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on Central and Western Asia |
| By: | Demeze-Jouatsa, Ghislain-Herman (Center for Mathematical Economics, Bielefeld University); Pongou, Roland (Center for Mathematical Economics, Bielefeld University); Tondji, Jean-Baptiste (Center for Mathematical Economics, Bielefeld University) |
| Abstract: | Frequent violations of fair principles in real-life settings raise the fundamental question of whether such principles can guarantee the existence of a self-enforcing equilibrium in a free economy. We show that elementary principles of distributive justice guarantee that a pure-strategy Nash equilibrium exists in a finite economy where agents freely (and non- cooperatively) choose their inputs and derive utility from their pay. Chief among these principles is that: 1) your pay should not depend on your name; and 2) a more productive agent should not earn less. When these principles are violated, an equilibrium may not exist. Moreover, we uncover an intuitive condition|technological monotonicity|that guarantees equilibrium uniqueness and efficiency. We generalize our findings to economies with social justice and inclusion, implemented in the form of progressive taxation and redistribution, and guaranteeing a basic income to unproductive agents. Our analysis uncovers a new class of strategic form games by incorporating normative principles into non-cooperative game theory. Our results rely on no particular assumptions, and our setup is entirely non- parametric. Illustrations of the theory include applications to exchange economies, surplus distribution in a firm, contagion and self-enforcing lockdown in a networked economy, and bias in the academic peer-review system. |
| Keywords: | Market justice, Social justice, Inclusion, Ethics, Discrimination, Self-enforcing contracts, Fairness in non-cooperative games, Pure strategy Nash equilibrium, Efficiency |
| Date: | 2021–09–16 |
| URL: | http://d.repec.org/n?u=RePEc:bie:wpaper:653&r= |
| By: | Miriam Kohl; Philipp M. Richter |
| Abstract: | This paper examines the effects of a unilateral reform of the redistribution policy in an economy open to international trade. We set up a general equilibrium trade model with heterogeneous agents allowing for country asymmetries. We show that under international trade compared to autarky, a unilateral tax increase leads to a less pronounced decline in aggregate real income in the reforming country, while income inequality is reduced to a larger extent for sufficiently small initial tax rates. We highlight as a key mechanism a tax-induced reduction in the market size of the reforming country relative to its trading partner, resulting in a firm selection effect towards exporting. From the perspective of a non-reforming trading partner, the unilateral redistribution policy reform resembles a unilateral increase in trade costs leading to a deterioration of terms-of-trade and a decline in both aggregate real income and inequality. |
| Keywords: | income inequality, redistribution, international trade, heterogeneous firms |
| JEL: | D31 F12 F16 H24 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_9296&r= |
| By: | Afees A. Salisu (Centre for Econometric & Allied Research, University of Ibadan, Ibadan, Nigeria; Department of Economics, University of Pretoria, Private Bag X20, Hatfield 0028, South Africa); Riza Demirer (Department of Economics and Finance, Southern Illinois University Edwardsville, Edwardsville, IL 62026-1102, USA); Rangan Gupta (Department of Economics, University of Pretoria, Private Bag X20, Hatfield 0028, South Africa) |
| Abstract: | This paper adds a novel perspective to the literature by exploring the predictive performance of two relatively unexplored indicators of financial conditions, i.e. financial turbulence and systemic risk, over stock market volatility in a sample of seven emerging and advanced economies. The two financial indicators that we utilize in our predictive setting provide a unique perspective to market conditions as they directly relate to portfolio performance metrics from both a volatility and co-movement perspective and, unlike other macro-financial indicators of uncertainty or risk, can be integrated into diversification models within a forecasting and portfolio design setting. Since the two predictors are available at weekly frequency, and we want to provide forecast at the daily level, we use the generalized autoregressive conditional heteroskedasticity-mixed data sampling (GARCH-MIDAS) approach. The results suggest that incorporating the two financial indicators (singly and jointly) indeed improves the out-of-sample predictive performance of stock market volatility models across both the short and long horizons. We observe that the financial turbulence indicator that captures asset price deviations from historical patterns does a better job when it comes to the out-of-sample prediction of future returns compared to the measure of systemic risk, captured by the absorption ratio. The outperformance of the financial turbulence indicator implies that unusual deviations in not only asset returns, but also correlation patterns clearly play a role in the persistence of return volatility. Overall, the findings provide an interesting opening for portfolio design purposes in that financial indicators that are directly associated with portfolio diversification performance metrics can also be utilized for forecasting purposes with significant implications for dynamic portfolio allocation strategies. |
| Keywords: | Systemic risk, Financial turbulence, Stock market, MIDAS models |
| JEL: | C32 D8 E32 G15 |
| Date: | 2021–09 |
| URL: | http://d.repec.org/n?u=RePEc:pre:wpaper:202162&r= |
| By: | Fricke, Daniel |
| Abstract: | Mutual fund risk-taking via active portfolio rebalancing varies both in the cross-section and over time. In this paper, I show that the same is true for funds’ off-balance sheet risk-taking, even after controlling for on-balance sheet activities. For this purpose, I propose a novel measure of synthetic leverage, which can be estimated based on publicly available information. In the empirical application, I show that German equity funds have increased their risk-taking via synthetic leverage from mid-2015 up until early 2019. In the cross-section, I find that synthetically leveraged funds tend to underperform and display higher levels of fragility. JEL Classification: G11, G23, E44 |
| Keywords: | derivatives, leverage, mutual funds, risk-taking, securities lending |
| Date: | 2021–09 |
| URL: | http://d.repec.org/n?u=RePEc:srk:srkwps:2021126&r= |
| By: | Fabian T. Pfeffer; Nora Waitkus |
| Abstract: | Comparative research on income inequality has produced several coherent frameworks to study the institutional determinants of income stratification. In contrast, no such framework and much less empirical evidence exist to explain cross-national differences in wealth inequality. This situation is particularly lamentable as cross-national patterns of inequality in wealth diverge sharply from those in income. We seek to pave the way for new explanations of cross-national differences in wealth inequality by tracing them to the influence of different wealth components. Drawing on the literatures on financialization and housing, we argue that housing equity should be the central building block of the comparative analysis of wealth inequality. Using harmonized data on fifteen countries included in the Luxembourg Wealth Study (LWS), we first demonstrate a lack of association between national levels of income and wealth inequality and concentration. Using decomposition approaches, we then estimate the degree to which national levels of wealth inequality and concentration relate to cross-national differences in wealth portfolios and the distribution of specific asset components. Considering the role of housing equity, financial assets, non-housing real assets, and non-housing debt, we reveal that cross-national variation in wealth inequality and concentration is centrally determined by the distribution of housing equity. |
| Date: | 2020–12 |
| URL: | http://d.repec.org/n?u=RePEc:lis:lwswps:33&r= |
| By: | Yaya, OlaOluwa S.; Vo, Xuan Vinh; Adekoya, Oluwasegun B. |
| Abstract: | This study uses the recently developed Generalized Autoregressive Conditional Heteroscedasticity (GARCH) model-based unit root test of Narayan et al. (2016) to examine the stock market efficiency of 19 Asian countries, using daily prices. The model flexibly accounts for heteroskedasticity and two structural breaks, the presence of which can lead to inaccurate results if neglected. Our results disclose the stock markets of 14 countries as inefficient following the rejection of the unit root null hypothesis. However, the stock markets of China, Hong Kong, Japan and the Korea Republic are adjudged efficient. We further extend the model to accommodate a maximum of five breaks to check the robustness of our results to higher breaks. We observe that the results are largely consistent except for Lebanon and Singapore. For completeness, we compare the results with those of conventional GARCH models that do not account for structural breaks and discover differing results for some countries. Hence, the role of structural breaks is not negligible in assessing market efficiency. Future studies should also incorporate heteroskedasticity and structural breaks in their modelling framework to obtain accurate results. |
| Keywords: | Stock market efficiency; GARCH; Unit root; Structural breaks; Asia |
| JEL: | C22 G01 G15 |
| Date: | 2021–09–14 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:109828&r= |
| By: | Théophile Azomahou (AERC - African Economic Research Consortium); Njuguna Ndung'U (AERC - African Economic Research Consortium); Mahamady Ouedraogo (CERDI - Centre d'Études et de Recherches sur le Développement International - CNRS - Centre National de la Recherche Scientifique - UCA - Université Clermont Auvergne) |
