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on Financial Development and Growth |
| By: | Eilers, Yota (University of Oxford); Kluve, Jochen (KfW Development Bank); Langbein, Jörg (World Bank); Reiners, Lennart (Asian Development Bank) |
| Abstract: | In 2022, governments around the world committed USD 211 bn. to official development assistance. Despite these high contributions, systematic assessments of the determinants of success - or failure - of development aid projects remain limited, particularly for bilateral development aid. This paper provides such a systematic, quantitative analysis: we construct a unique database covering 5, 608 evaluation results - success ratings - for bilateral development aid projects financed through one of the biggest global donors, KfW Development Bank. Detailed data on project characteristics allow us to link success ratings to five clusters of key explanatory factors along the entire project life-cyle and context: (a) In terms of project financing, we find a statistically significant positive association between the financial budget volume of the project and its success ratings, ceteris paribus. Second, concerning the (b) project structure, the type of project partner - government, private sector, multilateral organizations - shows no significant association with project success, suggesting that project implementation works equally well with different partners. (c) Project complexity as measured by both technical complexity and longer implementation duration exerts a negative influence on success ratings. Regarding (d) project risks, a highly relevant and significant predictor for less successful projects is the share of ex-ante identified risks that eventually materialized - suggesting that project designs correctly identify the relevant risks in advance, but are not able to mitigate (all of) them during execution. Finally, concerning (e) the project context there is some indication that higher GDP growth rates are positively associated with project success. |
| Keywords: | development finance, OECD DAC evaluation criteria, meta analysis |
| JEL: | C40 F35 O10 O19 |
| Date: | 2023–12 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp16691&r=fdg |
| By: | Abonyi, George (Institute of Southeast Asian Studies) |
| Abstract: | This paper presents a case study of the Asian Development Bank's Financial Sector Governance Reforms Development Program Loan (the Program) to the Government of Indonesia. The case study focuses on the political economy dimension of policy reform and its implications, rather than on Program details. Launched in June 1998, the Program was part of a multi-donor effort led by the International Monetary Fund, to help Indonesia respond to the Asian economic crisis and undertake reforms in the financial sector. The design and implementation of the Program took place in an environment characterized by an unexpected, deep, and sustained economic crisis, accompanied by social instability, and political and institutional uncertainty and change. Against this backdrop, the case study examines the context of Indonesia's policy reforms in the financial sector and the general design of the Program. It touches on the implementation of selected reforms and sustainability of the reform process. The purpose is to draw lessons that can assist in the more effective preparation and implementation of such reforms, and design of policy-based lending. In order to help structure the case study, a framework is introduced for the analysis of the political economy dimension of policy reform. This framework is proposed as a useful general tool both for the ex post understanding of the political economy dimension of policy reform, as well as an analytic tool for assisting in the ex ante design of specific policy reform programs and related policy-based lending. |
| Keywords: | financial sector governance; Indonesia; development program loan; policy reform; political economy |
| JEL: | G28 O53 P16 |
| Date: | 2024–01–16 |
| URL: | http://d.repec.org/n?u=RePEc:ris:adbewp:0076&r=fdg |
| By: | Bhaso Ndzendze |
| Abstract: | This paper investigates whether foreign investment (FDI) into Africa is at least partially responsive to World Bank-measured market friendliness. Specifically, I conducted analyses of four countries between 2009 and 2017, using cases that represent two of the highest scorers on the bank's Doing Business index as of 2008 (Mauritius and South Africa) and the two lowest scorers (DRC and CAR), and subsequently traced all four for growths or declines in FDI in relation to their scores in the index. The findings show that there is a moderate association between decreased costs of starting a business and growth of FDI. Mauritius, South Africa and the DRC reduced their total cost of starting a business by 71.7%, 143.7% and 122.9% for the entire period, and saw inward FDI increases of 167.6%, 79.8% and 152.21%, respectively. The CAR increased the cost of starting businesses but still saw increases in FDI. However, the country also saw the least amount of growth in FDI at only 13.3%. |
| Date: | 2023–12 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2401.00227&r=fdg |
| By: | David Gomtsyan (Universite Clermont-Auvergne) |
