An Econometric Investigation into the Macroeconomic Relationship between Investment and Saving: Evidence from the EU Region

By and large, it is beyond any question that sound government finances may indeed be an important factor that conditions economic progress. Nonetheless, the notion that saving must be boosted in order to expand investment, is a contention that has to be taken with a 'pinch of salt'. This study by elaborating on the temporal relationship between investment and saving, provides econometric evidence, on the basis of which investment is a variable with the utmost importance.Investment, Saving, EU

A post-mortem of austerity: the Greek experience

The policies of economic austerity are invoked whenever a country's public deficit is spiralling out of control. Given the intricate channels through which deficits and debt can be financed, i.e. either through borrowing or money creation, manipulation of public deficits may pose significant constraints on economic growth, social cohesion and political stability. In this context, austerity is a policy expedient that, if applied irresponsibly, might have irreversible effects on both economic and social structures. In Greece economic policies of austerity, in conjunction with internal devaluation, have been adopted in an attempt to improve competitiveness, correct external deficits and promote export-led growth. In this paper, by scrutinising a range of key economic indicators, we argue that austerity has depressed significantly the real economy in Greece, threatening further an already crippled economic environment with a danger of further stagnation. We also provide econometric evidence for the period 2000 - 2013 which shows that the positive contribution of net exports to economic growth in Greece has been as a result of relatively low domestic demand, not to relative gains in the international price competitiveness of Greek enterprises. Finally, it is envisaged that the lack of adequate endogenous capacity as a means of galvanising economic growth has the potential to usher in prolonged periods of economic depression

On patent legislation, patent enforcement and economic growth: empirical evidence from developed and developing countries

This study investigates the long-term effects of national patent legislation and enforcement systems on the economic development of 42 countries. The econometric methodology that has been adopted involves the estimation of three different models, namely, the pooled, the fixed effects and the random effects models whilst the specification of the economic development regressions is a variant of the standard growth specifications encountered in relevant studies. The empirical analysis is conducted in the context of the time period following the imposition of trade-related aspects of intellectual property rights (TRIPs). The results show that the extension and strengthening of patent legislation resulting from TRIPs have had a negative impact on economic development. In contrast, stronger levels of patent enforcement have had a positive effect overall and particularly for developing economies while negative for developed economies

Liquidity and the business cycle: Empirical evidence from the Greek banking sector

In the aftermath of the global financial turmoil the negative market sentiment and the challenging macroeconomic environment in Greece have severely affected the banking sector, which faces funding and liquidity challenges, deteriorating asset quality, and weakening profitability. This paper aims to investigate how banks’ liquidity interacted with solvency and the business cycle during the period 2004-2010. To this end a panel of 17 Greek banks is utilized which, in conjunction with cointegrating techniques and one-way static and dynamic panel models, explores the presence and the strength of the relationship between banks’ liquidity and the business cycle, while allowing for the role of banks’ solvency. Addressing the liquidity risk of the Greek banking sector and the liquidity-solvency nexus remains largely an uncharted area. The results generated provide clear-cut evidence on the linkages between banks’ market liquidity and the business cycle, as reflected in the real GDP and the effective exchange rate. Yet the results display a transmission channel that runs from banks’ solvency to liquidity and from country risk to bank risk

Determinants of bank profitability: Evidence from the Greek banking sector

This paper investigates the effects of bank-specific and macroeconomic determinants of bank profitability, using an empirical framework that incorporates the traditional Structure-Conduct- Performance (SCP) hypothesis. A panel data approach has been adopted and effectively applied to six Greek banks. The evidence generated suggests that for any consistent or systematic size the profitability relationship is relatively weak. Most of the bank-specific determinants were found to significantly affect bank profitability. A more ambiguous picture emerged when the macroeconomic factors were considered

Untangling the nonlinear ‘knots’ of UK’s housing prices

Purpose Housing prices in the UK offer an inspiring, yet a complex and under-explored research area. The purpose of this paper is to investigate the critical factors that affect UK’s housing prices. Design/methodology/approach The authors utilize the recently developed nonlinear ARDL approach of Shin et al. (2014) over the period 1969–2016. Findings The authors find that both the long-run and short-run impact of the price-to-rent (PTR) ratio and credit-to-GDP ratio on house prices (HP) is asymmetric whilst ambiguous results are established for mortgage rates, industrial production and equities. Apart from the novel framework of analysis, this study also establishes a positive association between HP and the PTR ratio which suggests a speculative behaviour and could imply the formation of a housing bubble. Originality/value It is the first study for the UK housing market that explores the underlying fundamental relationships by looking at nonlinearities hence, allowing HP to be tied by asymmetric relationships in the long as well as in the short run. Modelling the inherent nonlinearities enhances significantly the understanding of UK housing market which can prove useful for policymaking and forecasting purposes