| Abstract: | Oil-dependent countries face a twin-shock: in addition to the COVID-19 outbreak, they are facing an oil price collapse. In this paper, we study the impact of this dual shock on the forecasted GDP growth in Africa using the COVID-19 outbreak as a natural experiment. We use the IMF World Economic Outlook's GDP growth forecasts before and after the outbreak. We find that COVID-19 related deaths result in -2.75 percentage points forecasted GDP growth loss in the all sample while oil-dependence induces -7.6 percentage points loss. We document that the joint shock entails higher forecasted growth loss in oil-dependent economies (-10.75 percentage points). Based on oil price forecasts and our empirical findings, we identify five recovery policies with high potential: social safety net policy, economic diversification, innovation and technological transformation, fiscal discipline, and climate-friendly recovery policy. |
| Keywords: | Africa,growth forecast,oil-dependence,COVID-19 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-03344118&r= |
| By: | Yaya, OlaOluwa S.; Gil-Alana, Luis A.; Adekoya, Oluwasegun B.; Vo, Xuan Vinh |
| Abstract: | This paper deals with the analysis of long-run relationships of fear indices for US stocks, commodities, and the energy sector with global fear indices for stocks and oil. Departing from the classical literature, fractional integration, and cointegration techniques are used to determine the degree of persistence in the long-run relationship of the indices. Our results are threefold. We first established a fractional cointegrating relationship between each of the global and oil fear indices and other fear indices. However, the long-run relationship tends to be weak for the technology stocks. In addition, the cointegrating framework reveals a nonstationary mean-reverting behaviour in the long-run relationship, implying that the effect of shocks from financial, economic, or other exogenous sources will be temporary though with long-lasting effects. These findings have crucial policy inferences for portfolio managers concerning investment decisions. |
| Keywords: | CBOE fear gauge; mean reversion; fractional integration; fractional cointegration; technology stocks |
| JEL: | C22 G01 G15 |
| Date: | 2021–06–04 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:109829&r= |
| By: | Al-Ansari, Khalid Ahmed; Aysan, Ahmet Faruk |
| Abstract: | To identify how blockchain technology affects current and future research, we carried out a bibliometric overview of the journal articles written on the blockchain. We aimed to answer some of the questions to visualize the trend of the publications regarding the advancement of blockchain utilization in fields relating to finance, economics, and social science. We used the Scopus database for the literature research, which resulted in 506 papers by 1278 authors from 79 countries. Our study showed that from 2008 till 2021, publishing about blockchain was more significant in conference papers than articles by a factor of 2. Our study also showed the importance of citation regarding published academic articles, the link to the number of publications, the authors, the universities, the affiliated organizations, and the countries of the publications. The use of authoring and citation analysis give valuable insights. On the topic of blockchain, we identified Financial Innovation as the most impactful journal on the topic, the National Natural Science Foundation of China as the leading funding sponsor on blockchain research, the USA as the highest publication production country, and Hong Kong as the highest country in the average citation per document produced. We finally identified the 20 most cited articles on the blockchain topics. Unlike other brief bibliometric studies, our study's investigation and findings could become a first stage of learning for those interested in carrying out a bibliometric study. In addition, our study could become the starting point for any future research on any blockchain projects. |
| Keywords: | blockchain, smart contracts, crypto, bitcoin, bibliometric analysis |
| JEL: | C21 C22 G11 G14 G17 |
| Date: | 2021–08–21 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:109720&r= |
| By: | Bianchi, Milo; Brière, Marie |
| Abstract: | We study the introduction of robo-advising on a large representa- tive sample of Employee Saving Plans. Dierently from many services that fully automate portfolio decisions, our robo-advisor proposes in- vestment and rebalancing strategies, leaving investors free to follow or ignore them. We focus on the resulting human-robot interactions and show that with the robo-service investors increase their attention to the portfolio, their investment in the plan, their equity exposure. They experience higher risk-adjusted returns, mostly by changing their re- balancing so to stay closer to the target. These eects are robust across various specications accounting for the endogeneity of the take-up de- cision, and they are stronger for investors with smaller portfolios, lower baseline returns and stock market participation. Our results suggest that automated advice can promote nancial inclusion, and they high- light how human-robot interactions can in uence investors' portfolio decisions and possibly improve nancial capability. |
| Keywords: | Robo-Advising, Human-robot Interaction, Financial; Inclusion, Portfolio Dynamics, Long-Term Investment. |
| JEL: | G11 G41 G23 D14 G51 |
| Date: | 2021–09 |
| URL: | http://d.repec.org/n?u=RePEc:tse:wpaper:125979&r= |
| By: | Khalid Ahmed Al-Ansari (HBKU - Hamad Bin Khalifa University); Ahmet Aysan (HBKU - Hamad Bin Khalifa University) |
| Abstract: | To identify how blockchain technology affects current and future research, we carried out a bibliometric overview of the journal articles written on the blockchain. We aimed to answer some of the questions to visualize the trend of the publications regarding the advancement of blockchain utilization in fields relating to finance, economics, and social science. We used the Scopus database for the literature research, which resulted in 506 papers by 1278 authors from 79 countries. Our study showed that from 2008 till 2021, publishing about blockchain was more significant in conference papers than articles by a factor of 2. Our study also showed the importance of citation regarding published academic articles, the link to the number of publications, the authors, the universities, the affiliated organizations, and the countries of the publications. The use of authoring and citation analysis give valuable insights. On the topic of blockchain, we identified Financial Innovation as the most impactful journal on the topic, the National Natural Science Foundation of China as the leading funding sponsor on blockchain research, the USA as the highest publication production country, and Hong Kong as the highest country in the average citation per document produced. We finally identified the 20 most cited articles on the blockchain topics. Unlike other brief bibliometric studies, our study's investigation and findings could become a first stage of learning for those interested in carrying out a bibliometric study. In addition, our study could become the starting point for any future research on any blockchain projects. |
| Keywords: | blockchain,smart contracts,crypto,bitcoin,Bibliometric analysis |
| Date: | 2021–09–13 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:hal-03343048&r= |
| By: | Lloyd, Simon (Bank of England); Manuel, Ed (Bank of England); Panchev, Konstantin (University of Oxford) |
| Abstract: | We study how foreign financial developments influence the conditional distribution of domestic GDP growth. Within a quantile regression setup, we propose a method to parsimoniously account for foreign vulnerabilities using bilateral-exposure weights when assessing downside macroeconomic risks. Using a panel data set of advanced economies, we show that tighter foreign financial conditions and faster foreign credit-to-GDP growth are associated with a more severe left tail of domestic GDP growth, even when controlling for domestic indicators. The inclusion of foreign indicators significantly improves estimates of ‘GDP-at-Risk’, a summary measure of downside risks. In turn, this yields time-varying estimates of higher GDP growth moments that are interpretable and provide advanced warnings of crisis episodes. Decomposing historical estimates of GDP-at-Risk into domestic and foreign sources, we show that foreign shocks are a key driver of domestic macroeconomic tail risks. |
| Keywords: | Financial stability; GDP-at-Risk; international spillovers; local projections; quantile regression; tail risk |
| JEL: | E44 E58 F30 F41 F44 G01 |
| Date: | 2021–09–17 |
| URL: | http://d.repec.org/n?u=RePEc:boe:boeewp:0940&r= |
| By: | Kariem Soliman (Europäisches Institut für Internationale Wirtschaftsbeziehungen (EIIW)) |
| Abstract: | In recent years, the interest in the field of economic research in studying the effect of robots on economic outcomes, i.e., labour productivity, labour demand and wages, has increased from an individual country perspective as well as for country groups. By using a fixed effects panel modeling approach, this study of nine robot intensive European countries shows that the core characteristics of a general purpose technology (GPT) are already satisfied by industrial robots. In 2019, seven countries in the panel, i.e. Germany, Italy, France, Spain and the UK (top 5), Sweden (7th) and Austria (10th) - in terms of operational stocks - were among the top 10 of robot using European countries (excl. Turkey). Following the understanding of a GPT of Bresnahan/Trajtenberg (1995), six panel regression models were estimated and linked to the four main characteristics of a GPT. Accordingly, two new measures are proposed in this paper; the first one is named the Division of Labour (or DoL) and is constructed by building the ratio of labour productivity inside the manufacturing industry to labour productivity across all industries. The second one is the Robot Task Intensity Index (RTII), which accounts for the number of tasks that a robot was used for in different production processes across the nine European countries. A high level of fulfilled tasks implies a higher quality of robot as the number of potential tasks, which the robot can perform, is an important criterion for the quality of that robot. In accordance with the GPT literature, both measures showed the expected (in) significances. At the bottom line, all six models underlined the economic relevance of industrial robots for the nine European countries included in the analysis and give a strong indication that robots can indeed be seen as a new general purpose technology. |
