|
on Central and Western Asia |
| By: | Bos, Iwan; Marini, Marco A.; Saulle, Riccardo D. |
| Abstract: | This paper examines capacity-constrained oligopoly pricing with sellers who seek myopic improvements. We employ the Myopic Stable Set solution concept and establish the existence of a unique pure-strategy price solution for any given level of capacity. This solution is shown to coincide with the set of pure-strategy Nash equilibria when capacities are large or small. For an intermediate range of capacities, it predicts a price interval that includes the mixed-strategy support. This stability concept thus encompasses all Nash equilibria and o ers a pure-strategy solution when there is none in Nash terms. It particularly provides a behavioral rationale for di erent pricing patterns, including Edgeworth price cycles and states of hypercompetition with supply shortages. We also analyze the impact of a change in firm size distribution. A merger among the biggest firms may lead to more price dispersion as it increases the maximum and decreases the minimum myopically stable price. |
| Keywords: | International Relations/Trade, Political Economy |
| Date: | 2021–12–21 |
| URL: | http://d.repec.org/n?u=RePEc:ags:feemwp:317126&r= |
| By: | Hélène Latzer (CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique); Florian Mayneris |
| Date: | 2021–05 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-03515766&r= |
| By: | Hendrik Hakenes; Eva Schliephake |
| Abstract: | To reduce a negative externality, socially responsible households can invest respon- sibly (SRI), consume responsibly (SRC), or do both. Which is better? In a closed microeconomic model with intertwined product and capital markets, we analyze how responsible households should use SRI and SRC to maximize their impact. Both strategies reduce the externality as long as investors are risk-averse and the products have no perfect substitutes. Responsible households gain the highest impact when using SRC in equal proportion to SRI. A mere focus on SRC is never efficient. SRI plays a role in any green strategy. The financial performance of green investments is determined by the responsible households' mix between SRI and SRC. |
| Keywords: | Socially responsible investment (SRI), ethical investment, socially responsible consumption (SRC), sustainable investment, sustainable consumption, green investment, divestment, ESG, SPI |
| JEL: | D16 G30 G23 D62 D64 M14 |
| Date: | 2022–01 |
| URL: | http://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2022_330&r= |
| By: | Chengcheng Jia; Jing Cynthia Wu |
| Abstract: | We study the implications of the Fed’s new policy framework of average inflation targeting (AIT) and its ambiguous communication. The central bank has the incentive to deviate from its announced AIT and implement inflation targeting ex post to maximize social welfare. We show two motives for ambiguous communication about the horizon over which the central bank averages inflation as a result of time inconsistency. First, it is optimal for the central bank to announce different horizons depending on the state of the economy. Second, ambiguous communication helps the central bank gain credibility. |
| JEL: | E31 E52 |
| Date: | 2022–01 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:29673&r= |
| By: | Lukáš Fiala |
| Abstract: | This paper deals with the Czech household mortgage debt and its determinants in the 1Q2005 - 2Q2021 period. Our analysis focuses on variables determining the level of mortgage debt from short run and long run perspective. Our contribution is two-fold. First, we examine the relationship between selected variables within cross-correlation analysis, which confirms assumed relationship between mortgage debt and level selected variables. Second, we employ Johansen methodology and identify one cointegration relationship. Our results show that house prices and real wages affect the level of mortgage debt in the short run. However, in the long run the mortgage debt is determined by real GDP, real interest rates, house prices and real wages. |
| Keywords: | Mortgage debt, Household debt, Cointegration, ARDL model |
| JEL: | C01 C22 |
| Date: | 2021–12–06 |
| URL: | http://d.repec.org/n?u=RePEc:prg:jnlwps:v:4:y:2022:id:4.002&r= |
| By: | Maxfield, Sean Alexander |
| Abstract: | No longer does society consider the full extent of the argument and consequences or benefits of a system change. All the record-breaking economic success of the last few decades simply furthers a divide between people/organizations that have money and people/organizations that need money. However, those that can view this divide assign the capitalistic system as the culprit when in fact it is the modern mutation of capitalism that is at fault. Within modern neoclassical economies, there is no form of value-based meritocracy between people and organizations. |
| Date: | 2021–12–18 |
| URL: | http://d.repec.org/n?u=RePEc:osf:thesis:m8hpb&r= |
| By: | Sothearath Seang (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); Dominique Torre (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: | This paper proposes a theoretical setting to analyze the possibility of implementing a blockchain governance to local complementary currencies. The local currency that we capture is used to promote objectives such as short distribution channels, high quality products, and sustainable behaviors at the local level. Its viability relies on the ability of shops to support their involvement in the advantages derived from the use of the currency, on the interest of consumers in said advantages, and on the cost of the governance method used. The blockchain solution appears to be suitable in this specific setting that requires a substantial level of security and reproducibility. The model includes a control by the issuer or administrator of the currency of the advantages perceived by heterogeneous consumers. It also integrates the specifications of the blockchain (rewards of miners in a Proof-of-Work protocol, number of transactions per block) and their cost for the collectivity. Analytical results evaluate the conditions of sustainability of the system and numerical simulations from the model illustrate the diverse specifications of the trade-offs between the costs and advantages of such system for the population. |
| Keywords: | payment system,heterogeneous agents,digitization,community currency |
| Date: | 2021–12 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:halshs-03513449&r= |
| By: | Davis, John B. (Department of Economics Marquette University) |
| Abstract: | The meaning and significance of Keynes’s Treatise on Probability has changed over the 100 years since its publication. Initially it stood on its own as an original contribution to probability theory. After The General Theory some saw the Treatise strengthening Keynes’s later arguments. Yet by the time New Classical Economics became dominant it became largely ignored. This paper attributes that later rejection to the mainstream economics’ reliance on Savage’s subjective expected utility restriction of probability thinking to what he called small worlds. It argues that his small worldslarge worlds distinction produces a small worlds-closed worlds conception of economics the mainstream employs, and that Keynesian economic thinking and the Treatise employ a large worlds-open worlds conception of economics. It frames this open-closed opposition in terms of two contrasting conceptions of science from 1930s system theory, and argues that in economics it is the basis for two conceptions of time: a static, before-after view of temporal sequences and a dynamic, past-present-future view of temporal sequences. The paper then shifts to how Sraffa explained the relationship between production and distribution as an interaction between a relatively closed production system open to distributional forces, shows an analogous view exists in the later thinking of Wittgenstein with whom Sraffa interacted, and then argues Keynes’s thinking in the Treatise employs a similar Cambridge understanding whereby our probability judgments are relatively closed but also open to fundamental uncertainty. |
| Keywords: | Keynes, Treatise on Probability, Savage, small worlds, closed worlds, open systems, closed systems, Sraffa, Wittgenstein |
| JEL: | B29 B30 C10 C11 |
| Date: | 2022–01 |
| URL: | http://d.repec.org/n?u=RePEc:mrq:wpaper:2022-02&r= |
| By: | Dorian Henricot; Thibaut Piquard |
| Abstract: | We use data on granular holdings of debt and Credit Default Swaps (CDS) referencing non-financial corporations across financial investors, to investigate how CDS reallocate credit risk and whether this increases investor-level riskiness. To guide our investigation, we propose a methodology to disentangle CDS positions between three strategies: hedging, speculation, and arbitrage. In our dataset, arbitrage remains anecdotal. We find that CDS reduce exposure concentration, as hedgers shed off their most concentrated exposures, while speculators substitute debt for CDS. CDS also facilitate risk-taking by speculators. Overall, CDS increase portfolio risk metrics, due to a limited effect of hedging strategies compared to speculative ones. |
| Keywords: | Credit Default Swaps, Credit Risk |
| JEL: | E44 G11 G20 G23 |
| Date: | 2022 |
| URL: | http://d.repec.org/n?u=RePEc:bfr:banfra:860&r= |
| By: | D’Hondt, Catherine (Université catholique de Louvain, LIDAM/LFIN, Belgium); Elhichou Elmaya, Younes (Université catholique de Louvain, LIDAM/LFIN, Belgium); Petitjean, Mikael (Université catholique de Louvain, LIDAM/LFIN, Belgium) |
| Abstract: | We use random matching to study the trading behaviors of retail investors who hold passive exchange traded funds invested in stocks (P-ETFs). Using both trading records and survey data to control for all the key investor characteristics, we find strong evidence that retail investors trade differently when they hold P-ETFs. They have a higher portfolio size, a lower turnover, and keep their assets for a longer period of time than the control group of retail investors who hold individual stocks only. P-ETF retail investors are also better protected against stock gambling and those among them who follow a core-satellite approach are least likely to hold lottery-like stocks. |
| Keywords: | ETFs, Stocks, Retail Investors, Passive Investing, Gambling Behavior |
| JEL: | G11 G40 G53 |
| Date: | 2021–08–17 |
| URL: | http://d.repec.org/n?u=RePEc:ajf:louvlf:2021008&r= |
| By: | Drerup, Tilman (University of Bonn); Wibral, Matthias (Maastricht University); Zimpelmann, Christian (IZA) |
| Abstract: | Many models of investor behavior predict that investors prefer assets that they believe to have positively skewed return distributions. We provide a direct test of this prediction in a representative sample of the Dutch population. Using individual-level data on return expectations for a broad index and a single stock, we show that portfolio allocations increase with the skewness of respondents’ return expectations for the respective asset, controlling for other moments of a respondent’s expectations and sociodemographic information. We also show that while an individual’s expectations are correlated across assets, sociodemographics only capture very little of the substantial heterogeneity in expectations. |
| Keywords: | portfolio choice, stock market expectations, skewness, behavioral finance |
| JEL: | D14 D84 G02 G11 |
| Date: | 2022–01 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp15018&r= |
| By: | Li, Bin |
| Abstract: | Various“irrationalities” have always been deemed distinct from human reason or “rational thinking”. However, another long-standing view is that“irrationalities” are really some kinds of rationality that just need to be somehow proven. It would be most satisfactory if the proof could be done because a successful proof can re-justify the mainstream rational principle, then minimizing the price of reform of economics. This paper briefly introduces a ready-made solution. |
| Keywords: | irrationality; rationality; behavioral economics; psychology; animal spirits; bounded rationality |
| JEL: | A10 B00 C60 |
| Date: | 2022–01–06 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:111637&r= |
| By: | Davide Debortoli; Jordi Galí |
| Abstract: | We study the role of idiosyncratic income shocks for aggregate fluctuations within a simple heterogeneous household framework with no binding borrowing constraints. We show that the presence of idiosyncratic income shocks affects the economy’s response to an aggregate shock in a way that can be captured by a consumption weighted average of the changes in uncertainty generated by the shock. We apply this framework to two example economies —an endowment economy and a New Keynesian economy— and show that under plausible calibrations the impact of idiosyncratic income shocks on aggregate fluctuations is quantitatively small, since most of the changes in uncertainty are concentrated among poorer (low consumption) households. |
| JEL: | E21 E32 |
| Date: | 2022–01 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:29704&r= |
| By: | Davoli, Maddalena (Goethe University Frankfurt); Rodríguez-Planas, Núria (Queens College, CUNY) |
| Abstract: | Using a nationally representative US sample of 9,623 adults from 27 countries of ancestries, we find that the higher the degree of gender convergence in financial knowledge in the country of ancestry, the higher the financial knowledge of women in the US relative to their male counterparts. After ruling out gender differences in cognitive and non-cognitive skills as potential mechanisms, we find that higher patience and lower altruism in the country of ancestry are associated with greater financial knowledge for men but not for women in the US. Once we remove any country-of-ancestry gender variation from these preferences, gender convergence in financial knowledge continues to be associated with women's (relative and absolute) greater financial literacy in the US, underscoring that gender differences in financial literacy are socially constructed. This relative and absolute female improvement is particularly robust for knowledge related to inflation and risk-diversification. |
| Keywords: | financial literacy, gender, epidemiological approach, and preferences |
| JEL: | D1 J16 G53 Z10 |
| Date: | 2022–01 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp15054&r= |
| By: | Patrice Fontaine (EUROFIDAI - EUROFIDAI, CNRS - Centre National de la Recherche Scientifique, PULV - Pôle Universitaire Léonard de Vinci); Sujiao Zhao (Banco de Portugal - Banco de Portugal, UCP Porto - Catholic University of Portugal / Porto - Faculdade de Economia e Gestão & CEGE - Catholic University of Portugal / Porto - Faculdade de Economia e Gestão & CEGE) |
| Abstract: | We examine the impact of undervaluation on a firm's use of trade credit. To address potential endogene- ity bias, we construct our instrumental variable based on mutual fund outflow-driven price pressure, and our undervaluation measure allows us to distinguish misvaluation from fair valuation. We find that a firm's suppliers play an important role in providing temporary bridge financing when the firm is under- valued. The effect varies with the firm's information environment and with its dependence on external finance. In addition, based on a manually matched supplier-customer sample, we show that small cus- tomers in long-term relationships with their suppliers are more likely to obtain trade credit when fac- ing stock market undervaluation, while small suppliers with a smaller customer pool extend more trade credit to their undervalued customers. |
| Keywords: | Undervaluation,Trade credit,Information advantage,Implicit equity stake |
| Date: | 2021–03 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-03507994&r= |
| By: | Vincent Carret (TRIANGLE - Triangle : action, discours, pensée politique et économique - ENS Lyon - École normale supérieure - Lyon - UL2 - Université Lumière - Lyon 2 - IEP Lyon - Sciences Po Lyon - Institut d'études politiques de Lyon - Université de Lyon - UJM - Université Jean Monnet [Saint-Étienne] - CNRS - Centre National de la Recherche Scientifique); Michaël Assous (TRIANGLE - Triangle : action, discours, pensée politique et économique - ENS Lyon - École normale supérieure - Lyon - UL2 - Université Lumière - Lyon 2 - IEP Lyon - Sciences Po Lyon - Institut d'études politiques de Lyon - Université de Lyon - UJM - Université Jean Monnet [Saint-Étienne] - CNRS - Centre National de la Recherche Scientifique) |
