Mr. Federico J Diez, Jiayue Fan, and Carolina Villegas-Sánchez
Using a new firm-level dataset on private and listed firms from 20 countries, we document
five stylized facts on market power in global markets. First, competition has declined
around the world, measured as a moderate increase in average firm markups during 2000-
2015. Second, the markup increase is driven by already high-markup firms (top decile of
the markup distribution) that charge increasing markups. Third, markups increased mostly
among advanced economies but not in emerging markets. Fourth, there is a non-monotonic
relation between firm size and markups that is first decreasing and then increasing. Finally,
the increase is mostly driven by increases within incumbents and also by market share
reallocation towards high-markup entrants.
This paper analyzes how the leverage of financial institutions affects their demand for
assets and the resulting value of transactions between financial institutions. The results
show a positive relationship between buyer capital and the likelihood of buying assets,
and between buyer capital and the value of the deal. That is, those institutions that are
the least constrained in their ability to raise funding are those that demand assets and
pay more for them. This result does not hold, however, for deposit-taking institutions
that had access to several government programs designed to improve their liquidity
position during the crisis of 2008.
Despite the liberalization of foreign portfolio investment around the globe since the early 1980s, the home-bias phenomenon is still found to exist. Using a relatively new IMF survey dataset of cross-border equity holdings, this paper tests new structural equations from a consumption-based asset-pricing model on international portfolio holdings. Using of stock data allows us to provide new and clear-cut evidence on the determinants of international portfolio holdings.
Ms. Ling H Tan, Ms. Kala Krishna, and Mr. Ram Ranjan
This paper models investment/entry decisions in a competitive industry that is subject to a quantity control on an input for production. The quantity control is implemented by auctioning licenses for the restricted input (e.g., a pollution permit or a production license). The paper shows that liberalizing the quantity control could reduce investment in the industry under certain circumstances. Furthermore, the level of investment is quite different when licenses are tradable than when they are not. Key factors in the comparison include the elasticity of demand for the final good and the degree of input substitutability. Two examples are computed to illustrate the results.