International Finance最新文献

This paper assesses the possible development of government interest expenditures for Germany, France, Italy and Spain. Until 2021, governments could anticipate a substantial further reduction in interest expenditure. This outlook has changed drastically with the surge in inflation and government bond rates. Assuming that bond rates remain at the levels implied by yield curves from December 2022, interest expenditure rises substantially. We also examined scenarios with a further upward shift in yield curves by one or two percentage points. They indicate major medium-term risks for highly indebted member states with interest expenditure approaching or exceeding levels last observed on the eve of the euro area debt crisis. Governments should take action to achieve a decline in debt-to-GDP ratios towards safe levels. They need to make sure public debt remains sustainable at the higher interest rates that are required to achieve price stability in the euro area.

We use innovation premium (IP), proposed by Forbes, as a proxy for firm innovation to present evidence that firm value is positively associated with IP. The positive impact of the IP on firm value is amplified by overconfident CEOs, particularly in the high-tech and biotech industries with a high proportion of intellectual capital and intangible assets. In a series of tests, we confirm that the results hold after controlling for endogeneity. our findings are consistent with the notion that the beneficial effect of corporate innovations generated by overconfident CEOs exists primarily in industries where innovations are in critical demand.

Systematic risk, or beta, measures stock price variability in the overall stock market. A considerable body of literature focuses on estimating beta. To the best of our knowledge, there is, however, a lack of definitive research on the impact of income elasticity of demand on stock market beta. This study is the first to examine this relationship using 659 publicly traded firms from 47 industries in South Korea from 2001 to 2020. To estimate the value of the stock market beta, we employ an econometric model with a fixed effects-two stage least squares approach and use industry concentration as an instrumental variable to deal with the endogeneity problem in the estimation. The overall objective of this study is to investigate the influence of income elasticity of demand on stock market beta.

This paper examines optimal monetary policy in a two-country model with staggered nominal prices and wages. We show that given home nominal wage stickiness, changes in the degree of foreign nominal wage stickiness substantially impact the worldwide welfare losses and gains from commitment policy. Specifically, the welfare gains from a commitment policy are greatest when nominal wages in both countries are perfectly flexible. However, when nominal wages in the foreign country are stickier, the gains from commitment decrease.

There is a wide debate on the optimal shareholding proportion of controlling shareholders. Under the background of China's mixed-ownership reform, this paper focuses on a specific firm setting of mixed-ownership enterprises in fully competitive industries, and tries to find the heterogeneity in the association between controllers' shareholding and firm performance. Specifically, with a sample of China's A-share listed companies from 2007 to 2018, we find significant differences in this relationship due to different types of controlling shareholders. The effect of controller shareholding on firm performance is not significant in foreign-controlled enterprises, while that of private enterprises presents a monotone increasing linear relation with statistical significance. No optimal controlling shareholding interval is found in either foreign-controlled or private-controlled enterprise. In state-controlled enterprises, we find an overall inverted U-shaped with local stage linear relationship between state-controlling enterprises' controller shareholding and firm performance. The optimal interval of state-controlling shareholding is 42%–68%.

This paper examines the effect of tax progressivity on optimal monetary policy in a two-country new Keynesian model. We first address the issue that coefficients in both structural equations and the central bank's loss function are crucially affected by a change in tax progressivity in both countries. Second, we show that a change in tax progressivity significantly affects the properties of international monetary policy transmission. Third, we demonstrate that the impact of tax progressivity on international monetary policy transmission depends on the value of the constant relative risk-aversion coefficients.

This paper studies the dynamics of unemployment (u) and its natural rate (u*), with u* measured by real-time estimates for 29 countries from the Organization for Economic Cooperation and Development. We find strong evidence of hysteresis: an innovation in u causes u* to change in the same direction, and therefore has permanent effects. For our baseline specification, a one-percentage-point deviation of u from u* for 1 year has a long-run effect of 0.16 points on both variables. When we allow asymmetry, we find, perhaps surprisingly, that decreases in u have larger long-run effects than increases in u.