| Abstract: | The place of Harvard in the development of econometrics is assessed through the research of its faculty and the development of the courses they taught. Over the course of the century, as the content of econometrics was itself transformed, we find that the Harvard department of economics occupied a singular place in the econometric landscape. This idiosyncrasy was defined by large projects such as the Harvard barometer of the 1920s or the postwar development of input-output analysis, but also by the lack of common purpose that often characterized the work of its members. Through the storied halls of the university passed many of the best and brightest, but few were given the chance to pursue their projects durably, to the detriment of the constitution of a "Harvard econometrics." |
| Keywords: | Persons,Leontief,Jorgenson,business cycles,input-output,investment studies,microeconometrics,quasi-experiments,panel data |
| Date: | 2022–01–10 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:halshs-03520006&r= |
| By: | Gohl, Niklas (DIW Berlin); Haan, Peter (DIW Berlin); Michelsen, Claus (DIW Berlin); Weinhardt, Felix (European University Viadrina, Frankfurt / Oder) |
| Abstract: | This study examines short-, medium-, and long-run price expectations in housing markets. We derive and test six hypothesis about the incidence, formation, and relevance of price expectations. To do so, we use data from a tailored household survey, past sale and rental offerings, satellites, and from an information RCT. As novel findings, we show that price expectations exhibit mean reversion in the long-run. Moreover, we do not find evidence for biases related to individual housing tenure decisions or regret aversion. Confirming existing findings, we show that local market characteristics matter for expectations throughout, as well as aggregate price information. Lastly, we corroborate existing evidence that expectations are relevant for portfolio choice. |
| Keywords: | housing markets, price expectations |
| JEL: | R21 D84 |
| Date: | 2022–01 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp15040&r= |
| By: | Auriol, Emmanuelle; Friebel, Guido; Weinberger, Alisa; Wilhelm, Sascha |
| Abstract: | Based on a data set that we collected from the top research institutions in economics around the globe (including universities, business schools and other or- ganizations such as central banks), we document the underrepresentation of women in economics. For the 238 universities and business schools in the sample, women hold 25% of senior level positions (full professor, associate professor) and 37% of junior level positions. In the 82 U.S. universities and business schools, the figures are 20% on the senior level and 32% on the entry level, while in the 122 European institutions, the numbers are 27% and 38%, respectively, with some heterogeneity across countries. The numbers also show that the highest-ranking institutions (in terms of research output) have fewer women in senior positions. Moreover, in the U.S., this effect is even present on the junior level. The “leaky pipeline” may hence begin earlier than oftentimes assumed, and is even more of an issue in the highly integrated market of the U.S. In Europe, an institution ranked 100 places higher has three percentage points fewer women in senior positions, but in the U.S. it is almost five percentage points. |
| Keywords: | gender equality ; academic hierarchies ; leaky pipeline |
| JEL: | A11 J16 |
| Date: | 2022–01–19 |
| URL: | http://d.repec.org/n?u=RePEc:tse:wpaper:126450&r= |
| By: | Sebastien Valeyre |
| Abstract: | This paper derives an optimal portfolio that is based on trend-following signal. Building on an earlier related article, it provides a unifying theoretical setting to introduce an autocorrelation model with the covariance matrix of trends and risk premia. We specify practically relevant models for the covariance matrix of trends. The optimal portfolio is decomposed into four basic components that yield four basic portfolios: Markowitz, risk parity, agnostic risk parity, and trend following on risk parity. The overperformance of the proposed optimal portfolio, applied to cross-asset trading universe, is confirmed by empirical backtests. We provide thus a unifying framework to describe and rationalize earlier developed portfolios. |
| Date: | 2022–01 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2201.06635&r= |
| By: | Jones, Todd R. (Mississippi State University); Sloan, Arielle A. (Independent Researcher) |
| Abstract: | We use roster data of 96 top U.S. economics departments to document the academic origins of their tenure-track faculty. Academic origins may have implications for how undergraduate (B.A.) and doctoral (Ph.D.) students are trained and placed, as well as the type of research produced. We find that faculty educated at top-ranked Ph.D. universities are overrepresented; e.g., over half of our sample attended a top 15 university, and over a third attended a top six university. We find similar, but less pronounced, patterns for B.A. origins; e.g., over a third of those with a U.S. B.A. attended a top 15 university. |
| Keywords: | doctoral origins, Ph.D. origins, bachelor origins, B.A. origins, academic labor market, economics faculty |
| JEL: | I2 I23 J2 J4 |
| Date: | 2021–12 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp14965&r= |
| By: | International Monetary Fund |
| Abstract: | Despite a more favorable external environment, marked by the rebound in global growth, fast-increasing oil prices, and unprecedented Fund financial support, CEMAC is ending 2021 in a fragile external position. Net external reserves fell throughout 2021 to reach their lowest level in decades, and gross reserves are just above three months of imports of goods and services. The launch of a second phase of the regional strategy at the August 2021 CEMAC Heads of States summit saw renewed commitments to accelerate structural, transparency, and governance reforms. The resumption of program engagements with the Fund, combined with high oil prices and significant fiscal adjustments in 2022, should allow for a turnaround, and the build-up in external reserves is expected to resume in 2022. Risks include possible adverse pandemic developments, oil price volatility, possible fiscal slippages, shortfall in external financing, and security issues. |
| Keywords: | CEMAC authorities; CEMAC country; policy measure; CEMAC member country; further policy commitment; fiscal consolidation policy; Liquidity; Oil prices; Fiscal stance; Monetary base; Global |
| Date: | 2022–01–21 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:2022/013&r= |
| By: | Tiantian Mao; Ruodu Wang; Qinyu Wu |
| Abstract: | We introduce a new approach for prudent risk evaluation based on stochastic dominance, which will be called the model aggregation (MA) approach. In contrast to the classic worst-case risk (WR) approach, the MA approach produces not only a robust value of risk evaluation but also a robust distributional model which is useful for modeling, analysis and simulation, independent of any specific risk measure. The MA approach is easy to implement even if the uncertainty set is non-convex or the risk measure is computationally complicated, and it provides great tractability in distributionally robust optimization. Via an equivalence property between the MA and the WR approaches, new axiomatic characterizations are obtained for a few classes of popular risk measures. In particular, the Expected Shortfall (ES, also known as CVaR) is the unique risk measure satisfying the equivalence property for convex uncertainty sets among a very large class. The MA approach for Wasserstein and mean-variance uncertainty sets admits explicit formulas for the obtained robust models, and the new approach is illustrated with various risk measures and examples from portfolio optimization. |
| Date: | 2022–01 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2201.06370&r= |
| By: | Stéphane Dupraz; Hervé Le Bihan; Julien Matheron |
| Abstract: | How effective make-up strategies are depends heavily on how forward-looking agents are. Workhorse monetary models, which are much forward-looking, find them so effective that they run into the so-called “forward-guidance puzzle”. Models that discount the future further find them much less effective, but imply that agents discount the very perception of future policy rates. This only evaluates make-up strategies when financial markets do not notice them, or deem them non-credible. We amend one leading solution to the forward-guidance puzzle -namely Woodford's finite planning horizons -to the assumption that financial markets have rational expectations on policy rates, and incorporate them into the long-term nominal interest rates faced by all. Agents still have a limited ability to foresee the consequences of monetary policy on output and inflation, making the model still immune to the forward-guidance puzzle. First, we find that make-up strategies that compensate for a past deficit of accommodation after an ELB episode have sizably better stabilization properties than inflation targeting. Second, we find that make-up strategies that always respond to past economic conditions, such as average inflation targeting, do too but that their stabilization benefits over IT can be reduced by the existence of the ELB. |
| Keywords: | Make-up Strategies, Forward-Guidance Puzzle, Finite Planning Horizons |
| JEL: | E31 E52 E58 |
| Date: | 2022 |
| URL: | http://d.repec.org/n?u=RePEc:bfr:banfra:862&r= |
| By: | Dergunov, Ilya; Meinerding, Christoph; Schlag, Christian |
| Abstract: | In a parsimonious regime switching model, we find strong evidence that expected consumption growth varies over time. Adding inflation as a second variable, we uncover two states in which expected consumption growth is low, one with high and one with negative expected inflation. Embedded in a general equilibrium asset pricing model with learning, these dynamics replicate the observed time variation in stock return volatilities and stockbond return correlations. They also provide an alternative derivation for a measure of time-varying disaster risk suggested by Wachter (2013), implying that both the disaster and the long-run risk paradigm can be extended towards explaining movements in the stock-bond correlation. |
| Keywords: | Long-run risk,inflation,recursive utility,filtering,disaster risk |
| JEL: | E31 E44 G12 |
| Date: | 2022 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:safewp:334&r= |
| By: | Sergey Kovbasyuk (New Economic School); Marco Pagano (University of Naples Federico II,) |
| Abstract: | An arbitrageur with short investment horizon gains fr om accelerating price discovery by advertising his private information. However, advertising many assets may overload investors' attention, reducing the number of informed traders per asset and slowing price discovery. So the arbitrageur optimally concentrates advertising on just a few assets, unless his trades have significant price impact. The arbitrageur's gain from advertising is increasing in the assets' mispricing and in the precision of his private information, and is decreasing in its complexity. If several arbitrageurs have private information, inefficient equilibria can arise, where substantial mispricing persists or investors' attention is overloaded. |
| Keywords: | limits to arbitrage, advertising, price discovery, limited attention. JEL Classifications: G11, G14, G2, D84. |
| Date: | 2022–02 |
| URL: | http://d.repec.org/n?u=RePEc:abo:neswpt:w0287&r= |
| By: | Ceballos, Francisco; Kramer, Berber |
| Abstract: | Smallholder farmers in developing countries generally lack access to affordable agricultural insurance, in part because of high loss verification costs and asymmetric information in indemnity insurance and basis risk in index-based insurance. Advances in remote sensing and other digital technologies can help overcome these challenges by allowing for low-cost, remote loss verification, and settling claims based on observed visible damage in a farmer’s fields. By effectively proxying for indemnity insurance, however, such a product may be subject to moral hazard and adverse selection. We test these hypotheses leveraging the rollout of picture-based crop insurance among smallholder farmers in northwestern India. We find no evidence of moral hazard or adverse selection, and that the use of technologies increases willingness to pay. We conclude that digital technologies are a valuable tool to provide low cost, sustainable crop insurance remotely, at lower levels of basis risk than index products. |
| Keywords: | INDIA; SOUTH ASIA; ASIA; risk; insurance; crop insurance; mobile equipment; technology; crops; farmers; smallholders; agricultural insurance; field experimentation; moral hazard; adverse selection; asymmetric information; Picture-Based Crop Insurance |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:fpr:ifprid:2088&r= |
| By: | Mr. Chris Papageorgiou; Hendre Garbers; D. Filiz Unsal |
| Abstract: | We provide a multidimensional characterization of monetary policy frameworks across three pillars: Independence and Accountability, Policy and Operational Strategy, and Communications (IAPOC). We construct the IAPOC index by analyzing central banks’ laws and websites for 50 advanced economies, emerging markets, and low-income developing countries, from 2007 to 2018. Due to its scope and granularity, our index provides a holistic view of monetary policy frameworks which goes beyond existing measures of transparency or independence, as well as monetary policy or exchange rate regime classifications. Comparing the IAPOC index across countries and over time, we find that monetary policymaking is varied, fast-changing, and eclectic across the Policy and Operational Strategy and Communications pillars, especially in emerging markets and low-income developing countries. |
| Keywords: | Monetary Policy, Monetary Policy Regime, Exchange Rate Regime, Central Banks, Central Bank Independence, Central Bank Transparency |
| Date: | 2022–01–28 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:2022/022&r= |
| By: | Roman Frydman (Department of Economics, New York University); Soren Johansen (Department of Economics, University of Copenhagen); Anders Rahbek (Department of Economics, University of Copenhagen); Morten Nyboe Tabor (Institute for New Economic Thinking) |
| Abstract: | We extend Lucas's classic asset-price model by opening the stochastic process driving dividends to Knightian uncertainty arising from unforeseeable change. Implementing Muth's hypothesis, we represent participants' expectations as being consistent with our model's predictions and formalize their ambiguity-averse decisions with maximization of intertemporal multiple-priors utility. We characterize the asset-price function with a stochastic Euler equation and derive a novel prediction that the relationship between prices and dividends undergoes unforeseeable change. Our approach accords participants' expectations, driven by both fundamental and psychological factors, an autonomous role in driving the asset price over time, without presuming that participants are irrational. |
| Keywords: | Asset Prices; Unforeseeable Change; Knightian Uncertainty; Muth's Hypothesis; Model Ambiguity; Rational Expectations (REH); Behavioral Finance. |
| JEL: | D84 E00 G12 G41 |
| Date: | 2021–12–07 |
| URL: | http://d.repec.org/n?u=RePEc:thk:wpaper:inetwp172&r= |
| By: | Ding, Y. |
| Abstract: | We propose a new class of conditional heteroskedasticity in the volatility (CHV) models which allows for time-varying volatility of volatility in the volatility of asset returns. This class nests a variety of GARCH-type models and the SHARV model of Ding (2021). CH-V models can be seen as a special case of the stochastic volatility of volatility model. We then introduce two examples of CH-V in which we specify a GJR-GARCH and an E-GARCH processes for the volatility of volatility, respectively. We also show a novel way of introducing the leverage effect of negative returns on the volatility through the volatility of volatility process. Empirical study confirms that CH-V models have better goodness-of-fit and out-of-sample volatility and Value-at-Risk forecasts than common GARCH-type models. |
| Keywords: | forecasting, GARCH, SHARV, volatility, volatility of volatility |
| JEL: | C22 C32 C53 C58 G17 |
| Date: | 2021–11–09 |
| URL: | http://d.repec.org/n?u=RePEc:cam:camjip:2111&r= |
| By: | Asongu, Simplice; Meniago, Christelle; Salahodjaev, Raufhon |
