|
on Central and Western Asia |
| By: | Hippolyte d'Albis (PSE - Paris School of Economics - ENPC - École des Ponts ParisTech - ENS Paris - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique - EHESS - École des hautes études en sciences sociales - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS Paris - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement); Ekrame Boubtane (CERDI - Centre d'Études et de Recherches sur le Développement International - CNRS - Centre National de la Recherche Scientifique - UCA - Université Clermont Auvergne, INED - Institut national d'études démographiques, PSE - Paris School of Economics - ENPC - École des Ponts ParisTech - ENS Paris - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique - EHESS - École des hautes études en sciences sociales - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS Paris - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement); Dramane Coulibaly (GATE Lyon Saint-Étienne - Groupe d'analyse et de théorie économique - CNRS - Centre National de la Recherche Scientifique - Université de Lyon - UJM - Université Jean Monnet [Saint-Étienne] - UCBL - Université Claude Bernard Lyon 1 - Université de Lyon - UL2 - Université Lumière - Lyon 2 - ENS Lyon - École normale supérieure - Lyon) |
| Abstract: | In this article, we study the impact of demographic changes on the inequality between capital and labor incomes. More precisely, we analyze the impact of exogenous changes in both the rate of natural increase and the net migration rate on labor income as a share of total income. We estimate a structural vector autoregression (VAR) model on a panel of 18 OECD countries with annual data for 1985–2018. We find that the response of the labor income share to an exogenous change in the rate of natural increase is significantly negative a few years after the shock, whereas its response to an exogenous change in the net migration rate is significantly positive. This suggests that in addition to the factors usually introduced in the literature, demographic factors play a role in the observed variation in the labor income share. |
| Keywords: | Natural increase,International migration,JEL classification: E20,Labor income share,F22,J61 International Migration,Natural Increase,Labor Income Share |
| Date: | 2021–01 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-03038638&r= |
| By: | Roth, Steve |
| Abstract: | This paper explores economic measures that are surprisingly hard to assemble: US household income quintiles’ annual spending relative to annual income. The total sector’s income-minus-spending surplus is heavily dominated by the top 20%. The bottom 80% runs persistent spending deficits, implying ongoing asset disaccumulation; the bottom 80%’s annual “propensity” to spend relative to income, or spending multiplier, is greater than one. This spending deficit is found to be largely explained or “funded” by two additional asset sources that are not included in income: borrowing from the financial/banks sector, and — to a far greater extent — capital gains on asset holdings. |
| Keywords: | propensity; marginal; income; disposable income; personal income; capital gains; household; balance sheet; spending; saving; holding gains; borrowing; liabilities; assets; quintile; multiplier |
| JEL: | D14 D31 E21 |
| Date: | 2021–11–13 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:110670&r= |
| By: | Eisenkopf, Jana; Juranek, Steffen; Walz, Uwe |
| Abstract: | We investigate the differential effect of the COVID-19 shock to the stock market shock on the share prices of firms with different levels of ESG (Environmental, Social and Governance) scores. Thereby, we analyse whether and to what extent better ESG ratings provided insurance for investors in the stocks of those firms during this shock. We focus our analysis on the European market in which ESG investment plays a particularly important role. Using a broad sample of listed firms we provide mixed evidence. On the one hand, we show that immediately after the start of the shock firms with a higher ESG score outperformed their peers. On the other hand, this effect faded less than six weeks later. Given the quick recovery of the market our finding supports the idea that ESG stocks provide limited insurance in severe crises. |
| Keywords: | Responsible investment,ESG,stock market crisis,persistence |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:safewp:329&r= |
| By: | Alkan, Berkay |
| Abstract: | In this paper I investigate the empirical relationship between economic growth (as measured by growth in real GDP) and inflation in Turkey. We use a relatively large dataset spanning from 1960 to 2020. Our correlation analysis indicates that the nature of the relationship between inflation and unemployment in Turkey is substantially different before and after early 1980s. |
| Keywords: | growth; inflation; Turkish economy |
| JEL: | E31 N10 O40 |
| Date: | 2021–12–25 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:111227&r= |
| By: | An, Sungbae (KOREA INSTITUTE FOR INTERNATIONAL ECONOMIC POLICY (KIEP)); Kim, Subin (KOREA INSTITUTE FOR INTERNATIONAL ECONOMIC POLICY (KIEP)) |
| Abstract: | Following the Asian financial crisis of 1998, there was a need to improve regional financial cooperation, including liquidity support. The Chiang Mai Initiative Multilateralization (hereinafter, CMIM) and the Asian Bond Market Initiative (hereafter, ABMI) are two of the outcomes, but it is difficult to find countries that are actively using these mechanisms. Against this backdrop, we will first examine the limitations of existing systems and propose ways to overcome those limitations, as well as new ways to strengthen East Asian financial cooperation. We suggest three ways to strengthen financial coopera-tion in East Asia from a new perspective: 1) monetary cooperation through Central Bank Digital Currency (CBDC) 2) establishment of development financial institution in Northeast Asia 3) financial cooperation with Central Asia and Mongolia. Of course, more precise planning is required to implement these alternatives, and it is also recognized that the topics covered in this study represent only a subset of regional financial and monetary cooperation. However, by overcoming the limitations thus far, it is hoped that it can be a contribution that provides at least a glimmer of thought, which can hopefully become more concrete in future studies. |
| Keywords: | East Asia; regional financial cooperation; CMIM; CBDC |
| Date: | 2021–12–15 |
| URL: | http://d.repec.org/n?u=RePEc:ris:kiepwe:2021_043&r= |
| By: | Isaac K. Ofori (University of Insubria, Varese, Italy); Simplice A. Asongu (Yaoundé, Cameroon) |
| Abstract: | This study examines whether the remarkable inflow of resources in the form of foreign direct investment (FDI) to SSA contributes to inclusive growth in the region. The study further investigates whether SSA’s institutional fabric modulates the effect of FDI on inclusive growth in SSA. To this end, we draw data on 42 SSA countries for the period 1990 – 2020 for the analysis. The evidence, which are based on the GMM estimator shows that: (1) though FDI fosters inclusive growth in SSA, the effect is weak, and (2) the weak inclusive growth inducing-effects of FDI are weakened or nullified completely by SSA’ fragile governance quality. Nonetheless, the optimism, which we provide by way of threshold analysis shows that channelling resources into the development of these governance dynamics yield positive net effects from the short-term through to the long-term. Notably, the results show that the short-term to long-term FDI-induced inclusive growth gains of developing frameworks and structures for fighting corruption while addressing fragilities in regulatory quality and government effectiveness are outstanding. A few policy recommendations are discussed in the end. |
