Giuseppe De Arcangelis

Sectoral Determinants and Dynamics of ICT Investment in Italy

Many measures of the impact of Information and Comunication Technology (ICT) on growth have been provided for the United States; much fewer analyses have been proposed for European countries, due also to scarcity of disaggregated data. In this paper we make use of very detailed sectoral data for Italy to study both the aggregate evolution and the sectoral diffusion of ICT investment expenditure during the 1990s. In the aggregate we find that the 1992 recession strongly halted ICT investment, and only in 1999 the Italian economy recovered the same rate of ICT capital formation. Second, mixed evidence on diffusion is shown by the sectoral expenditure on ICT capital goods: although the ICT fraction of total investment has increased in all the relevant macro-sectors (industry, commerce and advances services), the number of total sectors investing in ICT has not risen between 1992 and 2000. Finally, an econometric analysis of sectoral ICT determination shows that, besides capital intensity and interest rates, R&D expenditure is a strong predictor of ICT investment expenditure. Hence, since R&D-intensive sectors are usually associated with the highest growth potential, ICT expenditure by those sectors may trigger a virtuous growth dynamics.

Intentions to Return of Clandestine Migrants: The Perverse Effect of Illegality on Skills

In this paper we show that highly skilled clandestine migrants are more likely to return home than migrants with low or no skills when illegality causes “skill waste”, i.e. when illegality reduces the rate of return of individual capabilities (i.e. skills and human capital) in the country of destination. In a simple life-cycle framework, illegality is modeled as a tax on skills that reduces the opportunity cost of returning home particularly for the highly skilled. This proposition is tested on a sample of apprehended immigrants that unlawfully crossed the Italian borders in 2003. The estimation confirms that the intention to return to the home country is more likely for highly skilled illegal immigrants. The empirical results of this paper attenuate the common wisdom on the return decisions of legal migrants, according to which low-skill individuals are more likely to go back home (mainly because of negative self-selection).

Balance‐of‐Payments Crises During the Great Recession: Is this Time Different?

During the 2007–09 financial crisis large volatility and wide currency swings characterized the foreign exchange market. This paper utilizes the early‐warning framework to evaluate whether during the period of the Great Recession there has been a structural break in the relationship between fundamentals and exchange rates. This is done by extending an original data set from 1999 and including not only the most recent period, but also 17 new countries. The analysis considers two variations of the original early‐warning system. First, two new methods are proposed to obtain the probability distribution of the early‐warning indicator (conditional on the occurrence of a crisis) - one fully parametric and one based on a novel distribution‐free semi‐parametric approach. Second, the original early‐warning indicator is compared with a core indicator that includes only “pseudo‐financial variables” (domestic credit/GDP, the real exchange rate, international reserves and the real interest‐rate differential) and their performance is evaluated not only for currency crises during the Great Recession, but also for the Asian Crisis. The conclusion from all tests is that “this time is different”, i.e. early‐warning systems based on traditional macroeconomic variables have not only failed to forecast currency crises during the Great Recession, but have also significantly worsened with respect to the period of the Asian crisis.

Monetary policy shocks and transmission in Italy: A VAR analysis

This paper provides updated empirical evidence about the real and nominal effects of monetary policy in Italy, by using structural VAR analysis. We discuss different empirical approaches that have been used in order to identify monetary policy exogenous shocks. We argue that the data support the view that the Bank of Italy, at least in the recent past, has been targeting the rate on overnight interbank loans. Therefore, we interpret shocks to the overnight rate as purely exogenous monetary policy shocks and study how different macroeconomic variables react to such shocks.

THE SPECIALIZATION OF THE DISTRICTS: FROM TYPICAL FINAL GOODS TO MACHINERY FOR MAKING THEM?

The main idea of this paper is that bank internationalization might encourage exports as banks’ foreign branches and representative offices provide financial and informational support to exporting firms. This hypothesis has been tested using bank and firm data at Italian province-level between 1993 and 2001. The empirical analysis suggests that there is a positive relationship between bank internationalization and export propensity. The effect seems to be concentrated in the scale and high-technology sectors (according to Pavitt classification), presumably reflecting the greater need for banks’ support in more complex and product-differentiated markets.

Currency Crises During the Great Recession: Is This Time Different?