| Abstract: | This study investigates: (i) the effect of foreign direct investment (FDI) on total factor productivity (TFP) and economic growth dynamics, and (ii) the relevance of value added from three economic sectors in modulating the established effect of FDI on TFP and economic growth dynamics. The geographical and temporal scopes are respectively 25 Sub-Saharan African countries and the period 1980–2014. The empirical evidence is based on non-interactive and interactive Generalised Method of Moments. The following main findings are established. First, FDI has a positive effect on GDP growth, GDP per capita and welfare real TFP. Second, the effect of FDI is negative on real GDP and TFP, while the impact is insignificant on real TFP growth and welfare TFP. Third, values added to the three economic sectors largely modulate FDI to produce negative net effects on TFP and growth dynamics. Policy implications are discussed with particular emphasis on the need to complement added value across various economic sectors in order to leverage on the benefits of FDI in TFP and economic growth. To the best of knowledge, this is the first study to assess how value added from various economic sectors affect the relevance of FDI on macroeconomic outcomes. |
| Keywords: | Economic output, total factor productivity, foreign investment, agricultural sector, manufacturing sector, service sector, sub-Saharan Africa |
| JEL: | E23 F21 F30 F43 O55 |
| Date: | 2021–01 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:111757&r= |
| By: | Caroline Jardet; Cristina Jude; Menzie D. Chinn |
| Abstract: | We examine the effect of uncertainty on foreign direct investment inflows for a heterogeneous sample of advanced, emerging market and developing countries over a 25 year long (pre-Covid) sample. Using a push-pull framework, and controlling for both global and local factors, we find policy uncertainty has discernable and significant effects on inflows, but those effects vary in strength and direction between different groups of countries. Moreover, it is not host country uncertainty that seems to matter the most, but rather global uncertainty. Additionally, we find that high levels of uncertainty matter disproportionately. Finally, financial openness accentuates the impact of uncertainty for emerging market and developing countries. |
| JEL: | F21 F4 |
| Date: | 2022–01 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:29687&r= |
| By: | Jean-Michel Servet (IHEID - Institut de hautes études internationales et du développement - University of Geneva [Switzerland], TRIANGLE - Triangle : action, discours, pensée politique et économique - ENS Lyon - École normale supérieure - Lyon - UL2 - Université Lumière - Lyon 2 - IEP Lyon - Sciences Po Lyon - Institut d'études politiques de Lyon - Université de Lyon - UJM - Université Jean Monnet [Saint-Étienne] - CNRS - Centre National de la Recherche Scientifique); André Tiran (TRIANGLE - Triangle : action, discours, pensée politique et économique - ENS Lyon - École normale supérieure - Lyon - UL2 - Université Lumière - Lyon 2 - IEP Lyon - Sciences Po Lyon - Institut d'études politiques de Lyon - Université de Lyon - UJM - Université Jean Monnet [Saint-Étienne] - CNRS - Centre National de la Recherche Scientifique); Solène Morvant-Roux (UNIGE - Université de Genève) |
| Abstract: | Article d'analyse des perspectives de l'inflation, paru dans The Conversation, 20/04/2021 : http://theconversation.com/previsions-di nflation-lanalyse-na-jamais-ete-aussi-co mplexe-159279 |
| Keywords: | inflation,prévision |
| Date: | 2021–04–20 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-03533425&r= |
| By: | Andreas HAUFLER; Amane Saito (Graduate School of Economics, Osaka University) |
| Abstract: | In this paper, we compare the return and volatility of ESG integrated indices to conventional market capitalization weighted indices, using Stochastic Volatility (SV) model. As a result of the analysis, it was confirmed that the return of the portfolio based on market capitalization weighted indices is affected by the U.S. stock market. As for the impact of market anomalies on volatility, asymmetry effect, holiday effect, turn- of-month effect, and U.S. volatility spillover effect are confirmed, indicating that volatility increased in each phase. In the ESG integrated portfolio, the return is also affected by the U.S. stock market, but the return of the previous business day has a significantly negative impact, indicating that the return tends to rise (fall) immediately after it falls (rises), and that the return is unlikely to move in one direction in a short-term. In addition, the coefficient of the asymmetric effect of volatility is found to be significantly smaller than that of the portfolio based on market capitalization weighted indices. Therefore, integrating ESG ratings of companies, for example, it was confirmed that the return would be less likely to be negative continuously and that the volatility would be suppressed during a stock market crash. |
| Keywords: | SV model, ESG, ESG integrated indices, Market Anomaly (asymmetry effect, holiday effect, turn of the month effect) |
| JEL: | C58 G17 Q50 M14 G34 |
| URL: | http://d.repec.org/n?u=RePEc:osk:wpaper:2127&r= |
| By: | Joel Alcedo; Alberto Cavallo; Bricklin Dwyer; Prachi Mishra; Antonio Spilimbergo |
| Abstract: | We study e-commerce across 47 economies and 26 industries during the COVID-19 pandemic using aggregated and anonymized transaction-level data from Mastercard, scaled to represent total consumer spending. The share of online transactions in total consumption increased more in economies with higher pre-pandemic e-commerce shares, exacerbating the digital divide across economies. Overall, the latest data suggest that these spikes in online spending shares are dissipating at the aggregate level, though there is variation across industries. In particular, the share of online spending in professional services and recreation has fallen below its pre-pandemic trend, but we observe a longer-lasting shift to digital in retail and restaurants. |
| JEL: | E2 F00 L81 O3 |
| Date: | 2022–02 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:29729&r= |
| By: | Eduardo Dávila (Cowles Foundation, Yale University and NBER; Yale University); Cecilia Parlatore (New York University, Stern School of Business, NBER and CEPR) |
| Abstract: | This paper studies the social value of closing price differentials in financial markets. We show that arbitrage gaps (price differentials between markets) exactly correspond to the marginal social value of executing an arbitrage trade. We further show that arbitrage gaps and measures of price impact are sufficient to compute the total social value from closing an arbitrage gap. Theoretically, we show that, for a given arbitrage gap, the total social value of arbitrage is higher in more liquid markets. We apply our framework to compute the welfare gains from closing arbitrage gaps in the context of covered interest parity violations and several duallisted companies. The estimates of the value of closing arbitrage gaps vary substantially across applications. |
| Keywords: | arbitrage, welfare, price impact, covered interest parity, dual-listed stocks |
| JEL: | G12 G18 D61 |
| Date: | 2022–01 |
| URL: | http://d.repec.org/n?u=RePEc:cwl:cwldpp:2322&r= |
| By: | Das, Abhiman; Mohapatra, Sanket; Nigania, Akshita |
| Abstract: | This paper examines the role of state-owned banks’ presence in allocation of credit to different sectors in India using the central bank's Asset Quality Review (AQR) as a quasi-natural experiment. The AQR resulted in a larger increase in non-performing loans of state-owned banks as compared to other banks. We exploit the heterogeneity in the presence of state-owned and other banks across districts to identify the supply side channels for bank credit reallocation. Using a difference-in-differences analysis, we find that the top-third of districts based on presence of state-owned banks' branches experienced a higher fall in the share of credit to the industrial sector in the post-AQR period compared to other districts. Such districts also experienced a greater increase in retail loans, which are considered less risky compared to industrial loans. Further, an analysis using a panel vector autoregression finds that the AQR, through an increase in non-performing loans of state-owned banks, led to a decrease in economic growth at the district-level. The results of this study suggest that central bank policy reforms can influence bank credit allocation at the sub national level and have real economy effects. |
| Date: | 2022–02–23 |
| URL: | http://d.repec.org/n?u=RePEc:iim:iimawp:14671&r= |
| By: | Antonio Garcia Pascual; José Abad |
| Abstract: | Following the COVID shock, supervisors encouraged banks to use capital buffers to support the recovery. However, banks have been reluctant to do so. Provided the market expects a bank to rebuild its buffers, any draw-down will open up a capital shortfall that will weigh on its share price. Therefore, a bank will only decide to use its buffers if the value creation from a larger loan book offsets the costs associated with a capital shortfall. Using market expectations, we calibrate a framework for assessing the usability of buffers. Our results suggest that the cases in which the use of buffers make economic sense are rare in practice. |
| Keywords: | Capital Buffers, Basel III, Capital Regulation, Financial Institutions, Macropru |
| Date: | 2022–01–28 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:2022/021&r= |
| By: | Barney Hartman-Glaser; Simon Mayer; Konstantin Milbradt |
| Abstract: | We consider a firm with infrequent access to capital markets, continuous access to financing by a risk-averse intermediary, and a cost of holding cash. The intermediary absorbs a fraction of cash-flow risk that decreases with the firm’s liquidity reserves and acquires a stake in the firm under distress. Implementing the optimal contract suggests an overlapping pecking order. The firm simultaneously finances shortfalls with cash reserves and a credit line and sells equity to the intermediary when it runs out of cash. The model helps explain empirical facts and trends in financial intermediation, such as the rise of private equity. |
| JEL: | D86 G32 G35 |
| Date: | 2022–01 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:29712&r= |
| By: | Innessa Colaiacovo; Margaret G. Dalton; Sari Pekkala Kerr; William R. Kerr |
| Abstract: | Over the past half-century, while self-employment has consistently accounted for around one in ten of the United States workforce, its composition has changed. Since 1970, industries with high startup capital requirements have declined from 53% of self-employment to 23%. This same time period also witnessed declines in "hometown" local entrepreneurship and the probability of the self-employed being among top earners. Using 2016 data, we show that high startup capital requirements are linked with lower profitability at small scales. The transition away from high startup capital industries appears most closely linked to changes in small business production functions and less due to advantageous reallocation to other opportunities, growth in returns-to-scale among large businesses, or a worsening of financing conditions and debt levels. |
| JEL: | D24 G51 J11 J24 J62 L26 M13 R11 R13 |
| Date: | 2022–02 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:29725&r= |
| By: | Antoine Berthou; Sebastian Stumpner |
| Abstract: | To curb the effect of the Covid-19 pandemic on public health, many countries around the world introduced lockdown policies in 2020. We estimate the effect of these lockdowns on international trade flows, using a rich dataset of monthly bilateral product-level trade flows that covers roughly three quarters of world trade. Our main findings are: (i) Both exporter and importer lockdowns substantially reduced international trade, with importer lockdowns having a stronger impact; (ii) The effect of lockdowns on trade was strongest during the first wave, and has since been declining; (iii) Beyond the direct effect of lockdowns, we find evidence for indirect effects (i.e. lockdowns by third countries) through global value chains. |
| Keywords: | COVID-19, Impact of Lockdowns, Global Value Chains |
| JEL: | F10 F14 F44 |
| Date: | 2022 |
| URL: | http://d.repec.org/n?u=RePEc:bfr:banfra:867&r= |
| By: | Jonathan J Adams (Department of Economics, University of Florida); Philip Barrett (International Monetary Fund) |
| Abstract: | The consensus among central bankers is that higher inflation expectations can drive up inflation today, requiring tighter policy. We assess this by devising a novel method for identifying shocks to inflation expectations: we run a structural VAR, where the expectation shock is the single dimension in the time series that causes forecasts to depart from those implied by rational expectations. We measure these shocks for inflation expectations, label them ``sentiment shocks", and study their effects on the macroeconomy. Using data on several measures of inflation expectations and other time series for the United States, we find that a positive sentiment shock causes output and interest rates to fall, but barely affects inflation. These results are a puzzle, incompatible with the standard New Keynesian model which predicts inflation and interest rates should increase. |
| JEL: | D84 E31 E32 E52 |
| Date: | 2022–02 |
| URL: | http://d.repec.org/n?u=RePEc:ufl:wpaper:001007&r= |
| By: | Lee, Kyu Yub (KOREA INSTITUTE FOR INTERNATIONAL ECONOMIC POLICY (KIEP)); Choi, Won Seok (KOREA INSTITUTE FOR INTERNATIONAL ECONOMIC POLICY (KIEP)); Park, Ji Hyun (KOREA INSTITUTE FOR INTERNATIONAL ECONOMIC POLICY (KIEP)); Eom, Jun-Hyun (KOREA INSTITUTE FOR INTERNATIONAL ECONOMIC POLICY (KIEP)); Kang, Min Ji (KOREA INSTITUTE FOR INTERNATIONAL ECONOMIC POLICY (KIEP)); Whang, Unjung (Jeonbuk National University) |
| Abstract: | This study provides evidence on barriers to digital trade and the economic effect of digital trade, based on surveys of domestic firms in Korea and data collected from random sampling. After briefly examining the prospects of e-commerce talks at the WTO and characterizing digital trade rules at the FTA level, the study concludes by providing suggestions for major policy tasks and mid- to long-term directions of Korea’s digital trade policy. |
| Keywords: | digital trade; trade policy; Korea; e-commerce; WTO; FTA |
| Date: | 2022–01–04 |
| URL: | http://d.repec.org/n?u=RePEc:ris:kiepwe:2022_001&r= |
| By: | Park, Youngseok (KOREA INSTITUTE FOR INTERNATIONAL ECONOMIC POLICY (KIEP)) |
| Abstract: | The United Nations Security Council adopted eight resolutions from 2012 to 2019, in condemning threatening actions on the part of North Korea, such as conducting ballistic missiles and nuclear weapons tests. I examine the efficacy of sanctions against North Korea using satellite nighttime lights data. The political system of North Korea is defined as suryong dictatorship, in which the dictator (supreme leader or suryong) holds absolute power to dictate the country’s resources. Suryong allocates large enough fraction of the country’s resources to the selectorate for supporting his political power. I empirically test the theoretical hypothesis - the ruler will transfer a greater fraction of the country’s resources to the selectorate as sanctions intensify - using satellite nighttime lights data. I find that an additional sanction is associated with an increase in the difference in nighttime lights between the capital city, Pyongyang, and the rest of the country by about 0.4 percent. Manufacturing cities, mining areas, the Chinese border region, and Sinuiju become relatively brighter with an additional sanctions event. Another notable finding is the estimate on the interaction term with the nuclear development facilities areas, which suggests that the ruler diverts resources and electricity from nuclear development activities to other sectors when sanctions increase. |
| Keywords: | North Korea; economic sanction; satellite nighttime light; dictatorship; nuclear development |
| Date: | 2022–01–26 |
| URL: | http://d.repec.org/n?u=RePEc:ris:kiepwe:2022_003&r= |
| By: | Lassance, Nathan (Université catholique de Louvain, LIDAM/LFIN, Belgium) |
| Abstract: | Maximizing the out-of-sample Sharpe ratio is an important objective for investors. To achieve this, we characterize optimal portfolio combinations maximizing expected out-of-sample Sharpe ratio. When investing in the risk-free asset is allowed and combination coefficients are unconstrained, as in Kan and Zhou (2007), we uncover that combining portfolios to maximize expected out-of-sample utility optimizes expected outof-sample Sharpe ratio as well. However, the two criteria are not equivalent for portfolios fully invested in risky assets, and in this case we show how to adapt the optimal portfolio combination of Kan, Wang, and Zhou (2021) to maximize expected out-of-sample Sharpe ratio. We find that the proposed mean-variance portfolio combinations calibrated to maximize expected out-of-sample Sharpe ratio generally outperform the considered benchmarks. Relative to the minimum-variance portfolio estimated with a nonlinearly shrunk covariance matrix, the annualized out-of-sample Sharpe ratio increases from 0.988 to 1.110 before transaction costs, and from 0.914 to 1.007 net of transaction costs, on average across four typical datasets. |
