|
on Central and Western Asia |
| By: | Ren, Rui; Lu, Meng-Jou; Li, Yingxing; Härdle, Wolfgang |
| Abstract: | The Financial Risk Meter (FRM) is an established mechanism that, based on conditional Value at Risk (VaR) ideas, yields insight into the dynamics of network risk. Originally, the FRM has been composed via Lasso based quantile regression, but we here extend it by incorporating the idea of expectiles, thus indicating not only the tail probability but rather the actual tail loss given a stress situation in the network. The expectile variant of the FRM enjoys several advantages: Firstly, the coherent and multivariate tail risk indicator conditional expectile-based VaR (CoEVaR) can be derived, which is sensitive to the magnitude of extreme losses. Next, FRM index is not restricted to an index compared to the quantile based FRM mechanisms, but can be expanded to a set of systemic tail risk indicators, which provide investors with numerous tools in terms of diverse risk preferences. The power of FRM also lies in displaying FRM distribution across various entities every day. Two distinct patterns can be discovered under high stress and during stable periods from the empirical results in the United States stock market. Furthermore, the framework is able to identify individual risk characteristics and capture spillover effects in a network. |
| Keywords: | expectiles,EVaR,CoEVaR,expectile lasso regression,network analysis,systemicrisk,Financial Risk Meter |
| JEL: | C00 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:irtgdp:2021008&r= |
| By: | Martinez, Tomás R.; Fuster Pérez, Luisa; Erosa Etchebehere, Andrés |
| Abstract: | What are the aggregate effects of informality in a financially constrained economy? We develop and calibrate an entrepreneurship model to data on matched employer-employee from both formal and informal sectors in Brazil. The model distinguishes between informality on the business side (extensive margin) and the informal hiring by formal firms (intensive margin). We find that when informality is eliminated along both margins, aggregate output increases 9.3%, capital 14.7%, TFP 5.4%, and tax revenue37%. The output and TFP increases would be much larger if informality were only eliminated on the extensive margin, a result that supports the view that the informal economy can play a positive role in an economy with financial frictions. Finally, we find that the output cost of financing social security in our baseline model is about twice as large as the one in an economy with no frictions. |
| Keywords: | Tax Revenue; Social Security; Financial Frictions; Informality; Occupational Choice |
| JEL: | O16 L26 H55 H20 E26 E22 |
| Date: | 2021–04–27 |
| URL: | http://d.repec.org/n?u=RePEc:cte:werepe:32495&r= |
| By: | Cândida Ferreira |
| Abstract: | Using panel fixed and random effects estimations as well as panel dynamic GMM estimations this paper analyses the contribution of the financial development, measured through the nine IMF financial development indices, to five macro performance indicators. The paper considers a panel with 46 developed countries, and a panel including only the sub-sample of the 28 EU countries, both over the interval 1990-2017. There are no remarkable differences between the results obtained for the two panels, and despite the lack of full convergence regarding the sign and strength of all estimation results, it is still possible to conclude that the IMF financial development indices have a dynamic and robust influence on all the five macro performance indicators. Overall, these indices contribute positively to the real GDP and negatively to the deflator, to the unemployment rate, to the current account, as well as to the net international investment position. There is also evidence that the results regarding the indices related to the different aspects of the financial institutions (access, depth, and efficiency) are statistically more robust than the results regarding the indices addressing the same aspects of the financial institutions. |
| Keywords: | Financial development; IMF financial development indices; macroeconomic performance; panel estimations; fixed and random effects estimations; panel dynamic GMM estimations. |
| JEL: | C33 E02 E44 G20 O43 |
| Date: | 2021–04 |
| URL: | http://d.repec.org/n?u=RePEc:ise:remwps:wp01732021&r= |
| By: | Mikhail Mamonov; Anna Pestova |
| Abstract: | Are disruptions of the mortgage market a consequence of financial imbalances accumulated in the past? In this paper, we study the effects of positive and negative credit supply (CS) shocks on subsequent household defaults on debt over the last four decades in U.S. states. We apply sign restrictions within a VAR framework to isolate state-level CS shocks, and identify that 1984 and 2004 were the years of systemic, countrywide, positive CS shocks whereas 1989 and 2009 brought systemic negative shocks. Further, by employing a difference-in-differences framework, we find that both positive and negative CS shocks lead to greater household defaults in the future if they also increase mortgage-to-income ratios. We show that the CS shock-induced (i) shifts of employment between the tradable and non-tradable sectors, (ii) changes in household income and (iii) in house prices facilitate the accumulation of default risks. Our results indicate that positive CS shocks occurred in 1984 did not raise household defaults by more in more exposed states compared to less exposed states because the shocks increased both future income and mortgage debt, while not affecting mortgage-to-income ratios. In contrast, the 1989, 2004 and 2009 CS shocks increased mortgage-to-income ratios in subsequent years, thereby raising debt delinquencies and household defaults. These results provide further empirical evidence to theories of endogenous credit cycles. |
| Keywords: | household finance; banking; credit supply; financial instability; mortgage; difference-in-differences; VARs, U.S. states; PSID; CEX; |
| JEL: | C34 G21 G33 |
| Date: | 2021–03 |
| URL: | http://d.repec.org/n?u=RePEc:cer:papers:wp691&r= |
| By: | Kaiser, Tim (University of Koblenz-Landau & DIW Berlin); Lusardi, Annamaria (George Washington University); Menkhoff, Lukas (HU & DIW Berlin); Urban, Carly (Montana State University) |
| Abstract: | We study the rapidly growing literature on the causal effects of financial education programs in a meta-analysis of 76 randomized experiments with a total sample size of over 160,000 individuals. The evidence shows that financial education programs have, on average, positive causal treatment effects on financial knowledge and downstream financial behaviors. Treatment effects are economically meaningful in size, similar to those realized by educational interventions in other domains and are at least three times as large as the average effect documented in earlier work. These results are robust to the method used, restricting the sample to papers published in top economics journals, including only studies with adequate power, and accounting for publication selection bias in the literature. We conclude with a discussion of the cost-effectiveness of financial education interventions. |
| Keywords: | financial education; financial literacy; financial behavior; RCT; meta-analysis; |
| JEL: | D14 G53 I21 |
| Date: | 2020–04–29 |
| URL: | http://d.repec.org/n?u=RePEc:rco:dpaper:240&r= |
| By: | Christoph Graf; Viktor Zobernig; Johannes Schmidt; Claude Kl\"ockl |
| Abstract: | We test the performance of deep deterministic policy gradient (DDPG), a deep reinforcement learning algorithm, able to handle continuous state and action spaces, to learn Nash equilibria in a setting where firms compete in prices. These algorithms are typically considered model-free because they do not require transition probability functions (as in e.g., Markov games) or predefined functional forms. Despite being model-free, a large set of parameters are utilized in various steps of the algorithm. These are e.g., learning rates, memory buffers, state-space dimensioning, normalizations, or noise decay rates and the purpose of this work is to systematically test the effect of these parameter configurations on convergence to the analytically derived Bertrand equilibrium. We find parameter choices that can reach convergence rates of up to 99%. The reliable convergence may make the method a useful tool to study strategic behavior of firms even in more complex settings. Keywords: Bertrand Equilibrium, Competition in Uniform Price Auctions, Deep Deterministic Policy Gradient Algorithm, Parameter Sensitivity Analysis |
| Date: | 2021–04 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2104.12895&r= |
| By: | Anqi Chen; Alicia H. Munnell |
| Abstract: | To evaluate their retirement resources, households approaching retirement will examine their Social Security statements, defined benefit pensions, defined contribution balances, and other financial assets. However, many households may forget that not all of these resources belong to them; they will need to pay some portion to the federal and state governments in taxes. The question is just how large the tax burden is for the typical retired household and for households at different income levels. To address that question, this brief, which is based on a recent study, estimates lifetime taxes for a group of recently retired households. The project uses data from the Health and Retirement Study linked to administrative earnings to determine Social Security benefits, and it uses administrative records on state of residence to estimate state tax liabilities. Income is then projected over the expected retirement of each household, and federal and state taxes are estimated with the TAXSIM program. The results relate the present discounted value of lifetime taxes at retirement to the present value of retirement resources. The discussion proceeds as follows. The first section describes the types of taxes that households face on their retirement resources. The second section discusses the data and methodology. The third section presents the results. For the lowest four quintiles, taxes are negligible, but rise to 11 percent for the top quintile, 16 percent for the top 5 percent, and 23 percent for the top 1 percent. These percentages change very little across a variety of strategies for drawing down retirement assets. The final section concludes that taxes are an important consideration for the retirees who are most reliant on 401(k)/IRA and other financial assets. Understanding the magnitude of this liability is important not only for individualsÕ assessment of their own retirement security but also for measuring trends in wealth over time and the impact of wealth on retirement decisions. |
