|
on Central and Western Asia |
| By: | Serdar Sayan (TOBB University of Economics and Technology); Ayla Alkan (Beykent University) |
| Abstract: | This paper describes a novel approach proposed for use in the assessment of economywide costs of sectoral shutdowns introduced to curb the spread of Covid-19. Based on a supply-driven input-output (IO) model, our methodological framework allows for a decomposition of the total impact of sectoral shutdowns into i) losses in sectoral outputs resulting directly from the idling of factors of production employed in the sectors ordered to shut down, and indirectly from broken input-output linkages due to ii) interruption of the delivery of inputs from the sectors that have been shut down to others, and iii) suspension of input purchases by these sectors from others. We demonstrate the use of proposed methodology to measure and decompose the effects of first round of shutdown orders that the Turkish government ordered for a number of service sectors over the period between March and June 2020 as part of the fight against the Covid-19 outbreak. We employ data from the most recent input-output table for Turkey, and carry out four simulation experiments. Our findings revealed that the upper bound for the cost of shutting down five sectors considered in the study could go as high as 7.2 percent of total gross output on an annual basis, exceeding 13 billion dollars in lost output and factor incomes. |
| Date: | 2021–02–20 |
| URL: | http://d.repec.org/n?u=RePEc:erg:wpaper:1464&r=all |
| By: | Federico J Diez; Romain A Duval; Jiayue Fan; José Garrido; Sebnem Kalemli-Ozcan; Chiara Maggi; Maria Soledad Martinez Peria; Nicola Pierri |
| Abstract: | The COVID-19 pandemic has increased insolvency risks, especially among small and medium enterprises (SMEs), which are vastly overrepresented in hard-hit sectors. Without government intervention, even firms that are viable a priori could end up being liquidated—particularly in sectors characterized by labor-intensive technologies, threatening both macroeconomic and social stability. This staff discussion note assesses the impact of the pandemic on SME insolvency risks and policy options to address them. It quantifies the impact of weaker aggregate demand, changes in sectoral consumption patterns, and lockdowns on firm balance sheets and estimates the impact of a range of policy options, for a large sample of SMEs in (mostly) advanced economies. |
| Keywords: | Corporate insolvency;Insolvency;Bankruptcy;Small and medium enterprises;Insolvency, Bankruptcy, “Quasi” Equity Injections, Small- and medium-size enterprises, COVID-19 |
| Date: | 2021–04–02 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfsdn:2021/002&r=all |
| By: | Goodhead, Robert (Central Bank of Ireland) |
| Abstract: | This paper studies the effects of forward guidance and unconventional monetary policy on financial and macro-economic variables using euro area data. I decompose intra-daily variation in response to communication by the ECB Governing Council using sign-restrictions, with the key identifying assumption being whether expansionary communication shocks steepen the yield curve (a forward guidance shock) or flatten it (a spread compression shock). Central bank “information shocks” are extracted via an additional restriction on equities. I employ recently developed non-parametric estimation methods to estimate a medium-scale time-varying parameter SVAR model with high-frequency identification, allowing consideration of multiple transmission channels simultaneously. Expansionary spread compression shocks markedly reduce volatility and persistently lower spreads, and affect activity and prices in line with theory. Spread compression surprises affect macro-economic variables in a manner comparable to forward guidance surprises. The effects of both forward guidance and yield curve compression surprises on inflation increased in the post-European sovereign debt crisis period, as did their effect on unemployment. |
| JEL: | E52 C32 C11 |
| Date: | 2021–01 |
| URL: | http://d.repec.org/n?u=RePEc:cbi:wpaper:1/rt/21&r=all |
| By: | Alireza Ghahtarani; Ahmed Saif; Alireza Ghasemi |
| Abstract: | In this paper, we provide a comprehensive review of recent advances in robust portfolio selection problems and their extensions, from both operational research and financial perspectives. A multi-dimensional classification of the models and methods proposed in the literature is presented, based on the types of financial problems, uncertainty sets, robust optimization approaches, and mathematical formulations. Several open questions and potential future research directions are identified. |
| Date: | 2021–03 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2103.13806&r=all |
| By: | Mupenda, Olivier Munene |
| Abstract: | Unsustainable debt reduces productivity of a country. Ten years following its “1960 independence”, the Democratic Republic of Congo adopted policies of resorting to external financing while the world was at the peak of the petro-dollar crisis in the 1970’s. A decade later, in the 1980’s, with the fall in price of raw materials, the Democratic Republic of Congo was trapped in an unsustainable debt burden cycle that saw its economy stagnating with the majority of its population living in extreme poverty with less than US$1.90 a day according to the World Bank. The rise of active armed conflicts in the 1990’s and political unrest during the 2000's added pressures to seek further financial support from creditors, which facilitated corruption and poverty in the process. A country's inability to service its debt has consequences on its population. With empirical evidence, our analysis will be looking at the Congolese standard of living from its independence in 1960 to the historical democratic transfers of power in late 2018 to understand the effects of external debts in the Congolese economic growth. |
| Keywords: | Growth, Economy and Debt in the Democratic Republic of Congo |
| JEL: | A1 A10 C0 H12 O49 Y4 Y5 |
| Date: | 2021–01–31 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:105750&r=all |
| By: | Wanniarachchi, Sasindu Lakruwan (Central Bank of Sri Lanka) |
| Abstract: | Over the past few years, external debt positions of South Asian economies have increased to alarming levels, indicating that those countries are more likely to be exposed to a debt crisis. Given the low domestic savings rate of these economies, they are increasingly compelled to invest significant resources in public infrastructure in order to maintain sustainable growth momentum. At the same time, those countries are invited to enrich by integrating with global synergies in the fields of maritime, trade, and financial initiatives. However, as the recent controversy over the debt-growth association is inconclusive to date; preserving the external debt exposures at an optimal level is incumbent. Consequently, this study reviews annual observations of independent cross-sections of South Asia during the period 1981-2017 in order to find the external debt-growth relationship. In addition, the quantitative research strategy used to measure the expected outcomes primarily consists of panel ARDL specifications. On aggregate levels of data, the results suggest that there is a statistically significant negative association between external debt and economic growth. Also, it has been observed that a significant nonlinear relationship exists in relation to lower-middle income countries. |
