|
on Central and Western Asia |
| By: | Alyssa G. Anderson; Wenxin Du; Bernd Schlusche |
| Abstract: | We show that the role of unsecured, short-term wholesale funding for global banks has changed significantly in the post-financial-crisis regulatory environment. Global banks mainly use such funding to finance liquid, near risk-free arbitrage positions---in particular, the interest on excess reserves arbitrage and the covered interest rate parity arbitrage. In this environment, we examine the response of global banks to a large negative wholesale funding shock as a result of the U.S. money market mutual fund reform implemented in 2016. In contrast to past episodes of wholesale funding dry-ups, we find that the primary response of global banks to the reform was a cutback in arbitrage positions that relied on unsecured funding, rather than a reduction in loan provision. |
| Keywords: | Money market mutual funds; Wholesale funding; Arbitrage |
| JEL: | G20 F30 E40 |
| Date: | 2021–05–14 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedgfe:2021-32&r= |
| By: | Kočenda, Evžen; Iwasaki, Ichiro |
| Abstract: | Bank survival is essential to economic growth and development because banks mediate the financing of the economy. A bank’s overall condition is often assessed by a supervisory rating system called CAMELS, an acronym for the components Capital adequacy, Asset quality, Management quality, Earnings, Liquidity, and Sensitivity to market risk. Estimates of the impact of CAMELS components on bank survival vary widely. We perform a meta-synthesis and meta-regression analysis (MRA) using 2120 estimates collected from 50 studies. In the MRA, we account for uncertainty in moderator selection by employing Bayesian model averaging. The results of the synthesis indicate an economically negligible impact of CAMELS variables on bank survival; in addition, the effect of bank-specific, (macro)economic, and market factors is virtually absent. The results of the heterogeneity analysis and publication bias analysis are consistent in terms that they do not find an economically significant impact of the CAMELS variables. Moreover, best practice estimates show a small economic impact of CAMELS components and no impact of other factors. The study concludes that caution should be exercised when using CAMELS rating to predict bank survival or failure. |
| Keywords: | bank survival, bank failure, CAMELS, meta-analysis, publication selection bias |
| JEL: | C12 D22 G21 G33 |
| Date: | 2021–06 |
| URL: | http://d.repec.org/n?u=RePEc:hit:hitcei:2021-02&r= |
| By: | Piergiorgio Alessandri; Andrea Gazzani; Alejandro Vicondoa |
| Abstract: | Isolating financial uncertainty shocks is difficult because financial markets rapidly price changes in several economic fundamentals. To bypass this difficulty, we identify uncertainty shocks using daily data and use their monthly averages as an instrument in a VAR. We show that this novel approach is theoretically appealing and has dramatic implications for leading empirical studies on financial uncertainty. Daily interactions between equity returns, bond spreads and expected volatility cause previous identification schemes to fail at the monthly frequency. Once these interactions are explicitly modeled, the impact of uncertainty shocks on output and inflation is significant and similar across specifications. |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:ioe:doctra:559&r= |
| By: | Roncalli, Thierry; Cherief, Amina; Karray-Meziou, Fatma; Regnault, Margaux |
| Abstract: | This article is part of a comprehensive research project on liquidity risk in asset management, which can be divided into three dimensions. The first dimension covers liability liquidity risk (or funding liquidity) modeling, the second dimension focuses on asset liquidity risk (or market liquidity) modeling, and the third dimension considers the asset-liability management of the liquidity gap risk (or asset-liability matching). The purpose of this research is to propose a methodological and practical framework in order to perform liquidity stress testing programs, which comply with regulatory guidelines (ESMA, 2019, 2020) and are useful for fund managers. The review of the academic literature and professional research studies shows that there is a lack of standardized and analytical models. The aim of this research project is then to fill the gap with the goal of developing mathematical and statistical approaches, and providing appropriate answers. In this second article focused on asset liquidity risk modeling, we propose a market impact model to estimate transaction costs. After presenting a toy model that helps to understand the main concepts of asset liquidity, we consider a two-regime model, which is based on the power-law property of price impact. Then, we define several asset liquidity measures such as liquidity cost, liquidation ratio and shortfall or time to liquidation in order to assess the different dimensions of asset liquidity. Finally, we apply this asset liquidity framework to stocks and bonds and discuss the issues of calibrating the transaction cost model. |
| Keywords: | Asset liquidity, stress testing, bid-ask spread, market impact, transaction cost, participation rate, power law, liquidation cost, liquidation ratio, liquidation shortfall, time to liquidation |
| JEL: | C02 G32 |
| Date: | 2021–04–01 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:108295&r= |
| By: | Malmendier, Ulrike M.; Pezone, Vincenzo; Zheng, Hui |
| Abstract: | Traits and biases of CEOs are known to significantly affect corporate outcomes. However, analyzing individual managers in isolation can result in misattribution. Our analysis focuses on the role of CEO and CFO overconfidence in financing decisions. We show that, when considered jointly, the distorted beliefs of the CFO, rather than the CEO, dominate in generating pecking-order financing distortions. CEO overconfidence still matters indirectly for financing as the CEO's (and not CFO's) type determines investors' assessment of default risk and the resulting financing conditions. Moreover, overconfident CEOs tend to hire overconfident CFOs whenever given the opportunity, generating a multiplier effect. |
| Date: | 2020–06 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:14929&r= |
| By: | Fiskara Indawan |
| Abstract: | The paper is investigating the relationship between financial integration proxied by composition of capital inflows and financial development inemerging economies. The composition of capital inflows are FDI inflow, external debt inflow and portfolio equity inflow, whereas the indicators of financial development are nine indices of new measure of financial development constructed by IMF that include financial development, financial institutions (banks), financial market (stock and debt market) as well as its depth, access and efficiency. Using dynamic panel data GMM estimation from 79 countries in emerging economies, the estimation results find that composition of capital inflow have positive and statistically significant in developing all aspect of financial development in emerging economies. Specifically, FDI inflow as the largest portion of capital inflow in emerging economies is closely associated with financial institutions depth, access and efficiency, and financial market depth and access. External debt inflow is positively effect financial institutions efficiency and financial market depth and efficiency. Moreover, portfolio equity inflow which hold the smallest portion among other inflow is closely related to financial institution depth, access and efficiency, and financial market depth and access. In general,those three composition of capital inflows are significantly increase the development of financial institutions and market, hence the deepening of financial system in emerging economies. |
| Keywords: | financial integration, financial development, capital inflow, financial institutions |
| JEL: | F36 F63 F32 N20 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:idn:wpaper:wp072020&r= |
| By: | Beirne, John (Asian Development Bank Institute); Renzhi, Nuobu (Asian Development Bank Institute); Volz, Ulrich (Asian Development Bank Institute) |
| Abstract: | We examine the role of local currency bond markets (LCBMs) and foreign investor participation in these markets in capital flow volatility in emerging Asian economies over the period 1999 to 2020. Using a panel analysis and impulse response functions generated from a panel structural vector autoregression, we show that greater development of LCBMs across 10 Asian emerging economies in terms of capitalization helps to mitigate against capital flow volatility, while foreign investor participation has the opposite effect, particularly for less developed LCBMs. Our findings have policy implications from a financial stability perspective, whereby continued efforts to enhance LCBMs while reducing reliance on foreign investors should be encouraged. Strengthening the local investor base and mobilizing domestic resources through LCBMs ought to be a priority for raising long-term capital that will enable the financing of sustainable investment and development. Our findings also suggest that greater efforts are needed to enhance foreign exchange hedging arrangements for foreign investors in LCBMs, particularly in times of heightened financial stress. |
| Keywords: | capital flow volatility; local currency bond markets |
| JEL: | F32 F41 F62 |
| Date: | 2021–04–09 |
| URL: | http://d.repec.org/n?u=RePEc:ris:adbiwp:1252&r= |
| By: | Ly Dai Hung (Vietnam Institute of Economics, Hanoi, Vietnam) |
| Abstract: | We analyze the economic growth under impact of public and foreign investment by a vector autogressive model (VAR) on a quarterly sample of Vietnam economy over 2008-2020. The method stresses the role of exchange rate and liquidity supply on context of open economy. The evidence records that there exists a synergy of public and foreign investment on raising economic growth, reducing inflation and evaluating domestic currency. Moreover, the public investment is crucial to combat economic recession, especially during the current pandemic Covid-19. |
