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The concern with persistant high government deficits and debts has been one of the most controversial and discussed issues among academics and policymakers during the last two decades of the twentieth century. Despite recent efforts towards fiscal consolidation in most developed countries, expensive welfare programs and unfunded social security systems can exert a considerable strain on public finances over the next generations. The main objective of this thesis is to investigate whether current fiscal policies are sustainable, that is, able to guarantee the government's solvency, and what are the consequences of unsustainability on monetization, inflation and interest rates. The first question is tested by examining the long-run univariate and multivariate stochastic properties of the fiscal variables, as implied by the intertemporal budget constraint. The second question is assessed within a vector autoregressive framework, which allows the consideration of feedback mechanisms often neglected in the literature. More specifically, the econometric methodology employed throughout the study comprises recent developments in cointegration analysis, panel data techniques, bounds-ARDL procedure, and Granger non-causality. The empirical analysis is focused on a comparative study of six core members of the European Union, during the post-war period: Belgium, France, Germany, Italy, Netherlands and United Kingdom. The evidence suggests that only Germany and the Netherlands have been following a sustainable fiscal path, although the latter remains vulnerable to the consequences of an ever-increasing stock of debt. However, unsustainable fiscal policies do not seem to have imposed an excessive burden on monetary policies, as predicted by the conventional economic theory. Apart from Italy, there is no empirical evidence that high deficits necessarily imply monetary financing, growing inflation and rising interest rates.

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Alors que depuis le début de la décentralisation les ressources des Régions avaient considérablement augmenté, elles se heurtent depuis quelques années (2008-2010) à une situation de contrainte budgétaire. La réforme dite de la taxe professionnelle de 2010 ralentit le dynamisme des recettes fiscales régionales et supprime la quasi-totalité du pouvoir de taux des élus régionaux. Les dotations de l’État, après avoir été gelées en valeur, se réduisent à travers les « pactes » successifs (de stabilité, de responsabilité et de croissance) introduits par différents gouvernements. En parallèle, les transferts de compétences du début des années 2000 (transport ferroviaire et acte 2 de la décentralisation) engendrent des charges croissantes qui rigidifient les budgets des Régions. Nous cherchons, dans ce travail de recherche, à comprendre les causes de ces transformations et à tenter de qualifier les changements qui affectent les ressources des Régions. Nous tentons de déterminer si l’on assiste à une financiarisation grandissante des politiques régionales ou si, au contraire, des capacités politiques demeurent pour les élus régionaux. En nous appuyant sur une analyse comparative entre trois Régions (Limousin, Alsace et Nord-Pas-de-Calais), et en observant les recompositions qui se produisent au sein des institutions régionales, nous proposons de saisir la manière dont le couple politique-finance évolue dans une situation de contrainte financière inédite. / For some years (2008-2010), territorial authorities have been facing a drastic decrease in their resources. The local business tax reform in 2010 has slowed down the dynamism of tax revenues. The regional political representatives no longer have the ability to determine the tax rate. The funds allocated by the State, after having first experienced a freeze in their value, are now reduced as a consequence of successive « stability », « responsibility » and "growth" pacts introduced by different governments. In parallel, the transfers of competences at the beginning of the 2000’s (rail transport and the second act of decentralization) are causing increasingly rigid financial charges for the Regions. Our research aims to understand the causes of these transformations and to qualify the changes that are impacting regional resources. It seeks to determine if there is a growing financialisation of regional politics or if, on the contrary, there is still some local political control despite budgetary constraint. Through a comparative analysis of three Regions (Limousin, Alsace and Nord-Pas-de-Calais), and based on the observation of the reorganization that is happening within regional institutions, our thesis envisages to understand how the political / financial duo evolves in a framework of unprecedented budget constraint.

nÃo hà / Considerando o atendimento à restriÃÃo orÃamentÃria intertemporal do governo, analisa-se a solvÃncia da dÃvida pÃblica contratual no Estado do Cearà a partir da proposta de Bohn(1998). Nesse contexto, a dÃvida à considerada sustentÃvel se o governo demostrar uma preocupaÃÃo em reagir a aumentos da relaÃÃo dÃvida/PIB com incrementos nos superÃvits primÃrios. Para o exercÃcio empÃrico, sÃo realizados testes de cointegraÃÃo baseadas na funÃÃo de resposta fiscal do governo sobre os dados mensais do perÃodo de 2002 a 2011. Constatam-se indÃcios de que o governo nÃo tem reagido ao aumento no nÃvel de endividamento verificado no perÃodo, apesar da dÃvida apresentar um comportamento explosivo (nÃo-estacionÃrio), constatado por meio do teste de raiz unitÃria.