| Abstract: | Online appendix for the Review of Economic Dynamics article |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:red:append:23-113&r=fdg |
| By: | Daniel Aparicio-Pérez (Department of Finance and Accounting, Universitat Jaume I, Castellón, Spain); Jordi Ripollés (Institute of International Economics and Department of Economics, Universitat Jaume I, Castellón, Spain) |
| Abstract: | This paper aims to identify the heterogeneity in the resource-growth nexus and explore the relative importance of the potential factors that may drive it. By exploiting a panel dataset of 97 countries from 1990 to 2019, we employ the Group Fixed Effect estimator of Bonhomme and Manresa (2015) to endogenously identify groups of countries with different time-varying patterns of economic growth that, in addition, present a heterogeneous economic response to changes in natural resource wealth. Subsequently, we employ an ordered probit to characterize the identified heterogeneity, assessing the relevance of multiple institutional factors and other transmission channels. Our findings indicate that the effect of natural resources on economic growth varies significantly among groups of countries, particularly in relation to the quality of economic and political institutions, social capital, export diversification, and financial development. |
| Keywords: | Economic growth; Grouped fixed effects; Heterogeneity; Institutions; Natural resources; Ordered probit. |
| JEL: | C23 O13 O43 |
| Date: | 2024 |
| URL: | http://d.repec.org/n?u=RePEc:jau:wpaper:2024/02&r=fdg |
| By: | Chihiro Shimizu; Yongheng Deng; Tomoo Inoue; Kiyohiko Nishimura |
| Abstract: | Many developed countries have experienced prolonged economic stagnation in the aftermath of property bubbles bursting. Such observations have led people to believe that economic stagnation accompanied by property bubbles has longer and more severe consequences than other forms of economic stagnation. This study conducts an empirical analysis to challenge this hypothesis and suggest that demographics are closely related to other aspects of long-term economic stagnation. Using panel data from 17 countries from 1974 to 2018, we investigate the residential property price dynamics by incorporating demographic factors and considering the interaction of those demographics with credit conditions. Our results shed new light on the importance of demographic factors in modeling the long-run equilibrium of residential property prices. We find that the effect of nominal interest rates determined by monetary policy on asset prices varies depending on the country and the degree of population aging at the time. We also find that persistently optimistic population projections lead to the over-supply of residential stocks in rapidly aging countries, resulting in stagnant residential property markets. We demonstrated that ignoring the demographic and credit factors in the dynamics may lead to misjudgment of the long-run equilibrium conditions and incorrect policy decisions.Length: 36 pages |
| Date: | 2024–01 |
| URL: | http://d.repec.org/n?u=RePEc:tcr:wpaper:e198&r=fdg |
| By: | Pinkus, David (Department of Economics, Copenhagen Business School); Pozzoli, Dario (Department of Economics, Copenhagen Business School); Schneider, Cédric (Department of Economics, Copenhagen Business School) |
| Abstract: | We use a unique database on domestic pension fund investment to analyze the re-lationship between pension fund investment and innovation within Danish firms. We find a significant positive association between pension fund investment and various measures of innovation, including green technologies for climate change mitigation and adaptation. However, this relationship is much weaker in highly competitive indus-tries, suggesting that pension funds encourage innovation by monitoring and holding managers accountable. Our analysis also shows that pension funds foster innovation by providing stable long-term capital. Overall, our study highlights the important role of pension funds in driving firm innovation, particularly by reducing managerial slack and by supplying stable, long-term capital. |
| Keywords: | Pension Fund Investment; Innovation; R&D |
| JEL: | J24 J60 L20 |
| Date: | 2024–01–17 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:cbsnow:2024_001&r=fdg |
| By: | Holm-Hadulla, Fédéric; Thürwächter, Claire |
| Abstract: | We study how shocks to corporate leverage alter the macroeconomic transmission of monetary policy. We identify leverage shocks as idiosyncratic firm-level disturbances that are aggregated up to a size-weighted country-level average to generate a Granular Instrumental Variable (Gabaix and Koijen, forthcoming). Interacting this instrumental variable with high-frequency identified monetary policy shocks, we find that transmission to the price level strengthens in the presence of leverage shocks, while the real effects of monetary policy are unaffected. We show that this disconnect can be rationalized with an internal devaluationchannel. Economies experiencing an increase in leverage exhibit a stronger monetary policy-induced contraction in domestic demand. This, however, is counteracted by a weaker contraction in exports, facilitated by their improved price competitiveness. JEL Classification: C36, E22, E52 |