| Keywords: | Industrial Robots, General Purpose Technology, Labour Productivity Growth, Robot Task Intensity Index (RTII), Fixed Effects Model, EU KLEMS |
| JEL: | D24 J24 O11 O14 O33 |
| Date: | 2021–09 |
| URL: | http://d.repec.org/n?u=RePEc:bwu:eiiwdp:disbei307&r= |
| By: | Mau Vladimir (RANEPA) |
| Abstract: | A turbulent decade ended with the turbulent year of 2020. Starting with the global financial crisis of 2008-2009, the world economy and politics were in a state of unstable uncertainty, which ended with a full-scale explosion - the pandemic of a new coronavirus. The further socioeconomic development of the world as a whole and of individual countries (developed and leading developing) will be determined by how the lessons of the past 12 years and of 2020 in particular are studied, interpreted and assimilated. The events of 2020 have been compared with different crisis periods of the past, especially economic ones: the Great Depression of the 1930s2, the structural crisis of the 1970s, the financial and economic crisis of the 1970s, and the economic crisis of the 1980s. These comparisons are fair, especially if you compare their quantitative characteristics - the depth of the recession, the scale of unemployment, etc. But to understand the current situation and identify ways to overcome the crisis, we need an analysis that goes beyond historical analogies (important as they are) and beyond economic subjects and arguments. |
| Keywords: | Russian economy, COVID-19, economic growth, economic crisis, economic policy |
| JEL: | P16 P26 P48 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:gai:ppaper:ppaper-2021-1113&r= |
| By: | Yaya, OlaOluwa S; Vo, Xuan Vinh; Olayinka, Hammed Abiola |
| Abstract: | The present paper investigates the long-run relationships between daily prices, stocks and fear gauges of gold and silver by employing an updated fractional cointegrating framework, that is, the Fractional Cointegrating Vector Autoregression (FCVAR). The initial unit root tests results indicate that the series are I(d)s with values of d around 1 in all cases, and these are homogenous in the paired cointegrating series. Evidence of cointegration is found in the three pairs (prices, stocks and market gauge indices), while these cointegrations are only time-varying in the case of market gauge indices for the commodities. The fact that cointegration exists in prices and stocks of gold and silver implies the possibility that gold and silver prices and stocks can interchangeably be used to access the performances of the commodity markets, with the recommendation that the two commodities are not to be traded in the same portfolio. |
| Keywords: | Fractional cointegration; FCVAR; Gold; Silver; Mean reversion; Market fear gauges |
| JEL: | C22 C32 |
| Date: | 2021–05–06 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:109830&r= |
| By: | Fabien Perez (CREST, ENSAE, INSEE); Guillaume Hollard (CREST, EcolePolytechnique, CNRS); Radu Vranceanu (ESSEC Business School and THEMA) |
| Abstract: | This paper analyzes within-session test/retest data from four different tasks used to elicit risk attitudes. Maximum-likelihood and non-parametric estimations on 16 datasets reveal that, irrespective of the task, measurement error accounts for approximately 50% of the variance of the observed variable capturing risk attitudes. The consequences of this large noise element are evaluated by means of simulations. First, as predicted by theory, the coefficient on the risk measure in univariate OLS regressions is attenuated to approximately half of its true value, irrespective of the sample size. Second, the risk-attitude measure may spuriously appear to be insignificant, especially in small samples. Unlike the measurement error arising from within-individual variability, rounding has little influence on significance and biases. In the last part, we show that instrumental-variable estimation and the ORIV method, developed by Gillen et al. (2019), both of which require test/retest data, can eliminate the attenuation bias, but do not fully solve the insignificance problem in small samples. Increasing the number of observations to N=500 removes most of the insignificance issues. |
| Keywords: | Measurement error, Risk-aversion, Test/retest, ORIV, Sample size |
| JEL: | C18 C26 C91 D81 |
| Date: | 2021–07–08 |
| URL: | http://d.repec.org/n?u=RePEc:crs:wpaper:2021-13&r= |
| By: | Dimitra Kontana (Department of Economics, University of Macedonia); Stilianos Fountas (Department of Economics, University of Macedonia) |
| Abstract: | This study investigates the long-run and short-run relationship between consumption, income, financial and housing wealth, and a long-term interest rate for the 50 US states. Using an updated set of quarterly data from 1975 to 2018, we perform panel cointegration analysis allowing for cross-sectional dependence. We obtain the following results. First, there is strong evidence for cointegration among consumption and its determinants. Second, estimates of the housing wealth and financial wealth elasticity of consumption range from 0.072 to 0.115 and 0.044 to 0.080, respectively. Finally, Granger causality tests show that there is a bidirectional short-term causality between per capita consumpti on, income, and financial wealth in the short run and between all the variables in the long run. |
| Keywords: | Consumption; Financial Wealth; Housing Wealth; Wealth effects; 10-year Treasury Constant Maturity Rate; Panel Cointegration; Granger Causality. |
| JEL: | E21 E44 R31 |
| Date: | 2021–09 |
| URL: | http://d.repec.org/n?u=RePEc:mcd:mcddps:2021_10&r= |
| By: | Robert Calvert Jump (University of Greenwich); Paul Levine (University of Surrey) |
| Abstract: | This paper introduces unemployment hysteresis into a tractable New Keynesian three equation model using an insider-outsider labour market. We demonstrate that strict inflation targeting can lead to a unit root in the unemployment rate, but dual mandate monetary policy can stabilise the economy around its efficient employment rate. |
| JEL: | E24 E31 E32 |
| Date: | 2021–09 |
| URL: | http://d.repec.org/n?u=RePEc:sur:surrec:0821&r= |
| By: | Ding Dong; Zheng Liu; Pengfei Wang |
| Abstract: | Recessions are associated with sharp increases in turbulence that reshuffles firms' productivity rankings. To study the business cycle implications of turbulence shocks, we use Compustat data to construct a measure of turbulence based on the (inverse of) Spearman correlations of firms' productivity rankings between adjacent years. We document evidence that turbulence rises in recessions, reallocating labor and capital from high-to low-productivity firms and reducing aggregate TFP and the stock market value of firms. A real business cycle model with heterogeneous firms and financial frictions can generate the observed macroeconomic and reallocation effects of turbulence. In the model, increased turbulence makes high-productivity firms less likely to remain productive, reducing their expected equity values and tightening their borrowing constraints relative to low-productivity firms. Thus, labor and capital are reallocated to low-productivity firms, reducing aggregate TFP and generating a recession with synchronized declines in aggregate output, consumption, investment, and labor hours, in line with empirical evidence. |
| Date: | 2021–09–07 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedfwp:93061&r= |
| By: | Zhengqing Gui (Wuhan University); Yangguang Huang (Hong Kong University of Science and Technology); Xiaojian Zhao (Monash University) |
| Abstract: | We study a retail financial market with naive investors who are unaware of possible financial fraud. In our model, firms strategically choose whether to offer normal or fraudulent products to possibly unaware investors. Having new firms in the market makes offering normal products less profitable and thus discourages firms from behaving honestly. In a leader-follower environment, an honest firm may sell a normal product to sophisticated investors, while a dishonest firm targets only naive investors. By disclosing information about financial fraud, the honest firm can steal market share from the dishonest firm, but doing so may induce the dishonest firm to deviate and compete for the normal-product market, which limits the honest firm’s incentive to disclose information. Policy instruments, such as increasing legal punishment, implementing public education programs, and lowering the interest rate ceiling, may also trigger the honest firm to strategically shroud information. As a consequence, these policies cannot ensure an improvement in investor welfare. |
| Keywords: | financial fraud, investor naivety, unawareness, shrouding |
| JEL: | D14 D83 G11 |
| Date: | 2021–09 |
| URL: | http://d.repec.org/n?u=RePEc:mos:moswps:2021-06&r= |
| By: | Giese, Julia (Bank of England); Joyce, Michael (Bank of England); Meaning, Jack (Bank of England); Worlidge, Jack (Bank of England) |
| Abstract: | Most tests of preferred habitat theory are indirect; they infer the existence of preferred habitat behaviour in financial markets by examining the behaviour of asset prices. We instead identify preferred habitat behaviour directly from whether investors show a preference towards a particular duration habitat. We do so by making use of a newly available and highly granular data set on the UK government bond (gilt) market, which allows us to examine investors’ gilt transactions and their daily stock of gilt holdings during 2016 and 2017. Using cluster analysis, we find that investors can be classified into distinct groups, some of which more closely display the behavioural properties that theory associates with preferred habitat investors. We find that these groups of investors are less sensitive to price movements than other investor groups and include institutional investors, like life insurers and pension funds, which are typically associated with preferred habitat behaviour. Evidence from the Bank of England’s QE4 purchase programme during August 2016 to March 2017 suggests that these investor groups sold relatively more of their gilt holdings to the Bank than other groups of investors. |
