|
on Central and Western Asia |
| By: | Metin M. Cosgel (University of Connecticut); Sadullah Yıldırım (Marmara University) |
| Abstract: | We use GIS data and information from the tax registers of the Ottoman Empire to study the economic geography of Ottoman Anatolia in the sixteenth century, soon after the vast expansion of the empire in Asian territories. For a consistent and systematic account of resources and activities, we use data from the official accounting registers (muhasebe defteri) of the empire recorded around the year 1530, available at the district (kaza) level from the State Archives in Turkey. The accounting registers include detailed information regarding the amounts and essential features of the inhabitants and resources of the empire, especially in relation to the fiscal and administrative capacity of the state. Since the data are given at the level of the district, we use the name of the district to georeference its location, calculate district-level values of several representative indicators, and use GIS software to display the geographic dispersion of these indicators on maps. Regarding people, we determine the total number of taxpaying inhabitants in a district and the fractions of inhabitants who were non-Muslims and those exempt from taxation. In the same vein, we use the information regarding productive resources to calculate the numbers of mills, caravanserais, and markets in each district. Finally, as an indicator of political economy constraints that the Ottomans faced in newly conquered territories, we provide information regarding the spatial implementation of the malikane-divani system, an unusual method of dividing tax revenues between the state and local private recipients (mülk, vakıf). |
| JEL: | N15 N35 N45 N75 N95 |
| Date: | 2021–03 |
| URL: | http://d.repec.org/n?u=RePEc:uct:uconnp:2021-03&r=all |
| By: | Yusuf Emre Akgunduz; H. Ozlem Dursun-de Neef; Yavuz Selim Hacihasanoglu; Fatih Yilmaz |
| Abstract: | This paper studies the relationship between house prices and financing conditions. In the analysis, it exploits a sudden reduction in the mortgage rates of state-owned banks in Turkey during the summer of 2020 as an exogenous shock to provide causal estimates of the cost of credit on house prices. The effects are estimated using a detailed dataset on all house sales with mortgages. Our results show that a 1 percentage point decrease in annual interest rates raised house prices by 2.1%. This impact is driven by a corresponding increase in individual mortgage loans of 6.6%. |
| Keywords: | Mortgage rates, Mortgage lending, House prices |
| JEL: | G21 G28 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:tcb:wpaper:2106&r=all |
| By: | Boris Fisera (Slovak Academy of Sciences; Charles University, Prague); Menbere Workie Tiruneh (Slovak Academy of Sciences; Webster Vienna Private University); David Hojdan (Webster Vienna Private University) |
| Abstract: | We investigate the long-term effect of domestic currency depreciation on the external debt for a panel of 41 emerging economies over the years 1999-2019. Using heterogenous panel cointegration methods, we find that domestic currency depreciation leads to an increase in external debt to GDP ratio over the long-term and it reduces the sustainability of external debt. This is particularly the case for larger depreciations, while smaller depreciations might reduce the external debt burden over the long-term for more developed emerging economies. Poorer emerging economies face a greater increase in external debt burden following domestic currency depreciation. We also find that higher exchange rate volatility and the use of floating exchange rates contributes to an increase in external debt burden over the long-term. Consequently, our results suggest that for emerging economies, having more volatile and floating exchange rates reduces the sustainability of external debt. We find asymmetrical effects of exchange rate depreciation on external debt: higher central bank independence limits the effect of currency depreciation on external debt, while higher financial development and illicit financial flows augment the effect of depreciation on external debt. |
| Keywords: | external debt, exchange rate, currency depreciation, exchange rate volatility, exchange rate regime, DFE estimator, PMG estimator |
| JEL: | E50 F31 F34 |
| Date: | 2021–03 |
| URL: | http://d.repec.org/n?u=RePEc:fau:wpaper:wp2021_06&r=all |
| By: | Gaillard, Alexandre; Kankanamge, Sumudu |
| Abstract: | We evaluate the effects of unemployment insurance variations in a general equilibrium occupational choice model of entrepreneurship. We establish that the occupational flow from unemployment to entrepreneurship is remarkably sensitive to unemployment insurance generosity, corroborating our empirical findings. Beyond direct effects on unemployment, we find large reallocations between employment and entrepreneurship relative to changes in generosity. They contribute to an empirically consistent stable aggregate employment rate, despite increasing unemployment. We show that an insurance coverage effect, i.e. a change in the relative riskiness between occupations with respect to generosity, is a key driver of our results. |
| Keywords: | Entrepreneurship; Unemployment Insurance; Labor Market Mobility |
| JEL: | E24 J65 E61 |
| Date: | 2021–02–08 |
| URL: | http://d.repec.org/n?u=RePEc:tse:wpaper:125253&r=all |
| By: | Rolando Gonzales Martinez |
| Abstract: | Benchmarks are standards that allow to identify opportunities for improvement among comparable units. This study suggests a 2-step methodology for calculating probabilistic benchmarks in noisy data sets: (i) double-hyperbolic undersampling filters the noise of key performance indicators (KPIs), and (ii) a relevance vector machine estimates probabilistic benchmarks with denoised KPIs. The usefulness of the methods is illustrated with an application to a database of nano-finance+. The results indicate that-in the case of nano-finance groups-a higher discrimination power is obtained with variables that capture the macro-economic environment of the country where a group operates. Also, the estimates show that groups operating in rural regions have different probabilistic benchmarks, compared to groups in urban and peri-urban areas. |
| Date: | 2021–03 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2103.01669&r=all |
| By: | Juliane Begenau; Tim Landvoigt |
| Abstract: | How does the shadow banking system respond to changes in capital regulation of commercial banks? We propose a quantitative general equilibrium model with regulated and unregulated banks to study the unintended consequences of regulation. Tighter capital requirements for regulated banks cause higher convenience yield on debt of all banks, leading to higher shadow bank leverage and a larger shadow banking sector. At the same time, tighter regulation eliminates the subsidies to commercial banks from deposit insurance, reducing the competitive pressures on shadow banks to take risks. The net effect is a safer financial system with more shadow banking. Calibrating the model to data on financial institutions in the U.S., the optimal capital requirement is around 16%. |
| JEL: | E41 E44 G21 G23 G28 |
| Date: | 2021–02 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:28501&r=all |
| By: | Martin, R.; de Haas, Ralph (Tilburg University, Center For Economic Research); Muuls, Mirabelle; Schweiger, Helena |
| Keywords: | Financial frictions; management practices; CO2 emissions; energy efficieny |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:tiu:tiucen:d95224cf-6fd8-486b-b9d7-4bda91530e50&r=all |
| By: | Leopold Ringwald (Department of Economics, Vienna University of Economics and Business); Thomas O. Zörner (Department of Economics, Vienna University of Economics and Business) |
| Abstract: | This paper proposes a Bayesian Logistic Smooth Transition Autoregressive (LSTAR) model with stochastic volatility (SV) to model inflation dynamics in a nonlinear fashion. Inflationary regimes are determined by smoothed money growth which serves as a transition variable that governs the transition between regimes. We apply this approach on quarterly data from the US, the UK and Canada and are able to identify well-known, high inflation periods in the samples. Moreover, our results suggest that the role of money growth is specific to the economy under scrutiny. Finally, we analyse a variety of different model specifications and are able to confirm that adjusted money growth still has leading indicator properties on inflation regimes. |
| Keywords: | Money-inflation link, Nonlinear modeling, Bayesian inference, LSTAR-SV model |
| JEL: | C11 C32 E31 E51 |
| Date: | 2021–03 |
| URL: | http://d.repec.org/n?u=RePEc:wiw:wiwwuw:wuwp310&r=all |
| By: | Bernard, Sabine; Loos, Benjamin; Weber, Martin |
