Evangelia Desli

Risk Measures and Theories of Choice

We discuss classes of risk measures in terms both of their axiomatic definitions and of the economic theories of choice that they can be derived from. More specifically, expected utility theory gives rise to the exponential premium principle, proposed by Gerber (1974), Dhaene et al. (2003), whereas Yaaris (1987) dual theory of risk can be viewed as the source of the distortion premium principle (Denneberg (1990), Wang (1996)). We argue that the properties of the exponential and distortion premium principles are complementary, without either of the two performing completely satisfactorily as a risk measure. Using generalised expected utility theory (Quiggin, 1993), we derive a new risk measure, which we call the distortion-exponential principle. This risk measure satisfies the axioms of convex measures of risk, proposed by Follmer and Shied (2002 a, b), and its properties lie between those of the exponential and distortion principles, which can be obtained as special cases.

Financial Development and Productive Efficiency in OECD Countries: An Exploratory Analysis

The recent literature provides evidence for a positive relationship between financial deepening and growth but is quite silent on the exact channels through which it materializes. Theory suggests that production efficiency should be one of those main channels. We attempt to capture this channel by modeling productive efficiency explicitly and constructing efficiency frontiers using data envelopment analysis. We apply this procedure to consider whether financial development creates productive efficiency gains in the industrialized OECD countries. Our results show that financial development contributes to productive efficiency. However, this effect weakens over time during the period under scrutiny. Moreover, we find that the effects of financial deepening on productive efficiency depend on the degree of efficiency already achieved.

Convergence and efficiency: evidence from the EU-15

This paper considers per capita income and productive efficiency beta-convergence for 15 EU countries (EU-15) during the European Economic and Monetary Union and the period preceding it. A production frontier approach is used to obtain efficiency measures. Even though we uncover evidence of convergence in both per capita income and efficiency, the results differ across various subperiods. Convergence per capita income occurs during 1986-90 and 1991-95. Productive efficiency convergence occurs during 1986-90, 1996-2000, and 2000-4. When we control for different efficiency levels, it emerges that less efficient countries display per capita income convergence more often. We also consider the implications of income inequality on per capita income growth and productive efficiency change and find that it mainly affects the latter.

Technical Efficiency and Financial Deepening in the non‐OECD Economies

Abstract This contribution investigates the channels through which the relationship between financial deepening and growth materializes. While this relationship has been extensively explored over the recent past, less attention has been paid to the channels through which the relationship comes about. In continuing our exploration of this relationship, instead of using a total factor productivity measure, as the existing literature does, we model productive efficiency in a more explicit and comprehensive way using non‐parametric methodologies to construct efficiency frontiers. We consider the link between financial deepening and productive efficiency in a number of non‐OECD countries, using the data available from the Penn World Tables. Our results show that financial development has in general a positive effect on productive efficiency.

Greece's Sudden Faltering Economy: From Boom to Bust with Special Reference to the Debt Problem

In this paper, we deal with theoretical propositions and empirical evidence that are needed to explain the paradox of rapid GDP growth in the face of the dismal competitiveness of the Greek economy during 1995–2008. We show how Greece’s economic structural weaknesses have hit the domestic economy and we investigate their impact on the current turmoil of the economy. We show that the previous favourable global economic environment acted as a locomotive to domestic growth, and now that it is gone, structural problems of poor governance, low competitiveness and a ballooning public deficit and debt, have come to the surface. Also, in the context of debt sustainability we look at the recent actions to reduce debt that are taken by the Growth and Stability Program. We construct five scenarios regarding the level of public debt at the end of the 2011–15 period that is commonly accepted that Greece will return to global financial markets to finance its debt. We find that only under a very optimistic scenario of robust growth of the economy based on structural and institutional reforms that boost productivity, significantly improve competitiveness, and boost the financial sector as described in the Growth and Stability Program along with a successful privatization of 50 billion euros the public debt-to-GDP ratio can reach the 60 per cent threshold that the financial markets find comfortable. We offer a specific explanation of the current unfortunate state of the economy and we briefly suggest avenues of necessary progressive reforms to overcome it.

International Evidence on Convergence and Openness

In this paper we examine for both economic convergence and openness convergence across the global economy and within specific regions. We find that convergence in openness is much more profound than income convergence. Moreover, convergence within regions takes place faster than convergence across the globe. We then examine for the effects of trade openness on income convergence. We use both trade openness indicators based on actual trade volumes as well as indices that rank countries according to trade policy openness. Finally, we consider the effects of such indices on openness convergence. We discuss our results in the context of the regionalism versus globalization debate.