Made available in DSpace on 2016-07-27T14:22:00Z (GMT). No. of bitstreams: 1 Manoel Rivelino de Araujo.pdf: 4890551 bytes, checksum: e3c3cc009551cdad52f0f132a4608758 (MD5) Previous issue date: 2009-12-18 / Our study started with predictions of the evolutionary psychology, along with the theory of market value, to study how men and women choose their partners. According to this approach, the way we choose our reproductive partners is based on the different selective pressures our ancestors had to face during the evolutionary process of natural and sexual selection, as well as on the view that each one of us represent products in a market of desirable attributes that are more or less available in different potential partners. Our sample was composed of students from the two largest Universities in Goiânia, with a total of 422 subject, most of them having 18-25 years of age. Each subject answered a questionnaire about his/her own characteristics (sex, age, financial situation, etc) and to questions about how important are 10 characteristics of a potential partner in two situations: ideal partner (no restrictions of points), and with a restriction of points (lesser power of choice). The results were consistent with those presented in previous studies, where beauty was more valued by male subjects, and characteristics linked to a good provider by female subjects. These characteristics also gained value for long term relationships when the subject had less power to choose (budget restriction). / Nosso estudo levou em consideração previsões da psicologia evolucionista, associada com a teoria de valor de mercado, para estudar como homens e mulheres escolhem seus parceiros. De acordo com esta abordagem nossa forma de escolher parceiros está embasada nas diferentes pressões que nossos antepassados sofreram durante o processo de seleção natural e sexual, como também pela visão que cada um de nós representamos produtos de troca e associação, no mercado de atributos disponíveis e desejáveis de potenciais parceiro. Testamos hipóteses já estudadas em outras culturas, como também em Goiânia-GO, onde já havia sido realizado outro estudo semelhante, porém estudamos também o efeito da restrição orçamentária (pouco poder de escolha) na forma com que homens e mulheres valorizam diferentes características de seus parceiros. Nossa amostra foi composta por universitários das duas maiores instituições de ensino superior de Goiânia, com um total de 422 sujeitos, a maioria na faixa etária de 18-25 anos. Cada sujeito respondeu um questionário sobre suas características (sexo, idade, poder aquisitivo, etc), além de perguntas sobre o grau de importância de 10 características de um possível parceiro em duas situações: parceiro ideal (sem restrição de pontos), e com restrição de pontos (pouco poder de escolha). Os resultados foram consistentes com estudos anteriores, onde as características corpo bonito e rosto bonito sobressaíram para o gênero masculino, e o padrão de bom provedor sobressaiu para o padrão feminino. Estas características também tiveram um acréscimo como atributos valorizados para relacionamento em longo prazo quando o poder de escolha era menor (restrição de pontos).

In this thesis, we investigate how multinational (MNC) parents can use the way they finance their subsidiary firms in order to constrain subsidiary management. In the first essay, we develop a theoretical framework in which we consider a number of alternative decisions related to the financing of MNC subsidiary firms. We show that, from the MNC parent's perspective, the optimal choice is to delegate the monitoring of the subsidiary to host-country banks and finance the subsidiary using short-term and short-term external debt. This arrangement will guarantee that the MNC subsidiary management exerts an optimal amount of effort and abides by the objectives set by the MNC parent. In the second essay, we propose and test four hypotheses addressing how MNC parents can use short-term and short-term external debt to constrain the rent-seeking behaviour of subsidiary management. One set of hypotheses analyses the use of short-term debt. The second set of hypotheses investigates the use of short-term external debt. Moreover, we investigate these two hypotheses in two different settings to measure: (i) the subsidiary effect by comparing between UK domestic and UK subsidiary firms and (ii) the location effect by comparing UK and US subsidiary firms. We find support for our hypotheses, namely that UK subsidiaries have more short-term debt and more short-term external debt as compared to equivalent UK domestic firms, and that US subsidiaries have more short-term debt and less short-term external debt compared to equivalent UK subsidiaries. Our results are both statistically and economically significant and are robust to the use of a matched sample approach to test our hypotheses. The third essay investigates the relationship between the bargaining power of MNC subsidiary firms and the way these firms are financed by analysing the source and the maturity of financing arrangements. We argue that the financing arrangements used to finance the subsidiary are linked to its ability to engage in rent-seeking behaviour and the latter depends on the amount of bargaining power that the subsidiary possesses. We use four different measures of bargaining power, namely age, size, presence of foreign sales and percentage of foreign sales. Using data relating to UK and US MNC subsidiaries between 2001 and 2010, we test two sets of hypotheses linking the bargaining power of the MNC subsidiary firms with the use of short-term debt and the use of external short-term debt. Our results provide strong support for our short-term debt hypotheses while support for our external debt hypotheses is more limited. The results are also economically significant when using the percentage of foreign sales as a bargaining power proxy. We also notice that the use of debt to constrain subsidiary management behaviour appears to differ across UK and US MNC subsidiary firms.

