How Bilateral Investment Treaties Impact on Foreign Direct Investment: A Meta-analysis of Public Policy +) By Christian Bellak *) Vienna

Size: px
Start display at page:

Download "How Bilateral Investment Treaties Impact on Foreign Direct Investment: A Meta-analysis of Public Policy +) By Christian Bellak *) Vienna"

Transcription

1 How Bilateral Investment Treaties Impact on Foreign Direct Investment: A Meta-analysis of Public Policy +) By Christian Bellak *) Vienna Draft version August 2013 prepared for 2013 MAER Network Colloquium, University of Greenwich (London, UK) Please do not circulate! +) An earlier version of this paper has been presented at IIFT 2013 (Kolkata, India). *) Vienna University of Economics and B.A. Department of Economics

2 Abstract The purpose of this study is to analyse the magnitude of the theoretically hypothesized effects of Bilateral Investment Treaties (BITs) on Foreign Direct Investment (FDI) and to explain the large between-study heterogeneity. The primary economic function of BITs is to act as a commitment device for the host government, by raising the ex-post costs of reneging the agreement. 33 studies, published between 1998 and 2012, including 825 single results on effect sizes, are analysed, of which 268 effect sizes are used in the meta-analysis. Descriptive results based on semi-elasticities show large differences in effect sizes for virtually all criteria applied, such as the publication media, endogeneity, empirical methodology and theoretical model applied. After correcting for outliers the mean effect size is about 17 per cent (standard deviation 37.4). More recent studies include more negatively signed and more varied coefficients. The most puzzling result is the similar effect size of the impact of BITs on FDI flows and FDI stocks. Preliminary results of the meta-analysis demonstrate substantial between-study heterogeneity and reject the H0 of zero effect size. Asymmetry tests reveal a substantial bias. Yet, bias-corrected estimates are close to zero and thus of no practical relevance. Keywords: Meta-analysis, Foreign Direct Investment; Bilateral Investment Treaties; International Investment Agreements; Public Policy. JEL codes: C83 (Survey Methods, Sampling Methods), K33 (International Law), F21 (International Investment, Long-term Capital Movements), 2

3 What can be taken away from these various studies? Considered collectively, econometric-minded analysts have failed to uncover any consistent evidence that BITs influence investment decisions if analysts try to identify that influence by looking for statistically significant, substantively meaningful correlations between the number of BITs a host state has signed and FDI inflows. (Yackee, 2011, Virginia Journal of International Law, p. 410) Introduction A notable feature of the on-going globalisation process of production and services via Foreign Direct Investment (FDI) has been the proliferation of International Investment Treaties and Bilateral Investment Treaties (BITs), in particular. In a very general way, BITs are agreements between two countries for the reciprocal encouragement, promotion and protection of investments in each other's territories by companies based in either country. 1 FDI reflects the objective of establishing a lasting interest by a resident enterprise in one economy (direct investor) in an enterprise (direct investment enterprise) that is resident in an economy other than that of the direct investor. (OECD 2008, p. 48) 2 Under the general objective of profit maximization, the motivation for FDI may be resource seeking, market seeking, strategic asset driven and efficiency seeking. The purpose of investment treaties is closely tied to the removal of obstacles that may stand in the way of allowing and channelling more foreign investment into the host states. (Dolzer and Schreuer 2009, p. 22) 3 This view has been clearly expressed by one of the EU officials currently in charge of the future European Union investment agreement 4, when he mentioned that the main purpose of the agreement is to attract FDI to the EU, which is currently channelled to Asia and other destinations aspx For a more concise definition, see e.g. Dolzer and Schreuer, (2008). 2 The official definition is 254 pages. 3 For an empirical assessment of infrastructure and taxes as determinants of FDI see Bellak et al. (2009). 4 Mr. L. Rubinacci, Head of Unit, Services and Investment (B1), DG Trade, European Commission, on 2nd March 2013 at the Diplomatic Academy, Vienna. 3

4 Over time, the views about the role and relevance of BITs concerning the objective of FDI attraction underwent substantial change and the only constant was that the view has never been uniform. Here, a few relatively recent examples should suffice to demonstrate this fact. (emphasis added in all cases) UNCTAD s World Investment Report (2003) held that BITs play a minor role in influencing global FDI flows. ( ) The policy framework is at best enabling, having by itself little or no effect on FDI flows. ( ) As a rule, IIAs tend to make the regulatory framework more transparent, stable, predictable and secure that is, they allow the economic determinants to assert themselves. And when IIAs reduce obstacles to FDI and the economic determinants are right, they can lead to more FDI. But it is difficult to identify the specific impact of the policy framework on FDI flows, given the interaction and relative importance of individual determinants. In 2009 Newcombe and Paradell concluded that Although later studies provide support for a more robust relationship between IIAs (International Investment Agreements, author) and FDI levels, the existence of a causal relationship and the strength of that relationship remain disputed. Nevertheless, even if empirical evidence of a causal relationship is inconclusive, there remains strong competitive pressure for developing states to enter into IIAs and thereby signal to foreign investors that an enabling environment for foreign investment exists. Büthe and Milner (2009, p. 187) develop a more direct link between BITs and FDI: In sum, enforcement procedures established by (or as a consequence of) BITs enable foreign governments and private actors to impose higher economic and political costs on governments that renege on their policy commitments and to do so more quickly than in the absence of BITs. By increasing the likelihood and the time-discounted magnitude of the punishment for reneging, international institutions should reduce the time-inconsistency problem posed by FDI for developing country governments. Busse et al. (2010) on the basis of their empirical analysis go even further and conclude that BITs may even substitute for domestic institutions. Tobin and Rose Ackerman (2011, p. 2) argue on the basis of empirical evidence that the global surge in BITs has weakened the treaties as a tool for attracting FDI to a particular country. So far, no meta-analysis exists in this field, which is particularly unfortunate, as BITs have become more visible in recent years not least because of the emergence of important investor - state arbitration cases on the basis of BITs. There are at least two types of motivations to deal with the question of how BITs affect FDI. 4

5 From a substantive viewpoint, the fact that empirical evidence is far from being conclusive as to the direction, but also to the magnitude and significance of the effect. From a policy point of view, the impact of BITs on FDI has gained renewed attention not only due to the strong increase in arbitration cases between a foreign investor and the host state, but also due to the envisaged inclusion of investment chapters in new regional trade agreements (EU Canada, EU India etc.). The aim of the meta-analysis is therefore, to establish a plausible effect of BITs on FDI and to explain the large between-study heterogeneity of results. In accordance with the MAER Network (Meta-Analysis of Economics Research Network) we report the following items: Research question and effect size Theoretical underpinning of the studies Measurement of the effect How the research literature was searched Studies used in the meta-analysis (full disclosure of the rules for study (or effect size) inclusion/exclusion) Descriptive evidence on the effect-sizes List of information coded for each study or estimate Summary statistics of variables used in the meta-analysis Bias: Funnel plots (all, journals and top journals) and tests Results of Meta analysis and tests for between study heterogeneity (Results of the multivariate Meta-regression: still to be carried out) (Sensitivity analysis: still to be carried out) The main contribution is to highlight the fact that this literature with few exceptions has compared empirical results only as to the sign of the coefficient and the statistical significance, but not as to the economic significance of BITs. While this 5

6 fact applies to many other fields in economics, too, it is particularly deplorable concerning BITs, as bilateral and regional investment treaty making is currently a crucial area of international policy making, but little is known about their effects. The paper is organized as follows: The theoretical part explains briefly, how BITs may increase FDI through investor protection. The following part discusses measurement issues, the derivation of the effect size and describes the approach used in this paper as well as the reporting requirements as listed on the MAER homepage. The data section presents descriptive statistics and provides details on the studies used. Results of the meta-analysis are discussed in the next section. A short summary concludes. Research question and effect size In an investment treaty, the host state deliberately renounces an element of its sovereignty in return for a certain new opportunity: the chance to better attract new foreign investments, which it would not have acquired in the absence of a treaty. It is true that this quid pro quo underlying the policy choice on the part of the host state is based on a policy judgement, the nature of which escapes precise abstract evaluation inasmuch as it is based upon assumptions about the effect of the treaty, which are objectively uncertain. (Dolzer and Schreuer, 2009, p. 23; emphasis added) Our research questions concern the evaluation of this policy measure in the field of FDI attraction: How large are theoretically hypothesized effects of BITs on FDI? More precisely, we ask: How much does (monadic or dyadic) FDI stock or FDI flow increase upon the conclusion of a new BIT? How is the large between-study heterogeneity in empirical studies addressing the impact of BITs on FDI explained? 6

