|
on Central and Western Asia |
| By: | DeAngelo, Harry (U of Southern California); Goncalves, Andrei S. (U of North Carolina); Stulz, Rene M. (Ohio State U) |
| Abstract: | This paper documents new and empirically important interactions between cash-balance and leverage dynamics. Cash ratios typically vary widely over extended horizons, with dynamics remarkably similar to (and complementary with) those of capital structure. Leverage and cash dynamics interact approximately as predicted by the internal-versus-external funding regimes in Myers and Majluf (1984). Leverage is quite volatile when cash ratios are stable and vice-versa, while net-debt ratios are almost always volatile. Most firms increase leverage sharply as cash balances (internal funds) become scarce. Capital structure models that extend Hennessy and Whited (2005) to include cash-balance dynamics explain some, but not all, aspects of the observed relation between cash squeezes and leverage increases. |
| JEL: | G31 G33 G35 |
| Date: | 2021–06 |
| URL: | http://d.repec.org/n?u=RePEc:ecl:ohidic:2021-10&r= |
| By: | Njangang, Henri; Asongu, Simplice; Tadadjeu, Sosson; Nounamo, Yann |
| Abstract: | This paper aims to investigate the effect of financial development on economic complexity using a panel dataset of 24 African countries over the period 1983-2017. The empirical evidence is based on two different approaches. First, we adopt the Hoechle (2007) procedure which produces Driscoll-Kraay standard errors to account for heteroscedasticity and cross–sectional dependence. Second, we implement the system Generalized Method of Moments to account for endogeneity. The results show that financial development increases economic complexity in Africa. Looking at the regional difference, the results show that this effect is less beneficial for SSA countries. |
| Keywords: | Financial development, Economic complexity, Panel data analysis, Africa |
| JEL: | E02 G20 G24 O55 P14 |
| Date: | 2021–01 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:110132&r= |
| By: | Ahmet Faruk Aysan (HBKU - Hamad Bin Khalifa University); Ali Yavuz Polat (Abdullah Gul University [Kayseri, Turkey]); Hasan Tekin; Ahmet Semih Tunali |
| Abstract: | This study aims to investigate the effect of fear sentiment with a novel data set on Bitcoin's return, volatility and transaction volume. We divide the sample into two subperiods in order to capture the changing dynamics during the Covid-19 pandemic. We retrieve the novel fear sentiment data from Thomson Reuters MarketPsych Indices (TRMI). We denote the subperiods as pre-and post-COVID19 considering January 13th, 2020, when first Covid-19 confirmed case was reported outside China. We employ bivariate vector autoregressive (VAR) models given below with lag-length k, to investigate the dynamics between Bitcoin variables and fear sentiment.Bitcoin market measures have dissimilar dynamics before and after the Coronavirus outbreak. The results reveal that due to the excessive uncertainty led by the outbreak, an increase in fear sentiment negatively affects the Bitcoin returns more persistently and significantly. For the post-COVID-19 period, an increase in fear also results in more fluctuations in transaction volume while its initial and cumulative effects are both negative. Due to extreme uncertainty caused by the COVID-19 pandemic, investors may trade more aggressively in the initial phases of the shock. |
| Keywords: | Bitcoin's return,COVID-19,fear sentiment,transaction volume,TRMI,volatility JEL Codes: C22,G12,G18,G41 |
| Date: | 2021–09–26 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:hal-03354930&r= |
| By: | Katja Kalkschmied (University of Graz, Austria); Joern Kleinert (University of Graz, Austria); Manuela Mahecha-Alzate (University of Geneva, Switzerland) |
| Abstract: | Institutions are pervasive and occur in many shapes. They are embodied in rules, norms, organizations and material artifacts such as money. In this paper, we analyze the most important institutions in market economies: markets and firms. We draw on Aoki's (2001) game-theoretic approach to formalize how markets and firms are built, sustained and changed in a decentralized manner by decisions of private parties. Markets and firms are therefore private-order institutions and distinctively different from pragmatic institutions which are outcomes of centralized planning by the state. Yet, the decentralized building of private-order institutions is critically influenced by the state. We discuss how legislation and specific state interventions can direct private-order institution-building in a decentralized, market-based economy. We further discuss the role of ideas for state interventions to be successful. |
| Keywords: | endogenous institutions; private-order; decentralized institution-building; state interventions |
| JEL: | E02 L22 P51 |
| Date: | 2021–09 |
| URL: | http://d.repec.org/n?u=RePEc:grz:wpaper:2021-10&r= |
| By: | Danielsson, Jon; Macrae, Robert; Uthemann, Andreas |
| Abstract: | Artificial intelligence (AI) is rapidly changing how the financial system is operated, taking over core functions for both cost savings and operational efficiency reasons. AI will assist both risk managers and the financial authorities. However, it can destabilize the financial system, creating new tail risks and amplifying existing ones due to procyclicality, unknown-unknowns, the need for trust, and optimization against the system. |
| Keywords: | ES/K002309/1; EP/P031730/1; UKRI fund |
| JEL: | F3 G3 |
| Date: | 2021–08–28 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:111601&r= |
| By: | Jozef Konings (Nazarbayev University, Graduate School of Business); Galiya Sagyndykova (Nazarbayev University, Department of Economics); Venkat Subramanian (Nazarbayev University, Graduate School of Business); Astrid Volckaert (KU Leuven, Faculteit Economie en Bedrijfswetenschappen, Vlaams Instituut voor Economie en Samenleving (VIVES)) |
