Portuguese Economic Journal, 2021, Volume 20, nº 3
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- Relative pricing of French Treasury inflation-linked and nominal bonds : an empirical approach using arbitrage strategiesPublication . Séverac, Béatrice de; Fonseca, José S. daThis paper investigates whether arbitrage opportunities exist between inflation-linked bonds and nominal bonds on the French Treasury market. Following arbitrage theory, we apply the risk hedging concept: we set up self-financing portfolios hedged against risks through durations of different orders. Perfectly hedged portfolios are those with a zero initial and a zero final value. The results show arbitrage gains when the first three duration orders are implemented, but they are not significantly different from zero when a fourth-order duration is added. Furthermore, a regression of arbitrage gains on the illiquidity measure of nominal and index Treasury bonds provides evidence that the illiquidity of inflation-linked bonds significantly explains arbitrage gains, whereas the illiquidity measure of nominal bonds does not
- Cross-border acquisitions from developing countries under decreasing returns to scalePublication . Dong, Quan; Bárcena-Ruiz, Juan CarlosWe assume that a firm from a developing country wants to acquire a firm from a developed country with better technology. The acquirer, which may be a private firm or a state-owned firm, seeks to improve its efficiency in production. We assume that at most there is one acquisition, and that it needs to be authorized by both the government of the developing country and that of the developed country. Firms face decreasing returns to scale. We find that if the level of inefficiency of the acquirer is very high, the government of the developed country forbids acquisitions. The private firm from the developing country is the acquirer in two cases: if the level of inefficiency of the firms from that country is low and if it is high. If the level of inefficiency is intermediate, the acquirer is the state-owned firm.
- External debt, growth and investment for developing countries : some evidence for the debt overhang hypothesisPublication . Turan, Taner; Yanıkkaya, HalitWe investigate the effect of total, public, and private external debt stocks on the growth rate and also on total, government, and private investment by using data for a large sample of developing countries. We find a significant and negative growth effect of total external debt stock, lending evidence for the debt overhang argument. Moreover, our results importantly indicate that external debt lowers growth only in countries with ethnically fractionalized and ineffective governments. Furthermore, our empirical findings don’t support the existence of a non-linear or threshold relationship between external debt and growth. Similar to the growth effects of external debt, the significantly and negatively estimated coefficients on the three measures of external debt stocks imply that external debt reduces investment, again providing a robust evidence for the debt overhang argument. Finally, our estimations show that private investment level is more sensitive to the government external debt than the private external debt.