| Keywords: | Mean-variance portfolio ; parameter uncertainty ; estimation risk ; out-of-sample performance |
| Date: | 2021–12–23 |
| URL: | http://d.repec.org/n?u=RePEc:ajf:louvlf:2021013&r= |
| By: | Brown, Alessio J.G.; Fraikin, Anne-Lore |
| Abstract: | The objective of the paper is to examine the retirement behaviour of Belgian workers in one-earner households who are automatically granted a more generous old-age pension benefits replacement rate, called the household replacement rate. Following a recommendation of the Belgian Pension Reform Committee, this policy is to be suppressed for new pensioners, except for those receiving the minimum pension. We provide an ex-ante impact evaluation of such reform on both pension sustainability and adequacy measures. Specifically, we test whether the household replacement rate entails a work (dis)incentive mechanism promoting (harming) pension sustainability and furthermore, we analyse the role of the household replacement rate in old-age poverty and inequality measures. To do so, we use the survey dataset SHARE and a discrete time logistic duration model to study the link between retirement and financial retirement incentives created by the social security system. We find that the household replacement rate generates slightly higher retirement incentives through an income effect and we find that the household replacement rate plays an important role in decreasing the elderly poverty rate. Since households with asymmetrical working arrangements are often at the lowest part of the equivalized income distribution, the substantial effect of the household replacement rate on poverty measures is a motive to use such mechanism as a poverty alleviation tool. Nevertheless, we advocate that income redistribution measures should not be tied to a specific household composition and policies such as pensionable earning minima, minimum pension benefits and the inclusion of replacement income periods in the pension benefits calculation effectively serve the income redistribution goal without favouring a certain type of household over another. Overall, despite the positive poverty and distributional aspects of this policy, our analysis supports the reform proposal of removing the household replacement rate. |
| Keywords: | retirement,pension policy,Belgium,impact assessment |
| JEL: | J22 H31 H55 J26 |
| Date: | 2022 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:glodps:1026&r= |
| By: | De Koning, Kees |
| Abstract: | One can describe the accumulation of wealth in home equity as a benefit to the homeowners. However, in practice the release process of such equity into cash is hindered by the fact that a joint ownership of a home by a lending institution and a household turns the equity stake into a debt obligation. If a household attempts to withdraw some cash from their home equity stake, the banking system turns such equity into a new debt obligation. This is -economically speaking- a worst-case scenario for households. When households reduce their shareholdings in companies, in government debt titles or by withdrawing money from their own bank savings, the conversion into cash does not turn itself into a new debt obligation. The result of these latter economic actions “only” reduces their accumulated savings levels. In the U.S., the level of home equity reached $25.3 trillion by the end of the third quarter 2021 according to the statistics from the Federal Reserve. With an estimated nominal GDP for the U.S. of $23.2 trillion for 2021, this single savings category of $25.3 trillion has now exceeded the total U.S. GDP level, a remarkable economic development! For the E.U., the European Central Bank has published a study in 2020 called “Household Wealth and Consumption in the Euro Area”. A rough estimate of net housing stock values in the E.U. showed a net worth in housing stock of Euro 45 trillion or in U.S. dollars $40.3 trillion in 2019. The World Bank estimated the EU GDP at U.S. $15.27 trillion for 2020. The European Central Bank, just like the Fed in the U.S., has helped governments to spend more than their tax receipts with the help of Quantitative Easing exercises. What, in economic terms, seems essential is that Central Banks and their governments take steps to put home equity levels on an equal footing with other forms of accumulated savings. For most countries involved, the level of savings incorporated in home equity represents by far the largest savings category. Why and how this can be done for the U.S. is explained in this paper. |
| Keywords: | Home equity in the U.S.;Long term trends in home equity;Federal Reserve interest rate policy for home equity; home foreclosures;Unemployment levels. |
| JEL: | E2 E21 E24 E3 E31 E4 E41 E43 E44 E5 E51 E6 |
| Date: | 2022–01–31 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:111827&r= |
| By: | Asongu, Simplice; Soumtang, Valentine; Edoh, Ofeh |
| Abstract: | The study assesses how financial institution dynamics have affected poverty and the severity of poverty in 42 sub-Saharan African countries for the period 1980-2019. In order to increase for policy relevance of the study, three financial development indicators are used, namely: financial institutions depth, financial institutions access and financial institutions efficiency. The adopted empirical strategy is a quantile regressions approach which enables the study to assess how financial institutions dynamics affect poverty and the severity of poverty throughout the conditional distribution of poverty and severity of poverty. The findings show various tendencies, inter alia: (i) financial institutions depth (efficiency) consistently decreases the severity of poverty (poverty headcount) and (ii) financial institutions access consistently decreases both poverty and the severity of poverty and the decreasing effect increases with increasing levels of poverty in the top quantiles and throughout the conditional distribution of the severity of poverty. Policy implications are discussed with respect of SDG1 on poverty reduction. |
| Keywords: | financial development; poverty alleviation; Africa |
| JEL: | G20 I10 I20 I30 O10 |
| Date: | 2021–11 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:111750&r= |
| By: | Kiemo, Samuel; Talam, Camilla; Rugiri, Irene W. |
| Abstract: | The paper sought to explore the role of bank capital in mitigating credit risk and promoting financial stability. To achieve this, we constructed a Financial Soundness Index to evaluate financial stability conditions. A Panel Vector Auto Regression Model was employed using annual bank-level data from 2001-2020 for 37 banks, to examine the effect of bank capital on credit risk and financial stability. Overall, financial stability index long-term trend shows banks remain resilient, despite the downward trend from 2011 and instability margins since 2016. The findings also reveal that bank capital, lowers credit risk and strengthens financial stability. The paper conclude that bank capital supports financial stability through mitigating credit risks, and recommends that authorities continue adopting and implementing appropriate capital policies to foster financial stability and promote bank lending. |
| Keywords: | Bank Capital,Credit Risk,Financial Stability,Panel Vector Auto Regression model |
| Date: | 2022 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:kbawps:57&r= |
| By: | Nemo Semret |
| Abstract: | What happens to mining when the Bitcoin price changes, when there are mining supply shocks, the price of energy changes, or hardware technology evolves? We give precise answers based on the technical forces and incentives in the system. We then build on these dynamics to consider value: what is the cost and purpose of mining, and is it worth it? Does it use too much energy, is it bad for the environment? Finally we extend our analysis to the long term: is mining economically feasible forever? What will the global hash rate be in 40 years? How is mining impacted by the limits of computation and energy? Is it physically sustainable in the long run? From first principles, we derive a fundamental scale-invariant feasibility constraint, which enables us to analyze the interlocking dynamics, find key invariants, and answer these questions mathematically. |
| Date: | 2022–01 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2201.06072&r= |
| By: | Egemen Eren (Bank for International Settlements (BIS) - Monetary and Economic Department); Semyon Malamud (Ecole Polytechnique Federale de Lausanne; Centre for Economic Policy Research (CEPR); Swiss Finance Institute); Haonan Zhou (Princeton University - Department of Economics) |
| Abstract: | We document that corporates in emerging markets borrow more in foreign currency when the local currency provides a better hedge in downturns. We develop an international corporate finance model in which firms facing adverse selection choose the foreign currency share of their debt. In the unique separating equilibrium, good firms optimally expose themselves to currency risk to signal their type. The nature of this equilibrium crucially depends on the co-movement between cash flows and the exchange rate. We provide extensive empirical evidence for this signalling channel using micro data for firms in multiple emerging markets and event studies of local currency depreciation episodes. |
| Keywords: | Foreign currency debt, corporate debt, signalling, exchange rates, pecking order |
| JEL: | D82 F34 G01 G15 G32 |
| Date: | 2022–02 |
| URL: | http://d.repec.org/n?u=RePEc:chf:rpseri:rp2215&r= |
| By: | Mr. Paulo A Medas; W. Raphael Lam; Mr. Daniel Garcia-Macia; Alexandra Fotiou; Andresa Lagerborg; Paul Elger; Xuehui Han; Mr. Hamid R Davoodi |
| Abstract: | Adoption of fiscal rules and fiscal councils continued to increase globally over the last decades based on two new global datasets. During the pandemic, fiscal frameworks were put to test. The widespread use of escape clauses was one of the novelties in this crisis, which helped provide policy room to respond to the health crisis. But the unprecedented fiscal actions have led to large and widespread deviations from deficit and debt limits. The evidence shows that fiscal rules, in general, have been flexible during crises but have not prevented a large and persistent buildup of debt over time. Experience shows that deviations from debt limits are very difficult to reverse. The paper also presents evidence on the benefits of a good track record in abiding by the rules. All these highlight the difficult policy choices ahead and need to further improve rules-based fiscal frameworks. |
| Keywords: | Fiscal Rules, Fiscal Councils, COVID-19, pandemic, Public debt, European Union, Deficit limits, independent fiscal institutions. |
| Date: | 2022–01–27 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:2022/011&r= |
| By: | Battulga Gankhuu |
| Abstract: | In this paper, we introduced a dynamic Gordon growth model which is augmented by Bayesian Markov--Switching Vector Autoregressive (MS--BVAR) process. Using the risk-neutral valuation method and locally risk-minimizing strategy, we obtained pricing and hedging formulas for European call and put options, Margrabe option, segregated fund, and unit-linked life insurance on dividend-paying assets. It is assumed that the regime-switching process is generated by a homogeneous Markov process and the residual process follows a heteroscedastic model. |
| Date: | 2022–01 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2201.06012&r= |
| By: | Amélie Barbier; Kea Baret; Alexandru Minea (CERDI - Centre d'Études et de Recherches sur le Développement International - CNRS - Centre National de la Recherche Scientifique - UCA - Université Clermont Auvergne) |
| Abstract: | We study the impact of national fiscal rules on fiscal discipline in the European Union. Our impact analysis, that accounts for potential endogeneity, shows that national fiscal rules significantly improve our new measure of fiscal discipline, namely Global Financial Performance Index (GFPI). In addition, we show that this favorable effect dramatically depends upon the type of fiscal rule and different structural factors. These two features, together with alternative measures of fiscal discipline, are found to be key ingredients that should be taken into account when assessing the effects of fiscal rules on fiscal discipline. |
| Abstract: | Nous étudions l'impact des règles budgétaires nationales sur la discipline budgétaire dans l'Union Européenne. Notre analyse d'impact, qui tient compte de l'endogénéité potentielle, montre que les règles budgétaires nationales améliorent considérablement notre nouvelle mesure de discipline budgétaire, à savoir le Global Financial Performance Index (GFPI). De plus, nous montrons que cet effet favorable dépend fortement du type de règle budgétaire et des différents facteurs structurels. Ces deux caractéristiques, ainsi que des mesures alternatives de discipline budgétaire, se révèlent être des ingrédients clés à prendre en compte lors de l'évaluation des effets des règles budgétaires sur la discipline budgétaire. |
| Keywords: | national fiscal rules,fiscal discipline |
| Date: | 2021–03 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-03509466&r= |
| By: | Kyle Handley; Nuno Limão |
| Abstract: | Trade policy uncertainty (TPU) has become an important source of economic uncertainty and research. We review the main sources and measures of TPU. We then provide a conceptual framework for modeling TPU and methods of estimating and quantifying its effects. We analyze its role in trade agreements and discuss open questions for future research. |
| JEL: | D81 F1 F13 F21 F4 |
| Date: | 2022–01 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:29672&r= |
| By: | Stefan Etgeton; Björn Fischer; Han Ye |
| Abstract: | This paper examines how households adjust their savings and consumption expenditure in response to an anticipated increase in the early retirement age (ERA). We examine the 1999 pension reform in Germany, which increased the ERA for women born after 1951 by at least three years. Using the German Income and Consumption Survey, we find a negative impact on private savings of 0.6 percentage points, which is driven by married households. We show that households consisting of highly educated women and homeowners are more likely to reduce their savings rates. Furthermore, we find that the treated households increase their leisure spending while maintaining an unchanged level of disposable income. Our findings suggest that the treated households absorb the pension wealth shock without increasing their savings. |
| Keywords: | Pension Reform; Early Retirement Age; Savings; Pension Wealth; Consumption Expenditur |
| JEL: | D14 J14 J26 |
| Date: | 2021–01 |
| URL: | http://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2021_255v1&r= |
| By: | Efraim Benmelech; Michal Zator |
| Abstract: | Automation technologies, and robots in particular, are thought to be massively displacing workers and transforming the future of work. We study firm investment in automation using cross-country data on robotization as well as administrative data from Germany with information on firm-level automation decisions. Our findings suggest that the impact of robots on firms has been limited. First, investment in robots is small and highly concentrated in a few industries, accounting for less than 0.30% of aggregate expenditures on equipment. Second, recent increases in robotization do not resemble the explosive growth observed for IT technologies in the past, and are driven mostly by catching-up of developing countries. Third, robot adoption by firms endogenously responds to labor scarcity, alleviating potential displacement of existing workers. Fourth, firms that invest in robots increase employment, while total employment effect in exposed industries and regions is negative, but modest in magnitude. We contrast robots with other digital technologies that are more widespread. Their importance in firms’ investment is significantly higher, and their link with labor markets, while sharing some similarities with robots, appears markedly different. |
| JEL: | E22 E24 E25 G31 J23 J24 J3 |
| Date: | 2022–01 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:29676&r= |