| Abstract: | This paper analyzes the importance of idiosyncratic firm specific shocks for explaining macroeconomic fluctuations in an emerging economy. To this end, we use detailed quarterly firm level data to document that the firm size distribution is fat-tailed and that idiosyncratic shocks of the largest 30 firms appear to explain nearly 80% of the growth in aggregate total factor productivity. This confirms earlier research for the U.S. of the "granular hypothesis" (Gabaix, 2011). Thus individual firm shocks do not average out in the aggregate as is assumed in most of the macroeconomic literature, instead, macroeconomic questions can be answered by analyzing the behavior of the largest firms. |
| Keywords: | granularity, firm heterogeneity, aggregate fluctuations, Total Factor Productivity, transitional economies |
| JEL: | D24 E23 E32 L16 L25 P27 |
| Date: | 2021–10 |
| URL: | http://d.repec.org/n?u=RePEc:asx:nugsbw:2021-01&r= |
| By: | Sébastien Charles (LED - Laboratoire d'Economie Dionysien - UP8 - Université Paris 8 Vincennes-Saint-Denis); Eduardo Bastian; Jonathan Marie (CEPN - Centre d'Economie de l'Université Paris Nord - CNRS - Centre National de la Recherche Scientifique - USPC - Université Sorbonne Paris Cité - UP13 - Université Paris 13) |
| Abstract: | The article proposes a typology of inflation regimes that can be applied to any kind of economy based on the Post-Keynesian and structuralist literature. We identify three separate regimes: the low, moderate, and high inflation regimes. Hyperinflation is also defined and described. Each regime presents different characteristics. We identify the key role played by the distributive conflict between workers and capitalists in all the regimes, the role played by the indexation of wages on domestic prices in the moderate and high inflation regimes, and the specific roles played by the widespread indexation on a short term basis in the high inflation regime. Hyperinflation is explained by selffulfilling prophecies about exchange rate variations and by the rejection of the domestic currency. Our analysis underlines the fact that the current fear of inflation is largely groundless. |
| Keywords: | Inflation,Hyperinflation,Post-Keynesian analysis,Structuralist analysis |
| Date: | 2021–10–03 |
| URL: | http://d.repec.org/n?u=RePEc:hal:cepnwp:hal-03363240&r= |
| By: | Uzuntepe, Beren |
| Abstract: | Emerging and gaining significance due to the widespread use of the Internet and the power of social media, crowdfunding, via crowdfunding platforms, provides entrepreneurs with creative business ideas with the opportunity to reach extensive masses and to be able to directly access the financial resources that their projects require. Even though the interest in crowdfunding rises, the literature seems to lack enough research about these platforms. Addressing the platforms that bring together the entrepreneurs and the backers, this research aims to compare the reward-based crowdfunding platforms operating in Turkey with the international crowdfunding platforms. Containing the categories of technology and movie/video, this research discusses the differences between the most prominent crowdfunding platforms in the two countries. The findings of the research constitute importance due to the fact that it shows the way to the entrepreneurs, crowdfunding platforms, and backers while making their decisions, encourages participation in the campaigns, and sheds light on other studies about the subject. |
| Keywords: | Keywords: Crowdfunding, Entrepreneurial Finance, Online Platform, Reward Based Crowdfunding, KIA |
| JEL: | G2 G24 G3 G32 L2 L26 M1 M13 O3 O30 O34 P3 P34 P35 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:109966&r= |
| By: | Johannes Maier; Dominik S. Fischer |
| Abstract: | We theoretically show that there is a fundamental disconnect between the disposition effect, i.e., investors’ tendency to sell winning assets too early and losing assets too late, and its common empirical measure, namely a positive difference between the proportion of gains and losses realized. While its common measure cannot identify the disposition effect, it identifies the presence of some systematic bias. We further investigate the measure’s comparative statics regarding markets, investors’ information level, and their attention. Besides generating novel testable predictions, this analysis reveals that, in contrast to the measure’s sign, variations in its magnitude are informative for its cause. |
| Keywords: | disposition effect, rational benchmark, investor behaviour, behavioural biases, market segments, financial attention, information level |
| JEL: | D90 D91 D83 D84 G11 G40 G41 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_9334&r= |
| By: | Martin Iseringhausen (ESM) |
| Abstract: | This paper studies macroeconomic risks in a panel of advanced economies based on a stochastic volatility model in which macro-financial conditions shape the predictive growth distribution. We find sizable time variation in the skewness of these distributions, conditional on the macro-financial environment. Tightening financial conditions signal increasing downside risk in the short term, but this link reverses at longer horizons. When forecasting downside risk, the proposed model, on average, outperforms existing approaches based on quantile regression and a GARCH model, especially at short horizons. In forecasting upside risk, it improves the average accuracy across all horizons up to four quarters ahead. The suggested approach can inform policy makers' assessment of macro-financial vulnerabilities by providing a timely signal of shifting risks and a quantification of their magnitude. |
| Keywords: | Bayesian analysis, downside risk, macro-financial linkages, time variation |
| JEL: | C11 C23 C53 E44 |
| Date: | 2021–06–10 |
| URL: | http://d.repec.org/n?u=RePEc:stm:wpaper:49&r= |
| By: | Mikhail Mamonov; Anna Pestova |