| Abstract: | The disposition effect is implicitly assumed to be constant over time. However, drivers of the disposition effect (preferences and beliefs) are rather countercyclical. We use individual investor trading data covering several boom and bust periods (2001-2015). We show that the disposition effect is countercyclical, i.e. is higher in bust than in boom periods. Our findings are driven by individuals being 25% more likely to realize gains in bust than in boom periods. These changes in investors' selling behavior can be linked to changes in investors' risk aversion and in their beliefs across financial market cycles. |
| Keywords: | Disposition Effect,Financial Market Cycles,Household Finance,Retail Investor |
| JEL: | D14 G11 G28 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:safewp:305&r=all |
| By: | Setiawan, Adib Rifqi; Saputri, Wahyu Eka |
| Abstract: | This research constructs learning design to guide primary education students on achieving financial literacy. The approach used is mixed method sequential exploratory model. This results shows that validity and reliability of this design in general on the category can be used. |
| Date: | 2021–02–05 |
| URL: | http://d.repec.org/n?u=RePEc:osf:thesis:d38xy&r=all |
| By: | Robert Oleschak |
| Abstract: | In economies with a low level of financial inclusion (FI), most activities are settled in cash and are thus more difficult to trace, record, and tax. I show theoretically that economies with inefficient financial technologies exhibit low levels of FI and of tax revenue and that using an inflation tax as an additional source of income improves welfare. Improvements in technology lead to a higher level of FI, increased tax revenue and lower (optimal) inflation. I test this prediction using panel data from a broad set of countries. The data show a strong and robust negative link between FI and inflation and a positive link between FI and tax revenue for developing countries. |
| Keywords: | Financial inclusion, financial technology, monetary policy, fiscal policy |
| JEL: | C12 C22 E31 E41 G21 H21 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:snb:snbwpa:2021-04&r=all |
| By: | Laurence M. Ball; N. Gregory Mankiw |
| Abstract: | This paper examines the optimal accumulation of capital and the effects of government debt in neoclassical growth models in which firms have market power and therefore charge prices above marginal cost. In this environment, the real interest rate earned by savers is less than the net marginal product of capital. We establish a new method for evaluating dynamic efficiency that can be applied in such economies. A plausible calibration suggests that the wedge between the real interest rate and the marginal product of capital is more than 4 percentage points and that the U.S. economy is dynamically efficient. In addition, government Ponzi schemes can have different implications for welfare than they do under competition. Even if the government can sustain a perpetual rollover of debt and accumulating interest, the policy may nonetheless reduce welfare by depressing steady-state capital and aggregate consumption. These findings suggest that even with low interest rates, as have been observed recently, fiscal policymakers should still be concerned about the crowding-out effects of government debt. |
| JEL: | E13 E22 E62 H63 O41 |
| Date: | 2021–03 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:28538&r=all |
| By: | Toptancı, Ali İskan |
| Abstract: | Increases in oil prices; It is due to the recession, periods of extreme inflation, reduced productivity, and low economic growth. In this study, the arguments supporting such views will be examined. It will first examine how it evolves in response to conceptual challenges in assigning a central role to oil price shocks in explaining macroeconomic fluctuations. Second, the idea that at least large oil price movements can be viewed as external to the US macroeconomy will be challenged. The evidence that has led many economists to give the oil market a central role in external political events will be examined critically. Third, even if none of the oil shocks are associated with stagflation of the US economy, the continuation of the oil shock, the US stagflation of the 1970s, is the idea that only oil price shocks can explain. This is not the case |
| Keywords: | Oil,Oil Price Shock,U.S.,Stagflation,Macroeconomics |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:esrepo:231406&r=all |
| By: | Harin, Alexander |
| Abstract: | A forbidden zone theorem, hypothesis, and applied mathematical method and model are introduced in the present article. The method and model are based on the forbidden zones and hypothesis. The model is uniformly and successfully applied for different domains. The ultimate goal of the research is to solve some generic problems of behavioral economics. |
| Keywords: | Expectation; Variation; Boundary; Utility; Prospect theory; Behavioral economics; |
| JEL: | C02 C1 D8 D81 |
| Date: | 2021–03–09 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:106545&r=all |
| By: | Verónica Acurio Vásconez; Olivier Damette; David W. Shanafelt |
| Abstract: | Despite the fact that the current covid-19 pandemic was neither the first nor the last disease to threaten a pandemic, only recently have studies incorporated epidemiology into macroeconomic theory. In our paper, we use a dynamic stochastic general equilibrium (dsge) model with a financial sector to study the economic impacts of epidemics and the potential for unconventional monetary policy to remedy those effects. By coupling a macroeconomic model to a traditional epidemiological model, we are able to evaluate the pathways by which an epidemic affects a national economy. We find that no unconventional monetary policy can completely remove the negative effects of an epidemic crisis, save perhaps an exogenous increase in the shares of claims coming from the Central Bank (“epi loans”). To the best of our knowledge, our paper is the first to incorporate disease dynamics into a dsge-sir model with a financial sector and examine the effects of unconventional monetary policy. |
| Keywords: | New-Keynesian model, dsge, covid-19, epidemiology. |
| JEL: | D58 E32 E52 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:ulp:sbbeta:2021-04&r=all |
| By: | Ouidad Yousfi (UM - Université de Montpellier); Nadia Loukil (UTM - Université de Tunis El Manar) |
| Abstract: | The current chapter shows that strategic corporate social responsibility (hereafter CSR) drives more pioneering socially responsible initiatives than responsive CSR based on "imitative" activities introduced to meet stakeholders' basic expectations. We conclude that strategic CSR leads to more sustainable financial performance as well as more socially and environmentally responsible innovation. We show that more diversity in top management positions could be a necessary requirement to shape more strategic CSR strategies. We present a critical survey of the literature structured in the following. First, we discuss the main features of CSR strategies and how they have evolved in the last years. Second, we shed light on the puzzled CSR-financial performance association. Then, we focus on the tools provided by strategic CSR to foster innovation potential of businesses and why we should rethink CSR to drive more sustainable innovations. Finally, the chapter discusses how hiring more diverse profiles in top positions could help to get out of the narrow CSR thinking and to go beyond stakeholders' expectations and reports' standards which could provide valuable opportunities to widen the innovation range in businesses through the implementation of more social, organizational and marketing innovations as well as the introduction of new products and processes. |
| Keywords: | CSR performance,strategic CSR,Innovation,diversity |
| Date: | 2021–01–11 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-03145064&r=all |
| By: | Yongqiang Meng (CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, TJU - Tianjin University); Dehua Shen (TJU - Tianjin University); Xiong Xiong (TJU - Tianjin University); Jørgen Vitting Andersen (CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, CNRS - Centre National de la Recherche Scientifique) |
| Abstract: | This paper investigates the relations between multiple measures of investor sentiment and the returns, volatility, trading volume, and liquidity. Using both data outside and inside market, we find that the Bullishness from socio-finance model are significant related to future realized volatility and trading volume, similar to Tweet, which is thought to capture information of well-informed investors in Bitcoin market. |
| Date: | 2020–10 |
| URL: | http://d.repec.org/n?u=RePEc:hal:cesptp:halshs-03048777&r=all |
