This paper tests whether politically connected firms in Putin’s Russia are a channel for the political business cycle. Given the widespread corruption and crony capitalism that exists in Russia, it is likely that federal and regional politicians may need to buy the electoral support of powerful, connected firms in order to win elections. Using panel data of approximately 60,000 Russian firms comprising an estimated 62 percent of GDP per year from 2003-2011, I find that federally connected firms are significantly more productive in federal election years. If these cycles in firm productivity are caused by electoral favors from politicians, this not only further corrupts Russia’s political landscape, but it also may induce powerful firms to engage in costly political bidding wars for these connections, thus inhibiting their productivity and the overall productivity of the Russian economy.

EMU as the only functioning single currency area has been criticised as a non-optimal currency area since the Treaty on European Union was signed. Despite this, it has been seen as, probably, the most complete economic project that has ever been conducted by any group of governments. Through Dynamic Factor model and Panel VAR method, we are focusing on the issues of business cycle synchronisation, effectiveness of ECB monetary policy and the euro fiscal dividend, thus to advances the current studies on EMU through assessing whether it can be a sustainable system. For example, whether economic fluctuations can be effectively managed by implementing a single ECB monetary policy and financial market can be relied upon as a monitoring and enforcing device to discipline fiscal behaviour of Eurozone countries. Overall, we concluded that EMU could be more sustainable if it was just formed by its core members, leaving the periphery outside the single currency area. However, since the EU has recently conducted many rescue measures to save the Eurozone, we are unlikely to see those troubled countries to quit EMU, at least, at the present time. The sustainability of the current EMU can be improved if more intra-trade can be promoted to enhance business cycle convergence; hence, it will be more likely to have a union-wide appropriate monetary policy. This will also reduce the requirement of depending upon using fiscal measures to compensate the loss of monetary sovereignty. Moreover, fiscal activities can also be better monitored/enforced since the financial market has begun to adequately adjust the long-term interest rates on Eurozone government bonds according to the development in those countries fiscal stance.

The first essay provides evidence on the origins of the size and value premiums by examining how order flow in the SMB and HML portfolios relates to economic conditions and investor sentiment. We find that buying pressure for SMB and HML is lower (increases) when economic conditions are expected to deteriorate (improve), while it is unrelated to proxies for investor sentiment and sales growth. These findings are consistent with big stock and value stocks being regarded as hedges against adverse shifts in economic conditions, and support a rational state variable interpretation of the size and value premiums. The second essay finds that the marketwide average of individual stock order flows and the difference between the average order flow for big stocks and the average order flow for small stocks (order flow differential) predict growth rates in real GDP, industrial production, and corporate earnings. The predictive significance of these two measures is robust to controls for return factors, suggesting a role for order flow in forecasting stock returns. Consistently, we show that an increase in the order flow differential forecasts higher returns for ten size-sorted portfolios and significantly greater market and size premiums in the subsequent quarter, even after accounting for a large host of variables. These findings are consistent with a world where aggregate order flow brings together dispersed information from heterogeneously informed investors. The third essay shows that stocks that are harder to value (stocks with less valuable growth options and more dispersed analyst forecasts) and stocks that attract less uninformed trading activity (small stocks, illiquid stocks, stocks not covered by analysts) have higher price impacts, greater probabilities of informed trading, and more private information in returns. In the time-series, reductions in trading activity and consumer sentiment increase the average price impact of trading and reduce the share of firm-specific information in returns. Recessions see high price impacts, low trading activity, and a smaller share of private signals in price movements. This reduction in private information seems to have an impact on the informativeness of prices for corporate managers: the sensitivity of corporate investment to the prices is significantly lower during recessions. / Finance

This paper investigates whether the inherent non-stationarity of macroeconomic time series is entirely due to a random walk or also to non-linear components. Applying the numerical tools of the analysis of dynamical systems to long time series for the US, we reject the hypothesis that these series are generated solely by a linear stochastic process. Contrary to the Real Business Cycle theory that attributes the irregular behavior of the system to exogenous random factors, we maintain that the fluctuations in the time series we examined cannot be explained only by means of external shocks plugged into linear autoregressive models. A dynamical and non-linear explanation may be useful for the double aim of describing and forecasting more accurately the evolution of the system. Linear growth models that find empirical verification on linear econometric analysis, are therefore seriously called in question. Conversely non-linear dynamical models may enable us to achieve a more complete information about economic phenomena from the same data sets used in the empirical analysis which are in support of Real Business Cycle Theory. We conclude that Real Business Cycle theory and more in general the unit root autoregressive models are an inadequate device for a satisfactory understanding of economic time series. A theoretical approach grounded on non-linear metric methods, may however allow to identify non-linear structures that endogenously generate fluctuations in macroeconomic time series. (authors' abstract) / Series: Working Papers Series "Growth and Employment in Europe: Sustainability and Competitiveness"

