|
on Central and Western Asia |
| By: | Alan de Bromhead; Alan Fernihough; Markus Lampe; Kevin Hjortshøj O’Rourke |
| Abstract: | This paper introduces a new dataset of commodity-specific, bilateral import data for four large Asian economies in the interwar period: China, the Dutch East Indies, India, and Japan. It uses these data to describe the interwar trade collapses in the economies concerned. These resembled the post-2008 Great Trade Collapse in some respects but not in others: they occurred along the intensive margin, imports of cars were particularly badly affected, and imports of durable goods fell by more than those of non-durables, except in China and India which were rapidly industrializing. On the other hand the import declines were geographically imbalanced, while prices were more important than quantities in driving the overall collapse. |
| Keywords: | Trade collapses; interwar economy; protection |
| JEL: | N75 F14 |
| Date: | 2021–04–01 |
| URL: | http://d.repec.org/n?u=RePEc:oxf:esohwp:_190&r= |
| By: | Ozili, Peterson Kitakogelu; |
| Abstract: | This paper is a survey of the most important research in the economic policy uncertainty literature. Economic policy uncertainty, although still under-researched relative to mainstream topics in economics and finance, has recently received increased scholarly attention. Through synthesizing common themes in the literature, the paper highlights the progress made so far and suggest some avenues for future research which allows future researchers to position their research and differentiate themselves from other studies in the literature. The paper finds that economic policy uncertainty affects banks through a reduction in credit supply and loan re-pricing. High economic policy uncertainty compel bank managers to discretionary distort bank financial reporting in ways that help them to mitigate the depressing effect of economic policy uncertainty on their profitability. |
| Keywords: | economic policy uncertainty, banking, banks, uncertainty, index, news, government, tax code, inflation, elections. |
| JEL: | E52 E61 G18 G20 G21 G24 G28 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:108017&r= |
| By: | Daniel Hopp |
| Abstract: | Artificial neural networks (ANNs) have been the catalyst to numerous advances in a variety of fields and disciplines in recent years. Their impact on economics, however, has been comparatively muted. One type of ANN, the long short-term memory network (LSTM), is particularly wellsuited to deal with economic time-series. Here, the architecture's performance and characteristics are evaluated in comparison with the dynamic factor model (DFM), currently a popular choice in the field of economic nowcasting. LSTMs are found to produce superior results to DFMs in the nowcasting of three separate variables; global merchandise export values and volumes, and global services exports. Further advantages include their ability to handle large numbers of input features in a variety of time frequencies. A disadvantage is the inability to ascribe contributions of input features to model outputs, common to all ANNs. In order to facilitate continued applied research of the methodology by avoiding the need for any knowledge of deep-learning libraries, an accompanying Python library was developed using PyTorch, https://pypi.org/project/nowcast-lstm/. |
| Date: | 2021–06 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2106.08901&r= |
| By: | Ali Hirsa; Joerg Osterrieder; Branka Hadji-Misheva; Jan-Alexander Posth |
| Abstract: | Financial trading has been widely analyzed for decades with market participants and academics always looking for advanced methods to improve trading performance. Deep reinforcement learning (DRL), a recently reinvigorated method with significant success in multiple domains, still has to show its benefit in the financial markets. We use a deep Q-network (DQN) to design long-short trading strategies for futures contracts. The state space consists of volatility-normalized daily returns, with buying or selling being the reinforcement learning action and the total reward defined as the cumulative profits from our actions. Our trading strategy is trained and tested both on real and simulated price series and we compare the results with an index benchmark. We analyze how training based on a combination of artificial data and actual price series can be successfully deployed in real markets. The trained reinforcement learning agent is applied to trading the E-mini S&P 500 continuous futures contract. Our results in this study are preliminary and need further improvement. |
| Date: | 2021–06 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2106.08437&r= |
| By: | Gandal, Neil; Gans, Joshua; Haeringer, Guillaume; Halaburda, Hanna |
| Abstract: | Since its launch in 2009 much has been written about Bitcoin, cryptocurrencies and blockchains. While the discussions initially took place mostly on blogs and other popular media, we now are witnessing the emergence of a growing body of rigorous academic research on these topics. By the nature of the phenomenon analyzed, this research spans many academic disciplines including macroeconomics, law and economics and computer science. This survey focuses on the microeconomics of cryptocurrencies themselves. What drives their supply, demand, trading price and competition amongst them. This literature has been emerging over the past decade and the purpose of this paper is to summarize its main findings so as to establish a base upon which future research can be conducted. |
| Keywords: | Cryptocurrencies Bitcoin Blockchain |
| Date: | 2020–06 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:14972&r= |
| By: | Martina Cioni; Giovanni Federico; Michelangelo Vasta (Division of Social Science) |
| Abstract: | This paper assesses the state of the art of economic history, focusing on recent changes that have recently characterized the field. We rely on a new database of almost 2,700 articles published from 2001 to 2018 in the top-five economic history journals and in 13 leading economics journals. We argue that economic history still remains a distinct field. The share of economic history articles in economics journals increased very little and only few authors published in both economics and economic history journals. Publishing in top-five economic journals yields more citations than in top-field journals, but this is not necessarily true for other prestigious economic journals. Finally, we speculate on the future. Will economic history lose its soul and become a sub-field of development studies? Will persistence studies become a separate field? Or, perhaps, a new synthesis will emerge, with scholars dealing with traditional and new research questions with a wide range of tools? JEL |
| Date: | 2021–06 |
| URL: | http://d.repec.org/n?u=RePEc:nad:wpaper:20210067&r= |
| By: | Shabir A A Saleem; Peter N Smith; Abdullah Yalaman |
| Abstract: | We investigate whether the daily betas of individual stocks vary with the release of firm-specific news in an emerging market. Using intraday prices of all stocks traded on the Borsa Istanbul, Turkey over the period 2005-2013, we find evidence that average market betas increase significantly from two weeks before the earnings announcement day, and then revert to their average levels two weeks after the announcement. The increase in betas is greater for larger, positive surprise earnings announcements than for smaller, negative news. The results are consistent with features of the learning model of Patton and Verardo (2012) but not with a number of their empirical results. |
| Keywords: | Realized Beta, Firm-specific News, Earnings Announcements, Emerging Market |
| JEL: | C22 G10 G11 G33 |
| Date: | 2021–03 |
| URL: | http://d.repec.org/n?u=RePEc:een:camaaa:2021-35&r= |
| By: | M.A. Anderson; M.H. Davies; J.E. Signoret; S.L.S. Smith |
| Abstract: | We examine import prices paid by direct-sourcing Indian manufacturing firms in the early 2000s using a unique data set that matches firm characteristics with product and source-country trade data, offering a theoretical and empirical extension of Halpern and Koren (2007). We find that import prices are positively associated with firm productivity, distance from source-country, and source-country GDP per capita, and negatively associated with source-country remoteness, an effect we attribute to the higher scope for quality differentiation in less remote locations. Further, we find that source-country characteristics matter more, and cost factors less, for differentiated than for non-differentiated goods. |
| Keywords: | Importers, Firm-level data, Pricing, Input quality, productivity, India |
| JEL: | F1 F10 F12 F14 |
| Date: | 2021–04 |
| URL: | http://d.repec.org/n?u=RePEc:een:camaaa:2021-42&r= |
| By: | George-Marios Angeletos; Chen Lian |
| Abstract: | A long-standing issue in the theory of monetary policy is that the same path for the interest rate can be associated with multiple bounded equilibrium paths for inflation and output. We show that a small friction in memory and intertemporal coordination can remove this indeterminacy. This leaves no space for equilibrium selection by means of either the Taylor Principle or the Fiscal Theory of the Price Level. It reinforces the logical foundations of the New Keynesian model’s conventional solution (a.k.a. its fundamental or MSV solution). And it liberates feedback rules to serve only one function: stabilization. |
| JEL: | D8 E4 E5 E7 |
| Date: | 2021–06 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:28881&r= |
| By: | Luisa Corrado; Stefano Grassi; Aldo Paolillo |
