|
on Central and Western Asia |
| By: | Giovanni Caggiano (Monash University and University of Padova); Efrem Castelnuovo (University of Padova) |
| Abstract: | We estimate a novel measure of global financial uncertainty (GFU) with a dynamic factor framework that jointly models global, regional, and country-specific factors. We quantify the impact of GFU shocks on global output with a VAR analysis that achieves set-identification via a combination of narrative, sign, ratio, and correlation restrictions. We find that the world output loss that materialized during the great recession would have been 13% lower in absence of GFU shocks. We also unveil the existence of a global finance uncertainty multiplier: the more global financial conditions deteriorate after a GFU shock, the larger the world output contraction is. |
| Keywords: | Global Financial Uncertainty, dynamic hierarchical factor model, structural VAR, world output loss, global Önance uncertainty multiplier. |
| JEL: | C32 |
| Date: | 2021–10 |
| URL: | http://d.repec.org/n?u=RePEc:mos:moswps:2021-12&r= |
| By: | Martin M. Andreasen (Aarhus University, CREATES, and the Danish Finance Institute.); Giovanni Caggiano (Monash University and University of Padova.); Efrem Castelnuovo (University of Padova.); Giovanni Pellegrino (Aarhus University) |
| Abstract: | This paper uses a nonlinear vector autoregression and a non-recursive identification strategy to show that an equal-sized uncertainty shock generates a larger contraction in real activity when growth is low (as in recessions) than when growth is high (as in expansions). An estimated New Keynesian model with recursive preferences and approximated to third order around its risky steady state replicates these state-dependent responses. The key mechanism behind this result is that firms display a stronger upward nominal pricing bias in recessions than in expansions, because recessions imply higher inflation volatility and higher marginal utility of consumption than expansions. |
| Keywords: | New Keynesian Model, Nonlinear SVAR, Non-recursive identification, State-dependent uncertainty shock, Risky steady state. |
| JEL: | E32 |
| Date: | 2021–10 |
| URL: | http://d.repec.org/n?u=RePEc:mos:moswps:2021-11&r= |
| By: | Brühl, Volker |
| Abstract: | The "European Green Deal" stipulates that the EU will become climate-neutral by 2050. This transformation requires enormous investments in all major sectors including energy, mobility, industrial manufacturing, real estate and farming. Although the EU Commission has announced that a total of EUR 1 trillion will be invested into the green transformation of the European economy over the next ten years, the majority of the investments must be financed by the private sector. Alongside many factors affecting a successful implementation of the Green Deal, a regulatory framework for the financial industry has to be established to facilitate the financing of sustainable investments. To that end, the European Sustainable Finance Strategy lays the foundation for a complex set of different measures that have been launched in recent years. This article provides a comprehensive overview of key regulatory initiatives such as the taxonomy regulation, the disclosure frameworks for both corporates and financial institutions and other aspects of financial market regulation that have already significantly improved the regulatory framework for sustainable finance. Nevertheless, some additional instruments could be considered, such as a reform of top management remuneration or the provision of tax incentives for green investments in the real economy, and these are briefly discussed. |
| JEL: | G10 G20 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:cfswop:657&r= |
| By: | Michael Peters; Fabrizio Zilibotti |
| Abstract: | We construct a model of creative destruction with endogenous firm dynamics. We integrate the theory into a general equilibrium multi-country model of technological convergence where countries interact via international spillovers. We derive implications for both firm dynamics and aggregate productivity dynamics. In richer economies, firms are on average larger and the best firms grow larger over time. In poorer economies, there is little creative destruction, low selection, and firms remain small. We estimate the parameters of the model using firm-level data for India and the United States. We study the effect of counterfactual policy reforms. Industrial policy that selectively targets the more productive firms can be beneficial in poor countries while being harmful in countries close to the economic frontier. The findings echo Acemoglu et al. (2006). |
| JEL: | O12 O4 O43 |
| Date: | 2021–10 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:29333&r= |
| By: | Emanuele Citera (Department of Economics, New School for Social Research) |
| Abstract: | This paper attempts to develop a theory of statistical equilibrium based on an entropy-constrained framework, that allow us to explain the distribution of stock returns over different market trends. By making use of the Quantal Response Statistical Equilibrium model (Scharfenaker and Foley, 2017), we recover the cross-sectional distribution of daily returns of individual company listed the S&P 500, over the period 1988-2019. We then make inference on the frequency distributions of returns by studying them over bull markets, bear markets and corrections. The results of the model shed light on the microscopic as well as macroscopic behavior of the stock market, in addition to provide insights in terms of stock returns distribution. |
| Keywords: | Stock returns, statistical equilibrium, information theory, stock market, maximum entropy |
| JEL: | C10 C70 D84 G10 G40 |
| Date: | 2021–10 |
| URL: | http://d.repec.org/n?u=RePEc:new:wpaper:2116&r= |
| By: | Priyaranjan Jha; Antonio Rodriguez-Lopez |
| Abstract: | Exploiting minimum-wage variation within multi-state commuting zones, we document a negative relationship between minimum wages and firm variety in the U.S. restaurant and retail-trade industries. To explain this finding, we construct a heterogeneous-firm model with a monopsonistic labor market and endogenous firm variety. The decentralized equilibrium underprovides the mass of firms compared to the outcome achieved by a welfare-maximizing planner. A binding minimum wage further reduces the mass of firms, exacerbating the distortion. Workers value employer variety, and thus, by reducing firm variety the minimum wage reduces workers’ welfare even if the average wage increases. |
| Keywords: | minimum wage, number for firms, love of employer variety |
| JEL: | J38 J42 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_9312&r= |
| By: | Carol C. Bertaut; Stephanie E. Curcuru; Bastian von Beschwitz |
| Abstract: | For most of the last century, the preeminent role of the U.S. dollar in the global economy has been supported by the size and strength of the U.S. economy, its stability and openness to trade and capital flows, and strong property rights and the rule of law. As a result, the depth and liquidity of U.S. financial markets is unmatched, and there is a large supply of extremely safe dollar-denominated assets. |
| Date: | 2021–10–06 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedgfn:2021-10-06-2&r= |
| By: | Aurelio Patelli; Andrea Zaccaria; Luciano Pietronero |