| Date: | 2020–11 |
| URL: | http://d.repec.org/n?u=RePEc:crr:issbrf:ib2020-16&r= |
| By: | Gulnihal Tuzun |
| Abstract: | The purpose of this study is to assess how do the domestic and foreign shocks affect the fundamental macroeconomic variables of a small-open economy, and in particular Turkey. The domestic supply, demand and monetary policy shocks as well as their global counterparts are identified by employing a Bayesian structural VAR model with sign and zero restrictions. After a US monetary tightening shock, the results demonstrate an appreciation of US Dollar against Turkish lira, a rise in the consumer price level in the Turkish economy, a contractionary monetary policy shock accompanied by a fall in the real output level. This reaction is a strong evidence of the existence of a global interest rate contagion present in the international macroeconomics literature. |
| Keywords: | Bayesian VAR, Sign and zero restrictions, Shock identification, Monetary policy |
| JEL: | C11 C32 E52 F41 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:tcb:wpaper:2109&r= |
| By: | Ali, Mazhar; Amir, Dr.Huma; Shamsi, Dr.Aamir |
| Abstract: | The purpose of this review paper is to present the application of herding behavior in online buying. The simplest description of herding behavior is the imitation of others in making decisions. Online buying platforms have facilitated observing others' buying behavior, thereby increasing possibilities of social influence on our information search, evaluation, and buying. The concept of herding is multi-disciplinary; however, the literature review on herding behavior is mainly grounded in economics and finance. There is little understanding of herding behavior in marketing literature. Therefore, this study covers herding behavior literature through high-quality research papers published from 2000 to 2020 in journals indexed in the social science citation index, science citation index expanded, and emerging source citation index. This paper discusses the conceptualization of herding in online buying, herding situations, information-processing view of herding, measuring herding effect, herding models and theories, and areas for future research to enrich herding literature in online buying. This paper proposes a herding model (HCMMD) based on the stimulus-organism-response (SOR) theory to study herding behavior |
| Keywords: | Consumer Herding Behavior, Herding Literature Review, Herding Models, Online Buying, Stimulus-Organism-Response (SOR) Theory. |
| JEL: | M31 |
| Date: | 2021–03–28 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:107435&r= |
| By: | Jorge M. Uribe (Universitat Oberta de Catalunya , Spain); Natalia Restrepo (Universidad del Valle, Colombia); Montserrat Guillen (Universitat de Barcelona, Spain) |
| Abstract: | The global energy transition to low-carbon technologies for transportation is heavily dependent on lithium. By leveraging the latest advances in time-series econometrics we show that lithium prices (carbonate and hydroxide) have recently experienced market bubbles, particularly from the end of 2015 to the end of 2018, although in the case of European hydroxide we also date a bubble as recently as September 2020. Bubbles are accompanied by market corrections and extreme uncertainty which, in the case of lithium, may put at risk the future continuous supply needed for manufacturing lithium-based batteries for the electric vehicle. Governments and private stakeholders could reduce uncertainty imposed by these speculative dynamics, for instance, by establishing public stabilization funds and setting up capital buffers that help to diversify operational and market risks induced by a bubble bursting. Such funds should be ideally located in portfolios, such as the global stock markets or other energy commodities, which exhibit idiosyncratic bubbles unsynchronized with the bubbles observed in lithium markets. |
| Keywords: | Speculative processes, Electric vehicle, Li-ion batteries. JEL classification: Q21, N70, Q41, Q42. |
| Date: | 2021–04 |
| URL: | http://d.repec.org/n?u=RePEc:ira:wpaper:202110&r= |
| By: | Christian Haddad; Lars Hornuf |
| Abstract: | We study the impact fintech startups have on the performance and the default risk of traditional financial institutions. We find a positive relationship between fintech startup formations and incumbent institutions’ performance for the period from 2005 to 2018 and a large sample of financial institutions from 87 countries. We further analyze the link between fintech startup formations and the default risk of traditional financial institutions. Fintech startup formations decreases stock return volatility of incumbent institutions and decreases the systemic risk exposure of financial institutions. Our findings indicate that the development of fintech startups should be monitored very closely by legislators and financial supervisory authorities, because fintechs not only have a positive effect on the financial sector’s performance, but can also improve financial stability relative to the status quo. |
| Keywords: | fintech, bank performance, default risk, financial stability |
| JEL: | K00 L26 O30 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_9050&r= |
| By: | Christopher G. Lamoureux; Huacheng Zhang |
| Abstract: | We analyze characteristics' joint predictive information through the lens of out-of-sample power utility functions. Linking weights to characteristics to form optimal portfolios suffers from estimation error which we mitigate by maximizing an in-sample loss function that is more concave than the utility function. While no single characteristic can be used to enhance utility by all investors, conditioning on momentum, size, and residual volatility produces portfolios with significantly higher certainty equivalents than benchmarks for all investors. Characteristic complementarities produce the benefits, for example momentum mitigates overfitting inherent in other characteristics. Optimal portfolios' returns lie largely outside the span of traditional factors. |
| Date: | 2021–04 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2104.12975&r= |
| By: | Jonathan Huntley (Penn Wharton Budget Model, The Wharton School, University of Pennsylvania); Valentina Michelangeli (Bank of Italy); Felix Reichling (Penn Wharton Budget Model, The Wharton School, University of Pennsylvania) |
| Abstract: | We use data on one-participant retirement savings plans to identify a behavioral bias in savings decisions. Investors who earn top-decile returns increase contributions to their accounts more than other investors. Using characteristics of the investors, characteristics of their retirement savings accounts, and multivariate regression analysis, we first show that such ``return chasing'' behavior is robust to controls for financial illiteracy, macroeconomic conditions, learning, transaction costs, housing prices, and informational frictions. We then use a structural two-asset model with tax-deferred and taxable assets to show that a permanent increase in expected returns produces investment responses for younger or liquidity-constrained investors that are consistent with our data. Our results provide evidence that younger investors' recent portfolio experiences have highly persistent effects on their expectations. |
| Keywords: | household finance, retirement saving, life-cycle |
| JEL: | D14 G4 |
| Date: | 2021–04 |
| URL: | http://d.repec.org/n?u=RePEc:bdi:wptemi:td_1334_21&r= |
| By: | Francisco J. Buera; Roberto N. Fattal-Jaef; Hugo Hopenhayn; P. Andres Neumeyer; Yongseok Shin |
| Abstract: | What are the effects of a temporary lockdown of the economy? Do firms' deteriorating balance sheets and labor market frictions propagate and prolong the effects? We answer these questions in a model with financial and labor market frictions. The model makes quantitative predictions about the effect of lockdowns of varying magnitude and duration on output, employment and firm dynamics. We find that the effects are not persistent if (i) workers on temporary layoff can be recalled by their previous employers without having to go through the frictional labor market and (ii) the government provides employment subsidies to firms during the lockdown. However, the effects are heterogeneous and young non-essential firms are disproportionately affected. In addition, if lockdowns lead to more permanent reallocation across industries, the recession becomes more protracted. Although the paper is motivated by the lockdowns during the Covid-19 pandemic, the framework can be readily applied to large, temporary shocks of different nature. |
| JEL: | E32 E44 L25 |
| Date: | 2021–04 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:28704&r= |
| By: | Yusuke Narita; Kohei Yata |
