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    Are firms more resilient to systemic banking crises in economies with higher levels of social trust? Using firm-level data in 34 countries from 1990 through 2011, we find that liquidity-dependent firms in high-trust countries obtain more trade credit and suffer smaller drops in profits and employment during banking crises than similar firms in low-trust economies. The results are consistent with the view that when banking crises block the normal banking-lending channel, greater social trust facilitates access to informal finance, cushioning the effects of these crises on corporate profits and employment.

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    We propose and test a new channel for the transmission of monetary policy. We show that when the Fed funds rate increases, banks widen the interest spreads they charge on deposits, and deposits flow out of the banking system. We present a model in which imperfect competition among banks gives rise to these relationships. An increase in the nominal interest rate increases banks' effective market power, inducing them to increase deposit spreads. Households respond by substituting away from deposits into less liquid but higher-yielding assets. Using branch-level data on all U.S. banks, we show that following an increase in the Fed funds rate, deposit spreads increase by more, and deposit supply falls by more, in areas with less deposit competition. We control for changes in banks' lending opportunities by comparing branches of the same bank. We control for changes in macroeconomic conditions by showing that deposit spreads widen immediately after a rate change, even if it is fully expected. Our results imply that monetary policy has a significant impact on how the financial system is funded, on the quantity of safe and liquid assets it produces, and on its lending to the real economy.

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    We develop a theory of career paths and earnings in an economy in which agents organize in production hierarchies. Agents climb these organizational hierarchies as they learn stochastically from other individuals. Earnings grow over time as agents acquire knowledge and occupy positions with larger numbers of subordinates. We contrast these and other implications of the theory with U.S. census data for the period 1990 to 2010. The model matches well the Lorenz curve of earnings as well as the observed mean experience-earnings profiles. We show that the increase in wage inequality over this period can be rationalized with a shift in the distribution of the complexity and profitability of technologies relative to the distribution of knowledge in the population.

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    Do financial markets properly reflect leverage? Unlike Gomes and Schmid (2010) who examine this question with a structural approach (using long-term monthly stock characteristics), my paper examines it with a quasi-experimental approach (using short-term a discrete event). After a firm has declared a dividend (i.e., after the news release), but in the few days that precede the payment date, an investor in the traded equity owns a claim to the dividend cash plus the remaining firm equity within the corporate shell. After the payment date, the shell contains only the dividend-sans-cash firm equity. The empirical evidence confirms rational increases in volatilities but shows unexpected decreases in average returns. The best explanation is behavioral.

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    What determines employee preferences for unionizing their workplaces? A substantial literature addresses this question with surveys on worker attitudes and pay. Unionization drives at the Universities of Minnesota and Washington have given rise to open letters of support or opposition from over 1,000 faculty at Washington and support from over 200 at Minnesota. Combining these expressions with publicly available data on salary, job titles, department affiliation, research productivity, teaching success, and political contributions from over 5,000 faculty, we provide new estimates of the determinants of faculty preferences for unionization at research universities. We find that faculty with higher pay and greater research productivity are less supportive of unionization, even after controlling for job title and department. Attitudes matter as well: after accounting for pay and productivity, faculty in fields documented elsewhere to have more politically liberal participants are more likely to support unionization.

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    Illiquidity in short-term credit markets during the financial crisis might have severely curtailed the supply of non-bank consumer credit. Using a new data set linking every car sold in the United States to the credit supplier involved in each transaction, we find that the collapse of the asset-backed commercial paper market reduced the financing capacity of such non-bank lenders as captive leasing companies in the automobile industry. As a result, car sales in counties that traditionally depended on non-bank lenders declined sharply. Although other lenders increased their supply of credit, the net aggregate effect of illiquidity on car sales is large and negative. We conclude that the decline in auto sales during the financial crisis was caused in part by a credit supply shock driven by the illiquidity of the most important providers of consumer finance in the auto loan market. These results also imply that interventions aimed at arresting illiquidity in short-term credit markets might have helped to contain the real effects of the crisis.

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    In this paper we derive a new measure of openness--the trade potential index--that quantifies the potential gains from trade as a simple function of data. Using a standard multicountry trade model, we measure openness by a country's potential welfare gain from moving to a world with frictionless trade. In this model, a country's trade potential depends on only the trade elasticity and two observable statistics: the country's home trade share and its income level. Quantitatively, poor countries have greater potential gains from trade relative to rich countries, while their welfare costs of autarky are similar. This leads us to infer that rich countries are more open to trade. Our trade potential index correlates strongly with estimates of trade costs, while both the welfare cost of autarky and the volume of trade exhibit correlate weakly with trade costs. Thus, our measure of openness is informative about the underlying trade frictions.

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    We document evidence consistent with retail day traders in the Forex market attributing random success to their own skill and, as a consequence, increasing risk taking. Although past performance does not predict future success for these traders, traders increase trade sizes, trade size variability, and number of trades with gains, and less with losses. There is a large discontinuity in all of these trading variables around zero past week returns: e.g., traders increase their trade size dramatically following winning weeks, relative to losing weeks. The effects are stronger for novice traders, consistent with more intense "learning" in early trading periods.

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    We study the distribution of economic activity, as proxied by lights at night, across 250,000 grid cells of average area 560 square kilometers. We first document that nearly half of the variation can be explained by a parsimonious set of physical geography attributes. A full set of country indicators only explains a further 10%. When we divide geographic characteristics into two groups, those primarily important for agriculture and those primarily important for trade, we find that the agriculture variables have relatively more explanatory power in countries that developed early and the trade variables have relatively more in countries that developed late, despite the fact that the latter group of countries are far more dependent on agriculture today. We explain this apparent puzzle in a model in which two technological shocks occur, one increasing agricultural productivity and the other decreasing transportation costs, and in which agglomeration economies lead to persistence in urban locations. In countries that developed early, structural transformation due to rising agricultural productivity began at a time when transport costs were still relatively high, so urban agglomerations were localized in agricultural regions. When transport costs fell, these local agglomerations persisted. In late developing countries, transport costs fell well before structural transformation. To exploit urban scale economies, manufacturing agglomerated in relatively few, often coastal, locations. With structural transformation, these initial coastal locations grew, without formation of more cities in the agricultural interior.

