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Huijun Wang - One of the best experts on this subject based on the ideXlab platform.

  • Aggregate expected Investment growth and stock market returns
    Social Science Research Network, 2018
    Co-Authors: Huijun Wang
    Abstract:

    Consistent with neoclassical models with Investment lags, we find that a bottom-up measure of Aggregate Investment plans, namely, Aggregate expected Investment growth, negatively predicts future stock market returns. with an adjusted in-sample R2 of 18.5% and an out-of-sample R2 of 16.3% at the 1-year horizon. The return predictive power is robust after controlling for popular macroeconomic return predictors, in subsample periods, as well as in other G7 countries. Further analyses suggest that the predictive ability of Aggregate expected Investment growth is more likely to be driven by the time-varying risk premium than by behavioral biases such as extrapolative expectations.

Joseph E Stiglitz - One of the best experts on this subject based on the ideXlab platform.

  • dividend taxation and intertemporal tax arbitrage
    Journal of Public Economics, 2009
    Co-Authors: Anton Korinek, Joseph E Stiglitz
    Abstract:

    Abstract We analyze the effects of changes in dividend tax policy using a life-cycle model of the firm, in which new firms first access equity markets, then grow internally, and finally pay dividends when they have reached steady state. We find that unanticipated permanent changes in tax rates have only small effects on Aggregate Investment, since macroeconomic dynamics are dominated by mature firms for which dividend taxation is not distortionary. Anticipated or temporary dividend tax changes, on the other hand, create incentives for firms to engage in inter-temporal tax arbitrage so as to reduce investors' tax burden. For example, a temporary tax cut – the type most likely to be enacted by policymakers – induces firms to accelerate dividend payments while tax rates are low, which reduces their cash holdings and makes them capital-constrained when large Investment opportunities arise. This can significantly lower Aggregate Investment for periods after the tax cut.

  • dividend taxation and intertemporal tax arbitrage
    2008
    Co-Authors: Anton Korinek, Joseph E Stiglitz
    Abstract:

    We analyze the effects of changes in dividend tax policy using a life-cycle model of the firm, in which new firms first access equity markets, then grow internally, and finally pay dividends when they have reached steady state.In accordance with the traditional view of dividend taxation, new firms raise less equity and invest less the higher the level of dividend taxes. However, as postulated by the new view of dividend taxation, the dividend tax rate is irrelevant for the Investment decisions of internally growing and mature firms. Since Aggregate Investment is dominated by these latter two categories, the level of dividend taxation as well as unanticipated changes in tax rates have only small effects on Aggregate Investment.Anticipated dividend tax changes, on the other hand, allow firms to engage in inter-temporal tax arbitrage so as to reduce investors' tax burden. This can significantly distort Aggregate Investment. Anticipated tax cuts (increases) delay (accelerate) firms' dividend payments, which leads them to hold higher (lower) cash balances and, for capital constrained firms, can significantly increase (decrease) Aggregate Investment for periods after the tax change.The analysis of dividend taxation in a contestable democracy thus has to take into account future policy changes as well as expectations thereof. This can significantly alter the evaluation of any given dividend tax policy.

Constance E Smith - One of the best experts on this subject based on the ideXlab platform.

  • Investment and the exchange rate short run and long run Aggregate and sector level estimates
    Journal of International Money and Finance, 2009
    Co-Authors: Stuart Landon, Constance E Smith
    Abstract:

    Abstract Aggregate and sector-level Investment equations are estimated for a panel of 17 OECD countries using an error correction methodology. A real currency depreciation is found to reduce Aggregate Investment and Investment in all nine sectors in the short run, and Aggregate Investment in the long run. The decline in Investment is quite persistent in service sectors, sectors that generally benefit less from an expansion of demand following a currency depreciation. A rise in the real wage has no short run impact on Investment in most sectors, but has a significant negative long run effect in six of nine sectors.

  • Investment and the exchange rate short run and long run Aggregate and sector level estimates
    Research Papers in Economics, 2007
    Co-Authors: Stuart Landon, Constance E Smith
    Abstract:

    Aggregate and sector-level Investment equations that incorporate the exchange rate are estimated for a panel of 17 OECD countries using an error correction methodology. A real currency depreciation is found to have a significant negative effect on Aggregate Investment in both the short run and the long run. This effect is negative in all sectors in the short run, is significant in six of nine sectors, and is particularly persistent in service sectors, sectors that do not generally benefit directly from an expansion of demand following a currency depreciation. Movements in another explanatory variable, the real wage, have an insignificant impact on Investment in the short run in most sectors, but a rise in the real wage has a significant negative long run effect on Aggregate Investment and on Investment in six of nine sectors. A simulation shows that movements in the real exchange rate and the real wage can explain a large proportion of cross-country differences in Investment.

Anton Korinek - One of the best experts on this subject based on the ideXlab platform.

