This paper discusses the “regulatory license” view that reliance by regulators on the output of rating agencies in the 1930s “caused” the agencies to become a central part of the fabric of the US financial system. Exploring pre-1930 court records, we find evidence of a growing reliance on the agencies that pre-dates the regulatory moves of the 1930s. We argue that courts began using ratings as financial community produced norms of prudence, providing a novel interpretation of the emergence of rating in financial systems as a product of trustee law. We remark that this created “a legal license” problem, creating incentives and conflicts of interest not unlike those which modern observers usually associate with regulation in the subprime crisis.
Export taxes usage has recently risen. They are widely presumed to affect trade, but the lack of data has prevented a systematic evaluation of their trade effects. Based on a new dataset of tax rates at the product level, this paper estimates the distortionary trade effects of export taxes. The results, which are based on theory-consistent estimation of a structural gravity model, indicate that the elasticity of trade quantities to tax is -1.8 on average, rising to -5.5 for extractive sectors. The effects are driven by homogeneous goods. The results suggest that the burden of export taxes is shared by exporters and importers and that export taxes play a role in the rise of world prices.
This paper describes a newly collected dataset on export tax rates, which provides comprehensive coverage for 20 countries, 2 time periods and all products at HS6 level. Export tax rates are based on national government documentation, including preferential provisions for partner countries. The data are organized in a harmonized and comparable format, including ad-valorem equivalents of specific taxes. The dataset can contribute to the empirical analysis of export taxes – an increasingly applied trade policy instrument, which merits further attention from academia and policy makers alike. Furthermore, the paper contains literature review and stylized facts highlighting various aspects of export taxes.
This paper reconsiders the effects of fiscal policy on long-term interest rates and sovereign spreads employing a Factor Augmented Panel (FAP) to control for the presence of common unobservable factors. We construct a real-time dataset of macroeconomic and fiscal variables for a panel of OECD countries for the period 1989-2009. We find that two global factors - the global monetary and fiscal policy stances - explain more than 60% of the variance in the long-term interest rates. The same two global factors play a relevant role also in explaining the variance of sovereign spreads, which in addition respond to global risk aversion. With respect to standard estimation techniques the use of the FAP reduces the importance of domestic fiscal variables in explaining long- term interest rates, while it emphasizes their importance in explaining sovereign spreads. Using the FAP framework we also analyse the cross-country differences in the propagation of a shock to global fiscal stance and global risk aversion. We find the effects of the former to be modest in large economies and strong in economies characterized by low financial integration and current account deficits. Changes in global risk aversion, instead, lead to higher spreads in countries with a high stock of public debt and weaker political institutions.
This paper unpacks the operation of foreign debt bondholder committees before the creation of the British Corporation of Foreign Bondholders (CFB) in 1868. I argue that many ideas about this period need to be revisited. In particular, my evidence (which uses archival work to describe market microstructures) shows the importance of the London Stock Exchange as a Court of Arbitration. I show how the LSE General Purpose Committee set up a system of Collective Action Clauses, requiring majority agreement among bondholders to sanction a restructuring deal and permit market access. I argue that (unlike what research has argued thus far) this created powerful incentives for bondholders to get organized as they did. Previous models and formal analyses need to be recast. The CFB appears to have been an experiment in statutory restructurings rather than one in coordination.
In this paper, I use a stratified Cox Proportional Hazard Model to econometrically evaluate the effects of intra-Africa regional trade cooperation and other underlying factors on Africa`s export survival. Using a highly disaggregated dataset of bilateral trade flows at HS 6 digit level for 49 African countries for the period 1995 to 2009, I obtain 3 key main empirical results. First, intra-Africa regional trade cooperation do increase the likelihood of Africa`s export survival. The results show that the depth of regional integration matters on lowering Africa`s export hazard rates relative to countries that are not in any regional cooperation. Second, I find evidence that supports the “learning by export hypothesis”. That is export experience within regional as well as rest of the world markets increases the likelihood of Africa`s export survival. Finally, results suggests that infrastructure related trade frictions such as costs to export, time to export, and customs procedures to export as well as weak export supporting institutions have a negative effect on Africa`s export survival. Similarly macroeconomic developments particularly exchange rate volatility, financial underdevelopment, “inappropriate” foreign direct investment hurt chances of an African export survival. The results also show that interaction effects between regional integration initiatives and a variety of these trade frictions namely: costs to export, time to export and customs procedures effects on hazard rates diminish in significance with the depth of regional integration over time.
The primary purpose of this paper is to seek empirical answers to the above question. Using a highly disaggregated bilateral trade flows at HS 6 digit level for African countries for a period 1995-2009 and a conditional logit technique, I find 3 main empirical results. First, intra-Africa regional trade cooperation enhances the likelihood of an African nation exporting across the new-product, new-market margin. Second, I also find evidence that both product and market experience help to increase the chances of African exporters exporting on new-product and new market margins thus providing support for the learning effects hypothesis. The third result shows that infrastructure related trade frictions such as export costs; time to export; procedures to export as well as weak export supporting institutions have a negative effect on African export diversification. Similarly macroeconomic developments particularly exchange rate volatility, financial underdevelopments and inappropriate foreign direct investments hurt African nation’s chances to diversify its exports. In policy terms this study suggests that for African exporters learning to export from regional markets before exploring major distant markets, a reduction in intra-African trade barriers, deepening and strengthening regional trade cooperation could be a significant channel for encouraging export diversification in Africa.
This paper develops a macroeconomic framework where the representative bank is owned by inside and outside owners and copes with capital requirements that vary countercyclically. The issuance of outside equity is characterized getting insights from the literature on corporate governance, especially that on corporate governance and investor protection. The insider receives utility benefits from the diversion of dividends, but the costs of diversion increase with the size of bank equity owned by outsiders. The goal is to see to what extent the willingness of insiders to share the bank with outsiders is affected by capital regulation. I find a negative link, which holds only if capital restrictions vary countercyclically. Thinking of a positive shock, the justification for such a negative link is that the shock leads not only to tighter regulation, but also to higher expected dividends and, relatedly, to higher agency costs affecting the distribution of earnings.
