|
on Central and Western Asia |
| By: | Firmin Doko Tchatoka (School of Economics & Public Policy, University of Adelaide); Qazi Haque (School of Economics & Public Policy, University of Adelaide) |
| Abstract: | We shed new light on the effects of monetary policy shocks in the US. Gertler and Karadi (2015) suggest that movements in credit costs may result in substantial impact of monetary policy shocks on economic activity. Using the proxy SVAR framework, we show that once the Volcker disination period is left out and one focuses on the post-1984 period, monetary policy shocks have no signfcant effects on output, despite large movements in credit costs. Our finding is robust to weak identfcation and alternative measure of economic activity. |
| Keywords: | Monetary policy shocks,Proxy-SVAR, Weak identifcation, Output dynamics. |
| Date: | 2021–08 |
| URL: | http://d.repec.org/n?u=RePEc:adl:wpaper:2021-02&r= |
| By: | Sangyup Choi (Yonsei University); Junhyeok Shin (Yonsei University) |
| Abstract: | During the recent COVID-19 pandemic, many commonalities shared by Bitcoin and gold raise the question of whether Bitcoin can hedge inflation or provide a safe haven as gold often does. By estimating a Vector Autoregression (VAR) model, we provide systematic evidence on the relationship among inflation, uncertainty, and Bitcoin and gold prices. Bitcoin appreciates against inflation (or inflation expectation) shocks, confirming its inflation-hedging property claimed by investors. However, unlike gold, Bitcoin prices decline in response to financial uncertainty shocks, rejecting the safe-haven quality. Interestingly, Bitcoin prices do not decrease after policy uncertainty shocks, partly consistent with the notion of Bitcoin’s independence from government authorities. We also find an interesting asymmetry in the drivers of Bitcoin price dynamics between the bullish and bearish markets. The main findings hold with or without the COVID-19 pandemic episode. |
| Keywords: | Cryptocurrencies; Bitcoin; inflation-hedging; safe-haven; gold; COVID-19 |
| JEL: | E41 E44 F31 G10 |
| Date: | 2021–08–16 |
| URL: | http://d.repec.org/n?u=RePEc:cth:wpaper:gru_2021_030&r= |
| By: | Jakub Grossmann |
| Abstract: | This paper analyzes employment effects of four minimum wage increases implemented in the Czech Republic during 2012–2017, which cumulatively increased the national minimum wage by 37 percent. We analyze outcomes at the level of firm-occupation-county-specific job cells and apply an intensity-treatment estimator similar to that of Machin et al. (2003). Our preferred specifications suggest that minimum wage increases led to higher wages for low-paid workers and did not have significant impacts on their employment. |
| Keywords: | Czech Republic, job cells, minimum wage, treatment intensity |
| JEL: | J31 J38 J68 |
| Date: | 2021–08 |
| URL: | http://d.repec.org/n?u=RePEc:cnb:wpaper:2021/2&r= |
| By: | Cho, Thummim |
| Abstract: | Using data on asset pricing anomalies, I test the idea that the act of arbitrage turns “alphas” into “betas”: Assets with high initial abnormal returns attract more arbitrage and covary endogenously more with systematic factors that arbitrage capital is exposed to. This channel explains the exposures of 40 anomaly portfolios to aggregate funding liquidity shocks and arbitrageur wealth portfolio shocks. My results highlight that financial intermediaries that act as asset market arbitrageurs not only price assets given risks, but also actively shape these risks through their trades. |
| Keywords: | endogenous risk; factor beta; financial intermediaries; arbitrage; asset pricing anomalies; Paul Woolley Centre at the LSE |
| JEL: | G11 G12 G23 |
| Date: | 2020–08–01 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:102085&r= |
| By: | Felix Brandt; Carsten Lausberg |
| Abstract: | This paper explores the stock returns of German real estate companies from 1991 to 2019. In contrast to previous studies we use a forward-looking approach and alternative risk measures to better reflect investor behavior. At first the paper constructs a traditional five-factor Arbitrage Pricing Theory model to measure the sensitivity of real estate stock returns to the stock, bond and real estate markets as well as to inflation and the overall economic development. The analysis shows that German real estate stocks are more impacted by changes in the economy and the stock market than by changes in the real estate market. We then apply a pseudo ge-ometric Brownian motion concept combined with a Monte Carlo simulation to model future asset prices. Value at risk and conditional value at risk are used to quantify the downside risk for an investor in listed real estate. The paper finds that listed real estate is less risky than the general stock market, which is in line with our expectations. |
| Keywords: | Asset Pricing; Germany; Monte Carlo Simulation; real estate |
| JEL: | R3 |
| Date: | 2021–01–01 |
| URL: | http://d.repec.org/n?u=RePEc:arz:wpaper:eres2021_86&r= |
| By: | Andrew F. Haughwout; Belicia Rodriguez |
| Abstract: | In our previous post, we illustrated the recent extraordinarily strong growth in home prices and explored some of its key spatial patterns. Such price increases remind many of the first decade of the 2000s when home prices reversed, contributing to a broad housing market collapse that led to a wave of foreclosures, a financial crisis, and a prolonged recession. This post explores the risk that such an event could recur if home prices go into reverse now. We find that although the situation looks superficially similar to the brink of the last crisis, there are important differences that are likely to mitigate the risks emanating from the housing sector. |
| Keywords: | mortgages; foreclosures; prices |
| JEL: | D14 R31 |
| Date: | 2021–09–08 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fednls:93032&r= |
| By: | Gee Hee Hong; Matthew Klepacz; Ernesto Pasten; Raphael Schoenle |
| Abstract: | This paper evaluates the informativeness of eight micro pricing moments for monetary non-neutrality. Frequency of price changes is the only robustly informative moment. The ratio of kurtosis over frequency is significant only because of frequency, and insignificant when non-pricing moments are included. Non-pricing moments are additionally informative about monetary non-neutrality, indicating potential omitted variable bias and the inability of pricing moments to serve as sufficient statistics. In contrast to existing theoretical work, this ratio has an ambiguous relationship with monetary non-neutrality in a quantitative menu cost model. We show which modeling ingredients explain this discrepancy, providing guidance on modeling choices. |
| Keywords: | Price-setting; menu cost; micro moments; sufficient statistics |
| JEL: | E13 E31 E32 |
| Date: | 2021–09–02 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedcwq:93012&r= |
| By: | Itzhak Ben-David; Mark J. Johnson; René M. Stulz |