| Abstract: | We present an integrated database suitable for the investigations of the Economic development of countries by using the Economic Fitness and Complexity framework. Firstly, we implement machine learning techniques to reconstruct the database of Trade of Services and we integrate it with the database of the Trade of the physical Goods, generating a complete view of the International Trade and denoted the Universal database. Using this data, we derive a statistically significant network of interaction of the Economic activities, where preferred paths of development and clusters of High-Tech industries naturally emerge. Finally, we compute the Economic Fitness, an algorithmic assessment of the competitiveness of countries, removing the unexpected misbehaviour of Economies under-represented by the sole consideration of the Trade of the physical Goods. |
| Date: | 2021–10 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2110.00302&r= |
| By: | Sami Alpanda (University of Central Florida, Department of Economics); Hyunji Song (Texas A&M University, Department of Economics); Sarah Zubairy (Texas A&M University, Department of Economics) |
| Abstract: | This paper examines how the effects of government spending shocks depend on the balance-sheet position of households. Employing U.S. household survey data, we find that in response to a positive government spending shock, households with mortgage debt have a large, positive consumption response, while renters have a smaller rise in consumption. Homeowners without mortgage debt, in contrast, have an insignificant expenditure response. We consider a dynamic stochastic general equilibrium (DSGE) model with three types of households: savers who own their housing, borrowers with mortgage debt, and rule-of-thumb consumers who rent housing, and show that it can successfully account for these findings. The model suggests that liquidity constraints and wealth effects, tied to the persistence of public spending, play a crucial role in the propagation of government spending shocks. Our findings provide both empirical and theoretical support for the notion that household mortgage debt position plays an important role in the transmission mechanism of fiscal policy. |
| Keywords: | Fiscal shocks, Government spending, Household balance sheets, Household debt. |
| JEL: | E21 E32 E62 |
| Date: | 2021–09–28 |
| URL: | http://d.repec.org/n?u=RePEc:txm:wpaper:20210928-001&r= |
| By: | Jonathan Cogliano (University of Massachusetts Boston); Roberto Veneziani (Queen Mary University of London); Naoki Yoshihara (School of Economics and Management, Kochi University of Technology) |
| Abstract: | This article surveys computational approaches to classical-Marxian economics. These approaches include a range of techniques { such as numerical simulations, agent-based models, and Monte Carlo methods { and cover many areas within the classical-Marxian tradition. We focus on three major themes in classical-Marxian economics, namely price and value theory; inequality, exploitation, and classes; and technical change, profi tability, growth and cycles. We show that computational methods are particularly well-suited to capture certain key elements of the vision of the classical-Marxian approach and can be fruitfully used to make signi ficant progress in the study of classical-Marxian topics. |
| Keywords: | Computational Methods, Agent-Based Models, Classical Economists, Marx |
| JEL: | C63 B51 B41 |
| Date: | 2021–09 |
| URL: | http://d.repec.org/n?u=RePEc:kch:wpaper:sdes-2021-10&r= |
| By: | Marianna Brunetti (DEF and CEIS, Università di Roma "Tor Vergata"); Roberta De Luca (Bank of Italy) |
| Abstract: | We test the Index options market efficiency by means of a statistical arbitrage strategy, i.e. pairs trading. Using data on five Stock Indexes of the Euro Area, we first identify any potential option mispricing based on deviations from the long-run relationship linking their implied volatilities. Then, we evaluate the profitability of a simple pair trading strategy on the mispriced options. Despite the signals of potential mispricing are frequent, the statistical arbitrage does not produce significant positive returns, thus providing evidence in support of Index Option market efficiency. The time-to-maturity of the options involved in the trade as well as financial market turbulence have a marginal effect on the eventual strategy returns, which are instead mostly driven by the moneyness of the options traded. Our results remain qualitatively unchanged if a stricter definition of reversion to the equilibrium is applied or when the long-run relationship is estimated on an (artificially derived) time series of options prices rather than on options’ implied volatilities. |
| Keywords: | pairs trading,option market efficiency |
| JEL: | G10 G12 C44 C5 |
| Date: | 2021–09–02 |
| URL: | http://d.repec.org/n?u=RePEc:rtv:ceisrp:512&r= |
| By: | Carmona, Julio (Fundamentos del Análisis Económico. University of Alicante); León, ángel (Fundamentos del Análisis Económico. University of Alicante) |
| Abstract: | We show how diseases can affect economic growth by using the standard Solow model with population growth and no technical progress as our benchmark. We couple this model in turn with the two most basic models of pandemics: SIS and SIR models. In these two models infections are assumed to take place by random matchings between infected and susceptible individuals according to some basic reproductive number. This number determines in which of the two posible equilibria, the disease free or the pandemic equilibrium, the economy ends. By inserting these two models of disease in the basic Solow growth model, we show that the steady state capital labour ratio is not affected by the disease but output per capita and consumption per capita do. |
| Keywords: | COVID-19; SIS; SIR; Solow model |
| JEL: | E00 I15 O40 |
| Date: | 2021–10–06 |
| URL: | http://d.repec.org/n?u=RePEc:ris:qmetal:2021_001&r= |
| By: | Yuta Kurose |
| Abstract: | This study presents contemporaneous modeling of asset return and price range within the framework of stochastic volatility with leverage. A new representation of the probability density function for the price range is provided, and its accurate sampling algorithm is developed. A Bayesian estimation using Markov chain Monte Carlo (MCMC) method is provided for the model parameters and unobserved variables. MCMC samples can be generated rigorously, despite the estimation procedure requiring sampling from a density function with the sum of an infinite series. The empirical results obtained using data from the U.S. market indices are consistent with the stylized facts in the financial market, such as the existence of the leverage effect. In addition, to explore the model's predictive ability, a model comparison based on the volatility forecast performance is conducted. |
| Date: | 2021–09 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2110.00039&r= |
| By: | Arita, Shawn; Cooper, Joseph C.; Gerlt, Scott; Meyer, Seth D.; Thompson, Wyatt; Westhoff, Patrick |
| Keywords: | Production Economics, Agricultural and Food Policy, Research Methods/Statistical Methods |
| Date: | 2021–08 |
| URL: | http://d.repec.org/n?u=RePEc:ags:aaea21:313930&r= |
| By: | Yongsheng Xu (Georgia State University,); Naoki Yoshihara (University of Massachusetts Amherst) |
| Abstract: | This paper discusses issues of axiomatic bargaining problems over opportunity assignments. The fair arbitrator uses the principle of 〠equal opportunity" for all players to make the recommendation on resource allocations. A framework in such a context is developed and the egalitarian solution to standard bargaining problems is reformulated and axiomatically characterized. |
| Keywords: | Opportunity sets, bargaining over opportunity assignments, egalitarian solution |