7 Effect size The effect size is defined as semi-elasticity, i.e. the percentage change of the dependent variable FDI and an independent variable BIT. Table 1 shows the results of a simple head-count. ************************* Table 1. Head count ************************* Figure 1 shows that a wide range of effect sizes remains, even after extreme observations have been excluded. (See below for a description which effect sizes have been excluded.) In particular, the negative effect sizes are a puzzle, as they are counterintuitive from a theoretical point of view (see next section). *********************** Figure 1. Histogram *********************** Figure 2 shows the evolution of semi-elasticities over time as more diverse, larger and more negative estimates emerge in more recent studies. This is against conventional wisdom, that early estimates in a certain research area are often exaggerated, and more plausible results emerge only in later studies. On the other hand, larger effect sizes may be reported, since arbitration on the basis of BITs has become more visible recently and thus BITs have gained importance as a location determinant for investors in later periods. ******************************************************* Figure 2. Semi-elasticities (effect sizes) over time ******************************************************* 7

8 Theoretical underpinning of the studies This part of the paper explains briefly how and why BITs may increase FDI through investor protection. The economic justification of BITs is derived from two arguments, which explain the fact that sometimes investment policies lack credibility. As a consequence of the lack of credibility, an efficient investment, which would otherwise have taken place, is not carried out in the absence of a BIT. These arguments pertain to the existence of adverse selection and time inconsistency, also known as hold-up problem (e.g. Tomz 1997, Guzman 1998). As both are well known in the literature on economic policy, a brief exposition suffices here: How does the credibility problem derive from these two arguments and are BITs an appropriate (efficient) answer to this problem? We discuss these problems here in light of the obsolescing bargain, i.e. once a firm undertakes a foreign direct investment, some bargaining power shifts to the host country government, which has an incentive to change the terms of the investment to reap a greater share of the benefits. (Büthe and Milner, 2008, p. 743) Given the obsolescing bargain argument, it is noteworthy at the outset that this is neither a necessary, nor a sufficient precondition for the credibility problem to arise, as there need not be an intent to deceive on the part of the host. Rather, adverse selection and time inconsistency aggravate the obsolescing bargain. 5 Adverse selection is based on a micro-economic perspective and refers to the fact that information about the true intentions of a government may be private, i.e. when observers lack information about the beliefs and values that are motivating a government to pursue ( ) (Tomz, 1997, p. 2) a certain policy, e.g. liberalizing of capital flows. Kerner (2009, p. 74) uses the term beliefs over a state s intentions. This can be even more pronounced, if the government in question is a foreign government of the potential host country of FDI, where information may be scarce, 5 While Büthe and Milner (2008, p. 743) argue that time-inconsistency aggravates the obsolescing bargain, Bonnitcha and Aisbett (2012, p. 688, FN 26) mention that these terms are used interchangably. 8

9 especially when dealing with countries that lack credible institutions, e.g. some developing countries. Time inconsistency (also called dynamic inconsistency problem) has first been developed with regard to macro-economic policies (e.g. Kydland and Prescott, 1977). It introduces a time-element into the discussion, namely a short-term versus a long-term perspective. The key issue here is that there is no long-term credible commitment possible from the side of the host country, no matter, whether the host country government has good intentions or not: the host country government will always have in the short run incentives to change the terms of existing foreign investments when the short-run benefits exceed the long-term costs. (Büthe and Milner, 2008, p. 743) Thus, the dynamic inconsistency problem arises, because the government s conduct changes once the investment is in place, i.e. sunk. Short-term welfare maximisation may thus dominate long-term welfare maximization / efficiency. 6 Viewed from the (potential) foreign investor s perspective, no conduct of the government can be credible, once these incentives exist. An investor will not undertake an investment or be able to enter into an efficient agreement with the host country. 7,8 Thus, whatever the agreement, it is not possible for a country to make its commitment fully credible even if it enters into an agreement. (Guzman, 1998, p. 79) 6 This may be aggravated in developing countries, as Büthe and Milner (2009, p. 743) argue that resourcestrapped developing country governments may have an even greater incentive than governments in advanced industrialized countries to discount the long term. Tomz (1997, p. 4) lists a number of reasons, why a government could be prompted to seek protectionism in trade policy ex post, even though free trade was superior ex ante. For example, a program of commercial liberalization could conflict with the objective of fiscal retrenchment. (ibidem) A similar problem in case could be a deteriorating current account. Tomz (ibidem) concludes: Thus, the temptation for true reformers to escalate tariffs may prove irresistible once investors have committed themselves. This type of reasoning can easily be transferred to the realm of investment policy: For example, a government could aim to liberalize capital flows and free transfer of funds, but could revert to capital controls later on; or raise tariffs on re-exported goods and intermediate services, despite a liberalizing policy approach in general. 7 Examples for agreements about the division of surplus (see, e.g. Guzman, 1989, p. 80) are: concessions and commitments on the part of each party, e.g. the host might agree to offer certain tax advantages to the investor, agree to allow the repatriation of profits, and waive certain import restrictions. The firm, on the other hand, might bind itself to providing a certain level of employment, certain transfers of technology, local content / value-added etc. 8 There are many ways how the host country government may shift the distribution of surplus / profit from the investor to the host state: raising tax levels, raising tariff levels, changes in regulation, fees, selective law enforcement, imposing new labour requirements etc. The most extreme ones are expropriation (Guzman 1998, p. 81). Yet, as Büthe and Milner (2009) argue, the likelihood of expropriation is low for investments that are part of a firm s global production chain, as they leave an expropriating government with essentially worthless assets. In addition, the competence to run an expropriated production facility may be low on the side of the host-country government. 9

10 It should be noted, that the dynamic-inconsistency problem remains, even if the information asymmetry is completely avoided, i.e. all information is public. Let us return to our question above and still continue to analyse a situation with no BIT in place. One might ask, Isn t it the case that there are forces at work, so that governments will have enough incentives not to exploit their increased bargaining power, once the investment is sunk? The argument usually put forward is that governments may resist the temptation to seize assets today in order to create or maintain a reputation that will attract future investment (Guzman 1998). Yet, this applies only, if the long-term is not discounted too much in favour of the short-term, the hold-up problem. So, self-control of the government is unlikely to work. Besides, international law does not remedy the situation, because the mechanisms for the enforcement of a contract between a country and a private firm are at best extremely weak and at worst completely non-existent. (Guzman, 1998, p. 79) Now enter a BIT and return to our original question: How does the BIT remedy the credibility problem and generate a credible expectation? Kerner (2009) argues that there are two possibilities: First, ex-ante costs (signals) and second, ex-post costs (commitments). The interplay between these two is important: In a setting of imperfect information, all commitments are signals but not all signals are commitments. (Tomz, 1997, p. 5) Signalling in the case of BITs and FDI may be defined as sending a broadly received signal that a country is trustworthy. (Kerner, 2009, p. 74) In other words, doubts about the true intentions of the host country government stemming from the information asymmetry -- can be reduced at the side of the investors, as they update their beliefs when the host country signs / ratifies a BIT. Hands-tying of ratifying host states is manifested when BITs present significant expost costs to signatory states that violate the agreement. (Kerner, 2009, p. 74) In this view, a BIT is a commitment device. 9 Since a BIT includes a number of 9 How do commitments raise ex-post costs? According to Büthe and Milner (2009, p. 745) formal agreements, such as treaties, make them more visible. For example, most BITs can easily be downloaded from the web. In addition, organizations like UNCTAD publish reports on investment policies of (some of) their member states. 10

11 commitments between two sovereign governments, violating a BIT, i.e. deviating from announced policy (Tomz, 1997, p. 5) constitutes a breach of international commitments, which should make those commitments more costly to break. (Büthe and Milner, p. 744, emphasis added) 10 Summarizing, commitments such as BITs have the potential to overcome the problems of time-inconsistency and adverse selection (through signalling) simultaneously. An efficient agreement between the host state and the investor can be reached, because the hands-tying and the signalling mechanism enable that commitments by the host state are seen as credible by the investor and help to overcome the credibility problem arising from the information asymmetry and hold-up problem. As Jandhyala and Weiner (2012, p. 11) mention, BITs provide greater certainty about the future treatment of assets by the state which allow firms to appropriate higher returns from their foreign assets. Thus, efficient location choices can be made and hence BITs should have a positive effect on FDI. 11 There are certain limitations to this view, which are discussed in the concluding section. In addition to the theoretical reasoning above, Jandhyala et al. (2011) argue convincingly on the basis of empirical evidence that the motives for BITs have changed over time: As the density of BITs among peer countries increased, more countries signed them in order to gain legitimacy and acceptance without a full understanding of their costs and competencies. (p. 1047) Thus, a plausible prior may be that the effects of BITs may have changed over time in parallel with the motives. Which are the threats to investors, against BITs may provide protection? Generally, BITs may provide protection against all measures by the host government that may Also, Multinational Enterprises who benefit from BITs, have an incentive to make violations of BITs public. Reasons like the aforementioned make thus commitments more credible and hence should lead to more FDI. Yet, by far the most important reason, why BITs make commitments more credible is that there is a mechanism that makes it easier to bring costly pressure on governments if they do not carry through on those promises. (Büthe and Milner, 2008, p. 746) This is the investor-state dispute settlement mechanism. 10 Note the difference between the first and the second argument, which is due to the fact that the first argument refers to all investors, including those not covered by the BIT in question, while the second refers only to investors covered by the BIT. 11 The impact of substantive protections provided by IITs (International Investment Treaties) on the efficiency of decisions made by investors are analysed conceptually in Bonnitcha and Aisbett (2012). 11