| By: | Afees A. Salisu (Centre for Econometric and Allied Research, University of Ibadan, Ibadan, Nigeria); Rangan Gupta (Department of Economics, University of Pretoria, Private Bag X20, Hatfield, 0028, South Africa); Qiang Ji (Institutes of Science and Development, Chinese Academy of Sciences, Beijing, China; School of Public Policy and Management, University of Chinese Academy of Sciences, Beijing, China) |
| Abstract: | In this study, we examine the predictive value of tail risks for oil returns using the longest possible data available for the modern oil industry, i.e., 1859-2020. The Conditional Autoregressive Value at Risk (CAViaR) of Engle & Manganelli (2004) is employed to generate the tail risks for both 1% and 5% VaRs across four variants (Adaptive, Symmetric absolute value, Asymmetric slope and Indirect GARCH) of the CAViaR with the best variant obtained using the Dynamic Quantile test (DQ) test and %Hits. Overall, our proposed predictive model for oil returns that jointly accommodates tail risks associated with the oil market and US financial market improves the out-of-sample forecast accuracy of oil returns in contrast with a benchmark (random walk) model as well as a one-predictor model with own tail risk only. Our results have important implications for academicians, investors and policymakers. |
| Keywords: | Oil returns, Tail risks, Forecasting, Advanced equity markets |
| JEL: | C22 C53 G15 Q02 |
| Date: | 2021–03 |
| URL: | http://d.repec.org/n?u=RePEc:pre:wpaper:202120&r=all |
| By: | Ateeb Akhter Shah Syed; Kaneez Fatima |
| Abstract: | This paper examines the impact of coronavirus (COVID-19) on stock market volatility (SMV) in Pakistan by controlling the effect of exchange rate, interest rate and government/central bank interventions to combat the pandemic. We used the vector autoregressive (VAR) model over a sample period ranging from February 25, 2020 to December 7, 2020. We find that a shock to total daily coronavirus cases in Pakistan lead to a significant increase in SMV. This result is aligned with a vast literature on pandemics and investors uncertainty and remains robust to several robustness checks applied in our analysis. |
| Date: | 2021–02 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2103.03219&r=all |
| By: | Wagenmakers, Eric-Jan (University of Amsterdam); Sarafoglou, Alexandra (University of Amsterdam); Aarts, Sil Dr. (Maastricht University); Albers, Casper J (University of Groningen); Algermissen, Johannes (Radboud University Nijmegen); Bahník, Štěpán (University of Economics, Prague); van Dongen, Noah N'Djaye Nikolai; Hoekstra, Rink; Moreau, David; van Ravenzwaaij, Don (University of Groningen) |
| Abstract: | We explore the promise of statistical reform by starting from the assumption that most researchers would endorse Merton's ethos of science as reflected in the four norms of communalism, universalism, disinterestedness, and organized skepticism. Translated to data analysis, these norms imply a need for transparency, a fair acknowledgement of uncertainty, and openness to alternative interpretations. We discuss seven statistical procedures, both old and new, that we believe can positively impact statistical practice in the social and behavioral sciences. |
| Date: | 2021–03–02 |
| URL: | http://d.repec.org/n?u=RePEc:osf:metaar:t93cg&r=all |
| By: | Nicholas Moehle; Jack Gindi; Stephen Boyd; Mykel Kochenderfer |
| Abstract: | Mean-variance portfolio optimization problems often involve separable nonconvex terms, including penalties on capital gains, integer share constraints, and minimum position and trade sizes. We propose a heuristic algorithm for this problem based on the alternating direction method of multipliers (ADMM). This method allows for solve times in tens to hundreds of milliseconds with around 1000 securities and 100 risk factors. We also obtain a bound on the achievable performance. Our heuristic and bound are both derived from similar results for other optimization problems with a separable objective and affine equality constraints. We discuss a concrete implementation in the case where the separable terms in the objective are piecewise-quadratic, and we demonstrate their effectiveness empirically in realistic tax-aware portfolio construction problems. |
| Date: | 2021–03 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2103.05455&r=all |
| By: | Lisa J. Dettling; Lauren Lambie-Hanson |
| Abstract: | Delinquencies and defaults on household debt typically closely follow the business cycle. As economic conditions deteriorate, falling employment and incomes put a strain on family finances, leading to a rise in missed debt payments and defaults. Yet, against the backdrop of a historic rise in unemployment associated with the COVID-19 pandemic, delinquencies have fallen. This FEDS Note documents trends in delinquency on mortgages and auto loans during the COVID-19 pandemic, and unpacks how changes in economic conditions and public policies have been associated with borrowers’ debt repayment behavior. |
| Date: | 2021–03–04 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedgfn:2021-03-04-2&r=all |
| By: | John H. Cochrane |
| Abstract: | How should long-term investors form portfolios in our time-varying, multifactor and friction-filled world? Two conceptual frameworks may help: looking directly at the stream of payments that a portfolio and payout policy can produce, and including a general equilibrium view of the markets’ economic purpose, and the nature of investors’ differences. These perspectives can rationalize some of investors’ behaviors, suggest substantial revisions to standard portfolio theory, and help us to apply portfolio theory in a way that is practically useful for investors. |
| JEL: | G11 G12 |
| Date: | 2021–02 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:28513&r=all |
| By: | Jan Brueckner; Matthew E. Kahn; Gary C. Lin |
| Abstract: | This paper studies the impacts of work-from-home (WFH) in the housing market from both intercity and intracity perspectives. Our results confirm the theoretical prediction that WFH puts downward pressure on housing prices and rents in high-productivity counties, a result of workers starting to relocate to cheaper metro areas during the pandemic without forsaking their desirable jobs. We also show that WFH tends to flatten intracity house-price gradients, weakening the price premium associated with good job access. |
| JEL: | R14 R23 |
| Date: | 2021–03 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:28526&r=all |
| By: | MORIKAWA Masayuki |
| Abstract: | This study examines the prevalence, frequency, and productivity of the working from home (WFH) arrangement in Japan during the COVID-19 pandemic using data from an original firm survey. The results reveal that about half of the firms that responded to the survey adopted the WFH arrangement. The mean WFH intensity, or the contribution of WFH to the total labor input, was approximately 23% among firms that adopted the WFH arrangement. The mean WFH productivity relative to working at the typical workplace was approximately 68%. However, large dispersions are observed in both WFH intensity and WFH productivity. The results obtained from the firm survey are generally consistent with the observations from the employee survey. |
| Date: | 2021–01 |
| URL: | http://d.repec.org/n?u=RePEc:eti:dpaper:21002&r=all |
| By: | Keilbar, Georg; Zhang, Yanfen |
| Abstract: | This paper aims to model the joint dynamics of cryptocurrencies in a nonstationary setting. In particular, we analyze the role of cointegration relationships within a large system of cryptocurrencies in a vector error correction model (VECM) framework. To enable analysis in a dynamic setting, we propose the COINtensity VECM, a nonlinear VECM specification accounting for a varying systemwide cointegration exposure. Our results show that cryptocurrencies are indeed cointegrated with a cointegration rank of four. We also find that all currencies are affected by these long term equilibrium relations. A simple statistical arbitrage trading strategy is proposed showing a great in-sample performance. |
| Keywords: | Cointegration,VECM,Nonstationarity,Cryptocurrencies |
| JEL: | C00 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:irtgdp:2020012&r=all |
| By: | Brad M. Barber; Wei Jiang; Adair Morse; Manju Puri; Heather Tookes; Ingrid M. Werner |
| Abstract: | Using a survey of AFA members, we analyze how demographics, time allocation, production mechanisms, and institutional factors affect research production during the pandemic. Consistent with the literature, research productivity falls more for women and faculty with young children. Independently and novel, extra time spent teaching (much more likely for women) negatively affects research productivity. Also novel are the results that concerns about feedback, isolation, and health have large negative research effects, disproportionately affecting junior faculty and PhD students. Finally, faculty facing greater concerns about employers’ finances report larger negative research effects and more concerns about feedback, isolation and health. |
