The Contribution of the Publicly Funded R&D Capital to Productivity Growth and an application to the Greek food and beverages industry

This paper follows the dual cost function methodology and develops a theoretical specification that assesses the contribution of public R&D capital to the productivity growth. The empirical application focuses on Greek food and beverages industry. For this purpose it employs a micro-aggregated annual data set over the period 1976-2002. The regression analysis shows that publicly funded R&D capital is a productive input as 8.7 percent and 7.3 percent of the total factor productivity growth in the food industry and in the beverages industry respectively is attributed to the publicly funded R&D capital. The relationship between publicly funded R&D and private purchased inputs is also examined.Public R&D; Productivity Growth; Rate of return.

Risk in the EU banking industry and efficiency under quantile analysis

This study estimates cost efficiency under a quantile regression framework. Our purpose is to investigate whether cost efficiency differs across quantiles of the conditional distribution. Efficiency scores are derived using the distribution-free approach. Results show that for higher conditional distributions, efficiency scores are lower. In a second stage analysis, we examine the relationship between risk, measured as distance to default and efficiency. Cross section regressions show that the higher the risk the lower the level of efficiency. The magnitude and the significance of the coefficient of the distance to default increases for conditional distributions associated with lower levels of efficiency.Cost efficiency; Quantile regression; Distribution-free approach; Distance to default.

European Banking Integration under a Quadratic Loss Function

European banking markets have become increasingly integrated in recent years, but barriers to full integration, especially in retail banking, still remain. This paper covers a gap in the literature by providing a first insight into the process of financial integration in the European Union (EU) in terms of convergence in the speed of adjustment of cost inefficiency to equilibrium level. We employ a quadratic loss function specification based on forward-looking rational expectations to model the underlying dynamics of efficiency scores in the banking industry of the EU-15 region over the period 1998-2005. Results show that there is considerable variation in the speed of adjustment across banking systems, while over time it also appears that continuing efforts to advance financial integration have not as yet led to an improvement in the speed of adjustment to the long run equilibrium.Speed of adjustment, rational expectations, cost inefficiency

Threshold Cointegration in BRENT crude futures market

This paper, using a threshold vector error-correction (TVECM) model, examines whether BRENT crude spot and futures oil prices are cointegrated. By employing this methodology we are able to evaluate the degree and dynamics of transaction costs resulting from various market imperfections. TVECM model is applied on daily spot and futures oil prices covering the period 1990-2009. The hypothesis we test is to what extent BRENT crude is indeed an integrated oil market in terms of threshold effects and adjustment costs. Our findings support that market follows a gradual integration path. We find that BRENT crude spot and futures are cointegrated, though two regimes are clearly identified. This implies that a threshold exists and it is indeed significant. Adjustment costs in the error correction are present, and they are valid at the typical regime that is the dominant, and as a result should not be ignored.Threshold Cointegration, BRENT crude futures, Non-normality, ML Estimation.

A Bayesian Markov Chain Approach Using Proportions Labour Market Data for Greek Regions

This paper focuses on Greek labour market dynamics at a regional base, which comprises of 16 provinces, as defined by NUTS levels 1 and 2 (Eurostat, 2008), using Markov Chains for proportions data for the first time in the literature. We apply a Bayesian approach, which employs a Monte Carlo Integration procedure that uncovers the entire empirical posterior distribution of transition probabilities from full employment to part employment, unemployment and economically unregistered unemployment and vice a versa. Our results show that there are disparities in the transition probabilities across regions, implying that the convergence of the Greek labour market at a regional base is far from being considered as completed. However, some common patterns are observed as regions in the south of the country exhibit similar transition probabilities between different states of the labour market.Greek Regions, Employment, Unemployment, Markov Chains.

