This paper studies the role of credit-supply factors in business cycle ∞uctuations. To this end, an imperfectly competitive banking sector is introduced into a DGSE model with flnancial frictions. Banks issue loans to both households and flrms, obtain funding via deposits and accumulate capital out of retained earnings. Margins charged on loans depend on bank capital-to-asset ratio and on the degree of interest rate stickiness. Bank balance-sheet constraints establish a link between the business cycle, which afiects bank proflts and thus capital, and the supply and the cost of loans. The model is estimated with Bayesian techniques using data for the euro area. We show that shocks originating in the banking sector explain the largest fraction of the fall of output in 2008 in the euro area, while macroeconomic shocks played a smaller role. We also flnd that an unexpected reduction in bank capital can have a substantial impact on the real economy and particularly on investment. JEL: E30; E32; E43; E51; E52;

/pdf/credit-and-banking-in-a-dsge-model-of-the-euro-area-o8cxnpx1ou.pdf

Credit and banking in a DSGE model of the euro area

Innovation in SMEs exhibits some peculiar features that most traditional indicators of innovation activity do not capture Therefore, in this paper, we develop a structural model of innovation that incorporates information on innovation success from firm surveys along with the usual R&D expenditures and productivity measures We then apply the model to data on Italian SMEs from the “Survey on Manufacturing Firms” conducted by Mediocredito-Capitalia covering the period 1995–2003 The model is estimated in steps, following the logic of firms’ decisions and outcomes We find that international competition fosters R&D intensity, especially for high-tech firms Firm size and R&D intensity, along with investment in equipment, enhances the likelihood of having both process and product innovation Both these kinds of innovation have a positive impact on firm’s productivity, especially process innovation Among SMEs, larger and older firms seem to be less productive

/pdf/innovation-and-productivity-in-smes-empirical-evidence-for-3kwfj88pbf.pdf

Innovation and productivity in SMEs: empirical evidence for Italy

Innovation in SMEs exhibits some peculiar features that most traditional indicators of innovation activity do not capture Therefore, in this paper, we develop a structural model of innovation which incorporates information on innovation success from firm surveys along with the usual R&D expenditures and productivity measures We then apply the model to data on Italian SMEs from the “Survey on Manufacturing Firms” conducted by Mediocredito-Capitalia covering the period 1995-2003 The model is estimated in steps, following the logic of firms’ decisions and outcomes We find that international competition fosters R&D intensity, especially for high-tech firms Firm size, R&D intensity, along with investment in equipment enhances the likelihood of having both process and product innovation Both these kinds of innovation have a positive impact on firm’s productivity, especially process innovation Among SMEs, larger and older firms seem to be less productive

/pdf/innovation-and-productivity-in-smes-empirical-evidence-for-11nyu56d1e.pdf

Innovation and Productivity in SMEs - Empirical Evidence for Italy

We find evidence of a bank lending channel for the euro area operating via bank risk. Financial innovation and the new ways to transfer credit risk have tended to diminish the informational content of standard bank balance-sheet indicators. We show that bank risk conditions, as perceived by financial market investors, need to be considered, together with the other indicators (i.e. size, liquidity and capitalization), traditionally used in the bank lending channel literature to assess a bank’s ability and willingness to supply new loans. Using a large sample of European banks, we find that banks characterized by lower expected default frequency are able to offer a larger amount of credit and to better insulate their loan supply from monetary policy changes.

https://papers.ssrn.com/sol3/Delivery.cfm/SSRN_ID1521512_code606534.pdf?abstractid=1521512&mirid=1

Bank Risk and Monetary Policy

We quantify the private returns and social costs of political connections exploiting a unique longitudinal dataset that combines matched employer-employee data for a representative sample of Italian firms with administrative archives on the universe of individuals appointed in local governments over the period 1985-97. According to our results, the revenue premium granted by political connections amounts to 5% on average, it is obtained through changes in domestic sales but not in exports, and it is not related to improvements in firm productivity. The connection premium is positive for upstream producers for the public administration only, and larger (up to 25%) in areas characterized by high public expenditure and high levels of corruption. These findings suggest that the gains in market power derive from public demand shifts towards politically connected firms. We estimate such shifts reduce the provision of public goods by approximately 20%.

https://papers.ssrn.com/sol3/Delivery.cfm?abstractid=1478489

Politicians at Work: The Private Returns and Social Costs of Political Connections

Technological change and the households’ demand for currency☆

It is shown that accounting for technology variations, across households and periods, is important to obtain theoretically consistent estimates of the demand for currency. An inventory model is presented where the withdrawal technology is explicitly modeled. Both the level and the interest rate elasticity of cash holdings depend on the withdrawal technology available to households. Empirical proxies for the household withdrawal technology, based on the diffusion of cash withdrawal points measured at city level, are used to test the model predictions on a panel of Italian household data over the 1993-2004 period.

Technological change and the households' demand for currency

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Technological change and the households’ demand for currency☆

Technological change and the households' demand for currency