| Keywords: | Preferred habitat; gilt market; yield curve; cluster analysis |
| JEL: | E43 E52 G11 G12 |
| Date: | 2021–09–10 |
| URL: | http://d.repec.org/n?u=RePEc:boe:boeewp:0939&r= |
| By: | Anthony E. Brockwell |
| Abstract: | We review some fundamental concepts of investment from a mathematical perspective, concentrating specifically on fractional-Kelly portfolios, which allocate a fraction of wealth to a growth-optimal portfolio while the remainder collects (or pays) interest at a risk-free rate. We elucidate a coherent continuous-parameter time-series framework for analysis of these portfolios, explaining relationships between Sharpe ratios, growth rates, and leverage. We see how Kelly's criterion prescribes the same leverage as Markowitz mean-variance optimization. Furthermore, for fractional Kelly portfolios, we state a simple distributional relationship between portfolio Sharpe ratio, the fractional coefficient, and portfolio log-returns. These results provide critical insight into realistic expectations of growth for different classes of investors, from individuals to quantitative trading operations. We then illustrate application of the results by analyzing performance of various bond and equity mixes for an investor. We also demonstrate how the relationships can be exploited by a simple method-of-moments calculation to estimate portfolio Sharpe ratios and levels of risk deployment, given a fund's reported returns. |
| Date: | 2021–09 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2109.10814&r= |
| By: | Asongu, Simplice; Nting, Rexon |
| Abstract: | This study investigates direct and indirect linkages between financial development and inclusive human development in data panels for African countries. It employs a battery of estimation techniques, notably: Two-Stage Least Squares, Fixed Effects, Generalized Method of Moments and Tobit regressions. The dependent variable is the inequality adjusted human development index. All dimensions of the Financial Development and Structure Database (FDSD) of the World Bank are considered. The main finding is that financial dynamics of depth, activity and size improve inclusive human development, whereas the inability of banks to transform mobilized deposits into credit for financial access negatively affects inclusive human development. Policies should be tailored to improve mechanisms by which credit facilities can be provided to both households and business operators. Surplus liquidity issues resulting from the inability of banks to transform mobilized deposits into credit can be resolved by enhancing the introduction of information sharing offices (like public credit registries and private credit bureaus) that would reduce information asymmetry between lenders and borrowers. This study complements the extant literature by assessing the nexus between financial development and inclusive human development in Africa. |
| Keywords: | Banking; human development; Africa |
| JEL: | E0 G20 I00 O10 |
| Date: | 2021–01 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:109846&r= |
| By: | Ajayi, Temitope Abraham |
| Abstract: | Diversification of the Nigerian economy from oil-based to other non-oil sectors has become a recurrent economic solution to the growing challenges associated with the Nigerian economy. For the past 20 years of uninterrupted democratic government in Nigeria, the successive federal governments have focused on the development of the agricultural sector as a credible option for diversification, partly for the past positive roles of the agricultural sector in the Nigerian economy before the discovery of oil. Using the multivariate vector autoregressive (VAR) model on the data obtained from 1999 to 2019, this study applied the vector error correction (VEC) model to determine the impacts of diversification of the Nigerian economy on economic growth, focusing on the manufacturing and the agricultural sectors. To determine the underlying impact of the democratic experience in Nigeria with diversification, we utilised the political rights of the population as a proxy variable. The empirical results showed that there exists cointegration among the variables used to represent the manufacturing and the agricultural sectors, political rights, and per capita gross domestic product (GDP) growth rate within the Nigerian economy. The manufacturing sector has a positive impact on the growth of the Nigerian economy; however, the agricultural sector and the political rights of the Nigerian people have adverse effects on the real GDP growth rate, in the short run. The Granger Causality tests found no evidence of causality among the variables. This study concludes that the diversification policy of the Nigerian government should be multi-faceted and that the political rights of the population are essential for the realisation of the diversification goal. |
| Keywords: | Diversification, Nigeria, GDP, Cointegration. |
| JEL: | O1 O11 O14 O17 Q1 Q11 Q13 Q15 Q17 Q18 |
| Date: | 2020–10–19 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:109271&r= |
| By: | Patrick Fève (TSE - Toulouse School of Economics - UT1 - Université Toulouse 1 Capitole - Université Fédérale Toulouse Midi-Pyrénées - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement); Pablo Garcia Sanchez (Unknown); Alban Moura (Unknown); Olivier Pierrard (Unknown) |
| Abstract: | We augment a simple Real Business Cycle model with financial intermediaries that may default on their liabilities and a financial friction generating social costs of default. We derive a closed-form solution for the general equilibrium of the economy, providing analytical results. Endogenous default generates a negative skew for aggregate variables and a positive skew for credit spreads, as documented in the empirical literature. Larger financial frictions strengthen asymmetry, which amplifies the welfare cost of fluctuations. Macro-prudential regulation alleviates both the cost of fluctuations and business-cycle asymmetry, at the expense of a steady-state distortion. Finally, we prove analytically the existence of an optimal level of regulation, which increases with the size of the financial friction. |
| Keywords: | Real Business Cycle model,Default,Financial frictions,Asymmetry,Optimal regulation |
| Date: | 2021–02 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-03346173&r= |
| By: | Federico Guglielmo Morelli; Karl Naumann-Woleske; Michael Benzaquen; Marco Tarzia; Jean-Philippe Bouchaud |
| Abstract: | In the General Theory, Keynes remarked that the economy's state depends on expectations, and that these expectations can be subject to sudden swings. In this work, we develop a multiple equilibria behavioural business cycle model that can account for demand or supply collapses due to abrupt drops in consumer confidence, which affect both consumption propensity and investment. We show that, depending on the model parameters, four qualitatively different outcomes can emerge, characterised by the frequency of capital scarcity and/or demand crises. In the absence of policy measures, the duration of such crises can increase by orders of magnitude when parameters are varied, as a result of the "paradox of thrift". Our model suggests policy recommendations that prevent the economy from getting trapped in extended stretches of low output, low investment and high unemployment. |
| Date: | 2021–09 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2109.09386&r= |
| By: | Isaac K. Ofori (University of Insubria, Varese, Italy); Simplice A. Asongu (Yaoundé, Cameroon) |
| Abstract: | Motivated by the projected rebound of foreign direct investment (FDI) inflow to sub-Saharan Africa (SSA) following the implementation of the AfCFTA and the finalization of the Africa Investment Protocol, we examine how FDI modulates the effects of various governance dynamics on inclusive growth in SSA. We do this by testing two hypotheses first, whether unconditionally FDI and various governance indicators (rule of law, control of corruption, regulatory quality, governance effectiveness, political stability, and voice and accountability) foster inclusive growth in SSA; and second, whether these governance dynamics engender positive synergy with FDI on inclusive growth in SSA. Using data from the World Bank’s World Governance Indicators and the World Development Indicators for the period 1990–2020, we employ several fixed effects, random effects, and the system GMM estimators for the analysis. First, we find that FDI and all our governance dynamics are significant inclusive growth enhancers in SSA. Second, though FDI amplifies the effects of all our governance dynamics on inclusive growth in SSA, governance effectiveness, voice and accountability, and political stability are keys. Policy recommendations are provided. |
| Keywords: | AfCFTA; Economic Integration; FDI; Governance; Inclusive Growth; Africa |
| JEL: | F6 F15 O43 O55 R58 |
| Date: | 2021–01 |
| URL: | http://d.repec.org/n?u=RePEc:abh:wpaper:21/038&r= |
| By: | Caselli, Francesco; Koren, Miklos; Lisicky, Milan; Tenreyro, Silvana |
| Abstract: | A widely held view is that openness to international trade leads to higher income volatility, as trade increases specialization and hence exposure to sector-specific shocks. Contrary to this common wisdom, we argue that when country-wide shocks are important, openness to international trade can lower income volatility by reducing exposure to domestic shocks and allowing countries to diversify the sources of demand and supply across countries. Using a quantitative model of trade, we assess the importance of the two mechanisms (sectoral specialization and cross-country diversification) and show that in recent decades international trade has reduced economic volatility for most countries. |
