|
on Central and Western Asia |
| By: | Crafts, Nicholas (CAGE, University of Warwick and University of Sussex) |
| Abstract: | This paper reviews the claim that economic policymakers in the post-Covid UK should learn the lessons of the 1940s. Post-1945 policies relating to delivering full employment, levelling up, upgrading social security, dealing with the public debt legacy, and addressing the productivity puzzle are considered. The paper finds many reasons to criticize 1940s’ policies. Although, superficially, outcomes appear to have been good, a closer look reveals significant failings notably concerning design of the welfare state and supply-side policy for growth. The main lesson from the 1940s is not to repeat the policy errors of those days. |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:wrk:warwec:1370&r= |
| By: | George Alessandria; Carter Mix |
| Abstract: | We evaluate the aggregate effects of changes in trade barriers when these changes can be implemented slowly over time and trade responds gradually to changes in trade barriers because firm-level trade costs make exporting a dynamic decision. Our model shows how expectations of changes in trade barriers affect the economy. We find that while decreases in trade barriers increase economic activity, expectations of lower future trade barriers temporarily decrease investment, hours worked, and output. Further- more, canceling an expected decline in future trade barriers raises investment and output in the short run but substantially lowers medium-run growth. These effects are larger when the expected reform is bigger. In the data, we find that countries with more trade growth after the General Agreement on Tariffs and Trade (GATT) rounds decreased investment and hours worked in the years leading to the tariff cuts, as predicted by our model. |
| Keywords: | Trade Policy; Business Cycles; Sunk Costs; Gains from Trade |
| JEL: | E31 F12 |
| Date: | 2021–09–24 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedgif:1330&r= |
| By: | Kohl, Miriam; Richter, Philipp M. |
| 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:zbw:tudcep:0521&r= |
| By: | Ogbonna, Ahamuefula; Olubusoye, Olusanya E |
| Abstract: | Hinging on the recently established relevance of tail thickness information, we examine the predictability of fifteen major stocks in the Asia-Pacific region using conditional autoregressive value at risk (CAViaR) model estimates of tail risks. We used a Westerlund and Narayan–type distributed lag model to examine the nexus between returns and tail risk under controlled global and US stocks spillover effects. Country-specific tail risks induce a near-term rise (completely disappears) in returns on “bad” (“good”) days. Our results are robust. |
| Keywords: | Conditional Autoregressive Value at Risk; Predictability; Returns; Tail Thickness |
| JEL: | C10 C53 G17 |
| Date: | 2021–04–09 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:109922&r= |
| By: | Jeremy B. Rudd |
| Abstract: | Economists and economic policymakers believe that households' and firms' expectations of future inflation are a key determinant of actual inflation. A review of the relevant theoretical and empirical literature suggests that this belief rests on extremely shaky foundations, and a case is made that adhering to it uncritically could easily lead to serious policy errors. |
| Keywords: | Phillips curve; Expectations; Inflation; Wage determination; Wage-price spiral |
| JEL: | E31 E52 |
| Date: | 2021–09–24 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedgfe:2021-62&r= |
| By: | Georgia Bush; Carlos Iván Cañón Salazar; Daniel Gray |
| Abstract: | We exploit individual security holdings data for global mutual funds to distinguish between two reasons why a fund's holdings of emerging market economy (EME) bonds might change: (i) the amount invested in the fund changes and (ii) the fund manager changes portfolio allocations. We find that funds' responsiveness to global macroeconomic conditions, ''push factors'', is explained by investor flow decisions. Conversely, funds' responsiveness to local macroeconomic conditions, ''pull factors'', is explained by manager reallocation decisions. We also identify other institutional factors which impact reallocation decisions: their leverage, their benchmark, and risk appetite (funds reallocate towards safer EMEs when global risk increases). |
| JEL: | F32 G11 G15 G23 |
| Date: | 2021–09 |
| URL: | http://d.repec.org/n?u=RePEc:bdm:wpaper:2021-13&r= |
| By: | Barahona, Ricardo (Tilburg University, School of Economics and Management) |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:tiu:tiutis:7552e242-7419-42a9-971f-10052d58bec2&r= |
| By: | ANDREI, Dalina |
| Abstract: | This below paper focuses on the economic entity concept. Difficult to find that (part of) economic literature not dealing with economic entities and afferent issues. But there won’t be the definition the paper’s starting point – this, assumable as followed by a whole description then inclining to a rather didactic text attitude --, but, on the contrary, there will be what is supposed to come out previously of all definitions. Or, this will be the history of economic thinking and here that part of history ‚giving birth’ to micro- and macroeconomic. And this will more precisely be about the JM Keynes’ capital paper of 1936’ focus that is what was called the ‚Macro-Model’. |
| Keywords: | economic entity, firms, banks & banking system, State & Government, flows and stocks |
| JEL: | B12 C0 C00 D0 D00 |
| Date: | 2019–11–10 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:109884&r= |
| By: | Koray Aktas; Valeria Gattai |
| Abstract: | In recent years, India has emerged as a leading foreign direct investment (FDI) player, featuring prominently as both an origin and a destination of FDI. This study takes a firm-level perspective to empirically address the relationship between inward FDI, outward FDI, and firm-level performance in India. Using the Orbis database, our estimates reveal that Indian firms that have at least one foreign shareholder and/or one foreign subsidiary outperform those that do not. Controlling for endogeneity through propensity score matching and difference-in-difference techniques, we show that the deeper the FDI involvement, the larger the performance differentials. Moreover, compared with investing abroad, receiving foreign capital can contribute more toward enhancing the performance of Indian firms. |
| Keywords: | India, Foreign Direct Investment (FDI), inward, outward, firm-level performance |
| JEL: | F23 L25 O53 |
| Date: | 2021–09 |
| URL: | http://d.repec.org/n?u=RePEc:mib:wpaper:481&r= |
| By: | Shakeel, Sabahat; Karim, Emadul |
| Abstract: | The main objective of this research study is to analyze the factors that affect the consumer buying behavior for organic and non-organic cosmetics. Therefore, this study is further divided into two sub research. One research studies the factors that affect consumer buying behavior for organic cosmetics whereas the other research assesses factors that impact consumer buying behavior for non-organic cosmetics. Most factors that affect both organic and non-organic cosmetics are the same, but some are different considering the variation between the two types of cosmetics under consideration. Consumer buying behavior is a topic of significant importance to marketers and to businesses as well. It is crucial to understand how consumer buying behavior functions. This research study was conducted through the collection of both primary and secondary data. Primary data was gathered through questionnaires whereas the secondary data was gathered mainly for the literature review through various sources which were mostly available on the web such as online published articles, books, and online journals. The primary data collected was fed into the SPSS software to run various tests. The hypotheses stated at the beginning of the research were tested. The results showed that not all hypotheses were accepted in both the studies. Recommendations have been suggested for each independent variable at the end of the study for consideration. |
| Keywords: | Consumer Buying Behavior; Organic Cosmetics; Non-Organic Cosmetics; Brand Name; Health Consciousness; Environmental Consciousness; Attractiveness Consciousness; Store Environment; Product Price Product Quality and Product Promotion. |
| JEL: | M31 Q02 |
| Date: | 2019–12–02 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:109973&r= |
| By: | Ali Al-Ameer; Khaled Alshehri |
| Abstract: | We propose a convex formulation for a trading system with the Conditional Value-at-Risk as a risk-adjusted performance measure under the notion of Direct Reinforcement Learning. Due to convexity, the proposed approach can uncover a lucrative trading policy in a "pure" online manner where it can interactively learn and update the policy without multi-epoch training and validation. We assess our proposed algorithm on a real financial market where it trades one of the largest US trust funds, SPDR, for three years. Numerical experiments demonstrate the algorithm's robustness in detecting central market-regime switching. Moreover, the results show the algorithm's effectiveness in extracting profitable policy while meeting an investor's risk preference under a conservative frictional market with a transaction cost of 0.15% per trade. |
| Date: | 2021–09 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2109.14438&r= |
| By: | Bali, Turan G.; Beckmeyer, Heiner; Moerke, Mathis; Weigert, Florian |
| Abstract: | Drawing upon more than 12 million observations over the period from 1996 to 2020, we find that allowing for nonlinearities significantly increases the out-of-sample performance of option and stock characteristics in predicting future option returns. Besides statistical significance, the nonlinear machine learning models generate economically sizeable profits in the long-short portfolios of equity options even after accounting for transaction costs. Although option-based characteristics are the most important standalone predictors, stock-based measures offer substantial incremental predictive power when considered alongside option-based characteristics. Finally, we provide compelling evidence that option return predictability is driven by informational frictions, costly arbitrage, and option mispricing. |
| Keywords: | Machine learning,big data,option return predictability |