European intellectual property institutions and Chinese foreign direct investment

Purpose We investigate the impact of the strength of intellectual property (IP) institutions on Chinese outward foreign direct investment (OFDI). Design/methodology/approach We use two different measures of IP on a sample of 21 European countries in the period 2003–2015. Panel quantile methodology is applied to assess the relationship at several points of the conditional distribution of OFDI. Findings We provide novel and robust evidence revealing a highly negative relationship between OFDI and the strength of IP institutions in Europe. This relationship which is more pronounced in the median and upper-quantiles, bolsters the conventional theoretical expectation that high institutional distance between home and host countries is inversely related to OFDI. Equally important is the preliminary evidence of the non-linear impact of IP at the median and upper-quantiles as well as the impact of other controlling variables such as GDP, population, trade openness and unit labour costs on Chinese OFDI. Originality/value The ensuing theoretical implications are of great significance for future studies on the institutional distance and drivers of OFDI by emerging economies as well as for European policymakers in so far as the strengthening of IP institutions constitutes a gravitational point for inward investment flows from China

Equity incentive schemes, investor protection and corporate performance: evidence from China

Purpose On the basis of corporate governance and agency cost theory, using the fifth sub-indicator of Fan et al. China Marketization Index as the regional investor protection index (IPI), the purpose of this paper is to explore the impact of equity incentives and regional investor protection on corporate payout policies and corporate performance. Design/methodology/approach This paper establishes ordinary least squares regression model to examine interactions between the effects of equity incentives and regional investor protection upon firms’ dividend payouts. In addition, the authors also explore whether the joint effects on payouts are altered in the presence of growth opportunities, and investigate the effects of interactions between equity incentives and regional investor protection on corporate performance. Findings The authors observe that firm managers appear to abuse equity incentives by increasing dividend payouts. However, regional investor protection can potentially restrain such behavior. The restraining effect depends on the firms’ growth opportunities, on the basis of which the effect on cash (stock) dividends is found to be weaker (stronger) in high-growth firms – and stronger (weaker) in low-growth firms. Further evidence indicates that the restraining effect of regional investor protection on selfish dividend-related behavior encouraged by equity incentives may also prove valuable in encouraging exploitation of these incentives so as to enhance corporate performance. Practical implications Since reforming investor protection laws and improving judicial quality are difficult and lengthy at a country level. Improving regional levels of investor protection, however, seems more feasible and effective. Through measures encouraging the development of intermediaries, increases in the number of lawyers – all of which seem likely to constrain behavior harmful to the interests of investors – the provincial administrations can reasonably expect to contribute toward improvements in the performance of firms and the development of the economy in their region. This paper provides encouragement to regional policy makers in China and in other developing countries. Originality/value This paper uses a regional index of investor protection to study the impact on corporate dividends and performance, in contrast with most previous studies, which have examined these issues at country or individual firm levels. The use of a regional-level investor IPI in this paper therefore fills a gap by coming in between the country- and firm-level indicators typically used in previous research, thus providing a new perspective on investor protection issue

Poverty considerations and income aspiration: a tale of two cities

The aim of this paper is to explore the role of poverty exposure in affecting income aspirations. In this direction, we collect samples from two relatively adjacent cities in Lebanon each with a different socioeconomic setting. The emerging evidence suggests that higher levels of education positively affects income aspirations, with education abroad being the most impactful across all estimated equations. The female population however consistently was found to have lower aspirations than their male counterparts across all estimated equations

Simulating Banking Sector Development in the GCC States

We provide simulation results on the banking sector’s depth levels for the Gulf Cooperation Council (GCC) States. In this context, several relationships between four banking sector depth ratios and the banking sector determinants in the top quartile countries are considered. The emerging evidence suggests that Oman and Saudi Arabia are set to exhibit deepening in their financial sector whilst Bahrain and Kuwait are likely to be the beneficiaries from enhancing banking sector stability, efficiency, and competition, as well as improving their governance, institutional, and legal settings