| Abstract: | With the onset of the COVID-19 crisis in March 2020, small business lending through fintech lenders collapsed. We explore the reasons for the market shutdown using detailed data about loan applications, offers, and take-up from a major small business fintech credit platform. We document that while the number of loan applications increased sharply early in March 2020, the supply of credit collapsed as online lenders dropped from the platform and the likelihood of applicants receiving loan offers fell precipitously. Our analysis shows that the drying up of the loan supply is most consistent with fintech lenders becoming financially constrained and losing their ability to fund new loans. |
| JEL: | G11 G21 G33 |
| Date: | 2021–09 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:29205&r= |
| By: | Chengcheng Jia; Jing Cynthia Wu |
| Abstract: | We study the implications of the Fed's new policy framework of average inflation targeting (AIT) and its ambiguous communication. We show that AIT improves the trade-off between inflation and real activity by tilting the Phillips curve in a favorable way. To fully utilize this feature and maximize social welfare, the central bank has the incentive to deviate from AIT and implement inflation targeting ex post. Next, we rationalize the central bank's ambiguous communication about the horizon over which it averages inflation. Ambiguous communication, together with uncertainty about economic fundamentals, helps the central bank to gain credibility and improve welfare in the long run, in spite of the time-inconsistent nature of AIT. |
| Keywords: | average inflation targeting; time inconsistency; ambiguous communication |
| JEL: | E31 E52 E58 |
| Date: | 2021–09–09 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedcwq:93039&r= |
| By: | Samia Badji (Monash University); Nicole Black (Monash University); David W. Johnston (Monash University) |
| Abstract: | Greater accessibility to gambling venues may increase gambling rates, and therefore enhance welfare through the additional enjoyment from gambling and the related socialising. However, it may also lead to problematic gambling, financial hardship and psychological distress. We provide new evidence on the potential benefits and harms of greater geographic accessibility to suburban gambling venues containing electronic gaming (slot) machines. Our setting is Australia, the world leader in per capita gambling expenditure. Our approach combines geolocations of gambling venues with longitudinal survey data on gambling behaviours and economic, health and social outcomes. We find that people residing in close proximity to gambling venues are more likely to gamble, less likely to be happy, and are more likely to suffer from financial hardship and mental health problems. We find no significant impacts on socialising, general health, relationship dissatisfaction, or crime victimisation. These findings have implications for the regulation of gambling venues. |
| Keywords: | gambling, harms, mental health, financial hardship |
| JEL: | D10 H70 I10 I30 |
| Date: | 2021–09 |
| URL: | http://d.repec.org/n?u=RePEc:mhe:chemon:2021-06&r= |
| By: | Czyżewski, Daniel |
| Abstract: | This paper addresses issues connected with economic growth, how the theory on it has changed and also what its potential determinants are. In order to do so, the panel data was constructed for 129 countries with the time period of 1975-2015. In addition to this, the paper also accounts for the model uncertainty as well as reverse causality issues that may arise while dealing with such data. The methodology applied in the research consists of the Moral-Benito (2016) framework combined with the bayesian model averaging method (BMA). Out of the five variables, only one turned out to be fragile. The other four appeared to be robust with three of them at the most restrictive level. What is more, the paper also presents the potential reasoning behind obtained results and upholds the hypothesis that international trade has a positive impact on the economic growth. |
| Keywords: | economic growth, bayesian model averaging, trade openesss, dynamic panels, weakly exogenous regressors |
| JEL: | F1 F19 F43 O11 O49 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:108405&r= |
| By: | Paul Bilokon; David Finkelstein |
| Abstract: | The principal component analysis (PCA) is a staple statistical and unsupervised machine learning technique in finance. The application of PCA in a financial setting is associated with several technical difficulties, such as numerical instability and nonstationarity. We attempt to resolve them by proposing two new variants of PCA: an iterated principal component analysis (IPCA) and an exponentially weighted moving principal component analysis (EWMPCA). Both variants rely on the Ogita-Aishima iteration as a crucial step. |
| Date: | 2021–08 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2108.13072&r= |
| By: | Marcos Escobar-Anel; Maximilian Gollart; Rudi Zagst |
| Abstract: | This paper develops the first closed-form optimal portfolio allocation formula for a spot asset whose variance follows a GARCH(1,1) process. We consider an investor with constant relative risk aversion (CRRA) utility who wants to maximize the expected utility from terminal wealth under a Heston and Nandi (2000) GARCH (HN-GARCH) model. We obtain closed formulas for the optimal investment strategy, the value function and the optimal terminal wealth. We find the optimal strategy is independent of the development of the risky asset, and the solution converges to that of a continuous-time Heston stochastic volatility model, albeit under additional conditions. For a daily trading scenario, the optimal solutions are quite robust to variations in the parameters, while the numerical wealth equivalent loss (WEL) analysis shows good performance of the Heston solution, with a quite inferior performance of the Merton solution. |
| Date: | 2021–09 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2109.00433&r= |
| By: | Jain, Neha; Goli, Srinivas |
| Abstract: | In this paper, we assess the economic benefits of demographic changes in India by employing econometric models and robustness checks based on panel data gathered over a period of more than three decades. Our analysis highlights four key points. First, the contribution of India’s demographic dividend is estimated to be around 1.9 percentage points out of 12% average annual growth rate in per capita income during 1981–2015. Second, India’s demographic window of opportunity began in 2005, significantly improved after 2011, and will continue till 2061. Third, our empirical analysis supports the argument that the realisation of the demographic dividend is conditional on a conducive policy environment with enabling aspects such as quality education, good healthcare, decent employment opportunities, good infrastructure, and gender empowerment. Fourth, the working-age population in India contributes around one-fourth of the inequality in per capita income across states. Thus, to reap the maximum dividends from the available demographic window of opportunity, India needs to work towards enhancing the quality of education and healthcare in addition to providing good infrastructure, gender empowerment, and decent employment opportunities for the growing working-age population. |
