Thomas Goda | Universidad EAFIT (original) (raw)

Journal Articles by Thomas Goda

Cambridge Journal of Economics, 2024

It is debated to what extent corporate taxation discourages capital formation, and the related em... more It is debated to what extent corporate taxation discourages capital formation, and the related empirical cross-country evidence is inconclusive. This paper provides new insights into this matter for a large sample of developed and developing countries. In the first step, national accounts data is used to calculate backward-looking effective corporate income tax rates (ECTR) for 77 countries during 1995–2018. In the second step, dynamic panel data regressions are used to estimate the effect of ECTR on aggregate corporate investment. The main findings of this exercise are that (i) statutory corporate income tax rates (SCTR), on average, are twice as high as ECTR, (ii) average ECTR has been relatively stable but show distinct dynamics across countries and (iii) no significant negative relationship exists between ECTR and investment. The latter finding is robust to different specifications and samples and when publicly available SCTR or forward-looking effective tax rate measures are used as alternative tax rate proxies.

International Economic Journal, 2024

Literature contends that the manufacturing sector is crucial for economic development, and it is ... more Literature contends that the manufacturing sector is crucial for economic development, and it is conventional wisdom that exports drive manufacturing growth. However, it has yet to be established empirically whether the market size of export destinations is an essential factor in explaining diverging regional and sectoral manufacturing growth patterns. This article argues that accessing a few large external markets reduces entry costs, increases expectations of economies of scale, and fosters capital formation. To test this hypothesis, we construct a novel Relative Export Market Size (REMS)
index that measures whether the share of sectoral exports destined to large economies in one region is higher than in other regions. Using a PVAR model with fixed effects, we verify the impact of the REMS index on value added, employment, and capital accumulation of 129 manufacturing sectors in 23 regions in Colombia from 1992 to 2017. The obtained results show that exporting to larger markets positively impacts employment, capital formation, and value added per capita of manufacturing sectors at a regional level. This finding indicates that exporting to the world’s largest market helps develop competitive manufacturing sectors.

Review of World Economics, 2024

The empirical evidence on the relationship between the real exchange rate and export performance ... more The empirical evidence on the relationship between the real exchange rate and export performance in emerging economies is inconclusive. In this paper, we present evidence that one reason for this inconclusiveness is the use of real exchange rate (RER) measures that do not consider the heterogeneity between economic sectors. To this end, we calculate a unique sectoral bilateral RER index (SBRER) for 12 Latin American economies, which considers the variation of producer price differentials and bilateral nominal exchange rates across 21 manufacturing sectors and 38 trade partners between 2001-2018, and to estimate the effect of SBRER movements on manufacturing exports. The regression results show that the SBRER is a significant determinant of aggregate manufacturing exports, whereas the bilateral RER is not significant. Moreover, sectoral export elasticities indicate that mainly sectors with low levels of product complexity and, to a lesser extent, those of medium complexity are affected by RER movements. These findings show that it is important to consider sectoral heterogeneity when estimating RER export elasticities from a macroeconomic perspective.

Development Studies Research, 2021

Existing literature argues that political competition and electoral participation influence gover... more Existing literature argues that political competition and electoral participation influence government efficiency. However, empirical evidence on the matter for developing countries is scant and mixed. This paper contributes to the literature by exploring the impact of political competition and electoral participation on the fiscal performance of 1,098 Colombian municipalities during four government periods (2000-2015). Using a fixed effect panel data model, we find a significant positive relationship between political competition and electoral participation and a composite fiscal performance index. To be more precise, our results indicate that municipalities that have a lower concentration of council seats in the hands of few parties (i.e., a lower Herfindahl-Hirschman Index) and higher voter turnout rates tend to perform better. These results are explained by the positive impact of political competition and electoral performance on operating expenses, local revenue generation, investment and savings. Overall, these findings support political accountability theories, which argue that electoral participation and political competition incentivize career-concerned politicians to perform well and to reduce rent-extraction behaviour.