| Abstract: | Algorithms produce a growing portion of decisions and recommendations both in policy and business. Such algorithmic decisions are natural experiments (conditionally quasi-randomly assigned instruments) since the algorithms make decisions based only on observable input variables. We use this observation to develop a treatment-effect estimator for a class of stochastic and deterministic algorithms. Our estimator is shown to be consistent and asymptotically normal for well-defined causal effects. A key special case of our estimator is a high-dimensional regression discontinuity design. The proofs use tools from differential geometry and geometric measure theory, which may be of independent interest. The practical performance of our method is first demonstrated in a high-dimensional simulation resembling decision-making by machine learning algorithms. Our estimator has smaller mean squared errors compared to alternative estimators. We finally apply our estimator to evaluate the effect of Coronavirus Aid, Relief, and Economic Security (CARES) Act, where more than \$10 billion worth of relief funding is allocated to hospitals via an algorithmic rule. The estimates suggest that the relief funding has little effects on COVID-19-related hospital activity levels. Naive OLS and IV estimates exhibit substantial selection bias. |
| Date: | 2021–04 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2104.12909&r= |
| By: | Simon Accorsi |
| Abstract: | This paper studies the relationship between democracy and economic growth with a time series approach. For a number of Latin America and European countries we estimate the long term effect of a democratic shock on the per capita GDP growth rate. The starting point is an Autoregressive Vector (VAR) acting as general unrestricted model (GUM). This general model is subjected through an automatic reduction process using a General to Specific (GETS) algorithm. This methodology ensures the weak exogeneity of the variables with respect of the parameters of interest and allows to investigate the strong exogeneity. Results show no clear patterns for the relation between political regime and economic performance, which is indicative of a country-specific relationship. In the Chilean case, a democratic shock takes 4 years to have a positive impact on the growth rate of GDP per capita. The maximum effect is reached after 10 years. |
| Date: | 2021–04 |
| URL: | http://d.repec.org/n?u=RePEc:udc:wpaper:wp515&r= |
| By: | Jan de Loecker; Jan Eeckhout; Simon Mongey |
| Abstract: | We propose a general equilibrium model with oligopolistic output markets where two channels can cause a change in market power: (i) technology, via changes to productivity shocks and the cost of entry, (ii) market structure, via changes to the number of potential competitors. First, we disentangle these narratives by matching data on markups, labor reallocation and costs, finding that both channels are necessary to account for the data. Second, we show that changes in technology and market structure yield positive welfare effects through reallocation and selection, but off-setting negative effects from dead-weight loss and overhead. Overall, welfare is 9 percent lower in 2016 than in 1980. Third, the changes we identify explain and decompose cross-sectional patterns in declining business dynamism, declining equilibrium wages and labor force participation via reallocation toward larger, more productive firms. |
| Keywords: | business dynamism, market power in the aggregate economy, technological change, market structure, reallocation, Endogenous markups, wage stagnation, labor share, passthrough |
| JEL: | C6 D4 D5 L1 |
| Date: | 2021–04 |
| URL: | http://d.repec.org/n?u=RePEc:bge:wpaper:1251&r= |
| By: | Böhl, Gregor; Hommes, Cars H. |
| Abstract: | Can boundedly rational agents survive competition with fully rational agents? The authors develop a highly nonlinear heterogeneous agents model with rational forward looking versus boundedly rational backward looking agents and evolving market shares depending on their relative performance. Their novel numerical solution method detects equilibrium paths characterized by complex bubble and crash dynamics. Boundedly rational trend-extrapolators amplify small deviations from fundamentals, while rational agents anticipate market crashes after large bubbles and drive prices back close to fundamental value. Overall rational and non-rational beliefs co-evolve over time, with time-varying impact, and their interaction produces complex endogenous bubble and crashes, without any exogenous shocks. |
| Keywords: | Heterogeneous agents,trend-extrapolation,bubbles,numerical solution method |
| JEL: | C63 E03 E32 E44 E51 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:imfswp:156&r= |
| By: | Park, Donghyun (Asian Development Bank); Tian, Shu (Asian Development Bank); Wu, Qiongbing (Western Sydney University) |
| Abstract: | This study examines the impact of bond markets on both bank profit and cost efficiency. By employing the stochastic frontier approach and utilizing a large micro dataset for 926 banks covering 27 economies from the Asia and Pacific region over the period from 2004 to 2017, we find that both the bond market development and bond market structure are relevant to bank efficiency. The development of bond markets generally has a positive (negative) effect on bank profit (cost) efficiency. Given the development level of the aggregate bond market, increasing the proportion of corporate bonds will enhance both bank profit and cost efficiency. Moreover, given the development level of a country’s corporate bond market, a greater share of local currency corporate bonds is significantly and positively related to both bank profit and cost efficiency. In addition, increasing share of bank-issued corporate bonds in corporate bonds significantly increases (decreases) bank profit (cost) efficiency. Overall, our results point to the significant importance of local currency corporate bonds to the overall bank efficiency. Our findings provide important implications for both policy makers and bank management. |
| Keywords: | Asia and Pacific region; bank efficiency; bond market development; bond market structure; stochastic frontier analysis |
| JEL: | D20 G21 G28 |
| Date: | 2020–03–16 |
| URL: | http://d.repec.org/n?u=RePEc:ris:adbewp:0612&r= |
| By: | Jan Engelmann (University of Amsterdam); Alejandro Hirmas (University of Amsterdam); Joël van der Weele (University of Amsterdam) |
| Abstract: | Economists have become increasingly interested in using attention to explain behavioral patterns both on the micro and macro level. This has resulted in several disparate theoretical approaches. Some, like rational inattention, assume a “top-down†model of executive optimization. Others, like salience theory, assume a “bottom-up†influence where attention is driven by contextual factors. This distinction is fundamental for the economic implications of attention, but so far there is little understanding of their relative importance. We propose a multi-attribute random utility model that unifies prior theoretical approaches by distinguishing between the impact of top-down and bottom-up attention. We accomplish this by separating agent-specific and decision-specific variation in attention and verify our framework in an eye-tracking experiment on risky choice. We find that both top-down and bottom-up attention are connected to important choice variables: both are associated with the weighting of the attributes of choice options, while top-down attention is additionally associated with measures of loss aversion. We discuss the insights regarding the nature of attention and its role in economic theory. |
| Keywords: | Attention, Random, Utility Models, Eye-tracking, Loss Aversion |
| JEL: | D81 D83 D87 D91 |
| Date: | 2021–04–26 |
| URL: | http://d.repec.org/n?u=RePEc:tin:wpaper:20210031&r= |
| By: | Favara, Marta (University of Oxford); Glewwe, Paul (University of Minnesota); Porter, Catherine (Lancaster University); Sanchez, Alan (Group for the Analysis od Development (GRADE)) |
| Abstract: | Education choices are made based on the expected returns to schooling. If individuals are badly informed, they may make inefficient choices. We directly elicit young people's subjective expectations at the age of 14-15 about earnings under different educational scenarios and find these predict university enrolment by the age of 18-19. Females expect lower earnings than males, likely anticipating the reality of the labour market. Living in a poorer household, weaker numeric skills and lower self-efficacy are also associated with lower expected returns to education. Comparing expectations with the actual earnings from a nationally representative sample of individuals matched by sex, region and place of residence, we find that expectations for earnings upon completing secondary education closely match observed earnings, while there is a tendency to overestimate the returns to completing a university degree. These results hold for both males and females although with considerable variation across regions and population subgroups. |
| Keywords: | subjective expectations, earning realizations, Young Lives, Peru |
| JEL: | I2 J22 J24 |
| Date: | 2021–04 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp14289&r= |
| By: | Brown, Sarah (University of Sheffield); Bucciol, Alessandro (University of Verona); Montagnoli, Alberto (University of Sheffield); Taylor, Karl (University of Sheffield) |
| Abstract: | We investigate the role of financial advice in shaping the composition of household portfolios in Great Britain. Advice is associated with a reallocation of wealth away from real estate and towards bonds and stocks, especially when households seek financial advice "for investments". Having a consultation with a stockbroker has a particularly large effect on the portfolio share in stocks. However, even free financial advice has a positive effect on the shares in bonds and stocks, compared to not receiving advice. Finally, we find a positive association between alternative measures of portfolio risk and the composition of the portfolio, whilst accounting for financial advice. |
