Mo.Fi.R. Working Papers (2019)

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

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  • Paper nr. 157
Title:  The pricing of green bonds: are financial institutions special?
Authors:  Serena Fatica, Roberto Panzica, Michela Rancan

The financial system plays a major role in the transition to a low-carbon economy. We investigate this issue analyzing the recent developments and challenges in the bond and debt markets. First, we study the pricing of green bonds at issuance. We find a premium when green bonds are issued by supranational institutions and corporates while there is no effect for financial institutions. We also document an effect for external review and repeated access to this market. Second, we investigate lending  decisions by banks issuing green bonds. Our results show that these lenders reduce their funding towards more polluting segments of the economy but limited to the amount of loans they granted as lead bank in the deal. This evidence may explain why we do not find a green premium for financial issuers. Yet it also suggests that the banking system may play a much larger role in channelling funds towards low-carbon activities, and thus reducing the environmental risks also for the financial system.

JEL Codes:  G12, G20, Q52, Q53, Q54
  • Paper nr. 156
Title:  Capital Inflows, Equity Issuance Activity, and Corporate Investment
Authors:  Charles W. Calomiris, Mauricio Larrain, Sergio L. Schmukler

This paper uses issuance-level data to study how equity capital inflows that enter emerging market economies affect equity issuance and corporate investment. It shows that foreign inflows are strongly correlated with country-level issuance. The relation especially reflects the behavior of large firms. To identify supply-side shocks, capital inflows into each country are instrumented with exogenous changes in other countries’ attractiveness to foreign investors. Shifts in the supply of foreign capital are important drivers of increased equity inflows. Instrumented contemporaneous and lagged capital inflows lead large firms to raise new equity, which they use to fund investment.

JEL Codes:  F23, F32, F65, G11, G15, G31
Keywords:  capital flows, corporate financing, emerging markets, domestic investors, foreign investors, use of funds
  • Paper nr. 155
Title:  Mr Phillips and the medium-run: temporal instability vs. frequency stability
Authors:  Michele Fratianni, Marco Gallegati, Federico Giri

The paper goes back to the original insight by Phillips and investigates the negative relationship between money wage inflation and the unemployment rate occurring at frequency bands that stretch beyond those of the business cycle. We use UK annual data for the period 1861-2015, and post-WWII quarterly data from 1960 to 2016. The two critical findings are that the wage Phillips Curve is predominantly a medium-run phenomenon, comprised in the 8-to16-year frequency band, and that the curve disappears beyond this range. Similar conclusions are reached using the post-WWII quarterly sample: at the aggregate level and at high frequencies the PC relationship is unstable over time, whereas in the frequency range between 32 to 64 quarters (our medium run timescale), this time dependency disappears.

JEL Codes:  E00, E30, E31, E32
Keywords:  Phillips Curve, frequency bands, wavelet, medium run
  • Paper nr. 154
Title:  The Rise of Domestic Capital Markets for Corporate Financing: Lessons from East Asia
Authors:  Facundo Abraham, Juan J. Cortina, Sergio L. Schmukler

During the past decades, firms from emerging economies have significantly increased the amount of financing obtained in capital markets. Most of the literature has focused on issuances in international markets, which appear to have been a key driver of the overall activity in a context of financial globalization. This paper explores whether domestic issuances have also played a role in this increase in financing. By examining the case of East Asia, which captures most of the capital raisings among
emerging economies, this paper shows that domestic issuances have been the main component of the overall expansion in capital market financing since 2000. As domestic markets developed, more and smaller firms accessed capital markets, while larger corporations increased their funding sources and their resilience to international shocks. The experience of East Asia shows that domestic capital markets can play a useful role and that numerous policies might aid in their development.

JEL Codes: F33; G00; G01; G15; G21; G23; G31
Keywords:  Asian Financial Crisis; corporate bond markets; corporate financing; Global Financial Crisis; SME capital markets; stock markets; syndicated loan markets
  • Paper nr. 153
Title:   R&D Subsidies and Firms’ Debt Financing
Authors:  Andrea Bellucci, Luca Pennacchio, Alberto Zazzaro

This study investigates the impact of public subsidies for research and development (R&D) on the debt financing of small and medium-sized enterprises (SMEs). It examines a public program implemented in the Marche region of Italy during the period 2005–2012. The study combines matching methods with a difference-in-difference estimator to examine whether receiving public subsidies affects total indebtedness, the structure and cost of debt of awarded firms. The results indicate that R&D subsidies modify firms’ (especially young firms’) debt structure in favor of long-term financing, and help firms to limit the average cost of debt. Subsidies also foster the use of bank financing, but do not affect the overall level of debt. Taken together, these findings suggest that public funding of SMEs’ innovation projects plays a certification role in access to external financial resources for firms receiving subsidies.

JEL Codes: G30; H25; O31; O38; R58
Keywords: R&D subsidies; Finance gap; Debt financing; Debt structure; Certification effects; Resource effects.
  • Paper nr. 152
Title:   Tariffs, Domestic Import Substitution and Trade Diversion in Input-Output Production Networks: how to deal with Brexit
Authors:  Raffaele Giammetti

This paper challenges and complements existing studies on the economic impact of Brexit providing a discussion of the UK’s decision to leave the EU and how it will affect international trade networks and value-added. Using the World Input-Output Database, we develop a multi-sector inter-country model that allows us to identify all the channels through which the economic effects of Brexit would propagate. The inclusion of global value chains and indirect Brexit effects in the model leads to estimates that diverge with the results of the main literature. Indeed our findings, suggest that Brexit could be risky and costly not only for the UK but also for many EU countries. Furthermore, building on the Dietzenbacher and Lahr (2013) method of hypothetical expansion, we develop a second model and present the first empirical analysis on the consequences of domestic import substitution and trade diversion policies in Input-Output schemes. We found that allowing sectors and countries to partly substitute foreign products, leads to significantly lower losses for both macro-regions. In the second model, the UK and EU27 would lose, at worst, the 0.05 and 0.5 percent of value-added, respectively.

JEL Codes:   C67, R15, F13, F14, O21
Keywords: Brexit, trade barriers, tariffs, input-output analysis, value chains, import substitution, production networks.
  • Paper nr. 151
Title:  The Rise and Fall of Family Firms in the Process of Development
Authors:  Maria Rosaria Carillo, Vincenzo Lombardo,Alberto Zazzaro

This paper explores the causes and the consequences of the evolution of family firms in the growth process. The theory suggests that in early stages of development,
valuable family specific human capital stimulated the productivity of family firms and the development process. However, in light of the rise in the importance of managerial talents for firms’ productivity in later stages, family firms generated a misallocation of managerial talents, curbing productivity and economic growth. Evidence supports the dual impact of family firms in the development process and the role of socio-cultural characteristics in observed variations in the productivity of family firms.

JEL Codes:   D2, J62, L26, O14, O33, O4, Z1
Keywords: Family firms, economic development and growth, culture and social structure, allocation of talents, industrialization.