Brazilian Journal of Political Economy, 2020

Previous work has established that an appreciation of the real effective exchange rate (REER) con... more Previous work has established that an appreciation of the real effective exchange rate (REER) contributes to premature deindustrialization, less productive investment and de-pendence on commodity booms and busts in emerging markets economies (EME). From the literature, it is less clear, however, what the most important drivers for the cyclical REER movements in EME are. The aim of this study is to provide empirical evidence about the determinants of the REER movements of 15 emerging markets during the last two decades, using statistical analysis and a dynamic panel fixed effects model approach. Our analysis shows that although “commodity” and “industrial” EME are heterogeneous, REER vola-tility tends to be higher among the former. EME that had more stable REER fared better than those that had a depreciating or appreciating trend (with the notable exception of China). As theoretically expected, commodity prices are an important structural driver of REER movements in “commodity EME”. Moreover, the results confirm the existence of the Harrod-Balassa-Samuelson effect, and show the importance of financial inflows. Fur-ther, the interventions of central banks were partially successful to avoid more substantial appreciations (depreciations). Finally, we find that lower country risk and, at least in some periods, growing broad money in OECD countries has led to REER appreciations in our sample countries.

Socio-Economic Review, 2019

Income inequality and house prices have risen sharply in developed countries during 1975–2010. In... more Income inequality and house prices have risen sharply in developed countries during 1975–2010. In line with theoretical models, we argue that this co-movement is no coincidence, but that inequality has driven up house prices on the grounds that it raises the aggregate demand for housing. Our results suggest that absolute inequality and house prices in most Organisation for Economic Co-operation and Development (OECD) countries were positively correlated and cointegrated, whereas relative inequality and mean income were not significant long-run determinants. This finding indicates that the surge in OECD house prices in part can be explained by a top-income-induced increase in housing demand, and that it is important to consider the interaction of rising mean income and its relative distribution when studying potential correlates of house prices. Moreover, our results confirm previous findings that the short-term real interest rate also is an important correlate of house prices.

Ensayos Sobre Política Económica, 2018

Este trabajo es el primero en construir un índice de tasa de cambio real sectorial bilateral (TCR... more Este trabajo es el primero en construir un índice de tasa de cambio real sectorial bilateral (TCRSB) para diecinueve subsectores manufactureros en Colombia, que considera las diferencias de cada uno de ellos en términos de sus socios comerciales y costos relativos internos y externos. Este índice es usado para determinar la importancia de la TCR en la dinámica de las exportaciones e importaciones de cada subsector para el período 2006-2013. Los resultados muestran, en primer lugar, que existe una alta heterogeneidad subsectorial en términos del comportamiento de sus respectivas TCRSB; en segundo lugar, la importancia de la TCRSB como determinante de los flujos de comercio internacional manufacturero colombiano y, finalmente, la heterogeneidad de sus sensibilidades con respecto a esta tasa. Con el fin de verificar la bondad de estas estimaciones, se hacen dos estimaciones alternativas usando índices de TCR agregados (índice de TCR bilateral y de TCR sectorial), encontrando que ninguno de ellos logra mejorar el desempeño de la TCRSB.

This paper is the first to construct bilateral sector-specific real effective exchange rate indices (TCRSB) for 19 manufacturing sectors in Colombia, which consider sectoral differences in terms of commercial partners and relative cost differences. These indices are used to determine the importance of the real effective exchange rate (REER) to explain sectoral export and import dynamics over the period 2006 to 2013. The results indicate a significant heterogeneity between the sectors in terms of changes in the TCRSB; the importance of the TCRSB to explain changes in Colombia's manufacturing trade flows; and relevant differences in the price elasticity of the distinct sectors. When comparing these results with those obtained when using aggregate REER indices (i.e. a bilateral and sectoral REER index), we find that neither of these improves the performance of the TCRSB.