| Abstract: | This paper proposes and estimates a new Two-Sector One-Agent model that features large shocks. The resulting medium-scale New Keynesian model includes the standard real and nominal frictions used in the empirical literature and allows for heterogeneous COVID-19 pandemic exposure across sectors. We solve the model nonlinearly and we propose a new nonlinear, non-Gaussian filter designed to handle large pandemic shocks to make inference feasible. Monte Carlo experiments show that it correctly identifies the source and time location of shocks with a massively reduced running time, making the estimation of macro-models with disaster shocks feasible. The estimation is carried out using the Sequential Monte Carlo sampler recently proposed by Herbst and Schorfheide (2014). Our empirical results show that the pandemic-induced economic downturn can be reconciled with a combination of large demand and supply shocks. More precisely, starting from the second quarter of 2020, the model detects the occurrence of a large negative demand shock in consuming all kinds of goods, together with a large negative demand shock in consuming contact-intensive products. On the supply side, our proposed method detects a large labor supply shock to the general sector and a large labor productivity shock in the pandemic-sensitive sector. |
| Keywords: | COVID-19, Nonlinear, Non-Gaussian, Large shocks, DSGE |
| JEL: | C11 C51 E30 |
| Date: | 2021–06 |
| URL: | http://d.repec.org/n?u=RePEc:nsr:niesrd:530&r= |
| By: | Daniel Fehrle (University of Augsburg, Department of Economics) |
| Abstract: | To which extent do equity and housing hedge against inflation? Despite an extensive literature, there is only little consensus. This paper presents new evidence from the Jordà -Schularick-Taylor Macrohistory Database, which covers return rates on housing and equity as well as consumer price indices of 16 developed countries from 1870 - 2015. The results depend on the time horizon and period considered. Within one, five, and ten years housing hedges, at least partly, against inflation and the hedge has been better in the post-war period. In the long run housing provides an excessive hedge in the whole sample and a perfect hedge in the post-war period. Equity provides no hedge within one-year in the whole sample period and the returns tend to decrease with inflation in the post-war period. The hedge improves slightly with a longer time horizon and is perfect in the long run in the post-war period. Thus, housing is, at least weakly, superior in hedging against inflation. The results are robust to a non-housing consumption price index and an asset price appreciation approach. |
| Keywords: | hedge, inflation, stocks, real estate, panel cointegration |
| JEL: | C22 C23 E31 E44 G11 N10 |
| Date: | 2021–06 |
| URL: | http://d.repec.org/n?u=RePEc:aug:augsbe:0342&r= |
| By: | Humaira Kamal Pasha (CERDI - Centre d'Études et de Recherches sur le Développement International - CNRS - Centre National de la Recherche Scientifique - UCA - Université Clermont Auvergne) |
| Abstract: | The purpose of the study is to examine the long-run relationship of economic growth and education in the developing countries of Asia from 1991 to 2015 by following Barro and Lee approach. The econometric strategy indicates long-run relationship between public spending on education and education achievement based on Cobb-Douglas production function with intuition of Solow Augmented Growth Model. In addition, the study attempts to deal with the potential endogeneity by using Generalized Method of Moment (GMM) technique. Findings provide increase economic growth with higher budget allocation in education; however, contradict the assumption of Solow Augmented Mankiw-Romer-Weil for population growth rate. The study finds robust estimates for economic growth determining by life expectancy rate and purchasing power parity as well as by examining heterogeneity among countries classified into subsamples. The findings present valuable recommendations to increase human capital investment in education for policy makers. |
| Keywords: | Economic growth,Human capital,Public spending,Panel data. JEL Codes: O1,I2,H52,C33 |
| Date: | 2021–03–18 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:hal-03230025&r= |
| By: | Soliwoda, Michał; Wieliczko, Barbara; Kulawik, Jacek |
| Abstract: | The circular economy is becoming an increasingly discussed concept being an alternative to the current model of economy based on the unsustainable constant growth built on the unlimited use of resources. The objective of the study will be to outline the circular economy concept with the presentation of attempts to operationalise it from the point of view of the sustainability of agriculture and the whole food sector. We verified a research thesis that the circular economy is one of several concepts enriching and probably likely to replace the EU agricultural and food sector sustainability in the future. An eclectic approach has been applied, using the method of literature studies, documentation method and elements of heuristic methods. The paper is a review study. Formally, the CE is to constitute a superstructure for the CAP and sustainability practised within it, more and more schematic and fossilised. The basis for enhancing the sustainability, improving the efficiency and competitiveness of the EU agriculture and the whole food should be, in the first place, broadly understood innovation and creativity. |
| Keywords: | Agribusiness, Agricultural and Food Policy |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:ags:iafepa:311214&r= |
| By: | Matias Braun; Francisco Marcet; Claudio E. Raddatz K. |
| Abstract: | We provide international empirical evidence that periods of rapid expansion in credit—credit booms—lead to a tradeoff between a relaxation of financial constraints and a worsening of capital allocation. This tradeoff is stronger across small, financially constrained, and more innovative firms, as well as for firms in less tangible industries. In advanced economies the misallocation effect is stronger than the relaxation of financial constraints, and the opposite is true among emerging markets. Credit booms with larger capital misallocation are associated with a higher probability of experiencing a banking crisis and with poor economic and financial performance after the boom. |
| Date: | 2021–06 |
| URL: | http://d.repec.org/n?u=RePEc:udc:wpaper:wp519&r= |
| By: | Denny IRAWAN; OKIMOTO Tatsuyoshi |
| Abstract: | This study examines the conditional capital surplus and shortfall dynamics of renewable and non-renewable resource firms. To this end, this study uses the systemic risk index by Brownlees and Engle (2017) and considers two conditional systemic events, namely, the stock market crash and the commodity price crash. The results indicate that companies in the resource sector tended to have conditional capital shortfalls before 2000 and conditional capital surpluses after 2000 owing to the boom of the commodity sector stock prices and the careful capital management adopted by these companies. The analysis using the panel vector autoregressive model indicates that commodity price, geopolitical, and economic policy uncertainties have a positive impact on the conditional capital shortfall. These uncertainties have also been proven to increase the conditional failure probability of firms in the sample. Lastly, the analysis of performance shows that conditional capital shortfall positively affects market returns, reflecting a high-risk, high-return trade-off for this sector. |
| Date: | 2021–04 |
| URL: | http://d.repec.org/n?u=RePEc:eti:dpaper:21031&r= |
| By: | Grossmann, Volker; Larin, Benjamin (University of St. Gallen); Steger, Thomas M. |
| Abstract: | The housing wealth-to-income ratio has been increasing in most developed economies since the 1950s. We provide a novel theory to explain this long-term pattern. We show analytically that house prices grow in the steady state if i) the housing sector is more land-intensive than the non-housing sector. Despite growing house prices and housing wealth, the housing wealth-to income ratio is constant in steady state. We hence study the dynamics in the housing wealth-to-income ratio by computing transitions. The model is calibrated separately to the US, UK, France, and Germany. On average, we replicate 89 percent of the observed increase in the housing wealth-to-income ratio. The key for replicating the data is the differentiation between residential land as a non-reproducible factor and residential structure as reproducible factor. The transition process from the calibrated model points to two driving forces of an increasing housing wealth-to-income ratio: i) A long-lasting construction boom that brought about a pronounced build-up in the stock of structures and ii) an increase in the demand for residential land that resulted in surging residential land prices. |
| Keywords: | Housing Wealth; Economie Growth; Wealth-to-Income Ratio; House Price; Land Price |
| JEL: | E10 E20 O40 |
| Date: | 2021–06–11 |
| URL: | http://d.repec.org/n?u=RePEc:fri:fribow:fribow00523&r= |
| By: | Matteo Barigozzi; Angelo Cuzzola; Marco Grazzi; Daniele Moschella |
| Abstract: | This paper analyzes the sources of export volatility estimating a dynamic factor model on transaction-level data. Using an exhaustive dataset covering all French export transactions over the period 1993-2017, we reconstruct the latent factor space associated to global and destination-specific macroeconomic cycles by means of a modified expectation maximization algorithm to accommodate both the sparsity and the high dimensionality of the micro time series. Thus while paving the way for a novel application of dynamic factor models to microeconomic analysis, we provide a decomposition of the volatility of aggregate export and firms growth rates, highlighting structural spatial patterns and drawing attention to the role of geographical diversification for the mitigation of risks related to firms' export activities. |