| Keywords: | financial advice, financial risk, household financial portfolios |
| JEL: | D81 G11 D14 |
| Date: | 2021–04 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp14301&r= |
| By: | Breunig, Christoph (Emory University); Grabova, Iuliia (HU and DIW Berlin); Haan, Peter (FU and DIW Berlin); Weinhardt, Felix (HU and DIW Berlin); Weizsäcker, Georg (HU and DIW Berlin) |
| Abstract: | The rational expectations assumption, e.g. in life-cycle models and portfolio-choice models, prescribes agents to have model-consistent beliefs and to avoid systematic prediction errors. In reality, justication and identication of expectations are nontrivial. One way to solve this problem is to elicit expectations collecting survey data. We utilize the German SOEP Innovation Sample to analyze short-run and long-run expectations of households in three different domains: stock market, labor market and housing market. Our main contribution to the existing literature is that we study expectations about price developments over longer periods, which is of central relevance since many important economic decisions of households concern the long run. Previous studies have mainly focused on short-run or medium-run expectations. We document that while expectations about wages are similar to historical values, the long-run expectations about the developments of the stock market index and about house prices are strongly pessimistic. In the case of the stock market, respondents expect only a small percentage of historical growth. We also observe substantial heterogeneity of expectations by socio-economic background. |
| Keywords: | long-run expectations; biased beliefs; returns to education; |
| JEL: | D63 H23 I24 I38 J22 J31 |
| Date: | 2019–12–16 |
| URL: | http://d.repec.org/n?u=RePEc:rco:dpaper:218&r= |
| By: | Menkhoff, Lukas (HU Berlin and DIW Berlin); Rieth, Malte (DIW Berlin); Stöhr, Tobias (Kiel Institute for the World Economy) |
| Abstract: | Evidence on the effectiveness of FX interventions is either limited to short horizons or hampered by debatable identification. We address these limitations by identifying a structural vector autoregressive model for the daily frequency with an external instrument. Applying this approach to the most important, freely floating currencies, we find that FX intervention shocks significantly affect exchange rates and that this impact persists for months. We show for Japan and the US that interest rates tend to fall in response to sales of the domestic currency, whereas stock prices of large (exporting) firms increase after devaluation of the domestic currency. |
| Keywords: | foreign exchange intervention; structural VAR; exchange rates; interest rates; stock prices; |
| JEL: | F31 F33 E58 |
| Date: | 2019–12–04 |
| URL: | http://d.repec.org/n?u=RePEc:rco:dpaper:205&r= |
| By: | Jeppe Christoffersen; Felix Holzmeister; Thomas Plenborg |
| Abstract: | We systematically examine which characteristics of a business opportunity – such as the likelihoods of potential gains and losses – affect managers' perception of risk and attractiveness. In an online experiment with a sample of 4,287 managers from small- and medium-sized enterprises in Denmark, we present participants with a hypothetical investment prospect in a business context, and elicit their perception of risk associated with the project and their perception of the investment's attractiveness. The experimental data is merged with a set of background variables on the company, which allows controlling for firm-specific effects. We find that risk perception is driven by the likeli hood and the return associated with the worst-case scenario as well as the size of the required investment. Managers' perception of attractiveness is affected not only by the worst-case scenario but also by the characteristics of the base-case and the best-case outcomes. Furthermore, we provide evidence that managers' perception of the project's attractiveness is significantly affected by their individual-level risk preferences and the interaction effect with risk perception. This implies that not only the characteristics of the different scenarios but also individuals' risk preferences play an important role when assessing the attractiveness of a business opportunity. |
| Keywords: | risk perception, risk preferences, attractiveness of investment project, business opportunity |
| JEL: | D81 D91 M10 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:inn:wpaper:2021-14&r= |
| By: | Julia Seither |
| Abstract: | This paper investigates the effects of incorrect beliefs over relative firm performance on micro-firm outputs through a randomized field experiment in Mozambique. At baseline, 76% of firm owners in the bottom of the distribution are overconfident about their firm’s performance. The estimates reveal that correcting these beliefs through a simple, easily scalable information experiment closes the performance gap between treated firms in the bottom of the distribution at baseline and average and top firms by almost 43%. Moreover, the treatment increases the time a firm owner allocates to her business, improves strategic cooperation with the most important business partners, and affects the pricing strategy of treated firm owners. My results suggest that incorrect beliefs about relative performance are a binding constraint to firm growth that have large implications for managerial behavior and firm outcomes. |
| JEL: | D22 D91 O12 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:unl:novafr:wp2108&r= |
| By: | Karle, Heiko (Frankfurt School of Finance & Management); Engelmann, Dirk (HU Berlin); Peitz, Martin (University of Mannheim) |
| Abstract: | In this paper, we match data on student performance in a multiple-choice exam with data on student risk preferences that are extracted from a classroom experiment. We find that more-loss-averse students leave more questions unanswered and perform worse in the multiple-choice exam when giving an incorrect answer is penalized compared to not answering. We provide evidence that loss aversion parameters extracted from lottery choices in a controlled experiment have predictive power in a field environment of decision making under uncertainty. Furthermore, the degree of loss aversion appears to be persistent over time, as the experiment was conducted three months prior to the exam. We also find important differences across genders; they are partly explained by differences in loss aversion. |
| Keywords: | loss aversion; decision making under uncertainty; multiple choice; |
| JEL: | C91 D01 D11 D83 |
| Date: | 2019–09–16 |
| URL: | http://d.repec.org/n?u=RePEc:rco:dpaper:182&r= |
| By: | Katie Eddins; Elizabeth Clary |
| Abstract: | This brief offers guidance to grantees who want to or already address one of the adulthood preparation subjects (APSs)—financial literacy—in their Personal Responsibility Education Program (PREP) program. |
| Keywords: | PREP, PMAPS, APS, Adulthood, Financial Literacy, Financial Capability |
| URL: | http://d.repec.org/n?u=RePEc:mpr:mprres:f6199506ffcf4643913954b15e8b0959&r= |
| By: | Blanco, Cesar; Diz, Sebastian |
| Abstract: | This paper explores the optimal design of monetary policy in a multisector model where agents' preferences are non-homothetic. Non-homotheticity derives from the existence of a minimum consumption requirement for food, which households need to satisfy for subsistence. We find that the introduction of a minimum consumption requirement reduces the weight on food inflation in the optimal index that the monetary authority should target. We identify three motives for such prescription. First, non-homothetic preferences turn the stabilization of food inflation more costly, as it requires larger deviations of output from the efficient level. Second, proximity to the subsistence level turns the demand for food insensitive to monetary policy. Inflation in this sector thus becomes difficult to control. Third, non-homothetic preferences imply that households spend only a small share of any additional income on food. This means that prices in this sector have a reduced impact on aggregate consumption demand. Hence, responding to inflation in this sector becomes less relevant. Importantly, our results provide a rationale for targeting an index that excludes (or attaches a limited weight to) food inflation, a usual practice amongst central bankers. |
| Keywords: | Inflation, Price Index, Monetary Policy |
| JEL: | E31 E52 |
| Date: | 2021–04–26 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:107427&r= |
| By: | Bahareh Afhami; Mohsen Rezapour; Mohsen Madadi; Vahed Maroufy |
| Abstract: | In this paper, we are concerned with the optimization of a dynamic investment portfolio when the securities which follow a multivariate Merton model with dependent jumps are periodically invested and proceed by approximating the Condition-Value-at-Risk (CVaR) by comonotonic bounds and maximize the expected terminal wealth. Numerical studies as well as applications of our results to real datasets are also provided. |
| Date: | 2021–04 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2104.11594&r= |
| By: | D’Hondt, Catherine (Université catholique de Louvain, LIDAM/LFIN, Belgium); De Winne, Rudy (Université catholique de Louvain, LIDAM/LFIN, Belgium); Merli, Maxime |
| Abstract: | Using information self-reported by retail investors in a risk-return profiling survey, we investigate the determinants of individual return objectives as well as the capacity of investors to reach them. Controlling for a large set of covariates, we provide empirical evidence that return objectives are related to subjective individual characteristics (such as financial literacy and risk tolerance), some sociodemographics (age, education), as well as recent past trading intensity. Retail investors with higher return objectives perform better, compared to their counterparts who want to avoid any risk of capital loss. The capacity to reach the return objective however decreases as the level of return objectives increases. |