| Keywords: | Demographic Dividend, Economic Growth, Population Growth, Working-Age Population, Health, Education, Employment |
| JEL: | J10 J11 O1 O15 |
| Date: | 2021–02–15 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:109560&r= |
| By: | Maëlle VAILLE |
| Abstract: | Central banks’ balance sheet policies, while intended to address ?nancial market dislocations and stimulate the economy, may have unintended persistent e?ects on systemic risk. Using a structural bayesian vector autoregressive model, this paper estimates the impacts of exogenous innovations to the central banks’ balance sheet on the aggregate systemic risk in the euro area, the United States and Japan. Our results suggest that these policies have positive e?ects on ?nancial stability in the short and medium term and seems to have no e?ects in the long term. Moreover, we study the e?ects of central balance sheet policies shocks on ?nancial institutions’ systemic risk through a panel VAR and highlight the role of leverage in the transmission of unconventional monetary policy to ?nancial ?rms’ systemic risk. |
| Keywords: | balance sheet policies, srisk, structural BVAR, zero and sign restrictions, leverage |
| JEL: | C32 C33 E44 E52 E58 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:grt:bdxewp:2021-15&r= |
| By: | Benjamin Caswell |
| Abstract: | Shocks to the marginal efficiency of investment (MEI) play a significant role in business cycle fluctuations. However, in standard quantitative models, positive (negative) MEI shocks tend to cause consumption to fall (rise) on impact while investment rises (falls). This conflicts with the well-established observation that consumption and investment are both procyclical and move together over the business cycle. This paper demonstrates that MEI shocks can generate positive comovement between consumption and investment in a standard RBC framework through the inclusion of a time-varying labour wedge. This allows for tractable analytical expressions, and straightforward graphical interpretations, which describe the subset of the parameter space where positive comovement is achieved. |
| Keywords: | comovement problem, investment shocks, labour wedge, business cycles |
| JEL: | E27 E32 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:lan:wpaper:335109180&r= |
| By: | Andr\'es Garc\'ia-Medina; Toan Luu Duc Huynh3 |
| Abstract: | Bitcoin has attracted attention from different market participants due to unpredictable price patterns. Sometimes, the price has exhibited big jumps. Bitcoin prices have also had extreme, unexpected crashes. We test the predictive power of a wide range of determinants on bitcoins' price direction under the continuous transfer entropy approach as a feature selection criterion. Accordingly, the statistically significant assets in the sense of permutation test on the nearest neighbour estimation of local transfer entropy are used as features or explanatory variables in a deep learning classification model to predict the price direction of bitcoin. The proposed variable selection methodology excludes the NASDAQ index and Tesla as drivers. Under different scenarios and metrics, the best results are obtained using the significant drivers during the pandemic as validation. In the test, the accuracy increased in the post-pandemic scenario of July 2020 to January 2021 without drivers. In other words, our results indicate that in times of high volatility, Bitcoin seems to autoregulate and does not need additional drivers to improve the accuracy of the price direction. |
| Date: | 2021–09 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2109.01214&r= |
| By: | Rishabh, Kumar (University of Basel) |
| Abstract: | Banks all over the world show interest in acting as venture capitalists. In this paper, I argue that banks offer venture capital (VC) financing along with traditional (collateralized) loans in response to the natural constraints of the hidden information that they face. Innovative entrepreneurs pursue new technology that promises high return but runs a high risk of failure. The more innovative entrepreneurs also have higher reservation utility. This interaction between type-dependent returns and reservation utility creates a situation where collateral alone is not sufficient to screen entrepreneurs, and the uninformed bank needs an additional screening device. VC fulfils that role. |
| Keywords: | Bank, Venture Capital, Collateral, Debt, Screening |
| JEL: | G21 G24 D86 |
| Date: | 2021–08–31 |
| URL: | http://d.repec.org/n?u=RePEc:bsl:wpaper:2021/09&r= |
| By: | Zhang, Bo (Beijing University of Chemical Technology); Zhou, Peng (Cardiff Business School) |
| Abstract: | The global financial crisis since 2008 revived the debate on whether or not and to what extent financial development contributes to economic growth. This paper reviews different theoretical schools of thought and empirical findings on this nexus, building on which we aim to develop a unified, microfounded model in a small open economy setting to accommodate various theoretical possibilities and empirical observations. The model is then calibrated to match some well-documented stylized facts. Numerical simulations show that, in the long run, the welfaremaximizing level of financial development is lower than the growth-maximizing level. In the short run, the price channel (through world interest rate) dominates the quantity-channel (through financial productivity), suggesting a vital role of international cooperation in tackling systemic risk of the global financial system. |
| Keywords: | economic growth; financial development; open economy; DSGE |
| Date: | 2021–09 |
| URL: | http://d.repec.org/n?u=RePEc:cdf:wpaper:2021/21&r= |
| By: | Noam, Eli |
| Abstract: | Cryptocurrencies provide an important dimension of innovation to the evolution of the exchange medium we call money. There are now over 4,000 such currencies, and their potential and volume is growing. The impact of such currencies for money laundering, law enforcement, and banking supervision have been extensively discussed on the transaction level. But this is the "micro" level of analysis. What has been rare is a "macro" level discussion of the impact on the monetary system of a country. Central banks, which are institutions tasked with providing monetary stability, will see their problems rise while the power of their traditional tools to control money supply and interest rates - such as reserve requirements and the discount rates - is declining. But the new digital technologies - such as distributed ledgers - and new approaches provide regulatory bodies also with new and potentially powerful tools. The task for central banks and policy makers is to create new approaches to use, regulate, and incent them in shaping the macro-economic path of their economy. The paper will propose several of these approaches. This is of particular importance in an economic recovery post coronavirus. In the process, central banks will also, predictably, issue their own digital currencies, and a tiny number of those will become global super-currencies. This will create a new type of issues. |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:itsb21:238043&r= |
