‘Zombie lending’ occurs when a lender supports an otherwise insolvent borrower. Recent studies document that zombie lending has been widespread following the European sovereign debt crisis. In this paper, I develop a quantitative model to study the impact of these lending practices on firm dynamics. In the model, firm liquidations and zombie lending arise endogenously. The model provides a good match to key euro‐area firm statistics over the period 2011–14. I find that zombie lending has a substantial impact on borrowing costs, helping more low‐productivity firms to survive. This, in turn, causes a drag on aggregate output, investment and productivity.
{"title":"The Real Effects of Zombie Lending in Europe","authors":"Belinda Tracey","doi":"10.1111/obes.12636","DOIUrl":"https://doi.org/10.1111/obes.12636","url":null,"abstract":"‘Zombie lending’ occurs when a lender supports an otherwise insolvent borrower. Recent studies document that zombie lending has been widespread following the European sovereign debt crisis. In this paper, I develop a quantitative model to study the impact of these lending practices on firm dynamics. In the model, firm liquidations and zombie lending arise endogenously. The model provides a good match to key euro‐area firm statistics over the period 2011–14. I find that zombie lending has a substantial impact on borrowing costs, helping more low‐productivity firms to survive. This, in turn, causes a drag on aggregate output, investment and productivity.","PeriodicalId":54654,"journal":{"name":"Oxford Bulletin of Economics and Statistics","volume":null,"pages":null},"PeriodicalIF":2.5,"publicationDate":"2024-09-18","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"142263965","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Angelo Cuzzola, Matteo Barigozzi, Marco Grazzi, Daniele Moschella
This paper analyzes the export volatility sources estimating a dynamic factor model on transaction‐level data. Utilizing an exhaustive dataset of French export transactions from 1993 to 2017, we reconstruct the latent factors space associated with global and destination‐specific macroeconomic shocks through a Quasi‐Maximum likelihood approach which allows accommodating both the high share of missing values and the high dimensionality of the microeconomic time series. The estimated parameters are then used to derive a volatility decomposition of the aggregate and firm‐level export growth rates, highlighting structural spatial patterns and the role of geographical diversification in mitigating export risks.
{"title":"Factoring in the Micro: A Transaction‐Level Dynamic Factor Approach to the Decomposition of Export Volatility","authors":"Angelo Cuzzola, Matteo Barigozzi, Marco Grazzi, Daniele Moschella","doi":"10.1111/obes.12639","DOIUrl":"https://doi.org/10.1111/obes.12639","url":null,"abstract":"This paper analyzes the export volatility sources estimating a dynamic factor model on transaction‐level data. Utilizing an exhaustive dataset of French export transactions from 1993 to 2017, we reconstruct the latent factors space associated with global and destination‐specific macroeconomic shocks through a Quasi‐Maximum likelihood approach which allows accommodating both the high share of missing values and the high dimensionality of the microeconomic time series. The estimated parameters are then used to derive a volatility decomposition of the aggregate and firm‐level export growth rates, highlighting structural spatial patterns and the role of geographical diversification in mitigating export risks.","PeriodicalId":54654,"journal":{"name":"Oxford Bulletin of Economics and Statistics","volume":null,"pages":null},"PeriodicalIF":2.5,"publicationDate":"2024-09-12","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"142206142","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
I provide new empirical estimates of the effect of state capacity on economic development across countries over the period 1960–2022. Specifically, I construct a comprehensive state capacity index based on six different dimensions of effective state institutions available in the Varieties of Democracy (V‐Dem) dataset. Then, I estimate heterogeneous parameter models under a common factor framework. My empirical strategy explicitly allows the growth effect of state capacity to differ across countries and accounts for unobserved common factors. My preferred estimates indicate that a one‐standard‐deviation increase in my V‐Dem‐based state capacity index predicts a rise in income per person by roughly 6%–7%. The magnitude of such impact equates to less than half of that implied by conventional estimates obtained under highly restrictive assumptions of slope homogeneity and cross‐sectional independence. Furthermore, I provide partial evidence suggesting that worldwide heterogeneity in the economic importance of state capacity is deeply rooted in prehistorically determined population diversity, state history, long‐term relatedness between countries, and interpersonal trust.