| Keywords: | Factor models; trade volatility; diversification. |
| Date: | 2021–06–08 |
| URL: | http://d.repec.org/n?u=RePEc:ssa:lemwps:2021/22&r= |
| By: | Giovanni Caggiano (Monash University and University of Padova); Efrem Castelnuovo (University of Padova) |
| Abstract: | We estimate a novel measure of global financial uncertainty (GFU) with a dynamic factor framework that jointly models global, regional, and country-specific factors. We quantify the impact of GFU shocks on global output with a VAR analysis that achieves set-identification via a combination of narrative, sign, ratio, and correlation restrictions. We find that the world output loss that materialized during the great recession would have been 13% lower in absence of GFU shocks. We also unveil the existence of a global finance uncertainty multiplier: the more global financial conditions deteriorate after GFU shocks, the larger the world output contraction is. |
| Keywords: | Global Financial Uncertainty, dynamic hierarchical factor model, structural VAR, world output loss, global finance uncertainty multiplier |
| JEL: | C32 E32 |
| Date: | 2021–02 |
| URL: | http://d.repec.org/n?u=RePEc:pad:wpaper:0269&r= |
| By: | Eric Monnet; Francois R. Velde |
| Abstract: | We review developments in the history of money, banking, and financial intermediation over the last twenty years. We focus on studies of financial development, including the role of regulation and the history of central banking. We also review the literature of banking and financial crises. This area has been largely unaffected by the so-called new econometric methods that seek to prove causality in reduced form settings. We discuss why historical macroeconomics is less amenable to such methods, discuss the underlying concepts of causality, and emphasize that models remain the backbone of our historical narratives. |
| Keywords: | historical macroeconomics; money; banking; financial intermediation |
| JEL: | N01 N10 N20 |
| Date: | 2020–11–13 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedhwp:92646&r= |
| By: | Todorova, Tamara |
| Abstract: | Using a simple linear demand and marginal cost function, we demonstrate that both competition and monopoly have incentives to innovate since this increases their profit levels. However, our results show that perfect competition is more motivated to innovate since the increase in the profit is greater with the same cost reduction and the same innovation. We also conclude that a more drastic innovation brings greater rent to the monopolist and reduces the advantages of perfect competition over monopoly. It could be presumed that monopoly firms would be attracted to more substantive innovations rather than non-drastic ones. |
| Keywords: | competition, monopoly, innovation, profit |
| JEL: | D41 D42 O31 O32 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:108121&r= |
| By: | Mukherjee, Sacchidananda (National Institute of Public Finance and Policy); Badola, Shivani (National Institute of Public Finance and Policy) |
| Abstract: | Due to the COVID-19 pandemic, public financial management in the FY 2020-21 and 2021-22 have become extremely challenging. The economic contraction has created pressures on PFM in India in terms of lower revenue mobilisation and higher expenditure needs. Both the Union and state governments are facing dual problem of arresting economic contraction and managing public finance with limited resources. The present paper analyses public finance management of the Union as well as 16 major Indian states during the time of COVID-19 pandemic. For comparison, we have also analysed pre-COVID public finance monthly data of state governments. The shock to PFM came from both the revenue as well as expenditure side. Apart from aggregate analysis of state finances of 16 major states, we present state-wise analysis to highlight measures adopted by states to deal with the unprecedented fiscal crisis. |
| Keywords: | COVID-19 pandemic ; Indian Public Finance ; Fiscal Managements ; Revenue Mobilisation ; Fiscal Deficit ; Revenue Deficit |
| JEL: | H20 H61 H62 H63 |
| Date: | 2021–05 |
| URL: | http://d.repec.org/n?u=RePEc:npf:wpaper:21/337&r= |
| By: | Leopoldo Catania (Aarhus University and CREATES); Alessandra Luati (University of Bologna); Pierluigi Vallarino (Aarhus University and CREATES) |
| Abstract: | This paper shows that different states of the financial system command a different effect in worsening financial conditions on economic vulnerability. As soon as financial conditions start deteriorating, the economic outlook becomes more pessimistic and uncertain. No increase in macroeconomic uncertainty is expected when financial conditions worsen from an already tighter than usual situation. We also find that past information on GDP growth is paramount to study and predict economic vulnerability. Both these findings have relevant forecasting and policymaking implications, and persist once we consider other measures of the real economic activity. From a methodological perspective, we carry out the analysis under a novel approach which relies on the state of the art in dynamic modelling of multiple quantiles. The proposed methodology exploits the entire information of past GDP growth, can accommodate a state dependent effect of financial conditions and allows for statistical inference under the standard quasi maximum likelihood setting. |
| Keywords: | Economic vulnerability, Macro-financial linkages, Growth-at-Risk, Score driven models |
| JEL: | C32 C53 E32 E44 |
| Date: | 2021–06–15 |
| URL: | http://d.repec.org/n?u=RePEc:aah:create:2021-09&r= |
| By: | Bacchetta, Philippe; Tièche, Simon; van Wincoop, Eric |
| Abstract: | Using data on international equity portfolio allocations of US mutual funds, we estimate a simple portfolio expression derived from a standard Markowitz mean-variance portfolio model extended with portfolio frictions. The optimal portfolio depends on two benchmark portfolios, the previous month and the buy-and-hold portfolio shares, and a present discounted value of expected future excess returns. We show that equity return differentials are predictable and use the expected return differentials in the mutual fund portfolio regressions. The estimated reduced form parameters are related to the structural model parameters. The estimates imply significant portfolio frictions and a modest rate of risk-aversion. While mutual fund portfolios respond significantly to expected returns, portfolio frictions lead to a weaker and more gradual portfolio response to changes in expected returns. We also document heterogeneity across funds. Global and larger funds face bigger portfolio frictions, while more active funds give relatively less weight to the buy-and-hold portfolio (rebalance more aggressively). |
| Date: | 2020–06 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:14898&r= |
| By: | Bertrand Achou (HEC Montréal - HEC Montréal); Hippolyte d'Albis (PSE - Paris School of Economics - ENPC - École des Ponts ParisTech - ENS Paris - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique - EHESS - École des hautes études en sciences sociales - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS Paris - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement); Eleni Iliopulos (EPEE - Centre d'Etudes des Politiques Economiques - UEVE - Université d'Évry-Val-d'Essonne - Université Paris-Saclay) |
| Abstract: | In this work we introduce a general equilibrium model with landlords, indebted owner-occupiers and renters to study housing markets' dynamics. We estimate it by using standard Bayesian methods and match the US data of the last decades. This framework is particularly suited to explain current trends on housing markets. We highlight the crucial relationship between interest rates, house prices and rents, and argue that it helps understanding the main driving forces. Our analysis suggests that current developments on housing markets can play a role for a recovery from the Covid pandemic as they have an expansionary effect on aggregate output. Moreover, we account for the heterogeneous impact of crisis-induced policies depending on agents' status on the housing market. We show how, despite an increase in housing prices, the welfare of landlords has been negatively hit. This is associated to the joint decrease in returns on housing and financial assets that reduces their financial incomes. |
| Keywords: | Housing,Rental Markets,Collateral Constraints,Financial Frictions,HANK Models |
| Date: | 2021–05 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:halshs-03231807&r= |
| By: | Julien Hok; Sergei Kucherenko |
| Abstract: | Local volatility models usually capture the surface of implied volatilities more accurately than other approaches, such as stochastic volatility models. We present the results of application of Monte Carlo (MC) and Quasi Monte Carlo (QMC) methods for derivative pricing and risk analysis based on Hyperbolic Local Volatility Model. In high-dimensional integration QMC shows a superior performance over MC if the effective dimension of an integrand is not too large. In application to derivative pricing and computation of Greeks effective dimensions depend on path discretization algorithms. The results presented for the Asian option show the superior performance of the Quasi Monte Carlo methods especially for the Brownian Bridge discretization scheme. |
| Date: | 2021–06 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2106.08421&r= |