| Abstract: | How large are the macroeconomic effects of financial sanctions and how one can distinguish the sanction shocks from other aggregate shocks affecting the economy at the same time? We employ a Bayesian (S)VAR model to estimate the effects of the Western financial sanctions imposed on the Russian economy in 2014 (first wave) and 2017 (second wave). The sanctions decreased the Russia’s corporate external debt and raised the country spread, but their effects were confounded by falling oil prices in 2014 (negative terms-of-trade, TOT, shock) and rising oil prices in 2017. We begin disentangling the sanction and TOT effects with a conditional forecasting approach, in which we simulate pseudo out-of-sample projections of domestic macroeconomic variables conditioned (i) solely on the oil price changes and then (ii) on both oil prices and external debt deleveraging. For each endogenous variable, we treat the difference between the two projections as the effect of sanctions. We then apply a structural approach to identify sanction shocks. Our results consistently indicate that the sanction effects were negative and non-negligible across the two sanction waves, being sizeable for the financial variables (real interest rate and corporate external debt) and moderate for the real variables (output, consumption, investment, trade balance, and the ruble real exchange rate). We argue that the estimated effects of sanctions are in line with the theoretical predictions from the literature on country spread shocks in open economies. |
| Keywords: | financial sanctions; corporate external debt; country spread shocks; terms-of-trade shocks; Bayesian (S)VAR; sign restrictions; conditional forecasting; small open economy; |
| Date: | 2021–09 |
| URL: | http://d.repec.org/n?u=RePEc:cer:papers:wp704&r= |
| By: | Diana Zigraiova (ESM); Tomas Havranek (Charles University, Prague); Jiri Novak (Charles University, Prague) |
| Abstract: | A key theoretical prediction in financial economics is that under risk neutrality and rational expectations, a currency's forward rates should form unbiased predictors of future spot rates. Yet scores of empirical studies report negative slope coefficients from regressions of spot rates on forward rates, which is inconsistent with the forward rate unbiasedness hypothesis. We collect 3,643 estimates from 91 research articles and using recently developed techniques investigate the effect of publication and misspecification biases on the reported results. Correcting for these biases yields slope coefficients of 0.31 and 0.98 for developed and emerging currencies respectively, which implies that empirical evidence is in line with the theoretical prediction for emerging economies and less puzzling than commonly thought for developed economies. Our results also suggest that the coefficients are systematically influenced by the choice of data, numeraire currencies, and estimation methods. The findings can be applied to calibrating carry trade strategies for individual currencies. |
| Keywords: | Forward rate bias, uncovered interest parity, meta-analysis, publication bias, model uncertainty |
| JEL: | C83 F31 G14 |
| Date: | 2020–07–31 |
| URL: | http://d.repec.org/n?u=RePEc:stm:wpaper:46&r= |
| By: | Martin M. Andreasen; Giovanni Caggiano; Efrem Castelnuovo; Giovanni Pellegrino |
| 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: | C32 E32 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_9328&r= |
| By: | Elena Deryugina (Bank of Russia, Russian Federation); Alexey Ponomarenko (Bank of Russia, Russian Federation); Andrey Sinyakov (Bank of Russia, Russian Federation) |
| Abstract: | In the digital economy, customer data becomes particularly valuable. Customer transactions monitored by banks, payment systems, and retail platforms are a useful source of information to assess potential borrowers’ credit risk. Thus, a dominant player at a payment or deposit market, behaving strategically, may influence the characteristics of the lending market. In this article, we show, within the game-theoretic framework, that such dominance can affect the market structure, loan pricing, financial inclusion, and credit risk accumulated on banks’ balance sheets. Our results show that specifics of the digital economy set a new link between structures of deposit and credit markets. Information asymmetries allow the dominant player to increase its profits at the expense of the profits gained by other players. At the same time, the accessibility of loans to more risky borrowers reduces while credit risks of banks’ loan portfolios decline. |
| Keywords: | retail payments, banking, market structure, asymmetric information, customer data |
| JEL: | D43 D82 G21 |
| Date: | 2021–09 |
| URL: | http://d.repec.org/n?u=RePEc:bkr:wpaper:wps78&r= |
| By: | Tendai Zawaira (Department of Economics, University of Pretoria, Hatfield 0028, South Africa); Matthew Clance (Department of Economics, University of Pretoria, Hatfield 0028, South Africa); Carolyn Chisadza (Department of Economics, University of Pretoria, Hatfield 0028, South Africa); Rangan Gupta (Department of Economics, University of Pretoria, Private Bag X20, Hatfield 0028, South Africa) |
| Abstract: | This study analyses the association between financial inclusion and gender inequality in sub-Saharan Africa. Our findings suggest that generally, most individuals in sub-Saharan Africa rely on informal sources of finance, such as savings at a savings club and borrowing from family and friends compared to formal financial sources. Moreover, women are more likely to turn to the informal sources compared to men which is a concern that needs to be addressed at policy level. Improving access to finance is at the center of improving gender equality and increasing the economic freedoms and opportunities that women have to contribute to their families and societies. |
| Keywords: | Gender, Financial development, Financial inclusion, Africa |
| JEL: | J16 O11 |
| Date: | 2021–10 |
| URL: | http://d.repec.org/n?u=RePEc:pre:wpaper:202167&r= |
| By: | Castellini, Marta; Di Corato, Luca; Moretto, Michele; Vergalli, Sergio |
| Abstract: | In this paper, we provide a real options model framing prosumers’ investment in photovoltaic plants. This is presented in a Smart Grid context where the exchange of energy among prosumers is possible. We determine the optimal size of the photovoltaic installations based on the influence the self-consumption profiles on the exchange of energy among prosumers. We calibrate the model using figures relative to the Northern Italy energy market and investigate the investment decision allowing for different prosumer profiles and consider several combinations of their individual energy demand and supply. Our findings show that the shape of individual energy demand and supply curves is crucial to the exchange of energy among prosumers, and that there could be circumstances under which no exchange occurs. |
