Existing empirical studies have mainly focused on determinants of average investment levels. Instead, we investigate episodes of accelerated capital stock growth having a duration of eight years or longer. We find that episodes are relatively common, even in low-growth regions, but more so in middle-income and Asian countries. After identifying 175 episodes between 1950 and 2014, we employ probit analysis to explore their characteristics. Turning points in investment tend to be preceded by macroeconomic stability, real exchange rate undervaluation, and net capital outflows (especially portfolio outflows). We also find a negative correlation with the capital to output ratio and per capita GDP, and a positive correlation with a human capital index. Investment surges tend to be associated with changes in the trade balance and, to a (statistically) weaker extent, with structural change.
This paper empirically examines the effects of the Federal Reserve's Large Scale Asset Purchases (LSAP) on bank profits. We use a new dataset on individual LSAP transactions and bank holding company data from the Fed's FRY-9C regulatory reports to construct a large panel of banks for 2008Q1 to 2009Q4. Our results suggest that banks that sold Mortgage-backed Securities to the Fed ("treatment banks") experienced economically and statistically significant increases in profitability after controlling for common determinants of bank performance. Banks heavily "exposed" to MBS purchases should also experience increases in profitability through asset appreciation. Our results also provide evidence for this type of spillover effect and suggest that large banks may have been more affected. Although our results suggest that MBS purchases increased bank profits, we find only mixed evidence that these were associated with increased lending. Our findings are thus consistent with the hypothesis that the Federal Reserve undertook these policies, at least in part, to increase the profitability of their main constituency: the large banks.JEL classification: G21, G28, G32
The article addresses the claim that the "left populist" governments of Argentina, Bolivia, Ecuador, and Venezuela failed to effectively reduce inequality in the 2000s. The author examines the econometric evidence presented by McLeod and Lustig (2011) that the "social democratic" governments of Brazil, Chile, and Uruguay were more successful and shows that McLeod and Lustig's results are highly sensitive to their use of data from the Socioeconomic Database for Latin America and the Caribbean (SEDLAC). Conducting the same analysis using inequality data from the Economic Commission for Latin America and the Caribbean (ECLAC) suggests the exactly opposite conclusion. The contrast between the results obtained using SEDLAC and ECLAC data suggests that the choice of inequality data source is not immaterial and that the difference is probably driven by how the two sources handle the underreporting of income in household surveys. The key difference between SEDLAC and ECLAC data is that the latter correct for the underreporting of income while the former do not. Absent reasonable criteria for choosing between the two datasets, the author suggests that any econometric results pertaining to Latin American income inequality should prove robust to both data sources.
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