|
on Central and Western Asia |
| By: | Guilhem Lecouteux (UCA - Université Côte d'Azur, GREDEG - Groupe de Recherche en Droit, Economie et Gestion - UNS - Université Nice Sophia Antipolis (... - 2019) - COMUE UCA - COMUE Université Côte d'Azur (2015 - 2019) - CNRS - Centre National de la Recherche Scientifique - UCA - Université Côte d'Azur) |
| Abstract: | Behavioural economics has challenged the normative consensus that agents ought to choose following their own preferences. I argue that normative economists implicitly defended a criterion of the sovereignty of the autonomous consumer, and that current debates in normative behavioural economics arise from disagreements about the nature of the threats to autonomy that are highlighted by behavioural economics. I argue that those disagreements result from diverging ontological conceptions of the 'self' in the literature. I distinguish between the unitary, psychodynamic, and socio-historical conceptions of the self, and show how different positive theories about preferences and the nature of the agent may determine normative positions in normative behavioural economics. |
| Keywords: | preference satisfaction,autonomy,welfare,reconciliation problem,socio-historical self |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:halshs-03418228&r= |
| By: | Heiner Mikosch; Christoher Roth; Samad Sarferaz; Johannes Wohlfart; Christopher Roth |
| Abstract: | We leverage the small open economy Switzerland as a testing ground for basic premises of macroeconomic models of endogenous information acquisition, using tailored surveys of firms and households. First, we show that firms perceive a greater exposure to exchange rate movements than households, which is reflected in higher levels of information acquisition and less dispersed beliefs about past and future exchange rate realizations. Similarly, within the two samples, acquisition of exchange rate information strongly increases in various proxies for stake size. Second, households who perceive higher costs of acquiring or processing information acquire less information. Finally, an exogenous increase in the perceived uncertainty of the exchange rate increases firms’ demand for a report about exchange rate developments, but not households’. Our findings inform the modeling of information frictions in macroeconomics. |
| Keywords: | information acquisition, uncertainty, stake size, firms, households |
| JEL: | D12 D14 D83 D84 E32 G11 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_9462&r= |
| By: | Neidhöfer, Guido; Ciaschi, Matías; Gasparini, Leonardo; Serrano, Joaquín |
| Abstract: | We explore the role of social mobility as a driver of economic development. First, we map the geography of intergenerational mobility of education for 52 Latin American regions, as well as its evolution over time. Then, through a new weighting procedure that considers the participation of cohorts to the economy in each year, we estimate the impact of changes in mobility on regional economic indicators, such as income per capita, poverty, child mortality, and luminosity. Our findings show that increasing social mobility had a significant and robust effect on the development of Latin American regions. |
| Keywords: | Intergenerational Mobility,Equality of Opportunity,Development,Growth,Latin America |
| JEL: | D63 I24 J62 O15 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:zewdip:21087&r= |
| By: | Hong, Jieying; Pouget, Sébastien |
| Abstract: | This paper studies the role of preopening periods in liquidity formation and welfare in financial markets. Because no transaction occurs during these preopening periods, their economic significance could be questioned. We model a market where costly participation and asymmetric information prevent latent liquidity from being expressed. At equilibrium, risk-averse insiders use preopening periods to better coordinate supply and demand of liquidity by communicating liquidity needs, thus improving welfare. Partial or full communication of private signals by the insider with the asset at preopening periods does not always enhance liquidity formation, but improves welfare through reducing adverse selection risk faced by the outsider and increasing the likelihood of her entry. Our findings have implications for portfolio management and the design of financial markets. |
| Keywords: | Asymmetric Information; Liquidity Formation; Preopening Periods |
| JEL: | G14 D82 |
| Date: | 2021–12 |
| URL: | http://d.repec.org/n?u=RePEc:tse:wpaper:126366&r= |
| By: | Miglo, Anton |
| Abstract: | This article analyzes the patterns of Fintech development in Greater Manchester, UK. Manchester is often called a northern capital of Fintech. We analyze different subsectors of FinTech and find that such sectors as payments, fintech loans, debt-based, reward-based and real-estate-based crowdfunding, big data analytics, data security, insurtech and regtech are the most growing areas. We also compare the Fintech structure in Manchester with that in London and other major cities in the UK and identify similarities and differences. |
| Keywords: | FinTech, cryptocurrencies, digital finance, crowdfunding, Fintech in Manchester, data security |
| JEL: | G00 G10 G32 O33 |
| Date: | 2022–01–02 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:111348&r= |
| By: | Mark L. Egan; Alexander MacKay; Hanbin Yang |
| Abstract: | We study empirical patterns in investment behavior using a comprehensive data set of defined contribution plans. Using plan-level portfolio allocation data for the near universe of 401(k) plans over the period 2009-2019, we document substantial differences in investment behavior across plans. Plans with wealthier and more educated participants tend to have higher equity exposure while plans with more retirees and minorities tend to have lower equity exposure. These patterns cannot be explained by differences in 401(k) menus or participation costs. To help interpret these facts, we use a revealed preference approach to estimate investors' expectations of stock market returns and risk aversion, where we allow investors to have heterogeneous risk aversion and subjective and potentially biased beliefs. We find that there is substantial variation in both beliefs and risk aversion across investors and over time, and that both sources of variation help explain investors' portfolio decisions. We also provide new evidence to understand how investors form beliefs. We find that investors extrapolate beliefs from past fund returns even when they initially allocate portfolios in new plans. We also find that investors extrapolate beliefs about the market from the past performance of their employer, which suggests that investor experience helps shape beliefs. |
| JEL: | G0 G11 G12 G40 G5 G51 J32 |
| Date: | 2021–12 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:29604&r= |
| By: | Pavel Chakraborty (Department Of Economics, Management School, Lancaster University); Nirvana Mitra (Department Of Economics, Shiv Nadar University) |
| Abstract: | New liberalization policies are rapidly globalizing financial services in developing countries, but there is little or no microeconomic evidence on the impact of banking reforms on the real economy. We examine the impact of a banking sector reform, characterized by the introduction of new domestic private and/or foreign banks, on Indian manufacturing firms' access to credit, performance and the resulting misallocation in the Indian economy using a unique firm-bank matched data. We find that the introduction of new banks led to (i) increase in access to credit by 18|23% for big firms (top 25 percentile of size distribution); (ii) reduction in access to loans for small firms (bottom 25th percentile) by around 45%; and (iii) increase in profit, total sales for big firms. Next, we follow Hsieh and Klenow (2009) and estimate the distortions arising out of capital and output market and show that the banking reforms significantly relaxed the credit constraints only for the big and more productive firms, resulting in reduced capital market misallocation. Finally, our counterfactual experiment shows that the reallocation of credit led to an overall gain in manufacturing output by 0.15 - 1.1%. |
| Keywords: | Banking Reforms, Private and/or Foreign Banks, Big Firms, Cream Skimming, Misallocation. |
| JEL: | G1 G21 O47 L25 |
| Date: | 2022–01–12 |
| URL: | http://d.repec.org/n?u=RePEc:alr:wpaper:2022-01&r= |
| By: | Yanqing Ma; Carmine Ventre; Maria Polukarov |
| Abstract: | The introduction of electronic trading platforms effectively changed the organisation of traditional systemic trading from quote-driven markets into order-driven markets. Its convenience led to an exponentially increasing amount of financial data, which is however hard to use for the prediction of future prices, due to the low signal-to-noise ratio and the non-stationarity of financial time series. Simpler classification tasks -- where the goal is to predict the directions of future price movement -- via supervised learning algorithms, need sufficiently reliable labels to generalise well. Labelling financial data is however less well defined than other domains: did the price go up because of noise or because of signal? The existing labelling methods have limited countermeasures against noise and limited effects in improving learning algorithms. This work takes inspiration from image classification in trading and success in self-supervised learning. We investigate the idea of applying computer vision techniques to financial time-series to reduce the noise exposure and hence generate correct labels. We look at the label generation as the pretext task of a self-supervised learning approach and compare the naive (and noisy) labels, commonly used in the literature, with the labels generated by a denoising autoencoder for the same downstream classification task. Our results show that our denoised labels improve the performances of the downstream learning algorithm, for both small and large datasets. We further show that the signals we obtain can be used to effectively trade with binary strategies. We suggest that with proposed techniques, self-supervised learning constitutes a powerful framework for generating "better" financial labels that are useful for studying the underlying patterns of the market. |