12 change the division of surplus / profit from the investment between the investor and the host state. For example, expropriation: direct and indirect unfair treatment discriminatory treatment: national / international restrictions on transfer of funds performance requirements by the host state. 12 Measurement of the effect Careful definition of the dependent and independent variable is a sine qua non for meta-analysis, especially when there are various ways of measurement of the dependent and independent variable. Definition of independent variable of main interest: Dyadic data: the existence of a BIT between two countries Non-dyadic data: the cumulated stock of BITs of a single home or host country Distinguishing between ratification and signing of BITs is another important indicator, as there is a theoretical prior that the effects on FDI should differ. Definition of dependent variable: Inward FDI Dyadic data: o Dyadic FDI stocks: inward FDI stocks from a single home country in a single host country 12 Please note, that the provisions addressing these threats will not be described here in detail, as they are quite complex and require a good deal of legal understanding. Rather, the interested reader is referred to the following excellent texts: Schreuer (online, see references section for web link) and Dolzer and Schreuer (2008). 12

13 o Dyadic FDI flows: inward FDI flows from a single home country into a single host country Non-dyadic data: o Aggregate FDI stocks: inward FDI stocks from all home countries of a single host country o Aggregate FDI flows: inward FDI flows from all home countries into a single host country Outward FDI 13 (same as for inward FDI above) This results in 2 (FDI inward / outward) * 2 (BIT dummy / cumulative) * 4 (FDI aggregate stocks / FDI aggregate flows / FDI dyadic stock / FDI dyadic flow / 4 different FDI ratios) = 64 possible combinations and all variables can appear in level or log form. Yet, not all combinations are relevant here and not every combination has actually been used in empirical studies so far. Most importantly, with dyadic datasets (BIT dummy), non-dyadic data can be included as well (BIT cumulative), but not vice versa. Interpretation Dyadic FDI data: If a host country j concludes a BIT with the home country i, the BIT increases bilateral inflows / outflows / instocks / outstocks from the home country i to host country j, which is a signatory to the BIT by x per cent (and vice versa). From a substantive point of view, this reflects the commitment effect, but not the signalling effect. Note that contrary to widespread belief - it does matter, whether one uses inward or outward FDI flows or stocks, even when dyadic data are used, as these may differ widely and thus the mirror statistics 14 do not match. 13 Note that the only study that uses firm-level data on FDI is Egger and Merlo (2012). 14 Mirror statistics is a term used in the FDI literature to note that the bilateral flows or stocks between country A and B may appear differently in the outward statistics of country A and the inward statistics of country B. The reason for such differences are manifold, among the most important are valuation differences, 13

14 Non-dyadic FDI data: If a host country j increases its total number of BITs by one BIT (no matter with which home country) or concludes a new BIT, the BIT increases total inflows / inward stocks of FDI from all home countries, which are or are not signatories of a BIT with host country j. (And vice versa, if country j is the home country.) From a substantive point of view, this reflects the commitment effect as well as the signalling effect of BITs on third-country investors. The choice between dyadic and non-dyadic data is motivated by data availability, econometric considerations (e.g. treatment of zeros, negative net FDI flows) and theoretical underpinning. Derivation of semi-elasticities The first task for the meta-analyst is to convert the published coefficients into semielasticities. As insufficient information has been found in several of the papers, authors have been contacted via and some have delivered the missing information that allowed us to include their study into our analysis. (See below: Studies used in the meta-analysis ) The general form of regression models used is represented by the following simplified equation: FDI = a + b BIT + cx + u Where a is the intercept, BIT is the variable of interest with estimated coefficient b, X is a matrix of the other independent variables that expectedly have an influence on FDI, c is a vector of coefficients that belong to the variables of matrix X, u is the error term and FDI represents the dependent variable. In the reduced form of this regression model, other independent variables and the error term are disregarded here. Coefficients have been converted into semi-elasticities as described in Table 2 and Appendix A. the inclusion or exclusion of reinvested earnings etc. On these issues see Bellak (1998) and Bellak and Cantwell (1998). 14

15 ************************************************************************************************ Table 2. Summary of the derivation of semi-elasticities from coefficients b and number of studies using respective effect sizes ************************************************************************************************ How the research literature was searched The literature was searched via google and google scholar as well as by contacts to key colleagues involved in research on FDI and partly BITs. The search has been repeated several times and the last search was done on 21st July As the terms used in the search routine Bilateral Investment Treaties and its acronym BIT are very specific and the empirical research on the subject started only in the mid-1990ies, we are confident to covering a very large share of all studies available in the field. The total number of studies identified is 37, thereof 33 have been used in this metaanalysis so far. The studies have been published in scientific journals (20, thereof 4 in top journals 15 ), in books (4), in Working Paper / Discussion Paper form or other unpublished works (8) as well as PhD thesis (1). Thus, it is a notable feature that a large share of the empirical material used here has not been published in economics journals. 15 Top according to the citation index in web of knowledge among the top 20 per cent: This yielded the following results: Economics: World Development, law: Harvard International Law Journal, political science: American Journal of Political Science. In addition the Haftel (2010) paper, published in the Review of International Political Economy has been classified as a top journal. Yet, as the web of knowledge is no longer accessible, it is based on the ranking by Halkos and Tzeremes (2012). This also shows how much this issue spans across the disciplines. 15

16 Studies used in the meta-analysis (full disclosure of the rules for study (or effect size) inclusion/exclusion) For a number of reasons, not all of the results published could be included in the analysis so far. In particular, for now we have excluded the following studies / effect sizes (see Table 3): A. Studies PhD dissertations o Siegmann (2008) has not yet been included, as it contains the largest number of results (184 single effect sizes) and it is difficult to judge which ones are the preferred ones by this author. As the number of results used in this meta-analysis is small (at least compared to many other meta-analyses), we intend to use some of these results in the future. o Tortian (2012), a conference paper, which seems to be part of a PhD, still has to be included. Also, the fact that some papers included insufficient information for the derivation of semi-elasticities resulted in a loss of effect sizes. Despite the authors were contacted, they did not bother to reply at all or they replied in a very general way that did not provide the information we were looking for: Hicks (2008), Hallward-Driemeier (2003); and Sullivan and Salacuse (2005). These studies or some of the effect sizes therein could not be included in further analysis. The study by Tobin and Rose-Ackerman (2011) will still be included, as the replication files for their study are now available on the Journal s website. UNCTAD (1998) is not available on the web anymore and has - for the time being - been excluded. If an earlier working paper version has been published in a journal later the earlier working paper version has been dropped: Peinhart and Allee (2008: 9 coefficients, 2012: 29 coefficients). Haftel (2007) published as Haftel (2010); Sokchea (2006) published in The very preliminary 2007 version of Jandhyala, Henisz and Mansfield included coefficients on BITs, which, however, did not appear in the later 16

17 versions (2010 WP and published in 2012). Expectedly, the authors did not want us to include these preliminary results of 2007 in our study. The study of Vandevelde et al. (1998, 1 coefficient) still has to be included. The study of Büthe and Milner (2014, forthcoming) still has to be included. The inclusion of additional studies may yield approximately 100 additional effect sizes. B. Effect sizes If effect sizes relate to other BITs, defined as the whole BIT network of a country, this coefficient has been dropped, as other BITs measures a different effect than the dyadic BIT variable. We have employed a standard outlier analysis to the semi-elasticities, i.e. discarded values smaller or larger 3 standard deviations. (3-sigma rule) Alternatively, we have applied the 3-sigma rule on a study by study basis. We have arbitrarily introduced an upper and lower bound of semi-elasticities at < 300 and < as these results do not make sense, neither from an economic point of view nor from a political science point of view. Moreover, the largest results would imply a huge bias to all descriptive statistics and graphs as they are so much larger than all of the rest. Treatment of interaction-terms with BIT variable 16 : Consider the following model, I = a + b BIT + cstab + d(bit STAB) + u, where STAB stands for political stability of the host country. b is the coefficient on the BIT variable and gives the effect of BIT on FDI when STAB is zero, which is unlikely. Therefore, interaction terms including the BIT variable have only been included, if they have been derived on the basis of a FE model (as all variables were demeaned) and thus, the effect of BIT on FDI is evaluated when the interacting variable STAB is evaluated at its mean value. In this case the effect is b + d(stab). 16 See for example Mekasha and Tarp (2011, p. 17) showing the significance of the interaction term for the partial effects in a replication meta-study. 17