| Keywords: | AfCFTA; Africa; Economic Integration; FDI; Governance; Inclusive Growth |
| JEL: | F6 F15 O43 O55 R58 |
| Date: | 2022–01 |
| URL: | http://d.repec.org/n?u=RePEc:agd:wpaper:22/003&r= |
| By: | Elisa Darriet (Lirsa, CNAM; Lemma, Université Paris II Panthéon-Assas); Marianne Guille (Lemma, Université Paris II Panthéon-Assas and Labex MME-DII); Jean-Christophe Vergnaud (Centre d'Economie de la Sorbonne, CNRS) |
| Abstract: | The aim of this chapter is to investigate the relationship between financial literacy and numeracy. It turns out that numeracy and financial literacy are strongly correlated. In order to clarify this relationship, we review, in a first section, the general definition of numeracy and its most commonly used measures. We then try to enlighten the distinction that can be made between numeracy and financial literacy. In a second section, we focus on the relationship between numeracy and financial literacy using the main empirical studies performed. Since the analyses of their results show that numeracy is a key determinant of financial literacy, we highlight, in a third and final section, the key role that numeracy could have in education programs and consumer protection policies to improve financial decisions |
| Keywords: | Financial literacy; Numeracy |
| JEL: | G4 G5 G53 D14 |
| Date: | 2021–10 |
| URL: | http://d.repec.org/n?u=RePEc:mse:cesdoc:21031&r= |
| By: | Gongqiu Zhang; Lingfei Li |
| Abstract: | We propose a very efficient method for pricing various types of lookback options under Markov models. We utilize the model-free representations of lookback option prices as integrals of first passage probabilities. We combine efficient numerical quadrature with continuous-time Markov chain approximation for the first passage problem to price lookbacks. Our method is applicable to a variety of models, including one-dimensional time-homogeneous and time-inhomogeneous Markov processes, regime-switching models and stochastic local volatility models. We demonstrate the efficiency of our method through various numerical examples. |
| Date: | 2021–12 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2112.00439&r= |
| By: | Wurm, Laura |
| Abstract: | How does futures trading affect spot price volatility? This paper uses a unique early-twentieth century natural experiment to test what happens when futures trading no longer exists. In 1903, futures trading in the Viennese grain market was banned. The permanency of this ban makes it ideal for studying its effect on volatility, using a difference-in-difference framework. Prices from Budapest, a market operating under similar conditions but unaffected by the ban, are used as a control. This paper finds increased spot price volatility and lower pricing accuracy because the information-transmission and risk-allocation functions of the futures market were no longer maintained. |
| Keywords: | futures trading,volatility,information,market regulation,speculation,commodity markets,agricultural economics,Austro-Hungarian Empire |
| JEL: | N23 G13 G14 G18 G41 E65 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:qucehw:202109&r= |
| By: | Georgiadis, Georgios; Müller, Gernot J.; Schumann, Ben |
| Abstract: | How does global risk impact the world economy? In taking up this question, we focus on the dollar’s role in the international adjustment mechanism. First, we rely on high-frequency surprises in the price of gold to identify the effects of global risk shocks in a Bayesian Proxy VAR model. They cause a synchronized contraction of global economic activity and appreciate the dollar. Other key financial indicators adjust in line with pre-dictions of recent theoretical work. Second, we illustrate through counterfactuals that the dollar appreciation amplifies the adverse impact of global risk shocks outside of the US via a financial channel. JEL Classification: F31, F42, F44 |
| Keywords: | Bayesian proxy structural VAR, counterfactual, global risk shocks, minimum relative entropy, US dollar exchange rate |
| Date: | 2021–12 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20212628&r= |
| By: | Camelia Minoiu; Rebecca Zarutskie; Andrei Zlate |
| Abstract: | We study the effects of the Main Street Lending Program (MSLP)—an emergency lending program aimed at supporting the flow of credit to small and mid-sized firms during the COVID-19 crisis on bank lending to businesses. Using instrumental variables for identification and multiple loan-level and survey data sources, we document that the MSLP increased banks' willingness to lend more generally outside the program to both large and small firms. Following the introduction of the program, participating banks were more likely to renew maturing loans and to originate new loans, as well as less likely to tighten standards on business loans than nonparticipating banks. Additional evidence suggests that the MSLP, despite low take-up, supported the flow of bank credit during the pandemic by serving as a backstop to the bank loan market and by increasing banks' levels of risk tolerance in the face of uncertainty. |
| Keywords: | Main Street Lending Program; Federal Reserve; Bank lending; COVID-19 pandemic; Emergency lending facilities |
| JEL: | E52 E58 E63 G21 |
| Date: | 2021–12–17 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedgfe:2021-78&r= |
| By: | Uta Pigorsch; Sebastian Sch\"afer |
| Abstract: | This paper proposes a Deep Reinforcement Learning algorithm for financial portfolio trading based on Deep Q-learning. The algorithm is capable of trading high-dimensional portfolios from cross-sectional datasets of any size which may include data gaps and non-unique history lengths in the assets. We sequentially set up environments by sampling one asset for each environment while rewarding investments with the resulting asset's return and cash reservation with the average return of the set of assets. This enforces the agent to strategically assign capital to assets that it predicts to perform above-average. We apply our methodology in an out-of-sample analysis to 48 US stock portfolio setups, varying in the number of stocks from ten up to 500 stocks, in the selection criteria and in the level of transaction costs. The algorithm on average outperforms all considered passive and active benchmark investment strategies by a large margin using only one hyperparameter setup for all portfolios. |
| Date: | 2021–12 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2112.04755&r= |
| By: | Pauline Gandré; Mike Mariathasan; Ouarda Merrouche; Steven Ongena |
| Abstract: | The G-20’s global over-the-counter (OTC) derivatives market reform has caused a dramatic shift in the geography of the global derivatives market. Following the early implementation of the reform in the US and associated increase in the cost of trading derivatives, US banks shifted up to 60 percent of their OTC derivatives activity abroad, particularly towards less regulated jurisdictions. This implies an increase in global risk as risk is shifted to jurisdictions that are less prepared to monitor it and deal with the consequences. Further, we find that foreign subsidiaries in more tightly regulated jurisdictions have increased risk-taking overall. |
| Keywords: | Bank regulation, Regulatory arbitrage, OTC Markets, Derivatives, Cross-border financial institutions, Financial risk. |
| JEL: | G15 G18 G21 G23 G28 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:drm:wpaper:2021-36&r= |
| By: | James B. Bullard |
| Abstract: | During a presentation in Clayton, Mo., for the Missouri Bankers Association, St. Louis Fed President Jim Bullard said that there has been an unexpected inflation shock in the U.S. during 2021, and that U.S. monetary policy has so far remained very accommodative. Asset price inflation has been substantial as well, he added. He said that U.S. real GDP has fully recovered and that labor markets are quite strong and likely to get stronger. He also noted that pandemic risk remains. “These considerations suggest, on balance, that the Federal Open Market Committee (FOMC) should remove monetary policy accommodation,” he said. |