| JEL: | G10 G12 G13 G14 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:cfrwps:2108&r= |
| By: | Nguyen, Minh-Hoang |
| Abstract: | Implementing new economic plans, fiscal and monetary policies to help the economy recover in the new “normal stage” is important, but limiting the rise of inflation must not be neglected. |
| Date: | 2021–09–18 |
| URL: | http://d.repec.org/n?u=RePEc:osf:osfxxx:9djqh&r= |
| By: | Andrew Yang; Bruce Changlong Xu; Ivan Villa-Renteria |
| Abstract: | Matching markets are of particular interest in computer science and economics literature as they are often used to model real-world phenomena where we aim to equitably distribute a limited amount of resources to multiple agents and determine these distributions efficiently. Although it has been shown that finding market clearing prices for Fisher markets with indivisible goods is NP-hard, there exist polynomial-time algorithms able to compute these prices and allocations when the goods are divisible and the utility functions are linear. We provide a promising research direction toward the development of a market that simulates buyers' preferences that vary according to the bundles of goods allocated to other buyers. Our research aims to elucidate unique ways in which the theory of matching markets can be extended to account for more complex and often counterintuitive microeconomic phenomena. |
| Date: | 2021–09 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2109.14850&r= |
| By: | Gharad T. Bryan; Dean Karlan; Adam Osman |
| Abstract: | We experimentally study the impact of substantially larger enterprise loans, in collaboration with an Egyptian lender. Larger loans generate small average impacts, but machine learning using psychometric data reveals dramatic heterogeneity. Top-performers (i.e., those with the highest predicted treatment effects) substantially increase profits, whereas profits for poor-performers drop. The magnitude of this difference implies that an individual lender’s credit allocation choices matter for aggregate income. Evidence on two fronts suggests large loans would be misallocated: top-performers are predicted by loan officers to have higher default rates; and, top-performers grow less than others when given small loans, implying that allocating larger loans based on prior performance is not efficient. Our results have important implications for credit expansion policy and our understanding of entrepreneurial talent: on the former, the use of psychometric data to identify top-performers suggests a pathway towards better allocation that revolves around entrepreneurial type more than firm type; on the latter, the reversal of fortune for poor-performers, who do well with small loans but not large, indicates a type of entrepreneur that we call a “go-getter” who performs well when constrained but poorly when not. |
| JEL: | D22 D24 L26 M21 O12 O16 |
| Date: | 2021–09 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:29311&r= |
| By: | David Atkin; Dave Donaldson |
| Abstract: | This chapter (to appear in the forthcoming Handbook of International Economics, Vol. 5) develops a framework with which to interpret and survey answers to the question: how does increased openness affect aggregate welfare in a typical developing country? We decompose answers into four mechanisms: (i) an effect akin to technological progress that is purely mechanical; (ii) an effect on factoral terms of trade; (iii) a distortion revenue effect that exacerbates or mitigates the consequences of domestic distortions; and (iv) an effect of trade on the magnitude of those distortions themselves. Our focus lies in the last two mechanisms as these are especially important for the study of low-income settings where domestic distortions are thought to be rife. Throughout, we provide both a review of existing work on these topics and quantitative calculations that aim to gauge the magnitudes involved in a global model that is calibrated to match firm- and industry-level data on trade flows, production techniques, and a host of distortions (tariffs, other taxes, markups, bribes, theft, credit constraints, contracting failures, labor regulations, and public utility provision) that have featured in the literature. |
| JEL: | F0 O0 |
| Date: | 2021–09 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:29314&r= |
| By: | Fiammetta Menchetti; Fabrizio Cipollini; Fabrizia Mealli |
| Abstract: | In December 2017, two leading derivative exchanges, CBOE and CME, introduced the first regulated Bitcoin futures. Our aim is estimating their causal impact on Bitcoin volatility and trading volume. Employing a new causal approach, C-ARIMA, we find that the CME future triggered an increase in both outcomes. There is also evidence of a positive volume-volatility relationship and that the effect on volatility was partially due to the higher trading volumes induced by the launch of the contract. After controlling for the effect on volumes, we find that the CME instrument caused Bitcoin volatility to increase by more than double. |
| Date: | 2021–09 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2109.15052&r= |
| By: | José Soares da Fonseca (University of Coimbra, Centre for Business and Economics Research, CeBER and Faculty of Economics) |
| Abstract: | This paper compares the performance of efficient portfolios based on the Markowitz (1952) mean-variance model with portfolios with high skewness. The assumption that the return of assets follows the normal distribution is the basis of the mean-variance model. However, the return of financial assets often deviates from the normal distribution, namely due to positive skewness, which may offer some advantages to investors. Previous literature reports several obstacles that make it difficult to include skewness in portfolio optimization, and that there is a trade-off between return and skewness maximization. Mean-variance optimization versus the search for positive skewness is addressed in this paper by estimating comparative performance ratios between mean-variance efficient portfolios and portfolios with high skewness. The paper also estimates probit models which highlight the probability of obtaining higher return from portfolios with high skewness than from mean-variance optimized portfolios. The probability given by our estimations is, in general, relatively low, which suggests that mean-variance optimization must be preferred to the search for positive skewness as method of portfolio choice. |
| Keywords: | Efficient frontier; Mean-variance optimization; Portfolio selection; Skewness. |
| JEL: | G10 |
| Date: | 2021–05 |
| URL: | http://d.repec.org/n?u=RePEc:gmf:papers:2021-05&r= |
| By: | Krings, Katharina; Schwab, Jakob |
| Abstract: | While blockchain technology (BT) has gained a great deal of publicity for its use in cryptocurrencies, another area of BT application has emerged away from the public eye, namely supply chains. Due to the increasing fragmentation and globalisation of supply chains in recent years, many products have to pass through countless production steps worldwide (from raw material extraction to the point of sale). Ensuring the quality and sustainability of production in preceding steps is a major challenge for many firms and thus, ultimately, also for the consumer. BT offers potential for achieving significant progress on this front. Put simply, the blockchain makes it possible to verify data decentralised within a network, store it in a tamper-proof and traceable format and make it accessible to all members of a network. The potential benefits of BT lie firstly with the consumer, who is able to trace the origin of products, which makes sustainable purchases easier. Secondly, BT enables producers to automate parts of their supply chains and to verify cost effectively the quality and origin of their products. Thirdly, there are hopes that BT could make supply chains more inclusive for small and medium-sized suppliers, especially in developing countries. BT also offers a means of more easily creating confidence in intermediate goods supplied, thereby dismantling barriers to entry. Taken together, BT could thus help to make consumption and production more environmentally friendly, socially equitable and inclusive, and thereby foster sustainable development. So far, pilot projects have received investment primarily from very large companies. Both the firms and their consumers can now audit a number of products in real time for manufacturing method and origin. While BT can securely store and chain together the inputted data, it cannot yet guarantee the accuracy of that data. This remaining challenge regarding the digital-analogue link could be addressed through links with other technologies, such as the Internet of Things (IoT). However, independent analogue audits are still the only means in most cases of checking compliance with labour, environmental, animal-welfare and other relevant standards. Consequently, the use of BT offers substantial potential benefits for sectors in which the digital-analogue link can be effectively bridged, such as the food and high-quality commodities sectors. Small-scale suppliers in developing countries also frequently lack the digital education, equipment and infrastructure needed in order to deploy BT. This is where national and international development policy is needed to leverage the benefits of BT solutions for inclusive production. General technological standards can also help to counteract the monopolisation of technological developments by multinational concerns. In this way, policy-makers could help to harmonise the interests of consumers and producers with those of small and medium-sized enterprises (SMEs) in the supply chain. |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:diebps:22021&r= |
| By: | Kyle Glenn (Department of Economics, Adams State University) |