| Keywords: | corporate leverage, granular instrumental variable, micro-to-macro analysis, monetary policy transmission |
| Date: | 2024–01 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20242891&r=fdg |
| By: | Makoto WATANABE; Yu Awaya; kohei Iwasaki |
| Abstract: | This paper examines how monetary expansion causes asset bubbles. Whenthere is no monetary expansion, a bubbly asset is not created due to a hold-upproblem. Monetary expansion increases buyers money holdings, and then, dealersare willing to buy a worthless asset from sellers, in hopes of selling it to buyers |
| Date: | 2024–01 |
| URL: | http://d.repec.org/n?u=RePEc:cnn:wpaper:24-001e&r=fdg |
| By: | Döttling, Robin |
| Abstract: | How does the zero lower bound on deposit rates (ZLB) affect how banks respond to capital regulation? I study this question in a model in which households value the liquidity services of deposits yet do not accept negative deposit rates. When deposit rates are constrained by the ZLB, tight capital requirements disproportionately hurt franchise values and are therefore less effective in curbing excessive risk taking. The model delivers a novel rationale for "interest-dependent" capital regulation that is optimally laxer when the ZLB binds and tighter when the ZLB is slack but may bind in the future. |
| Date: | 2023–12–19 |
| URL: | http://d.repec.org/n?u=RePEc:osf:osfxxx:9dxzf&r=fdg |
| By: | Xolani Sibande; Alistair Milne |
| Abstract: | This study investigates the impact of the Basel III capital requirement on the supply of bank credit in South Africa. The literature offers greatly varying estimates of the impact of bank capital requirements on loan supply. Using a specification closely modelled on a related study of Peru by Fang et al. (2020), we report panel regressions using monthly balance sheet data for the four biggest banks in South Africa. We distinguish between three different categories of bank lending for household and corporate borrowers and report complementary local projection estimates to capture dynamic impacts. We find little evidence that the introduction of higher capital requirements under Basel III has reduced the supply of bank credit in South Africa. We surmise that this is mainly due to the large banks being well capitalised and operating with capital buffers that are larger than regulatory minimum requirements. |
| Date: | 2024–01–29 |
| URL: | http://d.repec.org/n?u=RePEc:rbz:wpaper:11055&r=fdg |
| By: | Matteo Aquilina; Giulio Cornelli; Marina Sanchez del Villar |
| Abstract: | Can regulation ease problems of asymmetric information for young and innovative firms? The new and largely unregulated cryptocurrency ecosystem offers a unique setting to test this hypothesis. We construct a comprehensive measure of regulatory stringency at the state-month level for the United States and find that more stringent regulation is conducive to more private capital, but only in states with a more developed financial sector. Looking at granular deal-level data we trace the increase in access to capital triggered by a more stringent regulatory environment to a reduction in information asymmetries. Consistently with a reduction in information asymmetry, we find that younger firms with less tangible assets benefit more, and foreign investors, investors that are not specialised in the crypto sector and those with fewer investment professionals invest more capital. |
| Keywords: | corporate finance, venture capital, asymmetric information, cryptocurrency |
| JEL: | D82 G24 G28 O1 |
| Date: | 2024–01 |
| URL: | http://d.repec.org/n?u=RePEc:bis:biswps:1162&r=fdg |
| By: | Khalil Liouane |
| Abstract: | The African continent has witnessed a notable surge in entrepreneurial activity, with the number of startups and investments made in the ecosystem growing significantly in recent years. Against this backdrop, this paper presents an in-depth analysis of the critical key factors influencing funding amounts in African startup deals. A comprehensive analysis of 2, 521 startup investment deals, spanning from January 2019 to March 2023, was conducted using a combination of statistical and several machine learning techniques. The results of this study highlight a significant gender diversity gap, the importance of professional experience, and the impact of founders' academic backgrounds. The study reveals that human capital, a diversified sector approach, and cross-border collaboration strategies are crucial for a robust startup ecosystem. Additionally, we identified the potential positive impact of 'Y combinators' for African startups, the implications of exit strategies on deal amounts, and the heterogeneity as well as the incongruity of investment rounds across the continent. In light of these findings, we propose an assortment of policy recommendations aimed at fostering a propitious milieu for African entrepreneurial ventures, promoting equitable investment distribution, and enhancing cross-border collaboration. By providing a rigorous empirical analysis, this study not only contributes to the existing body of literature but also lays the foundation for future research aimed at promoting investment and catalyzing socio-economic development throughout the African continent. |