| Keywords: | Resource /Energy Economics and Policy |
| Date: | 2021–10–15 |
| URL: | http://d.repec.org/n?u=RePEc:ags:feemwp:314755&r= |
| By: | Sabiou M. Inoua (Economic Science Institute, Chapman University) |
| Abstract: | The Gini index underestimates inequality for heavy-tailed distributions: for example, a Pareto distribution with exponent 1.5 (which has infinite variance) has the same Gini index as any exponential distribution (a mere 0.5). This is because the Gini index is relatively robust to extreme observations: while a statistic’s robustness to extremes is desirable for data potentially distorted by outliers, it is misleading for heavy-tailed distributions, which inherently exhibit extremes. We propose an alternative inequality index: the variance normalized by the second moment. This ratio is more stable (hence more reliable) for large samples from an infinite-variance distribution than the Gini index paradoxically. Moreover, the new index satisfies the normative axioms of inequality measurement; notably, it is decomposable into inequality within and between subgroups, unlike the Gini index. |
| Keywords: | inequality, Gini index, heavy tail, power law, infinite variance, generalized central limit theorem, robustness |
| JEL: | C10 D63 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:chu:wpaper:21-18&r= |
| By: | Jean-No\"el Tuccella; Philip Nadler; Ovidiu \c{S}erban |
| Abstract: | Market manipulation is tackled through regulation in traditional markets because of its detrimental effect on market efficiency and many participating financial actors. The recent increase of private retail investors due to new low-fee platforms and new asset classes such as decentralised digital currencies has increased the number of vulnerable actors due to lack of institutional sophistication and strong regulation. This paper proposes a method to detect illicit activity and inform investors on spoofing attempts, a well-known market manipulation technique. Our framework is based on a highly extendable Gated Recurrent Unit (GRU) model and allows the inclusion of market variables that can explain spoofing and potentially other illicit activities. The model is tested on granular order book data, in one of the most unregulated markets prone to spoofing with a large number of non-institutional traders. The results show that the model is performing well in an early detection context, allowing the identification of spoofing attempts soon enough to allow investors to react. This is the first step to a fully comprehensive model that will protect investors in various unregulated trading environments and regulators to identify illicit activity. |
| Date: | 2021–10 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2110.03687&r= |
| By: | Laszlo Goerke (Institute for Labour Law and Industrial Relations in the European Union (IAAEU), Trier University) |
| Abstract: | This contribution surveys theoretical analyses of tax evasion by firms. It uses a simple model in which the firm determines economic activity and the under-declaration of the tax base to integrate various approaches into a coherent analytical framework. Initially, the chapter characterises the basic features of the firm's decision. Subsequently, it considers the effects of firm-size heterogeneity, restrictions on evasion behaviour, the co-existence of tax evasion with other illegal activities, output market interactions, non-profit objectives, and corporate governance issues. |
| Keywords: | Firm, Tax Avoidance, Tax Evasion |
| JEL: | H25 H26 K34 |
| Date: | 2021–04 |
| URL: | http://d.repec.org/n?u=RePEc:iaa:dpaper:202104&r= |
| By: | Asongu, Simplice; Nchofoung, Tii |
| Abstract: | This study empirically verifies the effect of terrorism on financial development and how globalisation and governance modulate the incidence of terrorism on financial development in Africa. Two terrorism indicators are adopted for this study, namely, the: number of terrorism incidences and number of terrorism deaths. The methodology involves the pooled data technique running from 1996-2018 for 34 African countries. The results from the POLS, Driscoll-Kraay and the Newey-West standard error corrections show that terrorism is detrimental to financial development. From the interactive regressions, three major tendencies are apparent. First, terrorism dynamics consistently have an unconditional negative effect on financial development. Second, the globalization and government dynamics modulate the terrorism dynamics to broadly induce a negative net effect on financial development. Third, policy thresholds at which the modulating variables reverse the net effect on financial development from negative to positive are: (i) 71.61572 trade (% of GDP) and 13.97872 FDI (% of GDP) for the incidence of terror and (ii) 1.16201 trade (% of GDP) for terror deaths. The computed thresholds make economic sense and worthwhile in terms of policy implications because they are within statistical range. The result is robust to alternative measures of terrorism and financial development. Policy implications are discussed. |
| Keywords: | terrorism, financial development, globalisation, governance, Pooled data |
| JEL: | C52 D74 F65 G28 P37 |
| Date: | 2021–01 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:110130&r= |
| By: | Okuyama, Suzuka |
| Abstract: | We investigate mixed markets in which a social welfare-maximizing public firm and a private firm engage in behavior-based price discrimination. We consider two cases: one where the private firm is completely owned by domestic shareholders and one where it is completely owned by foreign shareholders. In the domestic mixed duopoly, BBPD is irrelevant from the viewpoint of social welfare. This is because poaching does not occur. In the international mixed duopoly, BBPD reduces the public firm’s market share but improves domestic social welfare. This is because the outflow to foreign shareholders decreases. We also consider domestic and international pure duopoly and find that the presence of public firms reduces welfare loss caused by BBPD. |