| Abstract: | In this paper we explore how economists have addressed consumer behavior. We begin by analyzing the fundamental underpinning of neoclassical consumer behavior, utility maximization. We show how the contributions of behavioral economics, which prides itself on finding moments of nonconformity within the theory of consumer behavior, has put into question the validity of mainstream consumer choice modeling Accepting that the orthodox theory provides a poor model, the question remains: What alternative theories of consumer behavior exist? We discuss two alternative frameworks for consumer behavior: the endogenous preferences literature and the post-Keynesian notion of consumer choice. While both frameworks have provided valuable insights into consumer behavior, we argue that neither theory fully captures the complexities of consumer behavior. As such, we turn to literature in Business and Psychology surrounding how consumers actually behave. We find three common principles in the literature: consumer cannot process all information, preferences are malleable, and preferences are categorized eliciting varied behaviors dependent upon the category. We posit a basic neural network model that captures the three principles and illuminates some of the complexities of consumer behavior. |
| Keywords: | Consumer behavior, network models |
| JEL: | B50 D11 D90 |
| Date: | 2021–09 |
| URL: | http://d.repec.org/n?u=RePEc:new:wpaper:2114&r= |
| By: | Yang, Yingrui |
| Abstract: | There are two major rationality theories in social sciences, such as in economics and psychology, namely, economic rationality and bounded rationality. In terms of theoretical physics, these rationality theories are about accelerated states. This paper proposes a new theory, called ordinary rationality, which refers to ground states. Ordinary rationality theory is a principled theory that includes eight principles. Ordinary rationality also shares three meta-properties with Higgs fields, and its function is modeled by the Higgs mechanism in the standard model of particle physics. The present paper also discusses the relation between the notion of mass in physics and the notion of mass in social sciences: namely, it addresses the issue about P-mass vs. S-mass. |
| Keywords: | ordinary rationality, Higgs mechanism, mass, degenerated states, Goldstone mode |
| JEL: | A10 A12 C6 C60 |
| Date: | 2021–09–22 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:109912&r= |
| By: | Emanuele Casamassima; Lech A. Grzelak; Frank A. Mulder; Cornelis W. Oosterlee |
| Abstract: | Understanding mortgage prepayment is crucial for any financial institution providing mortgages, and it is important for hedging the risk resulting from such unexpected cash flows. Here, in the setting of a Dutch mortgage provider, we propose to include non-linear financial instruments in the hedge portfolio when dealing with mortgages with the option to prepay part of the notional early. Based on the assumption that there is a correlation between prepayment and the interest rates in the market, a model is proposed which is based on a specific refinancing incentive. The linear and non-linear risks are addressed by a set of tradeable instruments in a static hedge strategy. We will show that a stochastic model for the notional of a mortgage unveils non-linear risk embedded in a prepayment option. Based on a calibration of the refinancing incentive on a data set of more than thirty million observations, a functional form of the prepayments is defined, which accurately reflects the borrowers' behaviour. We compare this functional form with a fully rational model, where the option to prepay is assumed to be exercised rationally. |
| Date: | 2021–09 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2109.14977&r= |
| By: | Jacquelyn Humphrey; Shimon Kogan; Jacob Sagi; Laura Starks |
| Abstract: | We design an experiment to understand how social preferences affect investment decisions through stock allocations and probability assessments. The major preference channel is asymmetric in social outcomes – although negative and positive responsible investment (RI) externalities have the same magnitudes, negative externalities have greater impact on investment choices. The effect is persistent, but heterogenous. We also find asymmetries in belief formation and learning constitute a secondary channel. Overall, our results are consistent with important stylized empirical facts and the predictions of recent RI theories that social preferences lead to different investment choices, but our analyses also suggest important future modeling directions. |
| JEL: | C91 G11 G41 |
| Date: | 2021–09 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:29288&r= |
| By: | Manda, Vijaya Kittu; Sana, Alekhya |
| Abstract: | Stock market traders can be successful by picking the right financial security/instrument to invest/trade and then prepare and executing the trading plan. However, the success rate from doing so is only partly. The other part of success, which, unfortunately, is mostly ignored, comes from emotional and behavioral balance and control. Research already proved the connections between emotions and the mental health of individuals. Objectives: This paper explores the mental health aspects of a typical Indian stock market trader. Design: A self-constructed questionnaire is administered on a sample of 250 where 140 respondents were taken for the study on four dimensions-general trading stress profile, general mental and health profile, general lifestyle profile, and general financial status profile. Method: Data thus collected is statistically measured and tested using Chi-square, Pearson correlation, and simple linear regression. The research finds that age and marital status influence the stock market trader experience along with the highest, moderate, and lowest areas where the trader is affected on the above-mentioned dimensions. Findings from this research can help traders in bettering their mental health and thereby improve their trading outcomes. |
| Keywords: | stock market crash, trader suicide, trader mental health well being |
| JEL: | G10 I19 I31 |
| Date: | 2021–09–27 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:109941&r= |
| By: | Koichi Miyamoto; Kenji Kubo |
| Abstract: | Following the recent great advance of quantum computing technology, there are growing interests in its applications to industries, including finance. In this paper, we focus on derivative pricing based on solving the Black-Scholes partial differential equation by finite difference method (FDM), which is a suitable approach for some types of derivatives but suffers from the {\it curse of dimensionality}, that is, exponential growth of complexity in the case of multiple underlying assets. We propose a quantum algorithm for FDM-based pricing of multi-asset derivative with exponential speedup with respect to dimensionality compared with classical algorithms. The proposed algorithm utilizes the quantum algorithm for solving differential equations, which is based on quantum linear system algorithms. Addressing the specific issue in derivative pricing, that is, extracting the derivative price for the present underlying asset prices from the output state of the quantum algorithm, we present the whole of the calculation process and estimate its complexity. We believe that the proposed method opens the new possibility of accurate and high-speed derivative pricing by quantum computers. |
| Date: | 2021–09 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2109.12896&r= |
| By: | Alessandro Ferracci; Giulio Cimini |
| Abstract: | We study the difference between the level of systemic risk that is empirically measured on an interbank network and the risk that can be deduced from the balance sheets composition of the participating banks. Using generalised DebtRank dynamics, we measure observed systemic risk on e-MID network data (augmented by BankFocus information) and compare it with the expected systemic of a null model network, obtained through an appropriate maximum-entropy approach constraining relevant balance sheet variables. We show that the aggregate levels of observed and expected systemic risks are usually compatible but differ significantly during turbulent times (in our case, after the default of Lehman Brothers and the VLTRO implementation by the ECB). At the individual level instead, banks are typically more or less risky than what their balance sheet prescribes due to their position in the network. Our results confirm on one hand that balance sheet information used within a proper maximum-entropy network models provides good systemic risk estimates, and on the other hand the importance of knowing the empirical details of the network for conducting precise stress tests of individual banks, especially after systemic events. |
| Date: | 2021–09 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2109.14360&r= |
| By: | Shuo Sun; Rundong Wang; Bo An |
| Abstract: | Quantitative trading (QT), which refers to the usage of mathematical models and data-driven techniques in analyzing the financial market, has been a popular topic in both academia and financial industry since 1970s. In the last decade, reinforcement learning (RL) has garnered significant interest in many domains such as robotics and video games, owing to its outstanding ability on solving complex sequential decision making problems. RL's impact is pervasive, recently demonstrating its ability to conquer many challenging QT tasks. It is a flourishing research direction to explore RL techniques' potential on QT tasks. This paper aims at providing a comprehensive survey of research efforts on RL-based methods for QT tasks. More concretely, we devise a taxonomy of RL-based QT models, along with a comprehensive summary of the state of the art. Finally, we discuss current challenges and propose future research directions in this exciting field. |
| Date: | 2021–09 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2109.13851&r= |
| By: | Archawa Paweenawat (Bank of Thailand); Narapong Srivisal (Chulalongkorn University) |
| Abstract: | This paper studies impacts of One-Million-Baht Village Fund program on entrepreneurial activities of households in northern Thailand. In addition to being one of the largest-scaled microfinance programs to date, the implementation of the Village Fund program provides us with an exogenous variation in the availability of microcredit per household that can be used to form an instrumental variable. We apply our unique dataset, containing the instrument and a precise measure of the extent to which household businesses are financially constrained, to estimate Probit models that are subject to the problem of endogenous borrowing decisions. We find evidence for the positive impacts of the Village Fund program on relieving financial constraints faced by household businesses, but the impacts on business startup rates are not significant. Our findings offer policy implications on improving effectiveness of microfinance programs in promoting household businesses. |