| Date: | 2024–01 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2401.05760&r=fdg |
| By: | Hoang Nguyen; Audron\.e Virbickait\.e; M. Concepci\'on Aus\'in; Pedro Galeano |
| Abstract: | In this paper, we employ Credit Default Swaps (CDS) to model the joint and conditional distress probabilities of banks in Europe and the U.S. using factor copulas. We propose multi-factor, structured factor, and factor-vine models where the banks in the sample are clustered according to their geographic location. We find that within each region, the co-dependence between banks is best described using both, systematic and idiosyncratic, financial contagion channels. However, if we consider the banking system as a whole, then the systematic contagion channel prevails, meaning that the distress probabilities are driven by a latent global factor and region-specific factors. In all cases, the co-dependence structure of bank CDS spreads is highly correlated in the tail. The out-of-sample forecasts of several measures of systematic risk allow us to identify the periods of distress in the banking sector over the recent years including the COVID-19 pandemic, the interest rate hikes in 2022, and the banking crisis in 2023. |
| Date: | 2024–01 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2401.03443&r=fdg |
| By: | Tsagkanos, Athanasios; ANDRIAKOPOULOS, KONSTANTINOS |
| Abstract: | Bank firms try to improve their efficiency by offering credit to large firms which extent trade credit to those firms that are blocked from bank credit or faces high possibilities to not pay back their loans. This self-discipline helps banks to become more prudent when they lend risky firms such as small and medium size firms. So, the aim of this research is to empirically examine if both credit cycle of large lending and business cycle affect the ex-post credit risk (i.e. non-performing loans) in the banking system of USA. A unique data set is created by using the Statistics on Depository Institutions report compiled by the Federal Deposit Insurance Corporation covering the period between 2010Q1-2019Q4. The Credit Crunch of 2007 had its origin in US real estate market, but rapidly it is expanded worldwide because of banking system interconnection across countries. A crucial characteristic of the aforementioned crises was the defaults on subprime mortgages because of the lax lending practices and because the period covered by the low starter interest rate ended. Therefore, we carry out research on US NPLs considering a very important banking system for the global economy taking into account the pressure on south part pf Eurozone because of the Credit Crunch of 2007 as well as for the robustness of many European banks because of the interconnection of banks across counties. What we found, using the GMM as econometric methodology, is that both current credit cycle of large lending and current business cycle can influence negatively the US NPLs due to the self-discipline role of large lending and the adverse macroeconomic conditions respectively. In addition, we found that the credit cycle of large lending it can be associated positively with US NPLs with one period lag supporting the excess credit influence on NPLs. Moreover, we noticed that the US NPLs have not a symmetric sensitivity between both business cycle and credit cycle of large lending. Finally, the empirical result of our research can help policy makers as well as bankers to their effort to develop a more stable banking system when they design policies to deal effectively with NPLs. |
| Keywords: | Large Lending; Ex-post credit risk; Non -perfoming loans; Bysiness cycle; Credit cycle |
| JEL: | C23 C51 E32 G2 G21 |
| Date: | 2024–01–04 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:119664&r=fdg |
| By: | Aneta Hryckiewicz (Kozminski University); Kinga Tchorzewska (Kozminski University); Marcin Borsuk (Narodowy Bank Polski; Polish Science Academy; University of Cape Town); Dimitrios Tsomocos (Saïd Business School and St. Edmund Hall, University of Oxford) |
| Abstract: | The recent development of technological innovation in the banking sector has the potential to bring numerous benefits, but it also raises concerns regarding financial stability, an aspect that has been relatively understudied in academic literature. Our research paper aims to explore the impact of banks' recent adoption of FinTech solutions on both individual and systemic risks within the banking sector. Specifically, we examine how banks' technological innovations influence non-performing loans (NPLs), asset correlation in the system, and measures of systemic risk. To accomplish this, we utilize a unique dataset generated through data mining techniques, which captures the scale, types, and sources of technological solutions implemented by the largest banks in 23 countries over an 11-year period. Our findings indicate that FinTech solutions implemented by banks reduce both individual and aggregated systemic risks in the banking sector, although there are certain areas where systemic risk increases. |
| Keywords: | Fintech, innovation, IT technology, IT providers, bank, systemic risk, NPLs |
| JEL: | G21 G23 G32 L13 |
| Date: | 2024 |
| URL: | http://d.repec.org/n?u=RePEc:nbp:nbpmis:367&r=fdg |
