|
on Central and Western Asia |
| By: | De Nardi, M.; French, E.; Bailey Jones, J.; McGee, R. |
| Abstract: | While the savings of retired singles tend to fall with age, those of retired couples tend to rise. We estimate a rich model of retired singles and couples with bequest motives and uncertain longevity and medical expenses. Our estimates imply that while medical expenses are an important driver of the savings of middle-income singles, bequest motives matter for couples and highincome singles and generate transfers to nonspousal heirs whenever a household member dies. The interaction of medical expenses and bequest motives is a crucial determinant of savings for all retirees. Hence, to understand savings, it is important to model household structure, medical expenses, and bequest motives. |
| Keywords: | Savings, bequests, medical spending |
| JEL: | C51 D14 D15 I14 |
| Date: | 2021–10–20 |
| URL: | http://d.repec.org/n?u=RePEc:cam:camdae:2172&r= |
| By: | Johannes Stroebel; Jeffrey Wurgler |
| Abstract: | We survey 861 finance academics, professionals, and public sector regulators and policy economists about climate finance topics. They identify regulatory risk as the top climate risk to businesses and investors over the next five years, but they view physical risks as the top risk over the next 30 years. By an overwhelming margin, respondents believe that asset prices underestimate climate risks rather than overestimate them. We also tabulate opinions about the correlation between growth and climate change; social discount rates appropriate for projects that mitigate the effects of climate change; most influential forces for reducing climate risks; and, most important research topics. |
| Keywords: | climate finance, environment, ESG, SRI, social discounting |
| JEL: | G12 G14 H43 Q54 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_9350&r= |
| By: | Härdle, Wolfgang; Klochkov, Yegor; Petukhina, Alla; Zhivotovskiy, Nikita |
| Abstract: | Markowitz mean-variance portfolios with sample mean and covariance as input parameters feature numerous issues in practice. They perform poorly out of sample due to estimation error, they experience extreme weights together with high sen- sitivity to change in input parameters. The heavy-tail characteristics of financial time series are in fact the cause for these erratic fluctuations of weights that conse- quently create substantial transaction costs. In robustifying the weights we present a toolbox for stabilizing costs and weights for global minimum Markowitz portfolios. Utilizing a projected gradient descent (PGD) technique, we avoid the estimation and inversion of the covariance operator as a whole and concentrate on robust estimation of the gradient descent increment. Using modern tools of robust statistics we con- struct a computationally efficient estimator with almost Gaussian properties based on median-of-means uniformly over weights. This robustified Markowitz approach is confirmed by empirical studies on equity markets. We demonstrate that robustified portfolios reach higher risk-adjusted performance and the lowest turnover compared to shrinkage based and constrained portfolios. |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:irtgdp:2021018&r= |
| By: | Danial Saef; Odett Nagy; Sergej Sizov; Wolfgang Karl H\"ardle |
| Abstract: | While attention is a predictor for digital asset prices, and jumps in Bitcoin prices are well-known, we know little about its alternatives. Studying high frequency crypto data gives us the unique possibility to confirm that cross market digital asset returns are driven by high frequency jumps clustered around black swan events, resembling volatility and trading volume seasonalities. Regressions show that intra-day jumps significantly influence end of day returns in size and direction. This provides fundamental research for crypto option pricing models. However, we need better econometric methods for capturing the specific market microstructure of cryptos. All calculations are reproducible via the quantlet.com technology. |
| Date: | 2021–10 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2110.09429&r= |
| By: | Lahoucine Outolba (UIZ - Ibn Zohr University of Agadir); Abdelhaq Lahfidi (UIZ - Ibn Zohr University of Agadir) |
| Keywords: | Small businesses,Regulation,Entrepreneurship success. Classification JEL: M10 Paper type: Empirical research |
| Date: | 2021–10–01 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-03363167&r= |
| By: | Mukherjee, Sacchidananda (National Institute of Public Finance and Policy) |
| Abstract: | Shortfalls in GST compensation cess collection vis-à-vis GST compensation requirements of states for the Fiscal Years 2020-21 and 2021-22 are concerns for the Union as well as State governments. During 2020-21, the Union government borrowed Rs. 1.10 lakh crore against Government of India securities to provide compensation to the States. The Union government has also committed to borrowing 1.59 lakh crore during 2021-22 from the market (as back-to-back loans) to provide compensation to the States. As the GST compensation cess will be extended to pay interest and principal payment liabilities of the debt incurred by the Government of India, in this paper, we estimate whether GST compensation cess collections at the current rate will be sufficient to service the debt cost. We also rank States and their relative dependence on GST compensation for 2018-19 and 2019-20. We find that the economic structure (origin versus consuming state) of a state is an important factor affecting revenues and thereby the level of compensation requirement. |
| Keywords: | Goods and Services Tax (GST) ; GST Compensation ; GST Transition Period ; Revenue Protection ; India |
| JEL: | H20 E62 H26 |
| Date: | 2021–10 |
| URL: | http://d.repec.org/n?u=RePEc:npf:wpaper:21/356&r= |
| By: | David G. Blanchflower (Bruce V. Rauner ’78 Professor of Economics, Dartmouth College, Hanover, NH 03755-3514. Adam Smith School of Business, University of Glasgow and NBER); Alex Bryson (Professor of Quantitative Social Science, UCL Social Research Institute, University College London, 20 Bedford Way, London WC1H 0AL) |