Semestre Económico, 2017

Este artículo estudia la relación causal entre la minería de oro y las tasas de homicidios en los... more Este artículo estudia la relación causal entre la minería de oro y las tasas de homicidios en los municipios productores de oro en Colombia para el período 2004-2015. Para lograr este objetivo se usa un modelo econométrico de datos de panel con efectos fijos, estimado por mínimos cuadrados ordinarios. Los resultados obtenidos sugieren
que en el período de auge del precio del oro (2004-2010), el incremento de la producción de oro generó un aumento en las tasas de homicidios en los municipios auríferos de Colombia, mientras que la caída del precio del oro (2011-2015) ocasionó una disminución de las muertes violentas.

Journal of Income Distribution, 2018

Top 1% household survey income shares for 39 developed and developing countries that are part of ... more Top 1% household survey income shares for 39 developed and developing countries that are part of the Luxembourg Income Study (LIS). An additional novelty of this study is the distinction between labor and capital income. The obtained results suggest that for most countries top income shares are significantly higher than those reported in household surveys, which mainly underestimate top capital income. While the presented results should be treated with some caution, our easy-to-implement baseline approach seems suitable for countries for which no tax data is available.

International Criminal Justice Review, 2018

Economic crime models and the social strain theory argue that income inequality can foster proper... more Economic crime models and the social strain theory argue that income inequality can foster property crime, yet empirical studies do not provide strong support for this relationship across countries. An important limitation of these studies is that they only consider relative inequality measures and omit absolute ones. Absolute inequality can have a crime-inducing effect for two main reasons: First, the potential monetary returns from crime can be expected to depend on the interaction between relative income inequality and mean income. Second, higher levels of absolute inequality imply that the economic elite can capture institutions in ways that can make them dysfunctional for society as a whole. This article finds that, in contrast to relative inequality, absolute inequality is a robust and statistically significant determinant of violent property crime rates for a sample of up to 59 developed and developing countries.

Social Indicators Research, 2017

The existing literature on the determinants of income redistribution has identified a ‘paradox’.... more The existing literature on the determinants of income redistribution has identified a ‘paradox’. Namely, that countries with a high degree of market income inequality redistribute little, which is in disagreement with the median voter theorem. In a first step, this paper outlines several mechanisms that explain why government corruption might be partially responsible for this ‘paradox’. In a second step, different corruption perception indices and an instrumental variable approach are used to provide empirical evidence that indicates a significant negative impact of corruption on redistribution levels for a sample of 148 developing and developed countries. This finding suggests that, next to political and need factors, government corruption explains to some extent the ‘paradox of redistribution’. This is especially true for many developing countries, given that they typically have relatively high degrees of corruption and low levels of redistribution.

Cambridge Journal of Economics, 2018

This paper compares changes in relative and absolute wealth concentrations to establish whether b... more This paper compares changes in relative and absolute wealth concentrations to establish whether both processes have followed similar trajectories. The findings indicate that while the relative wealth concentration level has increased in recent times, it is not extraordinarily high from a historical perspective. In contrast, the absolute wealth concentration level is most likely higher than has ever previously occurred, due to the growth of per capita wealth holdings and the population size of high net worth individuals (HNWIs). The available data also suggest that HNWIs recovered very quickly from the losses that they experienced in the financial crisis of 2008. As a result, HNWIs’ wealth holdings in 2013 were at least 30% higher than they were in 2007. The post-crisis recovery of billionaires was even stronger, with their 2014 net wealth holdings more than 85% higher than 2007 levels.

Revista Finanzas y Politica Economica, 2017

It is widely accepted that inequality has increased sharply recently in developed countries, but ... more It is widely accepted that inequality has increased sharply recently in developed countries, but no consensus exists so far about the importance of inequality in the financial crisis of 2007-2009. The aim of this article is to outline and contrast the theoretical underpinnings of Marxian, post-Keynesian, and mainstream crisis theories, and to compare their viewpoints regarding the role that income inequality played in the crisis. The results of this review suggest that, despite important differences in their theoretical concepts, several economists of these three strands offer a similar explanation on why income inequality was an important contributing factor to the financial crisis.