18 In addition, we have performed our analyses after statistically significant negatively signed coefficients have been excluded, which resulted in a loss of another 6 observations. ***************************************** Table 3. Number of effect sizes used ***************************************** The grouping of the effect sizes by definition of the dependent and independent variables as described above resulted in eight different semi-elasticities, out of which several included too few observations to be used neither for the meta-analysis, nor the meta-regression. (see Table 4 below) Descriptive evidence on the effect-sizes Descriptive evidence on the effect-sizes is given in Table 4, distinguishing between various definitions of the dependent and independent variable. ************************************************************************************************ Table 4. Number of semi-elasticities, mean value and standard deviation by characteristics of dependent and independent variable (and by specification) ************************************************************************************************ Finally, these are summarized into four semi-elasticities (see Table 5), by combining inward and outward FDI in the case of dyadic FDI data: semi1 and semi3 = semi_a 18

19 in the case of aggregate inward and outward FDI flows: semi2 and semi4 = semi_b in the case of dyadic FDI stocks semi5 and semi7 = semi_c in the case of aggregate inward and outward FDI stocks: semi6 = semi_d Note: semi8 has zero observations and is therefore not grouped. ****************************************************************************************** Table 5. Summary of 4 types of semi-elasticities (by dep and indep variable definition) ******************************************************************************************* The unweighted mean value of the effect size of semi_a is 17.6 percent (standard deviation: 37.4). Effect sizes are almost equal for subsamples semi_a and semi_c that use FDI flows and FDI stocks, respectively as the dependent variable. More recent studies yield more negatively signed coefficients and also larger estimates (see Figure 2). As Tables 6a and 6b show, there are large differences in effect sizes, no matter which criteria are applied (such as endogeneity controlled, journals vs. other publication; single home country etc.). Some are plausible, some are counterintuitive and some are inconclusive. For example, it is quite plausible, that semi_b has a much larger mean value than semi_a, which may be explained by the fact that BITs are used cumulatively and thus also cover signalling effects - as FDI is aggregate FDI - in addition to commitment effects. It is counter-intuitive, for example, that comparing semi_a and semi_c leads to the striking result that the mean value of both semi-elasticities is almost equal (17.6 : 16.5). Yet, the first one is based on flows, while the latter is based on stocks, while the measurement of BITs and of other FDI characteristics is held constant. As an example for inconclusive descriptive evidence, take studies analysing FDI of the US as a single home country in other countries: this leads to a much lower semi-elasticity for semi_a, which may be explained by the fact that the commitment effect of the BIT is low, as there is no 19

20 credibility problem with a powerful government like the US, as the US is able to protect its MNEs outside the US even without a BIT. Yet, this effect is the opposite, when semi_b is used: The US as a home country leads to a much higher mean value of the semi-elasticity, which may reflect the total network of BITs of the US (which is, however, rather small). Note, that these results are partly due to the low number of effect sizes when the semi-elasticities semi_a semi_d are split into two or more categories. ********************************************************************** Table 6a. Semi-elasticities by various characteristics, semi_a Table 6b. Semi-elasticities by various characteristics, semi_a ********************************************************************** Table 7 presents unweighted means of the four semi-elasticities, of which semi_a and semi_b are further analysed, due to the low number of observations for semi_c and semi_d. ******************************************* Table 7. Unweighted means (OLS) ******************************************* Bias: Funnel plots and tests of bias (FAT, PET, PEESE) As the purpose of this research is an unbiased assessment of the underlying empirical phenomenon, we start the meta-analysis by analysing potential bias. Potential bias may have a number of sources, yet bias arising from publication selection is a primary concern in empirical economics. As has become apparent from the descriptive evidence, statistical significance seems to be favoured over economic 20

Marketing Mix Modelling and Big Data P. M Cain

Marketing Mix Modelling and Big Data P. M Cain 1) Introduction Marketing Mix Modelling and Big Data P. M Cain Big data is generally defined in terms of the volume and variety of structured and unstructured information. Whereas structured data is stored

More information

An Empirical Analysis of Insider Rates vs. Outsider Rates in Bank Lending

An Empirical Analysis of Insider Rates vs. Outsider Rates in Bank Lending An Empirical Analysis of Insider Rates vs. Outsider Rates in Bank Lending Lamont Black* Indiana University Federal Reserve Board of Governors November 2006 ABSTRACT: This paper analyzes empirically the

More information

The Elasticity of Taxable Income: A Non-Technical Summary

The Elasticity of Taxable Income: A Non-Technical Summary The Elasticity of Taxable Income: A Non-Technical Summary John Creedy The University of Melbourne Abstract This paper provides a non-technical summary of the concept of the elasticity of taxable income,

More information

FDI as a source of finance in imperfect capital markets Firm-Level Evidence from Argentina

FDI as a source of finance in imperfect capital markets Firm-Level Evidence from Argentina FDI as a source of finance in imperfect capital markets Firm-Level Evidence from Argentina Paula Bustos CREI and Universitat Pompeu Fabra September 2007 Abstract In this paper I analyze the financing and

More information

World Trade Organization. Economic Research and Statistics Division

World Trade Organization. Economic Research and Statistics Division WTO Working Paper ERSD-2014-04 Date: March 10, 2014 World Trade Organization Economic Research and Statistics Division Are Stricter Investment Rules Contagious? Host Country Competition for Foreign Direct

More information

Inequality, Mobility and Income Distribution Comparisons

Inequality, Mobility and Income Distribution Comparisons Fiscal Studies (1997) vol. 18, no. 3, pp. 93 30 Inequality, Mobility and Income Distribution Comparisons JOHN CREEDY * Abstract his paper examines the relationship between the cross-sectional and lifetime

More information

Asymmetry and the Cost of Capital

Asymmetry and the Cost of Capital Asymmetry and the Cost of Capital Javier García Sánchez, IAE Business School Lorenzo Preve, IAE Business School Virginia Sarria Allende, IAE Business School Abstract The expected cost of capital is a crucial

More information

The Determinants and the Value of Cash Holdings: Evidence. from French firms

The Determinants and the Value of Cash Holdings: Evidence. from French firms The Determinants and the Value of Cash Holdings: Evidence from French firms Khaoula SADDOUR Cahier de recherche n 2006-6 Abstract: This paper investigates the determinants of the cash holdings of French

More information

Exchange Rates and Foreign Direct Investment

Exchange Rates and Foreign Direct Investment Exchange Rates and Foreign Direct Investment Written for the Princeton Encyclopedia of the World Economy (Princeton University Press) By Linda S. Goldberg 1 Vice President, Federal Reserve Bank of New

More information

Determinants of Stock Market Performance in Pakistan

Determinants of Stock Market Performance in Pakistan Determinants of Stock Market Performance in Pakistan Mehwish Zafar Sr. Lecturer Bahria University, Karachi campus Abstract Stock market performance, economic and political condition of a country is interrelated

More information

MINITAB ASSISTANT WHITE PAPER

MINITAB ASSISTANT WHITE PAPER MINITAB ASSISTANT WHITE PAPER This paper explains the research conducted by Minitab statisticians to develop the methods and data checks used in the Assistant in Minitab 17 Statistical Software. One-Way

More information

DIVIDEND POLICY, TRADING CHARACTERISTICS AND SHARE PRICES: EMPIRICAL EVIDENCE FROM EGYPTIAN FIRMS

DIVIDEND POLICY, TRADING CHARACTERISTICS AND SHARE PRICES: EMPIRICAL EVIDENCE FROM EGYPTIAN FIRMS International Journal of Theoretical and Applied Finance Vol. 7, No. 2 (2004) 121 133 c World Scientific Publishing Company DIVIDEND POLICY, TRADING CHARACTERISTICS AND SHARE PRICES: EMPIRICAL EVIDENCE

More information

ESMT BUSINESS BRIEF. Exploitative Abuses. Lars-Hendrik Röller, ESMT. ESMT No. BB-107-002 ISSN 1866 4024

ESMT BUSINESS BRIEF. Exploitative Abuses. Lars-Hendrik Röller, ESMT. ESMT No. BB-107-002 ISSN 1866 4024 Business Brief Consolidation Index: Critical Success Factors for Industry Consolidation 1 ESMT No. BB-107-002 ESMT BUSINESS BRIEF Lars-Hendrik Röller, ESMT ISSN 1866 4024 2 Business Brief Consolidation

More information

Fixed-Effect Versus Random-Effects Models

Fixed-Effect Versus Random-Effects Models CHAPTER 13 Fixed-Effect Versus Random-Effects Models Introduction Definition of a summary effect Estimating the summary effect Extreme effect size in a large study or a small study Confidence interval

More information

A Short review of steel demand forecasting methods

A Short review of steel demand forecasting methods A Short review of steel demand forecasting methods Fujio John M. Tanaka This paper undertakes the present and past review of steel demand forecasting to study what methods should be used in any future

More information

Is the Forward Exchange Rate a Useful Indicator of the Future Exchange Rate?