Transition of Social Welfare in the European Country Clubs

This paper focuses on the dynamics of welfare by studying the persistence and transition of poverty risk, social transfers, employment and unemployment in the four European Country Clubs as defined by Esping-Andersen, G. (1990) and Bertola et al. (2001). We model their evolution in a multistate Markov process for proportions of aggregate data and estimate the transition matrix by adopting a Bayesian approach under inequality constraints and Monte Carlo Integration. Our approach uncovers the entire empirical posterior distribution of persistence and transition probabilities, for which statistical inference is readily available. The results show high persistence in unemployment rate in the Anglo-Saxon social club, whilst regarding social expenditures the four identified social clubs converge to two, the Nordic with the Continental club and the Anglo-Saxon with the Southern club. The half life statistics show fast pace across all variables of interest.Social Clubs, Markov Chains, Monte Carlo Integration, Transition

Decomposing total factor productivity while treating for misspecification

Decomposing firm performance has been challenging for some time. Yet the importance of accurately measuring performance is unequivocal. We propose a flexible functional of total factor productivity (TFP) that measures firm performance and treats misspecification. We argue that measuring bank productivity at global level, which is provided by our model based on bank micro-foundations, is better suited than other measures. Our results suggest that there is not much convergence in TFP across the world, though the technology has positively contributed to bank TFP growth. However, nonperforming loans have had the opposite effect. Furthermore, we show that bank risk-taking and raising capital by equity are negatively related to TFP growth; instead, liquidity has a positive impact

What drives investment bank performance? The role of risk, liquidity and fees prior to and during the crisis

This paper examines factors that affect the performance of investment banks in the G7 and Switzerland. In particular, we focus on the role of risk, liquidity and investment banking fees. Panel analysis shows that those variables significantly impact upon performance as derived from stochastic frontier analysis (SFA). Given our sample also comprises the financial crisis, we further test for regimes switches using dynamic panel threshold analysis. Results show different underlying regimes, in particular over the financial crisis. In addition, a strong positive effect of Z-Score on performance for banks in the regime of low default risk is reported, whilst fee-income ratio has also a positive impact for banks with low level of fees. On the other hand, liquidity exerts a negative impact. Notably, there is a clear trend of mobility of banks across the two identified threshold regimes with regards to risk a year before the financial crisis. Our results provide evidence that recent regulation reforms regarding capital adequacy and liquidity requirements are on the right track and could enhance performance

Understanding the impact of travel on wellbeing: evidence for Great Britain during the pandemic.

The paper investigates whether the wellbeing in Great Britain, measured by life satisfaction and happiness, is affected by the dramatic decline in travelling during the pandemic. I employ a Bayesian vector autoregression (VAR) that includes wellbeing, travel, and Covid-19 as endogenous variables while it controls for exogenous variables. I include in the VAR various modes of travel, like flying, car, rail, and cycling and also various Covid-19 related variables like confirmed infections, confirmed deaths and hospitalisations. The empirical findings of impulse response functions provide detailed responses of wellbeing and traveling in Great Britain to shocks in Covid-19 while testing for the direction of causality. Travel is negatively affected by shocks in Covid-19 and in turn, shocks in travel would reduce wellbeing. Interestingly, results show little to no evidence of responses of Covid-19 to shocks in various modes of travel. So, while the decline in travel reduces wellbeing, it does little to combat Covid-19. The forecast error variance decomposition analysis confirms the importance of travel for wellbeing and shows that while the pandemic has caused an unprecedented decline in traveling, this is not going to persist beyond the medium term. However, the decline in traveling in Great Britain would have a negative effect on life satisfaction and a positive effect on anxiety and such effects could persist. Lastly, the paper provides forecasting of the main endogenous variables

Does weather affect US bank loan efficiency?

The impact of strong emotions or mood on decision making and risk taking is well recognized in behavioral economics and finance. Yet, and in spite of the immense interest, no study, so far, has provided any comprehensive evidence on the impact of weather conditions. This paper provides the theoretical framework to study the impact of weather through its influence on bank manager’s mood on bank inefficiency. In particular, we provide empirical evidence of the dynamic interactions between weather and bank loan inefficiency, using a panel data set that includes 69 banks operating in the US spanning the period 1994 to 2009. Bank loan inefficiency is derived using both a standard stochastic frontier production approach for bank loans and a directional distance function. Then, we employ a Panel-VAR model to derive orthogonalised impulse response functions and variance decompositions, which show responses of the main variables, weather and bank loan inefficiency, to orthogonal shocks. The results provide evidence insinuating the importance of specific weather characteristics, such as temperature and cloud cover time, in explaining the variation of gross loans