| Date: | 2021–12 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2112.10139&r= |
| By: | Vincenzo Bove; Jessica Di Salvatore; Roberto Nisticò |
| Abstract: | We investigate the effect of economic sanctions on trade flows in countries sharing a border with the sanctioned state. On the one hand, trade models suggest that trade flows should decrease as sanctions disrupt trading routes and economic ties with suppliers and customers. On the other hand, countries can circumvent trade restrictions by clandestinely exchanging goods with sanctioned countries across the border and trading on its behalf. If this is the case, we should expect an increase in their imports and/or exports. |
| Keywords: | Economic sanctions, Trade, Synthetic control method, Sanctions |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:unu:wpaper:wp-2021-184&r= |
| By: | Guijin Son; Joocheol Kim |
| Abstract: | The Black-Scholes model, defined under the assumption of a perfect financial market, theoretically creates a flawless hedging strategy allowing the trader to evade risks in a portfolio of options. However, the concept of a "perfect financial market," which requires zero transaction and continuous trading, is challenging to meet in the real world. Despite such widely known limitations, academics have failed to develop alternative models successful enough to be long-established. In this paper, we explore the landscape of Deep Neural Networks(DNN) based hedging systems by testing the hedging capacity of the following neural architectures: Recurrent Neural Networks, Temporal Convolutional Networks, Attention Networks, and Span Multi-Layer Perceptron Networks. In addition, we attempt to achieve even more promising results by combining traditional derivative hedging models with DNN based approaches. Lastly, we construct \textbf{NNHedge}, a deep learning framework that provides seamless pipelines for model development and assessment for the experiments. |
| Date: | 2021–12 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2112.10084&r= |
| By: | Ofori, Isaac K.; Asongu, Simplice A. |
| 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: | F21 F6 F63 I3 O17 O55 R5 |
| Date: | 2022 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:111359&r= |
| By: | Aleksandar Vasilev (Lincoln International Business School, UK.) |
| Abstract: | Robots are introduced into a real-business-cycle setup augmented with a detailed government sector. Robots are modelled as an imperfect substitute for labor services. The model is calibrated to Bulgarian data for the period following the introduction of the currency board arrangement (1999-2020). The quantitative importance of the presence of robots in the economy is investigated for business cycle fluctuations inBulgaria. In the presence of robots, wages increase, but employment falls after a technology shock. However, for plausible parameter values, the effect is predicted to be quite small. |
| Keywords: | business cycles; robots; Bulgaria |
| JEL: | E24 E32 |
| Date: | 2022–01 |
| URL: | http://d.repec.org/n?u=RePEc:sko:wpaper:bep-2022-01&r= |
| By: | Geyer, Johannes; Lorenz, Svenja; Zwick, Thomas; Bruns, Mona |
| Abstract: | Early retirement options are usually targeted at employees at risk of not reaching their regular retirement age in employment. An important at-risk group comprises employees who have worked in demanding jobs for many years. This group may be particularly negatively affected by the abolition of early retirement options. To measure differences in labor market reactions of employees in low- and high-demand jobs, we exploit the quasi-natural experiment of a cohort-specific pension reform that increased the early retirement age for women from 60 to 63 years. Based on a large administrative dataset, we use a regression-discontinuity approach to estimate the labor market reactions. Surprisingly, we find the same relative employment increase of about 25% for treated women who were exposed to low and to high job demand. For older women in demanding jobs, we also do not find substitution effects into unemployment, partial retirement, disability pension, or inactivity. Eligibility for the pension for women required highlabor market attachment; thus, we argue that this eligibility rule induced a positive selection of healthy workers into early retirement. |
| Keywords: | pension reform,job demand,early retirement,quasi-experimental variation |
| JEL: | J14 J18 J22 J26 H31 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:zewdip:21082&r= |
| By: | Ozili, Peterson K |
| Abstract: | This paper examines whether economic policy uncertainty (EPU) reduces the level of financial inclusion. I predict that high EPU should have a negative effect on the level of financial inclusion. I argue that high EPU will discourage financial institutions from providing basic financial services to low end customers and unbanked adults, and this will lead to a decrease in the level of financial inclusion. Using a sample of 22 countries, I find that EPU does not have a significant impact on financial inclusion. None of the nine indicators of financial inclusion have a significant direct relationship with EPU. Also, I find some evidence that the combined effect of high EPU and high nonperforming loans reduces financial inclusion, particularly through bank branch contraction and a reduction in the use of electronic payments. Meanwhile, the use of formal accounts and credit cards increases in times of high credit supply and high EPU. |
| Keywords: | Financial inclusion, policy uncertainty, economic policy uncertainty, business cycle, non-performing loan, cost efficiency, cost to income ratio, access to finance, formal account, credit cards, debit cards, mobile payments, electronic payment, borrowings, savings bank branch, unbanked adults. |
| JEL: | E50 E52 E59 G21 I31 |
| Date: | 2022 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:111052&r= |
| By: | Robert Calvert Jump; Engelbert Stockhammer |
| Abstract: | A key characteristic of heterodox theories of the business cycle is their focus on endogenous business cycle mechanisms. This paper provides an overview and comparison of four models in heterodox business cycle theory: multiplier-accelerator models, Goodwin models, Minskyan debt-cycle models, and momentum trader models. A representative model from each theory is formulated as a two-dimensional predator-prey system in continuous time, which allows us to identify the different stabilising and destabilising mechanisms. We argue that the theories are substantially competing, as they posit different mechanisms that explain cycles, but we also argue that these mechanisms are not mutually exclusive. We suggest that heterodox economists work towards a synthesis. |
| Keywords: | Business cycles; Endogenous cycles; Crises |
| JEL: | B41 B50 E32 |
| Date: | 2022–01 |
| URL: | http://d.repec.org/n?u=RePEc:pke:wpaper:pkwp2201&r= |
| By: | Hammer, Thomas; Siegfried, Patrick |
| Abstract: | This text will explain which role “Green Bonds” play in financing projects and how the green factor is weighted. It will be discussed on how the term “green” can change the price of the bond, if there is a “green premium” and for which group of investors this type of bond is interesting. We will discuss ways to reduce their cost of capital, also considering the risks and on ways on how to improve their conditions. The sustainable and eco-friendly aspects are also highlighted in this text and they might become crucial in future investing, which gives the bond an interesting role. |
| Keywords: | Green Bonds, ESG, Sustainability, COP21 |
| JEL: | G11 G12 |
| Date: | 2021–12–31 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:111394&r= |
| By: | Richhild Moessner |
| Abstract: | This paper analyses the determinants of short-term inflation expectations based on surveys of professionals, using dynamic cross-country panel estimation for a large number of 34 OECD economies. We find that food consumer price inflation and depreciations of the domestic exchange rate have significant positive effects on professionals’ survey-based inflation expectations. Moreover, core consumer price inflation and the output gap have significant positive effects. |
| Keywords: | inflation expectations, inflation, food prices, exchange rates |
| JEL: | E52 E58 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_9485&r= |
| By: | Cigna, Simone; Vanessa.Gunnella; Quaglietti, Lucia |
| Abstract: | Global value chains (GVCs) have shaped the dynamics of globalisation in recent years. This paper reviews key concepts and tools to measure countries’ involvement in GVCs, explores recent trends and investigates the underlying drivers of GVC participation empirically. The analysis in the paper finds that in the last decade, GVCs have undergone an important transformation, with participation falling on the back of rising trade costs and the trade integration of some large emerging market economies slowing, while the role of recent technological developments remains unclear. In addition, supply chains appear to have become increasingly regional over time. The paper also offers an insight into the role of production chain linkages in the transmission of recent global shocks across countries, uncovering important amplification effects on trade and activity. Finally, it discusses future prospects for GVCs and global trade, including in the light of developments associated with the coronavirus pandemic. JEL Classification: F13, F14, F15, F23, F62 |