Is the Forward Exchange Rate a Useful Indicator of the Future Exchange Rate? Is the Forward Exchange Rate a Useful Indicator of the Future Exchange Rate? Emily Polito, Trinity College In the past two decades, there have been many empirical studies both in support of and opposing

More information

Domestic Multinationals and Foreign-Owned Firms in Italy: Evidence from Quantile Regression 1

Domestic Multinationals and Foreign-Owned Firms in Italy: Evidence from Quantile Regression 1 The European Journal of Comparative Economics Vol. 7, n. 1, pp. 61-86 ISSN 1824-2979 Domestic Multinationals and Foreign-Owned Firms in Italy: Evidence from Quantile Regression 1 Abstract Mara Grasseni

More information

)LQDQFLDO$VVXUDQFH,VVXHV RI(QYLURQPHQWDO/LDELOLW\

)LQDQFLDO$VVXUDQFH,VVXHV RI(QYLURQPHQWDO/LDELOLW\ )LQDQFLDO$VVXUDQFH,VVXHV RI(QYLURQPHQWDO/LDELOLW\ ([HFXWLYH6XPPDU\ %\ 3URI'U0LFKDHO*)DXUH//0 DQG 0U'DYLG*ULPHDXG Maastricht University and European Centre for Tort and Insurance Law (ECTIL) Final version

More information

Introduction to. Hypothesis Testing CHAPTER LEARNING OBJECTIVES. 1 Identify the four steps of hypothesis testing.

Introduction to. Hypothesis Testing CHAPTER LEARNING OBJECTIVES. 1 Identify the four steps of hypothesis testing. Introduction to Hypothesis Testing CHAPTER 8 LEARNING OBJECTIVES After reading this chapter, you should be able to: 1 Identify the four steps of hypothesis testing. 2 Define null hypothesis, alternative

More information

Earnings Announcement and Abnormal Return of S&P 500 Companies. Luke Qiu Washington University in St. Louis Economics Department Honors Thesis

Earnings Announcement and Abnormal Return of S&P 500 Companies. Luke Qiu Washington University in St. Louis Economics Department Honors Thesis Earnings Announcement and Abnormal Return of S&P 500 Companies Luke Qiu Washington University in St. Louis Economics Department Honors Thesis March 18, 2014 Abstract In this paper, I investigate the extent

More information

Response to Critiques of Mortgage Discrimination and FHA Loan Performance

Response to Critiques of Mortgage Discrimination and FHA Loan Performance A Response to Comments Response to Critiques of Mortgage Discrimination and FHA Loan Performance James A. Berkovec Glenn B. Canner Stuart A. Gabriel Timothy H. Hannan Abstract This response discusses the

More information

Testing for Granger causality between stock prices and economic growth

Testing for Granger causality between stock prices and economic growth MPRA Munich Personal RePEc Archive Testing for Granger causality between stock prices and economic growth Pasquale Foresti 2006 Online at http://mpra.ub.uni-muenchen.de/2962/ MPRA Paper No. 2962, posted

More information

Assessing the Effects of Buybacks on Investment Trust Discounts. Faculty of Actuaries Investment Research Group

Assessing the Effects of Buybacks on Investment Trust Discounts. Faculty of Actuaries Investment Research Group Assessing the Effects of Buybacks on Investment Trust Discounts Faculty of Actuaries Investment Research Group Andy Adams, Roddy Macpherson, Brian Moretta Abstract: Buybacks for investment trusts have

More information

DETERMINANT FACTORS OF FOREIGN DIRECT INVESTMENT FLOWS IN CENTRAL AND EASTERN EUROPEAN COUNTRIES

DETERMINANT FACTORS OF FOREIGN DIRECT INVESTMENT FLOWS IN CENTRAL AND EASTERN EUROPEAN COUNTRIES DETERMINANT FACTORS OF FOREIGN DIRECT INVESTMENT FLOWS IN CENTRAL AND EASTERN EUROPEAN COUNTRIES Nicoleta Ciurila Academy of Economic Studies Bucharest Faculty of Finance and Banking, Money and Banking

More information

A. Introduction. 1. Motivation

A. Introduction. 1. Motivation A. Introduction 1. Motivation One issue for currency areas such as the European Monetary Union (EMU) is that not necessarily one size fits all, i.e. the interest rate setting of the central bank cannot

More information

STATISTICAL SIGNIFICANCE AND THE STANDARD OF PROOF IN ANTITRUST DAMAGE QUANTIFICATION

STATISTICAL SIGNIFICANCE AND THE STANDARD OF PROOF IN ANTITRUST DAMAGE QUANTIFICATION Lear Competition Note STATISTICAL SIGNIFICANCE AND THE STANDARD OF PROOF IN ANTITRUST DAMAGE QUANTIFICATION Nov 2013 Econometric techniques can play an important role in damage quantification cases for

More information

Predicting the Performance of a First Year Graduate Student

Predicting the Performance of a First Year Graduate Student Predicting the Performance of a First Year Graduate Student Luís Francisco Aguiar Universidade do Minho - NIPE Abstract In this paper, I analyse, statistically, if GRE scores are a good predictor of the

More information

Theories of Exchange rate determination

Theories of Exchange rate determination Theories of Exchange rate determination INTRODUCTION By definition, the Foreign Exchange Market is a market 1 in which different currencies can be exchanged at a specific rate called the foreign exchange

More information

Chapter 5: Analysis of The National Education Longitudinal Study (NELS:88)

Chapter 5: Analysis of The National Education Longitudinal Study (NELS:88) Chapter 5: Analysis of The National Education Longitudinal Study (NELS:88) Introduction The National Educational Longitudinal Survey (NELS:88) followed students from 8 th grade in 1988 to 10 th grade in

More information

Do R&D or Capital Expenditures Impact Wage Inequality? Evidence from the IT Industry in Taiwan ROC

Do R&D or Capital Expenditures Impact Wage Inequality? Evidence from the IT Industry in Taiwan ROC Lai, Journal of International and Global Economic Studies, 6(1), June 2013, 48-53 48 Do R&D or Capital Expenditures Impact Wage Inequality? Evidence from the IT Industry in Taiwan ROC Yu-Cheng Lai * Shih

More information

TEMPORAL CAUSAL RELATIONSHIP BETWEEN STOCK MARKET CAPITALIZATION, TRADE OPENNESS AND REAL GDP: EVIDENCE FROM THAILAND

TEMPORAL CAUSAL RELATIONSHIP BETWEEN STOCK MARKET CAPITALIZATION, TRADE OPENNESS AND REAL GDP: EVIDENCE FROM THAILAND I J A B E R, Vol. 13, No. 4, (2015): 1525-1534 TEMPORAL CAUSAL RELATIONSHIP BETWEEN STOCK MARKET CAPITALIZATION, TRADE OPENNESS AND REAL GDP: EVIDENCE FROM THAILAND Komain Jiranyakul * Abstract: This study

More information

Life Cycle Asset Allocation A Suitable Approach for Defined Contribution Pension Plans

Life Cycle Asset Allocation A Suitable Approach for Defined Contribution Pension Plans Life Cycle Asset Allocation A Suitable Approach for Defined Contribution Pension Plans Challenges for defined contribution plans While Eastern Europe is a prominent example of the importance of defined

More information

FORECASTING DEPOSIT GROWTH: Forecasting BIF and SAIF Assessable and Insured Deposits

FORECASTING DEPOSIT GROWTH: Forecasting BIF and SAIF Assessable and Insured Deposits Technical Paper Series Congressional Budget Office Washington, DC FORECASTING DEPOSIT GROWTH: Forecasting BIF and SAIF Assessable and Insured Deposits Albert D. Metz Microeconomic and Financial Studies

