Laboratoire d’Économie d’Orléans

Abstract This paper presents a theoretical growth model which explicitly takes into account technological interdependence among economies and examines the impact of spillover effects. Technological interdependence is assumed to operate through spatial externalities. The magnitude of the physical capital externalities at steady state, which is not usually identified in the literature, is estimated using a spatial econometric specification. Spatial externalities are found to be significant. This spatially augmented Solow model yields a conditional convergence equation which is characterized by parameter heterogeneity. A locally linear spatial autoregressive specification is then estimated providing a convergence speed estimate for each country of the sample. Copyright © 2007 John Wiley & Sons, Ltd.

A great deal of attention in evidence‐based policy and practice is directed to statistical studies–especially randomized controlled trials–that support causal conclusions, which this chapter dubs ‘It‐works‐somewhere claims’. What's needed for policy and practice, however, are conclusions that the policy will work for us, as when and how we would implement it. Despite widespread recognition of the problem of external validity, it is all too easy to suppose that conclusions of the first sort provide strong evidence for those of the second sort. This chapter argues that this is not the case. Further, ‘external validity’ is the wrong way to characterize the problem. Usually the only reliable way to use an it‐works‐somewhere result as evidence for ‘It will work for us’ is via what J.S. Mill calls a ‘tendency’ claim (and the chapter calls a ‘capacity’ claim). This however points out how weak ‘It works somewhere’ is in support of ‘It will work for us’, for two reasons. (1) It takes a great deal of theory, observation and experiment, far beyond the statistical study itself, to establish a tendency/capacity claim; (2) Reliable prediction requires in addition a great deal of local knowledge supplied by neither the statistical study nor the capacity claim.

This paper offers a reappraisal of the impact of migration on economic growth for 22 OECD countries between 1986–2006, and relies on a unique data set we compiled that allows us to distinguish net migration of the native- and foreign-born populations by skill level. Specifically, after introducing migration in an augmented Solow-Swan model, we estimate a dynamic panel model using a system of generalized method of moments (SYS-GMM) to address the risk of endogeneity bias in the migration variables. Two important findings emerge from our analysis. First, there exists a positive impact of migrants’ human capital on GDP <it>per capita</it>, and second, a permanent increase in migration flows has a positive effect on GDP per worker. Moreover, the growth impact of immigration is high even in countries that have non-selective migration policies.

Abstract This paper reviews the main features of the banking and financial sector in 10 new European Union members, and then examines the relationship between financial development and economic growth in these countries by estimating a dynamic panel model over the period 1994–2007. The evidence suggests that the stock and credit markets are still underdeveloped in these economies and that their contribution to economic growth is limited owing to a lack of financial depth. By contrast, a more efficient banking sector is found to have accelerated growth. Copyright © 2014 John Wiley & Sons, Ltd.

Abstract This paper investigates the effect of foreign direct investment (FDI) on economic growth conditional on the institutional quality of host countries. We first develop several theoretical arguments to show that institutional heterogeneity may be an explanation for the mixed results of previous empirical studies. Second, using a panel smooth regression model on a large sample of developing countries, we show that FDI has a positive effect on growth only beyond a certain threshold of institutional quality. To benefit from FDI‐led growth, institutional reforms should thus precede FDI attraction policies. Additionally, some reforms seem to promote faster marginal effects of FDI, while institutional complementarities may lead to an incremental effect on growth.

This article proposes an overview of the recent developments relating to panel unit root tests. After a brief review of the first generation panel unit root tests, this paper focuses on the tests belonging to the second generation. The latter category of tests is characterized by the rejection of the cross-sectional independence hypothesis. Within this second generation of tests, two main approaches are distinguished. The first one relies on the factor structure approach and includes the contributions of Bai and Ng (2001), Phillips and Sul (2003a), Moon and Perron (2004a), Choi (2002) and Pesaran (2003) among others. The second approach consists in imposing few or none restrictions on the residuals covariance matrix and has been adopted notably by Chang (2002, 2004), who proposed the use of nonlinear instrumental variables methods or the use of bootstrap approaches to solve the nuisanceparameter problem due to cross-sectional dependency.