| By: | Lucien Boulet |
| Abstract: | Several academics have studied the ability of hybrid models mixing univariate Generalized Autoregressive Conditional Heteroskedasticity (GARCH) models and neural networks to deliver better volatility predictions than purely econometric models. Despite presenting very promising results, the generalization of such models to the multivariate case has yet to be studied. Moreover, very few papers have examined the ability of neural networks to predict the covariance matrix of asset returns, and all use a rather small number of assets, thus not addressing what is known as the curse of dimensionality. The goal of this paper is to investigate the ability of hybrid models, mixing GARCH processes and neural networks, to forecast covariance matrices of asset returns. To do so, we propose a new model, based on multivariate GARCHs that decompose volatility and correlation predictions. The volatilities are here forecast using hybrid neural networks while correlations follow a traditional econometric process. After implementing the models in a minimum variance portfolio framework, our results are as follows. First, the addition of GARCH parameters as inputs is beneficial to the model proposed. Second, the use of one-hot-encoding to help the neural network differentiate between each stock improves the performance. Third, the new model proposed is very promising as it not only outperforms the equally weighted portfolio, but also by a significant margin its econometric counterpart that uses univariate GARCHs to predict the volatilities. |
| Date: | 2021–08 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2109.01044&r= |
| By: | Herpfer, Christoph; Maturana, Gonzalo |
| Abstract: | Credit rating agencies (CRAs) are less likely and slower to downgrade firms with performance sensitive debt (PSD) if these downgrades increase borrowing costs. This effect is not driven by selection into PSD contracts, borrowers hiding information from CRAs, or by firms about to lose their investment grade classification. Moreover, originating banks seem aware of the CRAs' conflicts of interest, and sell loans with more embedded conflicts more frequently. In contrast, secondary market participants do not price conflicts of interest to the same extent. The recent settlements between the major CRAs and the U.S. government do not appear to prevent credit inflation. |
| Keywords: | Credit ratings, performance-sensitive debt, rating catering |
| JEL: | G0 G01 G1 G10 G18 G20 G21 G24 G28 G3 |
| Date: | 2020–10–01 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:109461&r= |
| By: | Christian Richter (Faculty of Managemennt Technology, German University in Cairo); Sara El Asy (Faculty of Management Technology, German University in Cairo) |
| Abstract: | The relationship between public debt and economic growth has been crucial in economics and economic development not least since the financial crisis in 2007. The problem arises when debt reduces economic growth. Thus, the focus of this paper is to investigate the relationship between public debt and economic growth. In particular, we determine the debt threshold that affects this relationship. We find that there is no single debt threshold valid for all countries and in turn that each country possesses its own country specifics, which affect its economic growth. We also find that debt is not always harmful to economic growth. Last but not least, we compare recent debt levels with the threshold and average debt levels. We also find that exceeding a threshold does not necessarily result in immediate default. This holds in particular for Western European countries where debt levels exceed threshold levels by more than for developing economies. |
| Keywords: | Public debt, Economic growth, Debt Threshold, Threshold model, Time series. |
| JEL: | C13 C32 H63 H68 |
| Date: | 2019–10 |
| URL: | http://d.repec.org/n?u=RePEc:guc:wpaper:52&r= |
| By: | Takeshi Murooka (Osaka School of International Public Policy (OSIPP), Osaka University); Takuro Yamashita (Toulouse School of Economics, University of Toulouse) |
| Abstract: | We study an adverse selection environment, where a rational seller can trade a good of which she privately knows its value to a buyer, and there are gains from trade. The buyer's types differ in their degree of inferential abilities: A rational type correctly infers the value of the good from the seller's offer, whereas a naive type under-appreciates the correlation between the seller's private information and offer. We characterize the optimal menu mechanism that maximizes the social surplus. Notably, no matter how severe the adverse selection is (in particular, even when no trade is the unique possible outcome if all agents are rational), all types of buyers trade in the optimal mechanism. The rational buyer's trade occurs at the expense of the naive buyer's losses. We also investigate a consumer-protection policy of limiting the losses and discuss its implications. |
| Keywords: | adverse selection, inferential naivety, mechanism design, behavioral contract theory, consumer protection |
| JEL: | D82 D86 D90 D91 |
| Date: | 2021–09 |
| URL: | http://d.repec.org/n?u=RePEc:osp:wpaper:21e006&r= |
| By: | Jain, Neha; Goli, Srinivas |
| Abstract: | This paper projects potential demographic dividend for India for the period from 2001 to 2061 by using simulation modelling software, Spectrum 5.753 which integrates demographic and socio-economic changes. Two key findings, after checking their robustness, from the simulation modelling are: First, the effective demographic windows of opportunity for India is available for the period between 2011 and 2041, giving India roughly 30 years of demographic bonus. It is the period where the maximum of the first demographic dividend can be reaped before the ageing burden starts. Second, favourable demographic changes alone provide a demographic dividend of over 165,000 rupees (almost an additional 43 percentage) in terms of GDP per capita by 2061 when integrated with supporting socio-economic policy environment in terms of investment in human capital, family planning, decent employment opportunities, the rapid pace of urbanization, and agricultural growth. |
| Keywords: | Demographic Dividend, Working-Age Population, Health, Education, Employment |
| JEL: | J10 J11 |
| Date: | 2021–02–15 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:109562&r= |
| By: | Jun Chen; Michael Ewens |
