Jim Lee

Family Firm Performance: Further Evidence

This article empirically investigates the competitiveness and stability of family-owned firms relative to firms owned by diverse shareholders. Founding families are present in about one-third of the S&P 500—the sample of this study. Data gathered over the 1992—2002 period confirm that family firms tend to experience higher employment and revenue growth over time and are more profitable. Regression analysis also supports that firm performance improves when founding family members are involved in management. Although evidence on the relative stability in employment among family firms over the long run is tenuous, data from the most recent recession support the role that founding families play in maintaining employment stability during temporary market downturns.

Does Size Matter in Firm Performance? Evidence from US Public Firms

Abstract This paper reexamines the determinants of firm performance and, in particular, the role that firm size plays in profitability. A fixed‐effects dynamic panel data model for over 7,000 US publicly‐held firms during the period 1987–2006 provides evidence that profit rates are positively correlated with firm size in a non‐linear manner, holding an array of firm‐ and industry‐specific characteristics constant. In addition, industry‐specific fixed effects play a negligible role in the presence of firm‐specific fixed effects.

Decomposing the Co-Movement of the Business Cycle: A Time-Frequency Analysis of Growth Cycles in the Euro Area

This article analyses the frequency components of European business cycles using real GDP by employing multiresolution decomposition (MRD) with the use of maximal overlap discrete wavelet transforms (MODWT). Static wavelet variance and correlation analysis is performed, and phasing is studied using co-correlation with the eurozone by scale. Lastly dynamic conditional correlation GARCH models are used to obtain dynamic correlation estimates by scale against the EU to evaluate synchronicity of cycles through time. The general …ndings are that eurozone members fall into one of three categories: i) high static and dynamic correlations at all frequency cycles (e.g. France, Belgium, Germany), ii) low static and dynamic correlations, with little sign of convergence occurring (e.g. Greece), and iii) low static correlation but convergent dynamic correlations (e.g. Finland and Ireland)

Evaluating the Stresses from ECB Monetary Policy in the Euro Area

This paper investigates the extent to which euro area monetary policy has responded to evolving economic conditions in individual member states as opposed to the euro area as a whole. Based on a forward-looking Taylor rule-type policy reaction function, we conduct counterfactual exercises that compare the monetary policy behaviour of the ECB under alternative hypothetical scenarios: (1) the euro member states make individual policy decisions, and (2) the ECB responds to the economic conditions of individual members. Stress measures are then constructed to evaluate the degree of divergence of member state economies under these two hypothetical scenarios. The results we obtain reflect the extent of heterogeneity among the national economies in the monetary union, indicating that euro area policy rates have been particularly close to the ‘counterfactual’ interest rates of the largest euro members and countries with similar economic conditions, namely Germany, Austria, Belgium and France.

EXCHANGE RATE VOLATILITY AND FOREIGN INVESTMENT: International Evidence

The assertion that exchange rate volatility has no real effects on trade volumes has been a contentious issue for over a decade. The European Union established the euro on the basis of a contrarian view to this assertion, and also maintained relatively fixed exchange rates following the collapse of the Bretton Woods exchange rate system in the early 1970s. Indeed, anecdotal evidence appears to support the view that there is an inverse relationship between trade volumes and exchange rate volatility. Business associations also consistently support more fixity in exchange rates, despite the existence of derivative markets for the purposes of hedging. While exports and imports appear on the current account of balance of payments, foreign direct investment appears on the capital account. Much of the world’s foreign direct investment (FDI) is undertaken by multinational enterprises (MNEs), about 60 percent on average during the 1990s. The nature of FDI flows is very unlike merchandise trade flows, as FDI largely consists of

The inflation and output variability tradeoff: evidence from a Garch model

Abstract This paper empirically investigates the possibility of a tradeoff between the variability of inflation and output gap over the period 1960–1997 in light of a bivariate GARCH model. There is strong evidence of temporal instability in the GARCH process, and the variability tradeoff is more apparent for the post-October 1979 subperiod. The slope of the tradeoff, nevertheless, appears to be considerably flat.

Business Cycle Synchronization in Europe: Evidence from a Dynamic Factor Model

This paper revisits the effect of the European Economic and Monetary Union (EMU) on the extent of business cycle synchronization across its member states. A dynamic latent factor model is used to identify the ‘regional’ effect of the euro area on output growth and inflation dynamics across European countries. The results of variance decomposition analysis confirm that both output growth and inflation tended to be more synchronized among European countries during the run-up to the EMU, but there is no strong evidence to support the argument that the ‘regional’ effects prevailed after 1999.

The Inflation-Output Variability Tradeoff and Monetary Policy: Evidence from a GARCH Model

This paper empirically investigates the Taylor curve volatility tradeoff in light of the stochastic behavior of the conditional variances of output and inflation. Stressing structural instability between periods before and after the 1979–1982 monetary policy regime change, I implement a bivariate generalized autoregressive conditional heteroskedasticity model to capture the output-inflation variability tradeoff and to explore the plausible impact of a change in the federal funds rate on the two conditional volatilities. I further evaluate the impacts of anticipated and unanticipated policy actions measured by two alternative policy reaction functions—one from a vector-autoregression-based reduced-form equation and another based on the Taylor rule. In addition to showing a volatility tradeoff relationship, the empirical model reveals different magnitudes of policy effects on output and inflation volatility across the two sample periods.

Federal funds rate target changes and interest rate volatility

Abstract This paper empirically investigates the varying volatility dynamics of Treasury interest rates in response to changes in the funds rate target over the period 1975–1999. Structural stability tests delimit five subperiods. Along with evidence of asymmetries in GARCH processes, the impulse–response functions of conditional volatility reveal different effects between a positive shock and a negative shock to the funds rate target on future interest rate volatility. The sizes of volatility responses weakened during the past two decades, and there is scant evidence of volatility transmission toward rates of longer maturities.

Cross-Country Evidence on the Effectiveness of Foreign Investment Policies

This study empirically evaluates the effectiveness of government policies toward foreign enterprises and foreign direct investment activity. Foreign investment policies are difficult to quantify, but we overcome this difficulty by employing an index that reflects a countrys general regulatory environment and treatment of foreign businesses. The evidence on the effectiveness of foreign investment policy measures is captured by a panel regression model, which pools together a cross-section of 153 countries over the period 1995–2001. The statistically significant explanatory power of the policy index is robust to the presence of a host of conditioning variables, some of which serve as fundamental foreign investment determinants that lie largely outside the direct control of national policy.