| Abstract: | Economic shocks are notoriously difficult to predict but recent research suggests qualitative metrics about economic actors’ expectations are predictive of downturns. We show consumer expectations indices from both the Conference Board and the University of Michigan predict economic downturns up to 18 months in advance in the United States, both at national and at state-level. All the recessions since the 1980s have been predicted by at least 10 and sometimes many more point drops in these expectations indices. A single monthly rise of at least 0.3 percentage points in the unemployment rate also predicts recession, as does two consecutive months of employment rate declines. The economic situation in 2021 is exceptional, however, since unprecedented direct government intervention in the labor market through furlough-type arrangements has enabled employment rates to recover quickly from the huge downturn in 2020. However, downward movements in consumer expectations in the last six months suggest the economy in the United States is entering recession now (Autumn 2021) even though employment and wage growth figures suggest otherwise. |
| Keywords: | Great unemployment, recession, consumer expectations |
| JEL: | J60 J64 J68 |
| Date: | 2021–10–01 |
| URL: | http://d.repec.org/n?u=RePEc:qss:dqsswp:2131&r= |
| By: | Curtis Nybo |
| Abstract: | Recently artificial neural networks (ANNs) have seen success in volatility prediction, but the literature is divided on where an ANN should be used rather than the common GARCH model. The purpose of this study is to compare the volatility prediction performance of ANN and GARCH models when applied to stocks with low, medium, and high volatility profiles. This approach intends to identify which model should be used for each case. The volatility profiles comprise of five sectors that cover all stocks in the U.S stock market from 2005 to 2020. Three GARCH specifications and three ANN architectures are examined for each sector, where the most adequate model is chosen to move on to forecasting. The results indicate that the ANN model should be used for predicting volatility of assets with low volatility profiles, and GARCH models should be used when predicting volatility of medium and high volatility assets. |
| Date: | 2021–10 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2110.09489&r= |
| By: | Radoslav Raykov |
| Abstract: | This paper explores the extent to which correlated investments in the futures market concentrated systemic risk on large Canadian banks around the 2008 crisis. We find that core banks took positions against the periphery, increasing their systemic risk as a group. On the portfolio level, position similarity was the main systemic risk driver for core banks, while cross-price correlations drove the systemic risk of noncore banks. Core banks were more diversified, but their portfolios also overlapped more. By contrast, non-core banks were less diversified, but also overlapped less. This significantly nuances the debate on concentration versus diversification as systemic risk sources. |
| Keywords: | Financial institutions; Financial markets |
| JEL: | G10 G20 |
| Date: | 2021–10 |
| URL: | http://d.repec.org/n?u=RePEc:bca:bocawp:21-50&r= |
| By: | Alain Bensoussan (emlyon business school); Benoit Chevalier-Roignant; Alejandro Rivera |
| Abstract: | We model the expansion decision of a levered firm. Straight debt distorts both timing and scaling: the firm invests less and later than its all-equity financed counterpart. The inclusion of performance sensitivity in the debt contract mitigates such distortions. Moreover, performance sensitivity is consistent with firm value maximization within a standard trade-off theory of capital structure. As a result, our model rationalizes the widespread use of performance sensitive debt (PSD), especially amongst fast growth firms. |
| Keywords: | Capital Structure,Real Options,Performance-Sensitive Debt,Debt Overhang |
| Date: | 2021–10–01 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-03364891&r= |
| By: | Alberto Cavallo; Oleksiy Kryvtsov |
| Abstract: | We use a detailed micro dataset on product availability to construct a direct high frequency measure of consumer product shortages during the 2020–21 pandemic. We document a widespread multi-fold rise in shortages in nearly all sectors early in the pandemic. Over time, the composition of shortages evolved from many temporary stockouts to mostly discontinued products, concentrated in fewer sectors. We show that product shortages have significant but transitory inflationary effects and that these effects can be associated with elevated costs of replenishing inventories. |
| Keywords: | Inflation and prices; Coronavirus disease (COVID-19) |
| JEL: | D22 E31 |
| Date: | 2021–10 |
| URL: | http://d.repec.org/n?u=RePEc:bca:bocawp:21-52&r= |
| By: | Edward Miguel; Ahmed Mushfiq Mobarak |
| Abstract: | The COVID-19 pandemic has upended health and living standards around the world. This article provides an interim overview of these effects, with a particular focus on low- and middle-income countries (LMICs). Economists have explained how the pandemic is likely to have differential consequences for LMICs, and demand distinct policy responses, compared to rich countries. We survey the rapidly expanding body of empirical research that documents its many adverse economic and non-economic effects in terms of living standards, education, health, and gender equality, which appear to be unprecedented in depth and scale. We also review research on successful and failed policy responses, including the failure to ensure widespread vaccine coverage in LMICs, which is needed to end the pandemic. We close with a discussion of implications for public policy in LMICs, and for the institutions of international governance, given the likelihood of future pandemics and other major shocks (e.g., climate). |
| JEL: | I15 O1 |
| Date: | 2021–10 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:29339&r= |
| By: | Fatma Zaarour (University of Sousse, IHEC, LaREMFiQ, BP n° 40 - 4054 Sousse, Tunisia Author-2-Name: Adnene AJIMI Author-2-Workplace-Name: University of Sousse, IHEC, LaREMFiQ, BP n° 40 - 4054 Sousse, Tunisia Author-3-Name: Author-3-Workplace-Name: Author-4-Name: Author-4-Workplace-Name: Author-5-Name: Author-5-Workplace-Name: Author-6-Name: Author-6-Workplace-Name: Author-7-Name: Author-7-Workplace-Name: Author-8-Name: Author-8-Workplace-Name:) |
| Abstract: | " Objective - This study examines the relation between stock market capitalization and international financial integration for 23 developing countries during 1996 - 2018. Methodology/Technique - By using recently developed econometric panel techniques. The present paper takes into consideration cross section and structural breaks. Findings - Our findings show several interesting results. First, the existence of a long run relationship between the stock market and financial integration, particularly when private capital flows are included. Second, with the presence of structural breaks the result shows that international financial integration has a negative impact on stock market, which means that financial integration loses its explanatory power over the crisis period. Novelty - There is no applied study on the verification of the volatility of international capital flows (foreign direct investments and remittances) in the analysis of the relationship between international financial integration and stock markets. Type of Paper - Empirical" |
