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

“The Price You Pay”: The Impact of State-Funded Secondary School Performance on Residential Property Values in England

This paper examines the relationship between state-funded secondary school performance and local residential property values in seven major English cities. When choosing which secondary school they wish their children to attend, parents will be aware of the school’s performance in Key Stage 3, GCSE and A- level examinations. We suggest that GCSE examination results will be the measure of school performance that parental choice will be most closely correlated with. Therefore, secondary schools with good GCSE examination results will be “oversubscribed” in that more students will wish to attend these schools than there are places available. Schools will then have to develop mechanisms for rationing the available places - central to rationing strategies in English schools at the moment is geographical proximity of the family home to the school of choice. Parents will thus have a strong incentive to purchase houses in the “catchment” area of high performing schools. Our results suggest that this is the case, with high performing schools stimulating a price premium in local residential property markets of between 1% and 3% for each additional 10% point improvement in the pass rate in GCSE examinations.Hedonic, Capitalisation of school performance, Property prices

Rethinking the Role of Regulation in the Aftermath of the Global Financial Crisis: The Case of the UK

Following the global financial crisis, many countries have embarked on fundamental reviews of their regulatory systems in an attempt to identify the causes of the near collapse in financial systems and to pave the way for a new approach to regulation. The focus of this paper concerns the intellectual assumptions on which previous regulatory approaches have largely been built, both in the UK and in a number of other countries. We examine the analysis provided by the UK’s Turner Review (2009) which follows the “market failure†approach to regulation and we contrast this with the alternative “state failure†approach. Both approaches only offer partial and polarised views into the causes of the crisis. We offer a synthesis and argue that a new conceptual approach to the management of financial markets is required. The essence of this new approach is the recognition that the state and regulation are not external to the market. While this paper largely relates to the UK, it provides potentially important lessons for many other countries.Regulation, Global financial crisis, Market failure, State failures

Testing for international financial markets integration

This paper examines the extent to which financial markets across the main international financial centres integrated between 1988 and 2001 in the face of technological change and capital market liberalisation. Two empirical approaches are adopted based on principal components analysis and cointegration tests, applied respectively to covered interest rate differentials and real interest rates.. The results suggest that some financial integration occurred during the 1990s but that integration is far from complete at the international level. The study also confirms differing trends in the integration of financial markets in different geographical regions.School of Managemen

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

Banking performance and technological change in non-core EU countries: A study of Spain and Portugal

The purpose of this paper is to investigate the cost efficiency of banks operating in two "non-core" EU countries, Portugal and Spain, over a number of years. Specifically, the paper aims to examine the extent to which banks' efficiency is influenced by their portfolio orientation and scale of operation. Data envelopment analysis is used to identify banks' levels of performance over time in both countries. In order to decompose banks' total factor productivity change into technological, scale efficiency and pure efficiency changes, the Malmquist index method is applied. Banks operating in both countries have improved their performance over time and savings banks and large banks, in particular, have tended to outperform other types of banks. Banks operating in Spain tend to perform better than in Portugal and Spanish-owned banks perform better than their Portuguese-owned counterparts. The improvements in performance revealed have mainly been due to technological change. Bankscope is a well- respected data source and has been the basis of many studies of performance in international banking. Unfortunately, owing to data deficiencies, around 20 per cent of the banks operating in Portugal and Spain were not included. Practical implications - If Portuguese banks are to be competitive internationally, there is considerable need for efficiency improvements. The paper provides insights into the dynamics of the Portuguese and Spanish banking systems. The results should be of interest to management in banking and bank regulators in Europe, and economists and others studying bank performance trends. The research reported may shed light on some of the challenges facing the banking sectors of the "new" EU states (such as Poland and Hungary)

A Dynamic Analysis of Mortgage Arrears in the UK Housing Market

The UK economy has enjoyed an unprecedented period of positive economic growth since the early 1990s. The absence of recession for more than a decade has been accompanied by a sustained decline in the level of mortgage arrears, as reported by major lenders. This paper seeks to examine the factors which have driven the reduction in mortgage arrears and, in doing so, identify those factors which are most likely to cause arrears to increase in the future, should economic conditions deteriorate. The paper employs the Johansen methodology to test for the presence of multiple cointegrating vectors. An error correction model is estimated in order to examine long-run and short-run dynamics in mortgage arrears. In line with previous research concerning the causes of mortgage arrears, the results presented here emphasise the importance of changes in the rate of unemployment, loan–income and debt–service ratios. More importantly, our results highlight the statistical significance of unwithdrawn housing equity as an explanatory variable with respect to mortgage arrears.mortgage arrears, housing market, cointegration

Challenges Facing the Polish Banking Industry: A Comparative Study with UK Banks

In 2004 Poland entered the EU. This paper investigates the performance of the Polish banking industry over the period 1999–2004, by looking specifically at its comparative efficiency in relation to one of the largest banking sectors in the EU namely, that of the UK. Based on a range of efficiency measures, the empirical results reveal a surprising degree of relative efficiency in the Polish banking industry, no doubt reflecting the substantial economic changes introduced in Poland since 1989. The findings suggest that the Polish banking sector should be able to withstand the new competitive pressures that it faces following entry into the banking sector of the EU.Poland, UK, banking, efficiency, performance