Survey information on Swiss exporters is used to test the hypothesis that firm-specific factors, in particular firm size, are important determinants of pricing-to-market (PTM). The survey asked exporters whether they set dif- ferent prices across markets and, if so, whether price segmentation occurred because of pricing conditions in the local market or other factors. The empirical analysis is based on a probit model that regresses a binary-choice variable of PTM on firm size and other control variables. The main empirical finding is that firm size and PTM are positively and significantly correlated. A further result is that while firms whose main export market is in the Euro area are less likely to engage in PTM, firm size plays a bigger role for them. These results are robust across different PTM classifications, regression specifications, export destinations, and industrial sectors.
We investigate whether information sharing among banks has affected credit market performance in the transition countries of Eastern Europe and the former Soviet Union, using a large sample of firm-level data. Our estimates show that information sharing is associated with improved availability and lower cost of credit to firms. This correlation is stronger for opaque firms than transparent firms, and stronger in countries with weak legal environments than countries with strong legal environments. In cross-sectional estimates, we control for variation in country-level aggregate variables that may affect credit, by examining the differential impact of information sharing across firm types. In panel estimates, we also control for the presence of unobserved heterogeneity at the firm level, as well as for changes in macroeconomic variables and the legal environment.
In this paper, we investigate how, in a stylised theoretical framework, an increase in the degree of globalization - modelled as a deline in trade costs - affects the real natural rate of interest by impacting firms markups. Outlining a two- country dynamic general equilibrium model with endogenous elasticity of substitution between goods, we suggest two main propositions: 1) Globalization - via the impplied variation in markups - has a potentially significant impact on the natural rate of interest. 2) Simple, plausible markup dynamics may have contributed to explain the recent "conundrum" of world interest rates.
Recently, the Bank of Japan outlined a two perspectives approach to the conduct of monetary policy that focuses on risks to price stability over different time horizons. Interpreting this as pertaining to different frequency bands, we use band spectrum regression to study the determination of inflation in Japan. We find that inflation is related to money growth and real output growth at low frequencies and the output gap at higher frequencies. Moreover, this relationship reflects Granger causality from money growth and the output gap to inflation in the relevant frequency bands.
This paper examines a special episode in communication practices of the Swiss National Bank (SNB) when short-term interest rates reached the zero bound. A particular feature of SNB communication policy at the time was to talk openly about alternative policy instruments despite the fact that they were never implemented. Non-sterilized FX interventions were frequently mentioned as a potential instrument. We ask how did financial markets respond to the SNBs repeated references of non-sterilized interventions? The empirical results with high frequency data provide strong evidence that SNB intervention references depreciated the domestic currency for several hours. The case study supports the view that communication is an effective tool for monetary policy.
In this paper we analyze high-frequency movements in Swiss financial markets in reaction to real-time communication by the Swiss National Bank. Our analysis of central bank communication encompasses official speeches and interviews, not only monetary policy announcements. We examine the reactions of the currency market, the bond market and the stock exchange. The evidence suggests that speeches and interviews, along with monetary policy announcements, engender a significant price reaction. This paper sheds light on the relevance of communications other than monetary policy announcements.
Multivariate filters based on the Hodrick-Prescott filter are appealing because they combine the advantages of the Hodrick-Prescott filter with economic relationships. Recently, a new multivariate filter has been put forward by Hirose and Kamada (2003). In this article we apply this new filter to Swiss data spanning the period from 1981 to 2005. We estimate both potential output and the associated output gap with quarterly data. Moreover, a model-consistent Phillips curve for an open economy is derived from simple economic relationships. Based on the estimated Phillips curve, we investigate exchange-rate pass through effects on consumer prices. We find only a weak transmission of exchange rate fluctuations into consumer prices.
I address David Albouy's (2006) critique of the data constructed by Daron Acemoglu, Simon Johnson and James Robinson (2001). The contribution of this paper is to instrument for settler mortality rates that are collected from historical sources - and that may be measured with error - with a geographic model of the determinants of disease. I first establish that my instruments are significant predictors of mortality and are otherwise excludable to institutions. Among other things, the excludability is established by a falsification exercise, in which I document that the geographic potential for mortality strongly affected institutions in former colonies, yet it had no effect on institutions in the rest of the world. This differential effect settler mortality had on development can only be rationalized by the early institution building hypothesis that Acemoglu et al. argue for. I next repeat the analysis of Acemoglu et al. instrumenting for the historical mortality rate with its geographic projection. The instrumented mortality rate is a highly significant predictor of institutional quality. Moreover, this result is true when instrumenting for either the original data or the revised mortality series of Albouy. This result is also true when accounting for the population that the historical data was sampled from. Turning to the instrumental variable estimations, I show that also the relation between institutions and income is highly significant and that the associated importance of institutions for international income differences is substantial. Again this finding is true when using either of the two historical series and also when accounting for the population that the historical data was sampled from. I thus conclude that the empirical results presented in Acemoglu et al. indeed reflect their early institution building hypothesis rather than measurement error.
In this paper, we introduce a new algorithm to estimate the term structure of interest rates. It is obtained from a constrained optimization, where the objective is to minimize the integral of squared first derivatives of the instantaneous forward interest rate subject to the condition that the estimated bond prices lie within the range of observed bid and ask prices. We use a finite series of ordinary Laguerre polynomials to approximate the unknown function of the instantaneous forward interest rate. The objective function can be written explicitly as a quadratic form of the Laguerre constants and the nonlinear constraints can be obtained from a recurrence relationship. The estimation error is less than one basis point, given a sufficient number of bonds.
We examine the impact of banking sector reforms on interest rates using bank-level data from Kyrgyzstan for 1998-2005. We find that increased confidence in the banking sector has contributed significantly to lowering interest rate levels, while the impact of lower intermediation costs, credit risk, and capital costs are negligible. Our results further suggest that the liberalization of the Kyrgyz financial sector has reduced both deposit and lending rates. Finally, we find that despite considerable restructuring, the Kyrgyz banking sector has not become more competitive. As a consequence, banks' interest rates have not fully responded to lower market rates following macroeconomic stabilization.