| Keywords: | COVID-19; inflation; monetary policy |
| Date: | 2021–12–03 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedlps:93442&r= |
| By: | Noriyuki Kunimoto; Kazuhiko Kakamu |
| Abstract: | Using the asymmetric stochastic volatility model, this study investigates the day-of-the-week and holiday effects on the returns and volatility of Bitcoin from January 1, 2013 to August 31, 2019; in this context, we also discuss the characteristics of Bitcoin as a financial asset. The results of the estimation are threefold. First, the finding shows a small day-of-the week effect in volatility on Saturday and Sunday than in the rest of the week. Second, although the holiday effects are examined in active trading countries, namely Japan, China, Germany, and the United States, the positive post-holiday effect on the returns and weak positive pre-holiday effect on the volatility are only observed in the United States. Finally, the asymmetry effect is not observed. A comparison of Bitcoin to several assets such as stock, currency, and gold shows Bitcoin's positioning between stock, currency, and gold in relation to the week and holiday effects, its reaction to federal funds and medium of exchange characteristics, and the lack of asymmetry effect. |
| Date: | 2021–11 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2111.15351&r= |
| By: | Checherita-Westphal, Cristina; Stechert, Marcel |
| Abstract: | We study the relationship between fiscal policy and household saving across the euro area countries for the period 1999-2019. To this extent, we propose a thick modelling approach, which allows a vast number of model specifications in a dynamic panel setting. We find that fiscal expansions are associated with an increase in household saving rate in the euro area, which supports a partial, but not full, Ricardian equivalence channel. The relationship holds regardless of how we measure the (discretionary) fiscal policy impulse. The median saving offset across all baseline specifications is around 19% in the short run and 41% in the long run. Various robustness checks underpin the basic results, while also pointing to model and estimation uncertainty and no robust evidence for total private saving offset. Our results for the euro area are broadly in line with the literature, albeit they tend to yield a somewhat weaker evidence for the saving offset of fiscal policy, particularly in relation to earlier studies. JEL Classification: D14, E62, H6 |
| Keywords: | deficit and debt, fiscal policy, household saving, national budget |
| Date: | 2021–12 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20212633&r= |
| By: | Adam N. Smith; Stephan Seiler; Ishant Aggarwal |
| Abstract: | We examine the profitability of personalized pricing policies that are derived using different specifications of demand in a typical retail setting with consumer-level panel data. We generate pricing policies from a variety of models, including Bayesian hierarchical choice models, regularized regressions, and classification trees using different sets of data inputs. To compare pricing policies, we employ an inverse probability weighted estimator of profits that explicitly takes into account non-random price variation and the panel nature of the data. We find that the performance of machine learning models is highly varied, ranging from a 21% loss to a 17% gain relative to a blanket couponing strategy, and a standard Bayesian hierarchical logit model achieves a 17.5% gain. Across all models purchase histories lead to large improvements in profits, but demographic information only has a small impact. We show that out-of-sample hit probabilities, a standard measure of model performance, are uncorrelated with our profit estimator and provide poor guidance towards model selection. |
| Keywords: | targeting, personalization, heterogeneity, choice models, machine learning |
| JEL: | C11 C33 C45 C52 D12 L11 L81 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_9439&r= |
| By: | Tweneboah Senzu, Emmanuel |
| Abstract: | It empirically argued that economic development depends on increasing productivity, mitigating income inequality, reducing dependency on natural resources, improving health outcomes, enhancing environmental quality, and importantly increasing economic growth. Which is complemented by the fact that, all requires a quality financial system, which collects information to facilitate the ex-ante evaluation and ex-post monitoring of investment opportunities to ease information asymmetry as a problem, and facilitates the allocation of resources to innovative projects and further produce complex products. The above postulation derives its core factor of achievement from sustainable financial inclusion, with the paper advancing a conceptual proposition towards an effective, and efficient financial inclusion in fragile economies, and its underlying policy architecture to sustain its performance efficiency, in medium and long term purpose. |
| Keywords: | Financial Inclusions, Financial ecosystem, Policy, Central Bank, Fragile Economy |
| JEL: | E2 E6 G23 G28 H5 |
| Date: | 2021–12–09 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:111002&r= |
| By: | Christine Laudenbach; Annika Weber; Johannes Wohlfart |
| Abstract: | We survey retail investors at an online bank to study beliefs about the autocorrelation of aggregate stock returns, and how these beliefs shape investment decisions measured in administrative account data. Individuals’ beliefs exhibit substantial heterogeneity and predict trading responses to market movements. We inform a random half of our respondents that historically the autocorrelation of aggregate returns was close to zero, which persistently changes their beliefs. Among those initially believing in mean reversion, treated respondents buy significantly less equity during the COVID-19 crash four months later. Our results highlight how heterogeneity in subjective models causally drives trade in asset markets. |
| Keywords: | expectation formation, information, updating, retail investors, trading |
| JEL: | D14 D83 D84 D91 E71 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_9427&r= |
| By: | Benjamin Bureau; Anne Duquerroy; Frédéric Vinas |
| Abstract: | Using unique daily data on payment defaults to suppliers in France, we show how the trade credit channel amplified the Covid-19 shock, during the first months of the pandemic. It dramatically increased short-term liquidity needs in the most impacted downstream sectors: a one standard deviation increase in net trade credit position leads to a rise in the probability of default of up to a third. This effect is short-term and cyclical and is concentrated on financially constrained firms. We argue that taking into account the trade credit channel is critical to properly quantify liquidity shortfalls in crisis times. |
| Keywords: | Firm, Corporate Finance, Trade Credit, Liquidity, Payment Default, Covid-19, Lockdown, Pandemic |
| JEL: | E32 G32 G33 H12 H32 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:bfr:banfra:851&r= |
| By: | Victor Olkhov |
