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- Venture Capital (17)
2011, 30
Central banks have recently introduced new policy initiatives, including a policy called ‘Quantitative Easing’ (QE). Since it has been argued by the Bank of England that “Standard economic models are of limited use in these unusual circumstances, and the empirical evidence is extremely limited” (Bank of England, 2009b), we have taken an entirely empirical approach and have focused on the QE-experience, on which substantial data is available, namely that of Japan (2001-2006). Recent literature on the effectiveness of QE has neglected any reference to final policy goals. In this paper, we adopt the view that ultimately effectiveness will be measured by whether it will be able to “boost spending” (Bank of England, 2009b) and “will ultimately be judged by their impact on the wider macroeconomy” (Bank of England, 2010). In line with a widely held view among leading macroeconomists from various persuasions, while attempting to stay agnostic and open-minded on the distribution of demand changes between real output and inflation, we have thus identified nominal GDP growth as the key final policy goal of monetary policy. The empirical research finds that the policy conducted by the Bank of Japan between 2001 and 2006 makes little empirical difference while an alternative policy targeting credit creation (the original definition of QE) would likely have been more successful.
2004, 05
We study the returns the venture capital and private equity investment from 221 venture capital and private equity funds that are part of 72 venture capital and private equity firms, 5040 entrepreneurial firms (3826 venture capital and 1214 private equity), and spanning 32 years (1971 - 2003) and 39 countries from North and South America, Europe and Asia. We make use of four main categories of variables to proxy for value-added activities and risks that explain venture capital and private equity returns: market and legal environment, VC characteristics, entrepreneurial firm characteristics, and the characteristics and structure of the investment. We show Heckman sample selection issues in regards to both unrealized and partially realized investments are important to consider for analysing the determinants of realized returns. We further compare the actual unrealized returns, as reported to investment managers, to the predicted unrealized returns based on the estimates of realized returns from the sample selection models. We show there exists significant systematic biases in the reporting of unrealized investments to institutional investors depending on the level of the earnings aggressiveness and disclosure indices in a country, as well as proxies for the degree of information asymmetry between investment managers and venture capital and private equity fund managers. Klassifikation: G24, G28, G31, G32, G35
478
he predictive likelihood is of particular relevance in a Bayesian setting when the purpose is to rank models in a forecast comparison exercise. This paper discusses how the predictive likelihood can be estimated for any subset of the observable variables in linear Gaussian state-space models with Bayesian methods, and proposes to utilize a missing observations consistent Kalman filter in the process of achieving this objective. As an empirical application, we analyze euro area data and compare the density forecast performance of a DSGE model to DSGE-VARs and reduced-form linear Gaussian models.
2001, 07 r
We use consumer price data for 81 European cities (in Germany, Austria, Finland, Italy, Spain, Portugal and Switzerland) to study the impact of the introduction of the euro on goods market integration. Employing both aggregated and disaggregated consumer price index (CPI) data we confirm previous results which showed that the distance between European cities explains a significant amount of the variation in the prices of similar goods in different locations. We also find that the variation of relative prices is much higher for two cities located in different countries than for two equidistant cities in the same country. Under the EMU, the elimination of nominal exchange rate volatility has largely reduced these border effects, but distance and border still matter for intra-European relative price volatility.
2005, 30
Using a unique data set of regional inflation rates we are examining the extent and dynamics of inflation dispersion in major EMU countries before and after the introduction of the euro. For both periods, we find strong evidence in favor of mean reversion (ß-convergence) in inflation rates. However, half-lives to convergence are considerable and seem to have increased after 1999. The results indicate that the convergence process is nonlinear in the sense that its speed becomes smaller the further convergence has proceeded. An examination of the dynamics of overall inflation dispersion (ó-convergence) shows that there has been a decline in dispersion in the first half of the 1990s. For the second half of the 1990s, no further decline can be observed. At the end of the sample period, dispersion has even increased. The existence of large persistence in European inflation rates is confirmed when distribution dynamics methodology is applied. At the end of the paper we present evidence for the sustainability of the ECB's inflation target of an EMU-wide average inflation rate of less than but close to 2%. Klassifikation: E31, E52, E58
2001, 13
We use consumer price data for 205 cities/regions in 21 countries to study PPP deviations before, during and after the major currency crises of the 1990s. We combine data from industrialized nations in North America (Unites States, Canada and Mexico), Europe (Germany, Italy, Spain and Portugal), Asia (Japan and South Korea), and Oceania (Australia and New Zealand) with corresponding data from emerging market economies in South America (Argentina, Bolivia, Brazil, Columbia) and Asia (India, Indonesia, Malaysia, Philippines, Taiwan, Thailand). By doing so, we confirm previous results that both distance and border explain a significant amount of relative price variation across different locations. We also find that currency attacks had major disintegration effects by considerably increasing these border effects and by raising within-country relative price dispersion in emerging market economies. These effects are found to be quite persistent since relative price volatility across emerging markets today is still significantly larger than a decade ago.