| JEL: | G0 G01 |
| Date: | 2021–02 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:28493&r=all |
| By: | Saki Bigio; Yuliy Sannikov |
| Abstract: | This paper integrates a realistic implementation of monetary policy through the banking system into an incomplete-markets economy with wage rigidity. Monetary policy sets policy rates and alters the supply of reserves. These tools grant independent control over credit spreads and an interest target. Through these tools, monetary policy affects the evolution of real interests rates, credit, output, and the wealth distribution—both in the long and in the short run. We decompose the effects through a combination of the interest and credit channels that depend on the size of the central bank’s balance sheet. Monetary policy reaches an expansionary limit when it enters a liquidity trap. The model highlights a trade-off between worse microeconomic insurance (insurance across agents) and greater macroeconomic insurance (insurance across states). The model prescribes that monetary policy should operate with a small balance sheet which tightens credit during booms, and should expand its balance sheet and lower policy rates during busts. |
| JEL: | E31 E32 E41 E42 |
| Date: | 2021–03 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:28540&r=all |
| By: | Jérémy Fouliard; Michael Howell; Hélène Rey |
| Abstract: | Financial crises cause economic, social and political havoc. Macroprudential policies are gaining traction but are still severely under-researched compared to monetary policy and fiscal policy. We use the general framework of sequential predictions also called online machine learning to forecast crises out-of-sample. Our methodology is based on model averaging and is "meta-statistic" since we can incorporate any predictive model of crises in our set of experts and test its ability to add information. We are able to predict systemic financial crises twelve quarters ahead out-of-sample with high signal-to-noise ratio in most cases. We analyse which experts provide the most information for our predictions at each point in time and for each country, allowing us to gain some insights into economic mechanisms underlying the building of risk in economies. |
| JEL: | E37 E44 G01 |
| Date: | 2021–02 |
| URL: | http://d.repec.org/n?u=RePEc:bis:biswps:926&r=all |
| By: | Spilak, Bruno; Härdle, Wolfgang Karl |
| Abstract: | Tail risk protection is in the focus of the financial industry and requires solid mathematical and statistical tools, especially when a trading strategy is derived. Recent hype driven by machine learning (ML) mechanisms has raised the necessity to display and understand the functionality of ML tools. In this paper, we present a dynamic tail risk protection strategy that targets a maximum predefined level of risk measured by Value-At-Risk while controlling for participation in bull market regimes. We propose different weak classifiers, parametric and non-parametric, that estimate the exceedance probability of the risk level from which we derive trading signals in order to hedge tail events. We then compare the different approaches both with statistical and trading strategy performance, finally we propose an ensemble classifier that produces a meta tail risk protection strategy improving both generalization and trading performance. |
| JEL: | C00 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:irtgdp:2020015&r=all |
| By: | FUJIWARA Yoshi; INOUE Hiroyasu; YAMAGUCHI Takayuki; AOYAMA Hideaki; TANAKA Takuma; KIKUCHI Kentaro |
| Abstract: | In this study, we investigate the flow of money among bank accounts possessed by firms in a single region by employing an exhaustive list of all the bank transfers in a regional bank in Japan, to clarify how the network of money flow is related to the economic activities of the firms. The network statistics and structures are examined and shown to be similar to those of a nationwide production network. Specifically, the bowtie analysis indicates what we refer to as a "walnut" structure with core and upstream/downstream components. To quantify the location of an individual account in the network, we used the Hodge decomposition method and found that the Hodge potential of the account has a significant correlation to its position in the bowtie structure as well as to its net flow of incoming and outgoing money and links, namely the net demand/supply of individual accounts. In addition, we used non-negative matrix factorization to identify important factors underlying the entire flow of money; it can be interpreted that these factors are associated with regional economic activities. One factor has a feature whereby the remittance source is localized to the largest city in the region, while the destination is scattered. The other factors correspond to the economic activities specific to different local places. This study serves as a basis for further investigation on the relationship between money flow and economic activities of firms. |
| Date: | 2021–01 |
| URL: | http://d.repec.org/n?u=RePEc:eti:dpaper:21005&r=all |
| By: | Sugandi, Eric Alexander (Asian Development Bank Institute) |
| Abstract: | We examine the impact of the COVID-19 pandemic on Indonesia’s financial markets and monetary policy dynamics. We explore five types of financial markets in Indonesia: (1) the Indonesian rupiah (IDR) interbank money market; (2) the US Dollar (USD) interbank money market; (3) government conventional bond (SUN) markets; (4) the stock market; and (5) the USD/IDR spot market. We examine Bank Indonesia's (BI) three types of monetary policy instrument: (1) BI seven-day reverse repo rate; (2) minimum reserve requirement ratios; and (3) BI’s monetary operations. We find that the COVID-19 pandemic causes different impacts of particular monetary policy instruments on Indonesia’s financial markets during the pandemic compared with those in the non-pandemic period. |
| Keywords: | COVID-19; monetary policy; Indonesia’s financial markets; Bank Indonesia |
| JEL: | E58 G10 |
| Date: | 2020–11–16 |
| URL: | http://d.repec.org/n?u=RePEc:ris:adbiwp:1198&r=all |
| By: | ; Claire Greene; Oz Shy |
| Abstract: | Using a representative sample of the U.S. adult population, we analyze which payment methods consumers use to pay other consumers (p2p) and how these choices depend on transaction and demographic characteristics. We additionally construct a random matching model of consumers with diverse preferences over the use of different payment methods for p2p payments. The random matching model is calibrated to the share of p2p payments made with cash, paper check, and electronic technologies observed from 2015 to 2019. We find about two thirds of consumers have a first p2p payment preference of cash. The remaining one third rank checks first. Approximately 93 percent of consumers rank electronic technologies second. Our empirical analysis finds that the most significant factors in determining the payment method used are the transaction value and the age and education of the payer. |
| Keywords: | consumer payment choice; person-to-person payments; electronic payments; mixed logit; machine learning; random matching |
| JEL: | D9 E42 |
| Date: | 2021–02–05 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedawp:90081&r=all |
| By: | Christoph Huber; Jürgen Huber; Michael Kirchler |
| Abstract: | In this paper we investigate how volatility shocks influence investors' perceptions about a stock's risk, its future development, and investors' investment propensity. We ran artefactual field experiments with two participant pools (finance professionals and students) that had to take investment decisions, differing in (i) the direction of the shock (down, up, straight) and (ii) the presentation format of the time series (prices or returns). We find that finance professionals perceive all shocks to increase risk similarly, while students do not perceive upwardlytrending shocks to increase the riskiness of the stock. Furthermore, we show that investment propensity is negatively associated with the direction of the shock and professionals do not show differences in price forecasts between presentation formats, but students do. |
| Keywords: | Risk perception, experimental finance, finance professionals, volatility shocks |
| JEL: | C91 G11 G41 |
| Date: | 2021–06 |
| URL: | http://d.repec.org/n?u=RePEc:inn:wpaper:2021-06&r=all |
| By: | Sida Li; Mao Ye; Miles Zheng |
| Abstract: | Financial regulations and clientele segmentation explain the proliferation of order types on stock exchanges. Plain market and limit orders lose money, indicating that informed traders use complex orders. Fifty-seven percent of trading volume comes from non-routable orders, which are designed to bypass Reg NMS. Because Reg NMS routes orders based on the best gross prices, it often routes orders to worse net prices after adjusting for fees. Non-routable orders win speed races to capture short-term profits, but all order types containing long-term information are routable. An order type that complies with share repurchase regulations earns a 30-day return of 7%. |