| Keywords: | 313164; 240852 |
| JEL: | E32 F41 |
| Date: | 2020–02–01 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:101615&r= |
| By: | Pietro Saggese; Alessandro Belmonte; Nicola Dimitri; Angelo Facchini; Rainer Böhme |
| Abstract: | We mine the leaked history of trades on Mt. Gox, the dominant Bitcoin exchange from 2011 to early 2014, to detect the triangular arbitrage activity conducted within the platform. The availability of user identifiers per trade allows us to focus on the historical record of 440 investors, detected as arbitrageurs, and consequently to describe their trading behavior. We begin by showing that a considerable difference appears between arbitrageurs when indicators of their expertise are taken into account. In particular, we distinguish between those who conducted arbitrage in a single or in multiple markets: using this element as a proxy for trade ability, we find that arbitrage actions performed by expert users are on average non profitable when transaction costs are accounted for, while skilled investors conduct arbitrage at a positive and statistically significant premium. Next, we show that specific trading strategies, such as splitting orders or conducting arbitrage non aggressively, are further indicators of expertise that increase the profitability of arbitrage. Most importantly, we exploit withinuser (across hours and markets) variation and document that expert users make profits on arbitrage by reacting quickly to plausible exogenous variations on the official exchange rates. We present further evidence that such differences are chiefly due to a better ability of the latter in incorporating information, both on the transactions costs and on the exchange rates volatility, eventually resulting in a better timing choice at small time scale intervals. Our results support the hypothesis that arbitrageurs are few and sophisticated users |
| Keywords: | Arbitrage, Bitcoin, Cryptocurrency Exchanges, Financial Econometrics, Behavior of Economic Agents |
| JEL: | C58 D53 G11 G40 |
| Date: | 2021–09 |
| URL: | http://d.repec.org/n?u=RePEc:usi:wpaper:860&r= |
| By: | Marianne Laurin; Derek Messacar; Pierre-Carl Michaud |
| Abstract: | Tax deductions on contributions to registered savings vehicles are a common policy tool used by governments in many industrialized countries to encourage people to save for retirement. However, these plans do not typically lock in funds, which means savers may also withdraw before retirement when their marginal tax rates are still high and forgo the tax benefit. In this paper, we investigate the extent to which pre-retirement savings withdrawals respond to changes in the net-of-tax benefit of withdrawing and whether such behavior depends on the saver’s financial literacy. To that end, we link respondents of a nationally representative financial capability survey from Canada to over 15 years of administrative tax data. Our results show that the correlation between savings withdrawals and the effective marginal tax rate is negative for those with higher financial literacy, but much weaker and sometimes statistically insignificant for those with lower financial literacy. The findings suggest that financial literacy is an important determinant of the extent to which tax-deductible savings plans are used efficiently. |
| Keywords: | tax-preferred savings accounts, retirement savings, financial literacy. |
| JEL: | G53 G51 D14 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:rsi:creeic:2106&r= |
| By: | Marco Ranaldi; Branko Milanovic |
| Abstract: | The paper investigates the relationship between capitalism systems and their levels of income and compositional inequality (how the composition of income between capital and labor varies along income distribution). Capitalism may be seen to range between Classical Capitalism, where the rich have only capital income, and the rest have only labor income, and Liberal Capitalism, where many people receive both capital and labor incomes. Using a new methodology and data from 47 countries over the past 25 years, we show that higher compositional inequality is associated with higher inter-personal inequality. Nordic countries are exceptional because they combine high compositional inequality with low inter-personal inequality. We speculate on the emergence of homoploutic societies where income composition may be the same for all, but Gini inequality nonetheless high, and introduce a new taxonomy of capitalist societies. |
| JEL: | D31 P51 |
| Date: | 2020–10 |
| URL: | http://d.repec.org/n?u=RePEc:lis:liswps:803&r= |
| By: | Chanthol, Hay |
| Abstract: | Money supply in a highly dollarized Cambodian economy appears to be highly unstable because the composition of domestic currency in aggregate money supply is very small. During its transition towards a market economy, Cambodia embarked upon a path of disinflation through dollarization and stable exchange rate. In this paper, the trend and behavior of money supply, money demand and inflation are examined, and a model is developed to explain the determinants of inflation under dollarization and estimate it for Cambodia in the 2000s using a two-step procedure. This paper also shows that management of rice price, gasoline price with a restrictive monetary policy based on broadly defined money or total liquidity was essential for the Cambodian authorities to succeed in fighting inflation. This paper explain the behavior of inflation and the role that a central bank may play in its determination. |
| Keywords: | money demand, inflation, dollarization, exchange rate |
| JEL: | E31 E41 E52 |
| Date: | 2021–03–01 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:109805&r= |
| By: | Stoian, Andreea; Vintila, Nicoleta; Iorgulescu, Filip; Cepoi, Cosmin Octavian; Dina Manolache, Aurora |
| Abstract: | This study investigates the relationship between risk aversion, financial literacy, and investment preferences of young adults in higher education in Romania. For this purpose, we conducted a survey that measured the basic, advanced and overall financial literacy, risk aversion, and parental financial behaviours. We had 479 respondents and a similar number of useable surveys. Resorting to OLS and IV econometric methods, we show that financial literacy, regardless of its level, contributes to reducing risk aversion quantified by the risk premium. Moreover, positive financial behaviours of parents also decrease the risk aversion. This finding is invalid in the case of a self-assessed risk tolerance. We also found that young adults' investment preferences are influenced by the self-assessed risk tolerance and not by the risk aversion. However, financial literacy increases the probability of young adults to select bonds or funds as investment options, but does not have a statistically significant influence on the selection of stocks, which is mainly driven by the self-assessed risk profile as well as bank deposits. |
| Keywords: | financial literacy, risk aversion, risk premium, investment choices, survey methods |
| JEL: | C83 G11 |
| Date: | 2021–08 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:109755&r= |
| By: | Daniel Spiro |
| Abstract: | What is a good reduced-form representation of Ramsey-Cass-Koopmans. (RCK) model? Solow’s model (despite non-optimizing agents) provides predictions largely consistent with a closed-economy RCK but fundamentally differs regarding open-economy income convergence. Where RCK predicts partial income and consumption convergence between open economies Solow predicts full convergence. This paper presents, by a small modification of the savings behavior in the Solow model, a framework that matches RCK’s properties in closed and open economies. The model, labeled rSolow, is analytically tractable, allowing closed-form solutions of all variables, thus makes several explicit and novel predictions. This includes how income and inequality depend on country size; that income growth will be a U-shaped function of initial income thus creating differentiated convergence; and that poor countries bene.t from higher saving but rich countries may not. |
| Keywords: | convergence, Ramsey, Solow, inequality, growth |
| JEL: | E10 E21 F21 F43 O11 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_9293&r= |
| By: | Vanesa Jorda; José María Sarabia; Markus Jäntti |
| Abstract: | Grouped data in the form of income shares have conventionally been used to estimate income inequality due to the lack of individual records. We provide guidance on the choice between parametric and nonparametric methods and its estimation, for which we develop the GB2group R package. We present a systematic evaluation of the performance of parametric distributions to estimate economic inequality. The accuracy of these estimates is compared with those obtained by nonparametric techniques in more than 5000 datasets. Our results indicate that even the simplest parametric models provide reliable estimates of inequality measures. The nonparametric approach, however, fails to represent income distributions accurately. |
| JEL: | D31 C13 C18 |
| Date: | 2020–12 |
| URL: | http://d.repec.org/n?u=RePEc:lis:liswps:804&r= |
| By: | Hajime Tomura (Faculty of Political Science and Economics, Waseda University, 1-6-1 Nishiwaseda, Shinjyuku-ku, Tokyo, 169-8050, Japan.) |