| Keywords: | COVID-19, globalisation, global value chains, gravity equation, trade slowdown |
| Date: | 2022–01 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbops:2022289&r= |
| By: | James B. Bullard |
| Abstract: | During a presentation for the CFA Society St. Louis, St. Louis Fed President Jim Bullard said that U.S. inflation has surprised substantially to the upside in an environment where measures of real economic activity and labor market performance are expected to remain robust. “There has been an initial U.S. monetary policy response to the inflation shock, and this response is already reflected in financial market pricing,” he said. The Federal Open Market Committee “is in good position to take additional steps as necessary to control inflation, including allowing passive balance sheet runoff, increasing the policy rate, and adjusting the timing and pace of subsequent policy rate increases,” Bullard said. He also discussed pandemic risk from the COVID-19 omicron variant. While pandemic risk remains, omicron variant cases are expected to subside in the weeks ahead, he noted. |
| Keywords: | COVID-19; inflation; labor market; labor force participation rate |
| Date: | 2022–01–06 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedlps:93608&r= |
| By: | Robert W. Staiger |
| Abstract: | The design of a trade agreement should reflect its purpose. Does digital trade change the purpose of a trade agreement? To explore this question, I first describe the definitional and classification issues associated with digital trade, and for modeling purposes I adopt a simple taxonomy of the ways in which digital trade can arise and the policies that can be used to restrict such trade. I then review what the theoretical literature on the economics of trade agreements has to say about the purpose of a trade agreement in a pre-digital model world economy, and how this purpose can be seen to be reflected in the broad design features of both GATT and GATS, the WTO agreements that govern international trade in goods and services respectively. Finally, I introduce digital trade into the model world economy and revisit the purpose of a trade agreement. From this perspective I consider whether the rise of digital trade warrants changes in the design of the WTO. |
| JEL: | F02 F13 |
| Date: | 2021–12 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:29578&r= |
| By: | Adam Copeland; Antoine Martin |
| Abstract: | This paper uses new data to provide a comprehensive view of repo activity during the 2007-09 financial crisis for the first time. We show that activity declined much more in the bilateral segment of the market than in the tri-party segment. Surprisingly, we find that a large share of the decline in activity is driven by repos backed by Treasury securities. Further, a disproportionate share of the decline in repo activity is connected to securities dealer’s market-making activity in Treasury securities. In particular, the evidence suggests that at least part of the decline is not driven by clients pulling away from securities dealers because of counterparty credit concerns. |
| Keywords: | repo; financial crisis; money markets |
| JEL: | G01 G23 E42 |
| Date: | 2021–12–01 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fednsr:93506&r= |
| By: | Cumming, Douglas J.; Reardon, Robert S. |
| Abstract: | COVID-19 brought about a shift in entrepreneurial opportunities and in the United States. In this paper, we proxy entrepreneurial processes by examining housing prices in different regions of the United States. Housing prices capture the movement in people, tax dynamics, and behavioral preferences for equity ownership in different regions and over time, all of which were drastically impacted by COVID-19. We examine all U.S. equity crowdfunding offerings starting with the very first offerings in 2016 Q2 until 2021 Q1 based on data from the Securities and Exchange Commission. The data indicate that regional housing prices post-COVID-19 are a strong predictor of the number of equity crowdfunding campaigns and the amount of capital raised. The impact of housing price changes on crowdfunding is more pronounced among more prosperous regions. The housing price effect is robust to numerous controls and consideration of outliers. |
| Keywords: | Equity Crowdfunding,COVID-19,Regional Entrepreneurship |
| JEL: | G21 G28 G51 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:cfswop:665&r= |
| By: | Huang, Zhengli; Behuria, Pritish |
| Abstract: | Zhengli Huang and Pritish Behuria examine projects financed by Indian and Chinese Exim Banks to analyze how the development financing of two 'emerging' donors – India and China – has evolved in Ethiopia. In India and China, Exim Banks work both as export credit agencies and other traditional development finance organizations, thereby blurring the boundary between development assistance and economic cooperation. The authors selected Ethiopia as it is a strategic partner for both countries, and existing literature has shown that the Ethiopian government is an outlier on the continent in employing its diplomatic relations to support strategic developmental goals. |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:caripb:582021&r= |
| By: | Kelly, Jane (Central Bank of Ireland); Kennedy, Gerard (Central Bank of Ireland); Lambert, Derek (Central Bank of Ireland) |
| Abstract: | Challenges around housing affordability have been growing internationally in recent years. In that context, we compare how Ireland’s experience has related to that of other European and OECD countries. Housing represents one of the largest single outlays for households as well as one of the largest sources of wealth for most owner occupiers. We show household debt burdens in Ireland are now closer to other European countries having been above average in the past. We highlight that mortgage and rental burdens in Ireland – although uneven across the household income distribution – are broadly comparable to those of other OECD countries. We find that house price valuations relative to incomes and to a lesser extent rents remain elevated relative to history, but nowhere near the levels preceding the housing crash and are slightly lower than two to three years ago. We also examine the relative affordability of acquiring home-ownership in a cross-country context, by constructing a series of national house price to income ratios and find that, on average, the current Irish level is in-line with many other developed economies. This is not to say that housing in Ireland is inexpensiveon an absolute basis but in placing the Irish data in a broader international context we show that the housing affordability pressures appear to be part of a wider set of global challenging trends in housing markets. This note mainly focuses on averages and does not examine the issue of housing affordability of individuals where experiences are likely to vary widely depending on income and within country regional dynamics. |
| Date: | 2021–10 |
| URL: | http://d.repec.org/n?u=RePEc:cbi:fsnote:10/fs/21&r= |
| By: | Pengyu Wei; Zuo Quan Xu |
| Abstract: | This paper studies a mean-risk portfolio choice problem for log-returns in a continuous-time, complete market. This is a growth-optimal problem with risk control. The risk of log-returns is measured by weighted Value-at-Risk (WVaR), which is a generalization of Value-at-Risk (VaR) and Expected Shortfall (ES). We characterize the optimal terminal wealth up to the concave envelope of a certain function, and obtain analytical expressions for the optimal wealth and portfolio policy when the risk is measured by VaR or ES. In addition, we find that the efficient frontier is a concave curve that connects the minimum-risk portfolio with the growth optimal portfolio, as opposed to the vertical line when WVaR is used on terminal wealth. Our results advocate the use of mean-WVaR criterion for log-returns instead of terminal wealth in dynamic portfolio choice. |
| Date: | 2021–12 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2112.14451&r= |
| By: | Garrett, Daniel F.; Gomes, Renato; Maestri, Lucas |
| Abstract: | We study competition by firms that simultaneously post (potentially nonlinear) tariffs to consumers who are privately informed about their tastes. Market power stems from informational frictions, in that consumers are heterogeneously informed about firms’ offers. In the absence of regulation, all firms offer quantity discounts. As a result, relative to Bertrand pricing, imperfect competition benefits disproportionately more consumers whose willingness to pay is high, rather than low. Regulation imposing linear pricing hurts the former but benefits the latter consumers. While consumer surplus increases, firms’ profits decrease, enough to drive down utilitarian welfare. By contrast, improvements in market transparency increase utilitarian welfare, and achieve similar gains on consumer surplus as imposing linear pricing, although with limited distributive impact. On normative grounds, our analysis suggests that banning price discrimination is warranted only if its distributive benefits have a weight on the societal objective. |
| Keywords: | oligopoly,; nonlinear pricing,; linear pricing; informational frictions; asymmetric information |