| Keywords: | Behavior-based price discrimination, Mixed oligopoly, Foreign firms, Privatization |
| JEL: | D43 H42 L13 |
| Date: | 2021–10–08 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:110206&r= |
| By: | Sébastien Laffitte (CEPS - Centre d'Economie de l'ENS Paris-Saclay - ENS Paris Saclay - Ecole Normale Supérieure Paris-Saclay - Université Paris-Saclay); Julien Martin (CEPR - Center for Economic Policy Research - CEPR); Mathieu Parenti (ECARES - European Center for Advanced Research in Economics and Statistics - ULB - Université libre de Bruxelles); Baptiste Souillard (ECARES - European Center for Advanced Research in Economics and Statistics - ULB - Université libre de Bruxelles); Farid Toubal (CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, CEPII - Centre d'Etudes Prospectives et d'Informations Internationales - Centre d'analyse stratégique, CEPR - Center for Economic Policy Research - CEPR, LEDa - Laboratoire d'Economie de Dauphine - IRD - Institut de Recherche pour le Développement - Université Paris Dauphine-PSL - PSL - Université Paris sciences et lettres - CNRS - Centre National de la Recherche Scientifique) |
| Abstract: | Minimum corporate taxation is the second Pillar of the reforms of international corporate taxation. It is a simple and powerful tool that could curb profit shifting towards low or no tax jurisdictions. Its implementation would allow France to tax the profits that French headquarters have shifted to tax havens, but also to reduce the erosion of its tax base. We estimate the French corporate income tax (CIT) revenues would increase by almost 6 billion euros in the short run after the implementation of an effective minimum tax rate of 15% and by 8 billion euros at a rate of 21%. CIT gains may vary substantially depending on the scope of the tax base, the possibility of headquarters' inversion, and whether it includes domestic corporations or not. CIT gains are relatively higher in France than in Germany or the United States. The expected gains are substantially larger than those to be expected from the implementation of the first Pillar of the reform in its version proposed by the US in April 2021, which opens up rights to tax the 100 largest corporations in the world according to their sales' destination. According to our estimates, Pillar One would bring in about 900 million euros for France. |
| Keywords: | Tax rate,multinational corporation,reform |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:hal:cesptp:hal-03361513&r= |
| By: | Roy, Tirthankar |
| Abstract: | Twentieth-century Afghanistan offers a lesson for the historian of comparative economic development. Two conditions help to understand Afghan history better, resource poverty and the absence of European colonial rule. In a resource-poor region, the possibility of rapid economic change depends to a great extent on the capability and stability of the states; at the same time, attempts to create strong centres of power with a weak tax base can generate debilitating conflicts. European colonialists in some cases managed to overcome the dilemma. In the absence of colonialism, old elites and old rivalries survived and intensified the conflict. These two features appeared in the histories of many of the world’s poor regions. They shaped the process of economic and political change in Afghanistan with great force. |
| JEL: | N45 N55 O10 O53 P16 |
| Date: | 2020–10 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:wpaper:106957&r= |
| By: | Ozili, Peterson K |
| Abstract: | Identifying the intersection between digital finance, green finance and social finance is important for promoting sustainable financial, social and environmental development. This paper suggests a link between digital finance, green finance and social finance. Using a simple conceptual model, I show that digital finance offers a smooth, efficient and seamless channel for individuals and corporations to fund social projects that deliver a social dividend, and green projects that promote a sustainable environment. The implication is that digital finance is both an enabler and a channel for efficient green financing and social financing. |
| Keywords: | green finance, social finance, digital finance, sustainable development, environment, sustainable finance, innovation |
| JEL: | G02 G20 G21 Q56 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:110151&r= |
| By: | Gong Cheng (ESM); Rudolf Alvise Lennkh (Scope Ratings) |
| Abstract: | This paper documents the diverse financial structures – including capital structures and funding strategies – of Regional Financing Arrangements (RFAs) and offers an analysis of RFAs’ lending capacity from a statutory, accounting and credit rating perspective. Using credit rating agencies’ methodologies, the paper presents the dynamic relationship between RFAs’ financial structures, the support from their member states and their resulting creditworthiness. A stylised model is developed to demonstrate how the relative size of an institution’s paid-in and callable capital, together with its member states’ support, could have an impact on the overall credit rating and lending capacity of an RFA. This paper contributes to the growing policy discussions on the heterogeneity of RFAs and their rising importance in the Global Financial Safety Net. |
| Keywords: | Regional Financing Arrangements, IMF, Credit rating, Capital, Lending capacity, Global Financial Safety Net |
| JEL: | F33 F34 F53 F55 G24 |
| Date: | 2020–05–28 |
| URL: | http://d.repec.org/n?u=RePEc:stm:wpaper:44&r= |
| By: | Carmel Chiswick (George Washington University) |