| Abstract: | Daily estimates of the effective reproduction number for new coronavirus based on reporting dates are regressed on real household expenditures per household on eating out, traveling, and apparel shopping, as well as mobility in public transportation, using publicly available daily nationwide data from February 15, 2020, to February 1, 2021 in Japan. The effects of absolute humidity, the declaration of states of emergency, and the year-end and new-year holiday period are controlled through dummy variables. The lagged infectious effect of economic activities due to incubation periods is also taken into account. Estimated regression coeffcients indicate that real household ex- penditures for cafe and bar had larger effects on the effective reproduction number per value of spending than the other types of household expenditures in explanatory vari- ables during the sample period. Thus, a loss of aggregate demand is minimized if the effective reproduction number is lowered by restricting only household consumption of cafe and bar. The posterior means of simulations based on the estimated regression coeffcients, however, imply that even if a self-restraint on packaged domestic travels and an endogenous decline in mobility are taken into account, it will be necessary to cut household consumption of cafe and bar by more than 80% of the 2019 level, in order to keep the e ective reproduction number below one on average. |
| Keywords: | new coronavirus; effective reproduction number; consumption; mobility. |
| JEL: | E21 I18 |
| Date: | 2021–05 |
| URL: | http://d.repec.org/n?u=RePEc:wap:wpaper:2107&r= |
| By: | Bruno S. Frey |
| Abstract: | Nowadays, academic journals of high standing rarely accept a conceptual idea in a paper not instantly accompanied by econometric estimates. The idea would almost certainly get rejected. Empirical validation based on past statistical data has produced an unfortunate backward orientation in economics. While one can learn from the past, this approach fails when the underlying conditions strongly change. The paper suggests various possibilities to overcome the intense publication pressure in so-called top journals and the overemphasis on instant empirical evidence. Academia is, however, unlikely to adapt. As economics is too backward oriented, other disciplines or cranks may well dominate future economic policy. |
| JEL: | A10 A11 B40 C10 C80 |
| Date: | 2021–09 |
| URL: | http://d.repec.org/n?u=RePEc:cra:wpaper:2021-32&r= |
| By: | Riley Webster; Mary Farrell |
| Abstract: | This case study describes Business Link, a program providing job placement and subsidized employment opportunities to recipients of cash assistance and other people with low incomes who live in New York City, as part of the State TANF Case Studies project. |
| Keywords: | Employment and training, wraparound supports, TANF, case studies, temporary assistance to needy families, Business Link |
| URL: | http://d.repec.org/n?u=RePEc:mpr:mprres:861baf9afad84e4abf267b015601fb9f&r= |
| By: | Olatunji A. Shobande (University of Aberdeen, UK); Simplice A. Asongu (Yaoundé, Cameroon) |
| Abstract: | This study examines whether knowledge causes economic growth in Africa's two leading economies: Nigeria and South Africa. Using the Vector Autoregressive and Vector Error Correction approach, the findings show cointegration among the variables. The speed of convergence of the variables to their long-term mean values is relatively higher for South Africa than for Nigeria. In the short run, it is observed that knowledge unidirectionally Granger causes growth for Nigeria, whereas bidirectional causality is observed for South Africa. The higher correlation between knowledge and growth in South Africa reflects the success of greater investment in education. Nigeria must increase investment in education and modern infrastructure to converge to South Africa’s growth trajectory. Moreover, for Nigeria, (i) knowledge unidirectionally Granger cause growth, (ii) evidence of bidirectional causality flow is apparent between trade, the economic incentive and growth and (iii) health unidirectionally Granger cause knowledge. As for South Africa: (i) there is bidirectional causality between knowledge, trade openness and growth, whereas investment and economic incentive, unidirectionally Granger causes growth, (ii) investment, trade openness and health unidirectionally Granger cause knowledge and (iii) economic incentive unidirectionally Granger cause trade openness. In conclusion, this paper argues that a transformed education system can provide the knowledge base essential for promoting and sustaining economic growth. |
| Keywords: | Convergence; Growth performance; Knowledge-based economy; Nigeria; South Africa |
| JEL: | O10 O30 O38 O55 O57 |
| Date: | 2021–01 |
| URL: | http://d.repec.org/n?u=RePEc:agd:wpaper:21/059&r= |
| By: | Modery, Wolfgang; Valderrama, Maria Teresa; Lopez-Garcia, Paloma; Albani, Maria; Anyfantaki, Sofia; Baccianti, Claudio; Barrela, Rodrigo; Bodnár, Katalin; Bun, Maurice; De Mulder, Jan; Falck, Elisabeth; Fenz, Gerhard; Lopez, Beatriz Gonzalez; Labhard, Vincent; Le Roux, Julien; Linarello, Andrea; Meinen, Philipp; Moder, Isabella; Oja, Kaspar; Ragacs, Christian; Oke, Roehe; Schulte, Patrick; Justo, Ana Seco; Serafini, Roberta; Setzer, Ralph; Lopez, Irune Solera; Vanhala, Juuso |
| Abstract: | The aim of this report is to foster a better understanding of past trends in, and drivers of, productivity growth in the countries of the European Union (EU) and of the interplay between productivity and monetary policy. To this end, a group of experts from 15 national central banks and the European Central Bank (ECB) joined forces and pooled data and expertise for more than 18 months to produce the report. Group members drew on the extensive research already conducted on productivity growth, including within the European System of Central Banks and in the context of the review of the ECB’s monetary policy strategy, and worked together to conduct new analyses.After recalling the key facts and figures, the report looks into the predominant drivers of productivity growth in firms, with a focus on technology as a key determinant of aggregate productivity dynamics. It then discusses the main factors behind resource reallocation both across incumbent firms and as a result of the entry and exit of firms. Although productivity is a real-economy phenomenon and its evolution predominantly hinges on the structural features of the economy and national policies, the report also raises the question of the extent to which, and under what circumstances, monetary policy may affect productivity. In addition, it places productivity in a broader perspective by taking into account other important structural trends that are expected to have an impact on productivity in the medium-to-long run, such as globalisation, population ageing, climate change and digitalisation. Finally, the report considers the possible impacts of the coronavirus (COVID-19) pandemic on productivity in EU countries. ... JEL Classification: D22, D24, D61, O33, O47, O52 |
| Keywords: | drivers and policy implications, European Union, Productivity growth |
| Date: | 2021–09 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbops:2021268&r= |
| By: | Bianchi, Milo; Luomaranta, Henri |
| Abstract: | We explore how the separation between ownership and control a§ects Örm productivity. Using administrative panel data on the universe of limited liability Örms in Finland, we document a substantial increase in productivity when the CEO obtains majority ownership or when the majority owner becomes the CEO. We exploit plausibly exogenous variations to CEO turnover, induced by shocks to the CEO spouseís health. Extending the analysis beyond typical samples of large public Örms, we show that our e§ects are stronger in medium-sized private Örms. We also investigate possible mechanisms and provide suggestive evidence that increased ownership boosts CEOís e§ort at work. |
| Keywords: | agency costs;Örm productivity,;CEO ownership. |
| JEL: | G30 M12 D24 E23 L25 |
| Date: | 2021–08 |
| URL: | http://d.repec.org/n?u=RePEc:tse:wpaper:125982&r= |
| By: | Patnaik, Ila (National Institute of Public Finance and Policy); Sengupta, Rajeswari (Indira Gandhi Institute of Development and Research (IGIDR) Mumbai) |
| Abstract: | We analyse India's exchange rate regime through the prism of exchange market pressure. We estimate the various regimes that India's de-facto exchange rate has been through during the period from 2000 to 2020. We find four specific regimes of the Indian rupee differentiated by the degree of flexibility of the exchange rate. We document the manner in which EMP in India has either been resisted through foreign exchange market intervention, or relieved through exchange rate change, across these four de-facto exchange rate regimes. In particular, we find that after the 2008 global financial crisis the rupee-dollar exchange rate was relatively more flexible and the share of exchange rate in EMP absorption was the highest. After 2013 there was a change in the way the EMP was absorbed. The exchange rate was actively managed using spot as well as forward market intervention. We also find that the response of the RBI to EMP has been asymmetric. When there is pressure to appreciate, the RBI has typically responded by purchasing reserves. On the other hand, in the periods in which there has been pressure to depreciate, only a tiny fraction of reserves are used for resisting the pressure. Such pressure is absorbed by rupee depreciation. |
| Keywords: | Exchange rate regime ; Forex intervention ; Reserves ; Exchangen market pressure ; Structural change |
| JEL: | E58 F31 F41 |
| Date: | 2021–08 |
| URL: | http://d.repec.org/n?u=RePEc:npf:wpaper:21/353&r= |
| By: | Christiane Baumeister |
| Abstract: | Asset prices are a valuable source of information about financial market participants' expectations about key macroeconomic variables. However, the presence of time-varying risk premia requires an adjustment of market prices to obtain the market's rational assessment of future price and policy developments. This paper reviews empirical approaches for recovering market-based expectations. It starts by laying out the two canonical modeling frameworks that form the backbone for estimating risk premia and highlights the proliferation of risk pricing factors that result in a wide range of different asset-price-based expectation measures. It then describes a key methodological innovation to evaluate the empirical plausibility of risk premium estimates and to identify the most accurate market-based expectation measure. The usefulness of this general approach is illustrated for price expectations in the global oil market. Then, the paper provides an overview of the body of empirical evidence for monetary policy and inflation expectations with a special emphasis on market-specific characteristics that complicate the quest for the best possible market-based expectation measure. Finally, it discusses a number of economic applications where market expectations play a key role for evaluating economic models, guiding policy analysis, and deriving shock measures. |