| JEL: | D82 |
| Date: | 2022–01–10 |
| URL: | http://d.repec.org/n?u=RePEc:tse:wpaper:126354&r= |
| By: | Ceyhun Elgin; M. Ayhan Kose; Franziska Ohnsorge; Shu Yu |
| Abstract: | We study the degree of synchronization between formal- and informal-economy business cycles. Using a comprehensive database of informal activity that covers a wide range of informality measures from almost 160 countries over the 1990-2018 period, we report two major results. First, fluctuations in informal-sector output are strongly positively correlated with those in formal-sector output. In contrast, fluctuations in informal employment are largely uncorrelated with those in formal-sector output. Second, movements in the formal economy tend to spillover to the informal economy. Using a novel set of instrumental variables, we show that fluctuations in formal-sector output “cause” movements in informal-sector output. |
| Keywords: | Informal economy, self-employment, business cycle |
| JEL: | E26 E32 J46 O17 |
| Date: | 2021–09 |
| URL: | http://d.repec.org/n?u=RePEc:een:camaaa:2021-77&r= |
| By: | Saten Kumar; Dennis Wesselbaum |
| Abstract: | We use novel survey data to study firms’ inventory contracts. We document facts about the usage of purchase and sale contracts. We find that firms purchase and sell inventory through three contractual arrangements: fixed price and quantity, fixed price only, and fixed quantity only. The former holds the largest share of contracts. The average duration of purchase contracts is not very different from the average duration of sale contracts. We then find that the upward bias in inflation expectations is a feature of firms that do not purchase or sell largely through contracts. Our findings are useful in the calibration of sticky price models. |
| Keywords: | Contracts, Inflation Expectations, Survey |
| JEL: | C83 D84 D86 E31 L14 |
| Date: | 2021–10 |
| URL: | http://d.repec.org/n?u=RePEc:een:camaaa:2021-85&r= |
| By: | Cumming, Douglas J.; Sewaid, Ahmed |
| Abstract: | Leveraging data from a leading FinTech peer-to-peer lending platform in the United States, allowing us to capture both individuals' successful and unsuccessful loan applications, we test the effect of FinTech loans on subsequent employment choice and future financial performance of serial borrowers, those repeatedly soliciting loans on the platform. An analysis of 198,984 loan requests made by 92,382 individuals shows that a failed loan application increases the probability of switching employment status. Self-employed individuals are 22% more likely to switch to becoming an employee following an unsuccessful loan application. This probability increases to 31% for those in the lowest income decile and decreases to 13% for those in the highest income decile. We document an improvement in monthly income and credit access following a successful loan application. However, this enhancement is asymmetric. Monthly income enhancement is 3.11 times larger for self-employed individuals in the lowest income decile relative to individuals in the highest income decile. Access to credit enhancement is 1.85 times larger for self-employed individuals in the lowest credit access decile relative to individuals in the second highest credit access decile. |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:cfswop:667&r= |
| By: | Yu Zhao; Huaming Du; Ying Liu; Shaopeng Wei; Xingyan Chen; Huali Feng; Qinghong Shuai; Qing Li; Fuzhen Zhuang; Gang Kou |
| Abstract: | Stock Movement Prediction (SMP) aims at predicting listed companies' stock future price trend, which is a challenging task due to the volatile nature of financial markets. Recent financial studies show that the momentum spillover effect plays a significant role in stock fluctuation. However, previous studies typically only learn the simple connection information among related companies, which inevitably fail to model complex relations of listed companies in the real financial market. To address this issue, we first construct a more comprehensive Market Knowledge Graph (MKG) which contains bi-typed entities including listed companies and their associated executives, and hybrid-relations including the explicit relations and implicit relations. Afterward, we propose DanSmp, a novel Dual Attention Networks to learn the momentum spillover signals based upon the constructed MKG for stock prediction. The empirical experiments on our constructed datasets against nine SOTA baselines demonstrate that the proposed DanSmp is capable of improving stock prediction with the constructed MKG. |
| Date: | 2022–01 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2201.04965&r= |
| By: | Marco A. Hernández Vega |
| Abstract: | This paper studies the macroeconomic impact of higher tariffs using a two-country DSGE model with endogenous trade and heterogeneous firms. The analysis consists of two scenarios. First, we assume that one country increases tariffs while the other does not. Second, both countries raise tariffs. In the first case, the country that did not raise tariffs suffers an economic contraction due to lower external demand. In turn, the one that imposed higher tariffs ends with a slight gain in output triggered by a surge in internal consumption originated from the transfer of tariff revenue to households. In the second case, however, both countries suffer a significant drop in exports, reducing dividends and wages paid, and decreasing consumption and output. |
| JEL: | F12 F13 F17 F41 F62 |
| Date: | 2021–12 |
| URL: | http://d.repec.org/n?u=RePEc:bdm:wpaper:2021-25&r= |
| By: | Imryoung Jeong; Hyunjoo Yang |
| Abstract: | We introduce a novel machine learning approach to leverage historical and contemporary maps to systematically predict economic statistics. Remote sensing data have been used as reliable proxies for local economic activity. However, they have only become available in recent years, thus limiting their applicability for long-term analysis. Historical maps, on the other hand, date back several decades. Our simple algorithm extracts meaningful features from the maps based on their color compositions. The grid-level population predictions by our approach outperform the conventional CNN-based predictions using raw map images. It also predicts population better than other approaches using night light satellite images or land cover classifications as the input for predictions. |
| Date: | 2021–12 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2112.13850&r= |
| By: | Henning Tarp Jensen; Marcus Keogh-Brown; Finn Tarp |
| Abstract: | Despite major public finance reform efforts over the last decade, Myanmarese public finances continue to be characterized by relative weakness in revenue collection, budget execution, and long-term sustainability. Myanmar is therefore in need of comprehensive public finance reform. Two top priorities of the Myanmar Sustainable Development Plan are to establish a fair and efficient tax system to increase government revenues, and to ensure effective public financial management. |
| Keywords: | Myanmar, Tax reform, Economic efficiency, Household income, Income distribution |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:unu:wpaper:wp-2021-179&r= |
| By: | Qian Lei; Chi Seng Pun |
| Abstract: | This paper proves the existence and uniqueness results (in the sense of maximally defined regularity) as well as the stability analysis for the solutions to a class of nonlocal fully-nonlinear parabolic systems, where the nonlocality stems from the flow feature (controlled by an external temporal parameter) of the systems. The derived mathematical results generalize the theory of stochastic differential games to incorporate with behavioral factors such as time-inconsistent preferences, which facilitate developments of many studies in financial economics including robust stochastic controls and games under relative performance concerns. Moreover, with the well-posedness results, we establish a general multidimensional Feynman--Kac formula in the presence of nonlocality (time inconsistency). |
| Date: | 2021–12 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2112.14409&r= |
| By: | Mr. Damiano Sandri; Mr. Francesco Grigoli; Emiliano Luttini |
| Abstract: | This paper provides the first assessment of the contribution of idiosyncratic shocks to aggregate fluctuations in an emerging market using confidential data on the universe of Chilean firms. We find that idiosyncratic shocks account for more than 40 percent of the volatility of aggregate sales. Although quite large, this contribution is smaller than documented in previous studies based on advanced economies, despite a higher degree of market concentration in Chile.We show that this finding is explained by larger firms being less volatile and by weaker propagation effects across Chilean firms. |
| Keywords: | Business cycle, emerging markets, firm-level shocks, granularity, propagation |
| Date: | 2021–12–10 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:2021/289&r= |
| By: | Nicolas Groshenny; Benedikt Heid; Tayushma Sewak |
| Abstract: | Uncertainty shocks have been shown to affect the real economy, but uncertainty remains about their trade effects and whether effects are similar across different types of uncertainty. We investigate how global economic, financial, and trade policy uncertainty affect the trade flows of the seven largest emerging economies (EM-7) using a panel structural vector autoregressive model. We find that: (1) Global economic and trade policy uncertainty shocks induce a protracted decline of about 4 to 5% in EM-7’s imports and exports. (2) Global economic and trade policy uncertainty act as trade barriers, reducing the EM-7’s degree of openness and their trade balance to GDP ratio. (3) Financial uncertainty only has a short-term impact on EM-7’s trade flows. (4) Trade policy uncertainty is the most important type of uncertainty affecting trade flows, explaining 11% of the variation in trade flows. |
