Are defined contribution pension schemes socially sustainable? A conceptual map from a macroprudential perspective

If the combined retirement income, provided by public and private defined contribution (DC) pension schemes, falls below socially acceptable standards, there is a political risk that consensus seeker policymakers could yield to pressures to commit future fiscal revenues. These contingent liabilities, when incorporated in markets’ expectations, are bound to create spillovers on sovereign risk, with negative feedback loops on the capital adequacy of banks and of other intermediaries, owing to losses on their government paper. Among the causes of reduced annuities out of the final assets in DC pension funds is an equity risk premium much lower than the commonly values advertised by the industry and by policymakers. From a macroprudential perspective, this political risk should be taken into account in stress tests assessing banks’ resilience to financial shocks.pensions, equity risk premium, political risk, sovereign risk, stress test;

When do trade credit discounts matter? Evidence from Italian firm-level data

Italian firms are top users of trade credit in an international comparison. The paper offers some clues to the determinants of this stylised fact exploiting the answers of about 1900 manufacturing firms on a wide range of contractual features, separately for domestic and foreign counterparties. The main finding is that, with the almost totality of commercial transactions made on credit, there is no evidence that trade credit is more expensive than loans. An econometric investigation shows that discounts offered have the expected effect of reducing payment delays only for customers located abroad, where customary credit periods are shorter. The result is consistent with the poor explanatory power of the discounts received for the trade debt period of domestic firms and with the evidence of larger buyers willing to exploit their market power with suppliers.Trade credit; Late payments; Credit rationing

Structural breaks in the interest rate pass-through and the euro. A cross-country study in the euro area and the UK

We search for breaks in the short term business lending rate pass-through in euro countries, possibly associated with the introduction of the euro. One break is detected in six national retail rates among EMU countries; two breaks are found in other six cases, and in the UK as well. The last break occurs much earlier for France while several quarters later for other countries, suggesting a loose link if ever with the event. Pass-throughs decrease (except for France), becoming even more incomplete (except for Netherlands); though the adjustment to equilibrium is faster, cross-country heterogeneity remains fairly large. With the new harmonized interest rates database, available since 2003, pass-throughs are much closer to one, especially for larger loans.Interest rates; Monetary policy; Economic and Monetary Union (EMU); Cointegration analysis; Structural breaks

Is trade credit more expensive than bank loans? Evidence from Italian firm-level data.

The study, aimed at evaluating the likely effects of the EC Directive on late payments, provides direct evidence that interfirm credit received by Italian manufacturing firms is, if ever, only slightly more expensive than bank loans. An econometric exercise shows that financial determinants have a stronger impact on recorded credit and debt periods for larger firms, able to use trade credit to smooth their cycle; smaller firms seem to adapt more passively to counterparties' supply and demand. A novel finding is that shorter credit periods are associated to the directly measured discount offered for quicker payments.Trade credit; Late payments; Credit rationing

Trade credit in Italy: Evidence from individual firm data

Interfirm late payments are a hot issue in the EU, as witnessed by the 1998 bills passed in Italy and in the U.K. and by the soon to be approved EU Directive. Comprehensive information, especially on the effective own cost, is however almost absent in the literature. The paper provides the first detailed evidence of the trade debt own cost for the Italian manufacturing firms, arising out of discounts offered and of penalties for late payments. It is shown that, comparing also self-defined bank lending rationed and non rationed firms, interfirm credit received is, if ever, only slightly more expensive than bank credit. Cross-section econometric analysis, besides establishing the greater reactivity of credit received rather than granted to the external funds implicit cost, finds that the discount offered for early payments affects significantly credit granted to buyers. The estimates obtained for the basic specifications are robust when the sample is split according to various criteria; larger firms, probably because less financially constrained, react more strongly to sales reductions via longer credit and debt periods.trade credit, late payments,credit rationing

