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.

Banking Operational Cost in the Balkan Region under a Quadratic Loss Function

This paper presents of theoretical specification of a quadratic loss function based on forward looking rational expectations to model the underlying dynamics of operational performance of the banking industry. As an empirical application we examine the determinants of total operating costs within a dynamic panel analysis in the Balkan region that is the South East Europe (SEE) over the period 1998-2005. Results show that operating performance is positively related to loan quality and the asset size or the bank’s market share, whilst the speed of adjustment to the long run operational cost is substantial in magnitude.Forward looking rational expectations, banking operating costs.

Towards a common EU policy on income distribution: the case of social benefit expenditures

The observed "soft" coordination at European and national level has hindered progress in terms of raising social welfare and reducing the risk of poverty in EU. This is a source of concern given that the fruits of economic efficiency should be shared by the individuals and Member States of EU in an equitable manner. Raising social welfare would assist the process of building up the necessary social consensus in favour of structural reforms in product and capital markets, which in turn would further enhance economic efficiency. This paper focuses on a key indicator of social policy in national agendas which is the social expenditure as a percent of the GDP so as to assess whether there is convergence in social policy across European countries. The empirical analysis utilises information from 18 European countries over the period 1990-2004 and appropriate methodological tools of absolute ó-convergence and analysis of distribution dynamics

What are the driving factors behind the rise of spreads and CDSs of Euro-area sovereign bonds? A FAVAR model for Greece and Ireland

This paper examines the underlying dynamics of selected euro-area sovereign bonds by employing a factor-augmenting vector autoregressive (FAVAR) model for the first time in the literature. This methodology allows for identifying the underlying transmission mechanisms of several factors; in particular, market liquidity and credit risk. Departing from the classical structural vector autoregressive (VAR) models, it allows us to relax limitations regarding the choice of variables that could drive spreads and credit default swaps (CDSs) of euro-area sovereign debts. The results show that liquidity, credit risk, and flight to quality drive both spreads and CDSs of five years’ maturity over swaps for Greece and Ireland in recent years. Greece, in particular, is facing an elastic demand for its sovereign bonds that further stretches liquidity. Moreover, in current illiquid market conditions spreads will continue to follow a steep upward trend, with certain adverse financial stability implications. In addition, we observe a negative feedback effect from counterparty credit risk

An Analysis of the Impact of Public Infrastructure on Productivity Performance of Mexican Industry

It has been frequently quoted in the literature that one decisive cause of the productive performance of an economy might be infrastructure investment. This paper provides a dual profit theoretical framework of measuring the effects of infrastructure on economic performance in terms of gains in profits, cost savings, as well as in terms of productivity growth enhancement. In an empirical application, we opt for Mexican industry data. The results show that returns to infrastructure capital are significant and positive, though some variability across time exists. Moreover, the decomposition of total factor productivity growth reveals that the economic performance could be enhanced by investing in infrastructure capital.profit function, productivity growth, public infrastructure, Mexican manufacturing

Public Infrastructure, Private Input Demand, and Economic Performance of the Greek Industry

In this paper we examine the effects of the services provided by public infrastructure on the cost structure, private input demands, and productivity performance of twenty two-digit Greek manufacturing industries. The model of the paper is the dual cost function. Although the effects of public infrastructure varies across different industries our results provide evidence in favour of a productive public infrastructure. In addition, public infrastructure is found to be complement to private capital stock and substitute to labour. Specifically, the cost-saving impact of public infrastructure ranges from 0.02 percent in food manufacturing industry to 0.78 percent in wood and cork. Moreover, empirical evidence is provided in favour of the argument that the productivity growth of the majority of the twenty Greek manufacturing industries has been depressed by the observed shortage in public infrastructure in the eighties.Dual cost function, Productivity growth, Infrastructure

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.

Towards a Common EU Policy on Income Distribution: the case of Social Benefit Expenditures

The observed “soft†coordination at European and national level has hindered progress in terms of raising social welfare and reducing the risk of poverty in EU. This is a source of concern given that the fruits of economic efficiency should be shared by the individuals and Member States of EU in an equitable manner. Raising social welfare would assist the process of building up the necessary social consensus in favour of structural reforms in product and capital markets, which in turn would further enhance economic efficiency. This paper focuses on a key indicator of social policy in national agendas which is the social expenditure as a percent of the GDP so as to assess whether there is convergence in social policy across European countries. The empirical analysis utilises information from 18 European countries over the period 1990-2004 and appropriate methodological tools of absolute ó-convergence and analysis of distribution dynamics.