{"title":"The Growth Effect of State Capacity Revisited","authors":"Trung V. Vu","doi":"10.1111/obes.12642","DOIUrl":"https://doi.org/10.1111/obes.12642","url":null,"abstract":"I provide new empirical estimates of the effect of state capacity on economic development across countries over the period 1960–2022. Specifically, I construct a comprehensive state capacity index based on six different dimensions of effective state institutions available in the Varieties of Democracy (V‐Dem) dataset. Then, I estimate heterogeneous parameter models under a common factor framework. My empirical strategy explicitly allows the growth effect of state capacity to differ across countries and accounts for unobserved common factors. My preferred estimates indicate that a one‐standard‐deviation increase in my V‐Dem‐based state capacity index predicts a rise in income per person by roughly 6%–7%. The magnitude of such impact equates to less than half of that implied by conventional estimates obtained under highly restrictive assumptions of slope homogeneity and cross‐sectional independence. Furthermore, I provide partial evidence suggesting that worldwide heterogeneity in the economic importance of state capacity is deeply rooted in prehistorically determined population diversity, state history, long‐term relatedness between countries, and interpersonal trust.","PeriodicalId":54654,"journal":{"name":"Oxford Bulletin of Economics and Statistics","volume":null,"pages":null},"PeriodicalIF":2.5,"publicationDate":"2024-09-10","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"142206156","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
The determinants of an economy's growth path for income per head may vary over time. In this paper, we apply unobserved components analysis to an otherwise standard panel model of economic growth dynamics so that an economy's long‐run relative income per head can change at any point of time. We apply this model to data for US states for 1929–2021 and the world economy for 1970–2019. In both datasets an economy's initial relative income per head is a good predictor of its long‐run relative income per head. Relatively poor economies on average remain relatively poor.
{"title":"Economic Growth Analysis When Balanced Growth Paths May Be Time Varying","authors":"Andrew Mountford","doi":"10.1111/obes.12638","DOIUrl":"https://doi.org/10.1111/obes.12638","url":null,"abstract":"The determinants of an economy's growth path for income per head may vary over time. In this paper, we apply unobserved components analysis to an otherwise standard panel model of economic growth dynamics so that an economy's long‐run relative income per head can change at any point of time. We apply this model to data for US states for 1929–2021 and the world economy for 1970–2019. In both datasets an economy's initial relative income per head is a good predictor of its long‐run relative income per head. Relatively poor economies on average remain relatively poor.","PeriodicalId":54654,"journal":{"name":"Oxford Bulletin of Economics and Statistics","volume":null,"pages":null},"PeriodicalIF":2.5,"publicationDate":"2024-08-22","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"142226416","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Many European countries introduced austerity policies to control rising debt in the wake of the Great Recession of the late 2000s. Recent research suggests that austerity fuelled political polarization, instability, and populism in Europe. However, the motives behind citizens' responses to austerity are not well understood. Using the case of the UK, we study whether preferences for redistribution drive the effect of austerity on political participation in the form of voting, appealing for reform with the government, and protesting. Based on experimental and observational data, we show that individual exposure to austerity increases voting and appealing for reform with the government but not protesting, and changes people's preferences for redistribution. The experimental data show that being exposed to austerity is associated with a 0.128 and a 0.096 unit increase in voting and appealing for reform, respectively. The data also show that exposure to austerity increases preferences for taxing higher incomes and spending more on welfare and social security. This change in preferences explains between 8% and 11% of the effect of exposure to austerity on political participation.