| Abstract: | We consider economic agents, agent's variables, agent's trades and deals with other agents and agent's expectations as ground for theoretical description of economic and financial processes. Macroeconomic and financial variables are composed by agent's variables. In turn, sums of agent's trade values or volumes determine evolution of agent's variables. In conclusion, agent's expectations govern agent's trade decisions. We consider that trinity - agent's variables, trades and expectations as simple bricks for theoretical description of economics. We note models that describe variables determined by sums of market trades during certain time interval {\Delta} as the first-order economic theories. Most current economic models belong to the first-order economic theories. However, we show that these models are insufficient for adequate economic description. Trade decisions substantially depend on market price forecasting. We show that reasonable predictions of market price volatility equal descriptions of sums of squares of trade values and volumes during {\Delta}. We call modeling variables composed by sums of squares of market trades as the second-order economic theories. If forecast of price probability uses 3-d price statistical moment and price skewness then it equals description of sums of 3-d power of market trades - the third-order economic theory. Exact prediction of market price probability equals description of sums of n-th power of market trades for all n. That limits accuracy of price probability forecasting and confines forecast validity of economic theories. |
| Date: | 2021–12 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2112.04566&r= |
| By: | Sylvérie Herbert; Hautahi Kingi; Flavio Stanchi; Lars Vilhubern |
| Abstract: | Given the importance of reproducibility for the scientific ethos, more and more journals have pushed for transparency of research through data availability policies. If the introduction and implementation of such data policies improve the availability of researchers' code and data, what is the impact on reproducibility? We describe and present the results of a large reproduction exercise in which we assess the reproducibility of research articles published in the American Economic Journal: Applied Economics, which has implemented a data availability policy since 2005. Our replication success rate is relatively moderate, with 37.78% of replication attempts successful. 68 of 162 eligible replication attempts successfully replicated the article's analysis (41.98%) conditional on non-confidential data. A further 69 (42.59%) were at least partially successful. A total of 98 out of 303 (32.34%) relied on confidential or proprietary data, and were thus not reproducible by this project. We also conduct several bibliometric analyses of reproducible vs. non-reproducible articles and show that replicable papers do not provide citation bonuses for authors. |
| Keywords: | Replication, Reproducibility, Transparency, Replicability, Journal Policies |
| JEL: | B41 C80 C81 C87 C88 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:bfr:banfra:853&r= |
| By: | Davis, John B. (Department of Economics Marquette University) |
| Abstract: | This chapter critically evaluates standard economics’ treatment of positive and normative, drawing on Putnam’s (2002) fact-value entanglement argument. It argues that economics is an inherently value-laden discipline but may still be an ‘objective’ one. The means of achieving this is to carry out a programme of value disentanglement that evaluates research approaches according to whether their different value structures are consistent. The method employed assumes that economics and social science disciplines are built around anchor values or normative ideals and additional sets of values concerning what most people in those disciplines see as most valuable and good about human society and characteristic of human nature from the perspective of their disciplines. Since the rise of neoclassicism, in economics the anchor value has been what I term an ‘individual realisation’ ideal. This normative ideal is coupled with values that interpret what individual well-being involves, based on additional values regarding what individuals are. The chapter evaluates the value structures of mainstream economics preferences/utility and the capability conceptions of individuals. The chapter concludes with discussion of different forms of interdisciplinarity and advances a general framework for ethics and economics in an ‘objective’ economics. |
| Keywords: | positive, normative, fact-value entanglement, individual realisation, capability, disciplinarity |
| JEL: | A13 B20 B41 B55 |
| Date: | 2022–01 |
| URL: | http://d.repec.org/n?u=RePEc:mrq:wpaper:2022-01&r= |
| By: | Brice Corgnet; Camille Cornand (GATE Lyon Saint-Étienne - Groupe d'analyse et de théorie économique - CNRS - Centre National de la Recherche Scientifique - Université de Lyon - UJM - Université Jean Monnet [Saint-Étienne] - UCBL - Université Claude Bernard Lyon 1 - Université de Lyon - UL2 - Université Lumière - Lyon 2 - ENS Lyon - École normale supérieure - Lyon); Nobuyuki Hanaki |
| Abstract: | We study the reaction of investors to tail events across trading institutions. We conduct experiments in which investors bid on a financial asset that delivers a small positive reward in more than 99% of the cases and a large loss otherwise. The baseline treatment uses a repeated BDM mechanism whereas the market treatment replaces the uniform draw of the BDM mechanism by a uniform draw over the bids of the other participants. Our design is such that bids should not differ across treatments in normal times while allowing for potential differences to emerge after tail events have occurred. We find that markets tend to exacerbate the reaction of investors to tail losses and we attribute this effect to emotions. |
| Keywords: | Tail events,trading institutions,experimental finance,emotions and risk |
| Date: | 2021–12–07 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:hal-03468913&r= |
| By: | Olkhov, Victor |
| Abstract: | We consider economic agents, agent’s variables, agent’s trades and deals with other agents and agent’s expectations as ground for theoretical description of economic and financial processes. Macroeconomic and financial variables are composed by agent’s variables. In turn, sums of agent’s trade values or volumes determine evolution of agent’s variables. In conclusion, agent’s expectations govern agent’s trade decisions. We consider that trinity - agent’s variables, trades and expectations as simple bricks for theoretical description of economics. We note models that describe variables determined by sums of market trades during certain time interval Δ as the first-order economic theories. Most current economic models belong to the first-order economic theories. However, we show that these models are insufficient for adequate economic description. Trade decisions substantially depend on market price forecasting. We show that reasonable predictions of market price volatility equal descriptions of sums of squares of trade values and volumes during Δ. We call modeling variables composed by sums of squares of market trades as the second-order economic theories. If forecast of price probability uses 3-d price statistical moment and price skewness then it equals description of sums of 3-d power of market trades – the third-order economic theory. Exact prediction of market price probability equals description of sums of n-th power of market trades for all n. That limits accuracy of price probability forecasting and confines forecast validity of economic theories. |
| Keywords: | theoretical economics; price probability; volatility; market trades; expectations |
| JEL: | A1 C0 E0 E1 E3 G0 |
| Date: | 2021–12–01 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:110893&r= |
| By: | Raphael A. Auer; Cyril Monnet; Hyun Song Shin |