| By: | Adrien Barton (IRIT-MELODI - MEthodes et ingénierie des Langues, des Ontologies et du DIscours - IRIT - Institut de recherche en informatique de Toulouse - UT1 - Université Toulouse 1 Capitole - Université Fédérale Toulouse Midi-Pyrénées - UT2J - Université Toulouse - Jean Jaurès - UT3 - Université Toulouse III - Paul Sabatier - Université Fédérale Toulouse Midi-Pyrénées - CNRS - Centre National de la Recherche Scientifique - Toulouse INP - Institut National Polytechnique (Toulouse) - Université Fédérale Toulouse Midi-Pyrénées, CNRS - Centre National de la Recherche Scientifique, UdeS - Université de Sherbrooke) |
| Abstract: | Introduced by Cass Sunstein and Richard Thaler, nudges have become an important tool in public policy, in particular for health-related interventions. This paper provides foundations to represent nudges in OBO Foundry ontologies. It defines a nudge as a function of an environment (or part thereof) that is designed to influence behavior, in order to contribute to the influencee's welfare or the society's welfare, and that is easily resistible. Nudges are distinguished from nudge-setting processes and nudge-activation processes. |
| Keywords: | Nudge,Disposition,Function,Intention,Behavior,OBO Foundry |
| Date: | 2021–09–15 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-03512325&r= |
| By: | Jonathan Eaton; Samuel S. Kortum; Francis Kramarz |
| Abstract: | Customs data reveal heterogeneity and granularity of relationships among buyers and sellers. A key insight is how more exports to a destination break down into more firms selling there and more buyers per exporter. We develop a quantitative general equilibrium model of firm-to-firm matching that builds on this insight to separate the roles of iceberg costs and matching frictions in gravity. In the cross section, we find matching frictions as important as iceberg costs in impeding trade, and more sensitive to distance. Because domestic and imported intermediates compete directly with labor in performing production tasks, our model also fits the heterogeneity of labor shares across French producers. Applying the framework to the 2004 expansion of the European Union, reduced iceberg costs and reduced matching frictions contributed equally to the increase in French exports to the new members. While workers benefitted overall, those competing most directly with imports gained less, even losing in some countries entering the EU. |
| JEL: | F12 F14 F16 |
| Date: | 2022–01 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:29685&r= |
| By: | Yann Bramoullé (AMSE - Aix-Marseille Sciences Economiques - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique); Rachel Kranton (Duke University [Durham]) |
| Abstract: | What patterns of economic relations arise when people are altruistic rather than strategically self-interested? This paper introduces an altruism network into a simple model of choice among partners for economic activity. With concave utility, agents effectively become inequality averse towards friends and family. Rich agents preferentially choose to work with poor friends despite productivity losses. Hence, network inequality-the divergence in incomes within sets of friends and family-is key to how altruism shapes economic relations and output. Skill homophily also plays a role; preferential contracts and productivity losses decline when rich agents have poor friends with requisite skills. |
| Date: | 2022–02–09 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:halshs-03558286&r= |
| By: | Yeva Nersisyan; L. Randall Wray |
| Abstract: | A recent article in the New York Times asks whether Modern Money Theory (MMT) can declare victory after its policies were (supposedly) implemented during the response to the COVID-19 pandemic. The article suggests yes, but for the high inflation it sparked. In the view of Yeva Nersisyan and Senior Scholar L. Randall Wray, the federal government's response largely validated MMT's claims regarding public debt and deficits and questions of sovereign government solvency--it did not, however, represent MMT policy. |
| Date: | 2022–02 |
| URL: | http://d.repec.org/n?u=RePEc:lev:levyop:op_69&r= |
| By: | Willem THORBECKE |
| Abstract: | This paper examines the stock market exposures of sectors in France, Germany, Japan, and South Korea. If a firm in one country competes with firms in another country, an appreciation of its currency relative to its competitors' currency should lower its profitability and its stock price. If a firm cooperates with firms in another country by purchasing imported intermediates from them, an appreciation of its currency relative to its comrades' currency should increase its ability to purchase inputs and raise its profitability and stock price. The results indicate that 60 percent of the sectors examined in France and Germany and 27 percent of the sectors examined in Korea benefit when their currency appreciates against the Japanese yen and that virtually no sectors are harmed by yen depreciations. This implies that Japanese firms play a vital role as suppliers of intermediate goods to firms in France, Germany, and Korea. By contrast, the results point to substantial competition between European and Korean firms. |
| Date: | 2021–12 |
| URL: | http://d.repec.org/n?u=RePEc:eti:dpaper:21098&r= |
| By: | Bäck, Asta (VTT); Hajikhani, Arash (VTT); Jäger, Angela (Fraunhofer Institute for Systems and Innovation Research ISI); Schubert, Torben (CIRCLE, Lund University); Suominen, Arho (VTT) |
| Abstract: | AI-related technologies have become ubiquitous in many business contexts. However, to date empirical accounts of the productivity effects of AI-adoption by firms are scarce. Using Finnish data on job advertisements between 2013 and 2019, we identify job advertisements referring to AI-related skills. Matching this data to productivity data from ORBIS, we estimate the productivity effects of AI related activities in our sample. Our results indicate that AI-adoption increases productivity, with three important qualifications. Firstly, effects are only observable for large firms with more than 499 employees. Secondly, there is evidence that early adopters did not experience productivity increases. This may be interpreted as technological immaturity.Thirdly, we find evidence of delays of least three years between the adoption of AI and ensuing productivity effects (investment delay effect). We argue that our findings on the technological immaturity and the investment delay effect may help explain the so-called AI-related return of the Solow-paradox: I.e. that AI is everywhere except in the productivity statistics. |
| Keywords: | Recruiting personnel; AI related jobs; Artificial Intelligence; Job Market; Text Mining; Firm performance; Productivity |
| JEL: | D22 D24 O31 O32 |
| Date: | 2022–02–15 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:lucirc:2022_001&r= |
| By: | Lionel Fontagné; Nadia Rocha; Michele Ruta; Gianluca Santoni |
| Abstract: | This paper explores the economic impacts of preferential trade agreements, conditional on their level of ambition. We cluster 278 agreements, encompassing 910 provisions over 18 policy areas and estimate the trade elasticity for the different clusters. We then use these elasticities in a series of general equilibrium counterfactual situations for endowment economies, revealing that deepening existing agreements (the intensive margin of regional integration) could boost world trade by 5 percent and world GDP by 1 percent. The expected gains from deepening agreements within or across regions vary depending on the initial depth of agreements and the size of regional markets. |
| Keywords: | Preferential Trade Agreements, Deep Integration, Structural Gravity |
| JEL: | F14 F15 |
| Date: | 2022 |
| URL: | http://d.repec.org/n?u=RePEc:bfr:banfra:866&r= |
| By: | PINSHI, Christian P. |
| Abstract: | This article provides an overview of inflation-forecast targeting (IFT) to build credibility and maintain stability. We show how inflation-forecast targeting is a transparent approach and an ideal strategy for monetary policy. In addition, public understanding would be essential to foster confidence and ensure the effectiveness of monetary policy. To this end, adequate management of expectations and transparent communication are important. |
| Keywords: | Inflation-Forecast Targeting, Expectations, Communication, Monetary policy |
| JEL: | E47 E52 E58 |
| Date: | 2022–01 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:111709&r= |
| By: | Viral V. Acharya; Raghuram Rajan |
| Abstract: | Central bank balance sheet expansion is financed by commercial banks. It involves not just a substitution of liquid central bank reserves for other assets held by commercial banks, but also a counterpart alteration in commercial bank liabilities, such as in short-term deposits issued to finance reserves and in off-balance-sheet encumbrances pledged against reserves, which are also claims on liquidity. In ordinary times, when these claims are not called on, central bank balance sheet expansion will typically enhance the net availability of liquidity to the system. However, in times of stress when these offsetting claims on liquidity are exercised, the demand for liquidity can be significantly more. Furthermore, liquid commercial banks, desiring to maintain unimpeachable balance sheets, may provide only limited re-intermediation of liquidity and contribute significantly to liquidity shortages. Commercial banks do not fully internalize prospective stress ex ante or take sufficient steps to avoid it. Consequently, central bank balance sheet expansion need not eliminate episodes of stress; it may even exacerbate them. This may also attenuate any positive effects of central bank balance sheet expansion on economic activity. |
| JEL: | E0 G0 |
| Date: | 2022–01 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:29680&r= |
| By: | Allen Head; Timothy Kam; Sam Ng; Isaac Pan |
| Abstract: | Using micro-level data for the U.S., we provide new evidence - at national and state levels - of a positive (negative) relationship between the standard deviation (coefficient of variation) and the average in bank lending-rate markups. In a quantitative theory consistent with these empirical observations, banks’ lending market power is determined in equilibrium and is a novel channel of monetary policy. At low inflation, banks tend to extract higher markups from existing loan customers rather than competing for additional loans. As a result, banking activity need not be welfare-improving if inflation is sufficiently low. This result speaks to concerns regarding market power in the banking sectors of low-inflation countries. Normatively, under a given inflation target, welfare gains arise if a central bank can use additional liquidity-provision (or tax-and-transfer) instruments to offset banks’ market-power incentives. |
| Keywords: | Banking and Credit, Markups Dispersion, Market Power, Stabilization Policy, Liquidity |
| JEL: | E41 E44 E51 E63 G21 |
| Date: | 2022–02 |
| URL: | http://d.repec.org/n?u=RePEc:een:camaaa:2022-16&r= |
| By: | Niklas Engbom; Christian Moser; Jan Sauermann |
| Abstract: | We study the nature of firm pay dynamics. To this end, we propose a statistical model that extends the seminal framework by Abowd, Kramarz and Margolis (1999) to allow for idiosyncratically time-varying firm pay policies. We estimate the model using linked employer-employee data for Sweden from 1985 to 2016. By drawing on detailed firm financials data, we show that firms that become more productive and accumulate capital raise pay, whereas firms lower pay as they add workers. A secular increase in firm-year pay dispersion in Sweden since 1985 is accounted for by greater persistence of firm pay among incumbent firms as well as greater dispersion in firm pay among entrant firms, as opposed to more volatile firm pay. |
| JEL: | D22 D31 E24 J31 M13 |
| Date: | 2022–01 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:29697&r= |
| By: | Parker, Gail Denise; Costa, King (Global Centre for Academic Research) |
| Abstract: | Since the advent of South Africa’s democracy, there have been many pressing questions; one of which has been: ‘to what extent has the newly found political and civil freedoms, which is guaranteed for all South Africans, translated into an a more economically-viable life?’ This research investigated whether local economic development (LED) interventions necessarily improve the livelihoods of poor communities. The methods used were hinged upon the interpretivist paradigm, using literature as a basis of enquiry. Furthermore, semi-structured interviews with target groups (eg. project beneficiaries, government officials, municipal manager, town mayor, etc) were conducted, followed by focus group-style interviews with key stakeholders. The study found that sound economic development vision may thrive if linked to the following: clear policy guidance, institutional capacity building, intersectoral collaboration, political will and real empowerment. |
| Date: | 2021–11–03 |
| URL: | http://d.repec.org/n?u=RePEc:osf:africa:q5wx4&r= |
| By: | Simon Cornée; Anastasia Cozarenco; Ariane Szafarz |
| Abstract: | Social banks have emerged as a new group of banks that call themselves as “alternative”, “ethical”, “sustainable”, and “value-based”. Their small market share increases at a rapid pace and is still expected to grow in the future. Social banks are institutions with both (at least some) activities of financial intermediation and one or several non-financial missions, typically based on environmental and social values. By unpacking the observable, real-life differences between social banks and conventional banks, this chapter paves the way to theorizing the multidimensional characteristics of social banks within the global banking industry. Business models, governance issues, lending technologies; and social outcomes appear to be key aspects to understand how innovative, value-based, social banks work and how they might one day substantively affect mainstream banking business. |
| Keywords: | Social Banks; Ethical Banks; Social Mission; Financial Cooperatives; Microcredit |
| JEL: | G21 B55 H23 G32 G28 H81 |
| Date: | 2022–02–22 |
| URL: | http://d.repec.org/n?u=RePEc:sol:wpaper:2013/340134&r= |
| By: | Stefania De Mitri (Bank of Italy); Antonio De Socio (Bank of Italy); Valentina Nigro (Bank of Italy); Sabrina Pastorelli (Bank of Italy) |
| Abstract: | The COVID-19 pandemic has led to an abrupt disruption of economic activity. A wide range of support measures have been introduced to help firms, including public loan guarantees to ease access to credit and debt moratoria to relieve their liquidity needs. This study explores the main features of the firms that had access to these initiatives in the year starting in March 2020. The liquidity crisis has prompted many companies to apply for both, especially in the sectors hit hardest by the pandemic (trade, accommodation and food services). Medium-sized and mid-cap companies, for which access to public guarantees has been extended, have resorted to guaranteed loans extensively. Access to state-backed loans has been wider for financially solid companies; recourse to moratoria has been higher for financially vulnerable firms. Overall, government measures have supported credit during the pandemic; only for large businesses, financing has increased also for those not resorting to guarantees. This evidence suggests that without the support measures, credit restrictions would have been severe also for larger companies. |
| Keywords: | COVID-19 pandemic, support measures, indebtedness, riskiness |
| JEL: | G32 H81 |
| Date: | 2021–12 |
| URL: | http://d.repec.org/n?u=RePEc:bdi:opques:qef_665_21&r= |
| By: | Atiti, Faith; Kimani, Stephanie; Agung, Raphael |
| Abstract: | This paper examines how macroeconomic shocks affect credit risk in the Kenyan banking sector. Using an autoregressive distributed lag (ARDL) model within a time-series framework, we establish the existence of both a short-run and long-run nexus between macroeconomic variables and bank-credit risk. We establish a negative relationship between credit risk and GDP growth although not significant. We also find that the relationship between bank profitability and asset quality is negative in the short-run but positive in the long-run. The paper also documents a positive short-run relation between asset quality and private sector credit growth, which turns negative in the longrun. Furthermore, the bank asset quality-capital nexus is positive in the short-run but turns negative in the long-run. The concave relationship suggest that NPLs will rise with increases in capital to a certain threshold (moral hazard effect), after which more capital build ups decrease NPLs (disciplinary or regulatory effect). Finally, the speed of adjustment coefficient is negative and statistically significant. A shock in any period is self-correcting at a rate of 24.96%, implying that the long-run market equilibrium is restored within a period of four quarters. |