| Keywords: | Entrepreneurship, Financial Constraints, Microfinance, Village Funds |
| JEL: | G21 G51 O16 |
| Date: | 2021–09 |
| URL: | http://d.repec.org/n?u=RePEc:pui:dpaper:163&r= |
| By: | International Monetary Fund |
| Abstract: | A recovery from the Covid-19 pandemic now underway in Georgia has benefited from a recent pickup in external demand and substantial fiscal support. Significant exchange rate depreciation, global commodity price increases and supply constraints have contributed to inflationary pressures and provided impetus for the authorities to start tightening monetary policy during 2021. Credit growth slowed during the pandemic but has since picked up again. Household and firm indebtedness is relatively high reflecting rapid credit growth in recent years. Banks face elevated credit risks as they carry high exposure to unhedged borrowers in foreign currency, some of whom are facing debt-servicing difficulties due to the pandemic. |
| Date: | 2021–09–21 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:2021/216&r= |
| By: | Verena Ehrler (DLR - Deutsches Zentrum für Luft- und Raumfahrt [Berlin]); Pierre Camilleri |
| Abstract: | So far, electric vehicles have not become a wide-spread alternative for the long-time dominating diesel vehicles in urban logistics. If this is to be changed, it is important to identify logistics applications for electric vehicles which are not geographically limited, to understand what improves user acceptance and how to measure the attractiveness of electric vehicles for users. The aim of this research is to contribute to answering these questions, based on evidence from France and Germany. For this purpose, findings from empirical research carried out in the form of pilot studies and surveys in Germany is analysed as the basis for the identification of user acceptance. By means of a basic model data from research in France is analysed, in order to identify, in how far incentives, technical and market developments contribute to an improved attractiveness and hence spread of electromobility for urban logistics. Findings from the German pilots and the French data are combined and compared. In a comparative analysis it is discussed whether the thesis can be confirmed, that electromobility is or will be a valid alternative for urban logistics in general. |
| Abstract: | Jusqu'à présent, les véhicules électriques ne sont pas devenus une alternative largement répandue aux véhicules diesel qui dominent depuis longtemps la logistique urbaine. Pour faciliter un changement rapide vers les véhicules électriques, il est important d'identifier les applications logistiques qui ne sont pas limitées géographiquement, de comprendre les aspects qui améliorent l'acceptation, et de mesurer les avantages des véhicules électriques pour leurs utilisateurs. L'objectif de cette recherche est de contribuer à des réponses à ces questions, en se basant sur des projets réalisés en France et en Allemagne. Dans la recherche présentée, les résultats des études pilotes et d'enquêtes en Allemagne sont analysés comme base pour l'identification de l'acceptation par les utilisateurs. Au moyen d'un modèle de base, des données issues d'une enquête en France sont analysées, afin d'identifier dans quelle mesure les incitations, les développements techniques et commerciaux contribuent à améliorer l'attractivité et donc la diffusion de l'électromobilité pour la logistique urbaine. Les résultats des projets pilotes allemands et des données françaises sont combinés et comparés. Dans une analyse comparative, il est discuté si la thèse peut être confirmée, que l'électromobilité est ou sera une alternative valable pour la logistique urbaine en général. |
| Keywords: | urban logistics,electric vehicles,freight transport,comparison France-Germany,logistique urbaine,véhicules électriques,transport de marchandises,comparaison franco-allemande |
| Date: | 2021–09–22 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-03305264&r= |
| By: | Margit Molnar; Ting Yang; Yusha Li |
| Abstract: | Overseas direct investment by Chinese firms increased eight fold over the past decade, making the country as an important investor in stock terms as Japan. Investing in leasing and business services appears to make up nearly half of China’s ODI stock according to official sources, though it is over-estimated owing to the fact that all investment through third parties and vehicles appears under this sector, not under the one where the investment is actually made. Correcting for this caveat by using firm-level M&A and greenfield investment data indicates that in fact China’s ODI mostly goes to resource-based manufacturing. Also, China is just as an important manufacturing investor as is Japan. Estimation results show that overseas direct investment affects domestic employment negatively in the majority of sectors, indicating substitution instead of a complementary relationship. Furthermore, ODI reduces the speed of labour market adjustment to its long-run equilibrium and increases the domestic price elasticity of demand for labour. There is considerable heterogeneity across sectors, but the impact of ODI on domestic fixed asset investment tends to be negative in most sectors. |
| Keywords: | fixed asset investment, greenfield investment, labour market adjustment, M&A, ODI, overseas direct investment |
| JEL: | F21 F23 F62 F63 F66 |
| Date: | 2021–10–05 |
| URL: | http://d.repec.org/n?u=RePEc:oec:ecoaaa:1685-en&r= |
| By: | Yildirim, Yusuf; Sanyal, Anirban |
| Abstract: | In this paper, we aim to analyze empirically how economic activity reacts to the financial stress shocks depending on the stress regime in Turkey. Using quarterly data, the effect of financial stress is examined using two threshold vector autoregression model (TVAR) for consumption, investment and real GDP by using financial stress index, credit growth and inflation rate as endogenous variables. The paper proposes local projection approach for estimating threshold VAR model as robustness check to overcome the data limitations. The main result of this paper is that the effect of financial stress on consumption, investment, and real GDP, such as magnitude and significance, vary greatly depending on the financial stress regime. The paper finds that financial stress is found to affect economic growth when the stress level is already high. This corroborates with the effectiveness of credit channel in the financial friction mechanism. On the contrary, the financial stress does not affect real economic activities to significantly during low stress regime. The effect of financial stress impairs consumption and investment growth during high stress regime which leads to slow down of economic activities. |
| Keywords: | Financial stress index, Threshold VAR model, Markov Switching Model, Local Projection, Forecast Error Variance Decomposition |
| JEL: | C01 C32 G01 |
| Date: | 2021–09–21 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:109845&r= |
| By: | ANDREI, Liviu; ANDREI, Dalina |
| Abstract: | Face to a significant list of theories on the foreign direct investments origins we previously worked on a simple world level FDI=DIA (direct investments abroad) equality on both short and (especially) long terms supporting several approaches: first, the “world top-16”, then the “static-dynamic” difference for world FDI&DIA, an extended analysis on the world area divided in a number of 20 multi-country regions, the Eurasian territory case (taken apart) and specific international capital sections, as a specific structure of this world capital market. This below paper will be for one more issue : international capital sharing into cooperation capital and long-way flows. These two are new concepts on international directly invested capital, in the larger context of such concepts already introduced in our previous papers on this topic. In a methodological view , cooperation capital and long-way flows, will result as composing the total/global amount of international directly invested capital. In this respect there will be below an analysis if exist or not, more than cooperation capital and long-way flows in the total amount of international directly invested capital. |
| Keywords: | international capital, foreign direct investments (FDI) , direct investments abroad (DIA), flows, stocks, stocks balance |
| JEL: | F00 F20 F21 |
| Date: | 2020–11–10 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:109883&r= |
| By: | Alex Armand; Alexander Coutts; Pedro C. Vicente; Ines Vilela |
| Abstract: | Corruption is often harmful for economic development, yet it is difficult to measure due to its illicit nature. We propose a novel corruption game to characterize the interaction between actual political leaders and citizens, and implement it in Northern Mozambique. Contrary to the game-theoretic prediction, both leaders and citizens engage in corruption. Importantly, corruption in the game is correlated with real-world corruption by leaders: citizens send bribes to leaders whom we observe appropriating community money, and these leaders are likely to reciprocate the bribes. In corrupt behavior, we identify an important trust dimension captured by a standard trust game. |
| Keywords: | Corruption, game, trust, lab-in-the-field, citizen, political leader, incentives, behavior, elite capture |
| JEL: | D10 D70 D72 D73 C90 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:unl:novafr:wp2112&r= |
| By: | Kotono Tanigawa (Kumamoto Gakuen University); Tomoya Sakagami (Kumamoto Gakuen University) |
| Abstract: | In this paper, we present a pension policy that supplements the pay-as-you-go pension system with payments by old generations with a high assets income. This supplement is intended to reduce intergenerational inequity. To analyze the effect of this pension policy on both capital stock in the economy and the utilities of the rich and the poor, we build an Over-Lapping Generations model with different incomes when young. This model finds that the stable steady-state capital stock level increases as the old rich generation contributes to the pension system. We also find by numerical simulations that there is a Pareto efficient premium level between high-income and low-income people. |
| Keywords: | pay-as-you-go pension system, intergenerational inequity, overlapping generations model |
