Nikolaos Mylonidis

A PANEL DATA ANALYSIS OF THE NEXUS BETWEEN DEFENCE SPENDING AND GROWTH IN THE EUROPEAN UNION

The nexus between economic growth and military expenditure has attracted considerable attention and has been the subject of extensive theoretical and empirical work. Given the move towards the development of a Common European Security and Defence Policy (CESDP), this paper, using panel data analysis, addresses the causal ordering issue between growth and defence spending in the case of the European Union (EU15). Results reported herein suggest the presence of a positive feedback between growth and military expenditure in the long run and a positive impact of the latter on growth in the short run.

REVISITING THE NEXUS BETWEEN MILITARY SPENDING AND GROWTH IN THE EUROPEAN UNION

This paper focuses on the influence of military spending on European economic growth. The estimated regressions are based on Barro’s (1991) growth model, which controls for economic institutional variation across countries. The cross‐section and panel data analyses cover the period 1960–2000. The empirical findings indicate that military spending has an overall net negative influence on economic growth. Furthermore, the magnitude of this negative impact tends to increase over time, as cross‐section regression results indicate. Given the development of a Common European Security and Defence Policy (CESDP), these findings suggest that enhanced defence spending may hinder European economic growth.

The Risk-Taking Channel of Monetary Policy in the USA: Evidence from Micro-Level Data

There is a growing consensus that a prolonged period of low interest rates can exert a negative impact on financial stability through the risk-taking incentives of banks. Using micro-level datasets from the US banking sector, this paper finds evidence of a highly significant negative relationship between monetary policy rates and bank-risk taking. This finding remains robust across various specifications, sub-periods and subsamples, thereby confirming the presence of an active risk-taking channel of monetary policy since the 1990s. The results, therefore, support the new responsibilities of the Fed on macro-prudential supervision to monitor systemic risks.

Uncovered interest parity puzzle: does it really exist?

Most studies indicate the violation of the Uncovered Interest Parity (UIP) restrictions, and indeed, there are many who find a statistically significant and negative interest rate differential slope. This finding has now become known in international economics as the UIP puzzle. Using recent data on four major currencies vis-à-vis the US dollar and employing the Generalized Method of Moments (GMM) technique, our estimation results indicate the absence of any relationship between the interest rate differential and the expected change in the exchange rate, rather than the presence of the UIP puzzle.

Relative effective taxation and income inequality: Evidence from OECD countries:

Using a panel data set of effective tax rates that are directly comparable across Organization for Economic Co-operation and Development (OECD) countries and over time, we investigate the redistributive effect of labour, consumption and capital tax rates. We show that what matters from a redistributive standpoint is the tax mix rather than the tax rates in isolation from the rest. The results suggest that increasing the tax burden on labour or consumption relative to capital leads to higher income inequality. In contrast, greater reliance on labour taxes relative to consumption taxes improves income equality. This effect likely stems from the redistributive objectives of social security contributions incorporated in labour taxes.

Bank market power and loan growth

The authors explore the impact of bank market power on the provision of credit using multi-year, bank-level data from 131 countries. Their findings reconcile the opposing views of the theory on this matter and indicate the existence of a U-shaped relationship between bank market power and loan growth. Specifically, they find that high market power, as measured by high values of the Lerner index, diminishes bank loan growth in accordance with the traditional industrial organization approach. However, they also document that, after a certain threshold, a further increase in bank market power results in greater credit expansion in line with the information hypothesis. These findings are robust to the inclusion of country-specific time effects and to alternative variants of the Lerner index.

Relative Effective Taxation and Income Inequality: Evidence from OECD Countries

Using a panel data set of effective tax rates that are directly comparable across OECD countries and over time, we investigate the redistributive effect of labour, consumption and capital tax rates. We show that what matters from the point of view of redistribution is the tax mix rather than the tax rates in isolation of the rest. We also find that as countries become more economically developed, and thus institutionally stronger, the adverse effects of relative tax rates on income equality diminish.

Financial variables as leading indicators in Greece

This paper presents business cycle stylized facts for the Greek economy and extends the relevant Greek literature in the following directions. First, the index of industrial production (IOP) is used to represent real economic activity and business cycle conditions. Second, the behavior of certain financial variables throughout the various phases of the business cycle is analyzed in order to assess their leading indicator properties. Third, possible non-linearities in these variables are investigated and tested for their relation to the business cycle states. The results imply that the most reliable leading indicators are real Treasury bill rates. Volatilities of real short-term interest rates may also contain useful predictive information for IOP volatility. Finally, mean non-linearities seem to be associated with business cycle asymmetries in the mean.