| Date: | 2020–09–20 |
| URL: | http://d.repec.org/n?u=RePEc:osf:osfxxx:ghfdb&r=all |
| By: | Tanaka, Yasuhito |
| Abstract: | We study the steady state with involuntary unemployment and fiscal policy to realize full-employment in a situation with technical progress. Under involuntary unemployment the nominal wage rate may decline. Then, the prices of the goods also decline, and the real balance effects work. In a three-generations OLG model of this paper consumptions in the childhood period are financed by borrowing money from the previous generation consumers, and these debts must be repaid in the next period. In such a model there may exist positive or negative real balance effect of decline of the nominal wage rate and the prices. Among others we show the following results. If the deflation (nominal wage rate decline) rate is equal to the technical progress rate, in order to maintain a steady state with constant employment a balanced budget is required. If the deflation rate is smaller than the technical progress rate and there exists a positive (or negative) real balance effect, in order to maintain a steady state with constant employment a budget deficit (surplus) is required. Also we show that fiscal policy to realize full-employment usually requires larger budget deficit. These budget deficits, including those for maintaining full-employment, should be financed by seigniorage not by public debt. If they are financed by public debts, they do not have to be repaid. Conversely, the budget surplus in some cases should not be returned to consumers as tax reduction. |
| Keywords: | Involuntary unemployment, Three-periods overlapping generations model, Technical progress, Deflation, Real balance effect. |
| JEL: | E14 E24 |
| Date: | 2021–03–19 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:106714&r=all |
| By: | Linh, Nguyen Thi |
| Abstract: | Culture has a special position and role in the development of a country, including economic development. There are many different definitions of culture, so when looking at the position and role of culture in economic development, there are often different approaches. |
| Date: | 2021–01–29 |
| URL: | http://d.repec.org/n?u=RePEc:osf:osfxxx:vnpcg&r=all |
| By: | Rohan Arora; Guillaume Bédard-Pagé; Philippe Besnier; Hayden Ford; Alan Walsh |
| Abstract: | The Canadian non-bank financial intermediation (NBFI) sector saw strong growth in 2018 and 2019. In 2020, COVID‑19 caused a financial shock. We provide a preliminary analysis on the impact of COVID‑19 on the sector as well as an update on its growth. |
| Keywords: | Coronavirus disease (COVID-19); Financial institutions; Financial markets; Financial stability |
| JEL: | G01 G20 G23 |
| Date: | 2021–03 |
| URL: | http://d.repec.org/n?u=RePEc:bca:bocsan:21-2&r=all |
| By: | Callum Jones; Pau Rabanal |
| Abstract: | We study the role that changes in credit and fiscal positions play in explaining current account fluctuations. Empirically, the current account declines when credit increases, and when the fiscal balance declines. We use a two-country model with financial frictions and fiscal policy to study these facts. We estimate the model using annual data for the U.S. and “a rest of the world” aggregate that includes main advanced economies. We find that about 30 percent of U.S. current account balance fluctuations are due to domestic credit shocks, while fiscal shocks explain about 14 percent. We evaluate simple macroprudential policy rules and show that they help reduce global imbalances. By taming the financial cycle, macroprudential rules that react to domestic credit conditions or to domestic house prices would have led to a smaller and less volatile U.S. current account deficit. We also show that a countercylical fiscal policy rule that stabilizes output growth reduces the level and volatility of the U.S. current account deficit. |
| Date: | 2021–02–19 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:2021/043&r=all |
| By: | René Böheim; Sarah Gust |
| Abstract: | In Austria, a gender pay transparency law was introduced in 2011, requiring companies with more than 1,000 employees to publish a pay report every other year. Firms with 500, 250, and 150 employees were subject to this requirement at later years. We estimate the impact of the law on men’s wages, women’s wages, and the gender pay gap using administrative data. The results from a regression discontinuity design suggest that the wage transparency law did not change wages or the gender wage gap. In larger firms, the wage of newly hired women increased more due to the reform than of newly hired men, suggesting that the gender wage gap decreased among newly hired workers. Our estimates of the effect of the law on employment growth or turnover are small, and statistically insignificant. For larger firms, we estimate that the transparency law led to a lower share of women in treated firms. These results are robust to several additional specifications. |
| Keywords: | wage transparency, gender wage gap |
| JEL: | J31 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_8960&r=all |
| By: | Lydon, Reamonn (Central Bank of Ireland); Simmons, Michael (University of London) |
| Abstract: | Variations in the unemployment rates of men and women often differ markedly. To understand the dynamics of the gender unemployment gap, this paper estimates the inflows to, and outflows from, unemployment by gender for 18 OECD countries over the last four decades. Whilst there are are cross-country differences in the relative contribution of inflows and outflows by gender, there is a clear common pattern: differences in the variations of the inflow of unemployment explain the majority of the dynamics of the gender unemployment gap for all countries under study. Specifically, in the recessions covered by our data, the flow of males into unemployment is typically larger than the flow of females into unemployment. Using data on output by sector, we show that a candidate explanation for these results for each country is the differing gender composition by sector. Over the four decades of data we analyse, and across all countries, females were more likely to work in sectors less exposed to economic downturns. |
| Keywords: | Unemployment, gender, inflows, outflows, dynamics. |
| JEL: | E24 E32 J16 J6 |
| Date: | 2020–12 |
| URL: | http://d.repec.org/n?u=RePEc:cbi:wpaper:10/rt/20&r=all |
| By: | Alexander Chudik (Federal Reserve Bank of Dallas, USA); Kamiar Mohaddes (University of Cambridge); Mehdi Raissi (International Monetary Fund, Washington DC, USA) |
| Abstract: | This paper uses a threshold-augmented Global VAR model to quantify the macro-economic effects of countries’ discretionary fiscal actions in response to the Covid-19 pandemic and its fallout. Our results are threefold: (1) fiscal policy is playing a key role in mitigating the effects of the pandemic; (2) all else equal, countries that implemented larger fiscal support are expected to experience less output contractions; (3) emerging markets are also benefiting from the synchronized fiscal actions globally through the spillover channel and reduced financial market volatility. |
| Date: | 2021–03–20 |
| URL: | http://d.repec.org/n?u=RePEc:erg:wpaper:1465&r=all |
| By: | Ida, Daisuke; Iiboshi, Hirokuni |