| JEL: | C71 C78 D60 D63 D70 |
| Date: | 2021–09 |
| URL: | http://d.repec.org/n?u=RePEc:kch:wpaper:sdes-2021-9&r= |
| By: | Ryo Kato; Tatsushi Okuda; Takayuki Tsuruga |
| Abstract: | Previous studies have stressed that inflation dynamics exhibit substantial dispersion across sectors. Using US producer price data, we present evidence that sectoral inflation persistence is negatively correlated with market concentration, which is difficult to reconcile with the prediction of the standard model of monopolistic competition. To better explain the data, we incorporate imperfect common knowledge into the monopolistic competition model introduced by Melitz and Ottaviano (2008). In the model, pricing complementarity among firms increases as market concentration decreases. Because higher pricing complementarity generates greater inflation persistence, our model successfully replicates the observed negative correlation between inflation persistence and market concentration across sectors. |
| Date: | 2021–10 |
| URL: | http://d.repec.org/n?u=RePEc:tcr:wpaper:e165&r= |
| By: | Philippe Bich (Centre d'Economie de la Sorbonne, Paris School of Economics); Julien Fixary (Centre d'Economie de la Sorbonne, Université Paris 1 Panthéon-Sorbonne) |
| Abstract: | In 1971, Robert Wilson ([19]) proved that "almost all" finite games have an odd number of mixed Nash equilibria (oddness theorem). Since then, several other proofs have been given, but always for mixed extensions of finite games. In this paper, we prove oddness theorem for large classes of polynomial payoff functions and semi-algebraic sets of strategies, and we provide some applications to recent models |
| Keywords: | Nash equilibria; polynomial payoff functions; generic oddness |
| JEL: | C02 C62 C72 D85 |
| Date: | 2021–08 |
| URL: | http://d.repec.org/n?u=RePEc:mse:cesdoc:21027&r= |
| By: | Hakan Yilmazkuday (Department of Economics, Florida International University) |
| Abstract: | This paper investigates the effects of inflation on per capita income growth for 36 developed and developing countries by using structural vector autoregression models that are robust to the consideration of endogeneity by construction. The results show evidence for heterogeneity of such effects across countries that are shown to be further connected to the strength of their institutions. While the effects of inflation on growth are negative and significant in countries with stronger institutions, they are positive and significant in countries with weaker institutions. |
| Keywords: | Economic Growth, Institutions, Inflation, Structural VAR |
| JEL: | O11 O23 O43 |
| Date: | 2021–09 |
| URL: | http://d.repec.org/n?u=RePEc:fiu:wpaper:2119&r= |
| By: | Davis, John B. (Department of Economics Marquette University) |
| Abstract: | Abstract: This paper is a contribution to the Erasmus Journal of Economics and Philosophy symposium on Dasgupta and Goyal’s “Narrow Identities†(2019) that models how individuals develop social identities. They do not distinguish categorical and relational social identities, model only social group social identities, minimize intersectionality (having multiple social group identities), and ignore inter-relational, social role social identities. In a club theory-like analysis, they portray the world as locked into polarized social group rivalries, where democracy matters little compared to social group loyalty. A problem with explaining social identity only in terms of social group identity is that the ‘identify with’ basis of social group loyalty undermines saying people are distinct individuals. Dasgupta and Goyal use the standard circular preferences conception of what makes people distinct individuals, so they cannot say individuals do not disappear into social groups. However, a relational social roles-based social identity analysis offers a way of explaining how people can be distinct individuals and have social identities, particularly where social group identities are connected to social role identities. This analysis is outlined using a distinction between relatively closed and relatively open behavioral domains. |
| Keywords: | social identity, social groups, social roles |
| JEL: | B41 B50 |
| Date: | 2021–09 |
| URL: | http://d.repec.org/n?u=RePEc:mrq:wpaper:2021-08&r= |
| By: | Dimitriadou, Athanasia (University of Derby); Agrapetidou, Anna (Democritus University of Thrace, Department of Economics); Gogas, Periklis (Democritus University of Thrace, Department of Economics); Papadimitriou, Theophilos (Democritus University of Thrace, Department of Economics) |
| Abstract: | Credit Rating Agencies (CRAs) have been around for more than 150 years. Their role evolved from mere information collectors and providers to quasi-official arbitrators of credit risk throughout the global financial system. They compiled information that -at the time- was too difficult and costly for their clients to gather on their own. After the 1929 big market crash, they started to play a more formal role. Since then, we see a growing reliance of investors on the CRAs ratings. After the global financial crisis of 2007, the CRAs became the focal point of criticism by economists, politicians, the media, market participants and official regulatory agencies. The reason was obvious: the CRAs failed to perform the job they were supposed to do financial markets, i.e. efficient, effective and prompt measuring and signaling of financial (default) risk. The main criticism was focusing on the “issuer-pays system”, the relatively loose regulatory oversight from the relevant government agencies, the fact that often ratings change ex-post and the limited liability of CRAs. Many changes were implemented to the operational framework of the CRAs, including public disclosure of CRA information. This is designed to facilitate "unsolicited" ratings of structured securities by rating agencies that are not paid by the issuers. This combined with the abundance of data and the availability of powerful new methodologies and inexpensive computing power can bring us to the new era of independent ratings: The not-for-profit Independent Credit Rating Agencies (ICRAs). These can either compete or be used as an auxiliary risk gauging mechanism free from the problems inherent in the traditional CRAs. This role can be assumed by either public or governmental authorities, national or international specialized entities or universities, research institutions, etc. Several factors facilitate today the transition to the ICRAs: the abundance data, cheaper and faster computer processing the progress in traditional forecasting techniques and the wide use of new forecasting techniques i.e. Machine Learning methodologies and Artificial Intelligence systems. |
| Keywords: | Credit rating agencies; banking; forecasting; support vector machines; artificial intelligence |
| JEL: | C02 C15 C40 C45 C54 E02 E17 E27 E44 E58 E61 G20 G23 G28 |
| Date: | 2021–10–04 |
| URL: | http://d.repec.org/n?u=RePEc:ris:duthrp:2021_009&r= |
| By: | Isaac Baley; Laura Veldkamp |
| Abstract: | We survey work using Bayesian learning in macroeconomics, highlighting common themes and new directions. First, we present many of the common types of learning problems agents face---signal extraction problems---and trace out their effects on macro aggregates, in different strategic settings. Then we review different perspectives on how agents get their information. Models differ in their motives for information acquisition and the cost of information, or learning technology. Finally, we survey the growing literature on the data economy, where economic activity generates data and the information in data feeds back to affect economic activity. |