| By: | Klump, Rainer; Jurkat, Anne; Schneider, Florian |
| Abstract: | Robots are continuously transforming industrial production worldwide and thereby also inducing changes in a variety of production-related economic and social relations. While some observers call this transformation an unprecedented "revolution", others regard it as a common pattern of capitalist development. This paper contributes to the literature on the effects of the rise of industrial robots in three ways. Firstly, we describe the historic evolution and organizational structure of the International Federation of Robotics (IFR), which collects data on the international distribution of industrial robots by country, industry, and application from industrial robot suppliers worldwide since 1993. Secondly, we extensively analyze this IFR dataset on industrial robots and point out its specificities and limitations. We develop a correspondence table between IFR industry classification and the International Standard Industrial Classification (ISIC) Revision 4 and shed some light on the price development of industrial robots by compiling data on robot price indices. We further compute implicit depreciation rates inherent to the operational stocks of robots in the IFR dataset and find an average depreciation rate of aggregate robot stocks between 4% and 7% per year between 1993 and 2019. Moreover, tracking the share of industrial robots that are not classified to any industry or application we find that their share in total robot stocks has sharply declined after 2005. The average value of 45% of unspecified industrial robots at country level is therefore likely to shrink in the future. We also compare IFR data with other data sources such as UN Comtrade data on net imports and unit prices of industrial robots or data on robot adoption from firm-level surveys in selected countries. Thirdly, we provide a comprehensive overview of the empirical research on industrial robots that is based on the IFR dataset. We identify four important strands of research on the rise of robots: (i) patterns of robot adoption and industrial organization, (ii) productivity and growth effect of robot adoption, (iii) its impact on employment and wages, and (iv) its influence on demographics, health, and politics. |
| Keywords: | Robots, productivity, growth, employment, industry classification, depreciation rates, IFR |
| JEL: | C23 E1 J2 J24 O3 O33 O4 O47 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:107909&r= |
| By: | ARA Tomohiro |
| Abstract: | We study unilateral trade liberalization and unilateral market expansion and their impact on optimal tariffs in a heterogeneous firm model with a general productivity distribution and an endogenous wage. We show that unilateral trade liberalization entails selection effects, but unilateral market expansion entails anti-selection effects in a country of origin. Conditional on the two sufficient statistics for welfare, the optimal level of import tariffs is the same across different trade models with a constant trade elasticity, but more generally the optimal level depends on the micro structure that makes the trade elasticity variable. |
| Date: | 2021–04 |
| URL: | http://d.repec.org/n?u=RePEc:eti:dpaper:21032&r= |
| By: | Malgorzata Rutkowska; Adam Sulich |
| Abstract: | Green Management (GM) is now one of many methods proposed to achieve new, more ecological, and sustainable economic models. The paper is focused on the impact of the developing human population on the environment measured by researched variables. Anthropopressure can have both a positive and a negative dimension. This paper aims to present an econometric model of the Green Industrial Revolution (GIR) impact on the Labour Market. The GIR is similar to the Fourth Industrial Revolution (FIR) and takes place as the next stage in the development of humanity in the perception of both machines and devices and the natural environment. The processes of the GIR in the European Union can be identified based on selected indicators of Sustainable Development (SD), in particular with the use of indicators of the Green Economy (GE) using taxonomic methods and regression analysis. The GM strives to implement the idea of the SD in many areas, to transform the whole economy, and elements of this process are visible Green Labour Market (GLM). The adopted direction of economic development depends on the as-sumptions of strategic management, which can be defined, for example, with green management, which is mainly manifested in the creation of green jobs. |
| Date: | 2021–05 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2106.00464&r= |
| By: | Bergant, Katharina; Grigoli, Francesco; Hansen, Niels-Jakob; Sandri, Damiano |
| Abstract: | We show that macroprudential regulation can considerably dampen the impact of global financial shocks on emerging markets. More specifically, a tighter level of regulation reduces the sensitivity of GDP growth to VIX movements and capital flow shocks. A broad set of macroprudential tools contribute to this result, including measures targeting bank capital and liquidity, foreign currency mismatches, and risky forms of credit. We also find that tighter macroprudential regulation allows monetary policy to respond more countercyclically to global financial shocks. This could be an important channel through which macroprudential regulation enhances macroeconomic stability. These findings on the benefits of macroprudential regulation are particularly notable since we do not find evidence that stricter capital controls provide similar gains. |
| Keywords: | capital controls; macroprudential policies; monetary policy |
| JEL: | E5 F3 F4 |
| Date: | 2020–06 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:14948&r= |
| By: | Junran Wu; Ke Xu; Xueyuan Chen; Shangzhe Li; Jichang Zhao |
| Abstract: | Stock prediction, with the purpose of forecasting the future price trends of stocks, is crucial for maximizing profits from stock investments. While great research efforts have been devoted to exploiting deep neural networks for improved stock prediction, the existing studies still suffer from two major issues. First, the long-range dependencies in time series are not sufficiently captured. Second, the chaotic property of financial time series fundamentally lowers prediction performance. In this study, we propose a novel framework to address both issues regarding stock prediction. Specifically, in terms of transforming time series into complex networks, we convert market price series into graphs. Then, structural information, referring to associations among temporal points and the node weights, is extracted from the mapped graphs to resolve the problems regarding long-range dependencies and the chaotic property. We take graph embeddings to represent the associations among temporal points as the prediction model inputs. Node weights are used as a priori knowledge to enhance the learning of temporal attention. The effectiveness of our proposed framework is validated using real-world stock data, and our approach obtains the best performance among several state-of-the-art benchmarks. Moreover, in the conducted trading simulations, our framework further obtains the highest cumulative profits. Our results supplement the existing applications of complex network methods in the financial realm and provide insightful implications for investment applications regarding decision support in financial markets. |
| Date: | 2021–06 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2106.02522&r= |
| By: | Eckhard Janeba; Karl Schulz |
| Abstract: | We study the nonlinear taxation of internationally mobile workers in general equilibrium. Contrary to conventional wisdom, in general equilibrium, migration lowers the bottom tax rate but raises the top tax rate, making the optimal tax system more progressive and moving tax rates closer to those in an economy with fixed wages. The intuition is that governments attract high-skilled workers by amplifying pre-tax wage inequality and partly offsetting trickle-down forces from production complementarities. This finding raises doubts about the importance of trickle-down for optimal taxation and offers a novel explanation for why globalization may increase tax progressivity and wage inequality. |
| Keywords: | optimal taxation, general equilibrium, trickle-down effects, migration, tax/subsidy competition |
| JEL: | H21 H24 H73 F22 R13 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_9132&r= |
| By: | Pettenuzzo, Davide; Sabbatucci, Riccardo; Timmermann, Allan |
| Abstract: | We examine the effect of the Covid-19 pandemic on firms' decisions to suspend dividends and estimate a model that quantifies the effect of suspensions on growth in aggregate dividends. Our estimates show that dividend suspensions had a large impact on expected future dividend growth and also helped predict the sharp declines observed in broader measures of economic activity. Firms with high leverage and low profitability were more likely to have suspended their dividends during the pandemic as were firms with the largest negative stock returns prior to the dividend announcement date. While firms that suspended their dividends experienced large negative abnormal returns, firms that substantially reduced but did not entirely eliminate dividends saw large positive abnormal returns around the announcement date. |
| Date: | 2020–06 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:14921&r= |
| By: | James D. Hamilton |