| JEL: | G14 G18 |
| Date: | 2021–02 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:28515&r=all |
| By: | Lin, Min-Bin; Khowaja, Kainat; Chen, Cathy Yi-Hsuan; Härdle, Wolfgang Karl |
| Abstract: | We investigate the relationship between underlying blockchain mechanism of cryptocurrencies and its distributional characteristics. In addition to price, we emphasise on using actual block size and block time as the operational features of cryptos. We use distributional characteristics such as fourier power spectrum, moments, quantiles, global we optimums, as well as the measures for long term dependencies, risk and noise to summarise the information from crypto time series. With the hypothesis that the blockchain structure explains the distributional characteristics of cryptos, we use characteristic based spectral clustering to cluster the selected cryptos into five groups. We scrutinise these clusters and find that indeed, the clusters of cryptos share similar mechanism such as origin of fork, difficulty adjustment frequency, and the nature of block size. This paper provides crypto creators and users with a better understanding toward the connection between the blockchain protocol design and distributional characteristics of cryptos. |
| Keywords: | Cryptocurrency,price,blockchain mechanism,distributional characteristics,clustering |
| JEL: | C00 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:irtgdp:2020027&r=all |
| By: | Javier Andrés (Universidad de Valencia); Óscar Arce (Banco de España); Pablo Burriel (Banco de España) |
| Abstract: | The Phillips curve has flattened out over the last decades. We develop a model that rationalizes this phenomenon as a result of the observed increase in polarization in many industries, a process along which a few top firms gain an increasing share of their industry market. In the model, firms compete à la Bertrand and there is exit and endogenous market entry, as well as optimal up and downgrading of technology. Firms with larger market shares find optimal to dampen the response of their price changes, thus cushioning the shocks to their marginal costs through endogenous countercyclical markups. Thus, regardless of its causes (technology, competition, barriers to entry, etc.), the recent increase in polarization in many industries emerges in the model as the key factor in explaining the muted responses of inflation to movements in the output gap witnessed recently. |
| Keywords: | firm heterogeneity, Bertrand competition, Phillips curve, market share |
| JEL: | E31 E52 L1 |
| Date: | 2021–02 |
| URL: | http://d.repec.org/n?u=RePEc:bde:wpaper:2106&r=all |
| By: | Kawaguchi, Daiji (University of Tokyo); Mori, Yuko (Tsuda University) |
| Abstract: | We examine the impacts of the minimum wage on employment using the minimum-wage hike induced by the introduction of indexation of the local minimum wage to the local cost of living. The revision of the Minimum Wage Act in 2007 of Japan essentially required the government to set the minimum wage indexed to the local cost of living, with a five-year moratorium period. The government subsequently increased the minimum wage in areas where the cost of living was high relative to the local minimum wage. Allowing for different trends in labor-market outcomes across regions in the pre-treatment period, we find that the minimum-wage hike raised the wages of low-wage workers, but reduced the employment of less-educated young men. A panel analysis based on matched Labor Force Survey data indicates that the minimum-wage hike decreased the job flows of prime-age men and women. |
| Keywords: | minimum wage, low skill workers, employment, Japan |
| JEL: | J23 J38 J42 J64 J81 |
| Date: | 2021–01 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp14086&r=all |
| By: | Huber, Christoph (University of Innsbruck); Huber, Juergen; Kirchler, Michael |
| Abstract: | In this paper we investigate how volatility shocks influence investors’ perceptions about a stock's risk, its future development, and investors' investment propensity. We ran artefactual field experiments with two participant pools (finance professionals and students) that had to take investment decisions, differing in (i) the direction of the shock (down, up, straight) and (ii) the presentation format of the time series (prices or returns). We find that finance professionals perceive all shocks to increase risk similarly, while students do not perceive upwardly-trending shocks to increase the riskiness of the stock. Furthermore, we show that investment propensity is negatively associated with the direction of the shock and professionals do not show differences in price forecasts between presentation formats, but students do. |
| Date: | 2021–03–03 |
| URL: | http://d.repec.org/n?u=RePEc:osf:osfxxx:jr4eb&r=all |
| By: | Emin M. Dinlersoz; Timothy Dunne; John Haltiwanger; Veronika Penciakova |
| Abstract: | The trajectory of new business applications and transitions to employer businesses differ markedly during the Great Recession and the COVID-19 recession. Both applications and transitions to employer startups decreased slowly but persistently in the post-Lehman crisis period of the Great Recession. In contrast, during the COVID-19 recession new applications initially declined but have since sharply rebounded, resulting in a surge in applications during 2020. Projected transitions to employer businesses also rise, but this projection is dampened by a change in the composition of applications in 2020 toward applications that are more likely to be nonemployers. |
| Keywords: | COVID-19; business failures; liquidity; small business |
| JEL: | D2 E65 G33 |
| Date: | 2021–01–29 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedawp:90075&r=all |
| By: | Krämer-Eis, Helmut; Botsari, Antonia; Kiefer, Kilian; Lang, Frank |
| Abstract: | 2020 was an unprecedented and remarkable year, and also a year with high uncertainty and increased information needs. The EIF VC Survey, the EIF Private Equity Mid-Market Survey, and the EIF Business Angels Survey (the largest regular survey exercises among GPs and Business Angels on a pan-European level) provide an opportunity to retrieve unique market insights. On an exceptional basis, two waves for each of the three surveys were performed in 2020. This publication summarises and compares the main results, providing a detailed picture of the recent developments. The paper focuses on the market sentiment and the impact of COVID-19 on investors, their portfolio, fundraising and investments (including ESG considerations), and finally, it shows respondents' opinion with regard to crisis-related policy measures. |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:eifwps:202171&r=all |
| By: | Kristof Lommers; Ouns El Harzli; Jack Kim |
| Abstract: | This study aims to examine the challenges and applications of machine learning for financial research. Machine learning algorithms have been developed for certain data environments which substantially differ from the one we encounter in finance. Not only do difficulties arise due to some of the idiosyncrasies of financial markets, there is a fundamental tension between the underlying paradigm of machine learning and the research philosophy in financial economics. Given the peculiar features of financial markets and the empirical framework within social science, various adjustments have to be made to the conventional machine learning methodology. We discuss some of the main challenges of machine learning in finance and examine how these could be accounted for. Despite some of the challenges, we argue that machine learning could be unified with financial research to become a robust complement to the econometrician's toolbox. Moreover, we discuss the various applications of machine learning in the research process such as estimation, empirical discovery, testing, causal inference and prediction. |
| Date: | 2021–02 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2103.00366&r=all |
| By: | Christian Gollier (TSE - Toulouse School of Economics - UT1 - Université Toulouse 1 Capitole - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement) |