The profitability and the sources of the returns on momentum strategy have always been a popular subject of study in the financial field. Nevertheless, there exist significant discrepancies between the conclusions of the papers due to the difference in time period and the emphasis on average results. Thus, the purpose of this paper is to investigate momentum strategy with information uncertainty in Taiwan stock market during the period 1990-2009 given the basis on the research method of Jegardeesh and Titman(1993). The result shows that momentum strategy cannot averagely obtain significantly positive returns in the long run in Taiwan stock market and moreover it presents an enormous short-term reversal. Besides, in terms of business cycle, there is still no significant return on momentum strategy either; there will be significantly negative return when implementing momentum strategy in the recession of business cycle. On the other hand, from the view of investor psychological biases, it should be seen greater psychological biases owing to greater information uncertainty. As a result, a stronger stock price continuation may be observed under high information uncertainty stocks. However, the effect of information uncertainty is only pronounced among loser portfolios. To summarize, compared with the profitability and the stability of contrarian strategy, the findings support that there is no significant momentum phenomena in Taiwan stock market at all.

This article will verify whether the central banks create political business cycles or not. To refer to the Opportunistic Model operated by Leetouwer and Maier (2002), this research will expand the acquisition time of data till the fourth season of 2008, and added Korea¡BMalaysia and Taiwan into the model. In this article, the independent variables will be the rates announced by central banks of these ten countries. The dependent variables will be the date of president/parliamentary elections and the independence of central bank to verify before the elections whether will the central banks create political business cycles through setting lower rate in monetary policy are pressured by rules or not. The empirical results show that: 1.The assumption of Central banks will use interest rates to create a political business cycle does not hold. This complements with Leetouwer and Maier¡¦s results studied in 2002, the interest rate cannot be used as a tool to create political business cycle. 2. The higher independence of central bank, the interest rate introduced by central bank will be lower, and as well as the inflation rate.

This paper apply a threshold model to examine the nonlinear relationship between economic growth and unemployment rate. The key innovation of our model is that it takes into account endogenous explanatory variables and endogenous threshold variables. Empirical results show that Okun¡¦s law is nonlinear. Among different models under consideration,the absolute value of Okun¡¦s coefficient during contraction period is larger than that during expansion period.