| By: | Fernández-Villaverde, Jesús; Schilling, Linda; Uhlig, Harald |
| Abstract: | This paper shows the existence of a central bank trilemma. When a central bank is involved in financial intermediation, either directly through a central bank digital currency (CBDC) or indirectly through other policy instruments, it can only achieve at most two of three objectives: a socially eÿcient allocation, financial stability (i.e., absence of runs), and price stability. In particular, a commitment to price stability can cause a run on the central bank. Implementation of the socially optimal allocation requires a commitment to inflation. We illustrate this idea through a nominal version of the Diamond and Dybvig (1983) model. Our perspective may be particularly appropriate when CBDCs are introduced on a wide scale. JEL Classification: E58, G21 |
| Keywords: | bank runs, CBDC, central bank digital currency, currency crises, financial intermediation, inflation targeting, monetary policy, spending runs |
| Date: | 2024–01 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20242888&r=fdg |
| By: | Nils Brouwer; Jakob de Haan |
| Abstract: | Using data from the Dutch Household Survey, we examine what individuals know about cryptocurrencies and how they acquire information about these assets. Our results suggest that higher-educated respondents with a stronger desire to be informed use more different information sources, which results in better knowledge. However, respondents relying on social media or friends for information on cryptocurrencies do not have better knowledge. We also observe that individuals who hold cryptocurrencies are better informed. Furthermore, the longer they own cryptocurrencies, the better knowledge respondents have. Finally, we find that individuals who acquire cryptocurrencies for investment purposes demonstrate a higher level of understanding than those who buy cryptocurrencies for other reasons. |
| Keywords: | cryptocurrencies; general public; information sources; knowledge |
| JEL: | D12 D14 G11 E41 |
| Date: | 2024–02 |
| URL: | http://d.repec.org/n?u=RePEc:dnb:dnbwpp:799&r=fdg |
| By: | Patricia Gomez-Gonzalez (Fordham University, Department of Economics); Gabriel Mathy (American University) |
| Abstract: | This paper assesses whether the British public debt featured a convenience yield during the Classical Gold Standard (1718-1913), as the US does in modern times. Our em- pirical results support this thesis. Increases in the British debt-to-GDP ratio decrease British public debt’s convenience yield between 8 and 20 basis points, qualitatively sim- ilar to the behavior of US public debt yields post-1926. Interestingly, the relationship between US yields and US public debt during the Classical Gold Standard counters previous findings for modern US times. International public debt yield spreads between other Gold Standard core countries and Britain were consistently positive and averaged 55 basis points, even though currency and sovereign risk were negligible at that time for the countries chosen. |
| Keywords: | Convenience yield, Safe asset, Liquidity, Gold Standard, Core countries |
| JEL: | E42 G12 G15 H63 N21 N23 |
| Date: | 2024 |
| URL: | http://d.repec.org/n?u=RePEc:frd:wpaper:dp2024-01er:dp2024-01&r=fdg |
| By: | Jose E. Gomez-Gonzalez (City University of New York- Lehman College (USA), Visiting Professor - Universidad de la Sabana.); Jorge M. Uribe (Universitat Oberta de Catalunya, Barcelona (Spain).); Oscar M. Valencia (Fiscal Management Division, Inter-American Development Bank, Washington (USA).) |
| Abstract: | Sovereign risk exhibits significantly asymmetric reactions to its determinants across the conditional distribution of credit spreads. This aspect, previously overlooked in the literature, carries relevant policy implications. Countries with elevated risk levels are disproportionately affected by climate change vulnerability compared to their lower-risk counterparts, especially in the short term. Factors such as inflation, natural resource rents, and the debt-to-GDP ratio exert different effects between low and high-risk spreads as well. Real growth and terms of trade have a stable but modest impact across the spread distribution. Notably, investing in climate change preparedness proves effective in mitigating vulnerability to climate change, in terms of sovereign risk, particularly for countries with low spreads and long-term debt (advanced economies), where readiness and vulnerability tend to counterbalance each other. However, for countries with high spreads and short-term debt, additional measures are essential as climate change readiness alone is insufficient to offset vulnerability effects in this case. Results also demonstrate that the actual occurrence of natural disasters is less influential than vulnerability to climate change in determining spreads. |
| Keywords: | Sovereign risk; Credit risk; Panel-quantile regressions; Nonlinear dynamics; Vulnerability; Preparedness ; Disaster risk. JEL classification: F34, G15, H63, Q51, Q54. |
| Date: | 2024–01 |
| URL: | http://d.repec.org/n?u=RePEc:ira:wpaper:202401&r=fdg |
| By: | Viral V. Acharya; Qian Jun; Yang Su; Zhishu Yang |
