Volume 23 (2018)
Part 1, March
Please select from the titles below:
Part 2, September
Please select from the titles below:
Part 1, March
by B Al-Najjar and E Kilincarslan
Abstract: This study investigates the effects of firm-specific factors on the dividend policies of Turkish publicly listed firms in the post-2003 period. The paper focuses on this period because, starting in fiscal year 2003, Turkish authorities and regulators implemented various major economic and structural reforms for market integration and made significant changes in the regulatory framework of cash dividend policy rules. We analyse a panel dataset of 264 firms traded on the Istanbul Stock Exchange (ISE) over the period 2003–2012. Our results reveal that profitability, debt, growth, firm age and firm size are the most important firm-specific characteristics determining cash dividend payment decisions of ISElisted firms. The findings, thus, suggest that more profitable, more mature and larger firms are more likely to pay dividends (and distribute higher dividends), whereas firms with higher growth (investment opportunities) and more debt are less likely to pay dividends (and distribute lower dividends) in the Turkish market. Overall, we detect that the firm-specific determinants that affect the corporate dividend policies of ISE firms do follow similar patterns of dividend policy factors in more developed economies after the implementation of major developments in the post-2003 period, and hence such reforms make Turkish firms comparable to their counterparts in developed markets in terms of dividend policy setting.
by M M Stack, E J Pentecost and G Ravishankar
Abstract: Examining the trade performance for the new European Union (EU) member states is an important issue in the context of the enlargement process – and in a new era of membership contraction with the likely exit of the United Kingdom from the EU. Typically, the degree of trade integration is assessed by comparing actual trade volumes with potential trade volumes projected from the gravity model parameters, estimated for a reference group of countries that best represent normal trade relations. This approach, however, does not compare trade levels against a maximum level of trade defined by a stochastic frontier. In this paper, a stochastic frontier specification of the gravity model is used to identify the efficiency of trade integration relative to maximum trade levels. The findings, based on a panel dataset of bilateral exports from 18 Western European countries to the 13 new member states over the 1995–2022 period, indicate a high degree of trade integration, close to two-thirds of frontier estimates. Using forecast data for 2017–2022, trade efficiency should remain broadly stable and even increase for the larger countries in the likely post-Brexit phase.
by M Charpe, P Flaschel and C R Proaño
Abstract: A widely debated issue in heterodox economics is the question of whether macroeconomic activity reacts positively or negatively to increases in the wage share, i.e. whether it is wage- or profit-led. In the present paper, from an empirical perspective, we show that this question is of secondary importance for Marx’s model of the distributive cycle. Our analysis starts with the traditional Goodwin (1967) model – which describes the dynamic interaction between the wage share and the employment rate – to which we add an effective demand function to cover the utilisation of the capital stock (thus a Keynes-component to the original supply-side dynamics). In this extended Goodwin model we show that the Goodwin story remains, qualitatively, akin to Marx’s supply side model, although the distributive cycle will now also depend on the state of effective demand. Here we find that the question of whether the capacity utilisation of firms is driven by a profit-led or a wage-led goods-market regime is irrelevant if a mild elasticity condition in the case of a positive dependence of the capacity utilisation rate on the wage share is met. We illustrate this result from an empirical perspective.
by C Sharma
Abstract: This study tests the effects of inequality of opportunity on the economic
performance of Indian states. This is first such attempt using Indian data, and
the case is relevant because Indian society is divided into different castes and
religious groups. Using two rounds of employment survey data conducted from
the National Sample Survey (NSS), a state-level analysis is performed. The paper
employs the recently-developed method proposed by Ferreira and Gignoux
(2011), and computes a state-level analysis of inequality of opportunity in income
due to caste, religion and gender. Results suggest that there is wide heterogeneity
among Indian states in inequality of opportunity. Models overcoming the
endogeneity problem in the estimation confirm the effects of inequality of
opportunity on economic performance. Specifically, the results of the analysis
suggest that the impact is negative and moderate on per capita income. These
findings validate the theoretical argument that a greater equity of opportunities
leads to enhanced productivity and efficiency. Conversely, a high level of
inequality of opportunity in the job market is likely to hurt economic performance.
