Urban growth and productivity: the case of Greece

The present paper reports an attempt to estimate the role of urbanisation economies in Greek industry. Using a flexible form of production function obtained from a Taylor-series expansion of a polynomial it is estimated that the labour productivity of the manufacturing sector is five per cent higher with each doubling of urban population. The substantial advantages to urban production seem to be at the heart of the urbanisation process that accompanied industrialisation in Greece. The policy implications are that decentralisation policies may be justifiable on regional equity but not on economic efficiency grounds. Selection and promotion of a few urban centres in each region would be a more successful regional policy.urbanisation; labour productivity; manufacturing

Entry in Greek manufacturing industry: Athens vs the rest of Greece

The paper reports an attempt to estimate the determinants of entry in Greek manufacturing industry in the 1984-87 period and to identify the differences between locatio nal entry preferences. Entry in Athens is found to be hesitant with respect to factors such as profitability and increased competition. Conversely, entry in the rest of the country is strongly related to expected profits and safe markets, negatively affected by relative labour costs and indifferent to international competition threats. The `healthier’ approach of regional entry is enhancing regional development prospects and partly justifies the strict regional policies of the 1980s.firm entry; location; manufacturing

On the geography of international banking: the role of third-country effects

International banking is a complex phenomenon. Among its determinants, distance has been found to be critical. But does distance only have a simple negative direct effect? Or is the role of geography more intricate? Applying spatial analysis techniques on BIS data of bank foreign claims in 178 countries in 2006, evidence of positive spatial autocorrelation under alternative spatial weights schemes is brought to light. The geographical aspects of international banking are further explored by a spatial autoregressive gravity model. The results obtained support that the operation of a spatial lag leads to important indirect or third-country effects. Evidence of such financial spillovers is further corroborated by results of a spatial autoregressive Tobit model. Geography is more important than the effect of distance on its own would suggest. Third-country effects operate in a manner that subsequently connects countries through links beyond those immediately involved in borrowing (destination) and lending (origin) relationships. Confirming earlier results, the economic size of sending and recipient countries, cultural similarity and in-phase business cycles enhance international banking, while distance and exchange rate volatility hinder it. Also, while lower political risk has a positive role, so do higher financial and economic risks, reflecting-to some extent-some of the reasons behind the current financial crisis.international banking ;financial spillovers; gravity model; spatial econometrics

Corporate performance: does ownership matter? A comparison of foreign - and domestic - owned firms in Greece and Portugal

The paper investigates whether multinational corporations (MNCs) operating in Portugal and Greece perform differently than domestic firms using two samples. The first contains 2651 and the second 523 firms operating in Greece in 1997 and Portugal in 1992 respectively. Departures from normality of firms' profitability motivated the adoption of the robust technique of quantile regression. The estimation results suggest that ownership ties do not make a significant difference with respect to performance of firms operating in Portugal. Results were similar for firms operating in Greece and only when firms in the upper quantiles of gross profits were compared, MNCs were found to significantly perform better than domestic firms. It is probably because MNCs have to compensate for their liability of foreigness that in spite of their technological advantages they cannot persistently outperform their domestic rivals.multinational corporations, profitability, manufacturing industry Quantile Regression

Economic and financial changes since the onset of the global and euro area crises

With the introduction of the euro and the mispricing of sovereign (Greek) risk, a flux of funding inundated Greece and helped fuel an impressive growth rate (averaging 4%) in 2000-2008. Growth, combined with low inflation since monetary policy was managed by the European Central Bank (ECB), produced a flattering picture of an economy suffering from serious reform resistance. Growing fiscal and external imbalances were thus left unaddressed. In 2009 the fiscal deficit reached 15%, while Greece’s competitiveness loss against its trading partners in 2000-2008 was 30%, leading to a current account deficit exceeding 15%. The government sector was crowding-out the tradeables sector

Corporate performance : does ownership matter? A comparison of foreign - and domestic - owned firms in Greece and Portugal