| Keywords: | Cointegration, Cross-Section, International Financial Integration, Panel Unit Root, Structural Breaks, Stock Market. |
| JEL: | C23 C51 C58 F02 F21 F24 G01 |
| Date: | 2021–09–30 |
| URL: | http://d.repec.org/n?u=RePEc:gtr:gatrjs:jber208&r= |
| By: | Nada Wasi; Chinnawat Devahastin Na Ayudhya; Ponpoje Porapakkarm; Nuarpear Lekfuangfu; Suphanit Piyapromdee |
| Abstract: | Thailand has several old-age income support schemes, ranging from contributory schemes for the formal sector, voluntary savings schemes for the informal sector to the universal noncontributory social assistance scheme. Although these schemes together can cover almost all Thai citizens, several challenges remain. This article focuses on the inadequacy of the mandatory Social Security system for the formal workers (known as Article 33). We identify four key reasons leading to low pension benefits: (i) a non-trivial fraction of workers left the formal sector before being eligible for annuity; (ii) those who left Article 33 but voluntarily joined Article 39 would receive unfair reduced pension benefits; (iii) the scheme did not use any indexation, meaning that the specified amount of past earnings, wage ceiling and benefits have lower value over time; and (iv) the scheme has no income redistribution mechanism. The scheme’s financial sustainability is also a concern. We proposed some adjustments to solve the inadequacy problem, as well as a strategy to delay claiming while minimizing the impact to beneficiaries in a hope to alleviate its financing pressure. In addition, broader issues of lack of a unified authority on pension policies, weak incentives of voluntary schemes, and complicacy of adjusting Civil Servants’ pension scheme are briefly discussed. |
| Keywords: | Old-age income; Social Security; Pension; Thailand |
| JEL: | H55 J26 D14 D02 |
| Date: | 2021–08 |
| URL: | http://d.repec.org/n?u=RePEc:pui:dpaper:157&r= |
| By: | Viola Angelini (University of Groningen; NETSPAR); Irene Ferrari (Department of Economics, University Of Venice CÃ Foscari; NETSPAR) |
| Abstract: | This paper examines the long-term effects of experienced macro-economic shocks – defined as multi-year peak-to-trough GDP declines of at least 10 percent – on the wealth distribution, portfolio allocation, and risk attitudes of older individuals in Europe. We show that individuals who have experienced more economic depression episodes have lower wealth in absolute terms, a lower probability to invest in risky assets, and display higher risk aversion. When analysing early investment decisions, we find that individuals hit by a depression substitute risky investments with investment in housing, and that these early choices shape wealth in the long-term. |
| Keywords: | Wealth distribution, economic depressions, risk aversion, early investments |
| JEL: | D31 E21 G51 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:ven:wpaper:2021:23&r= |
| By: | Seo, Eunsook (KOREA INSTITUTE FOR INTERNATIONAL ECONOMIC POLICY (KIEP)); Yoo, Kyeongwon (KOREA INSTITUTE FOR INTERNATIONAL ECONOMIC POLICY (KIEP)) |
| Abstract: | Since the 2008 global financial crisis, including the recent COVID 19 pandemic, low interest rates and low economic growth have continued around the world. In spite of this low interest rate trend, as the economic downturn prolongs, there is a situation of concern called the “new normal” of low interest rates and low economic growth, and low prices. In this new normal economic structure, the rapid progress of aging is increasing the necessity and desire for asset accumulation. In addition, digital finance such as Fin-tech with the evolution of the underlying technologies and the emergence of new technologies has replaced or improved many functions of existing finance in the advent of the 4th industrial revolution era. These changes are expected to bring benefits to the individual and corporate finance sectors, which have been subject to financial inclusion. On the other hand, digital finance, which is changing at such a rapid pace, may further isolate some individuals who were in the blind spot of finance, such as the elderly, and a support system for this is an issue that should be included in the policy of financial inclusion in each country. In this paper we find that Asian countries like other regions have achieved tangible results in financial inclusion while achieving financial deepening. When looking through various financial inclusion indicators such as holding accounts and loans, ATMs, and bank branches, the Asian region has achieved similar or superior performance to other regions. Compared to the income level, the growth of financial inclusion in Asia was found to be attributable to better performance in middle-income countries than in other similar regions. High-income countries in Asia are performing somewhat lower than similar peer groups in other regions, but this seems to be due to stagnation of growth. More seriously, financial inclusion in low-income countries in Asia is not appearing faster than in other income groups. In Asian countries there appears to be a wide variation in regional financial inclusion. However, Asian countries are expanding around the younger generation in the use of ICT technology that is helpful in spreading financial inclusion so if digital inclusive finance centered on Fintech is properly applied, Asian countries will become a new model for digital financial inclusion. However, since the gap in the use of Fintech in the region is large, how to fill this gap is being raised as an important policy task for each country as well as the whole region. (the rest omitted) |
| Keywords: | Fintech; Digital Finance; Financial Inclusion; Comparative Studies of Countries |
| JEL: | O33 |
| Date: | 2020–12–30 |
| URL: | http://d.repec.org/n?u=RePEc:ris:kiepas:2020_003&r= |
| By: | Li, Bin |
| Abstract: | The paper outlines an original thinking theory and its applications to economics. The author ascribes the flaws and divisiveness of economics mainly to the lack of a proper theory on how a person thinks. Human thoughts shall be entities, and thinking shall be behaviors, both featuring spatiotemporal. Simulating a computer, human thinking can be Kantianly and dually interpreted as computational operations which mean that Instructions, as the innate and general thinking tools, process information or data selectively, serially, and “roundaboutly”. Conditioning with operational speed, time, space and computing economy, the architecture reasonably leads to the results of knowledge stocks, Combinatorial Explosions, subjectivities, pluralities, conflicts, innovations, developments, “Semi-internalization”, convergences, divergences, “High-order Consistency”, etc., and hence a great deal of theoretical socio-economic puzzles are basically solved, including institution, organization, money, capital, Invisible Hand, business cycle, crisis, power, government, etc. This explosive framework could be a decisive breakthrough and a deconstruction of the mainstream equilibrium paradigm, and hence a grand synthesis or unification and a new comprehensive research program of economics. |