| Date: | 2021–09 |
| URL: | http://d.repec.org/n?u=RePEc:kyo:wpaper:1067&r= |
| By: | Laurence Francis Lacey |
| Abstract: | Monetary inflation is a sustained increase in the money supply than can result in price inflation, which is a rise in the general level of prices of goods and services. The objectives of this paper were to develop economic models to (1) predict the annual rate of growth in the US consumer price index (CPI), based on the annual growth in the US broad money supply (BMS), the annual growth in US real GDP, and the annual growth in US savings, over the time period 2001 to 2019; (2) investigate the means by which monetary and price inflation can develop into monetary and price hyperinflation. The hypothesis that the annual rate of growth in the US CPI is a function of the annual growth in the US BMS minus the annual growth in US real GDP minus the annual growth in US savings, over the time period investigated, has been shown to be the case. However, an exact relationship required the use of a non-zero residual term. A mathematical statistical formulation of a hyperinflationary process has been provided and used to quantify the period of hyperinflation in the Weimar Republic, from July 1922 until the end of November 1923. |
| Date: | 2021–08 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2109.12980&r= |
| By: | ANDREI, Dalina; Andrei, Liviu Catalin |
| Abstract: | This below paper focuses on the economic entity concept. Difficult to find that (part of) economic literature not dealing with economic entities and issues. For the sake of better understanding ever on this our text below will start from the JM Keynes’ capital paper of 1936’ focusing on what was called the ‚Macro-Model’, but as critical analysis of this last. There will be aimed a consistent image of basic types of economic entities. These last will be, besides the firms and households, on the ’trunk’( main part) of the macro-flow, already ‚recognized’ since the ‚old classics’, banks(with thier today ‚system’), the State (which is actually Government and/or the State economic sector detached) and the rest of the world, that is not only the widest economic area, but equally the appropriate expression of what is called the ‚open economy’. |
| Keywords: | economic entity, micro- & macro-economics, firms, banks & banking system, State & Government, rest of the world, flows & stocks |
| JEL: | B12 C0 D0 H0 |
| Date: | 2020–04–17 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:109886&r= |
| By: | Berger, Marius; Gottschalk, Sandra |
| Abstract: | In recent years governments around the world have introduced policies to stimulate investments in early stage entrepreneurial companies, in particular investments by Angel investors. In this paper we study whether introducing subsidies to Angel investors has effects on startups' access to financial and managerial resources provided by Angel investors. Using data for a representative sample of entrepreneurial companies in Germany, we analyze the effect of the introduction of a major subsidy program for Angel investors in Germany. Having data before and after the introduction of the program allows us to use a difference-in-differences framework to examine the effect of the program on eligible companies. Our findings indicate that subsidies for Angel investors both increase the chances to receive financing from Angel investors (+36-67%), as well as the amount of financing received (+70-82%). In terms of managerial resources, we find no effects that are significantly different from zero. This result is in contrast to theoretical predictions suggesting negative effects of investment subsidies on the level of managerial support that companies receive. Exploring the mechanisms behind our results, we find that the policy stimulated entry by inexperienced investors, but also increased syndicate sizes of Angel investors in entrepreneurial companies. |
| Keywords: | Entrepreneurship Policy,Angel Investors,Venture Capital,Syndication |
| JEL: | G28 G24 M13 O38 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:zewdip:21069&r= |
| By: | Weizhi Sun (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Opletalova 26, 110 00, Prague, Czech Republic); Ladislav Kristoufek (Institute of Economic Studies, Faculty of Social Sciences, Charles University & The Czech Academy of Sciences, Institute of Information Theory and Automation, Prague, Czech Republic) |
| Abstract: | Cryptoassets, particularly Bitcoin, have attracted the attention of institutional investors during the latest price rallies of 2020 and 2021. The need for cryptoassets apart from Bitcoin in their portfolios is mostly unexplored in the current literature, and the general perception of diversification benefits within cryptomarkets mostly builds on popular beliefs. The current study is a deep dive into active and passive investment strategies focusing on specifics of cryptoassets, the most important of which is the survival bias in the portfolio dataset construction and its implications. We show that survival bias does in fact drive the results at their very core and that the differences between using the backward-looking subset of assets and actual assets available at the time of portfolio construction are substantial and lead to completely different implications and investment suggestions. It turns out that active portfolio management does not pay off in most instances compared to simply holding Bitcoin. |
| Keywords: | cryptocurrencies, cryptoassets, Bitcoin, diversification, portfolio management, survival bias |
| JEL: | G11 G15 G19 G23 |
| Date: | 2021–09 |
| URL: | http://d.repec.org/n?u=RePEc:fau:wpaper:wp2021_31&r= |
| By: | Peter Reinhard Hansen; Chan Kim; Wade Kimbrough |
| Abstract: | We study recurrent patterns in volatility and volume for major cryptocurrencies, Bitcoin and Ether, using data from two centralized exchanges (Coinbase Pro and Binance) and a decentralized exchange (Uniswap V2). We find systematic patterns in both volatility and volume across day-of-the-week, hour-of-the-day, and within the hour. These patterns have grown stronger over the years and can be related to algorithmic trading and funding times in futures markets. We also document that price formation mainly takes place on the centralized exchanges while price adjustments on the decentralized exchanges can be sluggish. |
| Date: | 2021–09 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2109.12142&r= |
| By: | Bruno Alexandre Ferreira Albuquerque (Bank of England and FEUC) |
| Abstract: | Does corporate debt overhang affect investment over the medium term? To uncover this association, I measure debt overhang with a concept of debt accumulation or debt boom, and combine leverage with liquid assets to capture financial constraints. Using a large US firm-levelpanel over 1985Q1-2019Q1, I find that debt overhang leads financially vulnerable firms to cutpermanently back on investment: a 10 p.p. increase in the three-year change in the leverageratio is associated with lower investment growth of 5 p.p. after five years compared to the mostresilient firms. I also find that vulnerable firms experience weaker intangible capital growth inthe aftermath of debt booms. Finally, I find that general equilibrium effects dominate, stressingthe risk that firm-specific debt booms in a subset of firms may spill over to the rest of theeconomy. |
| Keywords: | IFRS 9, IAS 39, CECL, credit risk, transition matrices,stochastic simulation. |
| JEL: | D22 E22 E32 G32 |
| Date: | 2021–08 |
| URL: | http://d.repec.org/n?u=RePEc:gmf:papers:2021-08&r= |
| By: | Kristin J. Forbes (Massachusetts Institute of Technology (MIT)); Joseph E. Gagnon (Peterson Institute for International Economics); Christopher G. Collins (Morgan Stanley) |
| Abstract: | This paper revises and extends PIIE Working Paper 20-6. It continues to find strong support for a Phillips curve that becomes nonlinear when inflation is "low"—which our baseline model defines as less than 3 percent. The nonlinear curve is steep when output is above potential (slack is negative) but flat when output is below potential (slack is positive) so that further increases in economic slack have little effect on inflation. This finding is consistent with evidence of downward nominal wage and price rigidity. When inflation is high, the Phillips curve is linear and relatively steep. These results are robust to placing the threshold between the high and low inflation regimes at 2, 3, or 4 percent inflation or for a threshold based on country-specific medians of inflation. In this nonlinear model, international factors play a large role in explaining headline inflation (albeit less so for core inflation), a role that has been increasing since the global financial crisis. |
| Keywords: | economic slack, globalization, output gap, price dynamics |
| JEL: | E31 E37 E52 E58 F62 |
| Date: | 2021–09 |
| URL: | http://d.repec.org/n?u=RePEc:iie:wpaper:wp21-15&r= |
| By: | Takanori ADACHI; Michal Fabinger |
| Abstract: | This paper provides a comprehensive analysis of welfare effects of taxation under imperfect competition. Specifically, in relation to tax pass-through, we provide “sufficient statistics” formulas for two welfare measures under a fairly general class of demand, production cost, and market competition. The measures are (i) marginal value of public funds (i.e., the marginal loss of social welfare due to an increase in government revenue), and (ii) incidence (i.e., the ratio of a marginal change in consumer surplus to a marginal change in producer surplus). We begin with the case of symmetric firms facing both unit and ad valorem taxes to derive a simple and empirically relevant set of formulas. Then, we provide a substantial generalization of these results to encompass firm heterogeneity by using the idea of tax revenue specified as a general function parameterized by a vector of tax parameters. |
| Keywords: | Imperfect Competition; Pass-through; Marginal Value of Public Funds; Incidence;Sufficient Statistics |
| JEL: | D43 H22 L13 |
| URL: | http://d.repec.org/n?u=RePEc:kue:epaper:e-21-003&r= |
| By: | Mahmood, Haider; Chuadhary, AR |
