We study how financial market efficiency affects a measure of diversification of output across industrial sectors borrowed from the portfolio allocation literature. Using data on sector-level value added for a wide cross section of countries and for various levels of disaggregation, we construct...

Trading frictions in financial markets affect more long- than short-term bonds generating an upward sloping yield curve. Long-term financing is more expensive in economies with higher trading frictions so firms choose to borrow and invest in shorter horizons and lower productivity projects. The...

This paper argues that scholarship on the varieties of capitalism could provide a more complete understanding of fiscal policy convergence in the Eurozone after 2010 if it better examined the interdependencies between banks and sovereigns. Recently, this scholarship has explained fiscal...

Reserve Fund, National Wealth Fund and the funded part of the pension system are acting as a puffer to smooth the impact of external shocks on Russian federal budget. Sensibility for external shocks is the result of raw material exporter role of the country; witch affects not only the balance of...

This study deals with the statistical methods of contagion-effects on emerging capital markets. After fitting probability distribution on the empirical data, and cross-market correlation sensibility test were used on time series (2002-2009) of Hungarian, Polish Russian and US government bond,...

We show that fiscal multiplier estimations may be biased by movements in asset and credit markets, as they facilitate spurious correlations of changes in cyclically adjusted revenues and spending with GDP growth via wrong identifications and an omitted variable bias, thus overstating episodes of...

This paper studies the fiscal multiplier using a small-open-economy DSGE model enriched with financial frictions. It shows that the multiplier is large when frictions are present in domestic and international financial markets. The reason is that in the model government bonds are more liquid...

We show that fiscal multiplier estimations may be biased by movements in asset and credit markets, as they facilitate spurious correlations of changes in cyclically adjusted revenues and spending with GDP growth via an identification bias and an omitted variable bias, thus overstating episodes...

A frequently neglected aspect of financial booms and busts - financial cycles - is their impact on fiscal positions. And yet, the latest financial crisis and history show that these cycles can wreak havoc with public finances. After reviewing the impact of financial cycles on fiscal positions,...

Many policy actions of the CMU have the objective to enhance access to finance for the so-called backbone of the European economy-the SMEs. The CMU aims at improving the framework conditions for SME financing, at strengthening bank lending-as the most important external financing source for...