| Date: | 2022 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:kbawps:58&r= |
| By: | Spiritus, Kevin (Erasmus University Rotterdam); Lehmann, Etienne (CRED, Université Panthéon Assas Paris 2); Renes, Sander (Erasmus University Rotterdam); Zoutman, Floris T. (Norwegian School of Economics) |
| Abstract: | We analyze the optimal nonlinear income tax schedule when taxpayers earn multiple incomes and differ along many unobserved dimensions. We derive the necessary conditions for the government’s optimum using both a tax perturbation and a mechanism design approach, and show that both methods produce the same results. Our main contribution is to propose a numerical method to find the optimal tax schedule. Applied to the optimal taxation of couples, we find that optimal isotax curves are very close to linear and parallel. The slope of isotax curves is strongly affected by the relative tax-elasticity of male and female income. We make several additional contributions, including a test for Pareto efficiency and a condition on primitives that ensures the government’s necessary conditions are sufficient and the solution to the problem is unique. |
| Keywords: | nonlinear optimal taxation, multidimensional screening, household income taxation |
| JEL: | H21 H23 H24 D82 |
| Date: | 2022–01 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp15036&r= |
| By: | Emanuela Ciapanna (Bank of Italy); Sara Formai (Bank of Italy); Andrea Linarello (Bank of Italy); Gabriele Rovigatti (Bank of Italy) |
| Abstract: | In this paper, we provide an assessment of the evolution of markups in Italy in the last twenty years. To this aim, we resort to both macro and micro data and estimation techniques, namely reduced forms accounting measures (price-cost margins) and production function model-based indicators. When using aggregate data, we adopt a comparative approach and analyse markup dynamics in the four main euro area countries, whereas the micro-level analysis is focused on Italy. According to our findings i) markups have shown flat/slightly decreasing dynamics in the last decades in the major EU countries, settling on average in level at 1.1; ii) aggregate dynamics hide substantial across sector and firms heterogeneity in markups patterns; iii) the micro-level analysis for Italy indicates the within-firms component as the most relevant in explaining markups behavior; iv) no top firms-driven dynamics emerge; v) our evidence conflicts with the results obtained in De Loecker and Eeckhout (2018) because the latter suffers of two main sources of bias: a strong sample selection, and the assumption of a common technology parameter across countries. Finally, we propose an encompassing measure of market power, summarizing the several indices investigated in a principal component framework. This synthetic indicator describes the markups evolution for the Italian economy and we confirm its effectiveness based on a set of validation variables. |
| Keywords: | Markups, competition measures, Euro Area, micro-macro data |
| JEL: | D2 D4 E2 L1 O3 |
| Date: | 2022–02 |
| URL: | http://d.repec.org/n?u=RePEc:bdi:opques:qef_672_22&r= |
| By: | Ms. Dora Benedek; Juan Carlos Benitez; Charles Vellutini |
| Abstract: | Personal Income Tax (PIT) is one of the key sources of revenues in Advanced Economies (AEs) but plays a much more limited role in Low-Income Developing Countries (LIDCs) and Emerging Market Economies (EMEs), both in terms of revenue and redistributive impact. Notwithstanding, this paper shows that LIDCs and EMEs increased their PIT-to-GDP revenue by 110 and 48 percent, respectively, during the 1990-2019 period, a marked improvement in the PIT revenue performance. We find that this rise was driven primarily by economic developments and to a lesser extent by changes in the design of PIT systems. We also find that LIDCs that improved their tax-to-GDP ratios relied on a broader set of tax instruments and not exclusively on the PIT, suggesting that a successful revenue mobilization strategy of developing countries requires a comprehensive approach covering a wider range of taxes. Finally, using a newly assembled dataset of PIT characteristics of 157 countries over the 2006-2018 period, we estimate a novel redistribution index of the PIT in LIDCs. We show that the contribution of the PIT to inequality reductions has been significant. |
| Keywords: | Personal income tax, progressivity, redistribution, low-income countries, emerging market economies |
| Date: | 2022–01–28 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:2022/020&r= |
| By: | Zhiguo He; Bibo Liu; Feifei Zhu |
| Abstract: | This paper studies the connection between share pledging and entrepreneurial activities in China, challenging the common wisdom that share pledging funds circle back to the listed firms. Share pledging funds are at the discretion of the shareholders who pledge their publicly traded shares, and survey evidence shows that a majority of the largest shareholders (67.3%) used pledging funds outside the listed firms. By linking firm registration data with share pledging data, we show a positive relation between shareholders’ pledging transactions and entrepreneurial activities. Utilizing the launch of the exchange market in 2013 as a quasi-natural experiment that favors share pledging by natural person shareholders against that by legal entity shareholders, our difference-in-differences (DiD) analysis shows natural person shareholders increased their entrepreneurial activities significantly in response to the policy shock, relative to legal entity shareholders. In addition to various robustness checks, we also show that shareholders with better access to share pledging invest more heavily in industries with above-median growth potential. |
| JEL: | G15 G23 O16 O53 |
| Date: | 2022–02 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:29731&r= |
| By: | Jellason, Nugun P.; Robinson, Elizabeth J. Z.; Ogbaga, Chukwuma C. |
| Abstract: | A fourth agricultural revolution, termed agriculture 4.0, is gradually gaining ground around the globe. It encompasses the application of smart technologies such as artificial intelligence, biotechnology, the internet of things (IoT), big data, and robotics to improve agriculture and the sustainability of food production. To date, narratives around agriculture 4.0 associated technologies have generally focused on their application in the context of higher-income countries (HICs). In contrast, in this perspective, we critically assess the place of sub-Saharan Africa (SSA) in this new technology trajectory, a region that has received less attention with respect to the application of such technologies. We examine the continent’s readiness based on a number of dimensions such as scale, finance, technology leapfrogging, institutions and governance, education and skills. We critically reviewed the challenges, opportunities, and prospects of adopting agriculture 4.0 technologies in SSA, particularly with regards to how smallholder farmers in the region can be involved through a robust strategy. We find that whilst potential exist for agriculture 4.0 adoption in SSA, there are gaps in knowledge, skills, finance, and infrastructure to ensure successful adoption. |
| Keywords: | agriculture 4.0; internet of things (IoT); precision agriculture; robotics; smallholders; sub-Saharan Africa (SSA); APC funding |
| JEL: | R14 J01 |
| Date: | 2021–06–21 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:113550&r= |
| By: | Rau-Bredow, Hans |
| Abstract: | This paper gives a short recapitulation of the constraints for forward and futures prices under the condition that no risk-free profits can be achieved through arbitrage activities. |
| Keywords: | Contango, Backwardation, No-Arbitrage, Forwards and Futures |
| JEL: | G13 |
| Date: | 2022–01 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:111688&r= |
| By: | Alexandru Minea (CERDI - Centre d'Études et de Recherches sur le Développement International - CNRS - Centre National de la Recherche Scientifique - UCA - Université Clermont Auvergne); Camelia Turcu |
| Abstract: | This symposium is a selection of four policy-relevant research papers presented at the 2019 GEBA-GDR Money, Banking and Finance Thematic Conference organized by the Faculty of Economics and Business Administration (FEAA) at the University "Alexandru Ioan Cuza" of Iasi (Romania) and supported by the INFER (International Network For Economic Research). Motivated by two observations, namely that Fiscal policy was (and still is) the main tool for stabilization following the 2008-2009 financial crisis and that compared with other economic and monetary unions, including the United States or the two African Economic and Monetary Unions, the European Union is a particular area, the special issue is dedicated to the analysis of fiscal policies in post-communist Central and Eastern European countries. |
| Abstract: | Ce symposium est une sélection de quatre articles de recherche présentés à la conférence thématique GEBA-GDR Monnaie-Banque-Finance 2019 organisée par la Faculté d'économie et d'administration des affaires (FEAA) de l'Université "Alexandru Ioan Cuza" de Iasi (Roumanie) et soutenue par l'INFER (Réseau International Pour la Recherche Economique). Le numéro spécial est dédié à l'analyse des politiques budgétaires dans les pays post-communistes d'Europe Centrale et de l'Est pour deux raisons. Tout d'abord, parce'que la politique budgétaire a été (et est toujours) le principal outil de stabilisation après la crise financière de 2008-2009 ; et, aussi, car, par rapport aux autres unions économiques et monétaires, l'Union européenne est un espace économique particulier. |
| Keywords: | Pays communistes,Europe centrale et de l'est,Politique budgétaire |
| Date: | 2021–06 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-03509545&r= |
| By: | Peter Lone; Kumar Nagarajan; Trish Supples; Paul Wong |
| Abstract: | Although distributed ledgers frequently are viewed as a revolutionary technology that could transform many markets, the technology has not yet received wide-scale business adoption. This may be due in part to a lack of use cases for which the decentralized and distributed features of distributed ledger technology (DLT) are optimal. But payment directories (known in certain markets as registries), which facilitate the lookup of payments-related information, may be a use case that has specific challenges that take better advantage of these features than other use cases explored by businesses to date. Directories that support routing of information to support payments like aliases for peer-to-peer payments and business-to-business e-invoices may benefit from the use of DLT. DLT allows market participants to maintain and to protect localized information without the competitive, operational, and technical challenges of a centralized database. |
| Date: | 2022–02–03 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedgfn:2022-02-03-3&r= |
| By: | Gary B. Gorton; Chase P. Ross; Sharon Y. Ross |
| Abstract: | It is difficult for private agents to produce money that circulates at par with no questions asked. We study two cases of privately-produced money: pre-Civil War U.S. private banknotes and modern stablecoins. Private monies are introduced when there are no better alternatives, but they initially carry an inconvenience yield. Over time, these monies may become more money-like, but they do not always achieve a positive convenience yield. Technology advances and reputation formation pushed private banknotes toward a positive convenience yield. We show that the same forces are at work for stablecoins. |
| JEL: | E02 E4 E41 E42 E51 G1 G21 |
| Date: | 2022–01 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:29710&r= |
| By: | Muriithi, David |
| Abstract: | This study investigates the nexus between market structures on the banks' pricing behaviour in Kenya using the panel VAR model for 2003 - 2018 period. Bank-level annual data sourced from audited financial statements and macroeconomic data sourced from Central Bank of Kenya were used. Estimation results reveal that the market concentration measures all positively shock net interest margin. Further, the Impulse Response Function results indicate the positive shock of the Lerner index is short-lived, but the HerfindahlHirschman Index shock is long-lived. The concentration of the top five banks shock was found to be negative at first but immediately reversed, taking a sharp continual rise for the rest of the period. Therefore, policies on enhancing banking industry competitiveness would be appropriate in promoting market - based - pricing in the industry. |
| Keywords: | Behaviour,Pricing,Market Structure,Kenya |
| JEL: | D43 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:kbawps:52&r= |
| By: | Broadberry, Stephen; Gardner, Leigh |
| Abstract: | Sub-Saharan Africa (SSA) has been absent from recent debates about comparative long-run growth owing to the lack of data on aggregate economic performance before 1950. This paper provides estimates of GDP per capita on an annual basis for eight Anglophone African economies for the period since 1885, raising new questions about previous characterizations of the region's economic performance. The new data show that many of these economies had levels of per capita income which were above subsistence by the early twentieth century, on a par with the largest economies in Asia until the 1980s. However, overall improvements in GDP per capita were limited by episodes of negative growth or “shrinking”, the scale and scope of which can be measured through annual data. |
| Keywords: | Africa; economic growth; GDP per capita; shrinking |
| JEL: | E01 N37 O10 |
| Date: | 2022–01–01 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:113568&r= |
| By: | Marco Cozzi (Department of Economics, University of Victoria) |
| Abstract: | This paper quantifies the welfare effects of counterfactual public debt policies using an endogenous growth model with incomplete markets. The economy features public debt, Schumpeterian growth, infinitely-lived agents, uninsurable income risk, and discount factor heterogeneity. Two versions of the model are specified, one allowing for households to hold equity in the group of innovating firms. The model is calibrated to the U.S. economy to match the degree of wealth inequality, the share of R&D expenditure in GDP, the firms exit rate, the average growth rate, and other standard long-run targets. When comparing balanced growth paths, I find large long-run welfare gains in equilibria characterized by governments accumulating public wealth. In some parameterizations, the equilibrium response of the growth rate is modest. However, welfare effects decompositions show that the growth component is still an important determinant of the welfare gains in the equilibria characterized by public wealth. The version of the model without equity is easier to solve computationally, allowing to consider transitional dynamics. Taking into account the dynamic adjustment to the new long-run equilibrium shows that the transitional welfare costs are not large enough to change the sign of the welfare effects stemming from a change in public debt. I find that eliminating public debt would lead to a 1.7 increase in welfare, while moving to a debt/GDP ratio of 100% would entail a welfare loss of 0.8% |
| Keywords: | Public debt, Heterogeneous Agents, Incomplete Markets, Endogenous Growth, Welfare |
| Date: | 2022–02–15 |
| URL: | http://d.repec.org/n?u=RePEc:vic:vicddp:2006&r= |
| By: | Diamond, Rebecca (Stanford U); Moretti, Enrico (U of California, Berkeley) |
| Abstract: | Income differences across US cities are well documented, but little is known about the level of standard of living in each city—defined as the amount of market-based consumption that residents are able to afford. In this paper we provide estimates of the standard of living by commuting zone for households in a given income or education group, and we study how they relate to local cost of living. Using a novel dataset, we observe debit and credit card transactions, check and ACH payments, and cash withdrawals of 5% of US households in 2014 and use it to measure mean consumption expenditures by commuting zone and income group. To measure local prices, we build income-specific consumer price indices by commuting zone. We uncover vast geographical differences in material standard of living for a given income level. Low-income residents in the most affordable commuting zone enjoy a level of consumption that is 74% higher than that of low-income residents in the most expensive commuting zone. We then endogenize income and estimate the standard of living that low-skill and high-skill households can expect in each US commuting zone, accounting for geographical variation in both costs of living and expected income. We find that for college graduates, there is essentially no relationship between consumption and cost of living, suggesting that college graduates living in cities with high costs of living—including the most expensive coastal cities—enjoy a standard of living on average similar to college graduates with the same observable characteristics living in cities with low cost of living—including the least expensive Rust Belt cities. By contrast, we find a significant negative relationship between consumption and cost of living for high school graduates and high school drop-outs, indicating that expensive cities offer a lower standard of living than more affordable cities. The differences are quantitatively large: High school drop-outs moving from the most to the least affordable commuting zone would experience a 26.9% decline in consumption. |