In this paper we investigate the causal relationship between financial development and economic growth. We use an innovative econometric method which is based on a panel test of the Granger non causality hypothesis. We implement various tests with a sample of 63 industrial and developing countries over the
\n1960-1995 and 1960-2000 periods. We use three standard indicators of financial development. The results provide support for a robust causality relationship from economic growth to the financial development. On the contrary, the non causality
\nhypothesis from financial development indicators to economic growth can not be
\nrejected in most of the cases. However, these results only imply that, if such a
\nrelationship exists, it can not be easily identified in a simply bi-variate Granger
\ncausality test.

Combining panel data on bank liquidity at the individual level and data on their macroeconomic environment, for a sample of commercial banks in emerging countries between 1995 and 2004, we show that there exists a 'bank liquidity smile across exchange rate regimes'. In extreme regimes at both ends of the line, i.e. for pure floating exchange rate regimes at one end and currency boards and dollarised economies at the other end, bank assets are more liquid than in intermediate regimes.

Purpose The paper seeks to examine income smoothing practices in Islamic banks. It first focuses on detecting income smoothing practices. It then seeks to test whether loan loss provisions (LLPs) are used for earnings management purposes. Design/methodology/approach The paper explores income smoothing practices on a sample of 66 Islamic banks over the period 2001‐2006 using Beidleman's and Eckel's coefficients. Data are obtained from the Bankscope database. To test the use of LLPs to smooth Islamic banks results, a regression model was developed and tested. Findings The results provide evidence on an extensive use of income smoothing by Islamic banks. More than 75 per cent of the examined banks have a determination coefficient between 0.5 and 1 and 44 per cent have a variation coefficient less than 0.5. However, income smoothing is not achieved through LLPs. The variable earnings before taxes and provisions are not significant in all model specifications. The paper advances that these smoothed incomes are derived rather by the use of profit equalization reserve (PER) and investment risk reserve (IRR). The finding is contradictory to the widespread view stating that those mechanisms are designed to stabilize rewards attributed to investment account holders. Research limitations/implications The non‐disclosure of detailed information on PER and IRR prevented the empirical testing of the assertion on the use of these discretionary items to smooth Islamic banks' incomes. Originality/value Unlike previous studies which implicitly assume that Islamic banks intentionally use accounting techniques to disclose smoothed results, this paper pioneers the study on detecting income smoothing practice by such institutions. Second, it explores the use of LLPs for earnings management purposes in the context of a fast growing industry where Islamic assets have grown on average by 30 per cent per year over the period 2002‐2007. Third, it is the first paper to give some evidence on the use of PER and IRR as income smoothing devices. Finally, the paper covers a larger number of Islamic banks and from various countries.

Abstract The aim of this paper is to apply recently developed panel cointegration techniques proposed by Pedroni ( Oxford Bulletin of Economics and Statistics 61 (1999): Supplement, 653–670; Econometric Theory 20 (2004): 597–625) and generalized by Banerjee and Carrion‐i‐Silvestre (Working Paper 591, European Central Bank, February 2006) to examine the robustness of the PPP concept for a sample of 80 developed and developing countries. We find that strong PPP is verified for OECD countries and weak PPP for Middle East and North African countries. However, in African, Asian, Latin American and Central and Eastern European countries, PPP does not seem relevant to characterize the long‐run behavior of the real exchange rate. Further investigations indicate that the nature of the exchange rate regime does not condition the validity of PPP, which is more easily accepted in countries with high rather than low inflation.

Our article presents an overview of panel unit-root tests. There are two major trends in this research area. First, since the late 1990s, the work on panel unit-root tests aims to take account of heterogeneity in dynamic properties of series. Second, attempts have recently been made to introduce a dichotomy between two generations of tests. The first generation is based on the hypothesis of independence between units. In contrast, the second-generation tests are characterized by the rejection of the cross-sectional independence hypothesis. Our survey discusses both generations of tests.

International audience

This paper provides an econometric examination of geographic R&D spillovers among countries by focusing on the issue of cross-sectional dependence, and in particular on the di erent ways { weak and strong { it may a ect the model. A preliminary analysis based on the estimation of the exponent of cross-sectional correlation proposed by Bailey et al. (2013), a, provides a very clear-cut result with an estimate of a very close to unity, not only indicating the presence of strong cross-sectional correlation but also being consistent with the factor literature typically assuming that a = 1. Moreover, second generation unit roots tests suggest that while the unobserved idiosyncratic component of the variables under study may be stationary, the unobserved common factors appear to be nonstationary. Consequently, a factor structure appears to be preferable to a spatial error model and in particular the Correlated Common E ects approach is employed since, among other things, it is still valid in the more general case of nonstationary common factors. Finally, comparing the results with those obtained with a spatial model gives some insights on the possible bias occurring when allowing only for weak correlation while strong correlation is present in the data.