Development and Change, Jan 15, 2017

This article shows that the increase of income inequality and global wealth concentration was an ... more This article shows that the increase of income inequality and global wealth concentration was an important driver for the financial and Eurozone crisis. The high levels of income inequality resulted in balance of payment imbalances and growing debt levels. Rising wealth concentration contributed to the crisis because the increasing asset demand from the rich played a key role in the growth of the structured credit market and enabled poor and middle-income households to accumulate increasing amounts of debt. This analysis thereby puts both income and wealth inequality at the epicentre of the recent crisis, and as crucial for social scientists analysing the causes of the crisis. The authors’ findings suggest that the policy response to the crisis should not be limited to financial regulation but must involve policies to address inequality by increasing the bargaining power of labour as well as redistributive tax policies.

International Review of Applied Economics, Nov 2016

This paper examines the respective impacts of public and private governance institutions on forei... more This paper examines the respective impacts of public and private governance institutions on foreign direct and foreign portfolio investment inflows. We present two hypotheses: (1) there is a strong correlation between the quality of a country’s public governance institutions and the amount of FDI received while the quality of its private governance institutions has no further discernible impact on this correlation; (2) there is a strong correlation between the quality of a country’s public governance institutions and the amount of FPI received while the quality of its private governance institutions has a further positive impact on this correlation. Our findings, which are based on panel data analysis, show both hypotheses to be valid.

Social Indicators Research, Jan 2017

This paper is the first to decompose absolute global income inequality into its within-country an... more This paper is the first to decompose absolute global income inequality into its within-country and between-country component. The results show a continuous increase of absolute global inequality during 1850-2010, which can be separated into three distinct phases: (i) between 1850 and 1929, within-country inequality explained up to 76% of absolute global inequality, yet the growth rates of within-and between-country inequality were very similar; (ii) a sharp increase in the importance of between-country inequality occurred during the 1929-1950 period, which was followed by a period during which the within-and between-country components were approximately equally relevant; and (iii) after 1985, the growth in absolute global inequality was driven primarily by the accelerated growth of within-country income differences. Currently, within-country inequality explains 70% of absolute global market inequality, a figure close to that of the year 1850. Additional findings include that absolute income convergence between countries took place after 2005, that it is possible to reduce absolute inequality and to grow simultaneously, and that recently within-country net inequality has grown faster than market inequality. The main findings are preserved when different absolute decomposable inequality measures, sample sizes, and purchasing power parity exchange rates are used.

Ensayos Sobre Política Económica (ESPE), Dec 2015

Este trabajo busca aportar evidencia empírica sobre la relación entre flujos de capital, explotac... more Este trabajo busca aportar evidencia empírica sobre la relación entre flujos de capital, explotación de recursos naturales y desindustrialización, a partir del análisis del caso colombiano. Para ello, se concentra en indagar si el financiamiento externo percibido por el país durante el período de estudio generó un proceso de apreciación adicional de la tasa de cambio real fortaleciendo un posible fenómeno de “enfermedad holandesa” originado en el aumento de los precios de los commodities. Los resultados muestran que la entrada de capitales, sobre todo la entrada de Inversión Extranjera Directa al sector minero-energético, efectivamente ocasionaron una apreciación de la tasa de cambio que afectó negativamente el desempeño de los sectores transables en general y de la manufactura en particular. Esto demuestra que no sólo la explotación de los recursos naturales, sino además la forma en que esta se financie, influyen en el comportamiento de la industria en las economías de los países en desarrollo.

Ecos de Economía: A Latin American Journal of Applied Economics, Jun 2016

This paper provides an overview of historic worldwide trends in relative and absolute income ineq... more This paper provides an overview of historic worldwide trends in relative and absolute income inequality. Depending on the concept used, inequality trends differ considerably. Inequality between countries increased strongly during 1820-2000 and started decreasing at the beginning of the twenty-first century, whether measured in relative or absolute terms. Within-country inequality, on the contrary, grew especially strongly during the last decades: Its growth rate accelerated after 1950 in absolute terms and after 1975 in relative terms. Absolute global inequality also increased substantially in the post-1950 period, whereas relative global inequality decreased slightly during this period.