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    Critical transitions for a country are historical periods when the powerful organizations in a country shift from one set of beliefs about how institutions (the formal and informal rules of the game) will affect outcomes to a new set of beliefs. Critical transitions can lead a country toward more openness politically and economically or toward a more exclusionary society. Economic and political development is contextual; that is, there is no recipe. Periods of relative persistence are the norm with changes in institutions at the margin. We develop a framework consisting of several interconnected relatively unexplored concepts that we first define in a static context and then utilize to show how they produce a dynamic of institutional change or persistence. The key concepts include: windows of opportunity, beliefs, and leadership. Our major contribution is wedding the concepts of windows of opportunity, beliefs, and leadership to the dominant network, institutions, and economic and political outcomes to form a dynamic. We apply the framework illustratively to understand economic and political development in Argentina over the past 100 years.

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    Historical data suggest that the base rate for a severe, single-day stock market crash is relatively low. Surveys of individual and institutional investors, conducted regularly over a 26 year period in the United States, show that they assess the probability to be much higher. We examine the factors that influence investor responses and test the role of media influence. We find evidence consistent with an availability bias. Recent market declines and adverse market events made salient by the financial press are associated with higher subjective crash probabilities. Non-market-related, rare disasters are also associated with higher subjective crash probabilities.

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    We study the consequences of product and labor market reforms in a two-country model with endogenous producer entry and labor market frictions. We focus on the role of business cycle conditions and external constraints at the time of reform implementation (or of a credible commitment to it) in shaping the dynamic effects of such policies. Product market reform is modeled as a reduction in entry costs and takes place in a non-traded sector that produces services used as input in manufacturing production. Labor market reform is modeled as a reduction in firing costs and/or unemployment benefits. We find that business cycle conditions at the time of deregulation significantly affect adjustment. A reduction of firing costs entails larger and more persistent adverse short-run effects on employment and output when implemented in a recession. By contrast, a reduction in unemployment benefits boosts employment and output by more in a recession compared to normal times. The impact of product market reforms is less sensitive to business cycle conditions. Credible announcements about future reforms induce sizable short-run dynamics, regardless of whether the announcement takes place in normal times or during an economic downturn. Whether the immediate effect is expansionary or contractionary varies across reforms. Finally, lack of access to international lending in the wake of reform can amplify the costs of adjustment.

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    Rapid Addition, a leading provider of trading technology, has completed the integration of DET Tech, whom they acquired in October last year. The firm has continued to build on momentum after the integration with additional hires and clients in the last six months. The superior flexibility of the DET Hub and the capabilities of Rapid Addition’s FIX engine and FPGA technology has created a new generation of etrading performance.read more...

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    ACER organises a workshop on scenarios and cost-benefit analysis methodology for assessing cross-border infrastructure projectsread more...

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    Since the late 1990’s, significant efforts toward diversifying investment products and enhancing trading technologies in Japanese stock markets/exchanges have been made.read more...

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    The question ‘Bulletin boards – friend or foe?’ generated lively discussion at the recent CISI Corporate Finance Forum meeting. It followed two helpful presentations: one by Nick Bealer, Chartered FCSI, of Cornhill Capital; the other by Tim Metcalfe, founder and MD of IFC Advisory. Nick described the problems that can be caused by contributors on bulletin boards, who often indulge in behaviour that would have a regulated practitioner banned by the Financial Conduct Authority (FCA).Tim then gave a summary of the PR approaches which companies need to adopt. The volume of posts is now such that companies cannot hope to respond to everything, making most PR strategies reactive, not proactive. The key point was to not engage with bulletin board posters and to accept that sometimes one just has to ignore a post(Bulletin boards will remove abusive posts, if asked). Nick and Tim also pointed out that bulletin boards can have a benefit by identifying investor concerns and helping frame the investor relations dialogue. Improving information flow between market participants helps removes anomalies and increase market efficiency (assuming the information is fair and accurate); but do these benefits outweigh the negatives?read more...

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    Better Finance’s Spanish member organisation ADICAE is celebrating a historic victory against 101 banks in what has been the biggest class action Spain has ever seen. In this class action suit on behalf of 15.000 mortgage borrowers, a Madrid commercial court deemed that the fixed minimum rate mortgages in question lacked in transparency and declared them null and void, a decision that could potentially apply to 4 million mortgages altogether. read more...

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    The EEX dairy risk management suite saw an outstanding start into Q2/16. In the first week of April, a new weekly record was set with 729 contracts traded in dairy futures which equals 3,645 tonnes of goods equivalent. Thereof, 549 contracts (2,745 tonnes) were traded in Butter Futures which is also a new weekly record. More information on our dairy market offering is available at https://goo.gl/Z70B8c

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    EL AL, which has been listed on the Tel Aviv Stock Exchange since 2003, took part in the opening bell ceremony.read more...

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    Intercontinental Exchange, Inc. (NYSE:ICE), a leading operator of global exchanges and clearing houses and provider of data and listings services, today announced that the Industrial and Commercial Bank of China (ICBC) has been approved by ICE Benchmark Administration (IBA) to participate in the gold auction, which is used to determine the LBMA Gold Price, from May 16, 2016.read more...

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