Emergence of Sovereign Wealth Funds

E-print/Working paper (2014)

This paper tests the theoretically founded hypothesis that the surge of SWF establishments is determined by three main factors: 1) the existence of natural resources profits, 2) the government structure ... [more ▼]

This paper tests the theoretically founded hypothesis that the surge of SWF establishments is determined by three main factors: 1) the existence of natural resources profits, 2) the government structure and 3) the ability to invest usefully in the domestic economy. We test this hypothesis on a sample of 20 countries that established an SWF in the period 1998-2008 by comparing them to the roughly 100 countries that did not set up a fund in the same period. We find evidence for all three factors. The results suggest that SWFs tend to be established in countries that run an autocratic regime and have difficulties finding suitable opportunities for domestic investments. We do not find the net foreign asset position of a country to be similarly related to the explanatory variables, indicating that the establishment of an SWF is distinct from a national accounting result. We argue that our results indicate that it is relevant to study how an SWF interacts with the domestic economy and government policy. [less ▲]

Emergence of Sovereign Wealth Funds

Poster (2014, September)

Fiscal Integration and Growth Stimulation in Europe

in Recherches Economiques de Louvain (2014), 80(2), 5-45

Real Exchange Rates and Skills

E-print/Working paper (2014)

While most of the literature on the determination of real exchange rates is focused on the role of standard macroeconomic variables, there exists however a few papers that are more concerned by the impact ... [more ▼]

While most of the literature on the determination of real exchange rates is focused on the role of standard macroeconomic variables, there exists however a few papers that are more concerned by the impact of factors which are usually considered to play a key role in the process of economic development, like demography or inequality. In the present paper, we extend this small branch of the literature by exploring the relationship between labor skills and real exchange rates over the long-run. According to several theoretical arguments, the real exchange rate of countries experiencing an increase in the ratio between skilled and unskilled workers should appreciate. That is what we actually find empirically using panel regressions covering 22 countries over the period 1950-2010. The impact of skills on real exchange rates is robust to the inclusion of several control variables, like those used in traditional analyses of real exchange rates. The real exchange rate therefore appears as one channel through which increases in skills can alter economic growth. What we call a "skill disease" effect offers a new partial explanation to the weak link between human capital and GDP growth that is often found by the empirical literature. [less ▲]

Specific Markov-switching behaviour for ARMA parameters

E-print/Working paper (2014)

Change-point (CP) and Markov-switching (MS) Auto-regressive models have been intensively discussed over the last two decades due to their flexibility and their relatively simple estimations. Although CP ... [more ▼]

Change-point (CP) and Markov-switching (MS) Auto-regressive models have been intensively discussed over the last two decades due to their flexibility and their relatively simple estimations. Although CP- and MS-ARMA models constitute a natural extension, they have been barely studied. The main reason comes from that classical inference fails when estimating these models. In particular the CP- and MS-ARMA models exhibit path dependence problem that renders the likelihood out of reach. We propose an estimation method that circumvents the issue. Our MCMC algorithm resting on the sticky in.finite hidden Markov-switching model (sticky IHMM) self-determines the number of regimes as well as the specification : CP or MS. Furthermore, the CP and MS frameworks usually assume that all the model parameters vary from one regime to another. We relax this restrictive assumption. As illustrated by simulations realized on moderate samples (300 observations), the sticky IHMM-ARMA algorithm detects which parameters of the model change over regimes. Applications to the U.S. GDP growth and the DJIA realized volatility highlight this flexibility by estimating different structural breaks for the mean and the variance parameters. [less ▲]

An ex-post View of Inequality of Opportunity in France and its Regions

in Journal of Labor Research (2013), 34(3), 281-311

Trade integration and trade imbalances in the European Union: a network perspective

E-print/Working paper (2013)

We study the ever more integrated and ever more unbalanced trade relationships between European countries. To better capture the complexity of economic networks, we propose two global measures that assess ... [more ▼]

We study the ever more integrated and ever more unbalanced trade relationships between European countries. To better capture the complexity of economic networks, we propose two global measures that assess the trade integration and the trade imbalances of the European countries. These measures are the network (or indirect) counterparts to traditional (or direct) measures such as the trade-to-GDP (Gross Domestic Product) and trade deficit-to-GDP ratios. Our indirect tools account for the European inter-country trade structure and follow (i) a decomposition of the global trade flow into elementary flows that highlight the long-range dependencies between exporting and importing economies and (ii) the commute-time distance for trade integration,which measures the impact of a perturbation in the economy of a country on another country, possibly through intermediate partners by domino effect. Our application addresses the impact of the launch of the Euro. We find that the indirect imbalance measures better identify the countries ultimately bearing deficits and surpluses, by neutralizing the impact of trade transit countries, such as the Netherlands. Among others, we find that ultimate surpluses of Germany are quite concentrated in only three partners. We also show that for some countries, the direct and indirect measures of trade integration diverge, thereby revealing that these countries (e.g. Greece and Portugal) trade to a smaller extent with countries considered as central in the European Union network. [less ▲]

Real Exchange Rates, Commodity Prices and Structural Factors in Developing Countries

Scientific Conference (2013)

Specific Markov-Switching Behavior for ARMA Parameters

Scientific Conference (2013)

Commodities Inventory Effect

Scientific Conference (2013)