| Abstract: | The study attempts to find out the impact of foreign direct investment on income inequality in Pakistan. It takes foreign direct investment, government expenditure on health and education and gross domestic product growth rate as independent variable and GINI coefficient as dependent variable. ADF, PP, Ng-Perron and Zivot-Andrews Unit root tests are used to find the unit root problem. ARDL and its error correction model are used to find the long run and short run relationships. The study finds the long run and short run relationships in the model. Foreign direct investment has a positive impact on GINI coefficient. So, foreign direct investment is responsible in increasing the income inequality in Pakistan. Government expenditure on health and education has a negative relationship with income inequality. Economic growth has an insignificant impact on income inequality. |
| Keywords: | FDI, Income Inequality, Economic Growth, Cointegration |
| JEL: | F2 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:109854&r= |
| By: | Asad Islam (Centre for Development Economics and Sustainability and Department of Economics, Monash University); Debayan Pakrashi (Department of Economic Sciences, Indian Institute of Technology Kanpur); Soubhagya Sahoo (Department of Economic Sciences, Indian Institute of Technology Kanpur); Liang Choon Wang (Department of Economics, Monash University); Yves Zenou (Department of Economics, Monash University) |
| Abstract: | Using a field experiment in India where patients are randomly assigned to rank among a set of physicians of the same gender but with different castes and years of experience, we show that the differences in patients’ physician choices are consistent with gender-based statistical discrimination. Labor market experience cannot easily overcome the discrimination that female doctors suffer. Further, we find that gender discrimination is greater for lower caste doctors, who typically suffer from caste discrimination. Given the increasing share of professionals from a lower caste background, our results suggest that the 'intersectionality' between gender and caste leads to increased gender inequality among professionals in India. |
| Keywords: | gender discrimination, statistical discrimination, caste discrimination, intersectionality, affirmative action |
| JEL: | J16 J15 I15 O12 |
| Date: | 2021–09 |
| URL: | http://d.repec.org/n?u=RePEc:mos:moswps:2021-07&r= |
| By: | John List |
| Abstract: | This review summarizes results of field experiments examining individual behaviors across several market settings from - open-air markets to rideshare markets to tax-compliance markets - where people sort themselves into market roles wherein they make consequential decisions. Using three distinct examples from my own research on the endowment effect, left-digit bias, and omission bias, I showcase how field experiments can help researchers understand mediators, heterogeneity, and causal moderation involved in judgment biases in the field. In this manner, the review highlights that economic field experiments can serve an invaluable intellectual role alongside traditional laboratory research. |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:feb:natura:00738&r= |
| By: | Sarun Kamolthip |
| Abstract: | This paper demonstrates the potentials of the long short-term memory (LSTM) when applyingwith macroeconomic time series data sampled at different frequencies. We first present how theconventional LSTM model can be adapted to the time series observed at mixed frequencies when thesame mismatch ratio is applied for all pairs of low-frequency output and higher-frequency variable. Togeneralize the LSTM to the case of multiple mismatch ratios, we adopt the unrestricted Mixed DAtaSampling (U-MIDAS) scheme (Foroni et al., 2015) into the LSTM architecture. We assess via bothMonte Carlo simulations and empirical application the out-of-sample predictive performance. Ourproposed models outperform the restricted MIDAS model even in a set up favorable to the MIDASestimator. For real world application, we study forecasting a quarterly growth rate of Thai realGDP using a vast array of macroeconomic indicators both quarterly and monthly. Our LSTM withU-MIDAS scheme easily beats the simple benchmark AR(1) model at all horizons, but outperformsthe strong benchmark univariate LSTM only at one and six months ahead. Nonetheless, we find thatour proposed model could be very helpful in the period of large economic downturns for short-termforecast. Simulation and empirical results seem to support the use of our proposed LSTM withU-MIDAS scheme to nowcasting application. |
| Date: | 2021–09 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2109.13777&r= |
| By: | Rudolf Kerschbamer; Regine Oexl |
| Abstract: | Previous work has shown that unobservable random shocks on output have a detrimental effect on effort provision in short-term ('static') employment relationships. Given the prevalence of long-term ('dynamic') relationships in firms, we investigate whether the impact of shocks is similarly pronounced in gift-exchange relationships where the same principal-agent pair interacts repeatedly. In dynamic relationships, shocks have a significantly less pronounced negative effect on the agent's effort provision than in static relationships. In an attempt to identify the drivers for our results we find that the combination of a repeated-game effect and a noise-canceling effect is required to avoid the detrimental effects of unobservable random shocks on effort provision. |
| Keywords: | Gift exchange, principal agent model, incomplete contracts, random shocks, reciprocity, laboratory experiments, long-term contracts |
| JEL: | C72 C91 D81 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:inn:wpaper:2021-27&r= |
| By: | Tsoulfidis, Lefteris (University of Macedonia) |
| Abstract: | In recent years, the research on capital theory has shifted from reverse capital deepening and reswitching in techniques to a new direction, which goes beyond the near-linearities of price-rates of profit trajectories and wage-rates of profit curves and explicates the reasons behind them. The reswitching issue remains in the background of these studies as a remote, albeit ever-present, possibility. The article contributes some more evidence to the extant literature by utilizing data from the last available benchmark input-output table of the US economy of the year 2012. The derived near-linearities of price trajectories and wage-rate of profit curves are explained by the low effective rank of the economy’s input-output matrices and not from their seemingly random character. These findings shed additional light on a new and more meaningful direction in the research agenda; that is, the possibility of molding the essential features of the economy through dimensionality reduction. |
| Keywords: | price rate of profit trajectories; capital controversies; effective rank; eigendecomposition; eigenvalues |
| JEL: | B24 B51 C67 D46 D57 E11 E32 |
| Date: | 2021–09–22 |
| URL: | http://d.repec.org/n?u=RePEc:ris:sraffa:0051&r= |
| By: | Steven T. Berry; Philip A. Haile |
| Abstract: | Demand elasticities and other features of demand are critical determinants of the answers to most positive and normative questions about market power or the functioning of markets in practice. As a result, reliable demand estimation is an essential input to many types of research in Industrial Organization and other fields of economics. This chapter presents a discussion of some foundational issues in demand estimation. We focus on the distinctive challenges of demand estimation and strategies one can use to overcome them. We cover core models, alternative data settings, common estimation approaches, the role and choice of instruments, and nonparametric identification. |
| JEL: | C36 D12 L20 |
| Date: | 2021–09 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:29305&r= |
| By: | Germeshausen, Robert; Heim, Sven; Wagner, Ulrich J. |
| Abstract: | Successful decarbonization of the electricity sector hinges on the support of the public, which is at risk when electricity generation emits local externalities. This paper estimates the impact of wind turbine deployment on granular measures of revealed preferences for renewable electricity in product and political markets. We address endogenous siting of turbines with a novel IV approach that exploits quasi-experimental variation in profitability. We find that nearby wind turbines significantly reduce citizens' support, but this effect quickly fades with distance from the site. Our results shed light on how distance requirements and financial participation could enhance support for renewables. |
| Keywords: | Renewable energy,Wind power,Public support,Elections,Externalities |
| JEL: | D12 D72 Q42 Q50 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:zewdip:21074&r= |
| By: | Nina Boyarchenko; Caren Cox; Richard K. Crump; Andrew Danzig; Anna Kovner; Or Shachar; Patrick Steiner |
| Abstract: | The Federal Reserve introduced the Primary Market Corporate Credit Facility (PMCCF) and the Secondary Market Corporate Credit Facility (SMCCF) in response to the severe disruptions in corporate bond markets triggered by the COVID-19 pandemic and subsequent economic shutdowns. The Corporate Credit Facilities (CCFs) were designed to work together to restore functioning of credit markets, with an overarching goal of facilitating credit provision to the non-financial corporate sector of the U.S. economy. This paper provides an overview of the CCFs, including detailing the facilities’ design, documenting their operations and usage, and describing their impact on corporate bond markets. |
| Keywords: | Federal Reserve; corporate bond markets; corporate credit facilities; PMCCF; SMCCF; Federal Reserve lending facilities |
| JEL: | G12 G18 G19 |
| Date: | 2021–09–01 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fednsr:93083&r= |
| By: | Luigi Bonatti Roberto Tamborini; Roberto Tamborini |
| Abstract: | In this paper we briefly review the macroeconomic theory of inflation, relating it to the recent developments in the advanced economies. Then, we analyse the drivers of the rise in inflation observed in 2021 in the United States and in Europe, and we illustrate the factors that may affect the inflationary scenario of the advanced economies in the longer term. Finally, we discuss what challenges the Federal Reserve and the European Central Bank have to meet in the face of current inflationary pressures. This paper was provided by the Policy Department for Economic, Scientific and Quality of Life Policies at the request of the committee on Economic and Monetary Affairs (ECON) ahead of the Monetary Dialogue with the ECB President on 27 September 2021. |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:trn:utwprg:2021/14&r= |