| Abstract: | Blockchain technology breathes new life into the classical analysis of money as a substitute for a ledger of all past transactions. While it involves updating the ledger through a decentralized consensus on the unique truth, the robustness of the equilibrium that supports this consensus depends on who has access to the ledger and how it can be updated. To find the optimal solution, Buterin’s “scalability trilemma” needs to be addressed, so that a workable balance can be found between decentralization, security (i.e. a robust consensus), and scale (the efficient volume of transactions). Using a global game analysis of an exchange economy with credit, we solve for the optimal ledger design that balances the three objectives of this trilemma. We characterize the optimal number of validators, supermajority threshold, fees and transaction size. When intertemporal incentives are strong, a centralized ledger is always optimal. Otherwise, decentralization may be optimal, and validators need to be selected from the set of users of the system. |
| Keywords: | market design, money distributed ledger technology, DLT, blockchain, decentralized finance, global game, consensus |
| JEL: | C72 C73 D40 E42 G20 L86 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_9441&r= |
| By: | Ben Hambly; Renyuan Xu; Huining Yang |
| Abstract: | The rapid changes in the finance industry due to the increasing amount of data have revolutionized the techniques on data processing and data analysis and brought new theoretical and computational challenges. In contrast to classical stochastic control theory and other analytical approaches for solving financial decision-making problems that heavily reply on model assumptions, new developments from reinforcement learning (RL) are able to make full use of the large amount of financial data with fewer model assumptions and to improve decisions in complex financial environments. This survey paper aims to review the recent developments and use of RL approaches in finance. We give an introduction to Markov decision processes, which is the setting for many of the commonly used RL approaches. Various algorithms are then introduced with a focus on value and policy based methods that do not require any model assumptions. Connections are made with neural networks to extend the framework to encompass deep RL algorithms. Our survey concludes by discussing the application of these RL algorithms in a variety of decision-making problems in finance, including optimal execution, portfolio optimization, option pricing and hedging, market making, smart order routing, and robo-advising. |
| Date: | 2021–12 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2112.04553&r= |
| By: | Anne-Caroline Hüser; Caterina Lepore; Luitgard Veraart |
| Abstract: | We examine how the repo market operates during liquidity stress by applying network analysis to novel transaction-level data of the overnight gilt repo market including the COVID-19 crisis. During this crisis, the repo network becomes more connected, with most institutions relying on existing trade relationships to transact. There are however significant changes in the repo volumes and spreads during the stress relative to normal times. We find a significant increase in volumes traded in the cleared segment of the market. This reflects a preference for dealers and banks to transact in the cleared rather than the bilateral segment. Funding decreases towards non-banks, only increasing for hedge funds. Further, spreads are higher when dealers and banks lend to rather than borrow from non-banks. Our results can inform the policy debate around the behaviour of banks and non-banks in recent liquidity stress and on widening participation in CCPs by nonbanks. |
| Date: | 2021–11–05 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:2021/267&r= |
| By: | Roberto Daluiso; Emanuele Nastasi; Andrea Pallavicini; Stefano Polo |
| Abstract: | In this work we deal with the funding costs rising from hedging the risky securities underlying a target volatility strategy (TVS), a portfolio of risky assets and a risk-free one dynamically rebalanced in order to keep the realized volatility of the portfolio on a certain level. The uncertainty in the TVS risky portfolio composition along with the difference in hedging costs for each component requires to solve a control problem to evaluate the option prices. We derive an analytical solution of the problem in the Black and Scholes (BS) scenario. Then we use Reinforcement Learning (RL) techniques to determine the fund composition leading to the most conservative price under the local volatility (LV) model, for which an a priori solution is not available. We show how the performances of the RL agents are compatible with those obtained by applying path-wise the BS analytical strategy to the TVS dynamics, which therefore appears competitive also in the LV scenario. |
| Date: | 2021–12 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2112.01841&r= |
| By: | Jean-Felix Brouillette; Charles I. Jones; Peter J. Klenow |
| Abstract: | We construct a measure of consumption-equivalent welfare for Black and White Americans. Our statistic incorporates life expectancy, consumption, leisure, and inequality, with mortality rates playing a key role quantitatively. According to our estimates, welfare for Black Americans was 43% of that for White Americans in 1984 and rose to 60% by 2019. Going back further in time (albeit with more limited data), the gap was even larger, with Black welfare equal to just 28% of White welfare in 1940. On the one hand, there has been remarkable progress for Black Americans: the level of their consumption-equivalent welfare increased by a factor of 28 between 1940 and 2019, when aggregate consumption per person rose a more modest 5-fold. On the other hand, despite this remarkable progress, the welfare gap in 2019 remains disconcertingly large. Mortality from COVID-19 has temporarily reversed a decade of progress, lowering Black welfare by 17% while reducing White welfare by 10%. |
| JEL: | I31 J15 O40 |
| Date: | 2021–12 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:29539&r= |
| By: | Attila Lovas; Mikl\'os R\'asonyi |
| Abstract: | When applying threshold-type strategies, changes in the portfolio position are triggered by the asset price process reaching prescribed levels. Such strategies are frequently used by investors, to profit from price oscillations. In this paper, we make the first steps towards the optimization of threshold strategies by proving the ergodic properties of related functionals. Assuming a minorization condition and (one-sided) boundedness of the price increments, we show, in particular, that for given thresholds, the distribution of the gain converges in the long run. Our results cover, in particular, a large class of stochastic volatility models. We also extended recent results on the stability of overshoots of random walks from the i.i.d.\ increment case to Markovian increments, under suitable conditions. |
| Date: | 2021–11 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2111.14708&r= |
| By: | Ozili, Peterson K |
| Abstract: | This article offers a number of policy solutions to improve financial inclusion during the COVID19 crisis. COVID-19 is a global health crisisto which some of the usual global solutionslike greater financial inclusion can help. Financial inclusion remains a powerful development tool to improve access to finance and to support vulnerable individuals and households during the coronavirus or COVID-19 crisis. The documented policy solutions for financial inclusion can help mitigate the effect of the COVID-19 crisis through the combined use of Fintech and short-term policies |
| Keywords: | digital finance, Fintech, financial inclusion, access to finance, regulation, financial services, COVID-19, Coronavirus, SARS-CoV-2, lockdown, social distancing, pandemic, recession, financial crisis, policy. |
| JEL: | G00 G21 I31 I32 I38 I39 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:111219&r= |
| By: | Noll, Franklin; Lipkin, Andrei |