| JEL: | E0 G14 |
| Date: | 2021–10 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:29338&r= |
| By: | Nezih Guner (CEMFI, Centro de Estudios Monetarios y Financieros); Remzi Kaygusuz (Sabancy University); Gustavo Ventura (Arizona State University) |
| Abstract: | The U.S. spends non trivially on non-medical transfers for its working-age population in a wide range of programs that support low and middle-income households. How valuable are these programs for U.S. households? Are there simpler, welfare-improving ways to transfer resources that are supported by a majority? What are the macroeconomic effects of such alternatives? We answer these questions in an equilibrium, life-cycle model with single and married households who face idiosyncratic productivity risk, in the presence of costly children and potential skill losses of females associated with non-participation. Our findings show that a potential revenue-neutral elimination of the welfare state generates large welfare losses in the aggregate. Yet, most households support eliminating current transfers since losses are concentrated among a small group. We find that a Universal Basic Income program does not improve upon the current system. If instead per-person transfers are implemented alongside a proportional tax, a Negative Income Tax experiment, there are transfer levels and associated tax rates that improve upon the current system. Providing per-person transfers to all households is quite costly, and reducing tax distortions helps to provide for additional resources to expand redistribution. |
| Keywords: | Taxes and transfers, household labor supply, income risk, negative income tax. |
| JEL: | E62 H24 H31 |
| Date: | 2021–07 |
| URL: | http://d.repec.org/n?u=RePEc:cmf:wpaper:wp2021_2107&r= |
| By: | Kala Krishna; Carlos Salamanca; Yuta Suzuki; Christian Volpe Martincus |
| Abstract: | Free trade or preferential trade areas (PTAs) allow importers who belong to the area to export to each other while paying zero or preferential tariffs as long as Rules of Origin (ROOs) are met. Meeting them is costly not only in terms of production costs but also in terms of documentation costs. We ask if these fixed costs of documentation change over time with the experience of the firm in obtaining preferential tariffs. We explore this using a unique importer-exporter matched transaction-level customs data set on a group of Latin American countries. Our estimating equation is model-based and shows that these fixed costs depend on the history of preference utilization. Most of the effect comes from experience in the same product and same partner, with some spillover to other partners buying the same product. There is little learning from experience in other products and other partners. When considering products that have been under preferences for a while, some learning might have occurred prior to the start of our data. Using a natural experiment in Argentina, where some products were newly brought under preferences, we show that learning is indeed larger for such products. As facilitating preference use today also makes it easier to use preferences in the future, interventions early on in the life of the FTA to reduce such costs would be more effective. |
| JEL: | F02 F13 F14 F68 N76 |
| Date: | 2021–10 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:29319&r= |
| By: | Teresa Ghilarducci; Zachary Knauss; Richard McGahey; William Milberg; Drew Landes; Edward Nilaj (Schwartz Center for Economic Policy Analysis (SCEPA)) |
| Abstract: | We assess economics research and teaching frameworks in the United States by examining how knowledge is produced and ranked, the flaws and strengths of heterodox economic theory; and how students are trained, especially for careers in economic policy. We challenge the meaning of established terminology such as ‘heterodoxy’ and ‘mainstream’ by investigating their utility as a marker and to illuminate major barriers to the successful adoption of alternative economic theories in academia and the public discourse. Based on interviews with experienced economists working with heterodox paradigms in both mainstream and heterodox institutions, we identify three barriers 1) Neoclassical hegemony, 2) Weakness of heterodox theory, and 3) Pedagogy and training in economics. |
| Keywords: | Heterodox economics; pedagogy and training; cross discipline synthesis |
| JEL: | H55 J26 J32 |
| Date: | 2021–03 |
| URL: | http://d.repec.org/n?u=RePEc:epa:cepawp:2021-01&r= |
| By: | Henry Aray (Department of Economic Theory and Economic History, University of Granada.); Luis Pedagua (University of Leon) |
| Abstract: | The objective of this paper is to test the relationship between de- centralization and economic growth across states. A novel methodol- ogy is applied that allows obtaining thresholds in certain variables to classify the regions into regimes (high or low). Data for the regions of Spain over the period 1986-2010 are used. In general, the results point to a positive relationship between fiscal decentralization and economic growth in regions with low public infrastructure stock per efficient worker, high human capital per worker and low total factor produc- tivity (TFP). In addition, in regions with low public infrastructure stock per efficient worker and high human capital, a negative relation- ship between administrative decentralization and economic growth is found. |
| Keywords: | TFP; Spain; Panel Data. |
| Date: | 2021–09–28 |
| URL: | http://d.repec.org/n?u=RePEc:gra:wpaper:21/08&r= |
| By: | Kristin Forbes; Joseph Gagnon; Christopher G. Collins |
| Abstract: | This paper finds 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. |
| JEL: | E31 E37 E52 E58 F62 |
| Date: | 2021–10 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:29323&r= |
| By: | Bao Hoang Nguyen (School of Economics, University of Queensland, Brisbane, Qld 4072, Australia); Léopold Simar (Institut de Statistique, Biostatistique et Sciences Actuarielles, Université Catholique de Louvain.); Valentin Zelenyuk (School of Economics and Centre for Efficiency and Productivity Analysis (CEPA) at The University of Queensland, Australia) |
| Abstract: | Asymptotic statistical inference on productivity and production efficiency, using nonparametric envelopment estimators, is now available thanks to the basic central limit theorems (CLTs) developed in Kneip et al. (2015). They provide asymptotic distributions of averages of Data Envelopment Analysis (DEA) and Free Disposal Hull (FDH) estimators of production efficiency. As shown in their Monte-Carlo experiments, due to the curse of dimensionality, the accuracy of the normal approximation is disappointing when the sample size is not large enough. Simar & Zelenyuk (2020) have suggested a simple way to improve the approximation by using a more appropriate estimator of the variances. In this paper we suggest another way to improve the approximation, by smoothing out the spurious values of efficiency estimates when they are in a neighborhood of 1. This results in sharpening the data for observations near the estimated efficient frontier. The method is very easy to implement and does not require more computations than the original method. We compare our approach using Monte-Carlo experiments, both with the basic method and with the improved method suggested in Simar & Zelenyuk (2020) and in both cases we observe significant improvements. We show also that the Simar & Zelenyuk (2020) idea can also be adapted to our sharpening method, bringing additional improvements. We illustrate the method with some real data sets. |