| Abstract: | American Judaism is viewed from an economic perspective. Non-traditional family units and non-traditional religious practices are now persistent features of American Jewry. Incentives affecting the education, family formation and consumption patterns of American Jews are shown to have implications for patterns of Jewish observance and for the American Jewish community. Comparing US religious pluralism with Israel's state-sponsored Rabbinate suggests stresses as well as complementarities between the two largest Jewish communities, including a rise in anti-Zionism and anti-Semitism. Forecasting the future of American Judaism is based on trends in economic conditions and changes in religious institutions affecting its cultural context. |
| Keywords: | economics, demography, religion, Judaism, pluralism, consumption, value of time, cost of Judaism, Israel, anti-Semitism |
| JEL: | Z12 J19 D10 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:gwi:wpaper:2021-16&r= |
| By: | Gianluca Benigno; Luca Fornaro; Martin Wolf |
| Abstract: | Since the late 1990s, the United States has received large capital flows from developing countries - a phenomenon known as the global saving glut - and experienced a productivity growth slowdown. Motivated by these facts, we provide a model connecting international financial integration and global productivity growth. The key feature is that the tradable sector is the engine of growth of the economy. Capital flows from developing countries to the United States boost demand for U.S. non-tradable goods, inducing a reallocation of U.S. economic activity from the tradable sector to the non-tradable one. In turn, lower profits in the tradable sector lead firms to cut back investment in innovation. Since innovation in the United States determines the evolution of the world technological frontier, the result is a drop in global productivity growth. This effect, which we dub the global financial resource curse, can help explain why the global saving glut has been accompanied by subdued investment and growth, in spite of low global interest rates. |
| Keywords: | global saving glut, global productivity growth, international financial integration, capital flows, U.S. productivity growth slowdown, low global interest rates, Bretton Woods II, export-led growth |
| JEL: | E44 F21 F41 F43 F62 O24 O31 |
| Date: | 2019–12 |
| URL: | http://d.repec.org/n?u=RePEc:upf:upfgen:1803&r= |
| By: | Gabriel Borrageiro; Nick Firoozye; Paolo Barucca |
| Abstract: | We conduct a detailed experiment on major cash fx pairs, accurately accounting for transaction and funding costs. These sources of profit and loss, including the price trends that occur in the currency markets, are made available to our recurrent reinforcement learner via a quadratic utility, which learns to target a position directly. We improve upon earlier work, by casting the problem of learning to target a risk position, in an online learning context. This online learning occurs sequentially in time, but also in the form of transfer learning. We transfer the output of radial basis function hidden processing units, whose means, covariances and overall size are determined by Gaussian mixture models, to the recurrent reinforcement learner and baseline momentum trader. Thus the intrinsic nature of the feature space is learnt and made available to the upstream models. The recurrent reinforcement learning trader achieves an annualised portfolio information ratio of 0.52 with compound return of 9.3%, net of execution and funding cost, over a 7 year test set. This is despite forcing the model to trade at the close of the trading day 5pm EST, when trading costs are statistically the most expensive. These results are comparable with the momentum baseline trader, reflecting the low interest differential environment since the the 2008 financial crisis, and very obvious currency trends since then. The recurrent reinforcement learner does nevertheless maintain an important advantage, in that the model's weights can be adapted to reflect the different sources of profit and loss variation. This is demonstrated visually by a USDRUB trading agent, who learns to target different positions, that reflect trading in the absence or presence of cost. |
| Date: | 2021–10 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2110.04745&r= |
| By: | Clavin, P.; Corsetti, G.; Obstfeld, M.; Tooze, A. |
| Abstract: | Just over a century old, John Maynard Keynes’s The Economic Consequences of the Peace (1919) remains a seminal document of the twentieth century. At the time, the book was a prescient analysis of political events to come. In the decades that followed, this still controversial text became an essential ingredient in the unfolding of history. In this essay, we review the arc of experience since 1919 from the perspective of Keynes’s influence and his changing understanding of economics, politics, and geopolitics. We identify how he, his ideas, and this text became key reference points during times of turbulence as actors sought to manage a range of shocks. Near the end of his life, Keynes would play a central role in planning the world economy’s reconstruction after World War II. We argue that the “global order†that evolved since then, marked by increasingly polarized societies, leaves the community of nations ill prepared to provide key global public goods or to counter critical collective threats. |
| Keywords: | Keynes, World War I, Versailles, interwar period, League of Nations, World War II, Bretton Woods, Cold War, multilateralism, global order |
| JEL: | B30 E10 E30 F30 F40 N10 N20 |
| Date: | 2021–10–05 |
| URL: | http://d.repec.org/n?u=RePEc:cam:camdae:2169&r= |
| By: | Korobilis, Dimitris; Landau, Bettina; Musso, Alberto; Phella, Anthoulla |
| Abstract: | This paper develops a Bayesian quantile regression model with time-varying parameters (TVPs) for forecasting inflation risks. The proposed parametric methodology bridges the empirically established benefits of TVP regressions for forecasting inflation with the ability of quantile regression to model flexibly the whole distribution of inflation. In order to make our approach accessible and empirically relevant for forecasting, we derive an efficient Gibbs sampler by transforming the state-space form of the TVP quantile regression into an equivalent high-dimensional regression form. An application of this methodology points to a good forecasting performance of quantile regressions with TVPs augmented with specific credit and money-based indicators for the prediction of the conditional distribution of inflation in the euro area, both in the short and longer run, and specifically for tail risks. JEL Classification: C11, C22, C52, C53, C55, E31, E37, E51 |