| Abstract: | Using the method of Haberis and Lipinska (2020), this paper explores the effect of forward guidance (FG) in a two-country New Keynesian (NK) economy under the zero lower bound (ZLB). We simulate the effect of different lengths of FG or the zero interest rate policy under the circumstance of the global liquidity trap. We show that the size of the intertemporal elasticity of substitution plays an important role in determining the beggar-thy-neighbor effect or the prosper-thy-neighbor effect of home FG policy on the foreign economy. And in the former case, by targeting a minimum welfare loss of the individual country alone but not global welfare loss, two central banks can perform interesting FG bargaining in which they cooperatively adopt the same length of FG or strategically deviate from cooperation. |
| Keywords: | Forward guidance; Zero lower bound on nominal interest rates; Two-country new-Keynesian model; Taylor rule |
| JEL: | E52 E58 F41 |
| Date: | 2021–03–22 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:106752&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:journl:halshs-03048777&r=all |
| By: | Alogoskoufis, George |
| Abstract: | This paper reviews and interprets the history of the economy of modern Greece, from the eve of the war for independence in 1821 to the present day. It identifies three major historical cycles: First, the cycle of state and nation building, 1821-1898, second, the cycle of national expansion and consolidation, 1899-1949, and third, the post-1950 cycle of economic and social development. During these two hundred years, the country and the economy have been radically transformed. Compared to the first Greek state, Greece managed to almost triple its national territory, to increase its population by almost 15 times and to increase its real GDP per capita by another 15 times. From the margins of south-eastern Europe, it has moved to the core of today’s European Union. The paper focuses on the main determinants of economic performance during these cycles, with particular emphasis on the role and interactions of social and economic conditions, ideas, institutions and geopolitics. During the first two cycles, the economy underperformed, as state building and the pursuit of the ‘great idea’ were the top national priorities. Despite the early introduction of appropriate economic institutions, fiscal and monetary instability prevailed in the context of a relatively stagnant economy, due to wars, internal conflicts and the international environment. The economy and the welfare state only became a top priority during the third cycle, when a number of domestic and international factors contributed to economic and social development. Greece seems to have largely achieved many of its national goals, having consolidated both its borders and democratic institutions and become a relatively prosperous country in the core of the European union, despite the alternation of triumphs and disasters and the frequent occurrence of wars and internal conflicts, debt crises, ‘defaults’ or economic depressions. Yet many problems remain and the challenge for the future is to focus on reforms that will ensure even higher security and prosperity for the future generations of Greeks. |
| Keywords: | modern Greece; economic history; institutions; economic growth; fiscal policy; monetary policy |
| JEL: | N0 E6 R14 J01 |
| Date: | 2021–04–01 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:109848&r=all |
| By: | Elvira, Veronica |
| Abstract: | Based on the research that has been done, it can be proven that the implementation of GCG is one of the ways that can help the company in increasing value and effectiveness as well as helping to supervise and control problems that occur internally and externally. If the company is able to control and supervise the activities that are running, of course the profits will be and run well. Therefore, it is very important to ensure that the company has control over employees and the activities that occur. Employees are one of the important aspects in the company, without employees, the company will find it difficult to develop their products. Not only that, the vision and mission will also be difficult to achieve if you don't use the right team. The instructional process carried out by superiors to subordinates must also run smoothly because if not, there will be misunderstandings and make work not as it should be. |
| Date: | 2021–03–12 |
| URL: | http://d.repec.org/n?u=RePEc:osf:osfxxx:wrbcp&r=all |
| By: | Byrne, Stephen (Central Bank of Ireland); Hopkins, Andrew (Central Bank of Ireland); McIndoe-Calder, Tara (Central Bank of Ireland); Sherman, Martina (Central Bank of Ireland) |
| Abstract: | This letter describes the impact of the pandemic on private consumption, which accounts for just over half of national income (GNI*). We outline a methodology for using high-frequency data to track developments in consumption, and show the importance of accounting for pandemic-induced changes in spending patterns when measuring aggregate output. The expansion of firms’ online presence has mitigated the effect of the pandemic on total spending. The impact of the pandemic has varied across income groups with low income households more likely to see spending falls. While there may be significant forced savings accumulated as a result of the pandemic, this has largely been concentrated in higher income households. These households spend relatively less of each euro of additional income in normal times, meaning that the boost to consumption when the pandemic is over is likely to be lower than would be the case if the shock had been equally distributed. |
| Date: | 2020–12 |
| URL: | http://d.repec.org/n?u=RePEc:cbi:ecolet:15/el/20&r=all |
| By: | Tina Oreski (Swiss Finance Institute) |
| Abstract: | Using textual analysis and the firm life-cycle theory to proxy for a company's competitive strategy, this paper empirically examines the strategic similarity hypothesis. The findings show that merger and acquisition transactions are more likely between firms with the same strategy. Moreover, when the acquirer and the target firm compete based on one strategy, the deal yields higher stock returns and stronger future asset growth. The effect is more pronounced in a highly competitive environment, consistent with the strategic misalignment acting as a constraint to the merged company's optimal response. Overall, the results reveal that synergies obtained from the overlapping strategies constitute an important determinant of public merger and acquisition deals. |
| Keywords: | mergers and acquisitions, competitive strategy, synergies, firm life-cycle, textual analysis |
| JEL: | L21 G34 M21 |
| Date: | 2021–03 |
| URL: | http://d.repec.org/n?u=RePEc:chf:rpseri:rp2129&r=all |
| By: | Giovanni Pellegrino (Department of Economics and Business Economics, Aarhus University); Efrem Castelnuovo (University of Padova); Giovanni Caggiano (Monash University and University of Padova) |