| Keywords: | Data Envelopment Analysis (DEA), Free Disposal Hull (FDH), Production Efficiency, Statistical Inference |
| Date: | 2021–09 |
| URL: | http://d.repec.org/n?u=RePEc:qld:uqcepa:168&r= |
| By: | Campenhout, Bjorn Van |
| Keywords: | Agricultural Finance, International Relations/Trade |
| Date: | 2021–08 |
| URL: | http://d.repec.org/n?u=RePEc:ags:iaae21:313806&r= |
| By: | Srhoj, Stjepan; Dragojević, Melko |
| Abstract: | Public procurement contracts (PPCs) of goods, services and works is about one tenth of global gross domestic product. Much research has been conducted on government spending and its aggregate effects, but evidence is scarce at the micro-level. This study exploits sealed-bid PPC auctions of construction works, discontinuity in bidders' win margin and firms' daily employment variation to provide a causal estimate of winning a PPC on firms' employment. Winning a PPC has a small positive impact on a firm's short-run employment. The study investigates mechanisms and heterogeneity that can explain the initial small magnitudes. No compelling evidence is found in favour of political connections, an information leakage channel or PPC size as explanations for the small magnitude. A investigation of longer period shows the impact phases out in less than a year. The lack of a long-term impact is due to runners-up winning more PPCs and runners-up substituting towards more market revenue in the year after closely losing a PPC. Finally, the impacts are concentrated in construction firms that conduct the majority of contracted work in-house. The final estimation shows the effect is about four new employees per PPC with a public cost per job created at €45,200 [€34,200 - €66,200]. |
| Keywords: | public procurement; auction; firms; jobs; employment |
| JEL: | D22 D44 H57 M51 |
| Date: | 2021–10 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:109997&r= |
| By: | Andre Luduvice |
| Abstract: | What are the consequences of a nationwide reform of a transfer system based on means-testing toward one of unconditional transfers? I answer this question with a quantitative model to assess the general equilibrium, inequality, and welfare effects of substituting the current US income security system with a universal basic income (UBI) policy. To do so, I develop an overlapping generations model with idiosyncratic income risk that incorporates intensive and extensive margins of the labor supply, on-the-job learning, and child-bearing costs. The tax-transfer system closely mimics the US design. I calibrate the model to the US economy and conduct counterfactual analyses that implement reforms toward a UBI. I find that an expenditure-neutral reform has moderate impacts on agents’ labor supply response but induces aggregate capital and output to grow due to larger precautionary savings. A UBI of $1,000 monthly requires a substantial increase in the tax rate of consumption used to clear the government budget and leads to an overall decrease in the macroeconomic aggregates, stemming from a drop in the labor supply. In both cases, the economy has more equally distributed disposable income and consumption. The UBI economy constitutes a welfare loss at the transition if it is expenditure-neutral and results in a gain in the second scenario. |
| Keywords: | Universal Basic Income; Social Insurance; Overlapping Generations; Labor Supply |
| JEL: | E21 H24 J22 |
| Date: | 2021–09–28 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedcwq:93087&r= |
| By: | Christiane Baumeister (University of Notre Dame; University of Pretoria; NBER; CEPR) |
| 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. |
| Keywords: | futures markets, risk premia, monetary policy, commodities, market expectations, financial markets, asset pricing, return regressions, affine term structure models, risk adjustment, model uncertainty, forecasting, expectational shocks |
| JEL: | C52 E31 E43 E52 G14 Q43 |
| Date: | 2021–09 |
| URL: | http://d.repec.org/n?u=RePEc:pre:wpaper:202163&r= |
| By: | Gary B. Gorton; Ping He |
| Abstract: | Based on archival and survey data we show that the maturity of U.S. business loans has been continuously increasing since the mid-1930s when banks invented the term loan. Concurrently, bank innovation first involved the invention of credit analysis and covenant design. Later, bank innovation included the advent of loan sales, increased loan syndications, the opening of the leveraged loan market, and the securitization of loans in collateralized loan obligations. We estimate and calibrate a model of bank innovation to determine the quantitative contribution of bank innovation to economic growth. |
| JEL: | O0 O11 O30 O43 |
| Date: | 2021–10 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:29326&r= |
| By: | Nyborg, Karine (Dept. of Economics, University of Oslo) |
| Abstract: | I demonstrate a straightforward but apparently widely unrecognized implication of the standard requirements for perfect competition: an economy in which consumers can choose to learn is generally not perfectly competitive. In particular, if endogenous welfare relevant learning is feasible, the economy cannot be perfectly competitive unless identical learning choices by all consumers are guaranteed. If the new information is not shared with everyone, asymmetric information arise; if information is shared, externalities arise. The standard conditions for the two fundamental welfare theorems, thus, implicitly preclude heterogeneous welfare relevant learning decisions. |
| Keywords: | Perfect competition; fundamental welfare theorems; learning; symmetric information; externalities |
| JEL: | D41 D50 D60 D61 D62 D82 |
| Date: | 2021–05–03 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:osloec:2021_002&r= |
| By: | Julian Diaz Saavedra (Department of Economic Theory and Economic History, University of Granada.) |
| Abstract: | The gap in the life expectancy of the elderly across educational groups is high, and this will probably increase over the coming decades. In this article, we use a computable overlapping generations model economy to show that the long-term link between heterogeneity in longevity and education could translate into an implicit tax/subsidy on the expected lifetime benefits to lifetime payroll taxes ratio, with rates around 10 percent, and that such rates pervert redistributive objectives of pension systems. We then analyze some parametric changes aimed at restoring the progressiveness of these systems in the long run, and find that a higher minimum pension or changes in the pension benefit formula go a long way as a tools to restore the system’s long-term progressivity. |
| Keywords: | Computable general equilibrium, social security reform, redistribution. |
| JEL: | C68 H55 H23 |
| Date: | 2021–09–26 |
| URL: | http://d.repec.org/n?u=RePEc:gra:wpaper:21/07&r= |
| By: | Andreas Binder (MathConsult GmbH, Linz, Austria); Onkar Jadhav (MathConsult GmbH, Linz, Austria; Institute of Mathematics, TU Berlin, Berlin, Germany); Volker Mehrmann (Institute of Mathematics, TU Berlin, Berlin, Germany) |