| Keywords: | economics; economic methodology; social science; theory; time |
| JEL: | A10 B00 Z10 |
| Date: | 2020–03–15 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:110155&r= |
| By: | Clare A. Balboni; Oriana Bandiera; Robin Burgess; Maitreesh Ghatak; Anton Heil |
| Abstract: | There are two broad views as to why people stay poor. One emphasizes differences in fundamentals, such as ability, talent or motivation. The other, the poverty traps view, differences in opportunities which stem from access to wealth. To test between these two views, we exploit a large-scale, randomized asset transfer and an 11-year panel on 6000 households who begin in extreme poverty. The setting is rural Bangladesh and the asset is cows. The data supports the poverty traps view - we identify a threshold level of initial assets above which households accumulate assets, take on better occupations (from casual labor in agriculture or domestic services to running small livestock businesses) and grow out of poverty. The reverse happens for those below the threshold. Structural estimation of an occupational choice model reveals that almost all beneficiaries are misallocated in the work they do at baseline and that the gains arising from eliminating misallocation would far exceed the program costs. Our findings imply that large transfers which create better jobs for the poor are an effective means of getting people out of poverty traps and reducing global poverty. |
| JEL: | I32 J22 J24 O12 |
| Date: | 2021–10 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:29340&r= |
| By: | Sabrina T. Howell; Theresa Kuchler; David Snitkof; Johannes Stroebel; Jun Wong |
| Abstract: | We explore the sources of racial disparities in small business lending by studying the $806 billion Paycheck Protection Program (PPP), which was designed to support small business jobs during the COVID-19 pandemic. PPP loans were administered by private lenders but federally guaranteed, largely eliminating unobservable credit risk as a factor in explaining differential lending by race. We document that even after controlling for a firm’s zip code, industry, loan size, PPP approval date, and other characteristics, Black-owned businesses were 12.1 percentage points (70% of the mean) more likely to obtain their PPP loan from a fintech lender than a traditional bank. Among conventional lenders, smaller banks were much less likely to lend to Black-owned firms, while the Top-4 banks exhibited little to no disparity after including controls. We use novel data to show that the disparity is not primarily explained by differences in pre-existing bank or credit relationships, firm financial positions, fintech affinity, or borrower application behavior. In contrast, we document that Black-owned businesses’ higher rate of borrowing from fintechs compared to smaller banks is particularly large in places with high racial animus, pointing to a potential role for discrimination in explaining some of the racial disparities in small business lending. We find evidence that when small banks automate their lending processes, and thus reduce human involvement in the loan origination process, their rate of PPP lending to Black-owned businesses increases, with larger effects in places with more racial animus. |
| JEL: | G21 G23 G28 G41 J15 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_9345&r= |
| By: | Kevin Corinth; Bruce D. Meyer; Matthew Stadnicki; Derek Wu |
| Abstract: | The proposed change under the American Families Plan (AFP) to the Tax Cuts and Jobs Act (TCJA) Child Tax Credit (CTC) would increase maximum benefit amounts to $3,000 or $3,600 per child (up from $2,000 per child) and make the full credit available to all low and middle-income families regardless of earnings or income. We estimate the anti-poverty, targeting, and labor supply effects of the expansion by linking survey data with administrative tax and government program data which form part of the Comprehensive Income Dataset (CID). Initially ignoring any behavioral responses, we estimate that the expansion of the CTC would reduce child poverty by 34% and deep child poverty by 39%. The expansion of the CTC would have a larger anti-poverty effect on children than any existing government program, though at a higher cost per child raised above the poverty line than any other means-tested program. Relatedly, the CTC expansion would allocate a smaller share of its total dollars to families at the bottom of the income distribution—as well as families with the lowest levels of long-term income, education, or health—than any existing means-tested program with the exception of housing assistance. We then simulate anti-poverty effects accounting for labor supply responses. By replacing the TCJA CTC (which contained substantial work incentives akin to the Earned Income Tax Credit) with a universal basic income-type benefit, the CTC expansion reduces the return to working at all by at least $2,000 per child for most workers with children. Relying on elasticity estimates consistent with mainstream simulation models and the academic literature, we estimate that this change in policy would lead 1.5 million workers (constituting 2.6% of all working parents) to exit the labor force. The decline in employment and the consequent earnings loss would mean that child poverty would only fall by 22% and deep child poverty would not fall at all with the CTC expansion. |
| JEL: | C42 C81 H2 I32 I38 J2 |
| Date: | 2021–10 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:29366&r= |
| By: | Hans W. Friederiszick (ESMT European School of Management and Technology and E.CA Economics); Alexis Walckiers (E.CA Economics and ECARES – Université Libre de Bruxelles) |
| Abstract: | An increasing number of countries have introduced some form of prohibition of abuses of economic dependence or broadened the scope of their existing legislation. Yet, very little has been written on the economics of economic dependence, that is on economic reasoning, tools or metrics that can be relied upon to identify whether a company is economically dependent on another company. The present paper aims to fill this gap, and argues that bargaining theory and the economics of relative market power can be helpful to characterise economic dependence. We summarise a number of takeaways from this literature, and describe empirical strategies that can be relied upon to try and quantify economic dependence in specific cases. |