| Keywords: | Economic Growth,Public Investment,Foreign Investment,Vector Autoregression (VAR) model |
| Date: | 2021–05 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:hal-03241846&r= |
| By: | Almenberg, Johan; Lusardi, Annamaria; Säve-Söderbergh, Jenny; Vestman, Roine |
| Abstract: | We introduce a novel survey measure of attitude toward debt. Matching our survey results with panel data on Swedish household balance sheets from registry data, we show that our debt attitude measure helps explain individual variation in indebtedness as well as debt build-up and spending behavior in the period 2004â??2007. As an explanatory variable, debt attitude compares well to a number of other determinants of debt, including education, risk-taking, and financial literacy. We also provide evidence that suggests that debt attitude is passed down along family lines and has a cultural element. |
| Keywords: | Attitude Survey; Household borrowing decisions; Intergenerational transmission; personal finance; spending |
| JEL: | D14 D91 E21 G51 |
| Date: | 2020–05 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:14801&r= |
| By: | Chenyanzi Yu; Tianyang Xie |
| Abstract: | Pair trading is one of the most discussed topics among financial researches. Despite a growing base of work, portfolio management for multivariate time series is rarely discussed. On the other hand, most researches focus on refining strategy rules instead of finding the optimal portfolio weight. In this paper, we brought up a simple yet profitable strategy called Volatility & Model Adaption Trade-off (VMAT) to leverage the issues. Experiment studies show its superior profit performance over baselines. |
| Date: | 2021–06 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2106.09132&r= |
| By: | Hideaki Aoyama; Corrado Di Guilmi; Yoshi Fujiwara; Hiroshi Yoshikawa |
| Abstract: | Low inflation was once a welcome to both policy makers and the public. However, Japan’s experience during the 1990’s changed the consensus view on price of economists and central banks around the world. Facing deflation and zero interest bound at the same time, Bank of Japan had difficulty in conducting effective monetary policy. It made Japan’s stagnation unusually prolonged. Too low inflation which annoys central banks today is translated into the “Phillips curve puzzle”. In the US and Japan, in the course of recovery from the Great Recession after the 2008 global financial crisis, the unemployment rate had steadily declined to the level which was commonly regarded as lower than the natural rate or NAIRU. And yet, inflation stayed low. In this paper, we consider a minimal model of dual labor market to jointly investigate how blue the different factors. |
| Keywords: | Phillips curve, bargaining power, secondary workers |
| JEL: | C60 E31 |
| Date: | 2021–06 |
| URL: | http://d.repec.org/n?u=RePEc:een:camaaa:2021-49&r= |
| By: | Luc Arrondel (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); Marlene Haupt (University of Applied Sciences Ravensburg-Weingarten); María Mancebón (University of Zaragoza - Universidad de Zaragoza [Zaragoza]); Gianni Nicolini (University of Rome "Tor Vergeta" - University of Rome "Tor Vergeta"); Manuel Wälti (Swiss National Bank - Swiss National Bank); Jasmira Wiersma (University of Groningen [Groningen]) |
| Abstract: | If the idea of familiarizing individuals with savings is an old one, it is especially since the early 2000s that the economist's modern concept of financial literacy has been the object of particular attention. The literature, essentially empirical, has developed considerably since then. It is during this period that the Organisation for Economic Co-operation and Development (OECD) launched its Financial Literacy Programme. The objective of this chapter was to describe financial literacy and financial education programs in Western Europe: France, Germany, Italy, Spain, Switzerland, and the Netherlands. A first observation concerns financial literacy: to varying degrees, the residents of these countries are far from financially literate. A second observation concerns the heterogeneity of financial literacy. In all countries, financial literacy depends on age, education, and gender (higher among men, older people, and graduates). Some determinants appear to be more specific to the culture of each country (for example, political opinion in France, political past history in Germany (West vs. East), or language area in Switzerland). Finally, it appears that financial education programs have been in Western Europe since the mid-2000s, probably offered more systematically in centralized countries. |
| Date: | 2020–05 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:halshs-03243830&r= |
| By: | Laura Alfaro; Mauricio Calani; Liliana Varela |
| Abstract: | Foreign currency derivative markets are among the largest in the world, yet their role in emerging markets is relatively understudied. We study firms' currency risk exposure and their hedging choices by employing a unique dataset covering the universe of FX derivatives transactions in Chile since 2005, together with firm-level information on sales, international trade, trade credits and foreign currency debt. We uncover four novel facts: (i) natural hedging of currency risk is limited, (ii) financial hedging is more likely to be used by larger firms and for larger amounts, (iii) firms in international trade are more likely to use FX derivatives to hedge their gross --not net-- cash currency risk, and (iv) firms are more likely to pay higher premiums for longer maturity contracts. We then show that financial intermediaries can affect the forward exchange rate market through a liquidity channel, by leveraging a regulatory negative supply shock that reduced firms' use of FX derivatives and increased the forward premiums. |
| JEL: | F31 F38 G30 G38 |
| Date: | 2021–06 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:28910&r= |
| By: | Manuel M. F. Martins (Faculty of Economics, University of Porto and CEF.UP); Fabio Verona (Bank of Finland - Monetary Policy and Research Department and University of Porto - CEF.UP) |
| Abstract: | Policymakers and researchers see inflation characterized by cyclical fluctuations driven by changes in resource utilization and temporary shocks, around a trend influenced by inflation expectations. We study the in-sample inflation dynamics and forecast inflation out-of-sample by analyzing a New Keynesian Phillips Curve (NKPC) in the frequency domain. In-sample, while inflation expectations dominate medium-to-long-run cycles, energy prices dominate short cycles and business-to-medium cycles once expectations became anchored. While statistically significant, unemployment is not economically relevant for any cycle. Out-of-sample, forecasts from a low-frequency NKPC significantly outperform several benchmark models. The long-run component of unemployment is key for such remarkable forecasting performance. |
| Keywords: | Inflation dynamics; Inflation forecast; New Keynesian Phillips Curve; Frequency domain; Wavelets |
| JEL: | C53 E31 E37 |
| Date: | 2021–06 |
| URL: | http://d.repec.org/n?u=RePEc:por:cetedp:2101&r= |
| By: | George A. Alessandria; Carter B. Mix |
| Abstract: | We evaluate the aggregate effects of changes in trade barriers when these changes can be implemented slowly over time and trade responds gradually to changes in trade barriers because firm-level trade costs make exporting a dynamic decision. Our model shows how expectations of changes in trade barriers affect the economy. We find that while decreases in trade barriers increase economic activity, expectations of lower future trade barriers temporarily decrease investment, hours worked, and output. Further-more, canceling an expected decline in future trade barriers raises investment and output in the short run but substantially lowers medium-run growth. These effects are larger when the expected reform is bigger. In the data, we find that countries with more trade growth after the General Agreement on Tariffs and Trade (GATT) rounds decreased investment and hours worked in the years leading to the tariff cuts, as predicted by our model. |
| JEL: | E3 F1 F4 |
| Date: | 2021–06 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:28904&r= |
| By: | Giglio, Stefano W; Maggiori, Matteo; Stroebel, Johannes; Utkus, Stephen |
| Abstract: | We analyze how investor expectations about economic growth and stock returns changed dur- ing the February-March 2020 stock market crash induced by the COVID-19 pandemic, as well as during the subsequent partial stock market recovery. We surveyed retail investors who are clients of Vanguard at three points in time: (i) on February 11-12, around the all-time stock market high, (ii) on March 11-12, after the stock market had collapsed by over 20%, and (iii) on April 16-17, after the market had rallied 25% from its lowest point. Following the crash, the average investor turned more pessimistic about the short-run performance of both the stock market and the real economy. Investors also perceived higher probabilities of both further extreme stock market declines and large declines in short-run real economic activity. In contrast, investor expectations about long-run (10-year) economic and stock market outcomes remained largely unchanged, and, if anything, improved. Disagreement among investors about economic and stock market outcomes also increased substantially following the stock market crash, with the disagreement persisting through the partial market recovery. Those respondents who were the most optimistic in February saw the largest decline in expectations, and sold the most equity. Those respondents who were the most pessimistic in February largely left their portfolios unchanged during and after the crash. |