| Keywords: | Bayesian shrinkage, euro area, Horseshoe, inflation tail risks, MCMC, quantile regression, time-varying parameters |
| Date: | 2021–10 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20212600&r= |
| By: | Ogundari, Kolawole |
| Abstract: | The study revisits the causal relationship between agricultural productivity and economic growth in sub-Saharan Africa. The analysis is based on the panel cointegration approach, estimated using the Pooled Mean Group (PMG) estimators. The study employs a cross-country balanced panel data covering 35 countries from 1981 to 2010. Per capita, gross domestic product is an indicator of economic growth, and the total factor productivity (TFP) index is an agricultural productivity indicator used in the study. The empirical results show the variables have a different integration order based on the unit root test, while evidence of a cointegration relationship among the variables exists. The estimated PMG shows that in the long and short-run, agricultural TFP has significant positive and negative effects on economic growth, respectively, in the study. There is no effect of economic growth on agricultural TFP either in the long and short run. While the causality test shows that agricultural TFP Granger causes economic growth in the long and short run, we found no evidence that economic growth Granger causes agricultural TFP in the short run except in the long run. These findings show that greater attention to improving agricultural TFP would increase economic growth in the region. |
| Keywords: | Economic Growth, Agricultural Productivity, Granger Causality, Panel data, Sub Saharan Africa |
| JEL: | O1 O13 Q11 Q18 |
| Date: | 2021–10–14 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:110199&r= |
| By: | Carmine Gabriele (ESM) |
| Abstract: | Banking crises can be extremely costly. The early detection of vulnerabilities can help prevent or mitigate those costs. We develop an early warning model of systemic banking crises that combines regression tree technology with a statistical algorithm (CRAGGING) to improve its accuracy and overcome the drawbacks of previously used models. Our model has a large set of desirable features. It provides endogenously-determined critical thresholds for a set of useful indicators, presented in the intuitive form of a decision tree structure. Our framework takes into account the conditional relations between various indicators when setting early warning thresholds. This facilitates the production of accurate early warning signals as compared to the signals from a logit model and from a standard regression tree. Our model also suggests that high credit aggregates, both in terms of volume and as compared to a long-term trend, as well as low market risk perception, are amongst the most important indicators for predicting the build-up of vulnerabilities in the banking sector. |
| Keywords: | Early warning system, banking crises, regression tree, ensemble methods |
| JEL: | C40 G01 G21 E44 F37 |
| Date: | 2019–10–30 |
| URL: | http://d.repec.org/n?u=RePEc:stm:wpaper:40&r= |
| By: | Degryse, Hans; Matthews, Kent (Cardiff Business School); Zhao, Tianshu |
| Abstract: | It is well recognized that relationship banking helps to relieve the credit constraints faced by SMEs to access bank finance. Trust is an important part of relationship banking. However, the term trust is nebulous, and relationship banking means different things to different banks and different borrowers. How trust enables the credit market for SMEs through relationship banking is largely unexplored. Using a unique primary dataset of SMEsin the UK, we construct a measure of trust-based relationship banking from the perspective of the borrower. We examine the drivers of trust-based relationship banking in terms of organizational trust in the relationship manager, defined as the delegation of operational autonomy, along with local market and social capital factors, and the style of the bank-borrower relationship. Along with bank, firm, and market factors, trust-based relationship banking helped to reduce the credit constraints faced by SMEs in the decade following the global financial crisis. |
| Keywords: | Trust, Relationship Banking, SME Financing, Bank Organization |
| JEL: | G21 G29 L14 |
| Date: | 2021–10 |
| URL: | http://d.repec.org/n?u=RePEc:cdf:wpaper:2021/24&r= |
| By: | Astaiza-Gómez, José Gabriel |
| Abstract: | In this research I empirically study the effects of information acquisition by investors or traders on analysts' forecast bias. Based on the theoretical literature on sell-side analysts, I argue that forecast bias is correlated to investors' information gathering in two opposite directions. On the one hand, higher levels of reading activities about individual firms by investors induce analysts to issue more optimistic forecasts if the potential for trading is higher. On the other hand, higher levels of reading activities about individual firms by investors help them identify opportunistic behaviors and thus to discipline analysts. I find that investors' information acquisition is positively related to analysts' optimism when the potential for trading is larger, and negatively related to optimism when investors are more likely to identify inflated forecasts. Together, these results suggest that information acquisition is not only correlated to analysts' optimism but also that its effect does not work trivially and solely in one direction but it activates two different incentives in analysts' decisions. |
| Keywords: | trading incentives, analyst's credibility, responsive investors, naive investors. |
| JEL: | D82 D83 D84 G14 G17 G2 G23 G24 M21 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:110059&r= |
| By: | Yang, Bixuan; Asche, Frank; Li, Tao |
| Keywords: | Food Consumption/Nutrition/Food Safety, Consumer/Household Economics, Health Economics and Policy |
| Date: | 2021–08 |