| Keywords: | economic dependency, bargaining theory, vertical restraints, law & economics, competition law |
| JEL: | D43 D86 L42 K21 |
| Date: | 2021–10–14 |
| URL: | http://d.repec.org/n?u=RePEc:esm:wpaper:esmt-21-02&r= |
| By: | Spengel, Christoph; Fischer, Leonie; Ludwig, Christopher; Müller, Jessica; Weck, Stefan; Winter, Sarah |
| Abstract: | The economic crisis following the COVID-19 pandemic has increased the debt levels of corporations and reduced the level of investments. From a tax perspective, interest payments on debt are generally deductible from the corporate tax base, while costs related to equity are not. This debt-equity bias is a deep-rooted issue in today's tax system and inhibits equity-financed investments. From a microeconomic perspective, the bias leads to socially undesirable inefficiencies in capital markets, resulting in welfare losses. From a macroeconomic point of view, high debt levels hinder economic growth. To provide a stable and supportive tax environment for a sustainable recovery after the corona crisis, the European Commission has published a framework on "Business Taxation for the 21st Century" in May 2021. Besides other (long-term) proposals, a debt equity bias reduction allowance (DEBRA) should be developed to address the tax-induced distortions of debt financing. For a legislative proposal, the European Commission identified three possible concepts: First, a Comprehensive Business Income Tax (CBIT) that disallows the tax-deductibility of any financing cost. Second, an Allowance for Corporate Equity (ACE) that provides for the deductibility of notional interest on either all equity or new equity. And third, an alignment of the treatment of debt and equity financing by deducting a notional return on all capital, namely an Allowance for Corporate Capital (ACC). |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:zewpbs:72021&r= |
| By: | Jean-Pascal Bassino; Pierre van der Eng |
| Abstract: | This paper presents new estimates of the living standards of unskilled and skilled wage earners in Southeast Asia. It estimates welfare ratios in nine Asian cities (Bangkok, Hanoi, Jakarta, Penang, Rangoon, Saigon, Singapore, Surabaya and Tokyo) during 1880-1938 and compares them to those in two European cities (Milan and Paris). It finds that the welfare ratios in most Southeast Asian cities were close to or above the Italian and Japanese levels. By the 1930s those in Bangkok were even close to Paris. It also finds a wage premium for skilled labour that was higher than in Europe and Japan. These findings suggest that there was a sustained strong demand for skilled workers, as well as savings potentials and opportunities for the development of markets beyond basic commodities in these Asian cities. These findings are consistent with recent research into economic growth and living standards in pre-war East Asia. The paper synthesises these findings to argue that some of the foundations of modern economic growth, and therefore the second East Asian Economic Miracle since the mid-1960s, were being established before World War II. But it took most countries in Southeast Asia until the 1960s and after to draw the full benefits from these preconditions when their processes of modern economic growth accelerated. |
| Keywords: | East Asian Economic Miracle, welfare, wages, Southeast Asia |
| JEL: | I31 J30 N35 |
| Date: | 2021–10 |
| URL: | http://d.repec.org/n?u=RePEc:auu:hpaper:098&r= |
| By: | Tumisang Loate; Romain Houssa; Nicola Viegi |
| Abstract: | This paper analyses the macroeconomic effect of legislated personal income tax changes in South Africa over the 1996-2019 period. We identify personal income tax shocks using a narrative approach and incorporate these shocks in a proxySVAR model. Our analysis shows that permanent changes in personal income taxes have a larger and significant effect on output through both the investment and consumption channels. We also find that personal tax cuts have a persistent effect on output through the investment channel in the 1996-2010 sub-sample. |
| Keywords: | Personal income tax, Structural VAR, Instrumental variable, Macroeconomics, South Africa, Fiscal policy, Output |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:unu:wpaper:wp-2021-156&r= |
| By: | Sangyup Choi (Yonsei Univ); David Furceri (IMF); Prakash Loungani (IMF); Myungkyu shim (Yonsei Univ) |
| Abstract: | Can inflation anchoring foster growth? To answer this question, we use panel data on sectoral growth for 22 manufacturing industries from 39 advanced and emerging market economies over 1990–2014 and employ a difference-in-differences strategy based on the theoretical prediction that higher inflation uncertainty particularly depresses investment in industries that are more credit constrained. Industries characterized by high external financial dependence, liquidity needs, and R&D intensity, and low asset tangibility, tend to grow faster in countries with well-anchored inflation expectations. The results, based on an IV approach—using indicators of monetary policy transparency and central bank independence as instruments—confirm our findings. |
| Keywords: | industry growth; inflation anchoring; inflation forecasts; credit constraints; difference-in-differences; central bank independence. |
| JEL: | E52 E63 O11 O43 O47 |
| Date: | 2021–10 |
| URL: | http://d.repec.org/n?u=RePEc:yon:wpaper:2021rwp-188&r= |
| By: | Lorenzo Bretscher (London Business School - Department of Finance); Aytek Malkhozov (Board of Governors of the Federal Reserve System); Andrea Tamoni (Rutgers, The State University of New Jersey - Rutgers Business School at Newark & New Brunswick) |
| Abstract: | We estimate agents’ expectations about future fundamentals using a dynamic stochastic general equilibrium model augmented with anticipated shocks. Accounting for agents’ expectations at the business cycle horizon results in aggregate risk factor innovations that have significant explanatory power for the cross section of stock and bond returns. Further, exposure to macroeconomic fluctuations driven purely by expectations is important to explain the value premium. In contrast, exposure to macroeconomic fluctuations due to realized changes in fundamentals is important for the pricing of long-term bonds and cash-flow duration portfolios. We conclude that accounting for agents’ expectations advances our understanding of the aggregate risk. |