| Abstract: | The rise of shadow banking and attendant financial fragility in China can be traced to intensified deposit competition following the global financial crisis (GFC). Deposit competition intensified after the GFC because the GFC slowed down banks’ deposit growth from cross-border money inflows and simultaneously led to fiscal stimulus supported by banks’ credit expansion. Exploiting the fact that one big state-owned bank was particular affected by the GFC through these two channels, we document—by exploring small and medium-sized banks’ branch-level overlap with this big bank—that deposit competition increased banks’ reliance on shadow banking. In particular, exposed banks issued Wealth Management Products (WMPs)—short-maturity, off-balance-sheet substitutes for deposits—creating rollover risks for the issuers, as reflected by higher yields on new WMPs, higher borrowing rates in the interbank market, and lower stock-market performance during liquidity stress. |
| JEL: | E4 G20 |
| Date: | 2024–01 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:32034&r=fdg |
| By: | Salisu, Afees; Salisu, Sulaiman; Salisu, Subair |
| Abstract: | In this study, we develop the first daily news-based economic policy uncertainty [EPU] index for the largest economy in Africa which was hitherto suppressed in the various EPU indices published in recent times. With the renewed interest in Africa as an important destination for investments from developed economies/regions such as Europe, the US, and the UK as well as emerging economies such as China, India, and Russia, among others, in which Nigeria is strategically positioned to benefit from, the need to track the extent of economic uncertainties for the country becomes crucial for investment and policy. Thus, we construct an EPU index from -articles from prominent newspapers in the country using relevant keywords and covers the aftermath of the global financial crisis and also includes the COVID pandemic since the current data scope for the index spans January 01, 2010, to November 30, 2022. We evaluate the in-sample and out-of-sample predictability of the constructed EPU index by examining how it connects with economic/financial variables like exchange rates and stock prices in Nigeria. We provide evidence that lends credence to the inclusion of the index, among other predictors, in the predictive models for the relevant variables to produce more accurate out-of-sample forecasts for them. More importantly, the results are robust to alternative model specifications, different data frequencies, and multiple forecast horizons. We hope to extend this exercise to other useful indices such as geopolitical risk, Financial Stress indicators, and monetary policy uncertainty, among others, which are not readily available for Africa including Nigeria. |
| Keywords: | News, Economic Policy Uncertainty, Nigeria, Machine Learning, Predictability, Forecast Evaluation |
| JEL: | C53 C54 D80 |
| Date: | 2023–04–15 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:119539&r=fdg |
| By: | Rémy Herrera; Zhiming Long (THU - Tsinghua University [Beijing]); Weinan Ding (THU - Tsinghua University [Beijing]) |
| Abstract: | Considering that the rate of profit constitutes a key indicator for the analysis of the evolution of capitalist economies, this chapter proposes to study the case of France from 1896 to 2019, that is, over 124 years in total. From a series of stock of productive capital reconstructed for the occasion, a rate of profit is calculated at the macroeconomic level within a conceptual framework faithful to Marx. Over this period of more than a century, three successive long waves are identified, as parts of a secular trend towards the fall in the French rate of profit. The latter, however, recovered several times during these three sub-periods, but finally reoriented downwards, with fluctuations of an amplitude tending to decrease more and more and a deployment in a decreasing spiral of French capitalism. This long-term downward trend is mainly due to the rise in the organic composition of capital. |
| Keywords: | Rate of profit, long waves, productive capital, organic composition of capital, decomposition of the profit rate, France, Rate of profit long waves productive capital organic composition of capital decomposition of the profit rate France |
| Date: | 2023–11 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-04367756&r=fdg |
| By: | Braun, Alexander; Braun, Julia; Weigert, Florian |
| Abstract: | We examine if extreme weather exposure impacts firms' cost of equity. Motivated by a consumption-based asset pricing model with heterogeneous agents, we reveal the existence of an extreme weather risk premium in the cross-section of stock returns. In the period from 1995 to 2019, domestic U.S. stocks with the most negative sensitivity to thunderstorm losses earned excess returns of 6.5% p.a. over those with the most positive sensitivity. This premium can neither be explained by risk factors from standard asset pricing models nor by firm characteristics. Our results reveal a novel link between climate risk and firm value. |
| Keywords: | Extreme Weather Risk, Climate Risk, Cost of Equity, Empirical Asset Pricing |
| JEL: | C12 G01 G11 G12 G17 |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:cfrwps:281206&r=fdg |