Cambridge Journal of Economics, Mar 2014

The crisis that broke out in mid-2007 was caused by the fact that the collateralised debt obligat... more The crisis that broke out in mid-2007 was caused by the fact that the collateralised debt obligation (CDO) market had grown to a size sufficient to wreak general havoc when it suddenly collapsed. Several authors have argued that economic inequality was important to the growth of this market. This paper attempts to strengthen this argument by concentrating attention on global wealth concentration. After summarising recent evidence on the negative impact of investor demand on US bond yields in the pre-crisis period, new evidence regarding the specific contribution of high-net-worth individuals to this negative impact is presented. The paper then goes on to show how, after having helped to cause a yield problem in the major US debt markets, high-net-worth individuals (via hedge funds) continued to be a major source of the pressure on US banks to resolve this yield problem through the mass production of CDOs.

Journal of International Financial Markets, Institutions and Money, Dec 2013

Although the federal funds rate started rising from mid-2004 US long term rates continued to fall... more Although the federal funds rate started rising from mid-2004 US long term rates continued to fall. A likely contributory factor to this ‘conundrum’ was the contemporaneous increase in US bond demand. Using ARDL based models, which accommodate structural breaks, this paper estimates the impact of foreign and domestic demand on AAA rated US bond yields in the ‘conundrum’ period. This impact is shown to have been everywhere significantly negative. The fact that our model fully explains the ‘bond yield conundrum’ gives support to the hypothesis that the US CDO market was rapidly expanded before 2007 chiefly to absorb the overspill of global demand for safe assets. Moreover, our models demonstrate that there are strong linkages between the 10-year Treasury yield and the long term yields of AAA rated non-Treasury bonds.

Cambridge Journal of Economics, 2024

International Economic Journal, 2024

Review of World Economics, 2024

Development Studies Research, 2021

Brazilian Journal of Political Economy, 2020

Socio-Economic Review, 2019

Ensayos Sobre Política Económica, 2018

Semestre Económico, 2017

Journal of Income Distribution, 2018

International Criminal Justice Review, 2018

Social Indicators Research, 2017

Cambridge Journal of Economics, 2018

Revista Finanzas y Politica Economica, 2017

Development and Change, Jan 15, 2017

International Review of Applied Economics, Nov 2016

Social Indicators Research, Jan 2017

Ensayos Sobre Política Económica (ESPE), Dec 2015

Ecos de Economía: A Latin American Journal of Applied Economics, Jun 2016

Cambridge Journal of Economics, Mar 2014

Journal of International Financial Markets, Institutions and Money, Dec 2013

CIEF Working Paper 21-05, 2021

Standard theory considers the real exchange rate (RER) as an export determinant. A common limitat... more Standard theory considers the real exchange rate (RER) as an export determinant. A common limitation of crosscountry evidence is the use of effective (REER) or bilateral (BRER) RER indices, both of which have the same values across sectors. The novel contributions of this paper are to propose a variety of goods trade model, to exploit exchange rate variations across sectors by constructing a unique sectoral bilateral RER index (SBRER) for 12 Latin American countries, 21 sectors and 38 trade partners, and to estimate empirically the effect of SBRER movements on Latin American manufacturing exports during 2001-2018. The obtained results show that the SBRER is a statistically significant determinant of aggregate manufacturing exports, whereas the REER coefficient has an unexpected sign and the BRER appears not to be significant. Moreover, sectoral export elasticities indicate that in Latin America mainly low-technology sectors are affected by SBRER movements. Overall, these findings make evident that it is important to consider sectoral heterogeneity regarding trade partners and production costs when estimating RER export elasticities from a macroeconomic perspective and they provide new evidence on the effect of RER movements on Latin American exports.