| Abstract: | This paper develops a growth model characterized by equilibrium unemployment and sustained monopoly power. The level of demand is a key factor in deviations from the steady-state growth path with a Keynesian-type spending multiplier despite the absence of any nominal rigidities. The key friction in the model is the technological requirement that production of certain goods requires a dedicated team of workers that takes time to train and assemble. |
| JEL: | E0 |
| Date: | 2021–06 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:28888&r= |
| By: | Assous, Michaël |
| Abstract: | Review of “Irving Fisher” by Robert W. Dimand |
| Date: | 2021–05–26 |
| URL: | http://d.repec.org/n?u=RePEc:osf:osfxxx:m5fbw&r= |
| By: | Logan T. Lewis; Ryan Monarch; Michael Sposi; Jing Zhang |
| Abstract: | Services, which are less traded than goods, rose from 58 percent of world expenditure in 1970 to 79 percent in 2015. Using a Ricardian trade model incorporating endogenous structural change, we quantify how this substantial shift in consumption has affected trade. Without structural change, we find that the world trade to GDP ratio would be 15 percentage points higher by 2015, about half the boost delivered from declining trade costs. In addition, this structural change has lowered the global welfare gains from trade integration by almost 40 percent over the past four decades. Absent further reductions in trade costs, ongoing structural change implies that world trade as a share of GDP would eventually decline. Going forward, higher income countries gain relatively more from reducing services trade costs than from reducing goods trade costs. |
| Keywords: | Globalization; Structural Change; International Trade |
| JEL: | F41 L16 O41 |
| Date: | 2020–11–12 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedhwp:92684&r= |
| By: | Juan M. Londono; Sai Ma; Beth Anne Wilson |
| Abstract: | Using a sample of 30 countries representing about 65% of the global GDP, we find that real economic uncertainty (REU) has negative long-lasting domestic economic effects and transmits across countries. The international spillover effects of REU are (i) additional to those of domestic REUs, (ii) statistically significant, and (iii) economically meaningful. Trade ties play a key role in explaining why uncertainty generated in one country can affect economic outcomes in other countries. Based on this evidence, we construct a novel index for global REU as the trade-weighted average of all countries' REUs. We disentangle the effects of the domestic and foreign components of global REU and find that, on average, innovations to the foreign component can contribute up to 28% of the future variation in domestic industrial production, with the effect being disproportionately larger on its manufacturing component, the component contributing the most to the tradable goods sector, than on its retail sales component. |
| Keywords: | Economic effects of uncertainty; International transmission; Spillovers |
| JEL: | G01 E32 F62 F44 |
| Date: | 2021–04–30 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedgif:1317&r= |
| By: | Timothy Watson; Juha Tervala |
| Abstract: | We simulate a small open economy Two Agent New Keynesian (TANK) model featuring ‘learning by doing’ in production whereby changes in employment generate hysteresis in productivity and output. Credit constraints and hysteresis amplify the efficacy of Fiscal stimulus in a small open economy with a floating exchange rate and inflation-targeting central bank such that output multipliers can exceed unity; welfare multipliers can be positive; and the degree of hysteresis, output and employment multipliers match empirical evidence well. Fiscal stimulus helps reverse output hysteresis, and price-level targeting provides superior macroeconomic stabilisation compared to other simple monetary rules combined with fiscal stimulus. |
| Keywords: | Hysteresis, open economy macroeconomics, monetary policy, fiscal policy |
| JEL: | E32 E63 F41 |
| Date: | 2021–06 |
| URL: | http://d.repec.org/n?u=RePEc:een:camaaa:2021-46&r= |
| By: | De Koning, Kees |
| Abstract: | In a previous paper: “Quantitative Easing Home Equity: an Alternative Economic Management Tool” (MPRA Paper 106528), the writer did analyze some of the Great Recession’s experiences for different groups of U.S. households. In Q4 2005, the home equity level stood at $14.4 trillion for all households. As a result of the Great Recession this level dropped to $8.2 trillion by Q1 2012. This loss in wealth level lasted the longest for the bottom 50% of households. For this group it took over 10 years which was nearly 5 years longer than for the two household groups making up the top 50% of households. The latter groups took five years to get back to the income and wealth levels as assessed in 2007. Why was losing $6.2 trillion in home equity savings over the period Q4 2005 to Q1 2012 such a disaster? The first aspect is the value of savings made and the recovery period to earn back such savings losses. A savings loss of 43% on home values was an extreme percentage of losses, mainly due to two factors. The first was the reinforcement factor. When doubts crept into the mortgage backed securities markets in 2007, the snowball started rolling. Banks and other financial companies as well as some households were over extended. Defaults started to go up and the mood in the markets turned from overly optimistic to severely negative. Foreclosure levels were racing up and unemployment levels increased rapidly. The second aspect was the relationship between house prices and the home equity savings levels embedded in such home values. A home is for nearly all households a necessity rather than a luxury. If a household cannot afford to buy outright, a mortgage is often needed as the household will still need a place to live in. The downward housing prices –from a U.S. average of $257,400 in Q1 2007 to the bottom of $208,400 in Q1 2009 and back to $258,400 by Q1 2013 brought on a misery for many U.S. households. This paper will attempt to show that there can be a different solution to such market upheaval: a reversal method that helps households to spend more of their home equity level when needed. The household’s macro economic motto could be: “Save in good times and spend from your home equity in economic downturns”. To make it a success, a system needs to be developed to make such spending possible. |
| Keywords: | U.S.Great Recession period; home equity in U.S.; home mortgage levels, home wealth levels; a household help to buy scheme based on home equity |
| JEL: | E2 E21 E24 E4 E42 E44 E5 E6 |
| Date: | 2021–06–09 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:108239&r= |
| By: | Stephen Broadberry; Elena Korchmina |
| Abstract: | We provide estimates of economic growth at decadal frequency for Russia during the eighteenth century. Although GDP per head increased between the 1690s and 1760s, this was followed by a period of negative growth between the 1760s and 1800s, leaving GDP per capita just 17 per cent higher at the end of the century than at its beginning. Although Russia’s strong growth in large-scale industry during the eighteenth century has received much attention, this was starting from a very low base. Peter the Great’s modernisation drive thus had only a small effect on the economy as a whole, which remained dominated by agriculture and small-scale industry. |
| Date: | 2021–05–03 |
| URL: | http://d.repec.org/n?u=RePEc:oxf:esohwp:_192&r= |
| By: | Acharya, Viral V.; Bhadury, Soumya; Surti, Jay |
| Abstract: | This paper introduces a new financial vulnerability index for emerging market economies by exploiting key differences in their business cycles relative to those of advanced economies. Information on the domestic price of risk, cost of dollar hedging and market-based measures of bank vulnerability combine to generate indexes significantly more effective in capturing macro-financial vulnerability and stress compared to those based on information in trade and global factors. Our index significantly augments early warning surveillance capacity, as evidenced by out-of-sample forecasting gains around a majority of turning points in GDP growth relative to distributed lag models that are augmented with information from macro-financial indexes that are custom-built to optimize such forecasts. |
| Keywords: | business cycles; early warning indicators; financial conditions; price of risk; Vulnerability |
| JEL: | C53 E32 E44 |
| Date: | 2020–06 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:14962&r= |
| By: | Benest, Serge |
| Abstract: | Following World War II, the director of the Social Sciences Division at the Rockefeller Foundation, the industrial economist Joseph H. Willits, thought it important to extend its activities to Europe, especially France. His agenda was to strengthen institutional economics and to create modern research centers with a view to stabilizing the political situation. In the postwar decade, almost all economic research centers in France were funded by the Foundation, which helped provide greater autonomy to French economists within academia, but failed to reshape French economic training and research. |
| Date: | 2021–05–26 |
| URL: | http://d.repec.org/n?u=RePEc:osf:osfxxx:3gmf5&r= |
| By: | Miguel D. Ramirez (Department of Economics, Trinity College) |
| Keywords: | Absolute value; constant capital; fetishism; invariable standard;prices of production; profit; relative value; surplus-value; standard commodity; value; variable capital. |
| JEL: | B10 B14 B24 |
| Date: | 2021–06 |
| URL: | http://d.repec.org/n?u=RePEc:tri:wpaper:2101&r= |
| By: | Pierre-Philippe Combes (Institut d'Études Politiques [IEP] - Paris, CNRS - Centre National de la Recherche Scientifique); Laurent Gobillon (PSE - Paris School of Economics - ENPC - École des Ponts ParisTech - ENS Paris - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique - EHESS - École des hautes études en sciences sociales - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS Paris - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement); Yanos Zylberberg (University of Bristol [Bristol]) |