| Keywords: | behavioral finance; Expectations; Rare Disasters; sentiment; Surveys; Trading |
| JEL: | G11 G12 R30 |
| Date: | 2020–05 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:14813&r= |
| By: | Mauro, Filippo di (Asian Development Bank Institute); Hoang, Minh Duy (Asian Development Bank Institute); Morgan, Peter (Asian Development Bank Institute) |
| Abstract: | We provide an overview of productivity development and other related indicators in Asia and Pacific (APAC) countries, with comparisons with the Europe region. We use the seventh vintage firm-level data from the Productivity Research Network in the APAC region and CompNet in Europe for our study. The overall results show that the productivity growth in developed APAC countries (Australia, New Zealand, and the Republic of Korea) is significantly ahead of the growth in developing APAC countries (India and the People’s Republic of China) and on par with the EU’s growth. There is an ongoing process of bottom firms catching up with top firms in the Republic of Korea and the richest EU countries. Regarding employment and labor skills, employment growth has generally been quite stagnant in all regions. Labor skills, for which we use the wage premium as a proxy, are quite similar across most regions, with the richest EU countries showing a higher premium than the rest. Our test of the productivity–employment link indicates that the size of employment tends to have a greater impact on productivity in APAC countries, while labor skills have greater emphasis in the EU. |
| Keywords: | productivity; firm-level; employment; labor costs; labor skills; wage premium; TFP dispersion; firm concentration; financial constraint; Filippo di Mauro; Minh Duy Hoang; Peter Morgan |
| JEL: | D24 E24 J21 J24 P52 |
| Date: | 2021–05–21 |
| URL: | http://d.repec.org/n?u=RePEc:ris:adbiwp:1264&r= |
| By: | John List |
| Abstract: | All happy families are alike; each unhappy family is unhappy in its own way. -Leo Tolstoy, Anna Karenina |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:feb:artefa:00733&r= |
| By: | David Card; Stefano DellaVigna; Patricia Funk; Nagore Iriberri |
| Abstract: | We study the selection of Fellows of the Econometric Society, using a new data set of publications and citations for over 40,000 actively publishing economists since the early 1900s. Conditional on achievement, we document a large negative gap in the probability that women were selected as Fellows in the 1933-1979 period. This gap became positive (though not statistically significant) from 1980 to 2010, and in the past decade has become large and highly significant, with over a 100% increase in the probability of selection for female authors relative to males with similar publications and citations. The positive boost affects highly qualified female candidates (in the top 10% of authors) with no effect for the bottom 90%. Using nomination data for the past 30 years, we find a key proximate role for the Society's Nominating Committee in this shift. Since 2012 the Committee has had an explicit mandate to nominate highly qualified women, and its nominees enjoy above-average election success (controlling for achievement). Looking beyond gender, we document similar shifts in the premium for geographic diversity: in the mid-2000s, both the Fellows and the Nominating Committee became significantly more likely to nominate and elect candidates from outside the US. Finally, we examine gender gaps in several other major awards for US economists. We show that the gaps in the probability of selection of new fellows of the American Academy of Arts and Sciences and the National Academy of Sciences closely parallel those of the Econometric Society, with historically negative penalties for women turning to positive premiums in recent years. |
| JEL: | J16 |
| Date: | 2021–06 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:28942&r= |
| By: | Storesletten, Kjetil; Zhao, Bo; Zilibotti, Fabrizio |
| Abstract: | We document that business cycles change during the process of development. In countries with large declining agricultural sectors, aggregate employment is uncorrelated with GDP. During booms, agricultural employment declines even though agricultural labor productivity increases relative to other sectors. We construct a unified theory of business cycles and structural change consistent with the stylized facts. The theory focuses on the simultaneous decline and modernization of agriculture. As capital accumulates, agriculture becomes increasingly capital intensive as traditional agriculture is crowded out. We estimate the model and show that it accounts well for both structural transformation and business cycle fluctuations in China. |
| Date: | 2020–06 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:14964&r= |
| By: | Yifei Lyu (The Treasury) |
| Abstract: | This paper estimates the macroeconomic effects of government spending shocks in New Zealand. Using a structural vector autoregression (SVAR) model, I find small output multipliers for government consumption but large multipliers for government investment. Importantly, the real exchange rate appreciates after positive government spending shocks, consistent with classic theory. Private consumption and private investment decrease after government consumption shocks, but increase after government investment shocks. I show that selecting the appropriate series for government investment is important to estimating its effects. |
| Keywords: | government consumption; government investment; New Zealand; multiplier; VAR |
| JEL: | C32 E32 E62 H30 H54 |
| Date: | 2122–06 |
| URL: | http://d.repec.org/n?u=RePEc:nzt:nztwps:21/02&r= |
| By: | David Havrlant; Abdulelah Darandary (King Abdullah Petroleum Studies and Research Center) |
| Abstract: | The last decade has brought a row of substantial changes that have profound implications for the hydrocarbon resource-rich economies. The general answer to a changing environment is: Adapt! From the macroeconomic perspective, this means diversifying the economy to broaden the income base and reduce the dependence on oil revenues. This discussion paper examines the preferred diversification paths for the Saudi economy, with a focus on the foreseen adjustments in the sectoral composition along with broader macroeconomic shifts. The evaluation of the expected diversification impacts is based on the updated Vision 2030 Input-Output Table that maps the changing economic structure over the coming decade. The advances in economic diversification are measured by applying the Shannon-Weaver index to sectoral GDP and household income. We also conduct a sensitivity analysis to examine the effects of the foreseen diversification on the resilience of the Saudi economy to external shocks. |
| Keywords: | Economic Diversification |
| Date: | 2021–04–14 |
| URL: | http://d.repec.org/n?u=RePEc:prc:dpaper:ks--2021-dp06&r= |
| By: | Sriya Anbil; Mark A. Carlson; Mary-Frances Styczynski |
| Abstract: | We analyze whether the Federal Reserve's Paycheck Protection Program Liquidity Facility (PPPLF) was successful in bolstering the ability of commercial banks to provide credit to small businesses under the Small Business Administration's Paycheck Protection Program (PPP). Using an instrumental variables approach, we find a causal effect of the facility boosting PPP lending. On average, commercial banks that used the PPPLF extended over twice as many PPP loans, relative to their total assets, as banks that did not use the PPPLF. Our instrument is a measure of banks' familiarity with the operation of the Federal Reserve’s discount window; this measure is strongly related to both the propensity to sign up for and to utilize the PPPLF. Further, using a similar instrumental variables approach, we find evidence that the availability of the facility as a backstop source of funds may also have supported bank PPP lending, especially for larger banks. |
| Keywords: | COVID-19; PPP; PPPLF; Federal Reserve; Central bank lending |
| JEL: | E58 G21 H81 |
| Date: | 2021–05–05 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedgfe:2021-30&r= |
| By: | Diane Alexander; Ezra Karger |
| Abstract: | We link the county-level rollout of stay-at-home orders during the Covid-19 pandemic to anonymized cell phone records and consumer spending data. We document three patterns. First, stay-at-home orders caused people to stay home: county-level measures of mobility declined 7–8% within two days of when the stay-at-home order went into effect. Second, stay-at-home orders caused large reductions in spending in sectors associated with mobility: small businesses and large retail chains. Third, we estimate fairly uniform responses to stay-at-home orders across the country; effects do not vary by county-level income, political leanings, or urban/rural status. |
| Keywords: | Covid-19; stay-at-home orders; consumer spending; high-frequency data |
| JEL: | A19 E21 I12 R20 R50 |
| Date: | 2020–04–17 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedhwp:92745&r= |
| By: | Arnita Rishanty; Asep Suryahadi |
| Abstract: | Circular economy aims to improve the used-resources efficiency and effectiveness holistically, thereby self-sustained and sustainable. Such concept promotes an all-inclusive productivity worldview. Yet, a question remains to what extent does the circular economy practices have impact on firms’ productivity, particularly in developing economies where there are conditions that are not necessarily in line with textbook rules that are mostly based on the developed economies paradigm. As the concept of the circular economy is a relatively new focus of research, it makes this paper to be the first empirically investigating the impact of circular economy practices on firms productivity in Indonesia. The open paradigm of circular economy that is non-restrictive and adaptable to the social and ecological environment depending on the availability of resources (low-tech to high-tech) and markets (small to large), makes circular economy approach, theoretically, is effective to improve productivity sustainably with limited resources available as in developing economies such as Indonesia. The study also contributes by highlighting the challenge on limited data availability related to measuring the circular economy measurements. We find the evidence in support of circular economy practices positively affecting firms productivity. However, the effects differ across sectors. What also important is that the dynamics of other deteminant variables of productivity shows that there is unique treats of firms that implement circular economy practices which makes them different and more resilient compared to other general firms. |