| Abstract: | We assume that the ex-post utility of an agent facing a menu of lotteries depends upon the actual payoff together with its forgone best alternative, thereby allowing for the expost emotion of regret. An increase in the risk of regret is obtained when the actual payoff and its forgone best alternative are statistically less concordant in the sense of Tchen (1980). The aversion to any such risk of regret is thus equivalent to the supermodularity of the bivariate utility function. We show that more regret-risk-averse agents are more willing to choose the risky act in a one-risky-one-safe menu, in particular when the payoff of the risky choice is highly skewed. This is compatible with the "possibility effect" that is well documented in prospect theory. Symmetrically, we define the aversion to elationrisk that can prevail when the ex-post utility is alternatively sensitive to the forgone worst payoff. We show that elation-risk-seeking is compatible with the "certainty effect". We finally show that regret-risk-averse and elation-risk-seeking people behave as if they had rank-dependent utility preferences with an inverse-S shaped probability weighting function that reproduces estimates existing in the literature. |
| Keywords: | Riskseeking,Probability weighting,Possibility effect,Certainty effect,Longshot bias,Prospect theory,Behavioral finance |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-03142627&r=all |
| By: | AOYAMA Hideaki; Corrado DI GUILMI; FUJIWARA Yoshi; YOSHIKAWA Hiroshi |
| Abstract: | Low inflation was once a welcome to both policy makers and the public. However, Japan's experience during the 1990's changed the consensus view on price held by economists and central banks around the world. Facing deflation and the zero-interest-rate bound at the same time, BOJ had difficulty in conducting effective monetary policy. It unusually prolonged Japan's stagnation. The excessively low inflation which annoys central banks today is translated into the "Phillips curve puzzle." In the US and Japan, in the course of recovery from the Great Recession after the 2008 global financial crisis, the unemployment rate had steadily declined to the level which was commonly regarded as lower than the natural rate or NAIRU; and yet, inflation stayed low. In this paper, we consider a minimal model of labor market. The essential assumption is that the labor market is dual. In this model, we explore what kinds of changes in the economy flatten the Phillips curve. The level of bargaining power of workers, the elasticity of the supply of labor to wages in the secondary market and the composition of the workforce are the main factors in explaining the flattening of the Phillips curve. We argue that the changes we consider in the model, in fact, have plausibly flattened the Phillips curve in recent years. |
| Date: | 2021–01 |
| URL: | http://d.repec.org/n?u=RePEc:eti:dpaper:21006&r=all |
| By: | Ren, Rui; Althof, Michael; Härdle, Wolfgang Karl |
| Abstract: | Cryptocurrencies are gaining momentum in investor attention, are about to become a new asset class, and may provide a hedging alternative against the risk of devaluation of fiat currencies following the COVID-19 crisis. In order to provide a thorough understanding of this new asset class, risk indicators need to consider tail risk behaviour and the interdependencies between the cryptocurrencies not only for risk management but also for portfolio optimization. The tail risk network analysis framework proposed in the paper is able to identify individual risk characteristics and capture spillover effect in a network topology. Finally we construct tail event sensitive portfolios and consequently test the performance during an unforeseen COVID-19 pandemic. |
| Keywords: | Cryptocurrencies,Network Dynamics,Portfolio Optimization,Quantile Regression,Systemic Risk,Financial Risk Meter |
| JEL: | C00 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:irtgdp:2020028&r=all |
| By: | M. Avellaneda; T. N. Li; A. Papanicolaou; G. Wang |
| Abstract: | We propose a new approach for trading VIX futures. We assume that the term structure of VIX futures follows a Markov model. The trading strategy selects a multi-tenor position by maximizing the expected utility for a day-ahead horizon given the current shape and level of the VIX futures term structure. Computationally, we model the functional dependence between the VIX futures curves, the VIX futures positions, and the expected utility as a deep neural network with five hidden layers. Out-of-sample backtests of the VIX futures trading strategy suggest that this approach gives rise to reasonable portfolio performance, and to positions in which the investor can be either long or short VIX futures contracts depending on the market environment. |
| Date: | 2021–03 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2103.02016&r=all |
| By: | Klaus S. Friesenbichler; Andreas Reinstaller |
| Abstract: | We study the strategic positioning of Austrian manufacturing firms that face competition from emerging markets as opposed to firms that do not. Using a unique sample of large Austrian manufacturing, we find that emerging market competitors are not always a force majeure, but the result of the firms' international activity. Existing strengths and weaknesses are more pronounced when firms face competitors from emerging markets. Emerging market competition is associated with a broader product portfolio and triggers portfolio adjustments. Yet, a larger share of the companies facing emerging market competitors neither adjusts the product portfolio nor plans to develop new competences. |
| Keywords: | Emerging Markets, Competition, Manufacturing, Austria, Dynamic Capabilities |
| Date: | 2021–02–12 |
| URL: | http://d.repec.org/n?u=RePEc:wfo:wpaper:y:2021:i:625&r=all |
| By: | Kiki Verico (Institute for Economic and Social Research, Faculty of Economics and Business, Universitas Indonesia (LPEM FEB UI)) |
| Abstract: | This paper is the second part of the first paper published by the LPEM UI on January 18th 2021 (Verico, 2021a). This first part discussed Indonesia’s output gap, the global pandemic’s impact, and the scenario to avoid the middle-income trap by 2040. In this second part, the paper figures out the manufacturing sector performance from 1968 until 2019, before the global pandemic hit Indonesia’s economy. Indonesia’s economy needs an adjustment that depends on the pandemic containment to achieve even higher economic growth to compensate for economic contraction during the pandemic. This paper finds that Indonesia’s manufacture can boost economic growth, decrease open unemployment and improve productivity. This paper argues that Indonesia can achieve the second wave of the Chenery-Syrquin phenomenon of economic transformation from service to manufacturing through two scenarios: one, medium to long-run over the enhancement of the backward linkage of global value chains (GVCs), and two, natural short-run with the role of information and communication technology (ICT). |
| Keywords: | economic growth — manufacturing — industrial structure — economic transformation — Information Communication Technology |
| JEL: | D83 F43 L60 N10 O14 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:lpe:wpaper:202158&r=all |
| By: | Agnes Kügler; Klaus S. Friesenbichler; Cornelius Hirsch |
| Abstract: | Austria is a small open economy that in the last decades underwent two different waves of increasing trade integration: one with Eastern Europe and one with China. This paper studies the effects of increases in trade with China and Eastern Europe on labour market dynamics in Austrian NUTS-4 regions for two ten-year periods between 1995 and 2015. Given the limited data available, the current analysis could not identify significant effects on aggregate labour dynamics neither for rising imports from Eastern Europe or China, nor for rising exports to Eastern Europe. However, there is weak evidence that exports to China have facilitated employment growth, especially in high quality segments. Overall, these results add a cautious perspective to the discussion of import competition. |
| Keywords: | Trade, Employment, China, Eastern Europe, Austria |
| Date: | 2021–02–12 |
| URL: | http://d.repec.org/n?u=RePEc:wfo:wpaper:y:2021:i:624&r=all |
| By: | Athiphat Muthitacharoen; Trongwut Burong; Athiphat Muthitacharoen |
| Abstract: | This paper uses a panel of personal income tax return data for the population of Thai tax filers to examine how individuals respond to tax subsidy for long-term savings. We utilize the 2013 tax reform that lowered the price subsidy for long-term savings in order to obtain causal identification. Our difference-in-difference analysis illustrates that there is a considerable heterogeneity in the individual responses to the subsidy cut—with middle-income taxpayers responding much greater than their high-income counterparts. Among the middle-income group, we also find that the subsidy reduction has larger effects on decisions of smaller contributors. Our findings shed light on the heterogeneity of individual responses which are crucial for policymakers who consider an incremental change in the existing tax incentive scheme. |
| Keywords: | personal income tax, tax subsidy, long-term savings, retirement savings, developing countries |
| JEL: | H24 H31 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_8906&r=all |