During the 2007-2009 financial crisis the foreign exchange market was characterized by large volatility and wide currency swings. In this paper we evaluate whether during the period of the Great Recession there has been a structural break in the relationship between fundamentals and exchange rates within an early-warning framework. This is done by extending the original data set by Kaminsky and Reinhart (1999) and including not only the most recent period, but also 17 new countries. Our analysis considers two variations of the original early-warning system. First, we propose two new methods to obtain the probability distribution of the early-warning indicator (conditional on the occurrence of a crisis) – one fully parametric and one based on a novel distribution-free semi-parametric approach. Second, we compare the original early-warning indicator with a core indicator that includes only “pseudo-financial variables” (domestic credit/GDP, the real exchange rate, international reserves and the real interest-rate differential) and we evaluate their performance not only for currency crises during the Great Recession, but also for the Asian Crisis. All tests make us conclude that “this time is different”, i.e. early-warning systems based on traditional macroeconomic variables have not only failed to forecast currency crises during the Great Recession, but have also significantly worsened with respect to the period of the Asian crisis.

'Intentions to Return of Clandestine Migrants: The Perverse Effect of Illegality on Skills' - A Reply to the Note

The purpose of this reply is twofold. First, we discuss the major point raised by Stark and Lukasz (Review of Development Economics 17, no. 1 (2013):156–62), i.e. the fact that a framework which explicitly considers asymmetric information is correct and would imply a reversal of our finding. Although, we acknowledge that the mechanism highlighted by the authors is an alternative explanation to return decisions, we argue that the suggested framework is unsuitable in the specific context analyzed in our paper (as well as most real‐world situations). Instead, the assumptions underlying our simple theoretical model are strictly linked to data availability in order to perform a sensible empirical analysis. Second, we present a slightly different version of the model proposed in the original article that overcomes possible inconsistencies on the saving behavior of the migrants. Although all the computations are shown in one of the articles cited in our published paper, we now prefer to show them fully in this issue of the Review. The conclusions of our theoretical model do not change. Hence, we conclude that the empirical evidence of the original article - which is the main contribution of our work - is supported by a robust framework.

Policy-Making: EU trade links with developing neighbours: the case of SEECs, CEECs and the Mediterranean countries

European countries export a large portion of their manufactured goods to developing countries. Among these, the countries of the southern region of the Mediterranean Sea (MED or MED12s in Eurostat terminology), which represent a natural outlet given their geographical proximity, have always had a prominent role. From the beginning of the 1990s, however, the EU (and especially Italy) has also increased its commercial exchanges with the countries of South-Eastern Europe (SEECs) and those of Centre-Eastern Europe (CEECs). In these countries, which are also geographically close, after the fall of the Berlin Wall and the end of the Comecon, an important process of internal economic liberalization has been under way. In particular, what is relevant for the present purposes is that integration and the opening toward foreign countries has increased and, in a few years, this has radically modified the structure of commercial flows. Changes in the economic structure and in the political situation, particularly in the case of the SEECs, have improved the potential for growth of these countries. Progress in political and economic areas—liberalization of the financial sector, opening of a capital market, trade liberalization—although still under way, allows a more efficient allocation of both human and financial resources and favours economic development, thereby increasing the potential for growth. At the same time, the potential for growth of the MED countries is also in principle high. GDP growth rates in recent years have consistently been larger than those of industrial countries and demographic trends and per capita

Monetary Policy and Exchange-Rate Regimes in Europe: A Structural Approach

This paper proposes an empirical framework to analyze monetary policies in a small open economy under fixed exchange rates. First, the analysis proposes a semi-restricted VAR model with the lowest number of restrictions to focus on the effects of the center-country and the Rest-of-the-World monetary policies. Next, we use a fully structural VAR approach where the identifying restrictions are imposed on the short-run behavior of the variables. The model is applied to the EMS experience of France, Italy and the Netherlands by considring Germany as the center country and the U.S. as the Rest of the World. The presence of imperfect capital mobility allows us to attribute partial monetary independence to the domestic monetary authorities. Innovations in the German monetary policy are found to be highly important for the Dutch monetary policy, but much less for France and especially for Italy. Instead, the U.S. shock plays a particularly relevant role for the French monetary policymaking. There is also evidence of stronger recessionary impact of restrictive German monetary policies on France and Italy rather than the Netherlands. This may explain why the former two countries devalued so many times.