| Keywords: | Return objectives, Risk tolerance, Financial literacy, Retail investors, MiFID |
| JEL: | G11 G40 |
| Date: | 2021–03–08 |
| URL: | http://d.repec.org/n?u=RePEc:ajf:louvlf:2021003&r= |
| By: | Bonacini, Luca; Gallo, Giovanni; Scicchitano, Sergio |
| Abstract: | In this paper, we explore channels by which household background determines an individual's educational and social opportunities in Italy. Our analysis relies on a rich dataset that contains data both on individuals and their real parents, as well as information on individuals' non-cognitive skills. This paper also represents the first attempt to evaluate if and to what extent personality traits affect educational and occupational opportunities in Italy and how they interact with household background. The results highlight that the level of parental education is more relevant than the level of parental occupational skill in individuals' educational and social opportunities. The inclusion of 'Big-5' variables in the model helps control for omitted variables and reduces the unobserved heterogeneity in intergenerational social mobility among individuals with the same level of education and skills. Our results depict a dual and unequal labour market. |
| Keywords: | intergenerational mobility,equality of opportunity,household background,regional studies,personality traits,big five |
| JEL: | I24 J62 R23 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:glodps:832&r= |
| By: | Maré, David C. (Motu Economic and Public Policy Research Trust); Hyslop, Dean (Motu Economic and Public Policy Research Trust) |
| Abstract: | New Zealand has seen dramatic changes in minimum wage policies since 2000. The adult minimum wage has increased 75% in CPI-adjusted real terms. In addition, the youth minimum wage was abolished in two stages, resulting in a 125% increase in the real minimum wage for 16–19-year-old workers. We review the motivations for minimum wages and the changes and analyse how they have affected workers outcomes. We find that the minimum wage now strongly determines the wages of teenage workers, with the minimum wage now at the median wage of teenagers, and over half of 16–17-year-olds, and about 40% of 18–19-year-olds, earning at or below the minimum. Although we find no clear evidence that increases in the minimum wage have led to adverse employment effects, we expect there are downside risks for youth and low skilled workers' employment. As minimum wage workers are broadly spread across the household income distribution, we conclude that minimum wages are largely ineffective as a redistributive income support policy. |
| Keywords: | minimum wages, employment, earnings inequality, income inequality |
| JEL: | J21 J23 J24 J31 J38 |
| Date: | 2021–04 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp14302&r= |
| By: | Rammer, Christian; Fernández, Gastón P.; Czarnitzki, Dirk |
| Abstract: | Artificial Intelligence (AI) represents a set of techniques that enable new ways of innovation and allows firms to offer new features of products and services, to improve production, marketing and administration processes, and to introduce new business models. This paper analyses the extent to which the use of AI contributes to the innovation performance of firms. Based on firm-level data from the German part of the Community Innovation Survey (CIS) 2018, we examine the contribution of different AI methods and applications to product and process innovation outcomes. The representative nature of the survey allows extrapolating the findings to the macroeconomic level. The results show that 5.8% of firms in Germany were actively using AI in their business operations or products and services in 2019. The use of AI generated additional sales with world-first product innovations in these firms of about €16 billion, which corresponds to 18% of total sales of world-first innovations in the German business sector. Firms that developed AI by combining in-house and external resources obtained significantly higher innovation results. The same is true for firms that apply AI in a broad way and have already several years of experience in using AI. |
| Keywords: | Artificial Intelligence,Innovation,CIS data,Germany |
| JEL: | O14 O31 O32 O33 L25 M15 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:zewdip:21036&r= |
| By: | Minetti, Raoul (Michigan State University, Department of Economics); Moreland, Timothy (Michigan State University, Department of Economics); Kokas, Sotirios (Essex Business School, University of Essex) |
| Abstract: | We study the impact of the concentration and complexity of the banking sector on firms' financing and investment behavior over the business cycle. We find that, after the late 1990s, while debt issuance remained procyclical for U.S. firms of all sizes, equity issuance and liquidity accumulation switched from countercyclical to procyclical for small and medium-sized publicly-traded firms. Using matched firm-bank data, we provide evidence that bank consolidation contributed to this change. We rationalize these findings in a general equilibrium business cycle model. After bank consolidation, the weakening in firms' bargaining power and relational ties with banks enhances firms' precautionary demand for liquidity and equity issuance incentives following positive shocks. The change in financing behavior increases investment and employment sensitivity to aggregate productivity shocks. |
| Keywords: | Financial frictions; business cycles; nancial structure; credit shocks |
| JEL: | E22 E32 E44 G32 |
| Date: | 2021–04–06 |
| URL: | http://d.repec.org/n?u=RePEc:ris:msuecw:2021_001&r= |
| By: | Shohei Nakazato; Mariagrazia Squicciarini |
| Abstract: | This work proposes an experimental methodology to identify and measure artificial intelligence (AI)-related trademarks. It aims to shed light on the extent to which (new) companies and products appearing on the market rely on, exploit or propose AI-related goods and services, and to help identify the companies and organisations that are active in the AI space. The paper finds evidence that AI-related goods and services have expanded in consumer markets in recent years. Companies and other economic agents appear to register AI-related trademarks primarily to protect computer-related products and/or services, especially software, audio-visual devices and for analytical purposes. Important trademark activities related to AI also emerge in the education space, with AI-related keywords being frequently associated with educational services as well as classes, publications, workshops and online material. |
| Keywords: | Artificial Intelligence, goods and services, markets, trademarks |
| JEL: | O31 O34 L25 |
| Date: | 2021–05–04 |
| URL: | http://d.repec.org/n?u=RePEc:oec:stiaaa:2021/06-en&r= |
| By: | Abel Brodeur (University of Ottawa and IZA); Suraiya Bhuyian (Department of Economics, University of Ottawa); Anik Islam (Department of Economics, University of Ottawa); David Gray (Department of Economics, University of Ottawa) |
| Abstract: | The goal of this piece is to survey the developing and rapidly growing literature on the economic consequences of COVID-19 and the governmental responses, and to synthetize the insights emerging from a very large number of studies. This survey: (i) provides an overview of the data sets and the techniques employed to measure social distancing and COVID-19 cases and deaths; (ii) reviews the literature on the determinants of compliance with and the effectiveness of social distancing; (iii) the macroeconomic and financial impacts, including the modelling of plausible mechanisms; (iv) summarizes the literature on the socio-economic consequences of COVID-19, focusing on those aspects related to labor, health, gender, discrimination, and the environment, and v) summarizes the literature on public policy responses. |
| Keywords: | COVID-19, coronavirus, employment, lockdowns. |
| JEL: | E00 I15 I18 J20 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:ott:wpaper:2103e&r= |
| By: | Greta Meggiorini; Fabio Milani |
| Abstract: | This paper estimates a New Keynesian model with new and old behavioral elements. Agents in the model exhibit cognitive discounting, or myopia: they discount variables far into the future at higher rates than typically implied in the benchmark model. We investigate the model under different expectational assumptions: rational expectations, subjective expectations with infinite-horizon learning, and subjective expectations with Euler-equation learning. Under rational expectations, the model necessitates of large, possibly unrealistically so, degrees of myopia. The same result persists under infinite-horizon learning, given that agents are still remarkably far-sighted. But, under Euler-equation learning, the model can fit the data with only minimal estimated degrees of myopia. The results indicate that the empirical evidence for cognitive discounting may be sensitive to the modeling of expectations, and they highlight learning as a key behavioral feature to understand macroeconomic fluctuations. |
| Keywords: | behavioural macroeconomics, cognitive discounting, myopia, inattention, constant-gain learning, behavioural New Keynesian model |
| JEL: | E31 E32 E52 E58 E70 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_9039&r= |
| By: | Lutz G. Arnold; David Russ |