| Abstract: | Although an extensive literature shows that startups are financially constrained and that constraints vary by geography, the source of these constraints is still relatively unknown. We explore intermediary financing constraints, a channel studied in the banking literature, but only indirectly addressed in the venture capital (VC) literature. Our empirical setting is the VC fundraising and startup financing environment around the passage of the Volcker Rule, which restricted banks’ ability to invest in venture capital funds as limited partners (LPs). The rule change disproportionately impacted regions of the U.S. historically lacking in VC financing. We find that a one standard deviation increase in VCs’ exposure to the loss of banks as LPs led to an 18% decline in fund size and about a 10% decrease in the likelihood of raising a follow-on fund. Startups were not completely cushioned from the additional constraints on their VCs: capital raised fell and pre-money valuations declined. Overall, VC financing constraints manifest as fewer, smaller funds that change investment strategy and experience increases in bargaining power. Last, we show that the rule change increased the likelihood startups move out of impacted states, thus exacerbating the geographic disparity in high-growth entrepreneurship. |
| JEL: | G21 G23 G24 K22 L26 |
| Date: | 2021–09 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:29211&r= |
| By: | Guido Neidhöfer (ZEW Mannheim); Matías Ciaschi (CEDLAS-IIE-FCE-UNLP & CONICET); Leonardo Gasparini (CEDLAS-IIE-FCE-UNLP & CONICET); Joaquín Serrano (UCLA & CEDLAS-IIE-FCE-UNLP) |
| Abstract: | We explore the role of social mobility as a driver of economic development by constructing a panel data set that includes measures of intergenerational mobility of education at the sub-national level in Latin America. First, we map the geography of educational mobility for 52 Latin American regions, as well as its evolution over time. Then, through a novel weighting procedure that considers the participation of cohorts to the economy in each year, we estimate the effect of changes in mobility on economic indicators, such as income per capita, poverty, child mortality, and luminosity. Hereby, we control for several covariates, including migration, educational expansions, initial conditions, and unobserved cross-regional heterogeneity. Our findings show that increasing social mobility had a significant and robust impact on the development of Latin American regions. |
| JEL: | D63 I24 J62 O15 |
| Date: | 2021–09 |
| URL: | http://d.repec.org/n?u=RePEc:dls:wpaper:0286&r= |
| By: | Pollitt, M .G. |
| Abstract: | The UK left the European single market in energy on 31 December 2020, having been a leading light in its promotion. It entered into a new energy relationship with the EU-27 as outlined in the EU-UK Trade and Cooperation Agreement (TCA) on 1 January 2021. This paper discusses what has happened to the UK energy sector since the Brexit referendum of June 2016. Since our previous paper on this topic in 2017, there has been a significant clarification in the impact of Brexit on the energy sector in the UK. We outline what the TCA says about energy. We then discuss the current and potential future effects of Brexit on the UK electricity and gas systems in turn. We observe that the likely economic welfare impacts on electricity are larger than the impacts on gas, but the overall microeconomic impact appears likely to be modest (but negative). We offer a number of concluding observations. |
| Keywords: | Brexit, Trade and Cooperation Agreement, market coupling |
| JEL: | L94 |
| Date: | 2021–09–06 |
| URL: | http://d.repec.org/n?u=RePEc:cam:camdae:2161&r= |
| By: | Okumura, Tsunao; Usui, Emiko |
| Abstract: | Using the Japanese Study of Aging and Retirement (JSTAR), we examine the determinants of household portfolio choice by the elderly in Japan. Only one-fifth of Japanese elderly hold stocks among their financial assets. Japanese elderly who are more educated, have better mental functions, have higher income, and subjectively expect a greater probability of living until at least age 80 are more likely to hold stocks. Among those who plan to receive public pension benefits in the future, those who expect a greater decline in future public pension benefits have a smaller share of stocks and a larger share of bonds in their portfolio of financial assets, but both are in small quantities. The most important factors affecting the relatively low investment in stocks by Japanese elderly are educational and income differences, rather than their low expectations about their future pension benefits. |
| Keywords: | Household portfolio choice, subjective expectations, pension benefits |
| JEL: | I10 H55 D84 |
| Date: | 2021–09 |
| URL: | http://d.repec.org/n?u=RePEc:hit:cisdps:694&r= |
| By: | Stephen Lee |
| Abstract: | The theoretical model of Merton (1987) predicts a positive relation between idiosyncratic risk and returns, for investors who are not fully diversified. Investors in the private real estate market hold particularly undiversified portfolios due to lack of information, transaction costs, liquidity requirements, taxes, etc.. Therefore, it is especially important to see whether private real estate returns are significantly related to idiosyncratic risk. The lack of research in the private real estate market due to the lack of high frequency data needed to construct measures of idiosyncratic risk. To overcome this problem we use the cross sectional variance (CSV) as our measure of idiosyncratic risk, as it is calculably at any frequency and is model free. Using monthly data for 35 real estate market segments over the period 1987:1 to 2019:12 the results indicate that CSV is highly correlated with idiosyncratic risk measured by the average variance of errors from the market model. Therefore, we consider CSV a good proxy for idiosyncratic risk in the private real estate market. Then using quantile regression methodology we find that there is a positive relationship in the higher quantiles but an insignificant negative effect in the low quantiles for average market returns 1, 3, 6, 9 and 12 months ahead. Lastly, we find high idiosyncratic risk portfolios produce significantly higher returns than low idiosyncratic risk portfolios. The results indicate that idiosyncratic risk significantly affects private real estate returns. The study therefore provides important implications for investors and fund managers, as well as researchers. |
| Keywords: | cross section variance; Idiosyncratic risk; monthly data; quantile regressions |
| JEL: | R3 |
| Date: | 2021–01–01 |
| URL: | http://d.repec.org/n?u=RePEc:arz:wpaper:eres2021_219&r= |
| By: | Simplice A. Asongu (Yaounde, Cameroon); Alex Adegboye (Covenant University, Ota, Ogun State, Nigeria); Joseph Nnanna (The Development Bank of Nigeria, Abuja, Nigeria) |