| Keywords: | circular economy, productivity, Indonesia |
| JEL: | C5 D2 Q5 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:idn:wpaper:wp102020&r= |
| By: | Borissov, Kirill; Pakhnin, Mikhail; Wendner, Ronald |
| Abstract: | In this paper, we propose an approach to describe the behavior of naive agents with quasi-hyperbolic discounting in the neoclassical growth model. To study time-inconsistent decision making of an agent who cannot commit to future actions, we introduce the notion of sliding equilibrium and dis- tinguish between pseudo-perfect foresight and perfect foresight. The agent with pseudo-perfect foresight revises both the consumption path and expec- tations about prices; the agent with perfect foresight correctly foresees prices in a sliding equilibrium and is naive only about their time inconsistency. We prove the existence of sliding equilibria for the class of isoelastic utility func- tions and show that generically consumption paths are not the same under quasi-hyperbolic and exponential discounting. Observational equivalence only holds in the well-known cases of a constant interest rate or logarithmic utility. Our results suggest that perfect foresight implies a higher long-run capital stock and consumption level than pseudo-perfect foresight. |
| Keywords: | Quasi-hyperbolic discounting; Observational equivalence; Time inconsistency; Naive agents; Sliding equilibrium; Perfect foresight |
| JEL: | D14 D91 E21 O40 |
| Date: | 2021–01 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:108336&r= |
| By: | Néstor Duch-Brown (Joint Research Centre of the European Commission); Lukasz Grzybowski (SES - Département Sciences Economiques et Sociales - Télécom ParisTech, ECOGE - Economie Gestion - I3, une unité mixte de recherche CNRS (UMR 9217) - Institut interdisciplinaire de l’innovation - X - École polytechnique - Télécom ParisTech - MINES ParisTech - École nationale supérieure des mines de Paris - PSL - Université Paris sciences et lettres - CNRS - Centre National de la Recherche Scientifique, IP Paris - Institut Polytechnique de Paris); André Romahn (University of Dusseldorf); Frank Verboven (KU Leuven - Catholic University of Leuven - Katholieke Universiteit Leuven) |
| Abstract: | Did the Internet make international markets more integrated? To address this question, we study long-term international price differences and their speed of convergence, based on a unique data base for identical goods sold in both online and traditional "brick-and-mortar" distribution channels, covering ten European countries. We find that long-term international price differences are closely comparable between both distribution channels. Furthermore, international price differences converge only slightly faster online than offline, and the differences in the international price differences between online and offline converge at a very fast rate. Finally, regardless of the distribution channel, long-term price differences are lower and converge faster within the same currency union. Our findings imply that online markets are currently not more integrated than traditional markets. |
| Keywords: | L13,L68,L86 |
| Date: | 2021–07 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-03235901&r= |
| By: | Sakemoto, Ryuta |
| Abstract: | This study proposes a method to enhance cryptocurrency portfolios constructed by forecast models. This study forecasts returns on four liquid cryptocurrencies (Bitcoin, Litecoin, Ripple, and Dash) and determines the weights on the cryptocurrencies based upon a dynamic allocation framework. We assess the performances of the portfolios using the performance fee measure. Our results present that the proposed portfolios outperform the benchmark portfolio with the conventional level of the risk aversion parameter. The economic gain for an investor is equivalent to 12% per week. The economic gain is sensitive to a change in the risk aversion parameter, which contrasts with the studies of exchange rates which is due to the high volatility on the cryptocurrencies. Our predictors are related to the price momentum effects and they outperform widely used network factors. |
| Keywords: | Cryptocurrency, Bitcoin, Portfolio evaluation, Forecast model, Risk aversion |
| JEL: | G10 G11 G17 |
| Date: | 2021–06–13 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:108283&r= |
| By: | Jia, Pengfei |
| Abstract: | The Global Financial Crisis of 2007--2009 and its aftermath have called for a rethink of the role of money in shaping business cycle fluctuations. To this end, this paper studies a New Keynesian model with money (liquidity). In the model, agents hold government money and other financial assets. However, there is a "short rate disconnect" (i.e., an interest rate spread) between the policy rate on money and the interest rate on household's savings. The paper shows that there exists a meaningful "liquidity effect" that is quantitatively significant for the macroeconomy. As the spread increases, so does the price of liquidity. In a model where consumption and money are complements, such an increase in the opportunity cost of money induces agents to consume less and work less. Both the effects imply that the real wage can fall, which in turn puts downward pressures on inflation via the New Keynesian Phillips curve. The fall in inflation makes the monetary authority cut the nominal interest rates by more, but at the cost of increasing the spread even further. In addition, the paper compares the dynamic responses to technology shocks and monetary policy shocks for the model with liquidity and the standard New Keynesian model. The results show that the responses can be quantitatively different for the two models. Finally, this paper studies the interaction between the liquidity effect and monetary policy, highlighting the liquidity effect that can play in business cycles. |
| Keywords: | Liquidity, Money, New Keynesian model, Business cycle fluctuations |
| JEL: | E32 E41 E51 E52 E62 |
| Date: | 2021–06–14 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:108286&r= |
| By: | Michele Costola; Matteo Iacopini; Carlo R. M. A. Santagiustina |
| Abstract: | The meme stock phenomenon is yet to be explored. In this note, we provide evidence that these stocks display common stylized facts on the dynamics of price, trading volume, and social media activity. Using a regime-switching cointegration model, we identify the meme stock "mementum" which exhibits a different characterization with respect to other stocks with high volumes of activity (persistent and not) on social media. Understanding these properties helps the investors and market authorities in their decision. |
| Date: | 2021–06 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2106.03691&r= |
| By: | Loanoto, Vincent Indrakusuma |
| Abstract: | In this Covid-19 era, many companies are required to run new business platforms, but many of these companies are not able to keep up with the growing business trends. Of course, in anticipating changes in the competitive climate in the digital era, companies can carry out transformation programs and also implement good corporate governance values to avoid the dangers and risks of failure. This research uses a case study that focuses on efforts to foster Medium, Small and Medium Enterprises (MSMEs) that contribute to improving the Indonesian economy. |
| Date: | 2021–06–01 |
| URL: | http://d.repec.org/n?u=RePEc:osf:osfxxx:dpnvh&r= |
| By: | Antoinette Baujard (GATE Lyon Saint-Étienne - Groupe d'analyse et de théorie économique - CNRS - Centre National de la Recherche Scientifique - Université de Lyon - UJM - Université Jean Monnet [Saint-Étienne] - UCBL - Université Claude Bernard Lyon 1 - Université de Lyon - UL2 - Université Lumière - Lyon 2 - ENS Lyon - École normale supérieure - Lyon) |
| Abstract: | This chapter focuses on the inner rationale and consequences of four different archetypal positions regarding how ethical and political values are tackled in welfare economics. Welfare economics is standardly associated with the welfarist framework, for which social welfare is based on individual utility only. Beyond this, we distinguish the value-neutrality claimfor which ethical values should be and are out of the scope of welfare economics-, the value confinement idealfor which ethical values are acceptable if they are minimal and consensual-, the transparency requirementfor which any ethical values may be acceptable in the welfare economics framework if explicit and formalized-, and the entanglement claimwhich challenges the very possibility of demarcation between facts and values. |
| Keywords: | Welfare economics,facts and values,value judgement,welfarism,transparency,demarcation,normative and positive,neutrality |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:halshs-03244909&r= |
| By: | Nektarios Aslanidis; Aurelio F. Bariviera; \'Oscar G. L\'opez |
| Abstract: | This paper shows that Bitcoin is not correlated to a general uncertainty index as measured by the Google Trends data of Castelnuovo and Tran (2017). Instead, Bitcoin is linked to a Google Trends attention measure specific for the cryptocurrency market. First, we find a bidirectional relationship between Google Trends attention and Bitcoin returns up to six days. Second, information flows from Bitcoin volatility to Google Trends attention seem to be larger than information flows in the other direction. These relations hold across different sub-periods and different compositions of the proposed Google Trends Cryptocurrency index. |