More information

Panel Data. Tomohito Hata. In the present paper, I will examine the determinants of grant-loan allocation in Japanese ODA,

Panel Data. Tomohito Hata. In the present paper, I will examine the determinants of grant-loan allocation in Japanese ODA, Loans versus Grants in Japanese Bilateral ODA - Evidence from Panel Data Tomohito Hata 1 Introduction In the present paper, I will examine the determinants of grant-loan allocation in Japanese ODA, focusing

More information

HAS FINANCE BECOME TOO EXPENSIVE? AN ESTIMATION OF THE UNIT COST OF FINANCIAL INTERMEDIATION IN EUROPE 1951-2007

HAS FINANCE BECOME TOO EXPENSIVE? AN ESTIMATION OF THE UNIT COST OF FINANCIAL INTERMEDIATION IN EUROPE 1951-2007 HAS FINANCE BECOME TOO EXPENSIVE? AN ESTIMATION OF THE UNIT COST OF FINANCIAL INTERMEDIATION IN EUROPE 1951-2007 IPP Policy Briefs n 10 June 2014 Guillaume Bazot www.ipp.eu Summary Finance played an increasing

More information

A Study of the Relation Between Market Index, Index Futures and Index ETFs: A Case Study of India ABSTRACT

A Study of the Relation Between Market Index, Index Futures and Index ETFs: A Case Study of India ABSTRACT Rev. Integr. Bus. Econ. Res. Vol 2(1) 223 A Study of the Relation Between Market Index, Index Futures and Index ETFs: A Case Study of India S. Kevin Director, TKM Institute of Management, Kollam, India

More information

Do broker/analyst conflicts matter? Detecting evidence from internet trading platforms

Do broker/analyst conflicts matter? Detecting evidence from internet trading platforms 1 Introduction Do broker/analyst conflicts matter? Detecting evidence from internet trading platforms Jan Hanousek 1, František Kopřiva 2 Abstract. We analyze the potential conflict of interest between

More information

A.2 The Prevalence of Transfer Pricing in International Trade

A.2 The Prevalence of Transfer Pricing in International Trade 19. Transfer Prices A. The Transfer Price Problem A.1 What is a Transfer Price? 19.1 When there is a international transaction between say two divisions of a multinational enterprise that has establishments

More information

Example G Cost of construction of nuclear power plants

Example G Cost of construction of nuclear power plants 1 Example G Cost of construction of nuclear power plants Description of data Table G.1 gives data, reproduced by permission of the Rand Corporation, from a report (Mooz, 1978) on 32 light water reactor

More information

Yao Zheng University of New Orleans. Eric Osmer University of New Orleans

Yao Zheng University of New Orleans. Eric Osmer University of New Orleans ABSTRACT The pricing of China Region ETFs - an empirical analysis Yao Zheng University of New Orleans Eric Osmer University of New Orleans Using a sample of exchange-traded funds (ETFs) that focus on investing

More information

Abnormal Audit Fees and Audit Opinion Further Evidence from China s Capital Market

Abnormal Audit Fees and Audit Opinion Further Evidence from China s Capital Market Abnormal Audit Fees and Audit Opinion Further Evidence from China s Capital Market Zanchun Xie a, Chun Cai a and Jianming Ye b,* a School of Accounting, Southwestern University of Finance and Economics,

More information

Age to Age Factor Selection under Changing Development Chris G. Gross, ACAS, MAAA

Age to Age Factor Selection under Changing Development Chris G. Gross, ACAS, MAAA Age to Age Factor Selection under Changing Development Chris G. Gross, ACAS, MAAA Introduction A common question faced by many actuaries when selecting loss development factors is whether to base the selected

More information

ELASTICITY OF LONG DISTANCE TRAVELLING

ELASTICITY OF LONG DISTANCE TRAVELLING Mette Aagaard Knudsen, DTU Transport, mak@transport.dtu.dk ELASTICITY OF LONG DISTANCE TRAVELLING ABSTRACT With data from the Danish expenditure survey for 12 years 1996 through 2007, this study analyses

More information

Is there Information Content in Insider Trades in the Singapore Exchange?

Is there Information Content in Insider Trades in the Singapore Exchange? Is there Information Content in Insider Trades in the Singapore Exchange? Wong Kie Ann a, John M. Sequeira a and Michael McAleer b a Department of Finance and Accounting, National University of Singapore

More information

Assessing energy supply profitability: does a margins approach make sense?

Assessing energy supply profitability: does a margins approach make sense? Agenda Advancing economics in business Assessing energy supply profitability: does a margins approach make sense? How profitable should a competitive energy supply business be? Companies need to know this

More information

LOGNORMAL MODEL FOR STOCK PRICES

LOGNORMAL MODEL FOR STOCK PRICES LOGNORMAL MODEL FOR STOCK PRICES MICHAEL J. SHARPE MATHEMATICS DEPARTMENT, UCSD 1. INTRODUCTION What follows is a simple but important model that will be the basis for a later study of stock prices as

More information

Five Myths of Active Portfolio Management. P roponents of efficient markets argue that it is impossible

Five Myths of Active Portfolio Management. P roponents of efficient markets argue that it is impossible Five Myths of Active Portfolio Management Most active managers are skilled. Jonathan B. Berk 1 This research was supported by a grant from the National Science Foundation. 1 Jonathan B. Berk Haas School

More information

Report on Ph.D. Thesis Defence. Yohei Yamamoto (Hitotsubashi University)

Report on Ph.D. Thesis Defence. Yohei Yamamoto (Hitotsubashi University) Report on Ph.D. Thesis Defence Ph.D. Candidate Zhang Yan(PHD09010) Dissertation 10 July 2014 submitted Dissertation 31 July 2014 Defense Date Time 13:00-15:00 Main referee Referees Shinsuke Ikeda Roberto

More information

Introduction to Regression and Data Analysis

Introduction to Regression and Data Analysis Statlab Workshop Introduction to Regression and Data Analysis with Dan Campbell and Sherlock Campbell October 28, 2008 I. The basics A. Types of variables Your variables may take several forms, and it

More information

The Effects of Unemployment on Crime Rates in the U.S.

The Effects of Unemployment on Crime Rates in the U.S. The Effects of Unemployment on Crime Rates in the U.S. Sandra Ajimotokin, Alexandra Haskins, Zach Wade April 14 th, 2015 Abstract This paper aims to analyze the relationship between unemployment and crime

More information

Andrés López and Eugenia Orlicki 1

Andrés López and Eugenia Orlicki 1 REGIONAL INTEGRATION AND FOREIGN DIRECT INVESTMENT: THE POTENTIAL IMPACT OF THE FTAA AND THE EU-MERCOSUR AGREEMENT ON FDI FLOWS INTO MERCOSUR COUNTRIES Andrés López and Eugenia Orlicki 1 Although studies

More information

Romanian Economic and Business Review Vol. 3, No. 2 EQUAL PAY THE TIME-BOMB UNDER PAY STRUCTURES IN ROMANIA

Romanian Economic and Business Review Vol. 3, No. 2 EQUAL PAY THE TIME-BOMB UNDER PAY STRUCTURES IN ROMANIA Romanian Economic and Business Review Vol. 3, No. 2 EQUAL PAY THE TIME-BOMB UNDER PAY STRUCTURES IN ROMANIA W. David Rees and Christine Porter Abstract One of the major consequences of Romania joining

More information

A Sound Approach to Stock Investment for Individual Investors Unmasking Common Fallacies

A Sound Approach to Stock Investment for Individual Investors Unmasking Common Fallacies A Sound Approach to Stock Investment for Individual Investors Unmasking Common Fallacies By Masahiro Shidachi Financial Research Group 1. Introduction As interest rates in Japan continually mark new historical

More information

NCSS Statistical Software Principal Components Regression. In ordinary least squares, the regression coefficients are estimated using the formula ( )

NCSS Statistical Software Principal Components Regression. In ordinary least squares, the regression coefficients are estimated using the formula ( ) Chapter 340 Principal Components Regression Introduction is a technique for analyzing multiple regression data that suffer from multicollinearity. When multicollinearity occurs, least squares estimates

More information

Do Currency Unions Affect Foreign Direct Investment? Evidence from US FDI Flows into the European Union

Do Currency Unions Affect Foreign Direct Investment? Evidence from US FDI Flows into the European Union Economic Issues, Vol. 10, Part 2, 2005 Do Currency Unions Affect Foreign Direct Investment? Evidence from US FDI Flows into the European Union Kyriacos Aristotelous 1 ABSTRACT This paper investigates the