| Abstract: | We are heading for a cashless world. At some point, we will say goodbye to all those pieces of paper and polymer and switch to an electronic alternative. The only problem with these statements is that people have been saying them since the late 1960s. Banknotes have a robust technology and will be around for quite some years to come. What is needed is a transitional device that will ease the transition from nineteenth-century cash to twenty-first-century digital currency. The answer is a hybrid banknote. Basically, a hybrid banknote is a physical banknote on a paper or polymer substrate that can transfer value over an electronic network. It is denominated and has all the physical properties of a traditional banknote, allowing it to pass hand to hand. However, when the need arises, the user can access an electronic network and transfer the denominated value off the hybrid banknote. In this paper, we look at the past and present of hybrid banknotes, identifying their two basic forms—smart banknotes and cryptobanknotes—and how they differ. We also offer three hybrid banknote models that can be used to address pressing needs in payments technology. |
| Keywords: | hybrid banknotes, smart banknotes, cryptobanknotes, central bank digital currency |
| JEL: | E4 E5 |
| Date: | 2021–09–16 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:110887&r= |
| By: | Rocco Rante (Musée du Louvre - Musée du Louvre); Federico Trionfetti (AMSE - Aix-Marseille Sciences Economiques - EHESS - École des hautes études en sciences sociales - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique - AMU - Aix Marseille Université) |
| Abstract: | This paper focuses on the new approach studying variations in city size and the impact that the Silk Road had on the structure of cities, demonstrated through the study of economic aspects of the Bukhara oasis. We use archaeological data, compare the ancient economy to modern ones, use modern economic theory and methods to understand ancient society, and use what we have learned about the ancient economy to understand modern economies better. In sum, we explore the past through the present and the latter through the former. Our main finding is the generation of models able to answer to the city-size distribution in different territories, comparing them between the past and the present. This study first revealed that, through Zipf's Law, we found similarities between modern post-Industrial Revolution and medieval economics. Secondly, we also found that in ancient times the structure of the city was linked with the local economic demand. We have demonstrated this through the study of cities along the Silk Road. |
| Date: | 2021–11 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-03463252&r= |
| By: | Kouli, Yaman; König, Jörg |
| Abstract: | Historiography on European integration before 1914 has acknowledged that the level of entanglements between the European nation-states was quite advanced. Indeed, historians were able to confirm a high level of cooperation on the legal, social, technical and even political level. And yet, the exact level of economic integration has hitherto been unknown. In this paper, we quantitatively analyse the level of economic integration in Europe. We develop a comprehensive economic integration index for the period 1880-1913. By exploiting existing as well as newly available databases, we quantitatively analyse the longterm development of European economic integration for 15 European countries. Subindices are developed to measure for each country and each year the extent of European market integration, economic homogeneity and cyclical symmetry. We exploit the data using principal-component-analysis (PCA). Moreover, we test for country-specific characteristics via regression analysis and cluster analysis. With our findings, we are able to show that European economic integration actually declined during the years between 1880 and 1913 and got more fragmentated. Even though the exact picture depends on the country, the tendency is still undeniable: during the "first wave of globalisation", European economic integration levels moved downwards. |
| Keywords: | Economic History,European Economic Integration |
| JEL: | C38 N93 F15 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:dicedp:374&r= |
| By: | Tomás Marinozzi; Leandro Nallar; Sergio Pernice |
| Abstract: | General equilibrium models are typically presented with mathematical methods, such as the Edgeworth Box, that do not easily generalize to more than two goods and more than two agents. This is fine as a conceptual introduction, but it may be insufficient in the “Big-Data Machine-Learning Era”, with gigantic databases filled with data of extremely high dimensionality that are already changing the practice, and perhaps even the conceptual basis, of economics and other social sciences. In this paper present what we call the “Gradient Field Method” to solve these problems. It has the advantage of being, 1) as intuitive as the Edgeworth Box, 2) easily generalizes to far more complex situations, and 3) nicely mesh with the data friendly techniques of the new Era. In addition, it provides a unified framework to present both, partial equilibrium, and general equilibrium problems. |
| Keywords: | microeconomics, general equilibrium, radient, gradient field, machine learning. |
| Date: | 2021–12 |
| URL: | http://d.repec.org/n?u=RePEc:cem:doctra:820&r= |
| By: | Hoch, Felix; Seyberth, Lilo |
| Abstract: | Research investigating the relationship between firm performance and gender diversity has so far reported conflicting evidence: Some studies find firm performance to benefit from gender diversity, others find negative results or no effect at all. Taking this inconclusive evidence as a sign for moderators influencing the effect of gender diversity on firm performance, we investigate the moderating influence of institutions on this relationship. Using data on 7,661 firms in 71 countries, we employ a multilevel linear regression with fixed effects to examine the moderating effect of formal as well as informal institutional characteristics. We find that institutions indeed moderate the relationship between gender diversity and firm performance. In particular, informal institutions seem to moderate the effect of diversity on market valuation (Tobin's Q), while formal institutions moderate the effect of gender diversity on firm financial performance (ROA). These results have important theoretical implications for the academic debate on gender diversity and firm performance as well as practical implications for both businesses and lawmakers. |
| JEL: | J16 J71 L25 M12 M14 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:umiodp:112021&r= |
| By: | Gianluca Benigno; Julian di Giovanni; Jan J. J. Groen; Adam I. Noble |
| Abstract: | Supply chain disruptions have become a major challenge for the global economy since the start of the COVID-19 pandemic. Factory shutdowns (particularly in Asia) and widespread lockdowns and mobility restrictions have resulted in disruptions across logistics networks, increases in shipping costs, and longer delivery times. Several measures have been used to gauge these disruptions, although those measures tend to focus on selected dimensions of global supply chains. In this post, we propose a new gauge, the Global Supply Chain Pressure Index (GSCPI), which integrates a number of commonly used metrics with an aim to provide a more comprehensive summary of potential disruptions affecting global supply chains. |
| Keywords: | supply chain disruption; inflation; pandemic; COVID-19; global shocks |
| JEL: | F0 |
| Date: | 2022–01–04 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fednls:93594&r= |
| By: | Shujian Liao; Jian Chen; Hao Ni |
| Abstract: | In this paper, we investigate the problem of predicting the future volatility of Forex currency pairs using the deep learning techniques. We show step-by-step how to construct the deep-learning network by the guidance of the empirical patterns of the intra-day volatility. The numerical results show that the multiscale Long Short-Term Memory (LSTM) model with the input of multi-currency pairs consistently achieves the state-of-the-art accuracy compared with both the conventional baselines, i.e. autoregressive and GARCH model, and the other deep learning models. |