2011, 26
The unintended consequences of the debt ... will increased government expenditure hurt the economy?
(2011)
In 2008, governments in many countries embarked on large fiscal expenditure programmes, with the intention to support the economy and prevent a more serious recession. In this study, the overall impact of a substantial increase in fiscal expenditure is considered by providing a novel analysis of the most relevant recent experience in similar circumstances, namely that of Japan in the 1990s. Then a weak economy with risk-averse banks seemed to require some of the largest peacetime fiscal stimulation programmes on record, albeit with disappointing results. The explanations provided by the literature and their unsatisfactory empirical record are reviewed. An alternative explanation, derived from early Keynesian models on the ineffectiveness of fiscal policy is presented in the form of a modified Fisher-equation, which incorporates the recent findings in the credit view literature. The model postulates complete quantity crowding out. It is subjected to empirical tests, which were supportive. Thus evidence is found that fiscal policy, if not supported by suitable monetary policy, is likely to crowd out private sector demand, even in an environment of falling or near-zero interest rates. As a policy conclusion it is pointed out that by changing the funding strategy, complete crowding out can be avoided and a positive net effect produced. The proposed framework creates common ground between proponents of Keynesian views (as held, among others, by Blinder and Solow), monetarist views (as held in particular by Milton Friedman) and those of leading contemporary macroeconomists (such as Mankiw).
594
While record-making prices at art auctions receive headline news coverage, artists typically do not receive any direct proceeds from those sales. Early-stage creative work in any field is perennially difficult to value, but the valuation, reward, and incentivization for artistic labor are particularly fraught. A core challenge in studying the real return on artists’ work is the extreme difficulty accessing data from when an artwork was first sold. Galleries keep private records that are difficult to access and to match to public auction results. This paper, for the first time, uses archivally sourced primary market records, for the artists Jasper Johns and Robert Rauschenberg. Although this approach restricts the size of the data set, this innovative method shows much more accurate returns on art than typical regression and hedonic models. We find that if Johns and Rauschenberg had retained 10% equity in their work when it was first sold, the returns to them when the work was resold at auction would have outperformed the US S&P 500 by between 2 and 986 times. The implication of this work opens up vast policy recommendations with regard to secondary art market sales, entrepreneurial strategies using blockchain technology, and implications about how we compensate creative work.
No. 696
Employing the art-collection records of Burton and Emily Hall Tremaine, we consider whether early-stage art investors can be understood as venture capitalists. Because the Tremaines bought artists’ work very close to an artwork’s creation, with 69% of works in our study purchased within one year of the year when they were made, their collecting practice can best be framed as venture-capital investment in art. The Tremaines also illustrate art collecting as social-impact investment, owing to their combined strategy of art sales and museum donations for which the collectors received a tax credit under US rules. Because the Tremaines’ museum donations took place at a time that U.S. marginal tax rates from 70% to 91%, the near “donation parity” with markets, creating a parallel to ESG investment in the management of multiple forms of value.
2009, 30
This paper reviews the rationale for quantitative easing when central bank policy rates reach near zero levels in light of recent announcements regarding direct asset purchases by the Bank of England, the Bank of Japan, the U.S. Federal Reserve and the European Central Bank. Empirical evidence from the previous period of quantitative easing in Japan between 2001 and 2006 is presented. During this earlier period the Bank of Japan was able to expand the monetary base very quickly and significantly. Quantitative easing translated into a greater and more lasting expansion of M1 relative to nominal GDP. Deflation subsided by 2005. As soon as inflation appeared to stabilize near a rate of zero, the Bank of Japan rapidly reduced the monetary base as a share of nominal income as it had announced in 2001. The Bank was able to exit from extensive quantitative easing within less than a year. Some implications for the current situation in Europe and the United States are discussed.