{"title":"Can Preferences for Redistribution Explain the Impact of Austerity on Political Participation? Evidence from the UK","authors":"Patricia Justino, Bruno Martorano, Laura Metzger","doi":"10.1111/obes.12640","DOIUrl":"https://doi.org/10.1111/obes.12640","url":null,"abstract":"Many European countries introduced austerity policies to control rising debt in the wake of the Great Recession of the late 2000s. Recent research suggests that austerity fuelled political polarization, instability, and populism in Europe. However, the motives behind citizens' responses to austerity are not well understood. Using the case of the UK, we study whether preferences for redistribution drive the effect of austerity on political participation in the form of voting, appealing for reform with the government, and protesting. Based on experimental and observational data, we show that individual exposure to austerity increases voting and appealing for reform with the government but not protesting, and changes people's preferences for redistribution. The experimental data show that being exposed to austerity is associated with a 0.128 and a 0.096 unit increase in voting and appealing for reform, respectively. The data also show that exposure to austerity increases preferences for taxing higher incomes and spending more on welfare and social security. This change in preferences explains between 8% and 11% of the effect of exposure to austerity on political participation.","PeriodicalId":54654,"journal":{"name":"Oxford Bulletin of Economics and Statistics","volume":null,"pages":null},"PeriodicalIF":2.5,"publicationDate":"2024-08-17","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"142206158","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Technological change has been biased towards replacing routine labour over the past four decades. We study the implications of those shifts in the task composition of labour demand on hours worked fluctuations. We build quarterly time series on hours worked and task premiums from the CPS and assess the effects of routine‐biased technological change by estimating a VAR model with long‐run exclusion and sign restrictions. The results indicate that the decline in total hours worked is driven by routine‐biased technology shocks through a decline in routine hours. These shocks generate recognizable aggregate fluctuations pointing out to their potential relevance for business cycles.
过去四十年来，技术变革一直偏向于替代常规劳动。我们研究了劳动力需求的任务构成变化对工作时间波动的影响。我们从 CPS 中建立了工作时数和任务溢价的季度时间序列，并通过估计带有长期排除和符号限制的 VAR 模型来评估常规偏向技术变革的影响。结果表明，总工时的下降是由常规技术冲击通过常规工时的下降驱动的。这些冲击产生了可识别的总体波动，显示出它们与商业周期的潜在相关性。
{"title":"The Implications of Routine‐Biased Technological Change on Hours Worked Fluctuations*","authors":"Sébastien Bock, Idriss Fontaine","doi":"10.1111/obes.12637","DOIUrl":"https://doi.org/10.1111/obes.12637","url":null,"abstract":"Technological change has been biased towards replacing routine labour over the past four decades. We study the implications of those shifts in the task composition of labour demand on hours worked fluctuations. We build quarterly time series on hours worked and task premiums from the CPS and assess the effects of routine‐biased technological change by estimating a VAR model with long‐run exclusion and sign restrictions. The results indicate that the decline in total hours worked is driven by routine‐biased technology shocks through a decline in routine hours. These shocks generate recognizable aggregate fluctuations pointing out to their potential relevance for business cycles.","PeriodicalId":54654,"journal":{"name":"Oxford Bulletin of Economics and Statistics","volume":null,"pages":null},"PeriodicalIF":2.5,"publicationDate":"2024-08-16","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"142206157","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
In hierarchical prior longitudinal models, random effects are estimated by the Gibbs sampler. We show that fixed effects can be handled by a similar Gibbs sampler under a diffuse prior on the unobserved heterogeneity. The dummy variable approach for fixed effects is computationally intensive and has the out‐of‐memory risk, while the Gibbs sampler can reproduce the dummy variable estimator without creating dummy variables, and therefore avoids the memory burden. Compared to alternating projections and other classical approaches, our method simplifies both inference and estimation of the limited dependent variable models with fixed effects. The proposed method is applied to a real‐world mortgage dataset for classification with three‐way fixed effects on banks, regions, and loan purposes.