| Date: | 2021–12 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2112.01166&r= |
| By: | Alexis DIRER |
| Keywords: | , portfolio choice, risk aversion, timing risk |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:leo:wpaper:2916&r= |
| By: | Jiri Podpiera |
| Abstract: | Distance, as a proxy for trade barriers, is found in many studies to matter even for weightless cross-border financial investments and lending, possibly due to the presence of information asymmetries. Its importance is tested in this paper using exports of all five broad categories of the U.K.’s financial and insurance services. No trade barriers are found for the bulk of the U.K.’s exports. Trade barriers are confirmed only for interest-bearing activities – being in line with available results in the literature. The positive effect of EU membership appears to be small. Notwithstanding the uncertainties, it suggests that post-Brexit disruptions of the U.K.’s export of financial and insurance services may be minor. |
| Keywords: | Export; Gravity Model; Financial Services; Insurance; Censored Regression; insurance service; A. financial services; U.K.'s export; evidence from the United Kingdom; U.K.'s export value; Exports; Trade barriers; Service exports; Global |
| Date: | 2021–10–29 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:2021/260&r= |
| By: | Lee, King Fuei |
| Abstract: | In this study, we investigated the presence of the Halloween effect in the long-term reversal anomaly in the US. After examining the cross-sectional returns of loser-minus-winner portfolios formed on prior returns over the period of 1931–2021, we found evidence of stronger returns during winter months versus summer months. Specifically, the effect appeared to be driven by a significant winter-summer seasonality in the portfolio of small-capitalisation losers and a lack of the Halloween effect in the portfolio of large-capitalisation winners. This study’s results were found to be robust with respect to alternative measures of the long-term reversal effect, differing sub-periods, the inclusion of the January effect and outlier considerations, as well as regarding small- and large-sized companies. |
| Keywords: | Halloween effect, Sell-in-May, long-term reversal, market anomaly |
| JEL: | G00 |
| Date: | 2021–11–29 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:110859&r= |
| By: | Maxwell N. Burton-Chellew; Claire Guerin |
| Abstract: | Why does human cooperation often unravel in economic experiments despite a promising start? Previous studies have interpreted the decline as the reaction of disappointed cooperators retaliating in response to lesser cooperators (conditional cooperation). This interpretation has been considered evidence of a uniquely human form of cooperation, motivated by altruistic concerns for fairness and requiring special evolutionary explanations. However, experiments have typically shown individuals information about both their personal payoff and information about the decisions of their groupmates (social information). Showing both confounds explanations based on conditional cooperation with explanations based on individuals learning how to better play the game. Here we experimentally decouple these two forms of information, and thus these two learning processes, in public goods games involving 616 Swiss university participants. We find that payoff information leads to a greater decline, supporting a payoff-based learning hypothesis. In contrast, social information has small or negligible effect, contradicting the conditional cooperation hypothesis. We also find widespread evidence of both confusion and selfish motives, suggesting that human cooperation is maybe not so unique after all. |
| Keywords: | altruism, behavioral economics, confusion, reciprocity, social preferences |
| JEL: | D01 |
| Date: | 2021–11 |
| URL: | http://d.repec.org/n?u=RePEc:lau:crdeep:21.17&r= |
| By: | Bri\`ere Marie; Alasseur Cl\'emence; Joseph Mikael; Carl Remlinger |
| Abstract: | Machine learning algorithms dedicated to financial time series forecasting have gained a lot of interest over the last few years. One difficulty lies in the choice between several algorithms, as their estimation accuracy may be unstable through time. In this paper, we propose to apply an online aggregation-based forecasting model combining several machine learning techniques to build a portfolio which dynamically adapts itself to market conditions. We apply this aggregation technique to the construction of a long-short-portfolio of individual stocks ranked on their financial characteristics and we demonstrate how aggregation outperforms single algorithms both in terms of performances and of stability. |
| Date: | 2021–11 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2111.15365&r= |
| By: | Bulent Guler (Indiana University); Volodymyr Lugovskyy (Indiana University); Daniela Puzzello (Indiana University); Steven Tucker (University of Waikato) |
| Abstract: | We report the results of an experiment designed to study the role of trading institutions in the formation of bubbles and crashes in laboratory asset markets. We employ three trading institutions: Call Market, Double Auction and Tâtonnement. The results show that bubbles are significantly smaller in uniform-price institutions than in Double Auction. We reproduce this and other critical patterns of the data by calibrating a heterogeneous agent model with fundamental and myopic-noise traders. The model produces larger bubbles under Double Auction because multiple trades occur within a period, amplifying the impact of myopic traders with positive bias on transaction prices. |
| Keywords: | experimental asset markets; bubbles; traders' heterogeneity; trading institutions |
| JEL: | C90 C91 D03 G02 G12 |
| Date: | 2021–12–21 |
| URL: | http://d.repec.org/n?u=RePEc:wai:econwp:21/15&r= |
| By: | Christophe J. Godlewski (LARGE - Laboratoire de Recherche en Gestion et Economie - UNISTRA - Université de Strasbourg); Hong Nhung Le (LARGE - Laboratoire de recherche en gestion et économie - UNISTRA - Université de Strasbourg - L'europe en mutation : histoire, droit, économie et identités culturelles - CNRS - Centre National de la Recherche Scientifique - UNISTRA - Université de Strasbourg) |
| Date: | 2021–11 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-03431834&r= |
| By: | Salvanes, Kjell G. (Dept. of Economics, Norwegian School of Economics and Business Administration); Willage, Barton (Dept. of Economics, Norwegian School of Economics and Business Administration); Willén, Alexander (Dept. of Economics, Norwegian School of Economics and Business Administration) |
| Abstract: | Adverse economic shocks occur frequently and may cause individuals to reevaluate key life decisions in ways that have lasting consequences for themselves and the broader economy. These life decisions are fundamentally tied to specific periods of an individual’s career, and economic shocks may therefore have substantially different impacts on individuals – and the broader economy - depending on when they occur. We exploit mass layoffs and establishment closures to examine the impact of adverse shocks across the life cycle on labor market outcomes and major life decisions: human capital investment, mobility, family structure, and retirement. Our results reveal substantial heterogeneity on labor market effects and life decisions in response to economic shocks across the life cycle. Individuals at the beginning of their careers invest in human capital and relocate to new local labor markets, individuals in the middle of their careers reduce fertility and adjust family formation decisions, and individuals at the end of their careers permanently exit the workforce and retire. As a consequence of the differential interactions between economic shocks and life decisions, the very long-term career implications of labor shocks vary considerably depending on when the shock occurs. We also document important heterogeneity across genders and education levels, both with respect to the immediate impact as well as the sum total of all these effects in the very long-term. We conclude that effects of adverse labor shocks are both more varied and more extensive than has previously been recognized, and that focusing on average effects among workers across the life cycle misses a great deal. |
