Elmer Sterken

Does uncertainty affect economic growth?: an empirical analysis

Does Uncertainty Affect Economic Growth? An Empirical Analysis. — This paper investigates the effect of uncertainty on economic growth. We construct measures of export uncertainty, government policy uncertainty and price uncertainty to augment a growth model, and using econometric techniques we test for robustness of the effects of these measures on economic growth in a cross-section of 138 developing and developed economies during the 1970–1995 period. The result clearly shows a robust and negative effect of uncertainty on economic growth. These results underline the importance of export stability and policy credibility.ZusammenfassungBeeinflu\t Unsicherheit das wirtschaftliche Wachstum? Eine empirische Untersuchung. — Die Verfasser untersuchen den Einflu\ von Unsicherheit auf das wirtschaftliche Wachstum. Sie entwickeln Ma\e für die Unsicherheit am Beispiel der Exporte, Regierungspolitik und Preise, um ein Wachstumsmodell auszubauen. Danach testen sie ökonometrisch die Robustheit der Wirkungen dieser Ma\e auf das wirtschaftliche Wachstum eines Querschnitts von 138 Industrie- und Entwick-lungslÄndern in der Zeit von 1970 bis 1995. Das Ergebnis zeigt deutlich einen robusten und negativen Einflu\ von Unsicherheit auf das wirtschaftliche Wachstum. Dies unter-streicht die Bedeuting stabiler Exporte und einer verlÄ\lichen Politik.

Growth Impact of Major Sporting Events

Abstract In this paper we analyse the impact of organizing major sporting events on economic growth. We present ex-post-cross-country event results for the Summer Olympic Games and the FIFA World Cup. Both descriptive statistics of the relation between the timing of events and economic growth and estimation results of a panel growth model that incorporates both regular growth determinants and the timing of major sports events are presented. We observe that the Summer Olympic Games stimulate per capita GDP (gross domestic product)-growth, while the FIFA World Cup does not.

From the cradle to the grave: how fast can we run?

I model average running speed on distances from 5000 m to the marathon as a function of age, distance and sex. Using data on US age-dependent road-racing records, I simulate optimal performance for ages ranging from 3 to 95 years. The results of the correlation between running speed and age are in line with medical results on the relation between age and maximal oxygen uptake. The results show that official track and field age-grading overestimates human performance at older ages.

Investment and Debt Constraints: Evidence from Dutch Panel Data

It is generally accepted that real markets are sometimes affected by imperfections and their consequences. In contrast, the functioning of financial markets is mostly assumed to be perfect and efficient. Modigliani and Miller (1958, hereafter MM) show that in the latter case the capital structure of the firm is irrelevant for the user cost of capital and does neither affect investment nor the value of the firm. Since the publication of their seminal paper a large number of studies has pointed out that the empirical relevance of the MM-proposition is small. Financial markets suffer from several (institutional) market imperfections. In the first twenty years after the MM-publication, papers showed that distortionary taxes, transaction, bankruptcy and agency costs cause the financial structure to affect investment decisions. In recent studies the focus is directed towards information asymmetries. Agents have different sets of information. Firms know more about the quality of their investment project than, for instance, a bank. It can be shown that in such a case external funds (for instance bank credit) are more expensive than internal funds, because problems like adverse selection and moral hazard may occur. This might explain the empirical phenomenon that firms preferably use internal funds to finance Investment.1

The Role of the IFO Business Climate Indicator and Asset Prices in German Monetary Policy

We analyze the role of forward-looking indicators, like the IFO business climate indicator and asset prices, in German monetary transmission. We show that the use of both the IFO indicator and asset prices improves the performance and interpretation of a Vector AutoRegression (VAR) model of German monetary transmission. First, we show that the Bundesbank responded more intensively to changes in the IFO indicator than to changes in GDP. Secondly, we address the role of housing and equity prices. We demonstrate that especially housing prices help to give a more accurate description of the recent history of German monetary policy.

Endurance in speed skating: The development of world records

We analyse the development of world records speed skating from 1893 to 2000 for both men and women. The historical data show that it is likely that the relation between skating speed and distance of the various events is non-linear and converges to a limit value. We pay special attention to technical innovations in speed skating, especially, the introduction of the klapskate in the 1996/1997 season, and its impact on the long-run limit value. We focus on endurance and we estimate lower bounds for world records given the current technological state of the art. We illustrate the forecasting properties of our model using the Salt Lake City 2002 Winter Games results.

Monetary transmission and bank competition in the EMU

The introduction of the euro has led to renewed attention for monetary transmission in the European Union. This special issue of the Journal of Banking and Finance includes papers that contribute to the development of both the theory and empirical applications of the monetary transmission channel that assumes various types of imperfections. The issue includes papers that can best be described by the credit view and studies on concentration and competition in the European banking industry. This introduction positions the papers in this active field of research

The Option to Wait to Invest and Equilibrium Credit Rationing

Stiglitz and Weiss (1981) show that firms considering risky projects have higher reservation interest rates and hence it is optimal for a bank to reduce loan supply. In this note we show that when the risk involved in an investment will be resolved in the future, investors with riskier projects have a greater return from waiting. More risky projects have lower reservation interest rates and hence there is no motive for banks to ration credit demand.

Volatility of the interest rate, debt and firm investment: Dutch evidence

Abstract This paper analyzes the joint impact of the interest rate volatility and debt on firm investment. We derive an investment model taking account of the risk attitude of the owners of the firm. Using a panel of Dutch listed firms in the period of 1984–1995, we find that the cross-effect of the interest rate volatility and debt on investment is positive. This effect is more important for highly indebted firms than for less-indebted firms. The results are robust to different measures for the interest rate volatility. We interpret this finding by the tradeoff between the effect of the interest burden and the effect of debt revaluation.

Olympic Participation and Performance since 1896

Abstract We analyze the decision to participate and Olympic performance at the country level. We use an unbalanced panel of 118 countries over 24 editions of the Olympic Summer Games. The main focus of the paper is on economic, geographic and demographic explanations of Olympic participation and success. We estimate the impact of income per capita, population size, home advantage, and institutional variables on participation and success rates. We present separate results for events before the Second World War and after. These results show that income is an important determinant of Olympic participation and success. Socialist countries send more athletes to the games and have more success in medal counts. The home advantage has become less prominent.