| Abstract: | A recent literature has used a historical perspective to better understand fundamental questions of urban economics. However, a wide range of historical documents of exceptional quality remain underutilised: their use has been hampered by their original format or by the massive amount of information to be recovered. In this paper, we describe how and when the flexibility and predictive power of machine learning can help researchers exploit the potential of these historical documents. We first discuss how important questions of urban economics rely on the analysis of historical data sources and the challenges associated with transcription and harmonisation of such data. We then explain how machine learning approaches may address some of these challenges and we discuss possible applications. |
| Keywords: | urban economics,history,machine learning |
| Date: | 2021–05 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:halshs-03231786&r= |
| By: | Alvaro Arroyo; Bruno Scalzo; Ljubisa Stankovic; Danilo P. Mandic |
| Abstract: | Stock market returns are typically analyzed using standard regression, yet they reside on irregular domains which is a natural scenario for graph signal processing. To this end, we consider a market graph as an intuitive way to represent the relationships between financial assets. Traditional methods for estimating asset-return covariance operate under the assumption of statistical time-invariance, and are thus unable to appropriately infer the underlying true structure of the market graph. This work introduces a class of graph spectral estimators which cater for the nonstationarity inherent to asset price movements, and serve as a basis to represent the time-varying interactions between assets through a dynamic spectral market graph. Such an account of the time-varying nature of the asset-return covariance allows us to introduce the notion of dynamic spectral portfolio cuts, whereby the graph is partitioned into time-evolving clusters, allowing for online and robust asset allocation. The advantages of the proposed framework over traditional methods are demonstrated through numerical case studies using real-world price data. |
| Date: | 2021–06 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2106.03417&r= |
| By: | Neil R. Ericsson |
| Abstract: | David Hendry has made–and continues to make–pivotal contributions to the econometrics of empirical economic modeling, economic forecasting, econometrics software, substantive empirical economic model design, and economic policy. This paper reviews his contributions by topic, emphasizing the overlaps between different strands in his research and the importance of real-world problems in motivating that research. |
| Keywords: | Cointegration; Consumers' expenditure; Dynamic specification; Equilibrium correction; Forecasting; Machine learning; Model evaluation; Money demand; PcGive; Structural breaks |
| JEL: | C52 C53 |
| Date: | 2021–03–26 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedgif:1311&r= |
| By: | KIM YoungGak; INUI Tomohiko |
| Abstract: | This paper examines the effect of the development of AI and robot technology in a firm on its productivity and the number of employees. By matching the patent application data with firm data, we determined the application status of AI and robot technology in each firm. In addition, each patent application is weighted by the number of citations, and this value is regarded as an indicator of technological development in the firm. The results of the analysis are as follows. The progress of AI technology in the firm leads to improve its firm total factor productivity (TFP). It was also found that the progress in AI technology has a negative impact on the number of employees in the manufacturing sector but has a positive impact on the number of employees in the service sector. It was confirmed that progress in robot technology also has the effect of boosting the productivity of the firm. As with AI technology progress, no significant impact was found on overall employment, while the introduction and increase in robotic technology significantly reduced the number of employees in the manufacturing and sales sectors. This may be because the increase in the number of employees in the service sector cancels out the negative impact on manufacturing and sales sectors employment. Our results are similar to those in Ni and Obashi (2021) and Adachi, Kawaguchi, and Saito (2020), the results show that robots and employment are complementary as a whole in Japan. The progress in AI and robot technology brings about changes in firm domestic and overseas production systems. The technological progress related to AI and robots reduces the number of existing domestic manufacturing establishments, increases the probability of exit, and at the same time increases the creation of new manufacturing establishments, thereby improving the efficiency of resource allocation between business units within the firm. The progress in AI and robot technology enhances international competitiveness and thus promotes overseas production as a whole, but has a negative effect on the overseas affiliates' production activities in low-income countries. |
| Date: | 2021–03 |
| URL: | http://d.repec.org/n?u=RePEc:eti:rdpsjp:21009&r= |
| By: | Koijen, Ralph; Richmond, Robert; Yogo, Motohiro |
| Abstract: | Much work in finance is devoted to identifying characteristics of firms, such as measures of fundamentals and beliefs, that explain differences in asset prices and expected returns. We develop a framework to quantitatively trace the connection between valuations, expected returns, and characteristics back to institutional investors and households. We use it to analyze\ (i) what information is important to investors in forming their demand beyond prices and (ii) what is the relative importance of different investors -- differentiated by type, size, and active share -- in the price formation process. We first show that a small set of characteristics explains the majority of variation in a panel of firm-level valuation ratios across countries. We then estimate an asset demand system using investor-level holdings data, allowing for flexible substitution patterns within and across countries. We find that hedge funds and small, active investment advisors are most influential per dollar of assets under management, while long-term investors, such as pension funds and insurance companies are least influential. In terms of pricing characteristics, small, active investment advisors are most important for the pricing of payout policy, cash flows, and the fraction of sales sold abroad. Large, passive investment advisors are most influential in pricing the Lerner index, a measure of markups, and hedge funds for the CAPM beta. |
| JEL: | G1 |
| Date: | 2020–06 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:14890&r= |
| By: | Carey W. King |
| Abstract: | All economies require physical resource consumption to grow and maintain their structure. The modern economy is additionally characterized by private debt. The Human and Resources with MONEY (HARMONEY) economic growth model links these features using a stock and flow consistent framework in physical and monetary units. Via an updated version, we explore the interdependence of growth and three major structural metrics of an economy. First, we show that relative decoupling of gross domestic product (GDP) from resource consumption is an expected pattern that occurs because of physical limits to growth, not a response to avoid physical limits. While an increase in resource efficiency of operating capital does increase the level of relative decoupling, so does a change in pricing from one based on full costs to one based only on marginal costs that neglects depreciation and interest payments leading to higher debt ratios. Second, if assuming full labor bargaining power for wages, when a previously-growing economy reaches peak resource extraction and GDP, wages remain high but profits and debt decline to zero. By removing bargaining power, profits can remain positive at the expense of declining wages. Third, the distribution of intermediate transactions within the input-output table of the model follows the same temporal pattern as in the post-World War II U.S. economy. These results indicate that the HARMONEY framework enables realistic investigation of interdependent structural change and trade-offs between economic distribution, size, and resources consumption. |
| Date: | 2021–06 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2106.02512&r= |
| By: | Andrade, Philippe; Gautier, Erwan; Mengus, Eric |
| Abstract: | We provide evidence that households discretize their inflation expectations so that what matters for durable consumption decisions is the broad inflation regime they expect. Using survey data, we document that a large share of the adjustment in the average inflation expectation comes from the change in the share of households expecting stable prices; these households also consume relatively less than the ones expecting positive inflation. In contrast, variations of expectations across households expecting a positive inflation rate are associated with much smaller differences in individual durable consumption choices. We illustrate how this mitigates the expectation channel of monetary policy. |
| Keywords: | adjustment costs; Euler Equation; imperfect information; Inflation expectations; Stabilization policies; survey data |