| Date: | 2021–12 |
| URL: | http://d.repec.org/n?u=RePEc:ecl:stabus:3997&r= |
| By: | Michael Sockin (University of Texas, Austin); Wei Xiong (Princeton University) |
| Abstract: | This paper develops a model to examine decentralization of online platforms through tokenization as an innovation to resolve the conflict between platforms and users. By delegating control to a collection of preprogrammed smart contracts, tokenization creates commitment devices that prevent a platform from abusing its users. This commitment comes at the cost of not having an owner with an equity stake who, in conventional platforms, would subsidize user participation to maximize the platform’s network effect. This trade-off makes utility tokens a more appealing funding scheme than equity for platforms with weak fundamentals. Our analysis further highlights that token prices are determined by the marginal user’s convenience yield, in contrast to equity, whose payoff is determined by the average user. |
| Keywords: | Cryptocurrencies |
| JEL: | G19 |
| Date: | 2021–01 |
| URL: | http://d.repec.org/n?u=RePEc:pri:econom:2021-67&r= |
| By: | Scott Fulford (Consumer Financial Protection Bureau); Scott Schuh (West Virginia University) |
| Abstract: | Credit bureau data show remarkably stable consumer utilization of unsecured debt over the business cycle, life cycle, and individually quarter-to-quarter, despite massive variation in available credit. To explain these new findings, we propose a life-cycle consumption model with heterogeneous preferences, endogenous payment choice, and the option to revolve debt for consumption smoothing. Using diary data to identify payment use, the estimated model matches consumption and credit use at every frequency and suggests that around half the population has an endogenously high marginal propensity to consume. The results suggest understanding credit availability and heterogeneous use may lead to richer counter-cyclical policies. |
| Keywords: | Credit cards, life cycle, consumption, saving, precaution, buffer-stock, payments |
| JEL: | D14 D15 E21 E27 |
| Date: | 2020–12–20 |
| URL: | http://d.repec.org/n?u=RePEc:wvu:wpaper:19-07&r= |
| By: | Anthony Roberts; Roy Kwon |
| Abstract: | Prior country case studies show substantial wage premiums in the financial sector contributes to growth of top incomes and wage inequality in a select group of advanced economies. However, while comparative studies show financialization exerts heterogenous effects on wage inequality across advanced economies, it is unclear whether the magnitude and location of financial wage premium in the distribution of income varies across advanced economies. We address this gap in the empirical literature by examining the financial wage premium across the labor income distributions of 13 advanced economies since the 1980s using harmonized labor force data from multiple waves of the Luxembourg Income Study. Consistent with prior studies, we find the financial wage premium is concentrated at the upper end of the income distribution in most advanced economies, but the magnitude of the premium substantially varies across these economies. We account for this variation by showing the market structure of financial systems exacerbates the financial wage premium at the upper end of the distribution. Overall, this study shows the financial wage premium is an important distributional mechanism for understanding the growth of top incomes and wage inequality in advanced economies and the marketization of financial activity amplifies the wage dynamics of financialization. |
| Date: | 2021–12 |
| URL: | http://d.repec.org/n?u=RePEc:lis:liswps:822&r= |
| By: | Goodwin, Geoff |
| Abstract: | This article stems from a constructive dialogue that Richard Sandbrook and I started after the publication of my earlier paper on the double movement in Development and Change (Goodwin, 2018). I am grateful to Richard for graciously engaging with my work and to the editors of the journal for inviting me to write this response. Thanks also to the editorial board, Michele Cangiani and Jeremy Rayner for their extremely helpful comments on an earlier draft of this article. Lastly, I would like to thank the brilliant development studies students I have worked with at the University of Oxford and London School of Economics for helping me develop the ideas I present in this article. I remain fully responsible for all errors and omissions. |
| JEL: | J1 |
| Date: | 2022–02–08 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:113686&r= |
| By: | Dejian Tian |
| Abstract: | A pricing principle is proposed for non-attainable $q$-exponential bounded contingent claims in an incomplete Brownian motion market setting. This pricing functional is compatible with prices for attainable claims, and it is defined by the solution of a specific quadratic backward stochastic differential equation (BSDE). Except translation invariance, the pricing principle processes lots of elegant properties, such as monotonicity, time consistency, concavity etc. Tsallis relative entropy theory is found to be closely related to this pricing criterion. The buyer evaluates the contingent claim under the ``distorted Radon-Nikodym derivative'' and adjustment by Tsallis relative entropy over a family of equivalent martingale measures. The asymptotic behavior of the pricing principle for risk aversion coefficient is also investigated. The pricing functional is proved between minimal martingale measure pricing and conditional certainty equivalence of $q$-exponential utility. |
| Date: | 2022–01 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2201.05316&r= |
| By: | Timothy Kam; Junsang Lee |
| Abstract: | We study competitive search in goods markets in a heterogeneous-agent monetary model. The model accounts for three stylized facts connecting inflation to consumption inequality, to price dispersion, and to the speed of monetary payments. With competitive search, individuals’ endogenous probabilities on trading events give rise to a trading-opportunity (extensive-margin) force that works in opposite direction to well-known redistributive (intensive-margin) effect of inflation. This implies a new trade-off in response to long run inflation targets. Welfare falls but liquid-wealth inequality falls and then rises with inflation as an extensive margin of trade dominates the redistributive intensive margin, when inflation is sufficiently high. |
| Keywords: | Competitive Search, Inflation, Policy Trade-offs, Redistribution, Computational Geometry |
| JEL: | E0 E4 E5 E6 C6 |
| Date: | 2022–02 |
| URL: | http://d.repec.org/n?u=RePEc:een:camaaa:2022-20&r= |
| By: | Choe, Chung (Konkuk University); Jungy, SeEun (Inha University); Oaxaca, Ronald L. (University of Arizona) |
| Abstract: | Laboratory experiments involving a real effort task are conducted to examine the importance of gender differences in competition aversion for generating gender wage gaps. Cross-subject design treatment and control experiments suggest that gender differences in risk aversion play no significant role in competitive (tournament) vs. piece-rate job choices and consequent gender wage gaps. Subjects in the treatment experiments are sorted into relatively more and relatively less risk averse groupings. Relatively less risk averse subjects are assigned to a risky job track involving a known constant probability of unemployment in each period. The gender wage gap contribution of gender differences in competition aversion compared with the contribution of gender differences in performance is especially large for relatively less risk averse subjects. |
| Keywords: | gender wage gaps, wage decompositions, competition preferences, risk aversion, lab experiments |
| JEL: | J16 J31 C91 D91 |
| Date: | 2022–01 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp15048&r= |
| By: | Strebulaev, Ilya A. (Stanford U); Wang, Amanda (Stanford U) |
| Abstract: | This paper studies corporate venture capital (CVC) units of large US corporations to learn how they make decisions across several areas: internal organization of CVC units, relationships with par- ent companies, CVC unit objectives, investment process and approval, deal structure, relationship with portfolio companies, compensation, and composition of CVC teams. The study is conducted by interviewing senior team members of seventy-four CVC units, representing 78% of the active CVC units of companies in the S&P 500 index. CVC units are organized in significantly more diverse ways than institutional VC firms. Unlike institutional VC firms, most CVC units do not manage committed venture funds, but instead invest from the balance sheets of their parent compa- nies. Investment committees, in which parent company executives play a pivotal role in approving individual decisions, are common. Many corporate venture capitalists (CVCs) believe executives at their parent companies do not understand the norms of the venture space. The demographic composition of senior team members at CVC units is very different than that of their counterparts at institutional VC firms. The results raise a number of issues about the economic role of CVC units in corporate innovation. |
| Date: | 2021–11 |
| URL: | http://d.repec.org/n?u=RePEc:ecl:stabus:4008&r= |
| By: | Jean-Joseph Minviel (UMRH - Unité Mixte de Recherche sur les Herbivores - UMR 1213 - VAS - VetAgro Sup - Institut national d'enseignement supérieur et de recherche en alimentation, santé animale, sciences agronomiques et de l'environnement - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement); Marc Benoit (UMRH - Unité Mixte de Recherche sur les Herbivores - UMR 1213 - VAS - VetAgro Sup - Institut national d'enseignement supérieur et de recherche en alimentation, santé animale, sciences agronomiques et de l'environnement - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement) |
| Abstract: | Abstract Farm diversification is mainly driven by risk mitigation effects and economic gains related to complementarities between production activities. By combining these two aspects, we investigate diversification economies in a sample of French mixed sheep farming systems and rank these systems using stochastic dominance criteria. Partially diversified systems (Sheep-Grass, Sheep-Crop, Sheep-Landless) and fully diversified systems (Sheep-Grass-Crop-Landless) were evaluated. We find a high degree of diversification diseconomies in the sheep farming systems considered. The results also indicate that the fully diversified system is driven by its risk-reducing effects (including downside risk exposure) and that Sheep-Crop is the dominant system in terms of risk-adjusted returns. |
| Keywords: | downside risk exposure,economic resilience,economies of diversification,Massif Central,mixed sheep farms,SERF analysis,stochastic dominance |
| Date: | 2022–01–10 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-03522983&r= |
| By: | G. Cubadda; S. Grassi; B. Guardabascio |
| Abstract: | Many economic variables feature changes in their conditional mean and volatility, and Time Varying Vector Autoregressive Models are often used to handle such complexity in the data. Unfortunately, when the number of series grows, they present increasing estimation and interpretation problems. This paper tries to address this issue proposing a new Multivariate Autoregressive Index model that features time varying means and volatility. Technically, we develop a new estimation methodology that mix switching algorithms with the forgetting factors strategy of Koop and Korobilis (2012). This substantially reduces the computational burden and allows to select or weight, in real time, the number of common components and other features of the data using Dynamic Model Selection or Dynamic Model Averaging without further computational cost. Using USA macroeconomic data, we provide a structural analysis and a forecasting exercise that demonstrates the feasibility and usefulness of this new model. Keywords: Large datasets, Multivariate Autoregressive Index models, Stochastic volatility, Bayesian VARs. |
| Date: | 2022–01 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2201.07069&r= |
| By: | Isaiah Andrews; Drew Fudenberg; Annie Liang; Chaofeng Wu |
| Abstract: | Whether a model's performance on a given domain can be extrapolated to other settings depends on whether it has learned generalizable structure. We formulate this as the problem of theory transfer, and provide a tractable way to measure a theory's transferability. We derive confidence intervals for transferability that ensure coverage in finite samples, and apply our approach to evaluate the transferability of predictions of certainty equivalents across different subject pools. We find that models motivated by economic theory perform more reliably than black-box machine learning methods at this transfer prediction task. |
| Date: | 2022–02 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2202.04796&r= |
| By: | Langella, Monica; Manning, Alan |
| Abstract: | The UK has suffered from persistent spatial differences in unemployment rates for many decades. A low responsiveness of internal migration to unemployment is often argued to be an important cause of this problem. This paper uses UK census data to investigate how unemployment affects residential mobility using small areas as potential destinations and origins and four decades of data. It finds that both in- and out-migration are affected by local unemployment - but also that there is a very high ‘cost of distance’, so most moves are very local. We complement the study with individual longitudinal data to analyse individual heterogeneities in mobility. We show that elasticities to local unemployment are different across people with different characteristics. For instance, people who are better educated are more sensitive, the same applies to homeowners. Ethnic minorities are on average less sensitive to local unemployment rates and tend to end up in higher unemployment areas when moving. |
| Keywords: | residential mobility; regional inequality; unemployment; ES/N012259/1 |
| JEL: | J60 R23 Z10 |
| Date: | 2022–04–01 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:113323&r= |
| By: | Daniel Levy (Bar-Ilan University); Tamir Mayer; Alon Raviv |
| Keywords: | Financial crisis, Economic Crisis, Great recession, NBER working papers, LDA textual analysis, Topic modeling, Dynamic Topic Modeling, Machine learning |
| JEL: | E32 E44 E50 F30 G01 G20 |
| Date: | 2022–02 |
| URL: | http://d.repec.org/n?u=RePEc:biu:wpaper:2022-01&r= |
| By: | Krummel, Daniel; Siegfried, Patrick; Michel, Alex |