| Abstract: | We employ a nonlinear VAR framework and a state-of-the-art identification strategy to document the large response of real activity to a financial uncertainty shock during and in the aftermath of the great recession. We replicate this evidence with an estimated DSGE framework featuring a concept of uncertainty comparable to that in our VAR. We then use the estimated framework to quantify the output loss due to the large uncertainty shock that materialized in 2008Q3. We find such a shock to be able to explain about 60% of the output loss in the 2008-2014 period. The same estimated model unveils the role successfully played by the Federal Reserve in limiting the output loss that would otherwise have occurred had monetary policy been conducted as in normal times. Finally, we show that the rule estimated during the great recession is able to deliver an economic outcome closer to the flexible price one than the rule describing the Federal Reserve’s conduct in normal times. |
| Keywords: | Uncertainty shock, nonlinear IVAR, nonlinear DSGE framework, minimum-distance estimation, great recession |
| JEL: | C22 E32 E52 |
| Date: | 2021–03–26 |
| URL: | http://d.repec.org/n?u=RePEc:aah:aarhec:2021-05&r=all |
| By: | Víctor A. Beker |
| Abstract: | The main issue addressed in this paper is whether a new financial crisis can be avoided. After reviewing the key elements that were present in the 2007/2009 financial crisis, there is an analysis of the regulatory reforms which took place during and after the financial meltdown. The role played in it by the shadow banking system and the regulatory reforms dealing with it deserve particular attention. The regulatory reforms are assessed in the context of systemic risk and run vulnerability in order to recommend what should be done to prevent a new financial crisis from happening. A revision of what has already been done and what should be done in micro and macroprudential regulation completes the paper. The main conclusions are: 1) A key issue to avoid a new financial crisis is to prevent an excessive concentration of loans in any one sector, region or kind of assets of the economy. 2) The role of the central bank as lender of last resort should be reassessed in light of the experience of what has been done in the context of the COVID 19 pandemic. 3) In order to prevent managers from taking excessive risks using other people´s money, managerial compensation schemes should be changed. 4) Issues which have to do with the conflict of interests in the credit rating agencies are still waiting for better regulation. |
| Keywords: | financial crisis, shadow banking system, micro-prudential regulation, macroprudential regulation, lender of last resort, dealer of last resort. |
| JEL: | G01 G21 G23 |
| Date: | 2020–11 |
| URL: | http://d.repec.org/n?u=RePEc:aep:anales:4309&r=all |
| By: | Erica L. Groshen (Cornell University ILR School); Harry J. Holzer (Georgetown University) |
| Abstract: | We describe trends in wages and labor force participation for the “working class”—whom we define as workers with high school or less education—compared to those with college or more. We compare cyclical peaks over the entire period 1979–2019, with particular focus on the Great Recession (2007–2010) and recovery (2010–2019). We also present results by gender and race. We find real wage growth in the latter period for all workers, but not enough to change the long-term trends of growing inequality and stagnant wages for the less-educated; and we also find that labor force participation continued to decline for the less-educated, even during the recovery. Gaps between whites and blacks also grew, while Hispanics and Asians made more progress. We consider various explanations of these findings and show that the early effects of the 2020-2021 pandemic recession hurt less-educated workers and those of color more than anyone else. |
| Keywords: | Wages, participation, working class, Great Recession |
| JEL: | J15 J16 J31 |
| Date: | 2021–03 |
| URL: | http://d.repec.org/n?u=RePEc:upj:weupjo:21-342&r=all |
| By: | Atmaningrum, Siska; Kanto, Dwi Sunu; Kisman, Zainul; Institute of Research, Asian |
| Abstract: | Investment is an economic activity that can be a way for a person to expand or maintain his wealth. However, in investing, the public must be more careful in making decisions so that they are not trapped by fake investments. In investing, there are several factors that influence the decision to invest, namely Financial Knowledge, Income, Self-Control, Financial Behavior, and Financial Attitude towards Investment Decisions. This study aims to examine the influence of the variables of Financial Knowledge, Income, and Self-Control on Investing Decisions mediated by Financial Behavior and Financial Attitudes. This study uses Financial Knowledge, Income, and Self-Control as independent variables, then Investment Decisions as the dependent variable, then Financial Behavior, and Financial Attitudes as intervening variables. The results of this study indicate that financial knowledge has an effect on financial behavior. Financial Knowledge affects Financial Attitudes. Financial knowledge influences investment decisions. Income has an effect on Financial Behavior. Income has an effect on Financial Attitudes. Income does not affect the Investment Decision. Self-control affects financial behavior. Self-Control affects Financial Attitudes. Self-Control has no effect on Investment Decisions. Financial Behavior has no effect on Investment Decisions. Financial Attitudes do not affect the Investment Decision. |
| Date: | 2021–02–04 |
| URL: | http://d.repec.org/n?u=RePEc:osf:osfxxx:k4dzs&r=all |
| By: | Bos, Iwan; Marini, Marco A.; Saulle, Riccardo D. |
| Abstract: | This paper examines capacity-constrained oligopoly pricing with sellers who seek myopic improvements. We employ the Myopic Stable Set stability concept and establish the existence of a unique pure-strategy price solution for any given level of capacity. This solution is shown to coincide with the set of pure-strategy Nash equilibria when capacities are large or small. For an intermediate range of capacities, it predicts a price interval that includes the mixed-strategy support. This stability concept thus encompasses all Nash equilibria and offers a pure-strategy solution when there is none in Nash terms. In particular, it provides a behavioral rationale for different types of pricing dynamics, including real-world economic phenomena such as Edgeworth-like price cycles, price dispersion and supply shortages. |
| Keywords: | Demand and Price Analysis |
| Date: | 2021–04–01 |
| URL: | http://d.repec.org/n?u=RePEc:ags:feemwp:310282&r=all |
| By: | Jeffrey D. Michler; Frederi G. Viens; Gerald E. Shively |
| Abstract: | We investigate the sources of variability in agricultural production and their relative importance in the context of weather index insurance for smallholder farmers in India. Using parcel-level panel data, multilevel modeling, and Bayesian methods we measure how large a role seasonal variation in weather plays in explaining yield variance. Seasonal variation in weather accounts for 19-20 percent of total variance in crop yields. Motivated by this result, we derive pricing and payout schedules for actuarially fair index insurance. These calculations shed light on the low uptake rates of index insurance and provide direction for designing more suitable index insurance. |
| Date: | 2021–03 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2103.11047&r=all |
| By: | Sergio Cesaratto; Riccardo Pariboni |