Financial intermediaries are recognized to promote the efficiency of resource allocation by mitigating problems of incentives, asymmetric information and contract incompleteness. The role played by financial intermediaries is perceived so crucial that these institutions have received all over the world the greatest attention of regulators. Differences in regulatory regimes as well as in the real economies have produced a large variety in the characteristics of financial sectors and of individual intermediaries. In particular, in different places and times it is possible to observe banking sectors more or less competitive, populated by credit intermediaries of different sizes and with different levels of specialization. This variety of institutions raises interesting questions about the features of a well functioning financial intermediation sector. These questions have inspired an important body of economic literature which, however, is still inconclusive in many aspects. This dissertation includes three studies all intending to contribute in this direction. Chapter 2 Recent empirical works have found evidence consistent with larger banks having lower incentives to collect soft information and, in particular, to lend to small firms which are typically regarded as relatively opaque borrowers. Another market segment affected by relatively high levels of opaqueness is that of long-term loans and the reason is that, as emphasized in the corporate finance literature, short-term maturities are useful for the purpose of screening and monitoring investment projects. It is therefore interesting to assess whether large and small banks differ in their propensity to issue long-term loans, a type of investigation which has not been conducted yet. The reason why small and large banks might be expected to have a different propensity to issue long-term loans has to do with two notions. First, the effectiveness of a short-term maturity as a screening and monitoring device is preserved only if parties anticipate that, when payments are due, the lender will not be willing to extend the maturity, otherwise the initial short-term loan is de facto a long-term one. The problem may rise if the liquidation of insolvent firms produces lower payoffs than their refinancing: under these circumstances, as suggested by theories on renegotiation, liquidation is not implemented no matter what is written on the contract (parties can easily avoid the inefficiency that would result from liquidation, for example by simply granting a new loan). Second, at a more specific level theories on renegotiation suggest that the ability to commit to not extend thematurity decreases with bank size.1 Small banks are therefore predicted to issue shorter-term loans and to make a better selection of projects. The results are consistent with this prediction. Controlling for other characteristics of both the demand- and the supply-side as well as for the type of guarantee supplied, small banks have lower proportions of long-term loans to total loans and lower proportions of non performing loans to total loans. It should be pointed out that this does not imply that small banks are necessarily more efficient since short-term maturities also have costs; in particular, short-term maturities can interfere with the incentives of good types by inducing short-termism (the inflation of shortterm results at the expenses of total profitability). Moreover, beyond the ability to commit other supply-side features are shown to be relevant in the determination of the maturity, at least with specific classes borrowers. In particular, the findings are also consistent with the presence of economies of scale in lending at long maturities to firms in more technical and innovative industries. Since providing the right incentives to high quality entrepreneurs and to firms in innovative sectors is more likely to be a priority in more advanced countries, a policy implication is that these economies need more the presence of large credit institutions and the more so if venture capital and stock market are of limited size. Chapter 3 As already emphasized, theories on renegotiation suggest that the ability of banks to commit to a given course of action is an important factor for efficiency and that such ability depends on observable characteristics, like bank size. An important aspect which has not been analyzed in the theoretical literature is the effect that competition among banks exert on their ability to commit. The theoretical model presented in chapter 3 tries to provide an answer to this question. More specifically, the model studies the effects of competition among banks when these are subject to dynamic commitment problems which may result in excess refinancing of insolvent borrowers (soft budget constraint) as well as in excess termination of profitable ones (ratchet effect and short-termism). The building assumption is that, because of priority schemes and relationship lending, competition is harsher for new lending than for lending to ongoing projects. The main conclusion is that there exists a trade-off between the benefits that competition brings by disciplining low quality borrowers and the costs implied by worsening the incentives of good ones. The model also allows to look at the effects of competition on stability. This is done in two ways by looking at the extent to which competition interferes with the procyclicality of the banking sector and by studying if competition may eliminate or add inefficient equilibria. The main policy implication is that the optimal level of competition of a banking system is positively related to the quality of the underlying economy. If taken together, the results of chapters 2 and 3 also provide a theory