| By: | Savi Virolainen |
| Abstract: | A new mixture vector autoressive model based on Gaussian and Student's $t$ distributions is introduced. The G-StMVAR model incorporates conditionally homoskedastic linear Gaussian vector autoregressions and conditionally heteroskedastic linear Student's $t$ vector autoregressions as its mixture components, and mixing weights that, for a $p$th order model, depend on the full distribution of the preceding $p$ observations. Also a structural version of the model with time-varying B-matrix and statistically identified shocks is proposed. We derive the stationary distribution of $p+1$ consecutive observations and show that the process is ergodic. It is also shown that the maximum likelihood estimator is strongly consistent, and thereby has the conventional limiting distribution under conventional high-level conditions. |
| Date: | 2021–09 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2109.13648&r= |
| By: | Alexandra M. Tabova; Francis E. Warnock |
| Abstract: | While foreigners are prominent in the Treasury market and in theoretical and empirical work, little is known about the nature of their Treasury portfolios. We provide novel evidence on foreigners' U.S. Treasury portfolios based on data not yet used by researchers: the security-level Treasury portfolios of foreigners and private U.S. investors. We find that private foreign investors earn above market returns and on a risk-adjusted basis both foreign private and foreign official investors outperform U.S. investors. Moreover, while foreign officials, with their broader objective functions, may well have inelastic demand, private foreign investors increase purchases of Treasuries and increase the duration of their Treasury portfolios when their sovereign yields are low or decrease relative to Treasury yields (that is, when CIP deviations decrease). Our results are so different from existing results that we close with a reconciliation exercise that provides a useful assessment of different sources of data on flows and holdings. |
| JEL: | F30 G11 G12 |
| Date: | 2021–09 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:29313&r= |
| By: | Chakraborty, Lekha S |
| Abstract: | Extraordinary time requires extraordinary policy responses. As the Reserve Bank of India Governor Shri Shaktikanta Das puts it upfront, RBI has responded to a pandemic with “whatever it takes to” narrative and has done “heavy lifting” in terms of policy rates adjustments, liquidity infusion, and the regulatory mechanisms. The covid-19 is a dual crisis - a public health crisis and a macroeconomic crisis. Through the Great Lockdown strategy, we have systematically flattened the curve and moving towards growth recovery. However, strengthening fiscal and monetary linkages is crucial for the sustainability of the economic recovery. The pandemic economics of central banks is twofold. One is the focus on measures that relate to instantaneous economic “firefighting”: for instance, how to adjust the policy rates and also to ensure liquidity infusion into the system to stabilize the market reactions. The second is the long-term policy imperatives, including the regulatory mechanisms. As this crisis is of an unprecedented scale, it calls for unprecedented policy responses. The central banks have responded to the crisis within a “life versus livelihood” framework. This paper analyses the pandemic responses by the central bank of India and its new monetary policy framework of inflation targeting; and concludes with policy suggestions. |
| Keywords: | Central Bank , Pandemic policy , Covid19, Inflation Targeting, New Monetary Policy framework |
| JEL: | E52 G28 H63 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:109863&r= |
| By: | Christian Bustamante |
| Abstract: | Using a general equilibrium search-theoretic model of money, I study the distributional effects of open market operations. In my model, heterogeneous agents trade bilaterally among themselves in a frictional market and save using cash and illiquid short-term nominal government bonds. Wealth effects generate slow adjustments in agents’ portfolios following their trading activity in decentralized markets, giving rise to a persistent and nondegenerate distribution of assets. The model reproduces the distribution of asset levels and portfolios across households observed in the data, which is crucial to quantitatively assess the incidence of monetary policy changes at the individual level. I find that an open market operation targeting a higher nominal interest rate requires increasing the relative supply of bonds, raising the ability of agents to self-insure against idiosyncratic shocks. As a result, in the long run, inequality falls, and the inefficiencies in decentralized trading shrink. This leads agents that are relatively poor and more liquidity-constrained to benefit the most by increasing their consumption and welfare. |
| Keywords: | Inflation and prices; Monetary policy; Monetary policy implementation; Monetary policy transmission |
| JEL: | E21 E32 E52 |
| Date: | 2021–09 |
| URL: | http://d.repec.org/n?u=RePEc:bca:bocawp:21-46&r= |
| By: | Bandyopadhyay, Subhayu; Basu, Arnab K.; Chau, Nancy H.; Mitra, Devashish |
| Abstract: | Technological advance and improvements in communication technologies have facilitated the offshoring of jobs worldwide, where a typical scene following the supply chain involves developing countries importing finished products from developed countries that contain developing country labor content. We demonstrate that this pattern of offshoring can harbor a pro-trade bias, but only among countries upstream along the global supply chain. This upstream-downstream asymmetry has important implications on countries’ (i) incentive to violate trade agreements, and (ii) ability to leverage the dispute settlement procedures to punish violators. We then show that a well-enforced set of labor standards in developing countries, such as a binding minimum wage, resolves this conundrum by reviving the ability of the developing countries to use countervailing tariffs to punish trade agreement violators. |
| Keywords: | Labor and Human Capital |
| Date: | 2021–09–01 |
| URL: | http://d.repec.org/n?u=RePEc:ags:cudawp:313773&r= |
| By: | Misha Perepelitsa |
| Abstract: | In this paper we extend the analysis of an agent-based model for adaptive trading, called asynchronous stochastic price pump (ASPP) introduced by Perepelitsa and Timofeyev (2019), to the model with heterogeneous distribution of psychological parameters of speculative optimism and pessimism across the population of traders. We show that the new model has a range of qualitatively different dynamics when the correlation between those factors ranges from low negative to large positive values. A statistical parameter estimation suggests a heterogeneous ASPP with negative correlation as a model of price variations of Bitcoin. |
| Date: | 2021–09 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2109.12166&r= |
| By: | Angeloni, Ignazio; Kasinger, Johannes; Chantawit Tantasith |
| Abstract: | We present new statistical indicators of the structure and performance of US banks from 1990 to today, geographically disaggregated at the level of individual counties. The constructed data set (20 indicators for some 3150 counties over 31 years, for a total of about 2 million data points) conveys a detailed picture of how the geography of US banking has evolved in the last three decades. We consider the data as a stepping stone to understand the role banks and banking policies may have played in mitigating, or exacerbating, the rise of poverty and inequality in certain US regions. |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:safewp:321&r= |
| By: | David M. Arseneau; Jose Fillat; Molly Mahar; Donald P. Morgan; Skander J. Van den Heuvel |
| Abstract: | The Main Street Lending Program was created to support credit to small and medium-sized businesses and nonprofit organizations that were harmed by the pandemic, particularly those that were unsupported by other pandemic-response programs. It was the most direct involvement in the business loan market by the Federal Reserve since the 1930s and 1940s. Main Street operated by buying 95 percent participations in standardized loans from lenders (mostly banks) and sharing the credit risk with them. It would end up supporting loans to more than 2,400 borrowers and co-borrowers across the United States with an average loan size of $9.5 million and total volume of $17.5 billion. This article describes its goals, its design, the challenges and constraints that shaped its reach, and the characteristics of its borrowers and lenders. We conclude with some lessons learned for future policymakers and facility designers. |
| Keywords: | Main Street Lending Program; COVID-19; emergency lending facilities; credit demand; bank loans; bank capital; small business |
| JEL: | E51 E65 G21 H12 H81 |
| Date: | 2021–09–24 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedbcq:93068&r= |
| By: | Calì, Massimiliano; Presidente, Giorgio |
| Abstract: | Recent evidence suggests that automation technologies entail a trade-off between productivity gains and employment losses for the economies that adopt them. This paper casts doubts on this trade-off in the context of a developing country. It shows significant productivity and employment gains from automation in Indonesian manufacturing during the years 2008-2015, a period of rapid increase in robot imports. Analysis based on manufacturing plant data provides evidence of two plausible reasons for the absence of this trade-off. First, it documents the presence of diminishing productivity returns to robot adoption. As a result, the benefits from automation could be particularly large for countries at early stages of adoption, such as Indonesia. Second, the analysis finds significant positive employment spillovers from automation in downstream plants. Such effects are likely larger in countries such as Indonesia, where the foreign content of manufacturing production is low. Suggestive evidence indicates such results could apply to developing countries more generally. |
| Keywords: | Robots,Automation,Development,Employment,Productivity,Spillovers |