| Abstract: | This paper aims to stimulate the convergence of the Sraffian approach to demand-led growth theory with insights from monetary circuit theory and stock-flow models. The first Sraffian contribution to this convergence we identify is the extension of Garegnani’s interpretation of Keynes’ General Theory’s originality and limitations to Keynes’ 1937 papers on “finance.” In both cases, it is a question of freeing Keynes from the ties of marginalist theory. After discussing some troubles of the monetary circuit, we identify a complementarity between the Keynesian concept of finance, some insights of the monetary circuit, and the role attributed by the Sraffian take of demand-led growth to the autonomous components of demand (which are also Kalecki’s external markets). This seems to us to be the second Sraffian contribution to this convergence towards a monetary theory of demand-led growth. |
| Keywords: | Keynes, Finance, Monetary Circuit, Effective Demand, Supermultiplier |
| JEL: | B26 E12 E43 E50 |
| Date: | 2021–03 |
| URL: | http://d.repec.org/n?u=RePEc:usi:wpaper:851&r=all |
| By: | Q. Wang; Y. Zhou; J. Shen |
| Abstract: | This article comes up with an intraday trading strategy under T+1 using Markowitz optimization and Multilayer Perceptron (MLP) with published stock data obtained from the Shenzhen Stock Exchange and Shanghai Stock Exchange. The empirical results reveal the profitability of Markowitz portfolio optimization and validate the intraday stock price prediction using MLP. The findings further combine the Markowitz optimization, an MLP with the trading strategy, to clarify this strategy's feasibility. |
| Date: | 2021–03 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2103.13507&r=all |
| By: | Francisco Javier Vasquez-Tejos (Universidad Mayor de Chile); Prosper Lamothe Fernández (Universidad Mayor de Chile) |
| Abstract: | This study analyzes the impact of liquidity risk on stock returns in four Latin American markets (Chile, Columbia, Mexico, and Peru) between January 1998 and July 2018. Several previous studies have focused on measuring this effect in developed markets and a few in emerging markets, such as Latin American stock markets. In the present study, five liquidity risk measures with a multiple regression model; three have been widely used in previous studies and two were from recently proposed measures. We found evidence of an inverse relationship between liquidity risk and stock performance, which indicates that there exist rewards for investing in less liquid positions and therefore originate new investment strategies. In general, lesser developed or smaller markets have a disadvantage for this type of study, due to lack of access to historical information on stock purchase and sales. |
| Keywords: | Liquidity Risk, Stock Returns, Emerging Markets, Latin America, Liquidity Risk Measurements. |
| JEL: | G32 |
| Date: | 2020–11 |
| URL: | http://d.repec.org/n?u=RePEc:iad:wpaper:0420&r=all |
| By: | Aras, Atilla |
| Abstract: | This study provides a solution of the equity premium puzzle. Questioning the validity of the Arrow-Pratt measure of relative risk aversion for detecting the risk behavior of investors, a new tool in the form of the sufficiency factor of the model was developed to analyze the risk behavior of investors. The calculations of this newly tested model show that the value of the coefficient of relative risk aversion is 1.033526 by assuming the value of the subjective time discount factor as 0.99. Since these values are compatible with the existing empirical studies, they confirm the validity of the newly derived model that provides a solution to the equity premium puzzle. |
| Date: | 2021–02–02 |
| URL: | http://d.repec.org/n?u=RePEc:osf:osfxxx:gj3n2&r=all |
| By: | Hans Buehler; Phillip Murray; Mikko S. Pakkanen; Ben Wood |
| Abstract: | We present a numerically efficient approach for learning a risk-neutral measure for paths of simulated spot and option prices up to a finite horizon under convex transaction costs and convex trading constraints. This approach can then be used to implement a stochastic implied volatility model in the following two steps: 1. Train a market simulator for option prices, as discussed for example in our recent; 2. Find a risk-neutral density, specifically the minimal entropy martingale measure. The resulting model can be used for risk-neutral pricing, or for Deep Hedging in the case of transaction costs or trading constraints. To motivate the proposed approach, we also show that market dynamics are free from "statistical arbitrage" in the absence of transaction costs if and only if they follow a risk-neutral measure. We additionally provide a more general characterization in the presence of convex transaction costs and trading constraints. These results can be seen as an analogue of the fundamental theorem of asset pricing for statistical arbitrage under trading frictions and are of independent interest. |
| Date: | 2021–03 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2103.11948&r=all |
| By: | Maximilian Todtenhaupt; Johannes Voget |
| Abstract: | We investigate how changes in firm productivity after M&As are affected by differences in profit taxation between the target and the acquirer. We argue that tax differentials distort the efficient allocation of productive factors following an M&A and thus inhibit the realization of productivity improvements. Using firm-level data on inputs and outputs of production as well as on corporate M&As, we show that the absolute tax differential between the locations of two merging firms reduces the subsequent total factor productivity gain. This effect is concentrated in horizontal M&As and less pronounced when firms can use international profit shifting to attenuate effective differences in taxation. |
| Keywords: | M&A, productivity, international taxation |
| JEL: | F23 H25 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_8967&r=all |
| By: | Peña, Guillermo |
| Abstract: | Monetary policy, when rules-based, usually follows rules regarding inflation or output, but not always quantity, endemic and financial endogenous rules that minimize the gap between optimal and current rates of inflation and output. This paper proposes a rules-based monetary policy focused on reducing differences between short-term Treasury bill and implicit pure interest rate given by gravity models. Satisfying this rule is highly explanatory for reaching potential GDP growth, and for inflation targets such as the 2%. The results are confirmed with worldwide data. Central Banks could follow this rule, or combinations with other complementary alternatives, when deciding rates and amounts. |
| Keywords: | Pure interest, Policy Rules, Financial Services, Marginal Productivity, Value added |
| JEL: | D78 E43 E44 E52 E58 |
| Date: | 2021–02–09 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:105967&r=all |
| By: | Hernán Vallejo |
| Abstract: | It is well known in the economic literature that the labor supply curve can bend backwards and, therefore, that leisure can be a Giffen good. It is also known that leisure can be a normal good. This article proves that if leisure is a Giffen good, it has to be a normal good. This result also proves that, contrary to common knowledge in economics, not all Giffen goods, are inferior goods. The results presented here could be taken into account, for example, when finding empirical evidence and designing policies on labor supply, in an era of machine learning and artificial intelligence. |
| Keywords: | Leisure, labor supply, Giffen Goods, Ordinary Goods, Normal Goods, Inferior Goods |