| JEL: | D12 D84 E21 E31 E52 |
| Date: | 2020–06 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:14905&r= |
| By: | Koya Ishikawa; Kazuhide Nakata |
| Abstract: | In recent years, a wide range of investment models have been created using artificial intelligence. Automatic trading by artificial intelligence can expand the range of trading methods, such as by conferring the ability to operate 24 hours a day and the ability to trade with high frequency. Automatic trading can also be expected to trade with more information than is available to humans if it can sufficiently consider past data. In this paper, we propose an investment agent based on a deep reinforcement learning model, which is an artificial intelligence model. The model considers the transaction costs involved in actual trading and creates a framework for trading over a long period of time so that it can make a large profit on a single trade. In doing so, it can maximize the profit while keeping transaction costs low. In addition, in consideration of actual operations, we use online learning so that the system can continue to learn by constantly updating the latest online data instead of learning with static data. This makes it possible to trade in non-stationary financial markets by always incorporating current market trend information. |
| Date: | 2021–06 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2106.03035&r= |
| By: | Ozge Akinci; Gianluca Benigno; Marco Del Negro; Albert Queraltó |
| Abstract: | We introduce the concept of financial stability real interest rate using a macroeconomic banking model with an occasionally binding financing constraint as in Gertler and Kiyotaki (2010). The financial stability interest rate, r**, is the threshold interest rate that triggers the constraint being binding. Increasing imbalances in the financial sector measured by an increase in leverage are accompanied by a lower threshold that could trigger financial instability events. We also construct a theoretical implied financial condition index and show how it is related to the gap between the natural and financial stability interest rates. |
| Keywords: | r**; Financial crises; Financial stability; Occasionally binding credit constraint |
| JEL: | E40 E50 G00 |
| Date: | 2021–01–29 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedgif:1308&r= |
| By: | Eichenbaum, Martin; Rebelo, Sérgio; Trabandt, Mathias |
| Abstract: | We analyse the effects of an epidemic in three standard macroeconomic models. We Ã?nd that the neoclassical model does not rationalize the positive comovement of consumption and investment observed in recessions associated with an epidemic. Intro- ducing monopolistic competition into the neoclassical model remedies this shortcoming even when prices are completely áexible. Finally, sticky prices lead to a larger recession but do not fundamentally alter the predictions of the monopolistic competition model. |
| Keywords: | comovement; Epidemic; investment; Recession |
| JEL: | E1 H0 I1 |
| Date: | 2020–06 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:14903&r= |
| By: | Bruno P. C. Levy; Hedibert F. Lopes |
| Abstract: | Time series momentum strategies are widely applied in the quantitative financial industry and its academic research has grown rapidly since the work of Moskowitz, Ooi and Pedersen (2012). However, trading signals are usually obtained via simple observation of past return measurements. In this article we study the benefits of incorporating dynamic econometric models to sequentially learn the time-varying importance of different look-back periods for individual assets. By the use of a dynamic binary classifier model, the investor is able to switch between time-varying or constant relations between past momentum and future returns, dynamically combining different look-back periods and improving trading signals accuracy and portfolio performance. Using data from 56 future contracts we show that a mean-variance investor will be willing to pay a considerable managment fee to switch from the traditional naive time series momentum strategy to the dynamic classifier approach. |
| Date: | 2021–06 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2106.08420&r= |
| By: | Isaac K. Ofori (University of Insubria, Varese, Italy); Simplice A. Asongu (Yaoundé, Cameroon) |
| Abstract: | Motivated by the projected rebound of foreign direct investment (FDI) inflow to sub-Saharan Africa (SSA) following the implementation of the AfCFTA and the finalization of the Africa Investment Protocol, we examine how FDI modulates the effects of various governance dynamics on inclusive growth in SSA. We do this by testing two hypotheses first, whether unconditionally FDI and various governance indicators (rule of law, control of corruption, regulatory quality, governance effectiveness, political stability, and voice and accountability) foster inclusive growth in SSA; and second, whether these governance dynamics engender positive synergy with FDI on inclusive growth in SSA. Using data from the World Bank’s World Governance Indicators and the World Development Indicators for the period 1990–2020, we employ several fixed effects, random effects, and the system GMM estimators for the analysis. First, we find that FDI and all our governance dynamics are significant inclusive growth enhancers in SSA. Second, though FDI amplifies the effects of all our governance dynamics on inclusive growth in SSA, governance effectiveness, voice and accountability, and political stability are keys. Policy recommendations are provided. |
| Keywords: | AfCFTA; Economic Integration; FDI; Governance; Inclusive Growth; Africa |
| JEL: | F6 F15 O43 O55 R58 |
| Date: | 2021–06 |
| URL: | http://d.repec.org/n?u=RePEc:exs:wpaper:21/038&r= |
| By: | A. Ford Ramsey; Barry Goodwin; Mildred Haley |
| Abstract: | Food manufacturing and processing is an important link between agricultural producers and consumers in the agricultural supply chain. The food manufacturing sector in the United States is both increasingly mechanized and increasingly concentrated. Consequently, labor risks in food manufacturing have changed over time with changes in industry structure. Labor risks were highlighted by the COVID-19 pandemic - particularly in the animal slaughtering and processing industry - where labor-driven disruptions resulted in temporary plant closures. We use county-level data on employment in food manufacturing and dynamic panel models estimated via generalized method of moments to examine employment and wage dynamics in the food manufacturing sector and animal processing industry. We then compare forecasts from the estimated models with changes in food manufacturing and animal processing employment and wages during the onset of the COVID-19 pandemic. Our results provide insight into the role of operational and disruption risks in food manufacturing. We find significant delays in adjustment to employment and quicker adjustment in wages. Although there is an unanticipated drop in employment in food manufacturing and animal processing in April of 2020, employment returned to predicted levels within two to three months. The response of wages and employment to the COVID-19 pandemic suggest a degree of resilience in food supply chains. |
| JEL: | J2 L66 |
| Date: | 2021–06 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:28896&r= |
| By: | Kelly, Morgan; Mokyr, Joel; Ó Gráda, Cormac |
| Abstract: | For contemporaries, Britain's success in developing the technologies of the early Industrial Revolution rested in large part on its abundant supply of artisan skills, notably in metalworking. In this paper we outline a simple process where successful industrialization occurs in regions that start with low wages and high mechanical skills, and show that these two factors strongly explain the growth of the textile industry across the 41 counties of England between the 1760s and 1830s. By contrast, literacy and access to capital have no power in predicting industrialization, nor does proximity to coal. Although unimportant as a source of power for early textile machinery, Britain's coal was vital as a source of cheap heat that allowed it over centuries to develop a unique range of sophisticated metalworking industries. From these activities came artisans, fromwatchmakers to iron founders, whose industrial skillswere in demand not just in Britain but across all of Europe. Against the view that living standards were stagnant during the Industrial Revolution, we find that real wages rose sharply in the industrializing north and collapsed in the previously prosperous south. |
| Date: | 2020–06 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:14884&r= |
| By: | Javed, Farrukh (Örebro University School of Business); Mazur, Stepan (Örebro University School of Business); Thorsén, Erik (Stockholm Universtity) |
| Abstract: | In this paper, we investigate the distributional properties of the estimated tangency portfolio (TP) weights assuming that the asset returns follow a matrix variate closed skew-normal distribution.We establish a stochastic representation of the linear combination of the estimated TP weights that fully characterize its distribution. Using the stochastic representation we derive the mean and variance of the estimated weights of TP which are of key importance in portfolio analysis. Furthermore, we provide the asymptotic distribution of the linear combination of the estimated TP weights under the high-dimensional asymptotic regime, i.e. the dimension of the portfolio p and the sample size n tend to infinity such that p/n → c ∈ (0, 1). A good performance of the theoretical findings is documented in the simulation study. In the empirical study, we apply the theoretical results to real data of the stocks included in the S&P 500 index. |