We derive several popular systemic risk measures in a common framework and show that they can be expressed as transformations of market risk measures (e.g. beta). We also derive conditions under which the different measures lead to similar rankings of systemically important financial institutions (SIFIs). In an empirical analysis of US financial institutions, we show that (1) different systemic risk measures identify different SIFIs and that (2) firm rankings based on systemic risk estimates mirror rankings obtained by sorting firms on market risk or liabilities. One-factor linear models explain most of the variability of the systemic risk estimates, which indicates that systemic risk measures fall short in capturing the multiple facets of systemic risk.

This paper provides original econometric evidence on whether international remittance transfers spur economic growth based on data for a sample of 49 developing countries during the period 2001-2013. Using Panel Smooth Transition Regression (PSTR), difference and system generalized methods of moment models, we find two main results. First, remittances have a positive and significant impact on economic growth in developing countries, while aid and foreign direct investments have insignificant impact. Secondly, as far as the nonlinear relationship is concerned, we find two extreme regimes with a sharp shift characterizing the remittance–growth relationship, with respect to conditional variables, where the remittances effects are positive and significant under the first regime and negative or insignificant under the second. Our findings suggest that the nonlinear relationship between remittances and growth mainly depends on financial development and investment, and less on remittance level and consumption.

Abstract The “ten‐year rule” suggests that it takes about 10 years of preparation to reach “expert” status. How long does it take, however, for someone to reach a level of creative greatness? Through an analysis of 215 contemporary fiction writers, we found that these writers took an average of 10.6 years between their first publication and their best publication, although there was a high degree of variability. This tentatively suggests that at least for modern fiction writers, a second phase after the first ten years may be crucial for achieving eminence. We discuss these findings in the context of results found in other domains of creativity, along with limitations and future directions.

International audience

Abstract The aim of this paper is to empirically disentangle specific channels of technology spillovers from FDI to domestic firms. To this end, we look into the mechanisms of technology diffusion through FDI and investigate six measures of spillovers in a sample of Romanian firms for the period 1999–2007. Our results show that the position in the supply chain is essential for capturing FDI spillovers, as local suppliers enjoy productivity gains, while local clients suffer productivity losses. We also show that foreign affiliates internalise all benefits associated with supplier upgrading, thus raising concerns about the social return on technology transfer. Additionally, our approach allows us to separate horizontal spillovers into a competition effect, an imitation/demonstration effect and a labour mobility component. We find only labour mobility to act as an efficient channel for horizontal knowledge diffusion, even though its direction depends highly on human capital.

This paper examines the short-run relationships between oil prices and GCC stock markets. Since GCC countries are major world energy market players, their stock markets may be susceptible to oil price shocks. To account for the fact that stock markets may respond nonlinearly to oil price shocks, we have examined both linear and nonlinear relationships. Our findings show that there are significant links between the two variables in Qatar, Oman, and UAE. Thus, stock markets in these countries react positively to oil price increases. For Bahrain, Kuwait, and Saudi Arabia we found that oil price changes do not affect stock market returns.

The explosive development of "free" or "open source" information goods contravenes the conventional wisdom that markets and commercial organizations are necessary to efficiently supply products. This paper proposes a theoretical explanation for this phenomenon, using concepts from economics and theories of self-organization. Once available on the Internet, information is intrinsically not a scarce good, as it can be replicated virtually without cost. Moreover, freely distributing information is profitable to its creator, since it improves the quality of the information, and enhances the creator's reputation. This provides a sufficient incentive for people to contribute to open access projects. Unlike traditional organizations, open access communities are open, distributed and self-organizing. Coordination is achieved through stigmergy: listings of "work-in-progress" direct potential contributors to the tasks where their contribution is most likely to be fruitful. This obviates the need both for centralized planning and for the "invisible hand" of the market.