| JEL: | D01 D04 D11 J22 J38 |
| Date: | 2021–03–24 |
| URL: | http://d.repec.org/n?u=RePEc:col:000089:019138&r=all |
| By: | Purva Khera; Stephanie Y Ng; Sumiko Ogawa; Ratna Sahay |
| Abstract: | Adoption of technology in the financial services industry (i.e. fintech) has been accelerating in recent years. To systematically and comprehensively assess the extent and progress over time in financial inclusion enabled by technology, we develop a novel digital financial inclusion index. This index is based on payments data covering 52 developing countries for 2014 and 2017, taking into account both access and usage dimentions of digital financial services (DFSs). This index is then combined with the traditional measures of financial inclusion in the literature and aggregated into an overall index of financial inlusion. There are two key findings: first, the adoption of fintech has been a key driver of financial inclusion. Second, there is wide variation across countries and regions, with the greatest progress recorded in Africa and Asia and the Pacific regions. This index should offer a useful analytical tool for researchers and policy makers. |
| Date: | 2021–03–19 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:2021/090&r=all |
| By: | James Davies |
| Abstract: | The cross-country relationship between Covid-19 crude mortality rates and previously measured income inequality and poverty in the pandemic’s first wave is studied, controlling for other underlying factors, in a sample of 141 countries. An older population, fewer hospital beds, lack of universal BCG (tuberculosis) vaccination, and greater urbanization are associated with higher mortality. The death rate has a consistent strong positive relationship with the Gini coefficient for income. Poverty as measured by the $1.90 per day standard has a small negative association with death rates. The elasticity of Covid-19 deaths with respect to the Gini coefficient, evaluated at sample means, is 0.9. Assuming the observed empirical relationships unchanged, if the Gini coefficient in all countries where it is above the OECD median was instead at that median, 67,000 fewer deaths would have been expected after 150 days of the pandemic - - a reduction of 10%. Shrinking “excess Gini’s” down to the G7 median reduces predicted deaths by 88,500, or 14%. |
| Keywords: | Covid-19 pandemic inequality poverty mortality |
| JEL: | I14 I39 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_8957&r=all |
| By: | Kutha, Ngakan Made; Susan, Marcellia; Institute of Research, Asian |
| Abstract: | Profits show the performance of managers before the related parties, such as investors and creditors. Therefore, managers often incorrectly state them in the published annual financial reports to protect their reputation. Undoubtedly, this action needs to be reduced by the governance mechanism, like supervision by institutions as the owner and audit by the external public accountant firm. To control these two effects on profits management, additionally, this study employs financial leverage. This study aims to prove the impact of institutional ownership, the external auditor reputation, and financial leverage on profits management. The population and the samples are the non-financial companies establishing the LQ45 index from 2014 to 2018, getting taken by the simple random sampling technique. Also, the regression model performs as the technique to examine the data. By denoting the testing of the hypothesis results and the discussion section, this study summarizes that institutional ownership and reputable external auditor effectively decrease profits management. Additionally, although firms have much debt, they cut the tendency to manage their profits because of applying transparency. |
| Date: | 2021–02–04 |
| URL: | http://d.repec.org/n?u=RePEc:osf:osfxxx:a6nye&r=all |
| By: | Flavien Moreau; Adriana Lleras-Muney |
| Abstract: | We propose a dynamic production function of population health and mortality from birth onwards. Our parsimonious model provides an excellent fit for the mortality and survival curves for both primate and human populations since 1816. The model sheds light on the dynamics behind many phenomena documented in the literature, including (i) the existence and evolution of mortality gradients across socio-economic statuses, (ii) non-monotonic dynamic effects of in-utero shocks, (iii) persistent or “scarring” effects of wars and (iv) mortality displacement after large temporary shocks such as extreme weather. |
| Keywords: | Health;Aging;Population and demographics;Women;Environment;Mortality,In-utero shocks,Selection,Scarring,WP,health stock,health distribution,investment schedule,log mortality rates,health shock |
| Date: | 2021–02–12 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:2021/037&r=all |
| By: | Asaf Bernstein; Peter Koudijs |
| Abstract: | Mortgage amortization schedules are illiquid savings plans comparable in size to pension programs; however, little is known about their effects on wealth accumulation. Using individual administrative data and plausibly exogenous variation in the timing of home purchase (ex. childbirth-driven) around a 2013 Dutch reform, we find a near one-for-one rise in net worth for each dollar of amortization. Households leave other savings and liabilities unchanged, and instead increase labor supply and reduce consumption. Effects hold even for regular savers and older households. This has important macroprudential implications and suggests homeownership financed via amortizing mortgages is instrumental for household wealth building. |
| JEL: | D14 D15 E21 E6 G21 G4 G5 G51 J2 R3 |
| Date: | 2021–03 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:28574&r=all |
| By: | Arnold McIntyre; Pablo Bejar; Takuji Komatsuzaki; Mauricio Vargas |
| Abstract: | Rising income inequality has emerged as a major policy issue facing policymakers, but there is a dearth of empirical work on inequality in small states, including the Caribbean. Despite data limitations, the empirical analysis using a sample of small states finds that increased openness and deeper economic integration including financial market openness is associated with lower income inequality, whereas elevated debt levels limit fiscal space and are associated with higher income inequality. An important policy implication is that well targeted social sector spending aimed at improving education and health indicators will support increased redistribution and reduce income inequality. |
| Keywords: | Income inequality;Public debt;Income;Income distribution;Foreign direct investment;Small States,economic development,globalization,Gini at market income,absolute redistribution and income redistribution policies.,WP,market Gini coefficient,redistribution policy,market income,FDI inflow,Caribbean dummy variable,idiosyncratic income shock |
| Date: | 2021–02–12 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:2021/036&r=all |
| By: | Nadar, Anand |