| Abstract: | Do all types of information benefit the efficiency of prices in the sense that they drive them closer to fundamentals compared to the situation where information does not exist? Looking at the competitive noisy rational expectations framework, the clear answer of the literature is: yes. It suggests that rational traders use all available types of information to submit more sophisticated market orders, thereby boosting price efficiency. In this paper, however, we propose a contradiction to this traditional view. We show that there exist types of non-fundamental information that are detrimental to price eciency, as they lead traders to rationally trade with rather than against noise. We develop an analytically tractable framework with public non-fundamental information and prove that this type of information can harm price efficiency, i.e., prices would be closer to fundamentals if public non-fundamental information did not exist. |
| Keywords: | Rational Expectations Equilibrium, Market Eciency, Non-Fundamental Information, Destabilizing Rational Speculation. |
| JEL: | C62 D53 G12 G40 |
| Date: | 2020–12 |
| URL: | http://d.repec.org/n?u=RePEc:bav:wpaper:203_arnoldruss&r= |
| By: | Bruno Jetin (CEPN - Centre d'Economie de l'Université Paris Nord - CNRS - Centre National de la Recherche Scientifique - USPC - Université Sorbonne Paris Cité - UP13 - Université Paris 13) |
| Abstract: | The second automobile revolution, the age of electrification and digitalisation, is on its way. It is a gradual transition and not a sudden break. However, millions of electric vehicles (EVs) are now being sold, and the EV market is becoming a mass market propelled by economies of scale. It is reflected in the drop in the cost of batteries which will bring the price of EVs on a par with the price of conventional vehicles in the coming decade. Nonetheless, two interrelated issues have been underestimated and will now decide who will play a dominant role and benefit the most from the EV market. The first is the relative scarcity of raw materials from which batteries are made. The second is that the primary EV market is China which gives its companies a strategic advantage for the supply of critical metals and the large-scale production of batteries. Our research analyses the fundamental role of natural resources for the control of the EV market and the response of governments to ensure access to them. We show the importance of industrial and diplomatic policies in a context of geostrategic rivalries of large powers. |
| Keywords: | electric vehicle,battery electric vehicle,lithium-ion battery,materials,battery makers,carmakers |
| Date: | 2019–06–12 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:halshs-03193666&r= |
| By: | Helmut Herwartz (University of Goettingen); Christian Ochsner (University of Goettingen); Hannes Rohloff (University of Goettingen) |
| Abstract: | We estimate the marginal effects of identified components of global liquidity on 43 real economies. To this end, we employ global public and private credit components of Herwartz, Ochsner, and Rohloff (2021) in factor-augmented vector-autoregressions to trace credit shocks through the real economy (output, inflation and unemployment). Specifically, two components of global credit boost the business cycle and lower unemployment in the short-run, namely government credit demand and business credit supply, whereas household credit supply is found to deteriorate output. We find substantial heterogeneity with respect to prevalence and amplitude of global sectoral credit effects on real aggregates within the time and cross-sectional (country) dimension. |
| Keywords: | Credit shocks, credit composition, real economy, structural VAR, FAVAR |
| JEL: | C22 E32 E44 E51 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:mar:magkse:202116&r= |
| By: | Hardman, Scott; Tal, Gil |
| Abstract: | For the market introduction of electric vehicles to be successful, first-time adopters need to make continual purchases of the vehicles. Discontinuance, the act of abandoning a new technology after once being an adopter, has implications for market growth and could prevent electric vehicles from ever reaching 100% market share. Using results from five surveys of electric vehicle owners, the researchers examine discontinuance among battery electric and plug-in hybrid electric vehicle adopters. In this sample, discontinuance occurs at a rate of 21% for plug-in hybrid adopters and 19% for battery electric vehicle adopters. They show that discontinuance is related to dissatisfaction with convenience of charging, owning household vehicles with lower efficiencies, being a later adopter of PEVs, not having Level 2 (220V) charging from home, and not being male. Despite consumers overcoming initial barriers of PEVs, it appears some barriers, notably their refueling style, resurface during ownership and eventually become a barrier to continuing with PEV ownership. View the NCST Project Webpage |
| Keywords: | Social and Behavioral Sciences, Electric vehicle, market, consumers, survey |
| Date: | 2021–04–01 |
| URL: | http://d.repec.org/n?u=RePEc:cdl:itsdav:qt11n6f4hs&r= |
| By: | Strittmatter, Anthony (University of St. Gallen); Sunde, Uwe (LMU Munich); Zegners, Dainis (Erasmus University Rotterdam) |
| Abstract: | This paper presents novel evidence for the prevalence of deviations from rational behavior in human decision making – and for the corresponding causes and consequences. The analysis is based on move-by-move data from chess tournaments and an identification strategy that compares behavior of professional chess players to a rational behavioral benchmark that is constructed using modern chess engines. The evidence documents the existence of several distinct dimensions in which human players deviate from a rational benchmark. In particular, the results show deviations related to loss aversion, time pressure, fatigue, and cognitive limitations. The results also demonstrate that deviations do not necessarily lead to worse performance. Consistent with an important influence of intuition and experience, faster decisions are associated with more frequent deviations from the rational benchmark, yet they are also associated with better performance. |
| Keywords: | Rational strategies; artificial intelligence; behavioral bias; |
| JEL: | D01 D9 C7 C8 |
| Date: | 2020–05–29 |
| URL: | http://d.repec.org/n?u=RePEc:rco:dpaper:246&r= |
| By: | Candelon, Bertrand (Université catholique de Louvain, LIDAM/LFIN, Belgium); Fuerst, Franz; Hasse, Jean-Baptiste |
| Abstract: | Real estate, despite its spatial fixity, is subject to considerable cross-border investment flows. However, it may be surmised that the diversification potential of international real esta te investments dwindles if markets become increasingly interlinked. Building on a unique dataset of direct real estate markets covering 16 OECD countries over the period 1999-2018, we compare country-level and sector-level diversification potential. We apply a relative Sharpe ratio loss approach and develop a modified version of this measure, relying on the modified Value-at-Risk, which is robust to non-normality. Using a studentized circular blockbootstrap procedure, robust confidence intervals for both measures are built. This new diversification test provides investors and analysts with a valuable tool as it delivers both estimates and robust significance levels. The empirical findings broadly reveal that international diversification strategies outperform sectoral diversification of real estate assets. |
| Keywords: | Portfolio diversification ; Real estate markets |
| Date: | 2021–02–12 |
| URL: | http://d.repec.org/n?u=RePEc:ajf:louvlf:2021001&r= |
| By: | Yosuke Jin |
| Abstract: | The abuse of public office for private gains – discourages business dynamism, reducing investment and innovation, and weighs on growth prospects. It also undermines the equality of opportunities, distorts the income distribution and erodes trust in government. Corruption is often closely associated with other economic crimes such as tax evasion and money laundering. Corruption takes diverse forms such as bribery and abuse of functions, and is often a multi-faceted phenomenon. It prevails through many different mechanisms, stemming from deficiencies in specific policy areas under weak constraints against corrupt behaviour. Therefore, successfully combatting corrupt behaviour requires a comprehensive approach, addressing a wide range of policy areas. The framework developed in this paper explores in detail how corruption is associated with different policy settings. This framework also makes the most use of the existing corruption indicators, which reflect different understandings of corruption, in order to identify priority policy areas for each country. This framework aims to serve as a pathway to orient OECD Economic Surveys to state-of-the-art policy discussions which have been increasingly matured in each policy area within the Organisation. |
| Keywords: | corruption, economic crimes, law enforcement, public integrity |
| JEL: | D73 H10 K40 |
| Date: | 2021–04–26 |
| URL: | http://d.repec.org/n?u=RePEc:oec:ecoaaa:1666-en&r= |
| By: | Thomas Palley (Economics for Democratic and Open Societies (US)) |
| Abstract: | Almost fifty years ago, the Swedish econographer Axel Leijonhufvud (1973) wrote a seminal study on the Econ tribe titled “Life among the Econ”. This study revisits the Econ and reports on their current state. Life has gotten more complicated since those bygone days. The cult of math modl-ing has spread far and wide, so that even lay Econs practice it. Fifty years ago the Econ used to say “Modl-ing is everything”. Now they say “Modl-ing is the only thing”. The math priesthood has been joined by a priesthood of economagicians. The fundamental social divide between Micro and Macro sub-tribes persists, but it has been diluted by a new doctrine of micro foundations. The Econ remain a fractious and argumentative tribe. |
