borrowers could partially explain the limited impact of microcredit. The physical distance separating borrowers from the MFI could be considered a proxy of agency costs, making monitoring more costly and moral hazard easier. The estimation of the effect of distance on the borrower’s self-assessed outcome of a microcredit project in Colombia confirms the presence of moral hazard in the microcredit market, with agency costs increasing with geographical distance.

Citations: CitEc