| Keywords: | International trade, trade policy, uncertainty, emerging economies, panel VAR |
| JEL: | F13 F41 F62 |
| Date: | 2021–09 |
| URL: | http://d.repec.org/n?u=RePEc:een:camaaa:2021-84&r= |
| By: | Jacob Turton; Ali Kabiri; David Tuckett; Robert Elliott Smith; David P. Vinson |
| Abstract: | There is growing interest in the role of sentiment in economic decision-making. However, most research on the subject has focused on positive and negative valence. Conviction Narrative Theory (CNT) places Approach and Avoidance sentiment (that which drives action) at the heart of real-world decision-making, and argues that it better captures emotion in financial markets. This research, bringing together psychology and machine learning, introduces new techniques to differentiate Approach and Avoidance from positive and negative sentiment on a fundamental level of meaning. It does this by comparing word-lists, previously constructed to capture these concepts in text data, across a large range of semantic features. The results demonstrate that Avoidance in particular is well defined as a separate type of emotion, which is evaluative/cognitive and action-orientated in nature. Refining the Avoidance word-list according to these features improves macroeconomic models, suggesting that they capture the essence of Avoidance and that it plays a crucial role in driving real-world economic decision-making. |
| Date: | 2021–12 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2112.02607&r= |
| By: | Thibault Jaisson |
| Abstract: | In this article we introduce the differentiable reinforcement learning framework. It is based on the fact that in many reinforcement learning applications, the environment reward and transition functions are not black boxes but known differentiable functions. Incorporating deep learning in this framework we find more accurate and stable solutions than more generic actor critic algorithms. We apply this deep differentiable reinforcement learning (DDRL) algorithm to the problem of optimal trading strategies in various environments where the market dynamics are known. Thanks to the stability of this method, we are able to efficiently find optimal strategies for complex multi-scale market models and for a wide range of environment parameters. This makes it applicable to real life financial signals and portfolio optimization where the expected return has multiple time scales. In the case of a slow and a fast alpha signal, we find that the optimal trading strategy consists in using the fast signal to time the trades associated to the slow signal. |
| Date: | 2021–12 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2112.02944&r= |
| By: | Robert G. King; Yang K. Lu |
| Abstract: | The rise, fall, and stabilization of US inflation between 1969 and 2005 is consistent with a model of shifting policy regimes that features a forward-looking New Keynesian Phillips curve, policymakers that can or cannot commit, and private sector learning about policymaker type. Using model-implied inflation forecasting rules to extract state variables from the inflation forecasts in the Survey of Professional Forecasters, we provide evidence that policy regimes without commitment prevailed before 1980 and regimes with commitment prevailed afterward. With theory and quantification, we find that evolution of reputational capital is central to understanding the behavior of inflation. |
| JEL: | D82 D83 E52 |
| Date: | 2021–12 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:29585&r= |
| By: | James Cloyne (University of California Davis/NBER/CEPR); Clodomiro Ferreira (Bank of Spain); Maren Froemel (Bank of England); Paolo Surico (London Business School/CEPR) |
| Abstract: | In response to a change in interest rates, younger firms not paying dividends adjust both their capital expenditure and borrowing significantly more than older firms paying dividends. The reason is that the debt of younger non-dividend payers is far more sensitive to fluctuations in collateral values, which are significantly affected by monetary policy. The results are robust to a wide range of possible confounding factors. Other channels, including movements in interest payments, product demand, profitability and mark-ups, are also significant but seem unlikely to explain the heterogeneity in the response of capital expenditure. Our findings suggest that financial frictions play a significant role in the transmission of monetary policy to investment. |
| Keywords: | monetary policy, investment, firm’s debt, collateral, financial frictions |
| JEL: | E22 E32 E52 |
| Date: | 2021–11 |
| URL: | http://d.repec.org/n?u=RePEc:aoz:wpaper:92&r= |
| By: | Yi Liang; James Unwin |
| Abstract: | Reliable short term forecasting can provide potentially lifesaving insights into logistical planning, and in particular, into the optimal allocation of resources such as hospital staff and equipment. By reinterpreting COVID-19 daily cases in terms of candlesticks, we are able to apply some of the most popular stock market technical indicators to obtain predictive power over the course of the pandemics. By providing a quantitative assessment of MACD, RSI, and candlestick analyses, we show their statistical significance in making predictions for both stock market data and WHO COVID-19 data. In particular, we show the utility of this novel approach by considering the identification of the beginnings of subsequent waves of the pandemic. Finally, our new methods are used to assess whether current health policies are impacting the growth in new COVID-19 cases. |
| Date: | 2021–12 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2112.06393&r= |
| By: | Carrillo-Tudela, Carlos (University of Essex); Clymo, Alex (University of Essex); Coles, Melvyn (University of Essex) |
| Abstract: | This paper develops and estimates a fully microfounded equilibrium business cycle model of the US labor market with aggregate productivity shocks. Those microfoundations are consistent with evidence regarding the underlying distribution of firm growth rates across firms [by age and size] and, when aggregated, are consistent with macro-evidence regarding gross job creation and job destruction flows over the cycle. By additionally incorporating on-the-job search, we systematically characterise the stochastic relationships between aggregate job creation and job destruction flows across firms, gross hire and quit flows [churning] by workers across firms, as well as the persistence and volatility of unemployment and worker job finding rates over the cycle. |
| Keywords: | business cycle, firm dynamics, job search |
| JEL: | E24 E32 J62 J63 |
| Date: | 2021–11 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp14869&r= |
| By: | Kilian, Lutz; Zhou, Xiaoqing |
| Abstract: | Predictions of oil prices reaching $100 per barrel during the winter of 2021/22 have raised fears of persistently high inflation and rising inflation expectations for years to come. We show that these concerns have been overstated. A $100 oil scenario of the type discussed by many observers, would only briefly raise monthly headline inflation, before fading rather quickly. However, the short-run effects on headline inflation would be sizable. For example, on a yearover-year basis, headline PCE inflation would increase by 1.8 percentage points at the end of 2021 under this scenario, and by 0.4 percentage points at the end of 2022. In contrast, the impact on measures of core inflation such as trimmed mean PCE inflation is only 0.4 and 0.3 percentage points in 2021 and 2022, respectively. These estimates already account for any increases in inflation expectations under the scenario. The peak response of the 1-year household inflation expectation would be 1.2 percentage points, while that of the 5-year expectation would be 0.2 percentage points. |
| Keywords: | Scenario,inflation,expectation,oil price,gasoline price,household survey,core,pandemic,recovery |
| JEL: | E31 E52 Q43 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:cfswop:670&r= |
| By: | Gustavo Leyva; Carlos Urrutia |
| Abstract: | We document the evolution of labor markets of five Latin American countries during the COVID-19 pandemic, with emphasis on informal employment. We show, for most countries, a slump in aggregate employment, mirrored by a fall in labor participation, and a decline in the informality rate. The latter is unprecedented since informality used to cushion the decline in overall employment in previous recessions. Using a business cycle model with a rich labor market structure, we recover the shocks that rationalize the pandemic recession, showing that labor supply shocks and productivity shocks to the informal sector are essential to account for the employment and output loss and for the decline in the informality rate. |
| JEL: | E24 E32 F44 J65 |
| Date: | 2021–12 |
| URL: | http://d.repec.org/n?u=RePEc:bdm:wpaper:2021-21&r= |
| By: | Abdelaaziz Ait Ali; Uri Dadush |
| Abstract: | Mounting inflation in the major financial centers have raised concerns about the consequences on macroeconomic stability, including the Central Bank response they might trigger. In line with official views, we argue that inflation will probably wind down. We show that core inflation remains below pre-Covid levels in most large economies. We also argue that emerging markets are now less prone to “sudden stop” phenomena, in part because many have already started the exit from accommodative monetary policy. However, we also warn against complacency. If the acceleration of prices is sustained for long, nominal wages are bound to follow and feed a once-familiar vicious circle of rising prices and wages; and, if this does not happen, workers will see decline in their purchasing power and a further redistribution of income towards capital. |