| URL: | http://d.repec.org/n?u=RePEc:ags:aaea21:314067&r= |
| By: | Holden, Stein T. (Centre for Land Tenure Studies, Norwegian University of Life Sciences); Tilahun, Mesfin (Centre for Land Tenure Studies, Norwegian University of Life Sciences) |
| Abstract: | While economists in the past tended to assume that individual preferences, including risk preferences, are stable over time, a recent literature has developed that indicate that risk preferences respond to shocks. This paper combines survey data and field experiments with three different tools that facilitated elicitation of dis-aggregated measures of risk preferences, including utility curvature, probability weighting and loss aversion. By treating the recent shocks as natural experiments, the study assessed the sensitivity of each of these risk preference measures to the recent idiosyncratic and covariate (drought) shocks among a sample of resource-poor young adults living in a semi-arid rural environment in Sub-Saharan Africa. The results show that the dis-aggregated risk preference measures revealed substantial shock effects that were undetected when relying on a tool that elicited only one single measure of risk tolerance. Both the timing and covariate nature of the shocks affected the dis-aggregated measures of risk preferences differently, pointing towards the need for further studies of this kind in different contexts. |
| Keywords: | Covariate shocks; Idiosyncratic shocks; Stability of risk preference parameters; Field experiment; Ethiopia |
| JEL: | C93 D81 |
| Date: | 2021–10–14 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:nlsclt:2021_005&r= |
| By: | Heller-Sahlgren, Gabriel (Research Institute of Industrial Economics (IFN)); Jordahl, Henrik (Örebro University School of Business) |
| Abstract: | Research indicates that education quality – measured by test scores in international student surveys – predicts economic growth. In this paper, we extend previous findings up to 2016 and analyse test scores of upper-secondary school students only. We find that the positive relationship between growth and test scores holds in both cases. The share of top-performing students exhibits a stronger correlation with economic growth than does the share of students who meet basic requirements. |
| Keywords: | Education; Economic growth; PISA; TIMSS; Top-performing students |
| JEL: | I25 O15 O57 |
| Date: | 2021–10–01 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:iuiwop:1408&r= |
| By: | Molintas, Dominique Trual |
| Abstract: | Black-Scholes is a pricing model applied as the reference in the derivation of fair price—or the theoretical value for a call or a put option. A call is defined as the decision to buy actual stock at a set price, defined as the strike price; and by a scheduled expiration date. A put option is defined as the opportunity contract providing the owner the right but not the obligation, to sell an exact amount of underlying security at a stated price within a specific time frame. The call or put option in the Black Scholes model is based on six variables: strike price and underlying stock price, time and type of option, volatility and risk-free rate. The application of the model assumes that these stock or securities recognise its corresponding custom derivatives held to expiration. It is sufficient to state that the Black-Scholes treats a call option as an informal agreement defined as a forward contract with expectation to deliver stock at a contractual price, otherwise indicative in the strike price. Typically the Black-Scholes model is utilised to price European options (y p) that represents investment options in a selection of financial assets earning risk-free interest rates. In strictness, the model presents the option price as a function of stock price volatility: High volatility is tantamount a high premium price on the option. |
| Keywords: | Black-Scholes model, strike price, volatility , risk-free rate, stock price volatility |
| JEL: | E47 G12 |
| Date: | 2021–04–17 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:110124&r= |
| By: | Dante Amengual (CEMFI, Casado del Alisal 5, E-28014 Madrid, Spain); Gabriele Fiorentini (Università di Firenze and RCEA, Viale Morgagni 59, I-50134 Firenze, Italy); Enrique Sentana (CEMFI, Casado del Alisal 5, E-28014 Madrid, Spain) |
| Abstract: | We propose the information matrix test to assess the constancy of mean and variance parameters in vector autoregressions. We additively decompose it into several orthogonal components: conditional heteroskedasticity and asymmetry of the innovations, and their unconditional skewness and kurtosis. Our Monte Carlo simulations explore both its finite size properties and its power against i.i.d. coefficients, persistent but stationary ones, and regime switching. Our procedures detect variation in the autoregressive coefficients and residual covariance matrix of a Var for the US GDP growth rate and the statistical discrepancy, but they fail to detect any covariation between those two sets of coefficients. |
| Keywords: | GDP, GDI, Hessian matrix, Information matrix test, Outer product of the score |
| JEL: | C32 C52 E01 |
| Date: | 2021–10 |
| URL: | http://d.repec.org/n?u=RePEc:fir:econom:wp2021_18&r= |
| By: | Heller, Yuval; NEHAMA, Ilan |
| Abstract: | We examine evolutionary basis for risk aversion with respect to aggregate risk. We study populations in which agents face choices between aggregate risk and idiosyncratic risk. We show that the choices that maximize the long-run growth rate are induced by a heterogeneous population in which the least and most risk averse agents are indifferent between aggregate risk and obtaining its linear and harmonic mean for sure, respectively. Moreover, an approximately optimal behavior can be induced by a simple distribution according to which all agents have constant relative risk aversion, and the coefficient of relative risk aversion is uniformly distributed between zero and two. |
| Keywords: | Evolution of preferences, risk interdependence, long-run growth rate. |
| JEL: | D81 |
| Date: | 2021–10–13 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:110194&r= |