| Keywords: | Asset allocation; high-dimensional asymptotics; matrix variate skew-normal distribution; stochastic representation; tangency portfolio |
| JEL: | C13 G11 |
| Date: | 2021–06–10 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:oruesi:2021_013&r= |
| By: | Jaydip Sen; Sidra Mehtab; Abhishek Dutta |
| Abstract: | Volatility clustering is an important characteristic that has a significant effect on the behavior of stock markets. However, designing robust models for accurate prediction of future volatilities of stock prices is a very challenging research problem. We present several volatility models based on generalized autoregressive conditional heteroscedasticity (GARCH) framework for modeling the volatility of ten stocks listed in the national stock exchange (NSE) of India. The stocks are selected from the auto sector and the banking sector of the Indian economy, and they have a significant impact on the sectoral index of their respective sectors in the NSE. The historical stock price records from Jan 1, 2010, to Apr 30, 2021, are scraped from the Yahoo Finance website using the DataReader API of the Pandas module in the Python programming language. The GARCH modules are built and fine-tuned on the training data and then tested on the out-of-sample data to evaluate the performance of the models. The analysis of the results shows that asymmetric GARCH models yield more accurate forecasts on the future volatility of stocks. |
| Date: | 2021–05 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2105.13898&r= |
| By: | Daniel A. Dias; Carlos Robalo Marques |
| Abstract: | In the empirical literature, the analysis of aggregate productivity dynamics using firm-level productivity has mostly been based on changes in the mean of log-productivity. This paper shows that there can be substantial quantitative and qualitative differences in the results relative to when the analysis is based on changes in the mean of productivity, and discusses the circumstances under which such differences are likely to happen. We use firm-level data for Portugal for the period 2006-2015 to illustrate the point. When the mean of productivity is used, we estimate that TFP and labor productivity for the whole economy increased by 17.7 percent and 5.2 percent, respectively, over this period. But, when the mean of log-productivity is used, we estimate that these two productivity measures declined by 4.3 percent and 1.8 percent, respectively. Similarly disparate results are obtained for productivity decompositions regarding the contributions for productivity growth of surviving, entering and exiting firms. |
| Keywords: | Jensen's inequality; Productivity decomposition; Geometric mean |
| JEL: | D24 E32 L25 O47 |
| Date: | 2021–04–02 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedgif:1314&r= |
| By: | Juan M. Londono; Nancy R. Xu |
| Abstract: | We examine the commonality in international equity risk premiums by linking empirical evidence for the international stock return predictability of US downside and upside variance risk premiums (DVP and UVP, respectively) with implications from an international asset pricing framework, which takes the perspective of a US/global investor and features asymmetric global macroeconomic, financial market, and risk aversion shocks. We find that DVP and UVP predict international stock returns through different global equity risk premium determinants: bad and good macroeconomic uncertainties, respectively. Across countries, US investors demand lower macroeconomic risk compensation but higher financial market risk compensation for more-integrated countries. |
| Keywords: | Downside variance risk premium; Upside variance risk premium; International stock markets; Asymmetric state variables; Stock return predictability |
| JEL: | F36 G12 G13 G15 |
| Date: | 2021–05–18 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedgif:1318&r= |
| By: | Asmus, Gerda; Eichenauer, Vera; Fuchs, Andreas; Parks, Bradley |
| Abstract: | China and India increasingly provide aid and credit to developing countries. This paper explores whether India uses these financial instruments to compete for geopolitical and commercial influence with China (and vice versa). To do so, we build a new geocoded dataset of Indian government-financed projects abroad between 2007 and 2014 and combine it with data on Chinese government-financed projects. Our regression results for 2,333 provinces within 123 countries demonstrate that India's Exim Bank is significantly more likely to locate a project in a given jurisdiction if China provided government financing there in the previous year. Since this effect is more pronounced in countries where China has made public opinion gains relative to India and where both lenders have a similar export structure, we interpret this as evidence of India competing with China. By contrast, we do not find evidence that China uses official aid or credit to compete with India through co-located projects. |
| Keywords: | development finance,foreign aid,social development assistance,official credits,new donors,China,India,geospatial analysis |
| JEL: | F34 F35 F59 H77 H81 O19 O22 P33 R58 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:ifwkwp:2189&r= |
| By: | Clive L. Spash |
| Abstract: | Ecological economics has developed as a modern movement with its roots in environmentalism and radical environmental economics. Divisions and conflicts within the field are explored to show why material claiming to fall under the title of ecological economics fails to be representative of progress or the vision which drove socio-economic specialists to interact with ecologists in the first place. The argument is then put forward that ecological economics, as a social science engaging with the natural sciences, is a heterodox school of modern political economy. This is a paper from the Socio-Economics and Environment in Discussion working paper series edited by Clive L. Spash which ran from 2007 to 2009. This particular paper appeared in June 2009 and a revised version was published as a journal article: Spash, C. L. 2011. ‘Social ecological economics: Understanding the past to see the future’. American Journal of Economics and Sociology 70 (2): 340-375. https://doi.org/10.1111/j.1536-7150.2011 .00777.x. |
| Keywords: | ecological economics, methodology, ideology, politics, history |
| JEL: | B55 B4 B29 Q5 Q57 P48 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:wiw:wiwsre:sre-disc-2021_06&r= |
| By: | Schneider, Eric |
| Abstract: | Economic historians have long been aware that sample-selection bias and other forms of bias could lead to spurious causal inferences. However, our approach to these biases has been muddled at times by dealing with each bias separately and by confusion about the sources of bias and how to mitigate them. This paper shows how the methodology of directed acyclical graphs (DAGs) formulated by Pearl (2009) and particularly the concept of collider bias can provide economic historians with a unified approach to managing a wide range of biases that can distort causal inference. I present ten examples of collider bias drawn from economic history research, focussing mainly on examples where the authors were able to overcome or mitigate the bias. Thus, the paper highlights how to diagnose collider bias and also strategies for managing it. The paper also shows that quasi-random experimental designs are rarely able to overcome collider bias. Although all of these biases were understood by economic historians before, conceptualising them as collider bias will improve economic historians' understanding of the limitations of particular sources and help us develop better research designs in the future. |
| Keywords: | collider bias; directed acyclical graphs; sample-selection bias |
| JEL: | N01 N30 |
| Date: | 2020–06 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:14940&r= |
| By: | Ugbomhe, O. Ugbomhe; P, E. Okpamen; Adomokhai, S. Simon |
| Abstract: | The objective of the study was to determine the effects of demographic factors (Age, Gender, Income, Education, Marital Status and Occupation) on impulse buying bahaviour of consumers in Auchi. The study adopted survey design. The population of the study consisted all consumers who have made purchases in their present shopping trip in selected shops (supermarkets). The sample size of 384 was determined using Godden’s formula cited in Sangatang, Siochi and Plaza (2017). The main research instrument was questionnaire which was used to survey 384 respondents (192 males and 192 females). Non-probability convenience sampling was used in administering copies of questionnaire to the respondents. Multiple regression analysis was used to determine result for the data collected with the aid of SPSS 20.0. The multiple regression analysis result revealed among others that demographic characteristics (age, gender, income, education, marital status) had significant relationship with impulse buying behavior of consumers. The study concluded that demographic characteristics of consumers could explain the impulse buying behavior of consumers. The reason is that the study showed significant relationship between demographic characteristics and impulse buying behaviour of consumers might be related to the respondent’s perception about purchasing decision. The study recommended that consumer should arrange their priorities and always weigh specific weight of their preferences in relation to each other according to a particular pattern when purchasing products to prevent buying on impulse. |
| Date: | 2021–05–22 |
| URL: | http://d.repec.org/n?u=RePEc:osf:osfxxx:xcrz2&r= |