| Date: | 2021–11 |
| URL: | http://d.repec.org/n?u=RePEc:ocp:ppaper:pb41-21&r= |
| By: | Martin, Ian W.R.; Nagel, Stefan |
| Abstract: | Modern investors face a high-dimensional prediction problem: thousands of observable variables are potentially relevant for forecasting. We reassess the conventional wisdom on market efficiency in light of this fact. In our equilibrium model, N assets have cash flows that are linear in J characteristics, with unknown coefficients. Risk-neutral Bayesian investors learn these coefficients and determine market prices. If J and N are comparable in size, returns are cross-sectionally predictable ex post. In-sample tests of market efficiency reject the no-predictability null with high probability, even though investors use information optimally in real time. In contrast, out-of-sample tests retain their economic meaning. |
| Keywords: | Bayesian learning; high-dimensional prediction problems; return predictability; out-of-sample tests; Starting Grant 639744; Center for Research in Security Prices |
| JEL: | G14 G12 C11 |
| Date: | 2021–11–27 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:112960&r= |
| By: | Aikman, David (Central Bank of Ireland); Kelly, Robert (Central Bank of Ireland); McCann, Fergal (Central Bank of Ireland); Yao, Fang (Central Bank of Ireland) |
| Abstract: | Borrower-based macroprudential policies, such as limits to loan-to-value and loan-to-income ratios, have grown in popularity in the last decade globally. An understanding of their effects, both intended and unintended, is continuously evolving. In this Note, we discuss the macroeconomic channels though which such measures, like all economic policies, can both benefit and impose costs on the economy. System-wide benefits of such measures arise predominantly through the taming of housing-credit cycles, which lower both the probability and the severity of financial recessions, as well as avoiding resource misallocation. Such crises have been shown to have particularly harmful effects, are followed by slow recoveries and can have persistent adverse macroeconomic effects. The macroeconomic costs of such measures operate through liquidity constraints on renters, and reductions in consumption and construction activity that may arise through dampened house prices and expectations. These macroeconomic costs are more likely to be short-term, and less likely to affect the productive capacity of the economy in the long-run. |
| Date: | 2021–10 |
| URL: | http://d.repec.org/n?u=RePEc:cbi:fsnote:11/fs/21&r= |
| By: | Viet Anh Nguyen; Soroosh Shafieezadeh Abadeh; Damir Filipovi\'c; Daniel Kuhn |
| Abstract: | We introduce a universal framework for mean-covariance robust risk measurement and portfolio optimization. We model uncertainty in terms of the Gelbrich distance on the mean-covariance space, along with prior structural information about the population distribution. Our approach is related to the theory of optimal transport and exhibits superior statistical and computational properties than existing models. We find that, for a large class of risk measures, mean-covariance robust portfolio optimization boils down to the Markowitz model, subject to a regularization term given in closed form. This includes the finance standards, value-at-risk and conditional value-at-risk, and can be solved highly efficiently. |
| Date: | 2021–12 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2112.09959&r= |
| By: | Mr. Paolo Mauro |
| Abstract: | This note provides an overview of recent studies that have begun to investigate how differing moral perspectives shape attitudes toward tax and spending policies. Recent advances in evolutionary moral psychology and their application to survey-based economic analysis yield promising insights. Understanding the moral underpinnings of various groups’ views may help policymakers design and make the case for measures that can muster broader support. |
| Keywords: | Moral foundations, moral philosophy, public finance, redistribution, public debt, taxation, political economy, surveys |
| Date: | 2021–12–10 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:2021/287&r= |
| By: | Avagyan, Vardan; Camacho, Nuno; Van der Stede, Wim; Stremersch, Stefan |
| Abstract: | Innovation project selection is a decision of major relevance to firms. Errors in this decisionmay have serious consequences for firms, especially as many firms struggle with optimiz-ing innovation project selection decisions. In their pitches to innovation decision-makers,project teams invariably present financial projections on their innovation projects, whichoften include best- and worst-case scenario presentation. Despite the potential influencethe presentation of such financial projections has on firms’ innovation project selectiondecisions, this topic has not received sufficient attention in the literature. This study exam-ines the role of scenario presentation on financial projections in innovation project selec-tion by conducting two conjoint experiments among 2,425 managers and 11 follow-upinterviews with senior executives. First, the findings of this study suggest that firms shouldhelp project teams present small- rather than large-range scenarios. This is important for atleast the 57% of firms surveyed in this study where project teams are reported to present‘too wide’ and ‘too extreme’ scenarios. Second, firms seeking to promote transformationalinnovation in their innovation pipeline should make the presentation of small-range sce-narios required for an innovation proposal to be presented to a project selection commit-tee. This is relevant for 79% of surveyed firms that would like to select moretransformational than core innovation projects and especially for the half of which thatcurrently do not require scenario presentation. Third, project teams with less expertiseshould develop scenarios analytically rather than intuitively and convey the project’sstrategic merit to decision-makers to help increase innovation project selection likelihood |
| Keywords: | innovation; innovation project selection decisions; financial projections; finance; marketing-accounting interface; marketing-finance interface; new product development; scenario presentation |
| JEL: | M40 L81 |
| Date: | 2021–10–27 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:112474&r= |
| By: | Kazuki Kanehira; Norikazu Todoroki |
| Abstract: | This study proposes a scheme for stationarity analysis of stock price fluctuations based on KM$_2$O-Langevin theory. Using this scheme, we classify the time-series data of stock price fluctuations into three periods: stationary, non-stationary, and intermediate. We then suggest an example of a low-risk stock trading strategy to demonstrate the usefulness of our scheme by using actual stock index data. Our strategy uses a trend-based indicator, moving averages, for stationary periods and an oscillator-based indicator, psychological lines, for non-stationary periods to make trading decisions. Finally, we confirm that our strategy is a safe trading strategy with small maximum drawdown by back testing on the Nikkei Stock Average. Our study, the first to apply the stationarity analysis of KM$_2$O-Langevin theory to actual mechanical trading, opens up new avenues for stock price prediction. |
| Date: | 2021–12 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2112.12459&r= |
| By: | Gabriela López Noria |
| Abstract: | This paper assesses the effects of trade and technological change on Mexico''s labor market between 1994 and 2019. The implications of the exposure of local labor markets to greater trade integration under NAFTA and to greater competition from China in the US market are analyzed, as are the consequences of the exposure of local labor markets to automation. The main results show that trade integration under NAFTA promoted employment in Mexico for all demographic groups, especially for women and the less educated. In addition, it is also found that trade integration reduced unemployment and the non-participation rate. China''s competition in the US market had the opposite effects on these indicators. Finally, the analysis by sector (manufacturing and non-manufacturing) suggests that those markets susceptible to automation experienced a pattern of labor polarization. |
| JEL: | F13 F16 O33 |
| Date: | 2021–12 |
| URL: | http://d.repec.org/n?u=RePEc:bdm:wpaper:2021-22&r= |
| By: | Arman Khachiyan; Anthony Thomas; Huye Zhou; Gordon H. Hanson; Alex Cloninger; Tajana Rosing; Amit Khandelwal |
| Abstract: | We apply deep learning to daytime satellite imagery to predict changes in income and population at high spatial resolution in US data. For grid cells with lateral dimensions of 1.2km and 2.4km (where the average US county has dimension of 55.6km), our model predictions achieve R2 values of 0.85 to 0.91 in levels, which far exceed the accuracy of existing models, and 0.32 to 0.46 in decadal changes, which have no counterpart in the literature and are 3-4 times larger than for commonly used nighttime lights. Our network has wide application for analyzing localized shocks. |
| JEL: | R0 |
| Date: | 2021–12 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:29569&r= |
| By: | Ergys Islamaj; M. Ayhan Kose |