| Abstract: | This study explores whether female economic inclusion enhances tax performance in a sample of 48 countries in Sub-Saharan Africa from 2000 to 2018. The study’s empirical evidence is based on the generalized method of moments in order to account for endogeneity concerns. Three tax performance measurements are used, notably, total taxes revenue excluding social contributions, reported tax revenue derived from natural resources sources, and total non-resource tax revenue. Three female inclusion indicators are used, namely, female employment in industry, female labour force participation, and female employment. The following empirical evidences are documented; (i) There is a negative net effect from the enhancement of female employment in the industry on the total tax revenue. (ii) There is a positive net effect of female employment in the industry on the non-resource taxes. An extended threshold analysis is performed to establish the critical masses that could further influence tax performance positively. The following thresholds are established. (i) a minimum of 15.35 “employment in industry, female (% of female employment)†for the total tax revenue and (ii) a maximum of 23.75 “employment in industry, female (% of female employment)†for the non-resource tax revenue. These critical masses are crucial for sustainable development because, below or beyond these thresholds, policymakers should complement the female economic inclusion with other economic measures designed to improve tax performance in Sub-Saharan Africa. |
| Keywords: | Gender, economic inclusion, tax performance, sustainable development, Africa |
| JEL: | H20 H71 I28 J08 J21 |
| Date: | 2020–01 |
| URL: | http://d.repec.org/n?u=RePEc:aak:wpaper:20/002&r= |
| By: | Jain, Neha; Goli, Srinivas |
| Abstract: | India is on the edge of a demographic revolution with a rapidly rising working-age population. For the first time in this study, we investigate the role of the rising working-age population on per capita small savings in post offices and banks net of socio-economic characteristics using state-level panel data compiled from multiple sources for the period 2001-2018. Our comprehensive econometric assessment with multiple robustness checks provide three key findings: (1) Per capita private savings is increasing because of India’s growing working-age population, thus the ‘economic life cycle hypothesis’ is supported. (2) The demographic factors contribute around one-fourth of the per capita private savings inequality across Indian states. (3) The demographic window of economic opportunity for India can yield maximum benefits in terms of private savings when accompanied by favourable socio-economic policies on education, health, gender equity, and economic growth. |
| Keywords: | Demographic change, Working age population, Private savings, Life cycle hypothesis, State-level analysis |
| JEL: | J1 J11 O1 O15 O16 |
| Date: | 2021–02–15 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:109561&r= |
| By: | Steven C. Bourassa (Florida Atlantic University); Martijn Dröes (University of Amsterdam); Martin Hoesli (University of Geneva - Geneva School of Economics and Management (GSEM); Swiss Finance Institute; University of Aberdeen - Business School) |
| Abstract: | This paper explores the pricing of heterogeneous goods in the presence of market segmentation. We use housing as an example. We extend the theoretical hedonic model of Rosen (1974) and show that, in the presence of market segmentation, the hedonic price line is no longer continuous or unique. Using American Housing Survey data for the Miami and Louisville metropolitan areas and a finite mixture estimation approach, we find distinct market segments based on ethnicity, race, and income. |
| Keywords: | market segmentation, product differentiation, hedonic model, finite mixture model. |
| JEL: | E02 R31 O18 |
| Date: | 2021–09 |
| URL: | http://d.repec.org/n?u=RePEc:chf:rpseri:rp2162&r= |
| By: | J. Scott Davis; Eric van Wincoop |
| Abstract: | We develop a theory to account for changes in prices of risky and safe assets and gross and net capital flows over the global financial cycle (GFC). The multi-country model features global risk-aversion shocks and heterogeneity of investors both within and across countries. Within-country heterogeneity is needed to account for the drop in gross capital flows during a negative GFC shock (higher global risk-aversion). Cross-country heterogeneity is needed to account for the differential vulnerability of countries to a negative GFC shock. The key vulnerability is associated with leverage. In both the data and the theory, leveraged countries (net borrowers of safe assets) deleverage through negative net outflows of risky assets and positive net outflows of safe assets, experience a rise in the current account and a greater than average drop in risky asset prices. The opposite is the case for non-leveraged countries (net lenders of safe assets). |
| JEL: | F30 F40 |
| Date: | 2021–09 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:29217&r= |
| By: | Johnny Flentø (University of Copenhagen) |
| Abstract: | As the world approaches the halfway point to the target year of 2030 for achieving the Sustainable Development Goals (SDGs) approved in 2015, it is clear that poverty will be far from eradicated by then. Absolute poverty is concentrated in Sub-Saharan Africa (SSA) and overwhelmingly in 12-15 countries where progress in poverty alleviation is largely insufficient to get even close to achieving SDG1. The absolute number of extremely poor people in SSA is increasing and by 2030 it will be larger than the entire population of the European Union. While inequality matters for poverty reduction, it is the inequality between rich and poor nations that stands out. It is crucial to analyse poverty and inequality in absolute numbers. Relative and scale-neutral concepts distort our understanding and shield those who do not want to share just a tiny fraction of their rich countries’ wealth with the world’s poorest people. SDG1 would be within reach if rich countries shared a tiny fraction of their income. However, OECD countries are increasingly using their official development assistance as finance to support their more pressing foreign and security policy objectives, especially limiting migration, which also promotes redistribution from rich to poor. Europe needs to realize that investing more in Africa is good economics and good for security. Building strong relations with African governments and collaborating in building and strengthening key national institutions are critical both for poverty reduction and promoting peace and security. |
| Keywords: | poverty, inequality, sustainable development goals, development assistance |
| JEL: | I32 D63 F35 |
| Date: | 2021–02–09 |
| URL: | http://d.repec.org/n?u=RePEc:kud:kuderg:2113&r= |
| By: | Fabio Canova; Filippo Ferroni |
| Abstract: | This paper describes a package which uses MATLAB functions and routines to estimate VARs, local projections and other models with classical or Bayesian methods. The toolbox allows a researcher to conduct inference under various prior assumptions on the parameters, to produce point and density forecasts, to measure spillovers and to trace out the causal effect of shocks using a number of identification schemes. The toolbox is equipped to handle missing observations, mixed frequencies and time series with large cross-section information (e.g. panels of VAR and FAVAR). It also contains a number of routines to extract cyclical information and to date business cycles. We describe the methodology employed and implementation of the functions with a number of practical examples. |
