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This paper studies the effect of the strength of Bilateral Investment Treaties (BITs) on FDI activity. We develop an index for the strength of international dispute settlement provisions included in BITs in order to examine the role the content of BITs plays in attracting FDI. To this end we make use of data from the UNCTAD's International Investment Agreement Mapping Project and measure the provision strength of 1,676 BITs. Using panel data of bilateral and total inward FDI flows and stocks we study the effect of BITs on FDI. Our main finding indicates that stronger international dispute settlement provisions in BITs are indeed associated with positive effects on FDI activity.
This paper uses the Consensus Economic Forecast poll to investigate how forecasters in the foreign exchange market form expectations. In order to explain the expectation formation of forecasters, around 50,000 forecasts for 22 OECD-member currencies are analyzed. The results indicate that forecasters do not form expectations rationally when tested for unbiasedness and orthogonality. The results also suggest that forecasts for industrialized economies show a mix of trend-following and fundamentally-oriented behavior. By contrast, forecasts for emerging markets show significantly more destabilizing expectations. We find forecasting tendencies to strengthen in the short-run and medium-run when controlling for the Balassa-Samuelson effect. For long-run forecasts however this can not be confirmed.
In this paper, we study the bias in interest rate projections for four central banks, namely for Czech Republic, New Zealand, Norway, and Sweden. We examine whether central bank projections are based on an asymmetric loss function and report evidence that central banks perceive an overprojection of their longer-term interest rate forecasts as twice as costly as an underprojection of the same size. We document that rationality is consistent with biased interest rate projections which contribute to explaining the central banks’ behavior.
Our paper estimates the impact of immigration on the sustainability of the Italian public finances using the methodology of Generational Accounting. We take into account socio-economic differences between the main migrants’ communities resident in Italy and we present three possible scenarios to reflect the potential economic degree of integration of foreigners in the Italian territory. Moreover, for each scenario we propose several options for migrants concerning both the length of permanence in Italy and the possible collection of retirement benefits. Our results show that the burden of current fiscal policy reduces as integration of the foreign-born increases. If migrants’ children are economically perfectly integrated, the fiscal gap is reduced from 71.9 to -15.3 percent of GDP.
In this article we examine the influence of two goal compensation schemes on lying behavior. Based on the die rolling task of Fischbacher/Föllmi-Heusi (2013), we apply an individual goal incentive scheme and a team goal incentive scheme. In both settings individuals receive a fixed bonus when attaining the goal. We find that under team goal incentives subjects are less inclined to over-report production outputs beyond the amount which is on average necessary for goal attainment. Investigating subjects’ beliefs on their team mates’ behavior under team goal incentives reveals that subjects who either believe that lying is not profitable (i.e., the team goal cannot be reached with a lie) or not absolutely necessary (i.e., there is a good chance that the team goal can also be reached without lying) tend to be honest. We also find that subjects who believe that the team goal has already been reached by their team mates tend to over-report production outputs. Across treatments, women are found to be more honest than men. Subjects’ ersonality is not associated with reported production outputs. Our work contributes to previous research on how different compensation schemes affect unethical behavior in organizational settings.
Strong consistency of the least squares estimator in regression models with adaptive learning
(2017)
This paper looks at the strong consistency of the ordinary least squares (OLS) estimator in a stereotypical macroeconomic model with adaptive learning. It is a companion to Christopeit & Massmann (2017, Econometric Theory) which considers the estimator’s convergence in distribution and its weak consistency in the same setting. Under constant gain learning, the model is closely related to stationary, (alternating) unit root or explosive autoregressive processes. Under decreasing gain learning, the regressors in the model are asymptotically collinear. The paper examines, first, the issue of strong convergence of the learning recursion: It is argued that, under constant gain learning, the recursion does not converge in any probabilistic sense, while for decreasing gain learning rates are derived at which the recursion converges almost surely to the rational expectations equilibrium. Secondly, the paper establishes the strong consistency of the OLS estimators, under both constant and decreasing gain learning, as well as rates at which the estimators converge almost surely. In the constant gain model, separate estimators for the intercept and slope parameters are juxtaposed to the joint estimator, drawing on the recent literature on explosive autoregressive models. Thirdly, it is emphasised that strong consistency is obtained in all models although the near-optimal condition for the strong consistency of OLS in linear regression models with stochastic regressors, established by Lai & Wei (1982), is not always met.
This study examines heterogeneity in tax rate elasticities of corporate capital using staggered variation in local business tax rates of German municipalities. The results suggest an average long-run capital decline of 0.97% after a 1% increase in the tax rate. In line with prior literature that suggests higher investment-cash flow sensitivities of firms with financing constraints tax rate elasticities are up to half times larger for financially constrained firms than for unconstrained firms. Moreover, capital responses are about half times larger for firms with fewer tax avoidance possibilities. Finally, this study contributes to the literature on tax incidence. I find a weaker relation between taxes and capital for firms that are less likely to bear the economic burden of the tax because they shift the tax incidence to their stakeholders.