| Abstract: | A parametric model order reduction (MOR) approach for simulating the high dimensional models arising in financial risk analysis is proposed on the basis of the proper orthogonal decomposition (POD) approach to generate small model approximations for the high dimensional parametric convection-diffusion reaction partial differential equations (PDE). The proposed technique uses an adaptive greedy sampling approach based on surrogate modeling to efficiently locate the most relevant training parameters, thus generating the optimal reduced basis. The best suitable reduced model is procured such that the total error is less than a user-defined tolerance. The three major errors considered are the discretization error associated with the full model obtained by discretizing the PDE, the model order reduction error, and the parameter sampling error. The developed technique is analyzed, implemented, and tested on industrial data of a puttable steepener under the two-factor Hull-White model. The results illustrate that the reduced model provides a significant speedup with excellent accuracy over a full model approach, demonstrating its potential applications in the historical or Monte Carlo value at risk calculations. |
| Date: | 2021–10 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2110.00774&r= |
| By: | Dorje C. Brody |
| Abstract: | A modelling framework, based on the theory of signal processing, for characterising the dynamics of systems driven by the unravelling of information is outlined, and is applied to describe the process of decision makings. The model input of this approach is the specification of the flow of information. This enables the representation of (i) reliable information, (ii) noise, and (iii) disinformation, in a unified framework. Because the approach is designed to characterise the dynamics of the system under study, it is possible to quantify the impact of information control, including those resulting from the dissemination of disinformation. It is shown that if a decision maker assigns an exceptionally high weight on one of the alternative realities, then under the Bayesian logic their perception hardly changes in time even if evidences presented indicate that this alternative corresponds to a false reality. By observing the role played by noise in other areas of natural sciences, a new approach to tackle the dark forces of fake news is proposed. |
| Date: | 2021–10 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2110.03432&r= |
| By: | Pulapre Balakrishnan (Ashoka University); M Parameswaran (Centre for Developing Studies) |
| Abstract: | India has seen lower inflation by historical standards, for the past five years. This has been attributed by some observers to the adoption of inflation targeting by the country’s central bank, the Reserve Bank of India. In particular, it has been asserted that the taming of inflation reflects the anchoring of expectations of it through inflation targeting. We evaluate these claims. Our estimates indicate that there is no basis to the claim that inflation has been lowered due to the anchoring of expectations. On the other hand, we are able to fully account for the trajectory of inflation in India in terms of an explanation of inflation other than the one on which inflation targeting is premised. |
| Keywords: | Inflation targeting, Inflation models, Monetary policy, India, Structuralist macroeconomics |
| Date: | 2021–10 |
| URL: | http://d.repec.org/n?u=RePEc:ash:wpaper:66&r= |
| By: | Alessandro Dalla Benetta (European Commission - JRC); Maciej Sobolewski (European Commission - JRC); Daniel Nepelski (European Commission - JRC) |
| Abstract: | This report provides estimates of AI investments in EU27 in 2018 and for 2019. It considers AI as a general-purpose technology and, besides direct investments in the development and adoption of AI technologies, includes also investments in complementary assets and capabilities such as skills, data, product design and organisational capital among AI investments. According to the estimates, in 2019, EU invested between EUR 7.9 billion and EUR 9 billion in AI. Compared to 2018, this represents an increase by 39%. If the EU maintains a similar level of growth, by 2025 the AI investments will reach EUR 22.4 billion and surpass the EUR 20 billion target by over 10%. The EU AI investments concentrate in labour and human capital covered by the Skills investment target. Expenditures on AI-related Data and equipment account for 30%. R&D and Intangible assets account for 10% and 7% of the total EU AI investments respectively. The contribution of the European public sector is considerable and accounts for 41% of total AI investments in 2019. |
| Keywords: | General Purpose Technology, GPT, Artificial Intelligence, AI, digital technologies, investments, intangibles, Europe |
| Date: | 2021–09 |
| URL: | http://d.repec.org/n?u=RePEc:ipt:iptwpa:jrc126477&r= |
| By: | Rünstler, Gerhard |
| Abstract: | Using new quarterly narrative evidence, this paper examines the macroeconomic impact of reforms of unemployment benefits (UB) and employment protection legislation (EPL) in the euro area from a Bayesian narrative panel VAR. The approach complements existing micro-econometric evidence by aligning short- and mediumterm effects in a unified framework and assessing state dependencies. Liberalising reforms result in temporary wage declines and highly persistent increases in economic activity and employment. In contrast to UB reforms, the effects of EPL reforms on employment emerge only gradually. JEL Classification: E32, J08, O43 |
| Keywords: | discriminant regression, employment protection legislation, narrative identification, unemployment benefits |
| Date: | 2021–10 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20212592&r= |
| By: | Andreas Kammerlander; Günther G. Schulze |
| Abstract: | We show, for the first time, a causal effect of local economic growth on infant mortality. We use geo-referenced data for non-migrating mothers from 46 developing countries and 128 DHS survey rounds and combine it with nighttime luminosity data at a granular level. Using mother fixed effects we show that an increase in local economic activity significantly reduces the probability that the same mother loses a further child before its first birthday. |
| Keywords: | local economic growth, child mortality, nighttime lights |
| JEL: | I15 O18 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_9315&r= |
| By: | A. BAUER (Insee); - M. ROTEMBERG (New York University) |
| Abstract: | Corporate tax codes can have notches; values where after-tax profits decrease in before-tax sales. Firms endogenously respond to notches, leading to excess mass in the firm-size distribution. We study a 1997 policy reform in which the French government implemented a transient tax reform that increased profit taxes by 15% for firms with over 50 million Francs in turnover. We use two distinct and complementary approaches to estimate the extent of tax avoidance: (a) using firms far away from (and therefore unlikely to be responsive to) the tax notch in the same year and (b) the entire firm size distribution before the tax reform. Both strategies generate similar results for the extent of tax avoidance. We show that the firms who avoid the tax are the ones with the lowest calibrated adjustment costs and those with the larger profits. The tax avoidance behavior comes mostly from increases in inventories and decreases in sales. |
| Keywords: | Business Taxes, Tax Evasion, Firm Production |
| JEL: | H25 H26 H32 D24 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:nse:doctra:g2020-10&r= |
| By: | Vicente Esteve (Universidad de Valencia and Universidad de Alcalá, Spain); María A. Prats (Universidad de Murcia, Spain) |
| Abstract: | In this paper the dynamics of the Spanish public debt-GDP ratio is analysed during the period 1850-2020. We use a recent procedure to test for recurrent explosive behaviour (Phillips, Wu and Yu, 2011, and Phillips, Shi and Yu, 2015a, 2015b) in order to identify episodes of explosive public debt dynamics and also the episodes of fiscal adjustments over this long period. |