| By: | Martin Dufwenberg; Olof Johansson Stenman; Michael Kirchler; Florian Lindner; Rene Schwaiger |
| Abstract: | Does market interaction influence morality? We study a particular angle of this classic question theoretically and experimentally. The novelty of our approach is to posit that people are motivated by reciprocity; an urge many argued affects humans. We scrutinize how this shapes interaction in treatments mimicking societies (autarky, barter, and market societies) that differ only as regards whether and how people trade. While many have argued that market interactions make people more selfish, our reciprocity-based theory suggests that market interaction on the contrary induces more pro-sociality. The experimental results are broadly (but not completely) consistent with the theoretical predictions. The results may also shed light on the development of morality and prosocial behavior over time, in particular with respect to episodes in history where the nature of commerce was transformed. |
| Keywords: | Markets, morality, pro-sociality, reciprocity, kindness, autarky, barter, money |
| JEL: | C92 D02 D91 |
| Date: | 2021–07 |
| URL: | http://d.repec.org/n?u=RePEc:inn:wpaper:2021-07&r=all |
| By: | Gupta, Prankur; Khera, Reetika; Narayanan, Sudha |
| Abstract: | In recent years, the Minimum Support Price (MSP) and government procurement especially of paddy and wheat have been discussed widely, but these discussions have often drawn on evidence that is dated and incomplete. Consequently, such discussions have clouded the facts, resulting in a large number of factoids. According to these popular beliefs, very few farmers benefit (6% only), and primarily large farmers of Punjab and Haryana (and to some extent western Uttar Pradesh) benefit. In this article, we examine these three factoids and draw on multiple data sources to distil the facts. We argue that existing evidence suggests a more complex picture – (1) the MSP impacts 13(16)% paddy (wheat) sellers; (2) the geographies of procurement have expanded to new states including notably, Madhya Pradesh, Chhattisgarh and Odisha, and (3) Although, at the national level, there is a large farmer bias, this doesn’t imply exclusion of small and marginal farmers. In fact, majority of the beneficiaries are marginal and small farmers on both the extensive and the intensive margins. Further, we find substantial heterogeneity by states. Haryana for instance has a bias in favour of small and marginal farmers. We conclude that debates on the MSP and procurement must therefore take into account the changed geography of procurement and the profile of sellers and recognize the diversity of experiences with procurement across states. |
| Date: | 2021–02–28 |
| URL: | http://d.repec.org/n?u=RePEc:osf:socarx:ufw9k&r=all |
| By: | Marcin Hitczenko |
| Abstract: | This paper develops a two-stage statistical analysis to identify and assess the effect of a sample bias associated with an individual's household role. Survey responses to questions about the respondent's role in household finances and a sampling design in which some households have all members take the survey enable the estimation of distributions for each individual's share of household responsibility. The methodology is applied to the 2017 Survey of Consumer Payment Choice. The distribution of responsibility shares among survey respondents suggests that the sampling procedure favors household members with higher levels of responsibility. A bootstrap analysis reveals that population mean estimates of monthly payment instrument use that do not account for this type of sample misrepresentation are likely biased for instruments often used to make household purchases. For checks and electronic payments, analysis suggests it is likely that unadjusted estimates overstate true values by 10 percent to 20 percent. |
| Keywords: | survey error; Bayesian interference; Survey of Consumer Payment Choice; bootstrap; household economics |
| JEL: | C11 C83 D12 |
| Date: | 2021–02–03 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedawp:90079&r=all |
| By: | Bruneel-Zupanc, Christophe Alain |
| Abstract: | This paper examines the decision problem of a homeowner who maximizes her expected profitfrom the sale of her property when market conditions are uncertain. Using a large dataset of realestate transactions in Pennsylvania between 2011 and 2014, I verify several stylized facts aboutthe housing market. I develop a dynamic search model of the home-selling problem in which thehomeowner learns about demand in a Bayesian way. I estimate the model and find that learning,especially the downward adjustment of the beliefs of sellers facing low demand, explains some of thekey features of the housing data, such as the decreasing list price overtime and time on the market.By comparing with a perfect information benchmark, I derive an unexpected result: the value ofinformation is not always positive. Indeed, an imperfectly informed seller facing low demand canobtain a better outcome than her perfectly informed counterpart thanks to a delusively strongerbargaining position. |
| JEL: | D83 R2 R3 |
| Date: | 2021–02–05 |
| URL: | http://d.repec.org/n?u=RePEc:tse:wpaper:125250&r=all |
| By: | Billio, Monica; Lo, Andrew W.; Pelizzon, Loriana; Getmansky, Mila; Zareei, Abalfazl |
| Abstract: | The centrality of the United States in the global financial system is taken for granted, but its response to recent political and epidemiological events has suggested that China now holds a comparable position. Using minute-by-minute data from 2012 to 2020 on the financial performance of twelve country-specific exchange-traded funds, we construct daily snapshots of the global financial network and analyze them for the centrality and connectedness of each country in our sample. We find evidence that the U.S. was central to the global financial system into 2018, but that the U.S.-China trade war of 2018-2019 diminished its centrality, and the Covid-19 outbreak of 2019-2020 increased the centrality of China. These indicators may be the first signals that the global financial system is moving from a unipolar to a bipolar world. |
| Keywords: | Network theory,Centrality,High Frequency Data,ETFs,Financial Crises,Covid-19,International Finance |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:safewp:304&r=all |
| By: | A. R. Baghirzade; B. Kushbakov |
| Abstract: | Nowadays there are a lot of creative and innovative ideas of business start-ups or various projects starting from a novel or music album and finishing with some innovative goods or website that makes our life better and easier. Unfortunately, young people often do not have enough financial support to bring their ideas to life. The best way to solve particular problem is to use crowdfunding platforms. Crowdfunding itself is a way of financing a project by raising money from a crowd or simply large number of people. It is believed that crowdfunding term appeared at the same time as crowdsourcing in 2006. Its author is Jeff Howe. However, the phenomenon of the national funding, of course, much older. For instance, the construction of the Statue of Liberty in New York, for which funds were collected by the people. Currently, the national project is financed with the use of the Internet. Author of the project in need of funding, can post information about the project on a special website and request sponsorship of the audience. Firstly, author selects the best crowdfunding platform for project requirements and sign in. then he or she creates and draws up the project. The project that is created must correspond to one of the categories available for selection (music, film, publishing, etc.). If you create brand new product, it is necessary to submit the draft-working prototype or sample product. A full list of design rules for a project can be viewed directly on the site of crowdfunding platform. While calculating the cost of project it is necessary to take into account the cost of realization the project, reward for your sponsors, moreover commission of payment systems and taxes. The project is considered successfully launched after it gets through moderation on website. |
| Date: | 2021–03 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2103.05973&r=all |
| By: | Kalda, Ankit; Loos, Benjamin; Previtero, Alessandro; Hackethal, Andreas |
| Abstract: | Using transaction-level data from two German banks, we study the effects of smartphones on investor behavior. Comparing trades by the same investor in the same month across different platforms, we find that smartphones increase purchasing of riskier and lottery-type assets and chasing past returns. After the adoption of smartphones, investors do not substitute trades across platforms and buy also riskier, lottery-type, and hot investments on other platforms. Using smartphones to trade specific assets or during specific hours contributes to explain our results. Digital nudges and the device screen size do not mechanically drive our results. Smartphone effects are not transitory |