| Abstract: | This study investigate the effectiveness of fiscal policy and monetary policy in India. We collected the time series data for India ranging from 1960 to 2019 from World Development Indicator (WDI). We applied the bound test to check the long-run relationship between fiscal policy, monetary policy and economic growth. The short-run and long-run effects of fiscal policy and monetary policy have been estimated using ARDL models. The results showed that there is a long-run relationship between fiscal and monetary policies with economic growth. The estimated short-run coefficients indicated that a few immediate short run impact of fiscal and monetary policies are insignificant. However, the shortrun impacts become significant as time passes. The long-run results suggested that the long-run impact of both fiscal and monetary policies on economic growth are positive and significant. More specifically, the GDP level increases if the money supply and government expenditure increase (Expansionary fiscal and monetary policies). On the other hand, the GDP level decrease if the money supply and government expenditure decrease (contractionary fiscal and monetary policies). Therefore, this study recommend to use expansionary policies to spur the Indian economy. |
| Date: | 2021–03–26 |
| URL: | http://d.repec.org/n?u=RePEc:osf:osfxxx:7cevw&r=all |
| By: | Carlos Alós-Ferrer; Maximilian Mihm |
| Abstract: | When an economic agent makes a choice, stochastic models predicting those choices can be updated. The structural assumptions embedded in the prior model condition the updated one, to the extent that the same evidence produces different predictions even when previous ones were identical. We provide a general framework for models of stochastic choice allowing for arbitrary forms of (structural) updating and show that different models can be sharply separated by their structural properties, leading to axiomatic characterizations. Our framework encompasses Bayesian updating given beliefs over deterministic preferences (as implied by popular random utility models) and standard neuroeconomic models of choice, which update decision values in the brain through reinforcement learning. |
| Keywords: | Stochastic preferences, Bayesian learning, logit choice, reinforcement, neuroeconomic theory |
| JEL: | D01 D81 |
| Date: | 2021–03 |
| URL: | http://d.repec.org/n?u=RePEc:zur:econwp:381&r=all |
| By: | Jorge Davalos; Ekkehard Ernst |
| Abstract: | We document the evolution of labour market power by employers on the US and Peruvian labour markets during the 2010s. Making use of a structural estimation model of labour market dynamics, we estimate differences in market power that workers face depending on their sector of activity, their age, sex, location and educational level. In particular, we show that differences in cross-sectional market power are significant and higher than variations over the ten-year time span of our data. In contrast to findings of labour market power in developed countries such as the US, we document significant market power of employers in Peru vis-\`a-vis the tertiary educated workforce, regardless of age and sector. In contrast, for the primary educated workforce, market power seems to be high in (private) services and manufacturing. For secondary educated workers, only the mining sector stands out as moderately more monopsonistic than the rest of the labour market. We also show that at least for the 2010s, labour market power declined in Peru. We contrast these findings with similar estimates obtained for the United States where we are able to show that increases in labour market power are particularly acute in certain sectors, such as agriculture and entertainment and recreational services, as well as in specific geographic areas where these sectors are dominant. Moreover, we show that for the US, the labour market power has gradually increased over the past ten years, in line with the general rise in inequality. Importantly, we show that the pervasive gender pay gap cannot be linked to differential market power as men face higher labour market power than women. We also discuss possible reasons for these findings, including for the differences of labour market power across skill levels. Especially, we discuss the reasons for polarization of market power that are specific to sectors and locations. |
| Date: | 2021–03 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2103.15183&r=all |
| By: | CHIVU, LUMINITA (National Institute of Economic Research - Romanian Academy); GEORGESCU, GEORGE (National Institute of Economic Research - Romanian Academy) |
| Abstract: | The extremely fragile balance of the Romanian labour market is severely affected by the crisis caused by the COVID-19 pandemic and by the sudden and almost general deterioration of the macroeconomic context and the business environment. The present study aims to argue that, in times of crisis, such as the current one, the labour market policies need to be varied but also synergistic, in order to stimulate employment and capitalize the potential of each category, so as to contribute to the recovery of the country's macroeconomic and financial framework. Despite the Government's anti-crisis and economic support measures, in the short term, the Romanian labour market is facing the unemployment rate increase, at least in 2020, as a result of the restrictions in many activities, exacerbating the vulnerabilities of the employed population structure described in the study. The analyses carried out revealed that, in Romania, the crisis affected practically all the members of society, but in a disproportionate manner, the most exposed being the vulnerable groups, namely people in the "grey" or informal area of the economy, those working in the most affected sectors and workers with low qualification, many deprived of the needed protection and social assistance. In the context of efforts to identify ways to reduce the distortions generated by the crisis, the integration of social security systems with social assistance can be a viable solution. As activities resume, the labour market tensions are expected to be mitigated both by labour market-specific measures, including those presented in the study, and at the macroeconomic level, adapted to the post-COVID-19 restructuring of the economy, with the necessary policy support at central and local level, including in terms of employment |
| Keywords: | labour market, COVID-19 pandemic, employment, vulnerable groups, protection and social assistance, macroeconomic risks |
| JEL: | E24 F66 J10 J21 J46 O15 |
| Date: | 2021–03 |
| URL: | http://d.repec.org/n?u=RePEc:ror:wpince:210325&r=all |
| By: | Victor DeMiguel; Javier Gil-Bazo; Francisco J. Nogales; André A. P. Santos |
| Abstract: | Identifying outperforming mutual funds ex-ante is a notoriously difficult task. We use machine learning methods to exploit the predictive ability of a large set of mutual fund characteristics that are readily available to investors. Using data on US equity funds in the 1980-2018 period, the methods allow us to construct portfolios of funds that earn positive and significant out-of-sample risk-adjusted after-fee returns as high as 4.2% per year. We further show that such outstanding performance is the joint outcome of both exploiting the information contained in multiple fund characteristics and allowing for flexibility in the relationship between predictors and fund performance. Our results confirm that even retail investors can benefit from investing in actively managed funds. However, we also find that the performance of all our portfolios has declined over time, consistent with increased competition in the asset market and diseconomies of scale at the industry level. |