The paper investigates whether multinational corporations (MNCs) operating in Portugal and Greece perform differently than domestic firms using two samples. The first contains 2651 and the second 523 firms operating in Greece in 1997 and Portugal in 1992 respectively. Departures from normality of firms' profitability motivated the adoption of the robust technique of quantile regression. The estimation results suggest that ownership ties do not make a significant difference with respect to performance of firms operating in Portugal. Results were similar for firms operating in Greece and only when firms in the upper quantiles of gross profits were compared, MNCs were found to significantly perform better than domestic firms. It is probably because MNCs have to compensate for their liability of foreigness that in spite of their technological advantages they cannot persistently outperform their domestic rivals.Fundação para a Ciência e a Tecnologia (FCT

How likely is a credit-less recovery in the euro area? The role of a capital markets union

It is often discussed how bank-dependent for financing investment euro area firms are. It is estimated that 80% of their investment needs are financed from banks and only 20% from capital markets, while in the US the reverse is true. One of the reasons for this may be the large number of small and medium sized firms (SMEs) in Europe that are relatively small to be analysed and rated by rating companies. Hence, they remain dependent on the assessment of their local bank branch. Another reason may be the fragmentation of national capital markets where asymmetry of information, differences in regulation and savings availability issues are important

Questioning Greece’s future from the other side of the Atlantic

In the last month (20 Sept-18 Oct 2015) I visited a number of universities and think tanks in Canada and the US to give a series of lectures supported by the Onassis Foundation lectureships program. Visiting six cities and many more institutions in four weeks was a demanding but rewarding experience

Determinants of non-performing loans in Greece: the intricate role of fiscal expansion

Following the financial and debt crises in the euro area and the delays in formulating a cohesive policy response, Greek banks faced serious problems with the increase in nonperforming loans (NPLs) being the most threatening. In this study, we attempt to empirically investigate the determinants of NPLs in the Greek banking sector, using quarterly aggregate data for the period 2003Q1-2020Q2 and the autoregressive distributed lag (ARDL) bounds testing approach. We find that NPLs are determined mostly by factors related to macroeconomic conditions in Greece during the period under investigation, rather than by bank-related factors. Of particular interest is the case of government debt, which is found to exert a significant and positive long-term impact on NPLs irrespective of some short-term dynamics that appear to provide a temporary relief. The fiscal balance is also found to exert a negative long-term effect, justifying the quest for surpluses post-crisis. As debt accumulation is a policy followed by most countries in order to stabilize economies hit by the COVID-19 crisis, its long-term effects on the financial system should be taken into account and institutional measures introduced to face the new risk

Bank Lending Margins in the Euro Area: The Effects of Financial Fragmentation and ECB Policies. LEQS Discussion Paper No. 105/2016 February 2016

In the present paper we study the determinants of the margins paid by euro-area nonfinancial corporations (NFCs) for their bank loans on top of the rates they earn for their deposits (bank lending margins). We use panel VAR techniques, in order to test for causality relationships and produce impulse response functions for eleven euro-area countries from 2003:1 to 2014:12. The countries are separated into two groups (distressed and nondistressed), in order to examine for heterogeneities in the relationships between lending margins; the period is also separated with reference to the peak of the global financial crisis (before and after the collapse of Lehman in September 2008). We find that significant heterogeneities existed even before the global financial crisis and remained in its aftermath, although the magnitude and the direction of the effects exercised by the explanatory variables have changed. Furthermore, apart from finding that market concentration and the prudence of banks’ management increase the lending margins NFCs pay for their loans, there is evidence of substitution effects between financing obtained from banks and corporate bond markets. The provision of ample liquidity from the ECB, in the aftermath of the global financial crisis was found to be effective only for the core countries, suggesting that further policy actions are needed in order to reduce the fragmentation of bank lending and promote financial integration to the benefit of the euro-area real economy