More information

Implied Volatility Skews in the Foreign Exchange Market. Empirical Evidence from JPY and GBP: 1997-2002

Implied Volatility Skews in the Foreign Exchange Market. Empirical Evidence from JPY and GBP: 1997-2002 Implied Volatility Skews in the Foreign Exchange Market Empirical Evidence from JPY and GBP: 1997-2002 The Leonard N. Stern School of Business Glucksman Institute for Research in Securities Markets Faculty

More information

Is there a Race to the Bottom in Corporate Taxes? An Overview of Recent Research. By Mike Devereux, Ben Lockwood and Michela Redoano

Is there a Race to the Bottom in Corporate Taxes? An Overview of Recent Research. By Mike Devereux, Ben Lockwood and Michela Redoano Is there a Race to the Bottom in Corporate Taxes? An Overview of Recent Research By Mike Devereux, Ben Lockwood and Michela Redoano Statutory rates of corporation tax in developed countries have fallen

More information

Chapter 5 Estimating Demand Functions

Chapter 5 Estimating Demand Functions Chapter 5 Estimating Demand Functions 1 Why do you need statistics and regression analysis? Ability to read market research papers Analyze your own data in a simple way Assist you in pricing and marketing

More information

Composite performance measures in the public sector Rowena Jacobs, Maria Goddard and Peter C. Smith

Composite performance measures in the public sector Rowena Jacobs, Maria Goddard and Peter C. Smith Policy Discussion Briefing January 27 Composite performance measures in the public sector Rowena Jacobs, Maria Goddard and Peter C. Smith Introduction It is rare to open a newspaper or read a government

More information

The relationships between stock market capitalization rate and interest rate: Evidence from Jordan

The relationships between stock market capitalization rate and interest rate: Evidence from Jordan Peer-reviewed & Open access journal ISSN: 1804-1205 www.pieb.cz BEH - Business and Economic Horizons Volume 2 Issue 2 July 2010 pp. 60-66 The relationships between stock market capitalization rate and

More information

Online appendix to paper Downside Market Risk of Carry Trades

Online appendix to paper Downside Market Risk of Carry Trades Online appendix to paper Downside Market Risk of Carry Trades A1. SUB-SAMPLE OF DEVELOPED COUNTRIES I study a sub-sample of developed countries separately for two reasons. First, some of the emerging countries

More information

COMPARISONS OF CUSTOMER LOYALTY: PUBLIC & PRIVATE INSURANCE COMPANIES.

COMPARISONS OF CUSTOMER LOYALTY: PUBLIC & PRIVATE INSURANCE COMPANIES. 277 CHAPTER VI COMPARISONS OF CUSTOMER LOYALTY: PUBLIC & PRIVATE INSURANCE COMPANIES. This chapter contains a full discussion of customer loyalty comparisons between private and public insurance companies

More information

Understanding Financial Management: A Practical Guide Guideline Answers to the Concept Check Questions

Understanding Financial Management: A Practical Guide Guideline Answers to the Concept Check Questions Understanding Financial Management: A Practical Guide Guideline Answers to the Concept Check Questions Chapter 8 Capital Budgeting Concept Check 8.1 1. What is the difference between independent and mutually

More information

REINSURANCE PROFIT SHARE

REINSURANCE PROFIT SHARE REINSURANCE PROFIT SHARE Prepared by Damian Thornley Presented to the Institute of Actuaries of Australia Biennial Convention 23-26 September 2007 Christchurch, New Zealand This paper has been prepared

More information

Qualitative analysis of a potential Free Trade Agreement between the European Union and India. Executive Summary

Qualitative analysis of a potential Free Trade Agreement between the European Union and India. Executive Summary Centre for the Analysis of Regional Integration at Sussex Qualitative analysis of a potential Free Trade Agreement between the European Union and India Executive Summary Centre for the Analysis of Regional

More information

SURVEY ON HOW COMMERCIAL BANKS DETERMINE LENDING INTEREST RATES IN ZAMBIA

SURVEY ON HOW COMMERCIAL BANKS DETERMINE LENDING INTEREST RATES IN ZAMBIA BANK Of ZAMBIA SURVEY ON HOW COMMERCIAL BANKS DETERMINE LENDING INTEREST RATES IN ZAMBIA September 10 1 1.0 Introduction 1.1 As Government has indicated its intention to shift monetary policy away from

More information

Brazilian interest payments on net equity (Juros sobre o capital próprio): an international perspective

Brazilian interest payments on net equity (Juros sobre o capital próprio): an international perspective Brazilian interest payments on net equity (Juros sobre o capital próprio): an international perspective 1. Interest on Equity and Dividends: the Brazilian perspective Brazilian companies have two main

More information

Chapter 3 Local Marketing in Practice

Chapter 3 Local Marketing in Practice Chapter 3 Local Marketing in Practice 3.1 Introduction In this chapter, we examine how local marketing is applied in Dutch supermarkets. We describe the research design in Section 3.1 and present the results

More information

Talking Less and Moving the Market More: Is this the Recipe for Monetary Policy Effectiveness? Evidence from the ECB and the Fed *

Talking Less and Moving the Market More: Is this the Recipe for Monetary Policy Effectiveness? Evidence from the ECB and the Fed * Talking Less and Moving the Market More: Is this the Recipe for Monetary Policy Effectiveness? Evidence from the ECB and the Fed * Carlo Rosa a,b,c Giovanni Verga d Abstract This paper examines the impact

More information

BEPS ACTIONS 8-10. Revised Guidance on Profit Splits

BEPS ACTIONS 8-10. Revised Guidance on Profit Splits BEPS ACTIONS 8-10 Revised Guidance on Profit Splits DISCUSSION DRAFT ON THE REVISED GUIDANCE ON PROFIT SPLITS 4 July 2016 Public comments are invited on this discussion draft which deals with the clarification

More information

Earnings in private jobs after participation to post-doctoral programs : an assessment using a treatment effect model. Isabelle Recotillet

Earnings in private jobs after participation to post-doctoral programs : an assessment using a treatment effect model. Isabelle Recotillet Earnings in private obs after participation to post-doctoral programs : an assessment using a treatment effect model Isabelle Recotillet Institute of Labor Economics and Industrial Sociology, UMR 6123,

More information

IASB/FASB Meeting Week beginning 11 April 2011. Top down approaches to discount rates

IASB/FASB Meeting Week beginning 11 April 2011. Top down approaches to discount rates IASB/FASB Meeting Week beginning 11 April 2011 IASB Agenda reference 5A FASB Agenda Staff Paper reference 63A Contacts Matthias Zeitler mzeitler@iasb.org +44 (0)20 7246 6453 Shayne Kuhaneck skuhaneck@fasb.org

More information

Price Dispersion. Ed Hopkins Economics University of Edinburgh Edinburgh EH8 9JY, UK. November, 2006. Abstract

Price Dispersion. Ed Hopkins Economics University of Edinburgh Edinburgh EH8 9JY, UK. November, 2006. Abstract Price Dispersion Ed Hopkins Economics University of Edinburgh Edinburgh EH8 9JY, UK November, 2006 Abstract A brief survey of the economics of price dispersion, written for the New Palgrave Dictionary

More information

Why a Floating Exchange Rate Regime Makes Sense for Canada

Why a Floating Exchange Rate Regime Makes Sense for Canada Remarks by Gordon Thiessen Governor of the Bank of Canada to the Chambre de commerce du Montréal métropolitain Montreal, Quebec 4 December 2000 Why a Floating Exchange Rate Regime Makes Sense for Canada

More information

A Simple Model of Price Dispersion *

A Simple Model of Price Dispersion * Federal Reserve Bank of Dallas Globalization and Monetary Policy Institute Working Paper No. 112 http://www.dallasfed.org/assets/documents/institute/wpapers/2012/0112.pdf A Simple Model of Price Dispersion

More information

The Study of Chinese P&C Insurance Risk for the Purpose of. Solvency Capital Requirement

The Study of Chinese P&C Insurance Risk for the Purpose of. Solvency Capital Requirement The Study of Chinese P&C Insurance Risk for the Purpose of Solvency Capital Requirement Xie Zhigang, Wang Shangwen, Zhou Jinhan School of Finance, Shanghai University of Finance & Economics 777 Guoding

More information

Double Master Degrees in International Economics and Development

Double Master Degrees in International Economics and Development Double Master Degrees in International Economics and Development Detailed Course Content 1. «Development theories and contemporary issues for development» (20h) Lectures will explore the related themes

More information

WRITING A RESEARCH PAPER FOR A GRADUATE SEMINAR IN POLITICAL SCIENCE Ashley Leeds Rice University