| Date: | 2021–06 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2106.07104&r= |
| By: | Hyejin Lee; Johan Swinnen; Patrick Van Cayseele |
| Abstract: | Agricultural cooperatives have often been promoted as a way to increase their market power and to obtain stability of profit against uncertainty. This paper estimates the firm-level markups and markup volatility to identify the countervailing market power of cooperatives in the Italian fruits and vegetable sector and the dairy sector. We use the firm-level data of Italian firms for the period 2007-2014. We find that, overall, there is a tradeoff in cooperatives’ role between obtaining market power and stability. Farmer cooperatives in both sectors gain stability in their markups but their markups are lower, on average, than those for non-cooperatives. For processor cooperatives, the fruits and vegetable sector obtains more market power. This appears to arise from the product differentiation strategy of the processors cooperative. |
| Keywords: | Cooperatives, market power, firm-level markups, volatility |
| JEL: | L44 Q13 D23 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:lic:licosd:42421&r= |
| By: | Ivan Fursov; Matvey Morozov; Nina Kaploukhaya; Elizaveta Kovtun; Rodrigo Rivera-Castro; Gleb Gusev; Dmitry Babaev; Ivan Kireev; Alexey Zaytsev; Evgeny Burnaev |
| Abstract: | Machine learning models using transaction records as inputs are popular among financial institutions. The most efficient models use deep-learning architectures similar to those in the NLP community, posing a challenge due to their tremendous number of parameters and limited robustness. In particular, deep-learning models are vulnerable to adversarial attacks: a little change in the input harms the model's output. In this work, we examine adversarial attacks on transaction records data and defences from these attacks. The transaction records data have a different structure than the canonical NLP or time series data, as neighbouring records are less connected than words in sentences, and each record consists of both discrete merchant code and continuous transaction amount. We consider a black-box attack scenario, where the attack doesn't know the true decision model, and pay special attention to adding transaction tokens to the end of a sequence. These limitations provide more realistic scenario, previously unexplored in NLP world. The proposed adversarial attacks and the respective defences demonstrate remarkable performance using relevant datasets from the financial industry. Our results show that a couple of generated transactions are sufficient to fool a deep-learning model. Further, we improve model robustness via adversarial training or separate adversarial examples detection. This work shows that embedding protection from adversarial attacks improves model robustness, allowing a wider adoption of deep models for transaction records in banking and finance. |
| Date: | 2021–06 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2106.08361&r= |
| By: | Maria D. Tito; Ruoying Wang |
| Abstract: | This paper estimates the impact of reducing export and import tariffs on firm input choices. In presence of borrowing constraints, lower export tariffs facilitate the reallocation of capital and labor inputs across firms, while a decline in import tariffs either tightens import competition or increases the availability of imported inputs; all three mechanisms suggest that a higher degree of openness should be associated with lower misallocation. To analyze the empirical relationship between openness and input misallocation, we draw on the annual surveys conducted by the Chinese National Bureau of Statistics (NBS) between 1998 and 2007. From the surveys, we con- struct firm-level measures of input misallocation that control for firm heterogeneity; we identify shocks to openness using industry tariff levels and firm trade shares. We find that firm facing higher tariffs in either import or export markets make less optimal input choices. We further decompose our analysis between input and output tariffs: our results suggest that the labor reallocation mainly occurs because of lower input tariffs, while the selection effect induced by changes in output tariffs does not necessarily cause more distorted firms to exit and, therefore, tends to have an insignificant effect on input allocation. Finally, we calculate the contribution of tariff changes towards aggregate misallocation and productivity: our results indicate that the impact of firm-level tariff reductions on aggregate misallocation and productivity was marginal in our sample period, but the presence of sizeable interactions between trade shocks and mis- allocation at the sector level suggests that our result should be interpreted as a lower bound of the overall effect. |
| Keywords: | Openness; Misallocation; Export Tariffs; Input and Output Tariffs |
| JEL: | F14 |
| Date: | 2021–01–29 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedgfe:2021-07&r= |
| By: | Marco Angrisani (University of Southern California, Center for Economic and Social Research); Jeremy Burke (University of Southern California, Center for Economic and Social Research); Arie Kapteyn (University of Southern California, Center for Economic and Social Research) |
| Abstract: | In the past few decades, financial products target to consumers have become increasingly complex and recent evidence suggests that older adults are entering retirement with more debt than previous generations. We examine how cognitive ability is related to debt burdens among older adults and whether this relationship has changed over time with the increasingly complex financial landscape. Using data from the Health and Retirement Study spanning 1998 to 2014, we find that cognitive ability is an important predictor of debt burdens in older age and that, in more complex financial environments, individuals with higher cognitive ability have taken on higher debt levels than individuals with lower cognitive ability. In a complementary analysis using data from 2015 to 2019 drawn from the Understanding America Study, we find similar results and evidence that the relationship between cognitive ability and debt exposure is driven by financial sophistication. Our findings are broadly inconsistent with financial intermediaries pushing increasingly complicated financial products onto unsophisticated borrowers. However, we find that even higher cognitive ability individuals may have difficulty managing their debt burdens in more complex environments – they hold less total wealth, less liquid wealth, and are more likely to have debt levels that exceed half their assets than their counterparts prior to the expansion in complexity. All told, we find that individuals with higher cognitive ability disproportionately increased their debt burdens during the increase in financial product complexity, and that subsequently they were more financially fragile than similar individuals in previous cohorts. |
| Date: | 2020–09 |
| URL: | http://d.repec.org/n?u=RePEc:mrr:papers:wp411&r= |
| By: | Rohan Kekre; Moritz Lenel |
| Abstract: | We study the transmission of monetary policy through risk premia in a heterogeneous agent New Keynesian environment. Heterogeneity in households' marginal propensity to take risk (MPR) summarizes differences in portfolio choice on the margin. An unexpected reduction in the nominal interest rate redistributes to households with high MPRs, lowering risk premia and amplifying the stimulus to the real economy. Quantitatively, this mechanism rationalizes the role of news about future excess returns in driving the stock market response to monetary policy shocks and amplifies their real effects by 1.3-1.5 times. |
| JEL: | E44 E52 G12 |
| Date: | 2021–05 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:28869&r= |
| By: | Zengjing Chen; Larry G. Epstein; Guodong Zhang |
| Abstract: | This paper establishes a central limit theorem under the assumption that conditional variances can vary in a largely unstructured history-dependent way across experiments subject only to the restriction that they lie in a fixed interval. Limits take a novel and tractable form, and are expressed in terms of oscillating Brownian motion. A second contribution is application of this result to a class of multi-armed bandit problems where the decision-maker is loss averse. |
| Date: | 2021–06 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2106.05472&r= |
| By: | Nick James; Max Menzies |
| Abstract: | This paper introduces a new framework to quantify distance between finite sets with uncertainty present, where probability distributions determine the locations of individual elements. Combining this with a Bayesian change point detection algorithm, we produce a new measure of similarity between time series with respect to their structural breaks. Next, we apply this to financial data to study the erratic behavior profiles of 19 countries and 11 sectors over the past 20 years. Then, we take a closer examination of individual equities and their behavior surrounding market crises, times when change points are consistently observed. Combining new and existing methods, we study the dynamics of our collection of equities and highlight an increase in equity similarity in recent years, particularly during such crises. Finally, we show that our methodology may provide a new outlook on diversification and risk-reduction during times of extraordinary correlation between assets, where traditional portfolio optimization algorithms encounter difficulties. |
| Date: | 2021–06 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2106.07377&r= |
| By: | Anders D. Sleire; B{\aa}rd St{\o}ve; H{\aa}kon Otneim; Geir Drage Berentsen; Dag Tj{\o}stheim; Sverre Hauso Haugen |