CIEF Working Papers, No. 16-26, Aug 2016

Rational choice models argue that income inequality leads to a higher expected utility of crime a... more Rational choice models argue that income inequality leads to a higher expected utility of crime and thus generates incentives to engage in illegal activities. Yet, the results of empirical studies do not provide strong support for this theory; in fact, Neumayer provides apparently strong evidence that income inequality is not a significant determinant of violent property crime rates when a representative sample is used and country specific fixed effects are controlled for. An important limitation of this and other empirical studies on the subject is that they only consider proportional income differences, even though in rational choice models absolute difference in legal and illegal incomes determine the expected utility of crime. Using the same methodology and data as Neumayer, but using absolute inequality measures rather than proportional ones, this paper finds that absolute income inequality is a statistically significant determinant of robbery and violent theft rates. This result is robust to changes in sample size and to different absolute inequality measures, which not only implies that inequality is an important correlate of violent property crime rates but also suggests that absolute measures are preferable when the impact of inequality on property crime is studied.

CIEF Working Paper, No. 13-28, Aug 2013

In this study, we estimate the impact of the 2004-2012 energy and mining boom on the real effecti... more In this study, we estimate the impact of the 2004-2012 energy and mining boom on the real effective exchange rate in Colombia and the sectoral composition of its economy. To this end, we introduce the new “extended Dutch Disease” concept, according to which a currency appreciation may not only occur due to traditional “spending” and “relocation” effects but also due to exports and massive inflows of external capital that finances the booming sector. The empirical results indicate that Colombia experienced an overvaluation of its real exchange rate, which in turn negatively affected the competitiveness of its manufacturing and agricultural sector.

CIEF Working Paper, No. 14-1 , Jan 2014

This paper compares changes in relative and absolute wealth concentrations to establish if both p... more This paper compares changes in relative and absolute wealth concentrations to establish if both processes have followed similar trajectories. The findings indicate that while the level of relative wealth concentration has increased recently, it is not extraordinarily high in an historical perspective. On the contrary, the level of absolute wealth concentration is most likely higher than that previously occurred because of the increase in the wealth holdings and population size of high net worth individuals. The sustainability of this on-going absolute concentration of wealth is questionable insofar as the resulting pressure of investor demand for safe securities poses a potential threat for financial stability.

PKSG Working Paper, No. 1303 , Apr 2013

Rising income inequality has recently moved into the centre of political and economic debates in ... more Rising income inequality has recently moved into the centre of political and economic debates in line with increasing claims that a global rise in income inequality might have been a root cause of the subprime crisis. This paper provides an extensive overview of world scale developments in relative (i.e. proportional) income inequality to determine if the claims that the latter was high prior to the crisis are substantiated. The results of this study indicate that (i) non-population adjusted inequality between countries (inter-country inequality) increased between 1820 and the late 1990s but then decreased thereafter, while there was a steady decrease after the 1950s when population weights are taken into account; (ii) income inequality between ‘global citizens’ (global inequality) increased significantly between 1820 and 1950, while there was no clear trend thereafter; (iii) contemporary relative income inequality within countries (intra-country inequality) registered a clear upward trend on a global level since the 1980s.

CIEF Working Paper, No. 14-17, Aug 2014

Several Nobel laureates economists have called for redistributive policies. This paper shows that... more Several Nobel laureates economists have called for redistributive policies. This paper shows that there is a strong case for redistributive policies because the global increase of income inequality and wealth concentration was an important driver for the financial and Eurozone crisis. The high levels of income inequality resulted in balance of payment imbalances and rising debt levels. Rising wealth concentration contributed to the crisis because the increasing asset demand from the rich played a key role in the rise of the structured credit market and enabled poor and middle-income households to accumulate increasing amounts of debt. To tame the inherent instability of the current mode of capitalism it is necessary to reduce inequality.

PKSG Working Paper, No. 1305 , May 2013

An increasing number of economists argue that income inequality was a root cause behind the subpr... more An increasing number of economists argue that income inequality was a root cause behind the subprime crisis of 2007. The aim of this paper is to outline and contrast the theoretical underpinnings of Marxian, Post Keynesian and mainstream crisis theories and to compare their viewpoints regarding the role that inequality plays. The main finding of this paper is that despite important theoretical differences, economists from all three strands provide a similar explanation for the link between inequality and the subprime crisis (even though conventional mainstream crisis theories do not regard inequality as destabilizing factor). This suggests that the rise in income inequality indeed played an important role in the build-up of the crisis. To ensure that a wider audience accepts inequality as a prominent causal factor for the crisis it is however necessary that the negative effects of wealth concentration are also taken into account.