WRITING A RESEARCH PAPER FOR A GRADUATE SEMINAR IN POLITICAL SCIENCE Ashley Leeds Rice University WRITING A RESEARCH PAPER FOR A GRADUATE SEMINAR IN POLITICAL SCIENCE Ashley Leeds Rice University Here are some basic tips to help you in writing your research paper. The guide is divided into six sections

More information

The Case for a Tax Cut

The Case for a Tax Cut The Case for a Tax Cut Alan C. Stockman University of Rochester, and NBER Shadow Open Market Committee April 29-30, 2001 1. Tax Increases Have Created the Surplus Any discussion of tax policy should begin

More information

A Note on the Optimal Supply of Public Goods and the Distortionary Cost of Taxation

A Note on the Optimal Supply of Public Goods and the Distortionary Cost of Taxation A Note on the Optimal Supply of Public Goods and the Distortionary Cost of Taxation Louis Kaplow * Abstract In a recent article, I demonstrated that, under standard simplifying assumptions, it is possible

More information

Response to European Commission inquiry into the European business insurance sector pursuant to Article 17 of Regulation 1/2003

Response to European Commission inquiry into the European business insurance sector pursuant to Article 17 of Regulation 1/2003 Response to European Commission inquiry into the European business insurance sector pursuant to Article 17 of Regulation 1/2003 Executive summary The ABI believes the Commission is correct to place business

More information

How to Ensure Adequate Retirement Income from DC Pension Plans

How to Ensure Adequate Retirement Income from DC Pension Plans ISSN 1995-2864 Financial Market Trends OECD 2009 Pre-publication version for Vol. 2009/2 Private Pensions and 0B the Financial Crisis: How to Ensure Adequate Retirement Income from DC Pension Plans Pablo

More information

IMPLEMENTATION NOTE. Validating Risk Rating Systems at IRB Institutions

IMPLEMENTATION NOTE. Validating Risk Rating Systems at IRB Institutions IMPLEMENTATION NOTE Subject: Category: Capital No: A-1 Date: January 2006 I. Introduction The term rating system comprises all of the methods, processes, controls, data collection and IT systems that support

More information

Week 7 - Game Theory and Industrial Organisation

Week 7 - Game Theory and Industrial Organisation Week 7 - Game Theory and Industrial Organisation The Cournot and Bertrand models are the two basic templates for models of oligopoly; industry structures with a small number of firms. There are a number

More information

THE IMPACT OF MACROECONOMIC FACTORS ON NON-PERFORMING LOANS IN THE REPUBLIC OF MOLDOVA

THE IMPACT OF MACROECONOMIC FACTORS ON NON-PERFORMING LOANS IN THE REPUBLIC OF MOLDOVA Abstract THE IMPACT OF MACROECONOMIC FACTORS ON NON-PERFORMING LOANS IN THE REPUBLIC OF MOLDOVA Dorina CLICHICI 44 Tatiana COLESNICOVA 45 The purpose of this research is to estimate the impact of several

More information

IMPROVING THE RESOLUTION OF TAX TREATY DISPUTES

IMPROVING THE RESOLUTION OF TAX TREATY DISPUTES ORGANISATION FOR ECONOMIC CO-OPERATION AND DEVELOPMENT IMPROVING THE RESOLUTION OF TAX TREATY DISPUTES (Report adopted by the Committee on Fiscal Affairs on 30 January 2007) February 2007 CENTRE FOR TAX

More information

Chapter 4: Vector Autoregressive Models

Chapter 4: Vector Autoregressive Models Chapter 4: Vector Autoregressive Models 1 Contents: Lehrstuhl für Department Empirische of Wirtschaftsforschung Empirical Research and und Econometrics Ökonometrie IV.1 Vector Autoregressive Models (VAR)...

More information

IS MORE INFORMATION BETTER? THE EFFECT OF TRADERS IRRATIONAL BEHAVIOR ON AN ARTIFICIAL STOCK MARKET

IS MORE INFORMATION BETTER? THE EFFECT OF TRADERS IRRATIONAL BEHAVIOR ON AN ARTIFICIAL STOCK MARKET IS MORE INFORMATION BETTER? THE EFFECT OF TRADERS IRRATIONAL BEHAVIOR ON AN ARTIFICIAL STOCK MARKET Wei T. Yue Alok R. Chaturvedi Shailendra Mehta Krannert Graduate School of Management Purdue University

More information

Eric Neumayer and Laura Spess. Do bilateral investment treaties increase foreign direct investment to developing countries?

Eric Neumayer and Laura Spess. Do bilateral investment treaties increase foreign direct investment to developing countries? LSE Research Online Article (refereed) Eric Neumayer and Laura Spess Do bilateral investment treaties increase foreign direct investment to developing countries? Originally published in World development,

More information

Unraveling versus Unraveling: A Memo on Competitive Equilibriums and Trade in Insurance Markets

Unraveling versus Unraveling: A Memo on Competitive Equilibriums and Trade in Insurance Markets Unraveling versus Unraveling: A Memo on Competitive Equilibriums and Trade in Insurance Markets Nathaniel Hendren January, 2014 Abstract Both Akerlof (1970) and Rothschild and Stiglitz (1976) show that

More information

Gains from Trade: The Role of Composition

Gains from Trade: The Role of Composition Gains from Trade: The Role of Composition Wyatt Brooks University of Notre Dame Pau Pujolas McMaster University February, 2015 Abstract In this paper we use production and trade data to measure gains from

More information

Simple Linear Regression Inference

Simple Linear Regression Inference Simple Linear Regression Inference 1 Inference requirements The Normality assumption of the stochastic term e is needed for inference even if it is not a OLS requirement. Therefore we have: Interpretation

More information

Overview of Violations of the Basic Assumptions in the Classical Normal Linear Regression Model

Overview of Violations of the Basic Assumptions in the Classical Normal Linear Regression Model Overview of Violations of the Basic Assumptions in the Classical Normal Linear Regression Model 1 September 004 A. Introduction and assumptions The classical normal linear regression model can be written

More information

The Decline of the U.S. Labor Share. by Michael Elsby (University of Edinburgh), Bart Hobijn (FRB SF), and Aysegul Sahin (FRB NY)

The Decline of the U.S. Labor Share. by Michael Elsby (University of Edinburgh), Bart Hobijn (FRB SF), and Aysegul Sahin (FRB NY) The Decline of the U.S. Labor Share by Michael Elsby (University of Edinburgh), Bart Hobijn (FRB SF), and Aysegul Sahin (FRB NY) Comments by: Brent Neiman University of Chicago Prepared for: Brookings

More information

Mgmt 469. Model Specification: Choosing the Right Variables for the Right Hand Side

Mgmt 469. Model Specification: Choosing the Right Variables for the Right Hand Side Mgmt 469 Model Specification: Choosing the Right Variables for the Right Hand Side Even if you have only a handful of predictor variables to choose from, there are infinitely many ways to specify the right

More information

A Primer on Forecasting Business Performance

A Primer on Forecasting Business Performance A Primer on Forecasting Business Performance There are two common approaches to forecasting: qualitative and quantitative. Qualitative forecasting methods are important when historical data is not available.

More information

to the UN Working Group on Business and Human Rights Open Consultation on National Action Plans on Business and Human Rights Geneva, 20 February 2014

to the UN Working Group on Business and Human Rights Open Consultation on National Action Plans on Business and Human Rights Geneva, 20 February 2014 Presentation on behalf of Centre for Applied Legal Studies, Wits University (CALS) & Partners to the UN Working Group on Business and Human Rights Open Consultation on National Action Plans on Business

More information

Is success in private equity repeatable? A study on the persistence of alpha. Executive summary

Is success in private equity repeatable? A study on the persistence of alpha. Executive summary Is success in private equity repeatable? A study on the persistence of alpha Executive summary The idea of repeatability is one of core elements of investing in private equity. But recent research has

More information

CHAPTER I INTRODUCTION AND DESIGN OF THE STUDY

CHAPTER I INTRODUCTION AND DESIGN OF THE STUDY CHAPTER I INTRODUCTION AND DESIGN OF THE STUDY INTRODUCTION Working capital is the cash available for day to day functions of a business. It is the cash that can be used to foot expected and unplanned

More information

VOLATILITY AND DEVIATION OF DISTRIBUTED SOLAR

VOLATILITY AND DEVIATION OF DISTRIBUTED SOLAR VOLATILITY AND DEVIATION OF DISTRIBUTED SOLAR Andrew Goldstein Yale University 68 High Street New Haven, CT 06511 andrew.goldstein@yale.edu Alexander Thornton Shawn Kerrigan Locus Energy 657 Mission St.

More information