| Abstract: | It is well known that there are asymmetric dependence structures between financial returns. In this paper we use a new nonparametric measure of local dependence, the local Gaussian correlation, to improve portfolio allocation. We extend the classical mean-variance framework, and show that the portfolio optimization is straightforward using our new approach, only relying on a tuning parameter (the bandwidth). The new method is shown to outperform the equally weighted (1/N) portfolio and the classical Markowitz portfolio for monthly asset returns data. |
| Date: | 2021–06 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2106.12425&r= |
| By: | Bukowski, Pawel; Novokmet, Filip |
| Abstract: | We construct the first consistent series on the long-term distribution of income in Poland by combining tax, household survey and national accounts data. We document a U-shaped evolution of inequalities from the end of the 19th century until today: (i) inequality was high before WWII; (ii) abruptly fell after the introduction of communism in 1947 and stagnated at low levels during the whole communist period; (iii) experienced a sharp rise with the return to capitalism in 1989. We find that official survey-based measures strongly under-estimate the rise in inequality since 1989. Our results highlight the prominent role of capital income in driving the U-shaped evolution of top income shares. The unique inequality history of Poland speaks to the central role of institutions and policies in shaping inequality in the long run. |
| Keywords: | income inequality; transformation; Poland |
| JEL: | D31 E01 N34 |
| Date: | 2021–06–02 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:110221&r= |
| By: | Marc J. Melitz; Stephen J. Redding |
| Abstract: | Two central insights from the Schumpeterian approach to innovation and growth are that the pace of innovation is endogenously determined by the expectation of future profits and that growth is inherently a process of creative destruction. As international trade is a key determinant of firm profitability and survival, it is natural to expect it to play a key role in shaping both incentives to innovate and the rate of creative destruction. In this paper, we review the theoretical and empirical literature on trade and innovation. We highlight four key mechanisms through which international trade affects endogenous innovation and growth: (i) market size; (ii) competition; (iii) comparative advantage; (iv) knowledge spillovers. Each of these mechanisms offers a potential source of dynamic welfare gains in addition to the static welfare gains from trade from conventional trade theory. Recent research has suggested that these dynamic welfare gains from trade can be substantial relative to their static counterparts. Discriminating between alternative mechanisms for these dynamic welfare gains and strengthening the evidence on their quantitative magnitude remain exciting areas of ongoing research. |
| JEL: | F1 F43 O4 |
| Date: | 2021–06 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:28945&r= |
| By: | Reshmaan N. Hussam; Erin M. Kelley; Gregory V. Lane; Fatima T. Zahra |
| Abstract: | In settings where an individual’s labor choices are constrained, the inability to work may generate psychosocial harm. This paper presents a causal estimate of the psychosocial value of employment in the Rohingya refugee camps of Bangladesh. We engage 745 individuals in a field experiment with three arms: (1) a control arm, (2) a weekly cash arm, and (3) a gainful employment arm, in which work is offered and individuals are paid weekly the approximate equivalent of that in the cash arm. We find that employment confers significant psychosocial benefits beyond the impacts of cash alone, with effects concentrated among males. The cash arm does not improve psychosocial wellbeing, despite the provision of cash at a weekly amount that is more than twice the amount held by recipients in savings at baseline. Consistent with these findings, we find that 66% of those in our work treatment are willing to forego cash payments to instead work for free. Our results have implications for social protection policies for the unemployed in low income countries and refugee populations globally. |
| JEL: | D91 I31 J22 |
| Date: | 2021–06 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:28924&r= |
| By: | Manthos D. Delis; Pantelis Kazakis; Constantin Zopounidis |
| Abstract: | Firms with good management practices optimize and synthesize human resources, leadership, and technical and conceptual skills to enhance firm value. In this paper, we examine the role of management practices in merger and acquisition (M&A) decisions. M&A decisions are among the most important corporate decisions, on which firms spend a lot of resources and managerial qualities. We estimate management practices as a latent variable using a structural equation production model and Bayesian techniques. The key advantage of the Bayesian approach is the use of informative priors from survey-based management estimation methods, which are however available for a limited number of firms. Subsequently, we examine the effect of management practices on takeover events. We first show that management practices, on average, increase the probability of M&A deals. However, we also uncover a nonlinear U-shaped effect, which is consistent with the theoretical premise that poor management leads to many value-decreasing M&A deals, whereas good management leads to many value-increasing M&A deals. |
| Keywords: | OR in corporate finance; Management practices; Bayesian methods; Mergers and acquisitions; Nonlinear models |
| JEL: | G14 G34 C11 C30 |
| Date: | 2021–06 |
| URL: | http://d.repec.org/n?u=RePEc:gla:glaewp:2021_10&r= |
| By: | Sy-Hoa Ho; Jamel Saadaoui |
| Abstract: | While it is widely recognized that the development of a sound financial system may contribute to foster economic growth, the relation between economic growth and financial activities is complex. In this perspective, our contribution investigates the existence of threshold effects in the relationship between economic growth and bank credit. Our sample of ASEAN countries is examined over the period spanning from 1993 to 2019. We use the approach of Kremer et al. (2013) to estimate threshold effects in a dynamic panel where a group of explanatory variables can be endogenous. Our results do not confirm the vanishing effect of finance on economic growth. We found a threshold of 96.5% (significant at the 5% level) for the credit-to-GDP ratio, the threshold variable. In the short run, for observations inferior or equal to the threshold, the positive effect of bank credit expansion on economic growth is around 0.08 (significant at the 1% level). Whereas, for observations superior to the threshold, the positive effect of bank credit expansion on economic growth is around 0.02 (significant at the 1% level). The role of exporting firms is essential in ASEAN countries as they are more export-oriented than other regions in the world economy. Our results may indicate that the beneficiary of the credit (firms versus households), the structural features (export-led growth), and the regional heterogeneity have to be considered in empirical investigations of threshold effects in the relation between economic growth and bank credit. This empirical evidence may help to formulate sound policy recommendations. |
| Keywords: | Bank Credit, Economic Growth, Dynamic Threshold Estimation, ASEAN. |
| JEL: | C23 G21 O41 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:ulp:sbbeta:2021-24&r= |
| By: | Bertrand Rioux; Rami Shabaneh; Steve Griffiths (King Abdullah Petroleum Studies and Research Center) |
| Abstract: | Natural gas development across the member states of the Gulf Cooperation Council (GCC) — including Saudi Arabia, the United Arab Emirates (UAE), Qatar, Kuwait, Oman and Bahrain —has become a priority for achieving long-term energy security and for supporting economic diversification initiatives (Shabaneh et al. 2020). |
| Keywords: | Natural Gas, Infrastructure, GCC Countries |
| Date: | 2021–03–23 |
| URL: | http://d.repec.org/n?u=RePEc:prc:dpaper:ks--2021-dp01&r= |
| By: | Natalie Bau; Raquel Fernández |
| Abstract: | This handbook chapter focuses on important interactions between the family and culture. We discuss the wide range of global variation in family institutions, variation which is in part sustained by cultural differences, and important recent changes in family structures. The chapter discusses why different family institutions arise, when they persist, and what forces may lead them to change. Furthermore, it examines changes in key family outcomes, such as the rise of female labor force participation, the decline in marriage, and the increase in divorce. These changes have been accompanied by and interact with cultural change. Finally, we show how cultural institutions related to the family, such as son preference, co-residence traditions, polygyny, and marriage payments, affect decision-making within the family and interact with policy. We conclude that studying the family in a vacuum, without accounting for the role of culture, may lead to misleading conclusions regarding the effects of policies, macroeconomic shocks, or technological change. |
| JEL: | I0 J11 J12 J13 J14 J16 O11 O12 |
| Date: | 2021–06 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:28918&r= |
| By: | Lijun Bo; Tongqing Li; Xiang Yu |
