Access to capital markets and the geography of productivity leaders and laggards

This paper examines whether access to the capital market of convertible and nonconvertible bonds affects total factor productivity (TFP) for the population of Italian joint stock manufacturing companies, based in highly segmented local financial markets, between 2007 and 2017. The hypothesis, well grounded in the literature, is that long-term capital favors investment in intangibles and other risky assets necessary for productivity growth. To identify this effect, we exploit the exogenous shock of the Italian banking deregulation of the mid-1990s as an instrument for firm-level access to capital, interacted with distance from logistic networks. These reforms changed the distribution of the type of branches at the local level, increasing the share of joint stock banks, which have high connections to international capital markets. This geographical reallocation of banking activities ultimately affected firms' financial structure, favouring their access to capital, even when based in peripheral financial areas. Firms which issued instruments of market debt achieved higher levels of productivity and a higher probability to reach top percentiles of productivity distribution

Few Large with Many Small : Banks Size Distribution and Cross-Border Financial Linkages

We estimate the effect of the distribution of banks by asset size on a country\u2019s propensity to engage in cross-border banking. Countries where the distribution of banks by asset size is more skewed to the right (with few large and many small banks) lend more abroad and are recipients of more funds from foreign banks. This is consistent with the fact that large banks, with easier access to the international financial markets, act as a hub for smaller banks and at the same time stand out as safer too-big-to fail counterparts for foreign partners

BrExit and foreign investment in the UK

We explore the likely effect of Brexit on inward foreign direct investment (FDI) through its possible effect on the benchmark variables that characterize the macroeconomy. For this we propose the use of a Markov regime switching structural vector auto-regression to distinguish between the volatile and stable states of the economy and account, among other effects, for the contemporaneous effects that the frequency of FDI innately generates. Our findings suggest that, if Brexit triggers a sterling depreciation in the current economic climate, this will fuel a prolonged negative effect on FDI. FDI flows may be positively affected (at most) by a sterling depreciation after Brexit only if this event drives the UK economy to a period of highly volatile growth, inflation, interest and exchange rates: a scenario that is rather unlikely. And, even then, the sterling depreciation benefits would last for only a short period of time

Banche e Fintech : Amici o Nemici?

Il capitolo esamina l\u2019impatto di FinTech sulle banche. L\u2019innovazione digitale offrir\ue0 nuove opportunit\ue0 alle imprese gi\ue0 presenti nel mercato? Trasformer\ue0 il modo in cui le banche creano valore e forniscono prodotti e servizi? Oppure le nuove tecnologie sovvertiranno l\u2019assetto del settore finanziario, marginalizzando il ruolo degli intermediari? Sicuramente, il FinTech faciliter\ue0 l\u2019accesso al mercato dei servizi finanziari di imprese diverse dalle banche, accrescendo il grado di concorrenza. Ma gli intermediari finanziari gi\ue0 presenti nel mercato potranno reagire e affrontare la crescente pressione competitiva con nuove strategie. Il capitolo descrive i possibili scenari evolutivi e le conseguenze per la regolamentazione dell\u2019intero settore finanziario

Adjusting Labour Demand: Multinational vs. National Firms : A Cross-European Analysis

This paper provides a cross-country perspective to the firm-level analysis of the relation between foreign ownership and labour demand. We estimate labour demand equations in eleven European countries using dynamic panel data techniques on samples that permit to distinguish the ownership status of firms. We find that the employment adjustment is significantly faster in MNEs\u2019 affiliates, irrespective of the country investigated. As for the wage elasticity of labour demand, MNEs show smaller elasticities compared with national firms, and very little variation across countries. Cross-country correlations show that the relative value of wage elasticities in MNEs on that in NEs is positively related to country-level indexes of labour market regulation (employment protection, union presence,...). We interpret the results as follows. MNEs tend to have a more rigid demand for total labour (possibly due to a different skill composition). However, being MNEs relatively \u201cfootloose\u201d, this difference tends to vanish as the rigidity of employment regulations rises

Non-tariff measures and competitiveness

In this paper, we explore how tariff and standard-like Non-Tariff Measures (NTMs) introduced by the EU are related with market conditions in domestic EU markets. While Tariffs work as a pure tax on import, standard-like NTMs potentially affect costs of both domestic firms and foreign exporters. NTMs may not necessarily work as protectionist measures and even induce pro-competitive effects in the domestic market in the longer term, especially if we allow for firms mobility. The impact could be different for large and small firms. We extend the model by Melitz and Ottaviano (2008) to include Non-Tariff barriers. We derive some testable implications relating Non-Tariff barriers to the number of firms selling in the domestic market and average efficiency. The link between NTMs and domestic market conditions depends on whether they involve new standards and technical specifications imposed on both domestic and foreign firms, or, rather, the extension to foreign firms of standards and technical specifications already adopted by domestic firms. In the first case, there is a decline in the number of firms and in average productivity; in the second case, NTMs induce pro-competitive effects: an increase in the number of firms and of average productivity. We then take the model to the data for a group of European countries and manufacturing industries. We combine Compnet data for 15 EU countries in 2001-2012, providing information on firms performance at the industry level and by size class, with the STC WTO-I-TIP database, with information on Specific Trade Concerns raised at the WTO on NTMs and with the Trains database with information on Tariffs. The NTMs that we consider have similar effects as in the second NTMs case in the theoretical model; the results for Tariff are in the same direction, albeit of a larger magnitude. These results are consistent with a theoretical framework allowing for firms mobility in the longer term

Capital Market Union and Growth Prospects for Small and Medium Enterprises

One of the key aims of the CMU is easing the access of SMEs to credit and capital markets. This paper examines the role of SMEs in the European economy and their financial structure. It looks at the potential effects of the CMU, by specifically focusing on the informational market failures affecting SMEs finance. A fully integrated European Capital market will be beneficial to SMEs, and the European economy, if it does entice adequate large-scale technologies and actions to solve market failures related to informational issues. Otherwise, it may generate core-periphery outcomes, with peripheral regions and weaker SMEs further excluded from crucial sources of finance

Doom Loop or Incomplete Union. Sovereign adn Banking Risk

This chapterdiscusses the foremost regulatory advances and policy proposals forthe so-called \u201cdoom loop\u201d, i.e. the perverse and destabilizing interconnectionsbetween sovereigns\u2019 and banks\u2019 liabilities. We discusshow the merits of the proposed regulatory reforms are strictly intertwined with the mechanisms of risk sharing being built up and implemented within the Banking Union,and more broadly within the Eurozone. We argue that it is very unlikely that there might be viable solutions to the regulatory treatment of Sovereign exposures without a strengthening of risk-sharing mechanisms