Multifunctionality and value creation in rural areas of southern Italy

The paper focuses on a new theoretical-methodological approach to interpreting functional transformation processes of farms located in rural areas and marked by a delay in development. We have defined a theoretical paradigm of optimal value portfolio (OVP) which considers -in a new light- multifunctional agricultural farms as an ensemble of governance structures optimizing the creation of value. The need to validate the OVP functionality has led us to identify a new methodological approach referred to as the Value Portfolio and Multifunctional Governance Analysis (VPMGA). This analysis embeds value chain analysis and governance value analysis and at the same time attempts to overcome the “sectoral” limits representing also a new and further development. We deem, in fact, that the VPMGA best responds to the specificities of multifunctional agricultural farms. Through the VPMGA we have identified four determining family variables which are internal and external to the farm (internal resources, market, territory, policies). We have also assessed the functional links with the boundary shift processes and the mechanisms governing transactions and the creation of an optimal value portfolio. We have empirically verified this approach on selected agro-food chains which are located in rural areas characterized by different levels of development. From the findings we have defined various ideal types of farms that allowed us to make future scientific assumptions and highlight normative implications for improving managerial decision-making processes based on the VPMGA model. In this way, the VPMGA can be a tool to inform policy makers, especially in the light of the new challenges facing rural development.multifunctionality, rural development, positive externalities, value chains, Community/Rural/Urban Development, Q12, Q18, Q19,

Multiple breaks in lending rate pass-through A cross country study for the euro area

A new approach is proposed for searching multiple unknown breaks, possibly associated with EMU, in the short term business lending rate pass-through. Multiple breaks are detected in five out of nine countries of the euro area. The last break occurs much before the start of EMU for France, several months after that event for Austria, Italy and Germany. Long run pass-throughs decrease (except for France) sizably below one (except for the Netherlands); heterogeneity in the monetary transmission increases across countries. These results raise doubts on claims of a more effective monetary policy under EMU.Interest rates; Monetary policy; Economic and Monetary Union; Cointegration analysis; Structural breaks

A less effective monetary transmission in the wake of EMU? Evidence from lending rates pass-through

A new approach to search for structural breaks in the retail lending rates pass-through in the wake of EMU is proposed and implemented for Italy and Portugal. The econometric exercise shows that breakpoints cluster in the second semester 1999 and that the pass-through on short term lending is, in contrast with earlier research, sizeably lower in the post-break period. The recently proposed distinction between monetary policy and cost-of-funds approaches in the pass-through analysis does not yield different breakpoints. These results challenge the widely held view that EMU has in its wake enhanced the effectiveness of monetary transmission via the banking sector and made it more uniform across countries, because of rising and converging pass-throughs. A strengthened relationship lending could at least partly explain the reduced pass-through in the Italian case.Interest rates; Monetary policy; European Monetary Union; Relationship lending; Cointegration analysis; Structural breaks

L'uscita dall'euro: uno strumento adatto a quale obiettivo?

Nel lavoro si esamina la congruità dello strumento “uscita dall’euro”, e conseguente introduzione della nuova lira, rispetto ai tre obiettivi principali si intendono perseguire: i. stimolo alla crescita economica, tramite l’aumento delle esportazioni nette, come effetto della svalutazione della nuova lira rispetto alle altre monete; ii. autonomia decisionale nazionale nella politica economica, e monetaria in particolare, perché avrebbe effetti strutturali positivi sulla crescita; iii. recupero del ruolo dei cittadini/elettori italiani per una legittimazione democratica delle scelte di politica economica delegate a soggetti sovranazionali. I costi attuali della partecipazione all’euro, innegabili per l’incompletezza delle condizioni che ne favorirebbero il buon funzionamento, sono comunque sicuramente minori rispetto a quelli derivanti da un evento, come l’uscita dalla moneta unica e il ritorno alla lira, con elevati costi prevedibili sulla base dell’esperienza storica di crisi finanziarie, specie quelle in cui si intrecciano crisi di cambio, bancarie e sul debito sovrano

A less effective monetary transmission in the wake of EMU? Evidence from lending rates pass-through

A new approach to search for structural breaks in the retail lending rates pass-through in the wake of EMU is proposed and implemented for Italy and Portugal. The econometric exercise shows that breakpoints cluster in the second semester 1999 and that the pass-through on short term lending is, in contrast with earlier research, sizeably lower in the post-break period. The recently proposed distinction between monetary policy and cost-of-funds approaches in the pass-through analysis does not yield different breakpoints. These results challenge the widely held view that EMU has in its wake enhanced the effectiveness of monetary transmission via the banking sector and made it more uniform across countries, because of rising and converging pass-throughs. A strengthened relationship lending could at least partly explain the reduced pass-through in the Italian case.Interest rates; Monetary policy; European Monetary Union; Relationship lending; Cointegration analysis; Structural breaks