| Abstract: | This paper studies a systemic risk control problem by the central bank, which dynamically plans monetary supply for the interbank system with borrowing and lending activities. Facing both heterogeneity among banks and the common noise, the central bank aims to find an optimal strategy to minimize the average distance between log-monetary reserves and some prescribed capital levels for all banks. A relaxed control approach is adopted, and an optimal randomized control can be obtained in the system with finite banks by applying Ekeland's variational principle. As the number of banks grows large, we further prove the convergence of optimal strategies using the Gamma-convergence arguments, which yields an optimal relaxed control in the mean field model. It is shown that the limiting optimal relaxed control is linked to a solution of a stochastic Fokker-Planck-Kolmogorov (FPK) equation. The uniqueness of the solution to the stochastic FPK equation is also established under some mild conditions. |
| Date: | 2021–06 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2106.09978&r= |
| By: | Mashekwa Maboshe |
| Abstract: | This paper investigates the responsiveness of firm-level investment to corporate tax changes in South Africa over the period 1999 to 2012. The study exploits rare changes in corporate tax policy to assess the responsiveness of firm-level investment among Johannesburg Stock Exchange listed non-financial firms. Our estimation of a neoclassical investment model using GMM techniques shows that although changes in corporate tax policy reduced the tax-adjusted marginal cost of capital over time, the reductions did not translate into significant investments in fixed assets. We speculate that the well-documented financial frictions in the capital markets could explain the failure of neoclassical investment theory in South Africa. Our findings are similar to those in other developing countries and crucially suggest that investment policies should look beyond the use of corporate tax incentives. |
| Keywords: | corporate taxation, capital investment, user cost of capital |
| JEL: | E22 H32 C23 |
| Date: | 2021–06 |
| URL: | http://d.repec.org/n?u=RePEc:rza:wpaper:863&r= |
| By: | Gagliardi, Nicola (Free University of Brussels); Grinza, Elena (University of Milan); Rycx, Francois (Free University of Brussels) |
| Abstract: | In this paper, we explore the impact of workers' tenure on firm productivity, using rich longitudinal matched employer-employee data on private Belgian firms. We estimate a production function augmented with a firm-level measure of tenure. We deal with endogeneity, which arises from unobserved firm heterogeneity and reverse causality, by applying a modified version of Ackerberg et al.'s (2015) control function method, which explicitly removes firm fixed effects. Consistently with recent theoretical predictions, we find that tenure exhibits an inverted-U-shaped relationship with respect to productivity. The existence of decreasing marginal returns to tenure is corroborated in our analysis on the tenure composition of the workforce. We also find that the impact of tenure differs widely across workforce and firm dimensions. Tenure is particularly beneficial for productivity in contexts characterized by a certain degree of routineness and lower job complexity. Along the same lines, our findings indicate that tenure exerts stronger (positive) impacts in industrial and high capital-intensive firms, as well as in firms less reliant on knowledge- and ICT-intensive processes. |
| Keywords: | tenure, firm productivity, semiparametric methods to estimate production functions, longitudinal matched employer-employee data |
| JEL: | D24 M59 |
| Date: | 2021–05 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp14432&r= |
| By: | Andrés, Javier; Arce, Oscar; Fernández-Villaverde, Jesús; Hurtado, Samuel |
| Abstract: | We study the macroeconomic effects of internal devaluations undertaken by a periphery of countries belonging to a monetary union. We find that internal devaluations have large and positive output effects in the long run. Through an expectations channel, most of these effects carry over to the short run. Internal devaluations focused on goods markets reforms are generally more powerful in stimulating growth than reforms aimed at moderating wages, but the latter are less deflationary. For a monetary union with a periphery the size of the euro area's, the countries at the periphery benefit from internal devaluations even at the zero lower bound (ZLB) of the nominal interest rate. Nevertheless, when the ZLB binds, there is a case for a sequencing of reforms that prioritizes labor policies over goods markets reforms. |
| Keywords: | internal devaluation; monetary union; policy sequencing; Structural reforms; zero lower bound |
| JEL: | D42 E44 E63 |
| Date: | 2020–05 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:14829&r= |
| By: | Kamaladdin Fataliyev; Aneesh Chivukula; Mukesh Prasad; Wei Liu |
| Abstract: | Stock market movements are influenced by public and private information shared through news articles, company reports, and social media discussions. Analyzing these vast sources of data can give market participants an edge to make profit. However, the majority of the studies in the literature are based on traditional approaches that come short in analyzing unstructured, vast textual data. In this study, we provide a review on the immense amount of existing literature of text-based stock market analysis. We present input data types and cover main textual data sources and variations. Feature representation techniques are then presented. Then, we cover the analysis techniques and create a taxonomy of the main stock market forecast models. Importantly, we discuss representative work in each category of the taxonomy, analyzing their respective contributions. Finally, this paper shows the findings on unaddressed open problems and gives suggestions for future work. The aim of this study is to survey the main stock market analysis models, text representation techniques for financial market prediction, shortcomings of existing techniques, and propose promising directions for future research. |
| Date: | 2021–06 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2106.12985&r= |
| By: | Luca Merlo; Lea Petrella; Valentina Raponi |
| Abstract: | In this paper we propose a multivariate quantile regression framework to forecast Value at Risk (VaR) and Expected Shortfall (ES) of multiple financial assets simultaneously, extending Taylor (2019). We generalize the Multivariate Asymmetric Laplace (MAL) joint quantile regression of Petrella and Raponi (2019) to a time-varying setting, which allows us to specify a dynamic process for the evolution of both VaR and ES of each asset. The proposed methodology accounts for the dependence structure among asset returns. By exploiting the properties of the MAL distribution, we then propose a new portfolio optimization method that minimizes the portfolio risk and controls for well-known characteristics of financial data. We evaluate the advantages of the proposed approach on both simulated and real data, using weekly returns on three major stock market indices. We show that our method outperforms other existing models and provides more accurate risk measure forecasts compared to univariate ones. |
| Date: | 2021–06 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2106.06518&r= |
| By: | Zach Y. Brown; Alexander MacKay |
| Abstract: | Increasingly, retailers have access to better pricing technology, especially in online markets. Using hourly data from five major online retailers, we show that retailers set prices at regular intervals that differ across firms. In addition, faster firms appear to use automated pricing rules that are functions of rivals' prices. These features are inconsistent with the standard assumptions about pricing technology used in the empirical literature. Motivated by these facts, we consider a model of competition in which firms can differ in pricing frequency and choose pricing algorithms rather than prices. We demonstrate that, relative to the standard simultaneous price-setting model, pricing technology with these features can increase prices in Markov perfect equilibrium. A simple counterfactual simulation implies that pricing algorithms lead to meaningful increases in markups in our empirical setting, especially for firms with the fastest pricing technology. |
| JEL: | D43 L13 L81 L86 |
| Date: | 2021–05 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:28860&r= |
| By: | Mariacristina De Nardi; Eric French; John Bailey Jones; Rory McGee |
| Abstract: | While the savings of retired singles tend to fall with age, those of retired couples tend to rise. We estimate a rich model of retired singles and couples with bequest motives and uncertain longevity and medical expenses. Our estimates imply that while medical expenses are an important driver of the savings of middle-income singles, bequest motives matter for couples and high-income singles, and generate transfers to non-spousal heirs whenever a household member dies. The interaction of medical expenses and bequest motives is a crucial determinant of savings for all retirees. Hence, to understand savings, it is important to model household structure, medical expenses, and bequest motives. |
| Keywords: | Couples; Singles; Savings; Medical expenses; Bequest motives |
| JEL: | D15 D31 E21 H31 |
| Date: | 2021–05–25 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedmoi:92751&r= |
| By: | David Gaukrodger (OECD) |
| Abstract: | As our societies face new challenges and make new demands from policies addressing international investment, there is a new urgency to profoundly reconsider treaties addressing investment. This paper was prepared originally as background for initial inter-governmental and public discussions at the OECD about future investment treaties as well as possible alternatives. The paper surveys potential roles for treaties addressing investment in (i) contributing to sustainable development and responsible business conduct; (ii) preserving and improving investment market access and liberalisation of investment, and facilitating FDI; (iii) regulating subsidised state-owned enterprises, competition in subsidies for investment, and digitalisation; and (iv) addressing the interests of treaty-covered and other investors in reasonable legal predictability and a level playing field, together with the need for policy space and public support for treaty policy. It considers potential use of more flexible and varied remedies and implementation mechanisms. A final section briefly considers treaty policies as governments and societies confront the urgent challenge of climate change. |