| Keywords: | fintech,investor behavior,financial risk-taking,lottery-type assets,investment biases,trend chasing,spillover effects |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:safewp:303&r=all |
| By: | Marco Bardoscia; Paolo Barucca; Stefano Battiston; Fabio Caccioli; Giulio Cimini; Diego Garlaschelli; Fabio Saracco; Tiziano Squartini; Guido Caldarelli |
| Abstract: | The field of Financial Networks is a paramount example of the novel applications of Statistical Physics that have made possible by the present data revolution. As the total value of the global financial market has vastly outgrown the value of the real economy, financial institutions on this planet have created a web of interactions whose size and topology calls for a quantitative analysis by means of Complex Networks. Financial Networks are not only a playground for the use of basic tools of statistical physics as ensemble representation and entropy maximization; rather, their particular dynamics and evolution triggered theoretical advancements as the definition of DebtRank to measure the impact and diffusion of shocks in the whole systems. In this review we present the state of the art in this field, starting from the different definitions of financial networks (based either on loans, on assets ownership, on contracts involving several parties -- such as credit default swaps, to multiplex representation when firms are introduced in the game and a link with real economy is drawn) and then discussing the various dynamics of financial contagion as well as applications in financial network inference and validation. We believe that this analysis is particularly timely since financial stability as well as recent innovations in climate finance, once properly analysed and understood in terms of complex network theory, can play a pivotal role in the transformation of our society towards a more sustainable world. |
| Date: | 2021–03 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2103.05623&r=all |
| By: | Esteban García-Miralles (University of Copenhagen); Jonathan M. Leganza (University of California, San Diego) |
| Abstract: | How does the provision of public pension benefits impact private savings? We answer this question in the context of a reform in Denmark that altered old-age benefit payouts through a discontinuous increase in pension eligibility ages contingent on birthdate. Using detailed administrative data and a regression discontinuity design, we identify the causal effects of the policy, leveraging our setting to study essentially the entire financial portfolio. We document responses over two distinct time horizons. First, we show a lack of responses after the reform was announced but before it was implemented, inconsistent with the notion that future differences in pension eligibility impact savings. Second, we show large savings responses after implementation, when delayed benefit eligibility induces individuals to extend employment. Specifically, we find increased contributions to both employer-sponsored and personal retirement accounts, whereas we find no evidence of adjustments to other savings vehicles, such as bank or stock market accounts. Additional analyses point to inertia as a leading explanatory channel. The increased savings in personal retirement plans is entirely driven by those who made consistent contributions in the past. Moreover, the increased savings in employer-sponsored plans is largely explained by continuing to contribute at employer default rates, highlighting a role for firm policies in mediating responses to social security reform. |
| Keywords: | social security, private savings, pension reform |
| JEL: | H55 D14 J26 |
| Date: | 2021–03–04 |
| URL: | http://d.repec.org/n?u=RePEc:kud:kucebi:2106&r=all |
| By: | John Asker; Chaim Fershtman; Ariel Pakes |
| Abstract: | The behavior of artificial intelligences algorithms (AIAs) is shaped by how they learn about their environment. We compare the prices generated by AIAs that use different learning protocols when there is market interaction. Asynchronous learning occurs when the AIA only learns about the return from the action it took. Synchronous learning occurs when the AIA conducts counterfactuals to learn about the returns it would have earned had it taken an alternative action. The two lead to markedly different market prices. When future profits are not given positive weight by the AIA, synchronous updating leads to competitive pricing, while asynchronous can lead to pricing close to monopoly levels. We investigate how this result varies when either counterfactuals can only be calculated imperfectly and/or when the AIA places a weight on future profits. |
| JEL: | C72 C73 D43 D82 K21 L1 L13 L4 L51 O33 |
| Date: | 2021–03 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:28535&r=all |
| By: | Orley C. Ashenfelter; Štěpán Jurajda |
| Abstract: | We use price and wage data from McDonald's restaurants to provide evidence on wage increases, labor-saving technology introduction, and price pass-through by a large low-wage employer facing a flurry of minimum wage hikes from 2016-2020. We estimate an elasticity of hourly wage rates with respect to minimum wages of 0.7. In 40% of instances where minimum wages increase, McDonald's restaurants' wages are near the effective minimum wage level both before and after its increase; however, we also uncover a tendency among a large subset of restaurants to preserve their pay 'premium' above the minimum wage level. We find no association between the adoption of labor-saving touch screen ordering technology and minimum wage hikes. Our data imply that McDonald's restaurants pass through the higher costs of minimum wage increases in the form of higher prices of the Big Mac sandwich. We find a 0.2 price elasticity with respect to wage increases, which implies an elasticity of prices with respect to minimum wages of about 0.14. Based on a listing of all US McDonald's restaurants from 2010 to 2020, we also find no effects of minimum wages on McDonald's restaurant entry and exit. |
| JEL: | J23 J30 J38 |
| Date: | 2021–02 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:28506&r=all |
| By: | Sakae Oya |
| Abstract: | Managing a large-scale portfolio with many assets is one of the most challenging tasks in the field of finance. It is partly because estimation of either covariance or precision matrix of asset returns tends to be unstable or even infeasible when the number of assets $p$ exceeds the number of observations $n$. For this reason, most of the previous studies on portfolio management have focused on the case of $p n$, we propose to use a new Bayesian framework based on adaptive graphical LASSO for estimating the precision matrix of asset returns in a large-scale portfolio. Unlike the previous studies on graphical LASSO in the literature, our approach utilizes a Bayesian estimation method for the precision matrix proposed by Oya and Nakatsuma (2020) so that the positive definiteness of the precision matrix should be always guaranteed. As an empirical application, we construct the global minimum variance portfolio of $p=100$ for various values of $n$ with the proposed approach as well as the non-Bayesian graphical LASSO approach, and compare their out-of-sample performance with the equal weight portfolio as the benchmark. In this comparison, the proposed approach produces more stable results than the non-Bayesian approach in terms of Sharpe ratio, portfolio composition and turnover. Furthermore, the proposed approach succeeds in estimating the precision matrix even if $n$ is much smaller than $p$ and the non-Bayesian approach fails to do so. |
| Date: | 2021–03 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2103.05880&r=all |
| By: | Asgharian, Hossein; Christiansen, Charlotte; Hou, Ai Jun; Wang, Weining |
| Abstract: | We propose a bivariate component GARCH-MIDAS model to estimate the long- and short-run components of the variances and covariances. The advantage of our model to the existing DCC-based models is that it uses the same form for both the variances and covariances and that it estimates these moments simultaneously. We apply this model to obtain long- and short-run factor betas for industry test portfolios, where the risk factors are the market, SMB, and HML portfolios. We use these betas in cross-sectional analysis of the risk premia. Among other things, we find that the risk premium related to the short- run market beta is significantly positive, irrespective of the choice of test portfolio. Further, the risk premia for the short-run betas of all the risk factors are significant outside recessions. |
| Keywords: | long-run betas,short-run betas,risk premia,business cycles,component GARCH model,MIDAS |
| JEL: | G12 C58 C51 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:irtgdp:2020020&r=all |