| Keywords: | Labor Supply; Human Capital; Education; Fertility; Family Formation; Mobility; Retirement; Disability; Economic Shocks; Job Displacement |
| JEL: | I20 J63 |
| Date: | 2021–12–19 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:nhheco:2021_021&r= |
| By: | N. S. Gonchar; O. P. Dovzhyk; A. S. Zhokhin; W. H. Kozyrski; A. P. Makhort |
| Abstract: | This work was partially supported by the Program of Fundamental Research of the Department of Physics and Astronomy of the National Academy of Sciences of Ukraine "Mathematical models of non equilibrium processes in open systems" N 0120U100857. |
| Date: | 2021–12 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2112.04297&r= |
| By: | Roberto Martino |
| Abstract: | This paper estimates an augmented growth model to analyse the contribution of public investment to productivity growth for European regions. The empirical model accounts for the accumulation of public capital, the stock of infrastructure and the creation of knowledge by the government sector, alongside other growth determinants, as institutions, education, and business R&D. Convergence dynamics are also explored. Data include 273 NUTS2 European regions from 27 countries from 1999 to 2018. The empirical evidence presented suggests that public investment is positively associated with productivity growth and complementarities with business investment are in place. Furthermore, returns on both types of investments are larger in the regions of the Southern periphery, flagging policy space for further public and private productive spending. No significant effect is found for the stock of infrastructure. Public R&D has an indirect impact on productivity growth through the mediating effect of business R&D, while institutional quality is a horizontal determinant of growth. |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:frz:wpaper:wp2021_19.rdf&r= |
| By: | Jafet Baca |
| Abstract: | In light of the ongoing integration efforts, the question of whether CAPADR economies may benefit from a single currency arises naturally. This paper examines the feasibility of an Optimum Currency Area (OCA) within seven CAPADR countries. We estimate SVAR models to retrieve demand and supply shocks between 2009:01 - 2020:01 and determine their extent of symmetry. We then go on to compute two regional indicators of dispersion and the cost of inclusion into a hypothetical OCA for each country. Our results indicate that asymmetric shocks tend to prevail. In addition, the dispersion indexes show that business cycles have become more synchronous over time. However, CAPADR countries are still sources of cyclical divergence, so that they would incur significant costs in terms of cycle correlation whenever they pursue currency unification. We conclude that the region does not meet the required symmetry and synchronicity for an OCA to be appropiate. |
| Date: | 2021–12 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2112.02063&r= |
| By: | Michele Vodret; Iacopo Mastromatteo; Bence T\'oth; Michael Benzaquen |
| Abstract: | We compare the predictions of the stationary Kyle model, a microfounded multi-step linear price impact model in which market prices forecast fundamentals through information encoded in the order flow, with those of the propagator model, a purely data-driven model in which trades mechanically impact prices with a time-decaying kernel. We find that, remarkably, both models predict the exact same price dynamics at high frequency, due to the emergence of universality at small time scales. On the other hand, we find those models to disagree on the overall strength of the impact function by a quantity that we are able to relate to the amount of excess-volatility in the market. We reveal a crossover between a high-frequency regime in which the market reacts sub-linearly to the signed order flow, to a low-frequency regime in which prices respond linearly to order flow imbalances. Overall, we reconcile results from the literature on market microstructure (sub-linearity in the price response to traded volumes) with those relating to macroeconomically relevant timescales (in which a linear relation is typically assumed). |
| Date: | 2021–12 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2112.04245&r= |
| By: | Degiannakis, Stavros |
| Abstract: | The paper proposes a novel method to assess whether real investment can be nowcasted based on information that is available on the stock market. The stock market index on a daily sampling frequency is assessed as a predictor of gross fixed capital formation on a quarterly sampling frequency. For France, Germany, Greece and Spain (four representative countries of eurozone), we find significant empirical evidence that the information from the stock market does produce accurate nowcasting values of gross fixed capital formation. |
| Keywords: | Gross fixed capital formation, nowcasting, mixed frequency, predictor, real investment, stock market. |
| JEL: | C53 E22 E27 G17 |
| Date: | 2021–12–31 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:110914&r= |
| By: | Federico Etro |
| Abstract: | We study a hybrid marketplace such as Amazon selling its own products and setting commissions on sellers engaged in monopolistic competition with free entry. For a large class of microfoundations based on a representative agent, the introduction of products by the marketplace is neutral on consumer welfare for a given commission, but exerts an ambiguous impact through its changes: a "demand substitution mechanism" pushes for a higher commission, but an "extensive margin mechanism" pushes for a lower commission aimed at attracting new sellers and more purchases on the marketplace. With constant demand elasticities, a hybrid marketplace sets a lower (higher) commission rate and increases (decreases) consumer welfare compared to a pure marketplace if its products face a less (more) elastic demand. We extend the analysis to alternative timing, Bertrand competition between sellers, endogenous product selection by the marketplace, specific commissions and ads for product discovery. |
| Keywords: | Hybrid marketplaces, 3P Sellers, Commissions, Entry, Monopolistic Competition. |
| JEL: | L1 L4 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:frz:wpaper:wp2021_21.rdf&r= |
| By: | Francisco Queirós (Università di Napoli Federico II and CSEF) |
| Abstract: | There has been a growing interest in the theory of rational bubbles. Recent theories predict that bubbles are expansionary, but differ in the underlying mechanisms. This paper provides empirical evidence that help us assess different theories, and documents four main findings: stock market overvaluation is associated with (i) faster output and input growth, (ii) declining TFP growth, (iii) a greater contribution of labor for output growth, with no change in the contribution of capital, (iv) an increase in the number of firms. Overall, these findings suggest that bubbly expansions are driven by increased factor accumulation (in particular labor), and not from higher productivity growth. |
| Keywords: | Stock prices, fundamentals, bubbles, productivity growth. |
| JEL: | E44 G12 G31 G32 |
| Date: | 2021–12–20 |
| URL: | http://d.repec.org/n?u=RePEc:sef:csefwp:632&r= |