| Keywords: | News Shocks, Consumption-CAPM, Cross Section of Returns, Market-to-Book Decomposition |
| JEL: | G12 E32 E21 C63 |
| Date: | 2021–10 |
| URL: | http://d.repec.org/n?u=RePEc:chf:rpseri:rp2168&r= |
| By: | Juliane Begenau; Saki Bigio; Jeremy Majerovitz; Matias Vieyra |
| Abstract: | We propose a dynamic bank theory with a delayed loss recognition mechanism and a regulatory capital constraint at its core. The estimated model matches four facts about banks’ Tobin’s Q that summarize bank leverage dynamics. (1) Book and market equity values diverge, especially during crises; (2) Tobin’s Q predicts future bank profitability; (3) neither book nor market leverage constraints are binding for most banks; (4) bank leverage and Tobin’s Q are mean reverting but highly persistent. We examine a counterfactual experiment where different accounting rules produce a novel policy tradeoff. |
| Keywords: | banks, leverage dynamics, market vs. book values, delayed accounting |
| JEL: | G21 G32 G33 E44 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_9356&r= |
| By: | Jingtang Ma; Wensheng Yang; Zhenyu Cui |
| Abstract: | Rough volatility models have recently been empirically shown to provide a good fit to historical volatility time series and implied volatility smiles of SPX options. They are continuous-time stochastic volatility models, whose volatility process is driven by a fractional Brownian motion with Hurst parameter less than half. Due to the challenge that it is neither a semimartingale nor a Markov process, there is no unified method that not only applies to all rough volatility models, but also is computationally efficient. This paper proposes a semimartingale and continuous-time Markov chain (CTMC) approximation approach for the general class of rough stochastic local volatility (RSLV) models. In particular, we introduce the perturbed stochastic local volatility (PSLV) model as the semimartingale approximation for the RSLV model and establish its existence , uniqueness and Markovian representation. We propose a fast CTMC algorithm and prove its weak convergence. Numerical experiments demonstrate the accuracy and high efficiency of the method in pricing European, barrier and American options. Comparing with existing literature, a significant reduction in the CPU time to arrive at the same level of accuracy is observed. |
| Date: | 2021–10 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2110.08320&r= |
| By: | Didier Laussel; Ngo Van Long; Joana Resende |
| Abstract: | Using a Markov-perfect equilibrium model, we show that the use of customer data to practice intertemporal price discrimination will improve monopoly profit if and only if information precision is higher than a certain threshold level. This U-shaped relationship lends support to a popular view that knowledge is good only if it is sufficiently refined. When information accuracy can only be achieved through costly investment, we find that investing in profiling is profitable only if this allows to reach a high enough level of information precision. Consumers expected surplus being a hump-shaped function of information accuracy, we show that consumers have an incentive to lobby for privacy protection legislation which raises the cost of monopoly’s investment in information accuracy. However, this cost should not dissuade firms to collect some information on customers’ tastes, as the absence of consumers’ profiling is actually detrimental to consumers. |
| Keywords: | consumers profiling, endogenous investment in profiling capability, dynamic monopoly, consumers‘ collective action on privacy protection legislation |
| JEL: | C73 D42 L12 L15 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_9346&r= |
| By: | Leland Bybee; Bryan T. Kelly; Asaf Manela; Dacheng Xiu |
| Abstract: | We propose an approach to measuring the state of the economy via textual analysis of business news. From the full text of 800,000 Wall Street Journal articles for 1984–2017, we estimate a topic model that summarizes business news into interpretable topical themes and quantifies the proportion of news attention allocated to each theme over time. News attention closely tracks a wide range of economic activities and explains 25% of aggregate stock market returns. A text-augmented VAR demonstrates the large incremental role of news text in modeling macroeconomic dynamics. We use this model to retrieve the narratives that underlie business cycle fluctuations. |
| JEL: | E32 G0 |
| Date: | 2021–10 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:29344&r= |
| By: | Ludwig von Auer; Mark Trede |
| Abstract: | This study introduces the urbanicity index of employment. Unlike traditional measures of urbanization (e.g., urbanization rate), the urbanicity index is distance-based and accounts for the scale aspect as well as the concentration aspect of urbanization. The concentration aspect can be decomposed into the intersectoral mobility of employment and the spatial mobility of sectors. These two types of mobility can be further factorized into the contributions of the various sectors of the economy. To demonstrate the usefulness of the urbanicity index, the present paper applies it to German administrative employment data. The analysis reveals that, contrary to what Germany's rather stagnant urbanization rates seem to imply, strong urbanization trends have occurred. Employees switched from rural sectors to urban sectors that expanded their rural production sites. |
| Keywords: | index, measurement, migration, rural-to-urban, urbanicity |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:trr:wpaper:202104&r= |
| By: | Crescenzi, Riccardo; Di Cataldo, Marco; Giua, Mara |
| Abstract: | Can active investment promotion efforts attract FDI towards areas and sectors that would not otherwise be targeted? This paper leverages an ad hoc survey on national and sub-national Investment Promotion Agencies (IPAs) in Europe and applies state-of-the-art policy evaluation methods to estimate the impact of IPAs on FDI attraction. The results show that FDI responds to IPAs even in advanced economies. Sub-national IPAs, operating in closer proximity to investors’ operations, attract FDI in particular towards less developed areas where market and institutional failures are stronger. IPAs influence FDI over and above other policies targeting the general economic improvement of the host economies. Impacts are concentrated in knowledge-intensive sectors where collaborative systemic conditions are more relevant. IPAs work best for less experienced companies - ‘occasional’ investors - more likely to suffer from institutional failures. Finally, IPAs are equally effective in attracting companies from both outside and inside the EU Single Market even if the latter are less likely to suffer from regulatory or information asymmetries. Overall, this evidence sheds new light on the role of sub-national IPAs as local ‘institutional plumbers’ in support of foreign investors and their operations. |