| Abstract: | Cross-border capital flows are expected to lead to increased international risk sharing by facilitating borrowing and lending in global financial markets. This paper examines risk-sharing outcomes of various types of capital flows (foreign direct investment, portfolio equity, debt, remittance, and aid flows) in a large sample of emerging market and developing economies. The results suggest that remittances and aid flows are associated with increased international risk sharing. Other types of capital flows are not consistently correlated with better risk-sharing outcomes. These findings are robust to the use of different econometric specifications, country-specific characteristics, and other controls. |
| Keywords: | capital flows, remittances, aid flows, international risk sharing |
| JEL: | E1 F02 F4 G01 |
| Date: | 2021–11 |
| URL: | http://d.repec.org/n?u=RePEc:een:camaaa:2021-96&r= |
| By: | Florencia S. Airaudo (Universidad Carlos III); Hernán D. Seoane (Universidad Carlos III) |
| Abstract: | Long-run growth in Latin America over the last 50 years has been low and volatile inthe presence of frequent Sudden Stops. We develop a theory that links long-run growth,financial frictions, and Sudden Stops in Emerging countries. Our theory exploits thefact that reversals in trade balance during Sudden Stops occur through sharp declinesin imports, particularly of imported investment, rather than increases in exports. Imported investment, in turn, has a permanent impact on economic growth. We find thattrend growth deteriorates during Sudden Stops and, even though trend shocks play acrucial role, financial frictions and shocks have a significant impact on its dynamics.We apply our model to the Sudden Stops in Argentina since the 1950s and find thatfinancial crises have a strong permanent effect on the trend. Hence, to a large extent,the trend is the cycle.Long-run growth in Latin America over the last 50 years has been low and volatile inthe presence of frequent Sudden Stops. We develop a theory that links long-run growth,financial frictions, and Sudden Stops in Emerging countries. Our theory exploits thefact that reversals in trade balance during Sudden Stops occur through sharp declinesin imports, particularly of imported investment, rather than increases in exports. Imported investment, in turn, has a permanent impact on economic growth. We find thattrend growth deteriorates during Sudden Stops and, even though trend shocks play acrucial role, financial frictions and shocks have a significant impact on its dynamics.We apply our model to the Sudden Stops in Argentina since the 1950s and find thatfinancial crises have a strong permanent effect on the trend. Hence, to a large extent,the trend is the cycle.Long-run growth in Latin America over the last 50 years has been low and volatile in the presence of frequent Sudden Stops. We develop a theory that links long-run growth, financial frictions, and Sudden Stops in Emerging countries. Our theory exploits the fact that reversals in trade balance during Sudden Stops occur through sharp declines in imports, particularly of imported investment, rather than increases in exports. Imported investment, in turn, has a permanent impact on economic growth. We find that trend growth deteriorates during Sudden Stops and, even though trend shocks play a crucial role, financial frictions and shocks have a significant impact on its dynamics. We apply our model to the Sudden Stops in Argentina since the 1950s and find that financial crises have a strong permanent effect on the trend. Hence, to a large extent, the trend is the cycle. |
| Keywords: | Emerging markets; Real business cycle; trend shocks; Financial Frictions. |
| JEL: | F32 F34 F41 |
| Date: | 2021–12 |
| URL: | http://d.repec.org/n?u=RePEc:aoz:wpaper:97&r= |
| By: | Jarkko Harju; Aliisa Koivisto; Tuomas Matikka |
| Abstract: | We study the impact of corporate taxes on firm-level investments and business activity by exploiting a 6 percentage-point reduction in the corporate tax rate during 2012–2014 in Finland. We use detailed administrative data and a difference-in-differences method comparing small corporations (tax rate cuts) to similar partnerships (no change in taxes). We find no significant average investment responses but do observe an average increase in annual sales and variable costs. These effects are driven by more cash-constrained firms and firms where the main owner actively works in the firm. |
| JEL: | G31 G38 H21 H25 |
| Date: | 2022–01 |
| URL: | http://d.repec.org/n?u=RePEc:tam:wpaper:2234&r= |
| By: | Steffen Juranek; Øivind Anti Nilsen; Simen A. Ulsaker |
| Abstract: | In this paper we analyse the bank merger between DnB and Gjensidige Bank in 2003, ranked by market share as number one and number three in the Norwegian bank market. Focusing on loans to firms, our difference-in-differences analysis shows no increase of concentration of new loans. The concentration in affected markets (markets where both merging parties were present) developed similarly to unaffected markets. Moreover, the interest rate tended to be lower in the affected markets relative to unaffected markets, but this relationship is weak and not statistically significant. The merger also affected the riskiness of loans only marginally. These weak effects could be the result of efficiency gains in the form of lower costs being pass-through to customers, and the increased market power (and consequently higher interest rates) cancelled each other out. The remedial measures imposed by the Norwegian Competition Authority on the two merging parties are also likely to explain some of the modest effects of the merger. The weak effects are largely coincident with international literature showing the effects of mergers and acquisitions in the banking sector to be modest. |
| Keywords: | banking, local competition, risk taking, firm behaviour |
| JEL: | G21 L41 D53 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_9480&r= |
| By: | Kiss, Tamas (Örebro University School of Business); Nguyen, Hoang (Örebro University School of Business); Österholm, Pär (Örebro University School of Business) |
| Abstract: | In this paper, we analyse Okun’s law – a relation between the change in the unemployment rate and GDP growth – using data from Australia, the euro area, the United Kingdom and the United States. More specifically, we assess the relevance of non-Gaussianity when mod-elling the relation. This is done in a Bayesian VAR framework with stochastic volatility where we allow the different models’ error distributions to have heavier-than-Gaussian tails and skewness. Our results indicate that accounting for heavy tails yields improvements over a Gaussian specification in some cases, whereas skewness appears less fruitful. In terms of dynamic effects, a shock to GDP growth has robustly negative effects on the change in the unemployment rate in all four economies. |
| Keywords: | Bayesian VAR; Heavy tails; GDP growth; Unemployment |
| JEL: | C11 C32 C52 E32 |
| Date: | 2022–01–17 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:oruesi:2022_001&r= |
| By: | Kjell G. Salvanes; Barton Willage; Alexander L.P. Willén |
| 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 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 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 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 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_9491&r= |
| By: | Anthony Brassil (Reserve Bank of Australia); Mike Major (Reserve Bank of Australia); Peter Rickards (Reserve Bank of Australia) |
| Abstract: | We add a simplified banking sector to the RBA's macroeconometric model (MARTIN). How this banking sector interacts with the rest of the economy chiefly depends on the extent of loan losses. During small downturns, losses are absorbed by banks' profits and the resulting effect on the broader economy is limited to that caused by the lower shareholder returns (which is already part of MARTIN). During large downturns, loan losses reduce banks' capital, and banks respond by reducing their credit supply. This reduction in supply reduces housing prices, wealth and investment; thereby amplifying the downturn (which leads to further losses). Our state-dependent approach is a significant advance on the treatment of financial sectors within existing macroeconometric models. Having a banking sector in MARTIN allows us to explore important policy questions. In this paper, we show how the effectiveness of monetary policy depends on the state of the economy. During large downturns, monetary policy is more effective than usual because it can reduce loan losses and therefore moderate any reduction in credit supply. But at low interest rates, the zero lower bound on retail deposit interest rates reduces policy effectiveness. We also investigate how one of the more pessimistic economic scenarios that could have resulted from COVID-19 might have affected the banking sector, and subsequently amplified the resulting downturn. |
| Keywords: | banking; financial accelerator; macroeconomic model |
| JEL: | E17 E44 E51 G21 |
| Date: | 2022–01 |
| URL: | http://d.repec.org/n?u=RePEc:rba:rbardp:rdp2022-01&r= |
| By: | Luciano Campos (Universidad de Alcalá/RedNIE); Jesús Ruiz Andújar (Universidad Complutense de Madrid) |