about local or regional banks which is not based on any aprioristic assumption about the technology of these type of intermediaries. As long as these institutions can be seen as banks with a relatively high market power and a relatively small size (they are often important players at a local level although of limited size), both chapters 2 and 3 suggest that these intermediaries can more easily commit to a tough stance at the refinancing stage, with positive effects on their ability to screen out bad projects but with negative effects on their ability to incentivize good types and to fund more technical and innovative firms. In other words, these institutions might promote growth at earlier stages of development, although they are not sufficient to address the incentive issues of more advanced economies. Interestingly, this interpretation of the role of local banks is totally distinct from the traditional one which is based on the aprioristic assumption that these banks are good in doing relationship lending. Chapter 4 Conflicts of interest of economic institutions carrying out a variety of functions are considered a widespread phenomenon severely limiting the efficiency that can be achieved. These worries are often taken as justification for regulations imposing transparency requirements or tougher measures like separation of functions. At the same time, contract theory suggests that the effects of opportunistic behavior can be limited by adopting appropriate incentive schemes. The third study, chapter 4, tries to understand from a theoretical point of view to what extent the use of incentive schemes can address the distortions posed by the presence of conflicts of interest. The universal bank is regarded as a (common) agent serving different clients with potentially conflicting interests: for example, it may buy assets on behalf of investors and sell assets on behalf of issuing firms. The clients offer incentive schemes to the bank and they behave non-cooperatively. The bank decides a level of effort and, when firewalls are absent, a level of collusion, modelled as a costly and unproductive redistribution of wealth among the clients (for example, the banks can at no cost sell the securities it is underwriting to the funds it manages and can do so at the price it likes). Firewalls are defined as all legal or economic devices imposing a real separation of functions and therefore preventing the bank from colluding as specified above. The main conclusion is that in the absence of firewalls the equilibrium incentive schemes are steeper. This means that the equilibrium level of effort is higher and may compensate the (ex post) inefficiency of collusion. In other words, not only appropriate incentive schemes can eliminate the distortions posed by conflicts of interest but, at least in principle, their presence may even be necessary for efficiency (this happens if effort is a public good for the two principals so that the allocation without firewalls is characterized by under-provision of effort). At the same time, the allocation without firewalls is shown to be the least efficient in the presence of one naive player who does not recognize the existence of the conflict of interest. As long as transparency requirements can be considered tools to improve market participants’ sophistication, these results suggest why and how this type of regulation can work. Moreover, the model allows to draw conclusions about the desirability of tougher regulation prescribing a more or less neat separation of functions. With sophisticated economic agents, who can address the distortions posed by conflicts of interest by choosing appropriate incentive schemes, separation of functions is unnecessary or even detrimental for efficiency. On the other hand, more or less powerful firewalls are desirable if market participants are not considered sufficiently sophisticated to be able to react to the presence of conflicts of interest and if transparency requirements cannot increase their sophistication. In few words, the optimal regulation of conflicts of interest is softer in situations involving professionals who are more likely to realize and to react by choosing an appropriate incentive scheme or, more generally, for institutions operating in advanced economies where the average level of market participants sophistication is higher.

This thesis deals with the problems of optimal grading, employee performance evaluation by unaccountable managers, and the evolution of inequity-averse preferences. The purpose is to explain certain stylized facts related to these problems, and this is attempted with the help of contract-theoretic models. Chapter 1 of this thesis studies a teacher-student relationship as a principal-agent model with a costless reward structure. The model shows that the stylized fact of a mismatch and low correlation between students' abilities and their grades can be the expected-effort-maximizing outcome of teachers' optimal grading. Chapter 2 presents a three-tier model of a firm's economic organization, which is centered on the observation that managers do not fully internalize the payroll expenses they incur. With the idea that the degree of manager accountability varies inversely with firm size, the model predicts that the compression of ratings, the large-firm wage premium, and the inverse relationship between wage dispersion and firm size can actually be equilibrium outcomes. The last chapter presents an evolutionary argument for the endogeneity of people's preferences with respect to market exposure. It shows that aversion to income inequality observed empirically could have evolved as an optimal response to merchants' price discrimination. / <p>Diss. Stockholm : Handelshögskolan, 2009</p>