Part 2, September
by M Bahmani-Oskooee and A Mohammadian
Abstract: In an effort to engage in the most comprehensive analysis of the asymmetric effects of exchange rate changes on domestic production, we concentrate on bivariate linear and nonlinear models where domestic output is regressed on the real effective exchange rate. By using annual data from each of the 68 countries in our sample, the findings favour the nonlinear model and nonlinear adjustment of the exchange rate. Exchange rate changes are shown to have short-run asymmetric effects in almost all models. However, the short-run effects translate into long-run asymmetric effects in only 24 countries, though the findings are country-specific.
Abstract: Insights from behavioural economics suggest that individuals rely on different discount rates to assess the present values of gains and losses (the sign effect). They also suggest that individuals rely on different discount rates to assess investment in financial, environmental and health domains. A first objective is to further consider these valence versus domain effects. The second, novel, objective is to question whether individuals are likely to employ a higher discount rate for the benefits of investment if they also derive intrinsic value from action. The analysis focuses on perceptions of intrinsic value derived from action to conserve the environment. Will intrinsic motivation increase the sign effect and the difference between the discount rate in different domains? In a questionnaire survey, we collected data from 450 undergraduate students. Participants made choices between hypothetical financial, environmental and health gains and losses that took effect either immediately, or with a delay of 10 years. Results suggest the presence of valence and domain effects and further suggest that intrinsic motivation over action is likely to increase present bias by increasing the sign effect. This dimension of time preference is likely to have an impact on differences between discount rates in different domains.
by S K Gnangnon
Abstract: This article examines anew the implications of trade policy liberalisation for export performance in both developed and developing countries. The current empirical analysis departs from existing research in that it uses the ‘Adstock’ approach to investigate whether there exists a cumulative (i.e. sustainable) impact of trade policy liberalisation on countries’ export performance. Using a panel dataset comprising 168 countries (both developed and developing) over the period 1998–2014, the analysis provides strong evidence on how the impact of trade policy liberalisation on export performance is sustainable, i.e. whether it is persistent over time. Specifically, more advanced countries appear to benefit from a higher sustainability of the impact of trade policy liberalisation on their export performance than relatively less advanced economies. Moreover, in low-income countries there is no sustainability of this impact. The latter result could be explained by the structural weaknesses that prevent low-income countries from deriving the most benefit from their integration into the global trading system. Overall, the rise in anti-trade sentiment and the subsequent increase in trade protectionist measures are likely to hurt countries’ export performance. In addition, it would particularly be desirable that the international community enhance its effort towards helping low-income countries address the structural trade-relating constraints that prevent them from fully benefitting from their integration into the global trading system.
by H Naser and A Rashid
Abstract: This paper examines the response of real stock prices to oil price shocks for four selected emerging economies over the period from January 1991–March 2011. To overcome the problem of omitted information in small-scale vector autoregression (VAR) models, the factor augmented vector autoregressive (FAVAR) approach proposed by Bernanke et al (2005) is utilised. In addition, Stock and Watson (2002b) has been followed in order to extract two factors that are significantly related to a large set of world-level and country-specific macroeconomic variables. The extracted factors are then used as regressors in recursive VARs to assess the response of stock prices to oil price shocks. The key results suggest that the response of stock prices to oil price shocks is quite persistent and precise, but asymmetric across the four economies. Specifically, we observe that stock prices in Brazil and India respond negatively to oil price shocks, whereas the response in China is positive. We also observe that stock prices in Russia initially respond positively, however, the response becomes negative after four months. The impulse-response results indicate that the impact of oil price shocks on stock prices is smaller for China than for the remaining three countries. Overall, our results suggest that the use of the FAVAR approach allows us to obtain more coherent evidence on the effects of oil price shocks on stock prices, by obtaining relatively more precise responses and thus increasing understanding of such shocks from a theoretical point of view.
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