{"title":"Bayesian Estimation of Fixed Effects Models with Large Datasets*","authors":"Hang Qian","doi":"10.1111/obes.12641","DOIUrl":"https://doi.org/10.1111/obes.12641","url":null,"abstract":"In hierarchical prior longitudinal models, random effects are estimated by the Gibbs sampler. We show that fixed effects can be handled by a similar Gibbs sampler under a diffuse prior on the unobserved heterogeneity. The dummy variable approach for fixed effects is computationally intensive and has the out‐of‐memory risk, while the Gibbs sampler can reproduce the dummy variable estimator without creating dummy variables, and therefore avoids the memory burden. Compared to alternating projections and other classical approaches, our method simplifies both inference and estimation of the limited dependent variable models with fixed effects. The proposed method is applied to a real‐world mortgage dataset for classification with three‐way fixed effects on banks, regions, and loan purposes.","PeriodicalId":54654,"journal":{"name":"Oxford Bulletin of Economics and Statistics","volume":null,"pages":null},"PeriodicalIF":2.5,"publicationDate":"2024-08-14","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"142206159","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
I examine the effectiveness of monetary policy under the ultra‐low interest rate environment in Japan through the lens of yield curve dynamics. To that end, I employ the dynamic Nelson–Siegel model with time‐varying parameters, thereby computing indicators for tracing monetary easing effects. I show that the estimation performance of the yield curve models is sufficiently improved even under the ultra‐low interest rate environment by extending the dynamic Nelson–Siegel model to allow a loading parameter to vary over time, in addition to three factors of yield curve dynamics: level, slope, and curvature. However, I also demonstrate that the identification of the level and loading parameters is critical in assessing monetary policy effects. I reveal that monetary easing effects under the Quantitative and Qualitative Monetary Easing (QQE) are produced by flattening the yield curve in the ultra‐long‐term maturity zone over 10 years, while monetary easing effects from maturities shorter than ten years remain almost unchanged. Monetary policy fails to produce sufficient monetary easing effects within the time frame of the standard macroeconomic stabilization policy, even with the full‐fledged implementation of unconventional monetary policy measures under the ultra‐low interest rate environment in Japan.
{"title":"Monetary Policy Effectiveness under the Ultra‐Low Interest Rate Environment: Evidence from Yield Curve Dynamics in Japan","authors":"Shigenori Shiratsuka","doi":"10.1111/obes.12635","DOIUrl":"https://doi.org/10.1111/obes.12635","url":null,"abstract":"I examine the effectiveness of monetary policy under the ultra‐low interest rate environment in Japan through the lens of yield curve dynamics. To that end, I employ the dynamic Nelson–Siegel model with time‐varying parameters, thereby computing indicators for tracing monetary easing effects. I show that the estimation performance of the yield curve models is sufficiently improved even under the ultra‐low interest rate environment by extending the dynamic Nelson–Siegel model to allow a loading parameter to vary over time, in addition to three factors of yield curve dynamics: level, slope, and curvature. However, I also demonstrate that the identification of the level and loading parameters is critical in assessing monetary policy effects. I reveal that monetary easing effects under the Quantitative and Qualitative Monetary Easing (QQE) are produced by flattening the yield curve in the ultra‐long‐term maturity zone over 10 years, while monetary easing effects from maturities shorter than ten years remain almost unchanged. Monetary policy fails to produce sufficient monetary easing effects within the time frame of the standard macroeconomic stabilization policy, even with the full‐fledged implementation of unconventional monetary policy measures under the ultra‐low interest rate environment in Japan.","PeriodicalId":54654,"journal":{"name":"Oxford Bulletin of Economics and Statistics","volume":null,"pages":null},"PeriodicalIF":2.5,"publicationDate":"2024-08-07","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"141936093","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Aleksei Kiselev, Daria Kolesnik, Mikhail Mamonov, Anna Pestova
What role do credit supply shocks (CSS) play in macroeconomic dynamics in emerging economies? We exploit Russia's setting, including the 2014 Western sanctions, and show that a negative CSS normalized to 0.5 p.p. increase in the lending rate leads to a decrease of 2 p.p. in the output growth rate, 1.5 p.p. in the consumption growth rate and 5 p.p. in the investment growth rate within a quarter. The heterogeneity of the household and firm responses to CSS is driven by debt‐to‐income and leverage ratios, with indebted poorer households and larger firms being more sensitive to fluctuations in credit conditions.