| Keywords: | VARs; Local Projections; Bayesian Inference; Identification; Forecasts; Missing Values; Filters and Cycles; MATLAB |
| JEL: | E52 E32 C10 |
| Date: | 2021–09–04 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedhwp:93029&r= |
| By: | Prado, Tiago S. |
| Abstract: | This paper investigates short-term effects of big tech start-up acquisitions on innovation empirically. Innovation research has found a strong positive, causal relationship between VC investment and innovation. Using this insight, we can explore the repercussions of big tech start-up acquisitions on innovation by examining their effects on venture capital (VC) activity. We analyze a very large set of observations of more than 32,000 venture capital deals in more than 170 different segments of the tech industry and almost 400 tech start-up acquisitions made worldwide between 2010 and 2020 by Google, Facebook, Amazon, Apple, and Microsoft. Our results suggest a positive, causal impact of big tech start-up acquisitions on venture capital activity, challenging claims about the creation of "kill zones" for start-ups after acquisitions are made by the big techs. For example, after controlling for other factors that may impact VC activity, like initial public offerings (IPOs) and other mergers and acquisitions (M&As), we found an average increase of 30.7% in the total amount of VC funding towards U.S. based start-ups of the same industry segment in the four quarters following a big tech start-up acquisition. For deals targeting European start-ups, we found an increase of 32.1% in the VC funding in in the first quarter after a big tech start-up acquisition. Finally, our findings show that such positive effects, when existent, persist for a few months only, and so do not seem to have lasting impacts on the innovation incentives in the the start-up ecossystem. Our empirical findings should inform current competition policy discussions on imposing restrictions to acquistions of start-ups by the big techs. |
| Keywords: | kill zone,platform,big tech,venture capital,innovation |
| JEL: | G11 G24 G32 G34 L41 L44 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:itsb21:238049&r= |
| By: | Adejimi Adebayo |
| Abstract: | The commercial property market has been hit by e-commerce and COVID-19. These have led to increasing void periods, vacancies and business closures among other market occurrences. These occurrences require market actors to make strategic decisions on the future use of these spaces. One response to understanding the future of commercial property spaces is through analysing the rental value performance and the links (streets) connecting the properties within a defined city boundary. This study analyse street network to compute accessibility index via spatial configuration technique. The computed street data (accessibility integration) and observed changes in rental values for 14,570 commercial property units of a medium-sized UK city were analysed, digitalised and visualised using GIS choropleth maps. The variables (that is, accessibility and changes in rental value) were adopted in ranking property locations into future suitability for commercial purposes. Results show that almost 40% of the investigated properties require change of use for optimum utilisation the property spaces. The study contributes to the application of spatial configuration technique in analysing real property markets for efficient planning and management of urban spaces. |
| Keywords: | Accessibility; Changes in rental value; Commercial property market; GIS |
| JEL: | R3 |
| Date: | 2021–01–01 |
| URL: | http://d.repec.org/n?u=RePEc:arz:wpaper:eres2021_114&r= |
| By: | Koen van Ruijven (CPB Netherlands Bureau for Economic Policy Analysis); Joep Tijm (CPB Netherlands Bureau for Economic Policy Analysis) |
| Abstract: | The railroad tunnelling in Delft (the Netherlands) has led to substantial, additional, increases in residential property prices. Our results show that the price elasticity with respect to the distance to the (tunnelled) railroad would have been about 5 percentage points lower in case Delft would not have tunneled its railroad. In a Dutch document ‘De leefbaarheidseffecten van Spoorzone Delft’ we explain that the increased liveability can be valued at 400 million euros. Read the Dutch document ‘De leefbaarheidseffecten van Spoorzone Delft’. Inhabitants of Delft have experienced significant nuisance from railroad traffic. Since 1965, trains entered the city via an elevated track that ran right through the city. In our analyses we show that noise and other forms of nuisance made living close to the train tracks less attractive, which was reflected in residential property prices. For this research we have used a dataset provided by the NVM (the largest association of real estate agents and appraisers in the Netherlands) containing residential property characteristics and transaction prices starting in 1995. Besides the effect on residential property prices, we show that the railroad tunneling has led to sorting effects. Our results indicate that the socioeconomic status of inhabitants of neighbourhoods around the tunnel has changed substantially due to the railroad tunnelling. |
| JEL: | R38 R58 |
| Date: | 2021–06 |
| URL: | http://d.repec.org/n?u=RePEc:cpb:discus:423&r= |
| By: | Julius O. Campeci\~no |
| Abstract: | This manuscript presents a mathematical relationship between the coefficient of variation (CV) and security investment risk, defined herein as the probability of occurrence of negative returns. The equation suggests that there exists a range of CV where risk is zero and that risk never crosses 50% for securities with positive returns. It was found that at least for stocks, there is a strong correlation between CV and stock performance when the CV is derived from annual returns calculated for each month (as opposed to using, for example, only annual returns based on end-of-the-year closing prices). It was found that a low nonnegative CV of up to ~ 1.0 (~ 15% risk) correlates well with strong and consistent stock performance. Beyond this CV, share price growth gradually shows plateaus and/or large peaks and valleys. The efficient frontier was also re-examined based on CV analysis, and it was found that the direct relationship between risk and return (e.g., high risk, high return) is only robust when the correlation of returns among the portfolio securities is sufficiently negative. At low negative to positive correlation, the efficient frontier hypothesis breaks down, and risk analysis based on CV becomes an important consideration. |
| Date: | 2021–09 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2109.03977&r= |
| By: | Gero Junike; Konstantin Pankrashkin |