| Keywords: | environmental law, human rights, labour law, responsible business conduct, sustainable development |
| JEL: | F18 F13 F21 F23 F53 F60 K23 K32 K33 K40 |
| Date: | 2021–06–28 |
| URL: | http://d.repec.org/n?u=RePEc:oec:dafaaa:2021/03-en&r= |
| By: | Agostino Capponi; Sveinn Olafsson; Humoud Alsabah |
| Abstract: | Does the proof-of-work protocol serve its intended purpose of supporting decentralized cryptocurrency mining? To address this question, we develop a game-theoretical model where miners first invest in hardware to improve the efficiency of their operations, and then compete for mining rewards in a rent-seeking game. We argue that because of capacity constraints faced by miners, centralization in mining is lower than indicated by both public discourse and recent academic work. We show that advancements in hardware efficiency do not necessarily lead to larger miners increasing their advantage, but rather allow smaller miners to expand and new miners to enter the competition. Our calibrated model illustrates that hardware efficiency has a small impact on the cost of attacking a network, while the mining reward has a significant impact. This highlights the vulnerability of smaller and emerging cryptocurrencies, as well as of established cryptocurrencies transitioning to a fee-based mining reward scheme. |
| Date: | 2021–06 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2106.09783&r= |
| By: | Hanke, Steve (The Johns Hopkins Institute for Applied Economics, Global Health, and the Study of Business Enterprise); Hanlon, Nicholas (The Johns Hopkins Institute for Applied Economics, Global Health, and the Study of Business Enterprise); Chakravarthi, Mihir (The Johns Hopkins Institute for Applied Economics, Global Health, and the Study of Business Enterprise) |
| Abstract: | El Salvador’s President Nayib Bukele has blessed El Salvador’s Bitcoin Law, a law that will make bitcoin legal tender. Among other things, the President has asserted that bitcoin is a cheaper method of sending and receiving remittances than the methods currently used for the transmission of greenbacks to El Salvador. We examine the validity of the President’s assertion, and conclude that the assertion is false. |
| Keywords: | bitcoin; remittances |
| JEL: | F24 |
| Date: | 2021–06–23 |
| URL: | http://d.repec.org/n?u=RePEc:ris:jhisae:0185&r= |
| By: | Balazs Egert |
| Abstract: | Aggregate business investment is a major driver of long-term economic growth. It has been weak in many advanced economies over the last decade, partly due to cyclical demand-side effects. Nevertheless, a number of structural factors and policies interact with and have an effect on business investment. This paper provides a survey of the literature on the main policy drivers of business investment such as finance (including bank and market finance, venture capital and the debt bias in corporate taxation), tax policies, foreign direct investment, product and labour market and environmental regulations, the importance of an efficient insolvency regime, the negative impact of (regulatory) uncertainty and the role of infrastructure investment as a support for business investment. |
| Keywords: | aggregate investment, capital deepening, structural policy, product market regulation, labour market regulation, OECD |
| JEL: | E24 C13 C23 C51 L43 L51 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_9136&r= |
| By: | Sabiou M. Inoua (Economic Science Institute, Chapman University); Vernon L. Smith (Economic Science Institute, Chapman University) |
| Keywords: | Microeconomic Theory, Experimental Economics, Methodology of Economics, Information Aggregation |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:chu:wpaper:21-09&r= |
| By: | Wenyong Zhang; Lingfei Li; Gongqiu Zhang |
| Abstract: | We propose a two-step framework for predicting the implied volatility surface over time without static arbitrage. In the first step, we select features to represent the surface and predict them over time. In the second step, we use the predicted features to construct the implied volatility surface using a deep neural network (DNN) model by incorporating constraints that prevent static arbitrage. We consider three methods to extract features from the implied volatility data: principal component analysis, variational autoencoder and sampling the surface, and we predict these features using LSTM. Using a long time series of implied volatility data for S\&P500 index options to train our models, we find that sampling the surface with DNN for surface construction achieves the smallest error in out-of-sample prediction. Furthermore, the DNN model for surface construction not only removes static arbitrage, but also significantly reduces the prediction error compared with a standard interpolation method. Our framework can also be used to simulate the dynamics of the implied volatility surface without static arbitrage. |
| Date: | 2021–06 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2106.07177&r= |
| By: | Beni Egressy; Roger Wattenhofer |
| Abstract: | We consider networks of banks with assets and liabilities. Some banks may be insolvent, and a central bank can decide which insolvent banks, if any, to bail out. We view bailouts as an optimization problem where the central bank has given resources at its disposal and an objective it wants to maximize. We show that under various assumptions and for various natural objectives this optimization problem is NP-hard, and in some cases even hard to approximate. Furthermore, we also show that given a fixed central bank bailout objective, banks in the network can make new debt contracts to increase their own market value in the event of a bailout (at the expense of the central bank). |
| Date: | 2021–06 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2106.12315&r= |
| By: | Michel Lubrano (School of Economics, Jiangxi University of Finance and Economics, AMSE - Aix-Marseille Sciences Economiques - EHESS - École des hautes études en sciences sociales - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique - AMU - Aix Marseille Université); Zhou Xun (School of Economics and Management [Nanjing] - NJUST - Nanjing University of Science and Technology) |
| Abstract: | This survey paper reviews the recent Bayesian literature on poverty measurement. After introducing Bayesian statistics, we show how Bayesian model criticism could help to revise the international poverty line. Using mixtures of lognormals to model income, we derive the posterior distribution for the FGT, Watts and Sen poverty indices, then for TIP curves (with an illustration on child poverty in Germany) and finally for Growth Incidence Curves. The relation of restricted stochastic dominance with TIP and GIC dominance is detailed with an example on UK data. Using panel data, we show how to decompose poverty into total, chronic and transient poverty, comparing child and adult poverty in East Germany when redistribution is introduced. When a panel is not available, a Gibbs sampler is used to build a pseudo panel. We illustrate poverty dynamics by examining the consequences of the Wall on poverty entry and poverty persistence in occupied West Bank. |
| Keywords: | bayesian inference,mixture model,poverty indices,stochastic dominance,poverty dynamics |
| Date: | 2021–05–21 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:halshs-03234072&r= |
| By: | Mitoko, Jeremiah |
| Abstract: | Following the United Nations declaration of 2005 as the International Year of Microcredit, international organizations began to promote a tighter regulatory and supervisory framework for the microcredit industry. In this paper, I review the theoretical basis of this development considering recent empirical findings that microcredit programs tend to have initial success yet demonstrate few significant benefits beyond two years. I utilize an agent-based simulation as an ex-ante policy assessment tool to examine a tighter regulatory strategy. My findings for Kenya, with possible application to other developing countries and regions, suggest that a less rigid regulatory framework is more likely to lead to more sustained positive impacts than this emulation strategy. |
| Keywords: | Microcredit Financial Development Agent-based Models Financial Crises – Causes of Financial Crises – Research Government Policy and Regulation |
| JEL: | E5 F63 G01 G21 O23 O55 |
| Date: | 2021–06–21 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:108392&r= |
| By: | Weill, Pierre-Olivier |
| Abstract: | I review the recent literature that applies search-and-matching theory to the study of Over-the-Counter (OTC) financial markets. I formulate and solve a simple model in order to illustrate the typical assumptions and economic forces at play in existing work. I then offer thematic tours of the literature and, in the process, discuss avenues for future research. |
| Keywords: | Asset Pricing; OTC markets; search frictions |
| JEL: | G11 G12 G21 |
| Date: | 2020–06 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:14847&r= |
| By: | Rajesh, Raj; Srivastava, Vineet |
| Abstract: | This article evaluates the annual gross domestic product (GDP) growth projections of the Reserve Bank of India (RBI) against final official estimates of GDP, which are normally released with a lag of about three years. During 1998-99 to 2016-17, on an average, growth projections underestimated realised growth. Forecast errors, committed in both directions, were free of any systematic bias, and remained modest in a cross-country context. |
| Keywords: | Forecast error accuracy performance GDP growth India |
| JEL: | E0 E01 E59 |
| Date: | 2020–07–01 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:104131&r= |