| Keywords: | foreign direct investment; investment promotion; multinationals; institutions; European Union; 639633-MASSIVE-ERC-2014-STG; Internal OA fund |
| JEL: | F21 F23 O24 R58 |
| Date: | 2021–09 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:110728&r= |
| By: | Girotti Mattia,; Salvadè Federica |
| Abstract: | This paper studies whether greater competition can mitigate agency problems within banks. We measure the intensity of the agency conflict within a bank by the volume of loans that the bank lends to its insiders (e.g., executives). We first check that these loans are a form of private benefit. By exploiting interstate branching deregulation, we then show that banks react to greater competition by reducing insider lending, especially when the entry of new competitors may more strongly affect bank profitability. Results are robust to using various identification approaches and alternative indicators of agency conflict. We conclude that competitive pressure reduces managerial self-dealing. |
| Keywords: | Banks, Agency Problems, Private Benefits, Competition, Insider Loans |
| JEL: | G21 G28 G38 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:bfr:banfra:831&r= |
| By: | Banco de España Strategic Plan 2024: Risk identification for the financial and macroeconomic stability (Banco de España) |
| Abstract: | For central banks, it is crucial to develop and maintain risk identification frameworks that allow them to detect in good time and address potential threats to financial stability with the most appropriate policy tools. This paper reviews the main indicators developed for this purpose by the Banco de España and by other central banks and prudential authorities. In this way, this stocktaking exercise contributes to improving the transparency and effective communication of the financial stability-related tasks carried out at the Banco de España. Some of the indicators are used in regular Banco de España surveillance activities, whereas others pertain to specific research activities. We classify our set of measures into two broad categories depending on the risk monitored: standard or systemic risks. Given the multidimensional nature of systemic risk, its identification goes beyond the sum of the standard risks explored in this paper (namely credit, macroeconomic, market, and liquidity and bank risks). This survey also classifies indicators by the type of institutional segment that triggers risks; namely, sovereigns, households, non-financial corporations, banks, non-bank financial sector, residential real estate and the financial markets. This work shows how the measures developed and regularly used at the Banco de España allow potential vulnerabilities to be comprehensively monitored. Nevertheless, maintaining an adequate risk-identification framework requires continuous adaptation to new theoretical developments and econometric tools, and, more importantly, to emerging challenges. In this respect, there is a current drive to develop new indicators to assess potential risks arising from climate change and those linked to the risk of system-wide cyber incidents. It is expected that the monitoring needs related to these risks will increase in the future. |
| Keywords: | risk identification, systemic risk, systemic risk indicators, standard risk indicators, financial stability |
| JEL: | E58 C43 G10 G21 G32 G50 |
| Date: | 2021–09 |
| URL: | http://d.repec.org/n?u=RePEc:bde:opaper:2125&r= |
| By: | Hylton Hollander |
| Abstract: | Debt-financed fiscal stimulus programmes directly stimulate aggregate demand through government expenditure or tax cuts, but their effectiveness is highly dependent on direct crowding out of private sector expenditure, spillover effects to the private sector through a higher risk premium on interest rates, and the interaction between fiscal policy and monetary policy. |
| Keywords: | Public debt, Interest rate, Fiscal sustainability, Fiscal policy, Monetary policy |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:unu:wpaper:wp-2021-152&r= |
| By: | Vito Ricci (Università degli Studi di Bari Aldo Moro, Italy); Giacomo Zanibelli (Dipartimento di Scienze Economiche e Statistiche, Università di Napoli Federico II, Italy) |
| Abstract: | In this study, land inequality in Italy during fascism was observed and reconstructed in order to offer new elements of analysis related to the study of inequality in the Italian countryside during the first half of the twentieth century. Using provincial data of the 1930Agricultural Census, five indicators of land inequality were constructed. Initially, a univariate analysis was carried out, taking the indicators individually; subsequently, using a multivariate approach, three synthetic indicators were produced. Finally, the provinces were divided into homogeneous clusters based on the concentration of land ownership. A notable useful tool for analysis was mapping using GIS software. |
| Keywords: | Land Inequality, Fascism, Italy, Agriculture |
| JEL: | N53 O13 O44 Q15 |
| Date: | 2021–10 |
| URL: | http://d.repec.org/n?u=RePEc:ahe:dtaehe:2107&r= |
| By: | Roy, Tirthankar |
| Abstract: | This article says that climate shaped the long-term pattern of economic change in India and that the climatically conditioned economic change generated a distinct set of environmental consequences in the region. From the nineteenth century, political and economic processes that made scarce and controlled water resources more accessible to more people, enhanced welfare, enabled more food production and sustained urbanization. The same processes also raised water stress. These propositions carry lessons for comparative economic history and the conduct of discourses on sustainability in the present times. |
| Keywords: | caste; climate; environmental history; hydrology; India; inequality; monsoon; poverty; property rights; seasonality; South Asia |
| JEL: | N50 N55 O13 P48 Q00 |
| Date: | 2019–11 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:wpaper:102589&r= |
| By: | Tolulope Fadina; Yang Liu; Ruodu Wang |