| Abstract: | This paper investigates the evolution of business cycles synchronization in Latin America since the 1990’s. To do so, a Vector Autoregressive model is fed, alternatively, with the countries’ Industrial Production Indexes and with these series filtered by the US financial conditions index, which is considered as a common component affecting business cycles in the region. Additionally, a Markov switching model is estimated to identify regional recessions. Our findings indicate that business cycles connectedness rise significantly during regional recessions and that the common factor plays an important role. The evidence supports the usefulness of policy coordination among Latin American economies to cushion the spillover effects of exogenous shocks, and helps to identify subgroups of countries for which such coordination is recommendable. |
| Keywords: | Connectedness indexes, Vector autoregressive analysis, Markov switching models, policy coordination, Latin American business cycles. |
| JEL: | C32 E32 F44 N16 |
| Date: | 2021–11 |
| URL: | http://d.repec.org/n?u=RePEc:aoz:wpaper:91&r= |
| By: | Yu-chin Chen; Ippei Fujiwara; Yasuo Hirose |
| Abstract: | This paper conducts general equilibrium (GE) estimation to evaluate the empirical contributions of macroeconomic shocks in explaining the exchange rate disconnect, excess volatility, and the uncovered interest parity (UIP) puzzles. We embed stochastic volatilities and limits-to-international arbitrage in a two-country New Keynesian model and estimate the GE system for the US and Euro area using higher-order approximation and full-information Bayesian methods. Assessing the roles of level vs. volatility shocks and linear vs. higher-order approximations, we find that shocks to macroeconomic fundamentals together with their uncertainties can account for a sizable portion—over 40%—of the observed exchange rate variations. Using the GE estimates, we then evaluate whether the fundamental shocks in our model can deliver the UIP relationship observed in the data, and more importantly, whether the results may differ conditionally vs. unconditionally. In line with findings in previous literature, several fundamental shocks individually can indeed generate patterns consistent with data. However, their contributions unconditionally in the GE setting are quantitatively insufficient to resolve the UIP puzzle. The presence of multiple shocks, their potential interactions, and the need for estimators to fit empirical dynamics of all observables beyond just the exchange rate are all likely reasons behind this “General Equilibrium Puzzle,” which underscores the importance of GE estimation beyond simulations or partial-equilibrium analyses. |
| Keywords: | Exchange rate, risk premium, international risk sharing, stochastic volatility, nonlinear estimation. |
| JEL: | E52 F31 F41 |
| Date: | 2021–10 |
| URL: | http://d.repec.org/n?u=RePEc:een:camaaa:2021-86&r= |
| By: | Alessandro Micheli; Johannes Muhle-Karbe; Eyal Neuman |
| Abstract: | We study a multi-player stochastic differential game, where agents interact through their joint price impact on an asset that they trade to exploit a common trading signal. In this context, we prove that a closed-loop Nash equilibrium exists if the price impact parameter is small enough. Compared to the corresponding open-loop Nash equilibrium, both the agents' optimal trading rates and their performance move towards the central-planner solution, in that excessive trading due to lack of coordination is reduced. However, the size of this effect is modest for plausible parameter values. |
| Date: | 2021–12 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2112.02961&r= |
| By: | Niels Johannesen (University of Copenhagen) |
| Abstract: | This paper studies how the global minimum tax shapes national tax policies and welfare in a formal model of international tax competition with heterogeneous countries. The net welfare effect is generally ambiguous from the perspective of non-havens. On the one hand, the global minimum tax raises their welfare by curbing profit shifting, which boosts government revenue. One the other hand, it lowers their welfare by increasing equilibrium tax rates in havens, which transfers real resources from non-haven firms to haven governments. The net welfare effect is unambiguously positive when the global minimum rate is so high that profit shifting ends. |
| Keywords: | profit shifting, international taxation, global minimum tax, tax avoidance, multinational firms |
| JEL: | H25 H26 H77 |
| Date: | 2022–01–13 |
| URL: | http://d.repec.org/n?u=RePEc:kud:kucebi:2201&r= |
| By: | Joshua C. C. Chan; Aubrey Poon; Dan Zhu |
| Abstract: | State-space mixed-frequency vector autoregressions are now widely used for nowcasting. Despite their popularity, estimating such models can be computationally intensive, especially for large systems with stochastic volatility. To tackle the computational challenges, we propose two novel precision-based samplers to draw the missing observations of the low-frequency variables in these models, building on recent advances in the band and sparse matrix algorithms for state-space models. We show via a simulation study that the proposed methods are more numerically accurate and computationally efficient compared to standard Kalman-filter based methods. We demonstrate how the proposed method can be applied in two empirical macroeconomic applications: estimating the monthly output gap and studying the response of GDP to a monetary policy shock at the monthly frequency. Results from these two empirical applications highlight the importance of incorporating high-frequency indicators in macroeconomic models. |
| Date: | 2021–12 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2112.11315&r= |
| By: | Brown, David P. (University of Alberta, Department of Economics); Sappington, David E.M. (University of Florida) |
| Abstract: | We examine the distinct impacts of forward contracting on generators and buyers of electricity. Increased forward contracting systematically reduces the variance of a generator's profit but can increase the variance of a buyer's profit. Consequently, increased risk aversion or market uncertainty can lead buyers, but not generators, to prefer reduced levels of forward contracting. We examine how the extent of equilibrium forward contracting varies with industry conditions, including the number of generators, the number of buyers, their aversion to profit variation, and the structure of retail electricity prices. |
| Keywords: | forward contracting; risk aversion; electricity sector |
| JEL: | L51 L94 Q28 Q40 |
| Date: | 2021–12–31 |
| URL: | http://d.repec.org/n?u=RePEc:ris:albaec:2021_012&r= |
| By: | Ruediger Bachmann; Isabel Gödl-Hanisch; Eric R. Sims |
| Abstract: | We identify monetary policy shocks by exploiting variation in the central bank’s information set. To be specific, we use differences between nowcasts of the output gap and inflation with final, revised estimates of these series to isolate movements in the policy rate unrelated to economic conditions. We then compute the effects of a monetary policy shock on the aggregate economy using local projection methods. We find that a contractionary monetary policy shock has a limited negative effect on output but a persistent negative impact on prices. In contrast to alternative identification approaches, we do not observe a price puzzle when analyzing the period from 1987 to 2008. Further, we validate the identification approach in a simple New Keynesian model, augmented by the assumption that the central bank observes the ingredients of the Taylor rule with error. |
| JEL: | E31 E52 E58 |
| Date: | 2021–12 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:29572&r= |
| By: | Malani, Anup (University of Chicago); Holtzman, Phoebe; Imai, Kosuke (Harvard University); Kinnan, Cynthia (NBER); Miller, Morgen (University of Chicago); Swaminathan, Shailender (Sai University); Voena, Alessandra (Stanford University); Woda, Bartosz (University of Chicago); Conti, Gabriella (University College London) |
| Abstract: | We report on a large randomized controlled trial of hospital insurance for above-poverty-line Indian households. Households were assigned to free insurance, sale of insurance, sale plus cash transfer, or control. To estimate spillovers, the fraction of households offered insurance varied across villages. The opportunity to purchase insurance led to 59.91% uptake and access to free insurance to 78.71% uptake. Access increased insurance utilization. Positive spillover effects on utilization suggest learning from peers. Many beneficiaries were unable to use insurance, demonstrating hurdles to expanding access via insurance. Across a range of health measures, we estimate no significant impacts on health. |
| Keywords: | health insurance, health, randomized controlled trial, spillovers |
| JEL: | O10 I13 |
| Date: | 2021–12 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp14924&r= |
| By: | Amy Y. Guisinger; Michael W. McCracken; Michael T. Owyang |
| Abstract: | Previous studies show the Fed has a forecast advantage over the private sector, either because it devotes more resources to forecasting or because it has an informational advantage in knowing the path of future monetary policy. We evaluate the Fed’s forecast advantage to determine how much of it results from the Fed’s knowledge of the conditioning path. We develop two tests—an instrumental variable encompassing test and a path-dependent encompassing test—to equalize the Fed’s information set with the private sector’s. We find that, generally, the Fed does not encompass the private sector when the latter has knowledge of the future of monetary policy. Further, we find that between 20 and 30 percent of the difference between the Fed’s average mean squared forecast error and the private sector’s can be explained by monetary policy. |
| Keywords: | conditional encompassing; eurodollar futures; fed information |
| JEL: | C36 C53 E47 |
| Date: | 2022–01–06 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedlwp:93609&r= |