Since Bretton Woods System break down in year 1973. Many economists found that there are more similar business cycle between industrial countries. Recently, Doyle and Faust(2002) proposed the correlation of business cycle between two countries becomes weaker. Therefore in this search, we try to carry out two different aspect factor that effects the countries¡¦ business cycle correlation. The factor is so-called ¡§transmission mechanism.¡¨ Generally specking, Many empirical analysis have pointed out the temporary factors to the business cycle mainly come from the transferred factors of economic aspect. What is ¡§Transmission Mechanisms?¡¨ Economists often try to substitute it in good markets, financial markets, and the coordination of monetary policies. However, in this duration of the empirical analysis, using only these proxy variables to explain BCCs between two countries seems too limited. According to this situation, we believe if the BCCs can be explained by using proxy factors of non-economic variable, the result can be utilized by making up the defect. We attempt to find new factors in political approach and combine with the ¡§Transmission Mechanisms¡¨ that we have introduced earlier. To analyze further economic implication in our research, five conclusions have been summarized below: Firstly, increasing bilateral trade has significantly provided positive effect to BCCs among G7 countries from 1980 to 2002. Because bilateral trade intensity index is endogenous , we use exogenous variable as instrumental variable to estimate ¡§Trade¡¨. Secondly, we use Panel method to expand its matrix. Finally, we improve the empirical estimators of insignificant statistics before. So, when we talk about the relations between BCCs and good and service markets, we must consider these exogenous factors. Eventually, we will receive more detailed results. Secondly, although to trade in financial markets can increase the BCCs between two countries, the statistic report is insignificant . About this empirical result, we can obtain reasonable explanations from the researches (for instance: Imbs, 2004 or Kose et al, 2003), they point out that financial markets are bound excessively by globalization. Therefore, this will aggravatingly make each country to focus on its specialization. Finally, this situation will make the BCCs getting collapsed among these countries. This also explains that the specialization among these countries will reduce the positive effect from the BBCs to financial markets. Thirdly, in the research, the statistics effect of the trade intensity index and specialization are significant negative. It means that when good in transaction will result in more specialization. Two countries have similar industrial structure.Imbs(2004) consider the problem is the index we use to measure bilateral trade intensity. This index was effected from two countries¡¦ size . If use Clark and van Wincoop¡¦s trade intensity index to measure the effect, we can find that significant specialization by comparative advantage effect. Fourth, there are high level financial integration between two countries, because international risk sharing result in two countries have different industrial structure. Lastly, in the research, the statistics effect of the party variables and business cycle of correlations are very significant. This also indicates the political factor will play an important role for many sources of the fluctuation tread of BCCs. In other words, when we discuss the issue of BCCs if miss the contribution of political factors to the BCCs. Then, this might cause the omitted variable biased, and finally cause the whole computation become inefficient. In addition, we can have further discussion by an input of a factor: to conserve the joint benefit of all the member countries in an economic organization, these countries need to be ruled by the same ideal political party. Otherwise, the institute will never reach its essential result. Combining all the conclusions we have shown above, we can find out the BCCs among G7 countries from 1980-2002. Besides the influence of the ¡§Transmission Mechanisms,¡¨ the result will be varied by the political factors. In conclusion, we need to consider the contribution of the political party variables to the BCCs when talking about this issue, therefore; the original theoretical model can be more persuasive. According to a statistics of IMF, the BCCs among those industrial countries are falling little by little in recent years. Therefore, consolidating trade cooperation is essential for what we believe to improve the BCCs among G7. At the same time, pass through a strong integrate monetary policy can move forward all the incumbent parties from all the countries to agree among themselves, and even reach more substantial effect. From the example like this, we might find evidence from BCCs issues by discussing the integration process in European Monetary Union.

Abstract With the processing of globalization and the large increases in international trade and openness, it is important to capture the business cycle correlation with the intimate countries for government to make better policies and keep the economy steady. This study investigated the changes in relationships between the G7 business cycle after the European integration. Choosing 1993 the Europe Union (EU) commencement as the segment, we separated the sample period into 1965:1-1992:4 and 1993:1-2006:4.We adopted kinds of unit root tests to exam if these variables were stationary and the Johansen co-integration analysis to test whether the stationary long-run equilibrium exist or not. With the consideration of long run information, the Vector Error Correction Model (VECM) was applied to study the relationship between the business cycles of United State, EU and the other G7 countries. By Johansen co-integration analysis, we found that the stationary long-run relationship did exist between their industrial productions¡]IP¡^. In addition, the VECM evidence supported the emergence of two cyclically coherent groups -- the Euro-zone and the English-speaking countries -- after the EU commencement in 1993. In conclusion, with the greater correlation of business cycles, the party in office should take account of the business cycle movement of the closed countries more deliberately in this regionalization era.

After East Asian financial crisis in 1997 and European monetary unification in 1999, if it is suitable of establishing the Asian common monetary area becomes the hot topic. The precondition of establishing the monetary policy cooperation depends on the synchronization of various countries¡¦ business cycle co-movement. And the trade is the connector among the countries. Trade linkages seemed to have an influence on business cycle co-movement. Countries with close international trade link are more likely to be members of an optimal currency area. According to the theoretical literature, the impact of trade integration on business cycle correlation may go either way. On the one hand, if trade occurs mainly by Heckscher-Ollin or is of the Ricardian type, higher specialization would induce the industrial structures of the trading countries to diverge, resulting in less synchronized movements of business cycle. In contrast, if trade occurs mainly through intra-industry trade, specialization does not necessarily lead to less synchronized. In summary, the total effect of trade intensity on cycle correlation is theoretically ambiguous and poses a question that could only be solved empirically. The volume of trade in East Asia has increased continuously. This paper extends the study of Frankel and Rose (1998) to analyze the impact of trade integration on business cycle correlation and intra-industry trade by using SITC data and other macroeconomic factors. Moreover, using two-stage estimation and instruments to take into account the fact that trade intensity itself may be endogenous. Then, we use panel data to estimate our equation. By gathering annual information of 10 East Asian countries from 1987 to 2005, we found that higher trade integration leads higher business cycle synchronization. To sum up, intra-industry trade is the process of establishing East Asian common monetary area.