| Abstract: | A risk analyst assesses potential financial losses based on multiple sources of information. Often, the assessment does not only depend on the specification of the loss random variable, but also various economic scenarios. Motivated by this observation, we design a unified axiomatic framework for risk evaluation principles which quantifies jointly a loss random variable and a set of plausible probabilities. We call such an evaluation principle a generalized risk measure. We present a series of relevant theoretical results. The worst-case, coherent, and robust generalized risk measures are characterized via different sets of intuitive axioms. We establish the equivalence between a few natural forms of law invariance in our framework, and the technical subtlety therein reveals a sharp contrast between our framework and the traditional one. Moreover, coherence and strong law invariance are derived from a combination of other conditions, which provides additional support for coherent risk measures such as Expected Shortfall over Value-at-Risk, a relevant issue for risk management practice. |
| Date: | 2021–10 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2110.10792&r= |
| By: | Yuval Heller; Ilan Nehama |
| Abstract: | We examine the 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, 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. |
| Date: | 2021–10 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2110.11245&r= |
| By: | Kun Li; Xin (Kelly) Liu; Shang-Jin Wei |
| Abstract: | While major stock market indices are followed by large monetary investments, we document that membership decisions for the S&P 500 index have a nontrivial amount of discretion. We show that firms’ purchases of S&P ratings appear to improve their chance of entering the index (but purchases of Moody’s ratings do not). Furthermore, firms tend to purchase more S&P ratings when there are openings in the index membership. Such a pattern is also confirmed by an event study that explores a rule change on index membership in 2002. Finally, discretionary additions exhibit subsequent deterioration in financial performance relative to rule-based additions. |
| JEL: | F30 G10 G2 |
| Date: | 2021–10 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:29365&r= |
| By: | Simon Clinet; Jean-Fran\c{c}ois Perreton; Serge Reydellet |
| Abstract: | We develop a dynamic trading strategy in the Linear Quadratic Regulator (LQR) framework. By including a price mean-reversion signal into the optimization program, in a trading environment where market impact is linear and stage costs are quadratic, we obtain an optimal trading curve that reacts opportunistically to price changes while retaining its ability to satisfy smooth or hard completion constraints. The optimal allocation is affine in the spot price and in the number of outstanding shares at any time, and it can be fully derived iteratively. It is also aggressive in the money, meaning that it accelerates whenever the price is favorable, with an intensity that can be calibrated by the practitioner. Since the LQR may yield locally negative participation rates (i.e round trip trades) which are often undesirable, we show that the aforementioned optimization problem can be improved and solved under positivity constraints following a Model Predictive Control (MPC) approach. In particular, it is smoother and more consistent with the completion constraint than putting a hard floor on the participation rate. We finally examine how the LQR can be simplified in the continuous trading context, which allows us to derive a closed formula for the trading curve under further assumptions, and we document a two-step strategy for the case where trades can also occur in an additional dark pool. |
| Date: | 2021–10 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2110.11008&r= |
| By: | Florian Bonnet; Aurélie Sotura |
| Abstract: | This paper proposes homogeneous annual series on the income distribution of French metropolitan départements for the period 1960-69 and 1986-2018. We rely on unpublished and newly digitised archives of the French Ministry of Finance. They consist of fiscal tabulations that are a summary of households’ income tax declarations. Based on these raw sources, we interpolate the whole income distribution of French metropolitan départements after 1986. Before 1986, we need more assumptions as only households liable to French income tax filed income tax declarations at that time. We propose a methodology to estimate the number and average income of non-taxable households before 1986 that also allows us to reconstruct the income distribution of French metropolitan départements for the period 1960-69. |
| Keywords: | Intraregional Inequalities, Income Distribution, Economic Geography, Economic History |
| JEL: | D30 N34 N94 R12 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:bfr:banfra:832&r= |
| By: | Ishizu, Mina |
| Abstract: | The paper aims to offer an introduction to provincial financial agents as the key components in provincial-metropolitan integration of money markets. It establishes that PFAs engaged in de facto banking and played an important role in local money markets. Both in England and in Tokugawa Japan, they were responsible for making decisions whether or not to establish a connection with financial agents in the commercial centres. The paper also considers some of the financial services facilitated by the existence of financial connections between metropolitan and provincial financial agents. In both countries, remittances and (particularly in England) investment were important financial activities facilitated by such connections, while bill-rediscounting appears to have been relevant only in the English case. On the other hand, in Japan domain-related business activity forged financial links with the commercial centres, links in which provincial financial agents played a major role. Also the expansion of inter-domainal private trade may have further stimulated the inter-regional financial linkages in the late Tokugawa period. |
| Keywords: | financial agents; provincial towns; inter-regional financial linkages;; early industrialisation |
| JEL: | N20 N23 N25 |
| Date: | 2020–01 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:wpaper:103159&r= |
| By: | Haoyu Wei; Xiaojun Song |
| Abstract: | The normality assumption for errors in the Analysis of Variance (ANOVA) is common when using ANOVA models. But there are few people to test this normality assumption before using ANOVA models, and the existent literature also rarely mentions this problem. In this article, we propose an easy-to-use method to testing the normality assumption in ANOVA models by using smooth tests. The test statistic we propose has asymptotic chi-square distribution and our tests are always consistent in various different types of ANOVA models. Discussion about how to choose the dimension of the smooth model (the number of the basis functions) are also included in this article. Several simulation experiments show the superiority of our method. |
| Date: | 2021–10 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2110.04849&r= |