| Keywords: | Public debt; Fiscal sustainability; Explosiveness; Recursive unit root test; Spain; COVID-19 |
| JEL: | C12 C22 E62 H62 H63 |
| Date: | 2021–09 |
| URL: | http://d.repec.org/n?u=RePEc:eec:wpaper:2111&r= |
| By: | Mascagni, Giulia; Molla, Kiflu; Mengistu, Andualem |
| Abstract: | This paper explores the relationship between tax rates and tax evasion in a low-income country context: Ethiopia. By using transaction-level administrative trade data, we are able to provide an analysis that is largely comparable with the rest of the literature while also introducing two important innovations. First, we compare the elasticity of evasion to statutory tax rates and effective tax rates (ETRs). Most studies in the literature so far focused on the former. We show that ETRs are the most relevant parameter to explain evasion in contexts where exemptions are widespread, which results in a large divergence between ETRs and the statutory rates set out in the law. Second, we account for trade costs more precisely than the previous literature by adjusting the trade gap rather than controlling for proxies. We argue that this new approach to accounting for trade costs is superior to those previously adopted in the literature. |
| Keywords: | Finance, |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:idq:ictduk:16548&r= |
| By: | Yasin Kürsat Önder (-) |
| Abstract: | This paper quantitatively investigates the trade-offs of introducing an extra line of credit in an emergency situation. I show that temporary access to these lines for up to 3 percent of mean annual income during low liquidity periods yields long-term effects with a lower cost of borrowing but with incentives to accumulate higher debt. Permanent access, however, has only short-lived effects because temporal arrangement better completes the markets and induces market discipline as the government worries about rollover risk once the low liquidity period ends. I also present in an event analysis that Mexico’s arrangement of swap lines with the Federal Reserve amid the global financial crisis in 2008 helped avoid a potential debt crisis. |
| Keywords: | sovereign default, liquidity shocks, swap lines, sudden stops |
| JEL: | F30 F34 |
| Date: | 2021–10 |
| URL: | http://d.repec.org/n?u=RePEc:rug:rugwps:21/1029&r= |
| By: | Corlin Christensen, Rasmus; Hearson, Martin; Randriamanalina, Tovony |
| Abstract: | For half a century, the most influential international rules and standards for taxing multinational corporations have been formulated by a select group of developed countries, the OECD, with lower-income countries on the outside. Since 2013, this has changed: decision making at the OECD has moved to the ‘Inclusive Framework’ (IF), which today encompasses 137 jurisdictions. There is a lively debate about the extent to which the IF is truly a level playing field for lower-income countries. During late 2019 and 2020, we interviewed 48 negotiators, policymakers and other stakeholders in the IF. We also examined attendance records from OECD working party meetings and published policy documents. We assessed seven OECD and IF policy case studies and one comparison case at the United Nations (UN) Tax Committee (Table 1). This is the first comprehensive, micro-level, comparative account of lower-income countries in these institutions. Our study does not interrogate institutional legitimacy, but it does shed light on the appropriateness of particular institutional forms for addressing current cooperation needs. The IF’s expansion has made little difference to the number of lower-income countries attending meetings at which the practical technical policy work is done, and most members are fairly silent participants. This is partly because of well-documented structural obstacles not unique to the IF, but is exacerbated by some aspects of the OECD’s decision-making processes, such as the pace and intensity of discussions, the culture of policymaking, the costs of attending regular meetings in Paris, and the absence of routine and timely translation of documents and meetings. This can make the OECD a daunting environment for member state delegates, but especially for those from lower-income countries. In addition, many have joined with no intention of influencing standards, but rather in pursuit of technical assistance or prestige, or under coercion from the European Union. Summary of ICTD Working Paper 115 by Rasmus Corlin Christensen, Martin Hearson and Tovony Randriamanalina. |
| Keywords: | Economic Development, Finance, Globalisation, Governance, |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:idq:ictduk:15882&r= |
| By: | Dylan Balla-Elliott Author-1-Name-First: Dylan Author-1-Name-Last: Balla-Elliott (Harvard Business School); Zoë B. Cullen Author-2-Name-First: Zoë Author-2-Name-Last: Cullen (Harvard Business School, Entrepreneurial Management Unit); Edward L. Glaeser Author-3-Name-First: Edward Author-3-Name-Last: Glaeser (Harvard University); Michael Luca Author-4-Name-First: Michael Author-4-Name-Last: Luca (Harvard Business School, Negotiation, Organizations & Markets Unit); Christopher Stanton Author-5-Name-First: Christopher Author-5-Name-Last: Stanton (Harvard Business School, Entrepreneurial Management Unit) |
| Abstract: | The COVID-19 pandemic led to dramatic economic disruptions, including government-imposed restrictions that temporarily shuttered millions of American businesses. We use a nation-wide survey of thousands of small business owners to establish three main facts about business owners’ decisions to reopen at the end of the lockdowns. First, roughly 60% of firms planned to reopen within days of the end of legal restrictions, suggesting that the lockdowns were generally binding for businesses - although nearly 30% expected to delay their reopening by at least a month. Second, decisions to delay reopenings did not seem to be driven by concerns about employee or customer health; even businesses in high-proximity sectors with the highest health risks generally reported intentions to reopen as soon as possible. Third, pessimistic demand projections primarily explain delays among firms that could legally reopen. Owners expected demand to be one-third lower than before the crisis throughout the pandemic. Using experimentally induced shocks to perceived demand, we find that a 10% decline in expected demand results in a 1.5 percentage point (8%) increase in the likelihood that firms expected to remain closed for at least one month after being legally able to open. We use follow-up surveys to cross-validate expectations with realized outcomes. Overall, our results suggest that governments were setting more stringent guidelines for reopening, relative to what many businesses would have selected, suggesting that governments may have internalized costs of contagion that businesses did not. |
| Keywords: | COVID-19; demand forecasting; reopening |
| JEL: | D22 E32 I15 L23 |
| Date: | 2020–06 |
| URL: | http://d.repec.org/n?u=RePEc:hbs:wpaper:20-132&r= |
| By: | Aj Bostian (University of Tampere - University of Tampere); Christoph Heinzel (SMART-LERECO - Structures et Marché Agricoles, Ressources et Territoires - AGROCAMPUS OUEST - Institut Agro - Institut national d'enseignement supérieur pour l'agriculture, l'alimentation et l'environnement - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement) |