| Abstract: | Since tangible assets of companies are becoming increasingly insignificant, emphasis should rather be placed on human capital as an essential source of competitive edge. This paper, accordingly, pursues the purpose to shed light on the major demands that the Millenials place on their prospective employers. In consequence, the work aims to identify attractiveness factors that German retailers should particularly promote in order to succeed in the war for talents and attract the most promising candidates among the German GenY. This work is based on a mixed-methods approach. First, interviews with German retail experts as well as generational keynote speakers were conducted in order to obtain a deep understanding and assessment of the German retail landscape from a professional perspective. The insights gained were subsequently used to design a questionnaire, which distribution led to a final sample of 216 useable responses by Millenials. Furthermore, the data obtained by interviewing experts and the survey was subsequently compared in order to evaluate to what extent the expectations of the Millenials correspond to the experts’ assessment. This study reveals Millenials to be driven by the need for growth, such as wide offers of development opportunities or scope for decision when choosing an employer. Among the relatedness needs, a harmonious working environment is particularly important, whereas a weekend off ranks first among the existential needs. Moreover, male Millenials consider Media Markt is the most popular employer in the German retail sector, while dm is preferred from a female perspective. Overall, employers of the German retail sector provide the majority of factors required by the Millenials, yet are only considered the 4th most popular industry behind the automotive, IT, art and entertainment industries. Our findings provide valuable practical implications as the research results might serve companies to build up a target group-specific employer brand. Marketing strategies can be aligned with the identified attractiveness factors to efficiently and cost-effectively attract and bind Millenials to the company. Customized recruiting campaigns enhance the appeal as well as the attractiveness of an employer driving the likelihood of obtaining the strived status: Employer of Choice. To the best of the author’s knowledge, no study has yet dealt specifically with the attractiveness factors demanded by the Millenials in the context of the German re- tail sector as well as their most aspired employers in this industry. Furthermore, the attractiveness factors identified in the literature were embedded in Aldefer’s ERG theory. This work also offers a bilateral perspective through the widely conducted survey carried out among Millenials, which was additionally expanded through the lens of experts. |
| Keywords: | Employer Branding, Generation Y, Millenials, Employer Attractiveness Factors, Retailing |
| JEL: | L81 M5 |
| Date: | 2020–12–22 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:111580&r= |
| By: | Thomas Hasenzagl; Filippo Pellegrino; Lucrezia Reichlin; Giovanni Ricco |
| Abstract: | A mixed-frequency semi-structural model is used for estimating unobservable quantities such as the output gap, the Phillips curve and the NAIRU in real time. We consider two specifications: in one the output gap is observed as the official CBO measure, in the other is unobserved and derived via minimal theory-based restrictions. We find that the CBO model implies a smoother trend output but the second model better captures the business cycle dynamics of nominal and real variables. The methodology offers both a framework for evaluating official estimates of unobserved quantities of economic interest and for tracking them in real time. |
| Date: | 2022–01 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2201.05556&r= |
| By: | James G. MacKinnon (Queen's University) |
| Abstract: | As I document using evidence from a journal data repository that I manage, the datasets used in empirical work are getting larger. When we use very large datasets, it can be dangerous to rely on standard methods for statistical inference. In addition, we need to worry about computational issues. We must be careful in our choice of statistical methods and the algorithms used to implement them. |
| Keywords: | datasets, clustered data, statistical computation, statistical inference, bootstrap |
| JEL: | C10 C12 C13 C55 |
| Date: | 2022–02 |
| URL: | http://d.repec.org/n?u=RePEc:qed:wpaper:1482&r= |
| By: | Argenton, Cedric (Tilburg University, Center For Economic Research); Ivanova-Stenzel, Radosveta; Müller, Wieland (Tilburg University, Center For Economic Research) |
| Keywords: | cournot; Bayesian game; Bayes-Nash equilibrium; repeated games; collusion; cooperation; experimental economics |
| Date: | 2022 |
| URL: | http://d.repec.org/n?u=RePEc:tiu:tiucen:bec182fc-5222-4ec2-9632-3369a281269f&r= |
| By: | Achdou, Yves; Han, Jiequn; Lasry, Jean Michel; Lions, Pierre Louis; Moll, Ben |
| Abstract: | We recast the Aiyagari–Bewley–Huggett model of income and wealth distribution in continuous time. This workhorse model—as well as heterogeneous agent models more generally—then boils down to a system of partial differential equations, a fact we take advantage of to make two types of contributions. First, a number of new theoretical results: (1) an analytic characterization of the consumption and saving behaviour of the poor, particularly their marginal propensities to consume; (2) a closed-form solution for the wealth distribution in a special case with two income types; (3) a proof that there is a unique stationary equilibrium if the intertemporal elasticity of substitution is weakly greater than one. Second, we develop a simple, efficient and portable algorithm for numerically solving for equilibria in a wide class of heterogeneous agent models, including—but not limited to—the Aiyagari–Bewley–Huggett model. |
| Keywords: | wealth distribution; heterogeneous a; consumption; inequality; continuous time; OUP deal |
| JEL: | D14 D31 E21 C61 C63 |
| Date: | 2022–01–10 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:107422&r= |
| By: | Fernandes, Daniel |
| Abstract: | We apply the Business Cycle Accounting framework to the COVID-19 recession in the Euro Area and the United States. We conclude that the efficiency wedge had the most important role in the Euro Area, followed by the labor and investment wedges. In the United States, the labor wedge was most crucial, with the investment wedge taking a second place. We present hypotheses, supported by our theoretical framework, for the dichotomy of the role of the efficiency wedge between the studied regions. |
| Keywords: | Economics COVID-19 Business Cycle Accounting Macroeconomics Financial Crises Financial Frictions Wedges |
| JEL: | E3 E32 F4 F44 |
| Date: | 2022–01–17 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:111577&r= |
| By: | Allen, David; Mizuno, Hiro |
| Abstract: | This paper explores the influence of monetary policies, US influences, and other factors affecting stock prices in Japan from the beginning of the 1980s. The data set consists of monthly time series, largely taken from the Federal Bank of St. Louis (FRED) database in the USA. A variety of modelling and statistical techniques are applied which include regression analysis (OLS), cointegration and VECM analysis, plus the application of ARDL analysis and simulations. The results suggest that the adoption of QQE policy by the Japanese monetary authorities led to an upswing in Japanese share prices in the post-GFC period, whereas no such effect was apparent in the pre-GFC period |
| Keywords: | QQE, Japanese Share Prices,, Cointegration, VECM, ARDL, Simulations. |
| JEL: | E52 G1 G12 |
| Date: | 2021–12–24 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:111734&r= |
| By: | Lassance, Nathan (Université catholique de Louvain, LIDAM/LFIN, Belgium); Vrins, Frédéric (Université catholique de Louvain, LIDAM/CORE, Belgium) |
| Abstract: | We introduce a general framework to the portfolio-selection problem in which investors aim at targeting a distribution of returns, which can accommodate a wide range of preferences. The resulting optimal portfolio has a return density that is as close as possible to the target-return density. We study the theoretical properties of this approach for two classes of target distribution that allow for different first four moments. Three results that stand out are, first, that the fit to higher moments is controlled by the entropy of standardized portfolio returns when targeting a Gaussian distribution. Second, when targeting a specific Dirac-delta distribution, no norm-constrained portfolio can stochastically dominate the proposed optimal portfolio. Third, if the target-return mean and variance are located on or above the efficient frontier, the optimal portfolio is mean-variance efficient when asset returns are Gaussian. For non-Gaussian returns, the optimal portfolio may move away from the frontier to better fit the higher moments of the target distribution. The empirical analysis illustrates that the proposed framework helps the investor obtain portfolio returns in line with her preferences. |
| Keywords: | portfolio selection, higher moments, tail risk, Kullback-Leibler divergence |
| JEL: | G11 G12 |
| Date: | 2021–07–26 |
| URL: | http://d.repec.org/n?u=RePEc:ajf:louvlf:2021005&r= |
| By: | Yen Thuan Trinh; Bernard Hanzon |
| Abstract: | The binomial tree method and the Monte Carlo (MC) method are popular methods for solving option pricing problems. However in both methods there is a trade-off between accuracy and speed of computation, both of which are important in applications. We introduce a new method, the MC-Tree method, that combines the MC method with the binomial tree method. It employs a mixing distribution on the tree parameters, which are restricted to give prescribed mean and variance. For the family of mixing densities proposed here, the corresponding compound densities of the tree outcomes at final time are obtained. Ideally the compound density would be (after a logarithmic transformation of the asset prices) Gaussian. Using the fact that in general, when mean and variance are prescribed, the maximum entropy distribution is Gaussian, we look for mixing densities for which the corresponding compound density has high entropy level. The compound densities that we obtain are not exactly Gaussian, but have entropy values close to the maximum possible Gaussian entropy. Furthermore we introduce techniques to correct for the deviation from the ideal Gaussian pricing measure. One of these (distribution correction technique) ensures that expectations calculated with the method are taken with respect to the desired Gaussian measure. The other one (bias-correction technique) ensures that the probability distributions used are risk-neutral in each of the trees. Apart from option pricing, we apply our techniques to develop an algorithm for calculation of the Credit Valuation Adjustment (CVA) to the price of an American option. Numerical examples of the workings of the MC-Tree approach are provided, which show good performance in terms of accuracy and computational speed. |
| Date: | 2022–02 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2202.00785&r= |
| By: | Décamps, Jean-Paul; Villeneuve, Stéphane |
| Abstract: | We study a dynamic model of a rm whose shareholders learn about its profitability, face costs of external nancing and costs of holding cash. The shareholders' problem involves a notoriously challenging singular stochastic control problem with a two-dimensional degenerate diffusion process. We solve it by means of an explicit construction of its value function, and derive a corporate life-cycle with two stages: a "probation stage" where it is never optimal for the firm to issue new shares, and a "mature stage" where the firm resorts to the market whenever needed. The cash target level is non-monotonic in the belief about the profitability and reaches its highest value on the edge between the two stages. It follows new insights on the firm's volatility and its payout ratio which depend on the firm's stage in its life cycle. |
| Keywords: | Corporate cash management; Corporate life cycle; Learning; Singular control |
| JEL: | C02 C11 C61 G32 G33 G35 |
| Date: | 2022–02 |
| URL: | http://d.repec.org/n?u=RePEc:tse:wpaper:126577&r= |
| By: | Scott R. Baker; Steven J. Davis; Jeffrey A. Levy |
| Abstract: | We quantify and study state-level economic policy uncertainty. Tapping digital archives for nearly 3,500 local newspapers, we construct three monthly indexes for each state: one that captures state and local sources of policy uncertainty (EPU-S), one that captures national and international sources (EPU-N), and a composite index that captures both. EPU-S rises around gubernatorial elections and own-state episodes like the California electricity crisis of 2000-01 and the Kansas tax experiment of 2012. EPU-N rises around presidential elections and in response to 9-11, Gulf Wars I and II, the 2011 debt-ceiling crisis, the 2012 fiscal cliff episode, and federal government shutdowns. Close elections elevate policy uncertainty much more than the average election. The COVID-19 pandemic drove huge increases in policy uncertainty and unemployment, more so in states with stricter government-mandated lockdowns. VAR models fit to pre-COVID data imply that upward shocks to own-state EPU foreshadow weaker economic activity in the state. |
| JEL: | D80 E32 E66 G18 H70 R50 |
| Date: | 2022–02 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:29714&r= |
| By: | Mark Setterfield; Robert A Blecker |
| Abstract: | This paper provides an institutional-analytical account of changes in the structure of the US Phillips curve (PC) during the post-war period. It does so by restoring conflict and power to the forefront of macro theory and, in particular, the wage- and price-setting behaviour of workers and firms. The resulting account is consistent with the main stylized facts that characterize the evolution of the US PC since 1948: the disappearance and subsequent reappearance of a ‘standard’ PC (relating the level of the inflation rate, not the change in this rate, to the rate of unemployment); and the flattening of the PC since the 1990s. |
| Keywords: | Phillips Curve, inflation, unemployment, natural rate hypothesis, bargaining power, institutions |
| JEL: | E12 E24 E25 E31 N12 |
| Date: | 2022–02 |
| URL: | http://d.repec.org/n?u=RePEc:pke:wpaper:pkwp2208&r= |
| By: | Joel Dyer; Patrick Cannon; J. Doyne Farmer; Sebastian Schmon |
| Abstract: | Simulation models, in particular agent-based models, are gaining popularity in economics. The considerable flexibility they offer, as well as their capacity to reproduce a variety of empirically observed behaviours of complex systems, give them broad appeal, and the increasing availability of cheap computing power has made their use feasible. Yet a widespread adoption in real-world modelling and decision-making scenarios has been hindered by the difficulty of performing parameter estimation for such models. In general, simulation models lack a tractable likelihood function, which precludes a straightforward application of standard statistical inference techniques. Several recent works have sought to address this problem through the application of likelihood-free inference techniques, in which parameter estimates are determined by performing some form of comparison between the observed data and simulation output. However, these approaches are (a) founded on restrictive assumptions, and/or (b) typically require many hundreds of thousands of simulations. These qualities make them unsuitable for large-scale simulations in economics and can cast doubt on the validity of these inference methods in such scenarios. In this paper, we investigate the efficacy of two classes of black-box approximate Bayesian inference methods that have recently drawn significant attention within the probabilistic machine learning community: neural posterior estimation and neural density ratio estimation. We present benchmarking experiments in which we demonstrate that neural network based black-box methods provide state of the art parameter inference for economic simulation models, and crucially are compatible with generic multivariate time-series data. In addition, we suggest appropriate assessment criteria for future benchmarking of approximate Bayesian inference procedures for economic simulation models. |
| Date: | 2022–02 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2202.00625&r= |
| By: | Riccardo Poli (Bank of Italy); Marco Taboga (Bank of Italy) |
| Abstract: | We propose a methodology to build and validate a composite indicator of the market liquidity of euro-area sovereign bonds. The indicator aggregates several metrics from different trading venues, with the aim of providing a comprehensive measurement of prevailing bond-market liquidity conditions in the four largest euro-area economies (Germany, France, Italy and Spain). The composite indicator, which starts in 2010, allows us to put into historical context the sharp liquidity deterioration experienced at the height of the COVID-19 crisis. The deterioration was comparable to, although slightly less severe than, that experienced during the European sovereign debt crisis. However, while at the time the impairment in liquidity conditions had lasted for more than two years, this time it was quickly re-absorbed. We provide some evidence that the promptness and boldness of the ECB’s interventions in 2020 could help to explain this difference: according to our indicator, the announcements of the Pandemic Emergency Purchase Programme and other policy measures having an explicit market stabilization function were immediately followed by significant improvements in the liquidity of sovereign bonds. |
| Keywords: | market liquidity, sovereign bonds, market microstructure, Covid-19 |
| JEL: | G12 |
| Date: | 2021–12 |
| URL: | http://d.repec.org/n?u=RePEc:bdi:opques:qef_663_21&r= |