Majority voting with stochastic preferences : The whims of a committee are smaller than the whims of its members.

We study the volatility of the policy chosen by a committee whose members have volatile preferences. It is smaller than if it was chosen by a single member, smaller the larger the size of the committee, and smaller the volatility of members' preferences.Committee, majority voting, uncertainty, volatility.

Can Mergers in Europe Help Banks Hedge Against Macroeconomic Risk

European integration, risk sharing, regional specialization, portfolio diversification.

Is Corruption an Efficient Grease ?

This paper tests whether corruption can be viewed as an efficient grease in the wheels of an otherwise deficient institutional framework. It does so by analyzing the interaction between aggregate efficiency, corruption, and other dimensions of governance for a panel of 54 countries both developed and developing. Using three measures of corruption and five measures of other aspects of governance, we repeatedly observe that corruption is always detrimental in countries where institutions are effective, but that it may be positively associated with efficiency in countries where institutions are ineffective. We thus find evidence of the grease the wheels hypothesis.Governance, corruption, income, aggregate productivity, efficiency.

An FDI is an FDI is an FDI? The growth effects of greenfield investment and mergers and acquisitions in developing countries

We explore the effect of foreign direct investment (FDI) on economic growth in developing countries, distinguishing between mergers and acquisitions (M&As) and Greenfield investment. We find that these two types of FDI differ substantially with respect to their influence on growth. While Greenfield FDI substantially enhances growth, M&As have no effect, at best. We also demonstrate that, in contrast to Greenfield FDI, a larger volume of M&As results in an appreciated real exchange rate. The resulting loss in price competitiveness may explain the poor growth effect of the M&A variant of FDI. --Growth,foreign direct investment,mergers and acquisitions,green-field investments

Is corruption an efficient grease?

This paper tests whether corruption may act as an efficient grease for the wheels of an oth-erwise deficient institutional framework. We analyze the interaction between aggregate efficiency, corruption, and other dimensions of governance for a panel of 54 developed and developing countries. Using three measures of corruption and five measures of other aspects of governance, we observe that corruption is consistently detrimental in countries where institutions are effective, but that it may be positively associated with efficiency in countries where institutions are ineffective. We thus find evidence of the grease the wheels hypothesis.governance; corruption; income; aggregate productivity; efficiency

Behind closed doors: Revealing the ECB’s Decision Rule

This paper aims at discovering the decision rule the Governing Council of the ECB uses to set interest rates. We construct a Taylor rule for each member of the council and for the euro area as a whole, and aggregate the interest rates they produce using several classes of decision-making mechanisms: chairman dominance, bargaining, consensus, voting, and voting with a chairman. We test alternative scenarios in which individual members of the council pursue either a national or a federal objective. We then compare the interest-rate path predicted by each scenario with the observed euro area’s interest rate. We find that scenarios in which all members of the Governing Council are assumed to pursue Euro-area-wide objectives are dominated by scenarios in which decisions are made collectively by a council consisting of members pursuing national objectives. The best-performing scenario is the one in which individual members of the Governing Council follow national objectives, bargain over the interest rate, and their weights are based on their country’s share of the zone’s GDP.European Central Bank, Monetary Policy Committee, Decision rules

An FDI is an FDI is an FDI? The growth effects of greenfield investment and mergers and acquisitions in developing countries

We explore the effect of foreign direct investment (FDI) on economic growth in developing countries, distinguishing between mergers and acquisitions (M&As) and Greenfield investment. We find that these two types of FDI differ substantially with respect to their influence on growth. While Greenfield FDI substantially enhances growth, M&As have no effect, at best. We also demonstrate that, in contrast to Greenfield FDI, a larger volume of M&As results in an appreciated real exchange rate. The resulting loss in price competitiveness may explain the poor growth effect of the M&A variant of FDI

The Devil is in the Shadow – Do Institutions Affect Income and Productivity or only Official Income and Official Productivity?

This paper assesses the relationship between institutions, output, and productivity, when official output is corrected for the size of the shadow economy. Our results confirm the usual positive impact of institutional quality on official output and total factor productivity, and its negative impact on the size of the underground economy. However, once output is corrected for the shadow economy, the relationship between institutions and output becomes weaker. The impact of institutions on total (“corrected”) factor productivity even becomes insignificant. Differences in corrected output must then be attributed to differences in factor endowments. These results survive several tests for robustness.shadow economy, income, aggregate productivity, development accounting

An FDI is an FDI is an FDI? The growth effects of greenfield investment and mergers and acquisitions in developing countries

We explore the effect of foreign direct investment on economic growth in developing countries, distinguishing between mergers and acquisitions ("M&As") and "greenfield" investment. A simple model captures the key difference between the two types of FDI: unlike greenfield investment, M&As partly represent a rent accruing to previous owners, and do not necessarily contribute to expanding the host country's capital stock. The model suggests that greenfield FDI has a stronger impact on growth than M&A sales. This hypothesis is supported by our empirical results, which show that greenfield FDI enhances growth, while M&As have no effect, at best

The Devil is in the Shadow Do institutions affect income and productivity or only official income and official productivity

This paper assesses the relationship between institutions, output, and productivity, when official output is corrected for the size of the shadow economy. Our results confirm the usual positive impact of institutional quality on official output and total factor productivity, and its negative impact on the size of the underground economy. However, once output is corrected for the shadow economy, the relationship between institutions and output becomes weaker. The impact of institutions on total (corrected) factor productivity even becomes insignificant. Differences in corrected output must then be attributed to differences in factor endowments. These results survive several tests for robustness. --shadow economy,income,aggregate productivity,development accounting