Market Liberalism, Growth, and Economic Development in Latin America (Routledge Studies in Development Economics) , Jun 2011

This paper analyses what impact North-South and South-South regional integration agreements have ... more This paper analyses what impact North-South and South-South regional integration agreements have on inward foreign direct investment in developing countries, i.e. on Mexico and Brazil. First, theoretical expectations are discussed and then FDI inflow and stock data of Mexico and Brazil for the period 1990-2006 is analysed. The data show that after the accession of NAFTA and MERCOSUR, respectively, Mexico (mainly secondary sector) and Brazil (mainly tertiary sector) have received higher inflows of FDI. Surprisingly, the share of the inward FDI stock from the US has decreased in Mexico, which is not in line with theoretical expectations. The proposition that NAFTA has had a bigger impact on Mexico than MERCOSUR on Brazil is not confirmed by the changes of the FDI/GDP ratio. The data indicates that higher inflows to both countries might rather reflect a global trend than resulting from the RIA.

International Criminal Justice Review, 2018

The impact of effective corporate tax rates on investment Economía y Finanzas, 2020

There exists an intense debate about the effects of corporate tax cuts on the formation of privat... more There exists an intense debate about the effects of corporate tax cuts on the formation of private capital in the real sector. This paper studies the investment impact of the effective fiscal burden of firms during the period 1995-2014. To this end, in a first step national accounts data is used to calculate backward looking average Effective Corporate Tax Rates (ECTR) for 73 developed and developing countries. In a second step, a dynamic panel approach is employed to estimate the impact of the ECTR on private gross fixed capital formation and foreign direct investment inflows. The obtained results indicate that: (i) ECTR not only tend to be much lower than statutory corporate tax rates, but also have different dynamics over time; and (ii) there exists no clear statistically significant negative relationship between ECTR and private investment. Instead, private capital formation and FDI inflows are rather explained by economic growth, the persistence of investment spending, trade op...

Brazilian Journal of Political Economy

Previous work has established that an appreciation of the real effective exchange rate (REER) con... more Previous work has established that an appreciation of the real effective exchange rate (REER) contributes to premature deindustrialization, less productive investment and dependence on commodity booms and busts in emerging markets economies (EME). From the literature, it is less clear, however, what the most important drivers for the cyclical REER movements in EME are. The aim of this study is to provide empirical evidence about the determinants of the REER movements of 15 emerging markets during the last two decades, using statistical analysis and a dynamic panel fixed effects model approach. Our analysis shows that although “commodity” and “industrial” EME are heterogeneous, REER volatility tends to be higher among the former. EME that had more stable REER fared better than those that had a depreciating or appreciating trend (with the notable exception of China). As theoretically expected, commodity prices are an important structural driver of REER movements in “commodity EME”. Mo...

Journal of International Financial Markets, Institutions and Money, 2013

ABSTRACT Although the federal funds rate started rising from mid-2004 US long term rates continue... more ABSTRACT Although the federal funds rate started rising from mid-2004 US long term rates continued to fall. A likely contributory factor to this ‘conundrum’ was the contemporaneous increase in US bond demand. Using ARDL based models, which accommodate structural breaks, this paper estimates the impact of foreign and domestic demand on AAA rated US bond yields in the ‘conundrum’ period. This impact is shown to have been everywhere significantly negative. The fact that our model fully explains the ‘bond yield conundrum’ gives support to the hypothesis that the US CDO market was rapidly expanded before 2007 chiefly to absorb the overspill of global demand for safe assets. Moreover, our models demonstrate that there are strong linkages between the 10-year Treasury yield and the long term yields of AAA rated non-Treasury bonds.