| Keywords: | Micro, macro, economagicians, Keynesians, New Classicals, New Keynesians |
| JEL: | A10 B00 B20 Z00 Z10 |
| Date: | 2021–04 |
| URL: | http://d.repec.org/n?u=RePEc:pke:wpaper:pkwp2106&r= |
| By: | Ivan Faiella (Bank of Italy); Luciano Lavecchia (Bank of Italy) |
| Abstract: | This paper proposes a novel methodology to estimate the demand and elasticity of electricity, heating, and private transport fuels by aligning the microdata of the Italian Household Budget Survey with several external sources. These estimates are used to evaluate the effects of a set of one-off carbon taxes on energy demand and expenditure. According to our simulations, the increase in energy prices prompted by carbon taxation would decrease energy demand for all uses considered. Our simulations suggest that the effects of carbon taxation are generally regressive: expenditure would increase more for poorer households while their energy demand is compressed. The carbon tax could achieve a significant decrease in GHG emissions and raise revenues, which could be recycled to compensate vulnerable households or reinvested to support the energy transition. |
| Keywords: | household energy demand, Italy, climate change, carbon tax, energy poverty |
| JEL: | Q41 Q54 Q58 |
| Date: | 2021–04 |
| URL: | http://d.repec.org/n?u=RePEc:bdi:opques:qef_614_21&r= |
| By: | Mauricio Medeiros Jr; Bernardus Van Doornik |
| Abstract: | We establish the relevance of human capital to startup financing. Using administrative databases from the Central Bank of Brazil, we obtain information on private firms, their founders and their access to bank credit. Our empirical strategy is based on the premature death of founders, which allows us to identify how losing founders’ human capital affects startup financing. The results show that once a founder dies unexpectedly, there is a decrease in the amount of credit and an increase in interest rates and default rates. These findings are mainly driven by the death of founders who are also managers in the firm, which is consistent with the theory of founders contributing critical resources to their firms. |
| Date: | 2021–04 |
| URL: | http://d.repec.org/n?u=RePEc:bcb:wpaper:546&r= |
| By: | Jerzy Grobelny; Rafal Michalski |
| Abstract: | The study shows the application of hidden Markov models (HMMs) for the analysis of eye ball movement fixations. The registered visual activity con-cerns pairwise comparisons of simple advertisement leaflets, differed in their layout orientation and captions’ styles. A simulation experiment was conducted to specify the most appropriate HMMs in terms of information criteria. Six best models were discussed in detail. The identified hidden states together with transition and emission probabilities were the basis of subjects’ visual behavior hypothetical interpretations. |
| Keywords: | eye tracking; cognitive modeling; visual presentation; digital signage; advertisement; human factors; ergonomics |
| JEL: | D01 D03 D40 D81 D83 D87 D91 L15 L81 L82 L86 M31 M37 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:ahh:wpaper:worms2108&r= |
| By: | Domenico Delli Gatti; Elisa Grugni |
| Abstract: | We explore the macro-financial consequences of the disruption of a supply chain in an agent based framework characterized by two networks, a credit network connecting banks and firms and a production network connecting upstream and down-stream firms. We consider two scenarios. In the first one, because of the lockdown all the upstream firms are forced to cut production. This generates a sizable down-turn during the lockdown due to the indirect effects of the shock (network based financial accelerator). In the second scenario, only those upstream firms located in the “red zone” are forced to contract production. In this case the recession is milder and the recovery begins earlier. Upstream firms hit by the shock, in fact, will be abandoned by their customers who will switch to suppliers who are located outside the red zone. In this way firms endogenously reconstruct (at least in part) the supply chain after the disruption. This is the main determinant of the mitigated impact of the shock in the “red zone” type of lockdown. |
| Keywords: | supply chain disruption, agent based macroeconomic model |
| JEL: | E17 E44 E70 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_9029&r= |
| By: | Giulia Brancaccio (Cornell University); Myrto Kalouptsidi (Harvard University); Theodore Papageorgiou (Boston College) |
| Abstract: | In this paper we investigate the importance of fuel costs in shaping world trade. We use AIS data on ship locations and transaction-level shipping prices, along with a dynamic model describing the world shipping industry, to measure the elasticity of trade with respect to ship fuel costs. We find that the average estimated elasticity is 0.35, but ranges from 0.1 to about 1.2 depending on the level of the fuel cost. The pass-through of fuel costs to transport costs is low, at 0.17. Strikingly, the trade elasticity features a pronounced asymmetry in low vs. high oil prices. As fuel costs decline, the elasticity plateaus and further declines have little impact on trade. This “flattening out” of the elasticity is attributed to the equilibrium of the transportation sector and in particular the changes in the relative bargaining positions of ships and exporters. Finally, we use the estimated elasticity to assess the importance of ship design on trade flows: if the large fuel efficiency gains achieved in the 1980s had not been realized, trade would be 12% lower today. |
| Keywords: | fuel costs, shipping, world trade, trade elasticity, oil prices, fuel efficiency, fuel cost pass-through |
| JEL: | F1 F64 L90 R4 |
| Date: | 2021–04–24 |
| URL: | http://d.repec.org/n?u=RePEc:boc:bocoec:1030&r= |
| By: | Thielmann, Axel; Wietschel, Martin; Funke, Simon; Grimm, Anna; Hettesheimer, Tim; Langkau, Sabine; Loibl, Antonia; Moll, Cornelius; Neef, Christoph; Plötz, Patrick; Sievers, Luisa; Tercero Espinoza, Luis; Edler, Jakob |
| Abstract: | When looking at the main questions along the entire battery value chain, it becomes clear that there are no insurmountable obstacles that could prevent the widespread market diffusion of battery-electric passenger cars, particularly during the decisive ramp-up phase between 2020 and 2030+. However, numerous technological, economic, ecological, regulatory and societal challenges still need to be tackled in the coming decade. The most important findings are summarized below, followed by a more detailed description in the individual chapters. |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:fisipp:012020&r= |
| By: | Xin Zhang; Lan Wu; Zhixue Chen |
| Abstract: | Factor strategies have gained growing popularity in industry with the fast development of machine learning. Usually, multi-factors are fed to an algorithm for some cross-sectional return predictions, which are further used to construct a long-short portfolio. Instead of predicting the value of the stock return, emerging studies predict a ranked stock list using the mature learn-to-rank technology. In this study, we propose a new listwise learn-to-rank loss function which aims to emphasize both the top and the bottom of a rank list. Our loss function, motivated by the long-short strategy, is endogenously shift-invariant and can be viewed as a direct generalization of ListMLE. Under different transformation functions, our loss can lead to consistency with binary classification loss or permutation level 0-1 loss. A probabilistic explanation for our model is also given as a generalized Plackett-Luce model. Based on a dataset of 68 factors in China A-share market from 2006 to 2019, our empirical study has demonstrated the strength of our method which achieves an out-of-sample annual return of 38% with the Sharpe ratio being 2. |
| Date: | 2021–04 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2104.12484&r= |
| By: | Ivanova-Stenzel, Radosveta (TU Berlin); Seres, Gyula (HU Berlin) |
| Abstract: | Anchoring is one of the most studied and robust behavioral biases, but there is little knowledge about its persistence in strategic settings. This article studies the role of anchoring bias in private-value auctions. We test experimentally two different anchor types. The announcement of a random group identification number but also of an upper bid limit in the first-price sealed-bid auction result in higher bids. We show that such behavior can be explained as a rational response to biased beliefs. In Dutch auctions, the effect of a starting price, is negative. We demonstrate that the long-established ranking that the Dutch auction generates lower revenue than the first-price sealed-bid auction crucially depends on the size of the anchor. |
| Keywords: | anchoring bias; games; incomplete information; auctions; |
| JEL: | D44 D91 C72 C91 |
| Date: | 2019–12–11 |
| URL: | http://d.repec.org/n?u=RePEc:rco:dpaper:211&r= |
| By: | Ainaa, Carmen; Brunetti, Irene; Mussida, Chiara; Scicchitano, Sergio |
| Abstract: | This paper investigates what happened to the wage distribution in Italy during the first wave of the COVID-19 pandemic. It shows which categories of workers and economic sectors have suffered more than others and to what extent both the actual level of smart-working and the ability to Working From-Home can influence the wage distribution. We use a unique dataset relying on the merging of two sample surveys: the Italian Labor Force Survey set up by National Institute of Statistics and the Italian Survey of Professions conducted by the National Institute for Public Policy Analysis. We estimate quantile regression models accounting for selection. First, the findings reveal that the pandemic has affected the wages of the whole workers, but the effect is higher at the bottom of the wage distribution. Second, the actual working from home mitigates the negative distributional consequences of the COVID-19 observed for those at the bottom of the wage distribution. However, the advantage of workers at the bottom tail of the wage distribution seems to lessen in the long term once the health emergency is passed. Third, looking at sectoral heterogeneity, retail and the restaurant are the most hit sectors in terms of wage loss. Fourth, separating by gender, men have been mostly hit by the pandemic, particularly at lowest deciles, though they benefited more from working at home at higher deciles. Finally, women appear as the one that in the long run would benefit more from increasing working from home possibility. |