| Abstract: | The Fourier cosine expansion (COS) method is used for pricing European options numerically very fast. To apply the COS method, a truncation interval for the density of the log-returns need to be provided. Using Markov's inequality, we derive a new formula to obtain the truncation interval and prove that the interval is large enough to ensure convergence of the COS method within a predefined error tolerance. We also show by several examples that the classical approach to determine the truncation interval by cumulants may lead to serious mispricing. Usually, the computational time of the COS method is of similar magnitude in both cases. |
| Date: | 2021–09 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2109.01030&r= |
| By: | Donatella Baiardi; Maria Gaia Soana |
| Abstract: | We empirically investigate the effectiveness of environmental and energy policies, complying with legal requirements or followed voluntarily by firms, on the proenvironmental efforts of 63 listed firms in Italy in the years 2008-2019. Our research design combines macroeconomic data referring to general policies for reducing air emissions, renewable energy interventions and energy efficiency measures with analogous policies applied at firm level on voluntary basis. The empirical analysis is performed in a panel data context by means of propensity score matching with multiple treatments, which allows us to test the effectiveness of (1) macroeconomic policies on firm environmental performance; (2) microeconomic policies on firm environmental performance, and (3) the coexistence of macroeconomic and microeconomic policies on firm environmental performance. Our results show that the effectiveness of these interventions, applied either separately or jointly, depends on the type of indicator used to proxy firm environmental performance. In particular, we find that the social costs of climate change are not internalized by listed companies, and that macroeconomic interventions are an excellent tool to implement because they are effective to fight climate change where voluntary actions fail and are also complementary to voluntary actions, since they support their effectiveness. |
| Keywords: | Firm environmental performance; General policies for reducing air emissions, Renewable energy policies; Energy efficiency policies; Propensity score matching with multiple treatments; Italian listed companies. |
| Date: | 2021–08 |
| URL: | http://d.repec.org/n?u=RePEc:mib:wpaper:478&r= |
| By: | Makariou, Despoina; Barrieu, Pauline; Chen, Yining |
| Abstract: | We introduce a random forest approach to enable spreads’ prediction in the primary catastrophe bond market. In a purely predictive framework, we assess the importance of catastrophe spread predictors using permutation and minimal depth methods. The whole population of non-life catastrophe bonds issued from December 2009 to May 2018 is used. We find that random forest has at least as good prediction performance as our benchmark-linear regression in the temporal context, and better prediction performance in the non-temporal one. Random forest also performs better than the benchmark when multiple predictors are excluded in accordance with the importance rankings or at random, which indicates that random forest extracts information from existing predictors more effectively and captures interactions better without the need to specify them. The results of random forest, in terms of prediction accuracy and the minimal depth importance are stable. There is only a small divergence between the drivers of catastrophe bond spread in the predictive versus explanatory framework. We believe that the usage of random forest can speed up investment decisions in the catastrophe bond industry both for would-be issuers and investors. |
| Keywords: | catastrophe bond pricing; interactions; machine learning in insurance; minimal depth-importance; permutation importance; primary market spread prediction; random forest; stability |
| JEL: | G22 |
| Date: | 2021–07–30 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:111529&r= |
| By: | Fernández-Bonilla, Fernando; Navío-Marco, Julio; Gijón, Covadonga |
| Abstract: | This research analyses determining factors of business innovation in Spain during a long period of study. A panel is carried out with data from 2003 to 2016 obtained from the Spanish Technological Innovation Panel (PITEC) survey to determine their influence, and in particular variables related to human factors are included to observe their impact on innovation. Along with other general factors such as firm size, ownership of the company, turnover and financing of the company, it is found that training in R & D & I has a relevant influence on business innovation. The article put special emphasis on human factors and is an invitation to continue their study. |
| Keywords: | business innovation,panel data,RDI |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:itsb21:238021&r= |
| By: | Kristy A. Anderson; Jeffrey Hemmeter; David Wittenburg; Julia Baller; Anne M. Roux; Jessica E. Rast; Paul Shattuck |
| Abstract: | This paper used Social Security Administration program data from 2005 to 2019 to examine national- and state-level changes in the number of new adult supplemental security income (SSI) awardees on the autism spectrum relative to awardees with intellectual disability and other mental health disorders. |
| Keywords: | Autism, Poverty, Policy, Supplemental Security Income (SSI), Adults |
| URL: | http://d.repec.org/n?u=RePEc:mpr:mprres:03e478314c3b4a60a431e2d21cec646c&r= |
| By: | Jung, Benjamin; Kohler, Wilhelm |
| Abstract: | In this paper, we provide a detailed analysis of a mechanism that distorts production towards too much use of primary factors like labor and too little use of intermediate inputs. The distortion results from two ingredients that are cornerstones of modern quantitative trade theory: monopolistic competition and input-output linkages. The distortion as such is unrelated to trade, but has important consequences for trade policy, including a positive first-order welfare effect from an import subsidy. For a crystal-clear view on the distortion, we first look at it in a single-sector, closed economy where the monopolistic competition equilibrium would be efficient without the presence of input-output linkages. We compare the social-planner-solution with the decentralized market equilibrium, and we identify first-best policies to correct the distortion. To analyze the trade policy implications we then extend our analysis to a setting with trade between two symmetric countries. We identify first-best cooperative policies, featuring nondiscriminatory subsidies of intermediate input use, aswell as non-cooperative trade policies where countries use tariffs to weigh terms of trade effects against benefits from correcting the input distortion. |
| Keywords: | input-output linkages,monopolistic competition,international trade,allocational inefficiency,optimal policy |
| JEL: | F12 F13 D57 D61 H21 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:hohdps:062021&r= |