  • dividend taxation and intertemporal tax arbitrage
    Journal of Public Economics, 2009
    Co-Authors: Anton Korinek, Joseph E Stiglitz
    Abstract:

    Abstract We analyze the effects of changes in dividend tax policy using a life-cycle model of the firm, in which new firms first access equity markets, then grow internally, and finally pay dividends when they have reached steady state. We find that unanticipated permanent changes in tax rates have only small effects on Aggregate Investment, since macroeconomic dynamics are dominated by mature firms for which dividend taxation is not distortionary. Anticipated or temporary dividend tax changes, on the other hand, create incentives for firms to engage in inter-temporal tax arbitrage so as to reduce investors' tax burden. For example, a temporary tax cut – the type most likely to be enacted by policymakers – induces firms to accelerate dividend payments while tax rates are low, which reduces their cash holdings and makes them capital-constrained when large Investment opportunities arise. This can significantly lower Aggregate Investment for periods after the tax cut.

  • dividend taxation and intertemporal tax arbitrage
    2008
    Co-Authors: Anton Korinek, Joseph E Stiglitz
    Abstract:

    We analyze the effects of changes in dividend tax policy using a life-cycle model of the firm, in which new firms first access equity markets, then grow internally, and finally pay dividends when they have reached steady state.In accordance with the traditional view of dividend taxation, new firms raise less equity and invest less the higher the level of dividend taxes. However, as postulated by the new view of dividend taxation, the dividend tax rate is irrelevant for the Investment decisions of internally growing and mature firms. Since Aggregate Investment is dominated by these latter two categories, the level of dividend taxation as well as unanticipated changes in tax rates have only small effects on Aggregate Investment.Anticipated dividend tax changes, on the other hand, allow firms to engage in inter-temporal tax arbitrage so as to reduce investors' tax burden. This can significantly distort Aggregate Investment. Anticipated tax cuts (increases) delay (accelerate) firms' dividend payments, which leads them to hold higher (lower) cash balances and, for capital constrained firms, can significantly increase (decrease) Aggregate Investment for periods after the tax change.The analysis of dividend taxation in a contestable democracy thus has to take into account future policy changes as well as expectations thereof. This can significantly alter the evaluation of any given dividend tax policy.

Balázs Égert - One of the best experts on this subject based on the ideXlab platform.

  • Regulation, Institutions and Aggregate Investment: New Evidence from OECD Countries
    Open Economies Review, 2018
    Co-Authors: Balázs Égert
    Abstract:

    This paper investigate the relationship linking Investment (capital stock) and structural policies. Using a panel of 32 OECD countries from 1985 to 2013, we show that more stringent product and labour market regulations are associated with less Investment (lower capital stock). The paper also sheds light on the existence of non-linear effects of employment protection legislation (EPL) on the capital stock. Several alternative testing methods show that the negative influence of EPL is considerably stronger at higher levels. Finally, and importantly, the paper uncovers important policy interactions between product and labour market policies. Higher levels of product market regulations (covering state control, barriers to entrepreneurship and barriers to trade and Investment) tend to amplify the negative relationships between EPL and the capital stock and ETCR and the capital stock. Equally important is the finding that the rule of law and the quality of (legal) institutions alters the overall impact of regulations on capital deepening: better institutions reduce the negative effect of more stringent product and labour market regulations on the capital stock, possibly through the reduction of uncertainty as regards the protection of property rights. This result also implies that the benefit from product and labour market reforms may be smaller in countries with weaker institutions.

  • regulation institutions and Aggregate Investment new evidence from oecd countries
    Social Science Research Network, 2017
    Co-Authors: Balázs Égert
    Abstract:

    This paper investigates the relationship linking Investment (capital stock) and structural policies. Using a panel of 32 OECD countries from 1985 to 2013, we show that more stringent product and labour market regulations are associated with less Investment (lower capital stock). The paper also sheds light on the existence of non-linear effects of product and labour market regulation on the capital stock. Several alternative testing methods show that the negative influence of product and labour market regulation is considerably stronger at higher levels. The paper uncovers important policy interactions between product and labour market policies. Higher levels of product market regulations (covering state control, barriers to entrepreneurship and barriers to trade and Investment) tend to amplify the negative relationships between product and labour market regulations and the capital stock. Equally important is the finding that the rule of law and the quality of (legal) institutions alters the overall impact of regulations on capital deepening: better institutions reduce the negative effect of more stringent product and labour market regulations on the capital stock, possibly through the reduction of uncertainty as regards the protection of property rights.

  • regulation institutions and Aggregate Investment
    2017
    Co-Authors: Balázs Égert
    Abstract:

    This paper investigates the relationship linking Investment (capital stock) and structural policies. Using a panel of 32 OECD countries from 1985 to 2013, we show that more stringent product and labour market regulations are associated with less Investment (lower capital stock). The paper also sheds light on the existence of non-linear effects of product and labour market regulation on the capital stock. Several alternative testing methods show that the negative influence of product and labour market regulation is considerably stronger at higher levels. The paper uncovers important policy interactions between product and labour market policies. Higher levels of product market regulations (covering state control, barriers to entrepreneurship and barriers to trade and Investment) tend to amplify the negative relationships between product and labour market regulations and the capital stock. Equally important is the finding that the rule of law and the quality of (legal) institutions alters the overall impact of regulations on capital deepening: better institutions reduce the negative effect of more stringent product and labour market regulations on the capital stock, possibly through the reduction of uncertainty as regards the protection of property rights.