| JEL: | O14 J23 J24 L11 F63 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:esprep:242497&r= |
| By: | Marcel Ausloos; Yining Zhang; Gurjeet Dhesi |
| Abstract: | A TGARCH modeling is argued to be the optimal basis for investigating the impact of index futures trading on spot price variability. We discuss the CSI-300 index (China-Shanghai-Shenzhen-300-Stock Index) as a test case. The results prove that the introduction of CSI-300 index futures (CSI-300-IF) trading significantly reduces the volatility in the corresponding spot market. It is also found that there is a stationary equilibrium relationship between the CSI-300 spot and CCSI-300-IF markets. A bidirectional Granger causality is also detected. ''Finally'', it is deduced that spot prices are predicted with greater accuracy over a 3 or 4 lag day time span. |
| Date: | 2021–08 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2109.15060&r= |
| By: | Atabek Atayev; Maarten Janssen |
| Abstract: | Consumers can acquire information through their own search efforts or through their social network. Information diffusion via word-of-mouth communication leads to some consumers free-riding on their "friends" and less information acquisition via active search. Free-riding also has an important positive effect, however, in that consumers that do not actively search themselves are more likely to be able to compare prices before purchase, imposing competitive pressure on firms. We show how market prices depend on the characteristics of the network and on search cost. For example, if the search cost becomes small, price dispersion disappears, while the price level converges to the monopoly level, implying that expected prices are decreasing for small enough search cost. More connected societies have lower market prices, while price dispersion remains even in fully connected societies. |
| Date: | 2021–09 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2109.15288&r= |
| By: | Kanis Saengchote (Chulalongkorn University) |
| Abstract: | Decentralized finance (DeFi) has recently gained much attention and scrutiny because of its rapid growth. DeFi services replicate traditional financial services such as lending, exchange, and asset management, but they are currently unregulated, unlike their traditional counterparts. We investigate Compound – one of the earliest and largest DeFi lending protocol – to show how it works, who the users are and the potential motivations behind their uses. We find that the loan durations are short (31 days on average), borrowing rates volatile and borrowers are concerned about liquidation risk. Further analyses reveal that some loan demand may arise from leveraged investment strategies. Taken together with the tacit leverage in DeFi yield farming, further availability of on-chain lending could potentially transpire into DeFi systemic risk. |
| Keywords: | DeFi, Lending, Incentives |
| JEL: | G10 G21 |
| Date: | 2021–09 |
| URL: | http://d.repec.org/n?u=RePEc:pui:dpaper:162&r= |
| By: | Mathias Beiglb\"ock; George Lowther; Gudmund Pammer; Walter Schachermayer |
| Abstract: | Hamza-Klebaner posed the problem of constructing martingales with Brownian marginals that differ from Brownian motion, so called fake Brownian motions. Besides its theoretical appeal, the problem represents the quintessential version of the ubiquitous fitting problem in mathematical finance where the task is to construct martingales that satisfy marginal constraints imposed by market data. Non-continuous solutions to this challenge were given by Madan-Yor, Hamza-Klebaner, Hobson, and Fan-Hamza-Klebaner whereas continuous (but non-Markovian) fake Brownian motions were constructed by Oleszkiewicz, Albin, Baker-Donati-Yor, Hobson, Jourdain-Zhou. In contrast it is known from Gy\"ongy, Dupire, and ultimately Lowther that Brownian motion is the unique continuous strong Markov martingale with Brownian marginals. We took this as a challenge to construct examples of a "very fake'' Brownian motion, that is, continuous Markov martingales with Brownian marginals that miss out only on the strong Markov property. |
| Date: | 2021–09 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2109.12927&r= |
| By: | Prydz, Espen Beer; Jolliffe, Dean; Serajuddin, Umar |
| Abstract: | Estimates of average per capita consumption and income from national accounts differ substantially from corresponding measures of consumption and income from household surveys. Using a new compilation of more than 2,000 household surveys matched to national accounts data, we find that the gaps between the data sources are larger and more robust than previously established. Means of household consumption estimated from surveys are, on average, 20 percent lower than corresponding means from national accounts. The gap with GDP per capita is nearly 50 percent. The gaps have increased in recent decades and are largest in middle-income countries, where annualized growth rates for consumption surveys are systematically lower than national accounts growth rates. We show that the gaps in measures across these two sources have implications for assessments of economic growth, poverty, and inequality. We find that typical survey measures of consumption and income may exaggerate poverty reduction and underestimate inequality. |
| Keywords: | National Accounts Systems,Household Income and Expenditure Surveys,Poverty,Inequality |
| JEL: | I3 I32 E31 F01 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:glodps:944&r= |
| By: | Illing, Hannah (Institute for Employment Research (IAB), Nuremberg, Germany); Koch, Theresa (Institute for Employment Research (IAB), Nuremberg, Germany) |
| Abstract: | "We are the first to provide empirical evidence on differences in the individual costs of job loss for migrants compared to natives in Germany. Using linked employer-employee data for the period 1996-2017, we compute each displaced worker’s earnings, wage, and employment loss after a mass layoff in comparison to a matched, nondisplaced, control worker. We find that migrants face substantially higher earnings losses than natives due to both higher wage and employment losses. Differences in individual characteristics and differential sorting across industries and occupations can fully explain the gap in wage losses but not the employment gap after displacement. Laid-off migrants are both less likely to become reemployed and work fewer days than laid-off natives. In terms of channels, we show that i) migrants sort into worse establishments and ii) migrants’ slightly lower geographic mobility across federal states may explain part of their lower re-employment success; iii) our results suggest that competition from other migrants, rather than natives, negatively contributes to migrants’ costs of job loss." (Author's abstract, IAB-Doku) ((en)) |
| Keywords: | Bundesrepublik Deutschland ; Auswirkungen ; berufliche Reintegration ; Einkommensentwicklung ; IAB-Betriebs-Historik-Panel ; Inländer ; Integrierte Erwerbsbiografien ; Lohn ; Migranten ; Arbeitslose ; Arbeitslosigkeitsbewältigung ; Ungleichheit ; Arbeitsmarktchancen ; Arbeitsplatzverlust ; 1996-2017 |
| JEL: | J20 J61 J63 J64 J65 |
| Date: | 2021–05–04 |
| URL: | http://d.repec.org/n?u=RePEc:iab:iabdpa:202108&r= |
| By: | Nguyen, Minh-Hoang |
| Abstract: | Today, when reading about multicollinearity – one of the most dreaded problems in regression analysis, I came across the statement of Blanchard [8]: “Multicollinearity is God’s will, not a problem with OLS or statistical techniques in general.” Immediately, I thought: “If it is really God’s will, we should keep the problem within our grasp, but not rely on God.” |
| Date: | 2021–09–24 |
| URL: | http://d.repec.org/n?u=RePEc:osf:osfxxx:kpgbh&r= |
| By: | John Kandrac |
| Abstract: | Modern central bankers confront a challenge of providing economic stimulus even when the policy rate is constrained by a lower bound. This challenge has led to substantial innovation by policymakers and a proliferation of new policy tools. In this paper, I offer evidence on the efficacy of a new tool known as funding for lending, which provides banks with subsidized funding to make additional loans. I focus on a historical episode from the United States in which the Federal Reserve provided banks with steeply subsidized loans to promote the expansion of credit within their local communities. I show that the cheap funding succeeded in generating more lending by countering banks' excessive liquidity preference. The additional credit benefited the real economy. Local areas enjoyed higher rates of small business formation and more rapid employment growth. Finally, I show that the cost of the subsidy provided by the government was more than offset by the additional payroll taxes paid out of higher wages and salaries. These results suggest that funding for lending programs deserve consideration for the modern central banker's toolkit and demonstrate that certain unconventional tools can offer monetary policymakers the means to pursue more targeted objectives. |
| Keywords: | Monetary policy; Funding for lending; Bank lending; Countercyclical policy; Discount window |
| JEL: | G28 G21 E58 E52 |
| Date: | 2021–09–24 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedgfe:2021-61&r= |
| By: | Joshua Aizenman; Yin-Wong Cheung; Xingwang Qian |
| Abstract: | We examine the effects of active international reserve management (IRM) conducted by central banks of emerging market economies (EMEs) on firm investment in the presence of global financial shocks. Using firm level data from 46 EMEs from 2000 to 2018, we document four findings. First, active IRM positively affects firm investment - the effect strengthens with the magnitude of adverse external financial shocks. Second, financially constrained firms, compared with unconstrained ones, are less responsive to active IRM. Third, our results suggest that the country credit spread is a plausible causal channel of the positive IRM effect on firm investment. Fourth, the policies of capital controls and exchange rate managements are complementary to the IRM – it is beneficial to form a macro policy mix including active IRM to safeguard firm investment against global financial shocks. Further, our results indicate the IRM effect on firm investment is both statistical and economical significance and is relevant to the aggregate economy. |
| JEL: | F36 F42 F61 G31 |
| Date: | 2021–09 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:29303&r= |