| Keywords: | Mutual fund performance, performance predictability, active management, machine learning, elastic net, random forests, gradient boosting |
| Date: | 2021–03 |
| URL: | http://d.repec.org/n?u=RePEc:upf:upfgen:1772&r=all |
| By: | John Guyton; Patrick Langetieg; Daniel Reck; Max Risch; Gabriel Zucman |
| Abstract: | This paper studies tax evasion at the top of the U.S. income distribution using IRS micro-data from (i) random audits, (ii) targeted enforcement activities, and (iii) operational audits. Drawing on this unique combination of data, we demonstrate empirically that random audits underestimate tax evasion at the top of the income distribution. Specifically, random audits do not capture most tax evasion through offshore accounts and pass-through businesses, both of which are quantitatively important at the top. We provide a theoretical explanation for this phenomenon, and we construct new estimates of the size and distribution of tax noncompliance in the United States. In our model, individuals can adopt a technology that would better conceal evasion at some fixed cost. Risk preferences and relatively high audit rates at the top drive the adoption of such sophisticated evasion technologies by high-income individuals. Consequently, random audits, which do not detect most sophisticated evasion, underestimate top tax evasion. After correcting for this bias, we find that unreported income as a fraction of true income rises from 7% in the bottom 50% to more than 20% in the top 1%, of which 6 percentage points correspond to undetected sophisticated evasion. Accounting for tax evasion increases the top 1% fiscal income share significantly. |
| JEL: | D31 H26 |
| Date: | 2021–03 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:28542&r=all |
| By: | Abdullah, Hariem; Tursoy, Turgut |
| Abstract: | This study attempts to empirically investigate the reverse causality between firm performance and capital structure for German listed firms in the non-financial sectors over the period 1993-2016. We measure firm performance based on both financial and market indicators while capital structure is measures by leverage ratio of total debt to assets. In addition to two-step GMM estimator, panel causality test of Dumitrescu and Hurlin (2012) is performed to specify the causality direction of causation. The findings provide evidence for the existence of homogeneous causality between capital structure and the two selected proxies of firm performance. Financial performance and financial leverage can positively affect each other. Capital structure could negatively determine market performance whereas stock price has a positive influence on leverage ratio. Our results rather support trade-off theory, probably indicating that non-financial firms in Germany bear more debt to benefit from tax shield. |
| Keywords: | firm performance, capital structure, panel causality, and Germany |
| JEL: | G3 |
| Date: | 2021–02–02 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:105871&r=all |
| By: | Demiessie, Habtamu |
| Abstract: | This Article is an extract from my newly published book titled ‘Ethiopia: From Revolutionary Democracy to Prosperity - The Moral and Philosophical Foundations of a Prosperous Society’,Pages 108-111; 114. This monograph book, which is available for sale online via amazon.com, documents the foundation of state governance, politics, economy, education and society in Ethiopia in the period between 1991 and 2020. Narratives made in the book are organized into Six (6) parts. Within the domain of the six sections, there are thirty (30) chapters structured on diverse themes: politics, economy, ideology, philosophy, lifestyle, history and education. An extract from the book, this article reflects on the economics of prosperity. Hence, the concept of prosperity defined; the essence of prosperity discussed and the theory (teachings) and practices (development policy) in the context of prosperity was also conceptualized. Summary about the book is depicted in the annex part of this article. |
| Keywords: | Prosperity; Wellbeing; Ethiopia; Revolutionary Democracy; Abiy Ahmed Ali (PhD); Meles Zenawi;EPRDF; Prosperity Party; Collective Prosperity |
| JEL: | B50 K0 O1 O10 P4 Z10 |
| Date: | 2021–02–01 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:105692&r=all |
| By: | Jay Cao; Jacky Chen; John Hull; Zissis Poulos |
| Abstract: | This paper shows how reinforcement learning can be used to derive optimal hedging strategies for derivatives when there are transaction costs. The paper illustrates the approach by showing the difference between using delta hedging and optimal hedging for a short position in a call option when the objective is to minimize a function equal to the mean hedging cost plus a constant times the standard deviation of the hedging cost. Two situations are considered. In the first, the asset price follows a geometric Brownian motion. In the second, the asset price follows a stochastic volatility process. The paper extends the basic reinforcement learning approach in a number of ways. First, it uses two different Q-functions so that both the expected value of the cost and the expected value of the square of the cost are tracked for different state/action combinations. This approach increases the range of objective functions that can be used. Second, it uses a learning algorithm that allows for continuous state and action space. Third, it compares the accounting P&L approach (where the hedged position is valued at each step) and the cash flow approach (where cash inflows and outflows are used). We find that a hybrid approach involving the use of an accounting P&L approach that incorporates a relatively simple valuation model works well. The valuation model does not have to correspond to the process assumed for the underlying asset price. |
| Date: | 2021–03 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2103.16409&r=all |
| By: | Apostolos Chalkis; Emmanouil Christoforou; Theodore Dalamagkas; Ioannis Z. Emiris |
| Abstract: | We exploit a recent computational framework to model and detect financial crises in stock markets, as well as shock events in cryptocurrency markets, which are characterized by a sudden or severe drop in prices. Our method manages to detect all past crises in the French industrial stock market starting with the crash of 1929, including financial crises after 1990 (e.g. dot-com bubble burst of 2000, stock market downturn of 2002), and all past crashes in the cryptocurrency market, namely in 2018, and also in 2020 due to covid-19. We leverage copulae clustering, based on the distance between probability distributions, in order to validate the reliability of the framework; we show that clusters contain copulae from similar market states such as normal states, or crises. Moreover, we propose a novel regression model that can detect successfully all past events using less than 10% of the information that the previous framework requires. We train our model by historical data on the industry assets, and we are able to detect all past shock events in the cryptocurrency market. Our tools provide the essential components of our software framework that offers fast and reliable detection, or even prediction, of shock events in stock and cryptocurrency markets of hundreds of assets. |
| Date: | 2021–03 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2103.13294&r=all |