| Keywords: | Wage inequality,COVID-19,Working from home,Quantile regression |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:glodps:829&r= |
| By: | Giammario Impullitti; Omar Licandro; Pontus Rendahl |
| Abstract: | We study the gains from trade in a model with oligopolistic competition, heterogeneous firms and innovation, and provide a formula to decompose the mechanism. The new insight we provide is that market concentration can be a welfare-relevant feature of market power above and beyond markup dispersion. Trade liberalisation increases foreign competition and reduces the number of active firms in the market, thereby increasing concentration. A more concentrated economy is more efficient due to increasing returns in production. Moreover, higher concentration produces a scale effect on firms’ incentives to innovate, which increases welfare via productivity improvements. In the calibrated version of the model we show that a trade-induced increase in concentration contributes substantially to the gains from trade, mostly via its stimulating effect on innovation. Sizeable gains also come from the reduction of the inefficiency produced by trade in identical goods; i.e. through a reduction in reciprocal dumping. Changes in markup dispersion, in contrast, have only negligible effects. |
| Keywords: | gains from trade, heterogeneous firms, oligopoly, innovation, endogenous markups, market concentration |
| JEL: | F12 F13 O31 O41 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_9022&r= |
| By: | Younes Bennane (KLMSU - Kalmyk State University); Sanaa Haouata (UH2MC - Université Hassan II [Casablanca]) |
| Abstract: | Le tourisme étant une industrie (Sid Ahmed, 1987), revêt une importance de plus en plus capitale pour le développement des territoires et de leurs économies (Leroux&Pupion, 2014). Ce constatest appuyé par les chiffres relevés dans le rapport de l'OMT (2017), où les recettes du tourisme international ont atteint le chiffre de 1340 milliards de dollars avec une augmentation de 4,9% en comparaison avec l'année 2016, 10% du PIB mondial est réalisé par le secteur touristique, ce dernier permet la création de 1/10 des emplois par rapport aux autres secteurs économiques. Dans cette perspective, le tourisme représente un secteur prometteur dont la concurrence est devenuefarouche (Balfet&al., 2012), notamment avec l'évolution de nouvelles formes d'activités touristiques, à l'instar de la concurrence directe que subissent les agences de voyages traditionnelles au regard de l'apparition de nouveaux opérateurs tels que le ‘'e-tourisme'' et le ‘'m-tourisme'' (Balfet&al., 2012 ; Leroux &Pupion, 2014), voire l'apparition des agrégateurs (Observatoiredu Tourisme Marocain, 2014). A partir des années 90, le secteur du tourisme a connu une évolution considérable en matière de recours aux TIC. D'ailleurs ces dernières jouent un rôle central dans le développement du tourisme d'aujourd'hui (Gallouj& Leroux, 2011). Au regard de cette évolution, nous envisageons à travers ce papier, faire une analyse de la revue de littérature en vue d'illustrer les différentes étapes qu'a traversé l'activité touristique, tout en mettant en exergue l'évolution des principaux opérateurs touristiques, notamment les nouveaux : le e-tourisme, le m-tourisme ainsi que les agrégateurs, afin d'analyser leur impact sur le secteur. Sur le plan empirique, nous souhaitons nous approcher de plus près des entreprises ayant choisi le e-tourisme comme plateforme pour promouvoir et commercialiser des produits touristiques. Pour ce faire, nous menons par le biais d'une analyse qualitative du contenu, une étude comparative des trois entreprises ayant une part de marché importante dans le ‘'e-tourisme'' à savoir : Booking, Airbnb et Expedia. |
| Keywords: | Tourisme,e-tourisme,m-tourisme,innovation,TIC,agrégateurs de tourisme,opérateurs de tourisme |
| Date: | 2019–04–24 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-03199668&r= |
| By: | Ortigueira, Salvador; Siassi, Nawid |
| Abstract: | We characterize the optimal reform of U.S. income support for low-income single parents. We develop a heterogeneous agents model with idiosyncratic risk and incomplete asset markets where single parents evolve through three life stages defined by their children's care needs. Using the U.S. tax-transfer system as the benchmark policy and a sample of single mothers drawn from the CPS, we assess reforms that maximize the expected utility of entering mothers. When policy cannot be tagged by the single mothers' life stage, the optimal reform calls for an increase in out-of-work income support by 11 percent, from $6,320 to $7,080, and a decrease in the wage subsidy to low-wage workers from 34 to 22 percent. This reform delivers substantial welfare gains for single mothers-to-be, and has the support of a vast majority of incumbent mothers. Tagging policy by the life stage makes the government's trade-off between providing insurance to single mothers in stage one (child in pre-schooling age) and incentivizing them to work when they transit to stage two (child in school age) more favorable, thus increasing their scope for smoothing marginal utility throughout life stages. Single mothers in stage one receive $8,950 in out-of-work support, and no subsidies to low-wages. For single mothers in stage two the optimal reform prescribes a reduction in out-of-work income support and an increase in work subsidies. Tagging brings additional welfare gains. |
| Keywords: | Optimal income transfers,Single-parent households,Intertemporal savings and labor supply |
| JEL: | D15 E21 E61 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:tuweco:052021&r= |
| By: | Mitchener, Kris James (Santa Clara University, CAGE, CEPR, CES-ifo & NBER); Wandschneider, Kirsten (University of Vienna & CEPR); O’Rourke, Kevin Hjortshøj (NYU-Abu Dhabi, CEPR, NBER & CAGE) |
| Abstract: | We document the outbreak of a trade war after the U.S. adopted the Smoot-Hawley tariff in June 1930. U.S. trade partners initially protested the possible implementation of the sweeping tariff legislation, with many eventually choosing to retaliate by increasing their tariffs on imports from the United States. Using a new quarterly dataset on bilateral trade for 99 countries during the interwar period, we show that U.S. exports to countries that protested fell by between 15 and 22 percent, while U.S. exports to retaliators fell by 28-33 percent. Furthermore, using a second new dataset on U.S. exports at the product-level, we find that the most important U.S. exports to retaliating markets were particularly affected, suggesting a possible mechanism whereby the U.S. was targeted despite countries’ MFN obligations. The retaliators’ welfare gains from trade fell by roughly 8-17%. |
| Keywords: | Trade wars, gravity model, Smoot-Hawley, Great Depression, trade policy JEL Classification: F13, F14, N70 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:cge:wacage:550&r= |
| By: | Ricky Kanabar (Univeristy of Bath); Paul Gregg (Univeristy of Bath) |
| Abstract: | The aim of this paper is to document the intergenerational persistence of wealth between adult offspring and their parent's using the Wealth and Assets Survey for Great Britain. As parental wealth it is not directly observed it is assessed as mean values based on age, home ownership and education from retrospective questions. Estimates are then derived employing a commonly used two stage estimator. For offspring aged around 44 and parents aged around 74, the oldest where wealth can reliably be observed in the sample, the intergenerational wealth elasticity (IWE) is 0.4 and the rank-rank elasticity 0.3. However, wealth is a stock accumulated over a person's working life and then dissaving takes place in retirement. Thus, peak wealth holding occurs around the age of 64 and this represents a proxy measure of life-time wealth accumulation. Under certain assumptions about parental wealth holding we explore wealth persistence for older offspring up to age 64. Importantly, we find at these older ages wealth persistence is generally lower than for those currently aged in their 30s and early 40s, though rank based estimates are broadly stable. The average IWE is 0.35 (ages 28-64) and rank equivalent 0.3 in 2012. For those in their 30s however, the IWE is 0.4, even though the short panel suggests a strong life cycle bias where wealth persistence is lower at ages below 64. Exploration of this contradiction shows that those who have a relatively high wealth among older cohorts came from more typical backgrounds than in younger ones. The six year panel data also shows that intergenerational wealth elasticity is 3.8 percentage points higher when comparing people with those the same age six years previously. There is, thus, very strong evidence of higher wealth intergenerational persistence in younger age cohorts. As it was already higher than for older cohorts and has risen rapidly, standing at 0.44 (ages 32-44) by 2018. |
| Keywords: | Wealth, Inequality, intergenerational mobility, Great Britain. |
| JEL: | D31 D63 I24 |
| Date: | 2021–04 |
| URL: | http://d.repec.org/n?u=RePEc:ucl:cepeow:21-06&r= |