{"title":"The Real Effects of Credit Supply Shocks: Evidence from an Emerging Economy","authors":"Aleksei Kiselev, Daria Kolesnik, Mikhail Mamonov, Anna Pestova","doi":"10.1111/obes.12634","DOIUrl":"https://doi.org/10.1111/obes.12634","url":null,"abstract":"What role do credit supply shocks (CSS) play in macroeconomic dynamics in emerging economies? We exploit Russia's setting, including the 2014 Western sanctions, and show that a negative CSS normalized to 0.5 p.p. increase in the lending rate leads to a decrease of 2 p.p. in the output growth rate, 1.5 p.p. in the consumption growth rate and 5 p.p. in the investment growth rate within a quarter. The heterogeneity of the household and firm responses to CSS is driven by debt‐to‐income and leverage ratios, with indebted poorer households and larger firms being more sensitive to fluctuations in credit conditions.","PeriodicalId":54654,"journal":{"name":"Oxford Bulletin of Economics and Statistics","volume":null,"pages":null},"PeriodicalIF":2.5,"publicationDate":"2024-07-24","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"141770463","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Morakinyo O. Adetutu, Kayode Odusanya, Eleni Stathopoulou, Thomas G. Weyman‐Jones
The demand for transparency about the microeconomic sources of environmental pollution has surged recently, causing carbon disclosure to rise to the top of the global climate change discourse. In this study, we empirically investigate how the environmental performance of firm production technologies shapes their voluntary carbon disclosure behaviour and how key stakeholders influence the performance‐disclosure relationship. Using a panel of 1,547 firms across 24 countries covering 2006–20, we find that firms with the most efficient technologies for reducing emissions tend to disclose their carbon impact, especially when they face more stringent environmental regulations. These high‐performing firms demonstrate a tendency for non‐disclosure when faced with intense shareholder and environmental activist pushback against pollution. Our findings also highlight the existence of a profitability penalty for transparent high‐efficiency firms relative to comparable firms that adopt strategic silence.
{"title":"The Impact of Firm Technology on Carbon Disclosure: The Critical Role of Stakeholder Pressure","authors":"Morakinyo O. Adetutu, Kayode Odusanya, Eleni Stathopoulou, Thomas G. Weyman‐Jones","doi":"10.1111/obes.12633","DOIUrl":"https://doi.org/10.1111/obes.12633","url":null,"abstract":"The demand for transparency about the microeconomic sources of environmental pollution has surged recently, causing carbon disclosure to rise to the top of the global climate change discourse. In this study, we empirically investigate how the environmental performance of firm production technologies shapes their voluntary carbon disclosure behaviour and how key stakeholders influence the performance‐disclosure relationship. Using a panel of 1,547 firms across 24 countries covering 2006–20, we find that firms with the most efficient technologies for reducing emissions tend to disclose their carbon impact, especially when they face more stringent environmental regulations. These high‐performing firms demonstrate a tendency for non‐disclosure when faced with intense shareholder and environmental activist pushback against pollution. Our findings also highlight the existence of a profitability penalty for transparent high‐efficiency firms relative to comparable firms that adopt strategic silence.","PeriodicalId":54654,"journal":{"name":"Oxford Bulletin of Economics and Statistics","volume":null,"pages":null},"PeriodicalIF":1.5,"publicationDate":"2024-07-16","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"141642161","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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