| Abstract: | Participants in an experiment can engage in unobservable asset integration, mentally incorporating their own non-experimental "field" resources into an otherwise controlled scenario. This paper extends asset integration to include intertemporal tradeoffs like consumption smoothing. A model of "lifecycle asset integration" shows that exogenous and endogenous field resources cause different interference patterns. Exogenous resources cannot be affected by the experiment, and so their interference can be controlled by accounting for their level. Endogenous resources, by contrast, are highly substitutable with the experiment, and their interference can be controlled only by modeling the entire experiment-field interaction. The model's practical implications are investigated in the context of three classic laboratory experiments on risk and time: one static (Holt and Laury, 2002) and two dynamic (Andersen et al., 2008; Andreoni and Sprenger, 2012). As interference worsens, decisions in these tasks tend to exhibit a kind of attenuation bias toward less risk aversion and more patience. Interference occurs reliably when field resources are on household scales, but amounts on the scale of pocket change can also cause problems. |
| Keywords: | Risk aversion,Consumption smoothing,Discount rate,Asset integration,Experiment |
| Date: | 2019–12–05 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-03358977&r= |
| By: | Astaiza-Gómez, José Gabriel |
| Abstract: | I estimate a demand model for online services of financial data, from a random parameters or mixed logit model, using a sample with searches at Bloomberg Terminals and at the EDGAR system. My preliminary results suggest that the substitution investors make of financial information providers, are affected by the subscription prices, investors' expectations on stock returns, and investors' income. |
| Keywords: | random parameters, open access services, subscription providers, market shares. |
| JEL: | D80 D82 D83 D84 G00 G14 G23 L86 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:110008&r= |
| By: | Ximing Wu |
| Abstract: | We propose nonparametric Bayesian estimators for causal inference exploiting Regression Discontinuity/Kink (RD/RK) under sharp and fuzzy designs. Our estimators are based on Gaussian Process (GP) regression and classification. The GP methods are powerful probabilistic modeling approaches that are advantageous in terms of derivative estimation and uncertainty qualification, facilitating RK estimation and inference of RD/RK models. These estimators are extended to hierarchical GP models with an intermediate Bayesian neural network layer and can be characterized as hybrid deep learning models. Monte Carlo simulations show that our estimators perform similarly and often better than competing estimators in terms of precision, coverage and interval length. The hierarchical GP models improve upon one-layer GP models substantially. An empirical application of the proposed estimators is provided. |
| Date: | 2021–10 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2110.00921&r= |
| By: | Friedman, Dan; Rabanal, Jean Paul (University of Stavanger); Rud, Olga A (University of Stavanger); Zhao, Shuchen |
| Abstract: | Can an efficient correlated equilibrium emerge without any exogenous benevolent agent providing coordinating signals? Theoretical work in adaptive dynamics suggests a positive answer, which we test in a laboratory experiment. In the well-known Chicken game, we observe time average play that is close to the asymmetric pure Nash equilibrium in some treatments, and in other treatments we observe collusive play. In a game resembling rock-paper-scissors or matching pennies, we observe time average play close to a correlated equilibrium that is more efficient than the unique Nash equilibrium. Estimates and simulations of adaptive dynamics capture much of the observed regularities. |
| Keywords: | Correlated equilibrium; Laboratory experiment; Adaptive dynamics |
| JEL: | A00 |
| Date: | 2021–09–29 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:stavef:2021_002&r= |
| By: | Ettore Gallo (Department of Economics, New School for Social Research) |
| Abstract: | The paper provides an analytical solution to the differential equation that regulates the motion of the neo-Kaleckian model in the short run. After presenting a simple open economy neo-Kaleckian model with government activity, the paper analytically derives an expression for the time of adjustment, defined as the time required for the system to make a k-percent adjustment from one steady-state to another. The solution shows that there is an inverse relationship between the strength of the Keynesian stability condition and the the time of adjustment. Last, the model is calibrated for the US, showing that vicinity of the new equilibrium is reached after a period of about 4 quarters. By formally analyzing the out-of-equilibrium trajectory of the neo-Kaleckian model, this contribution moves away from the method of comparative dynamics and provides a historical-time representation of the model's traverse. |
| Keywords: | Neo-Kaleckian Model, time, adjustment period, traverse, effective demand, growth, distribution |
| Date: | 2021–10 |
| URL: | http://d.repec.org/n?u=RePEc:new:wpaper:2117&r= |
| By: | Samba Diop (Alioune Diop University, Bambey, Senegal); Simplice A. Asongu (Yaoundé, Cameroon); Vanessa S. Tchamyou (Yaoundé, Cameroon) |
| Abstract: | This paper measures the macroeconomic impact of recent political crisis, protest and uprisings in Africa with the generalized synthetic control method and evaluates the role played by natural resource dependence on the modulation of the impact. We find that political crisis, protests and uprisings have a significant and negative impact on economic growth while the impact is positive on investment and price level. For economic growth, the deviation of the actual series from the counterfactual is negative, instantaneous, persistent and highly significant; indicating non-negligible costs of the shock. Indeed, dependence on natural resources amplifies the negative effect of political crisis, protests and uprisings on GDP. Finally, the more the treated country depends on natural resources, the more it becomes resilient from the investment losses caused by political crisis. |
| Keywords: | political conflicts; economic growth; Africa |
| JEL: | F52 K42 O17 O55 P16 |
| Date: | 2021–01 |
| URL: | http://d.repec.org/n?u=RePEc:exs:wpaper:21/060&r= |
| By: | Stanislav Anatolyev; Vladimir Pyrlik |
| Abstract: | Copulas are a convenient framework to synthesize joint distributions, particularly in higher dimensions. Currently, copula-based high dimensional settings are used for as many as a few hundred variables and require large data samples for estimation to be precise. In this paper, we employ shrinkage techniques for large covariance matrices in the problem of estimation of Gaussian and t copulas whose dimensionality goes well beyond that typical in the literature. Specifically, we use the covariance matrix shrinkage of Ledoit and Wolf to estimate large matrix parameters of Gaussian and t copulas for up to thousands of variables, using up to 20 times lower sample sizes. The simulation study shows that the shrinkage estimation significantly outperforms traditional estimators, both in low and especially high dimensions. We also apply this approach to the problem of allocation of large portfolios. |
| Keywords: | Gaussian copula; t copula; high dimensionality; large covariance matrices; shrinkage; portfolio allocation; |
| JEL: | C31 C46 C55 C58 |
| Date: | 2021–08 |
| URL: | http://d.repec.org/n?u=RePEc:cer:papers:wp699&r= |