| JEL: | C52 E31 E43 E52 G14 Q43 |
| Date: | 2021–09 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:29232&r= |
| By: | Deepak Malghan; Hema Swaminathan |
| Abstract: | Di?erences in economic outcomes between men and women within a household, or intra-household gender inequality has su?ered from relative neglect despite a renewed focus on gender inequality. Using global micro-data from nearly three million house-holds, we present evidence that this neglect renders our understanding of the relation-ship between gender inequality and economic development analytically and empirically incomplete. We show that intra-household gender inequality in earnings is persistent across the income distribution, across a wide range to countries, and over four-decades. For a sub-sample of countries, we show that the relationship between intra-household gender inequality and household economic status is non-monotonic – that we refer to as the “micro-Kuznets” relationship. We also develop an empirical framework to mea-sure the aggregate welfare loss from intra-household gender inequality. For a range of plausible inequality aversion assumptions, we report an median welfare loss of over 15% of aggregate earnings. |
| JEL: | D63 I31 J16 D10 |
| Date: | 2021–02 |
| URL: | http://d.repec.org/n?u=RePEc:lis:lwswps:34&r= |
| By: | Coskun, Yener; Akinsomi, Omokolade; Gil-Alana, Luis A.; Yaya, OlaOIuwa S. |
| Abstract: | We examine stock market responses during the COVID-19 pandemic period using fractional integration techniques by considering the data spanning from August 2nd 2019 to July 9th 2020. The evidence suggests that stock markets generally follow a synchronized movement before and during the stages of the pandemic’s shocks. We find that, while mean reversion significantly declines, the degree of persistence and dependence has been increased in the majority of the stock market indices- in the full sample analysis. This outcome implies increasing integration and possibly declining benefits of diversification for the global stock portfolio management. |
| Keywords: | Coronavirus; stock markets; fractional integration; long memory; mean reversion |
| JEL: | C12 C22 F31 |
| Date: | 2021–09–09 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:109827&r= |
| By: | Ratang Sedimo; Kelesego Mmolainyane (Botswana Institute for Development Policy Analysis) |
| Abstract: | This study seeks to understand institutional frameworks that exist in Botswana to protect the rights of ordinary shareholders. There is no literature on the subject matter in the context of Botswana; hence this study attempts to fill in the literature gap. The study uses a variety of data collection methods, such as semi-structured interviews, the Choppies case study and lessons learnt from other jurisdictions. Findings reveal that ordinary shareholders’ rights protection involves the use of institutional frameworks. In Botswana, existing frameworks are not adequate to protect ordinary shareholders’ rights. Implementation and enforcement of legal and regulatory instruments in Botswana is weak. Furthermore, the study observed that lack of adherence to corporate governance standards created room for the expropriation of ordinary shareholders of Choppies. Learning from other jurisdictions, the study suggests a review of the institutional frameworks in Botswana with an aim to protect shareholders’ rights, more especially the ordinary shareholders’ rights. |
| Keywords: | Ordinary Shareholders’ Rights; Institutional Framework; Botswana |
| JEL: | G23 G28 |
| Date: | 2020–03 |
| URL: | http://d.repec.org/n?u=RePEc:bid:wpaper:71&r= |
| By: | Italo Colantone; Gianmarco I.P. Ottaviano; Piero Stanig |
| Abstract: | We review the literature on the globalization backlash, seen as the political shift of voters and parties in a protectionist and isolationist direction, with substantive implications on governments’ leaning and enacted policies. Using newly assembled data for 23 advanced democracies, we document a protectionist and isolationist shift in electorates, legislatures, and executives from the mid-1990s onwards. This is associated with a noticeable protectionist shift in trade policy –although with some notable nuances– especially since the financial crisis of 2008. We discuss the economics of the backlash. From a theoretical perspective, we highlight how the backlash may arise within standard trade models when taking into account the ‘social footprint’ of globalization. Then, we review the empirical literature on the drivers of the backlash. Two main messages emerge from our analysis: (1) globalization is a significant driver of the backlash, by means of the distributional consequences entailed by rising trade exposure; yet (2) the backlash is only partly determined by trade. Technological change, crisis-driven fiscal austerity, immigration, and cultural concerns are found to play an important role in creating politically consequential cleavages. Looking ahead, we discuss possible future developments, with specific focus on the issue of social mobility. |
| Keywords: | globalization, social footprint, backlash |
| JEL: | F10 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_9289&r= |
| By: | Miroslav Gabrovski; Victor Ortego-Marti (Department of Economics, University of California Riverside) |
| Abstract: | The co-movement of buyers and vacancies, i.e. the Beveridge Curve, is a key determinant of the cyclical properties of the housing market, as it determines the sign of the correlation between prices and key measures of liquidity such as vacancies (i.e.\ houses for sale), sales, and time-to-sell. As recent work has shown, to account for the core stylized facts of the housing market, search and matching models must be consistent with a positively correlated co-movement of buyers and vacancies, i.e.\ with an upward-sloping Beveridge Curve. This paper provides evidence that buyers and vacancies are positively correlated along the housing cycle, i.e. the Beveridge Curve on the housing market is upward sloping. Using data on vacancies and time-to-sell, we construct a series for buyers and estimate the slope of the Beveridge Curve. This approach requires only one minimal structural assumption: the existence of a matching function. Our findings confirm the positive relationship between buyers and vacancies over the business cycle, i.e. an upward sloping Beveridge Curve. In addition, we provide an estimate of the elasticity of vacancies with respect to buyers. We find that a one percent increase in vacancies is associated with around a two percent increase in buyers, confirming recent findings that buyers are more volatile than houses for sale. We hope that this estimate will help future researchers in this area. |
| Keywords: | Housing market; Search and matching; Beveridge Curve; Housing liquidity |
| JEL: | E2 E32 R21 R31 |
| Date: | 2021–09 |
| URL: | http://d.repec.org/n?u=RePEc:ucr:wpaper:202113&r= |
| By: | Julia Wardley-Kershaw; Klaus R. Schenk-Hoppé |
| Abstract: | Economic growth transformed the world. Its measurement via GDP has risen to prominence as the pre-eminent metric of economic prowess and political success. How better to tell its story than through the lens of the world's first growing economy? Britain's experience with economic growth has been a rocky path of tremendous highs and despairing lows, but despite crises and shifts in industry growth has rolled with the punches. Our work presents an analysis of growth and crisis in the UK, surveying key ideas from academic literature in an engaging and informative manner, accessible to readers with or without a background in Economics. Our paper studies defining events in Britain's past relationship with growth, whilst engaging with pertinent contemporary debates surrounding its future. We explore the drivers of growth, the restructuring effects of crisis on productivity and employment, and the socioeconomic impacts of restricted access to the growing economy. We hope that our work provides context and depth to modern discussions, enabling readers to evaluate growth and crisis in a new light and to inform their perspectives on future growth. |
| JEL: | O1 |
| Date: | 2021–09 |
| URL: | http://d.repec.org/n?u=RePEc:man:sespap:2108&r= |
| By: | Johane Motsatsi (Botswana Institute for Development Policy Analysis) |
| Abstract: | This paper estimates the impact of exchange rate volatility on non-diamond exports in Botswana using an Autoregressive Distributed Lag (ARDL) model. The model used quarterly data for the period 1995-2018, to estimate both the long and short run dynamics. The estimated results show that real GDP in the non-diamond sector, GDP growth of OECD countries, transport investment and water & electricity investment have a positive impact on non-diamond exports. While the lending interest rate, inflation differentials, exchange rate volatility and misalignment impact non-diamond exports negatively. The findings indicate that the coefficients with respect to the exchange rate volatility in both models are relatively low, suggesting that it has not had harmful impacts on non-diamond exports. This reflects the emphasis given to a stable and competitive exchange rate that will attract increased foreign demand which, as a result, could lead to export diversification. However, Botswana’s export structure is still undiversified, despite efforts made to diversify the sector. To achieve the national objectives of sustainable export and economic diversification, the policy should continue encouraging a stable and competitive exchange rate. Other policies intended to boost export growth should focus on: expanding the production base of the non-diamond sector, committing more investment in the transport sector, and improving water & electricity infrastructure. |
| Keywords: | Non-diamond exports; Exchange rate volatility; Botswana |
| Date: | 2020–03 |
| URL: | http://d.repec.org/n?u=RePEc:bid:wpaper:77&r= |
| By: | Ila Patnaik (National Institute of Public Finance and Policy); Rajeswari Sengupta (Indira Gandhi Institute of Development Research) |
| Abstract: | We analyse India's exchange rate regime through the prism of exchange market pressure. We estimate the various regimes that India's exchange rate has been through during the period from 2000 to 2020. We find four specific regimes of the Indian rupee differentiated by the degree of flexibility. We document the manner in which EMP in India has either been resisted through foreign exchange market intervention, or relieved through exchange rate change, across these four exchange rate regimes. We find that in only one of the four regimes the rupee-dollar exchange rate was relatively more flexible and the share of exchange rate in EMP absorption was the highest. This regime corresponded with the aftermath of the 2008 global crisis. In contrast, after 2013 the exchange rate was actively managed using spot as well as forward market intervention. We also find that the RBI has been intervening in the foreign exchange market in an asymmetric fashion to prevent the rupee from appreciating. |
| Keywords: | Exchange rate regime, Forex intervention, Reserves, Exchange market pressure, Structural change |
| JEL: | E58 F31 F41 |
| Date: | 2021–08 |
| URL: | http://d.repec.org/n?u=RePEc:ind:igiwpp:2021-022&r= |
| By: | Ela Ince |
| Abstract: | The thesis brings together three independent essays on the economics of innovation. I analyse the impact of competition on firm-level innovation (chapter 1) and the impact of different types of innovation on firm performance (chapter 2) looking at the top business R&D spenders of the world. I, then, switch my focus on researchers and analyse the determinants of brain drain in Europe (chapter 3).The first chapter is co-authored by Anabela Santos (European Commission) and Michele Cincera (ULB) and aims at assessing the impact of competition on firm-level innovation. The sample is composed of the world top corporate R&D spenders listed in the EU 2017 industrial R&D Scoreboard, and the analysis covers the years spanning from 2007 to 2016. We use an industry-year indicator, the inverse of the Lerner Index, as the indicator of competition for these firms that are leading in innovation efforts in the industries they are operating at the worldwide. R&D expenditures are used as the proxy for innovation. Model is estimated using two-stage least squares, to control for potential endogeneity of the competition indicator. Results confirm the existence of an inverted-U shaped relationship between competition and innovation. Further analysis is undertaken splitting the overall firm sample into services and manufacturing sectors according to technology and knowledge intensities and into the country of headquarters. We validate the inverted-U shaped relationship between competition and innovation for the firms in medium-high- and high-tech manufacturing sectors whereas we do not observe this impact for the firms operating in medium-low- and low-tech manufacturing sectors nor in services sectors. We also find differences in innovation behaviour of firms headquartered in the EU, US, Japan and China. While the inverted-U shaped relationship is highly pronounced for the Chinese firms, we find the U shaped impact of competition on the innovation of the EU and Japanese firms.The second chapter brings together firm-level R&D spending information with patent information, and aims at investigating the impact of different types of patented inventions on firm output growth performance controlling for R&D spending and other firm financials. The firm sample is sourced from the EU 2014 Industrial R&D Scoreboard that brings together the leading private sector R&D investors of the world. The analysis covers the years from 2005 to 2010. I consider forward-looking patent value indicators of breakthrough and general innovation using 7-year citation window, and backward-looking patent value indicators of originality and radicalness in innovation activities. Firm performance is estimated through a Cobb-Douglas production function. I allow for non-linearity in the relationship between innovation strategy and firm performance, and investigate sectoral heterogeneity looking at the impact in health industries and ICT producers. Models are estimated using two-stage least squares and generalised method of moments to control for potential endogeneity of innovation indicators. The findings confirm certain non-linearities and sectoral heterogeneities in the relationships between the different types of innovation and firm performance. ICT producers are growing with breakthrough innovations, generality and novelty in innovation process supporting the general-purpose technology feature of ICT. I, however, do not find a positive impact of technological breakthroughs nor a specific trend of generality and novelty in innovation process on productivity of pharmaceutical and biotechnology firms in the sample.The third chapter is co-authored by Christophe Colassin (ULB) and Michele Cincera (ULB) and aims at analysing the determinants of brain drain in Europe where there exists unbalances and polarisation between the States in terms of attractiveness for researchers despite the common policies and practices put in place by the European Union. The information about the mobility outflows are sourced from Centre for Science and Technology Studies and concern the year 2019. In order to analyse the macroeconomic determinants of mobility of researchers, the chapter brings together information from various data sources that attribute country-level values to the potential determinants of mobility outflows. We use a gravity model framework to detect quantitatively the pull and push factors of researchers' mobility including the 28 EU Member states in the time of analysis, and 3 additional Schengen countries, Norway, Iceland and Switzerland. In addition to the cultural and geographic proximity, we find that a country’s researcher base, entrepreneurial opportunities, knowledge intensity, public R&D spending and international collaborations increase the mobility of researchers within Europe whereas non-academic placements of researchers and the perception of virtual mobility as an alternative decrease the mobility. Researchers from countries with attractive research systems, more innovative private sector and more female researchers are found to be more mobile, whereas, the ones with higher GDP growth rates are less. We find that satisfaction with the recruitment process and the salary levels are decreasing factors for the mobility outflows. Finally, while fixed-term contracts in academia are found to be a factor that decreases the attractiveness; satisfaction with recruitment process, existence of the top R&D spending enterprises in the economy, and the freedom of academic exchange and dissemination are the factors that increases the attractiveness of a country for mobility inflows. |
| Keywords: | Competition; Innovation; R&D; Productivity; Brain Drain |
| Date: | 2021–09–17 |
| URL: | http://d.repec.org/n?u=RePEc:ulb:ulbeco:2013/331968&r= |
| By: | Janet Gornick; Eva Sierminska |
| Abstract: | Wealth is an increasingly important dimension of economic well-being and is attracting rising attention in discussions of social inequality. In this paper, we compare – within and across countries – wealth outcomes, and link those to both employment-related factors and policy solutions that have the potential to improve wealth creation and retirement security for women. By constructing country-specific portraits of wealth outcomes and “retirement preparedness,” we reveal extensive cross-national variation in multiple facets of wealth. Our regression analysis finds a statistically significant and positive effect of work experience on wealth, with that effect, in general, increasing over time. The effect of work experience for single women is greater than for single men, suggesting that, among men, other, stronger forces are at work in creating wealth. The retirement preparedness outcomes indicate that single women in all three countries are in a precarious position at retirement, with much lower expected annual wealth levels than single men. The second preparedness indicator, which links expected annual wealth to income, demonstrates that men have the potential to cover larger shares of their income at retirement – and thus are more able, than their female counterparts, to maintain standards of living achieved earlier in life. Our policy discussion indicates that employment remains a viable option for ultimately bolstering women’s wealth accumulation. Many scholars, gender equality advocates, and policymakers have argued for raising women’s employment rates – for a multitude of reasons – but few, if any, have made the case for strengthening women’s employment in order to ultimately bolster women’s wealth building. We hope to help reduce the gap in the literature on policy supports for women’s employment and re-open the discussion on how women can create more wealth. |
| Date: | 2021–07 |
| URL: | http://d.repec.org/n?u=RePEc:lis:lwswps:36&r= |
| By: | Dirk Schoenmaker |
| Abstract: | Companies are under pressure to change their business models and become more sustainable. Corporate governance codes across Europe have introduced the term ‘long-term value creation’ to capture companies’ social responsibility. However, the concept of long-term value creation lacks tools that would enable its application. Companies still steer their investments based on outdated valuation methods, which are entirely based on financial value. The concept of integrated value would give substance to... |
| Date: | 2021–09 |
| URL: | http://d.repec.org/n?u=RePEc:bre:polcon:44891&r= |