|
on Central and Western Asia |
| By: | Toshiko Matsui; Ali Al-Ali; William J. Knottenbelt |
| Abstract: | This paper examines the determinants of the volatility of futures prices and basis for three commodities: gold, oil and bitcoin -- often dubbed solid, liquid and digital gold -- by using contract-by-contract analysis which has been previously applied to crude oil futures volatility investigations. By extracting the spot and futures daily prices as well as the maturity, trading volume and open interest data for the three assets from 18th December 2017 to 30th November 2021, we find a positive and significant role for trading volume and a possible negative influence of open interest, when significant, in shaping the volatility in all three assets, supporting earlier findings in the context of oil futures. Additionally, we find maturity has a relatively positive significance for bitcoin and oil futures price volatility. Furthermore, our analysis demonstrates that maturity affects the basis of bitcoin and gold positively -- confirming the general theory that the basis converges to zero as maturity nears for bitcoin and gold -- while oil is affected in both directions. |
| Date: | 2022–02 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2202.09845&r= |
| By: | Simon Cornée (Univ Rennes, CNRS, CREM - UMR 6211, F-35000 Rennes, France ; Center for European Research in Microfinance (CERMi), France); Anastasia Cozarenco (Montpellier Business School and CERMi, France); Ariane Szafarz (Université Libre de Bruxelles (ULB), SBS-EM, CEBRIG and CERMi, Belgium) |
| 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 |
| URL: | http://d.repec.org/n?u=RePEc:tut:cremwp:2022-02&r= |
| By: | Christophe Muller (Aix-Marseille Univ, CNRS, AMSE, Marseille, France.) |
| Abstract: | This chapter discusses facts, methods and empirical results that pertain to poverty measurement under income and price dispersions. The correlation of prices and living standards is examined, and its origins are considered, in terms of whether such origins are related to consumer preferences, economic interactions and market imperfections. Then, the relationship of price dispersion and aggregate social indicators - including poverty measures - is analysed by combining stochastic hypotheses about prices and incomes with normative properties of social and poverty indicators. Finally, empirical results about how dispersed heterogeneous price indices affect poverty measurement, anti-poverty targeting and poverty-alleviation price reforms are reviewed. |
| Keywords: | poverty, prices, living standards, price dispersion, poverty alleviation, price indices |
| JEL: | C83 D43 E31 I32 |
| Date: | 2022–03 |
| URL: | http://d.repec.org/n?u=RePEc:aim:wpaimx:2204&r= |
| By: | Thanasis Stengos (Department of Economics and Finance, University of Guelph, Guelph ON Canada); Theodore Panagiotidis (University of Macedonia); Georgios Papapanagiotou (University of Macedonia) |
| Abstract: | We perform a large-scale analysis to evaluate the performance of traditional and Markov-switching GARCH models for the volatility of 292 cryptocurrencies. For each cryptocurrency, we estimate a total of 27 alternative GARCH specifications. We consider models that allow up to three different regimes. First, the models are compared in terms of goodness-of-fit using the Deviance Information Criterion and the Bayesian Predictive Information Criterion. Next, we evaluate the ability of the models in forecasting one-day ahead conditional volatility and Value-at-Risk. The results indicate that for a wide range of cryptocurrencies, time-varying models outperform traditional ones. |
| Keywords: | Bitcoin, Cryptocurrency, Volatility, GARCH, Markov-switching, Information criteria |
| JEL: | C12 C13 C15 C22 |
| Date: | 2022 |
| URL: | http://d.repec.org/n?u=RePEc:gue:guelph:2022-02&r= |
| By: | Joel Bowman |
| Abstract: | This paper assesses the consequences of zombie businesses in Australia between 2001/02 to 2018/19. Zombie businesses are broadly defined as businesses whose ability to meet interest expenses from current profits is less compared with other firms operating within the same industry. This work finds that an increasing share of labour sunk into zombie businesses is correlated with weaker activity for viable businesses operating within the same industry. However, it does not find that zombie firms adversely affect the allocative efficiency of labour and capital and does not reduce the responsiveness of business exits to productivity. Further, the spillover effect of zombie firms does not appear to be propagated by the crowding out of financing or the imposition of additional entry barriers for firms operating within the same industry. Overall, the stable share of labour allocated to zombie firms at an aggregate level since 2007 suggests that it is unlikely that the adverse effects of zombie firms explain the slowdown in Australia’s economic activity since the mid 2000s. |
| Keywords: | Zombie Firms, Labour Productivity, Firm Dynamics, Resource Allocation |
| JEL: | D24 E22 G33 J24 L25 |
| Date: | 2022–03 |
| URL: | http://d.repec.org/n?u=RePEc:een:camaaa:2022-23&r= |
| By: | Victor Olkhov |
| Abstract: | This paper considers direct dependence of the market price autocorrelation on statistical moments of the market trades as a must necessary requirement. We regard market time-series of the trade value and volume as origin of price time-series. That determines dependence of the market-based averaging of price on averaging of the trade value and volume time-series. We introduce the market-based price statistical moments as functions of the statistical moments of trade value and volume. Moving average helps define the market-based price statistical moments with time-lag and introduce the price time autocorrelation as function of time-lag statistical moments of the trade value and volume. Statistical moments of the market trade value and volume are determined by conventional frequency-based probability measures. However, the price statistical moments and the price autocorrelation in particular are determined by the market-based probability measure that differs from the conventional frequency-based price probability. That distinction leads to different treatments of the price autocorrelation via market-based and frequency-based approach. To assess market dependence of price statistical moments and price autocorrelation one should revise results founded on frequency-based approach. |
| Date: | 2022–02 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2202.09323&r= |
| By: | Ajay Chhibber (George Washington University) |
| Abstract: | India has a long and a somewhat checkered history of planning - with some success but also many failures. Despite India's federal structure India's approach to planning has been top-down with the union government controlling many levers - financial and otherwise to determine the direction of the economy and social programs. India has tried 3 different types of planning - "directed planning", "indicative planning" and now just a "strategy but no planning". India needed to replace the Planning Commission but not give up on planning altogether. Just as the rest of the world was going back to a "new planning" surge to handle climate change and the desire to meet the SDG's India abolished planning altogether. The successor to the planning commission - the Niti Aayog needs to get back to "new planning", that is now being adopted by many countries with stronger leadership, a legitimized authorizing environment and effective use to plan for helping India achieve the SDGs by 2030 and become a prosperous country by 2047. |
| Keywords: | Economic Planning; Niti Aayog; Planning Commission; SDG's |
| JEL: | O1 O2 |
| Date: | 2022–03 |
| URL: | http://d.repec.org/n?u=RePEc:gwi:wpaper:2022-03&r= |
| By: | Sulka, Tomasz |
| Abstract: | Planning for retirement and subsequent execution of the plan are difficult, but essential for financial security in old age. To formally analyse the interplay between planning and self-control, I introduce cognitive costs of formulating a plan into the dual-self model of impulse control. The resulting model can generate rational inaction in pension choices, with the agent's self-control and level of income playing a role of inputs into the decision whether or not to undertake costly planning. Furthermore, when they do plan, agents characterised by poor self-control save over shorter horizons and accumulate lower pension wealth. The possibility of rational inaction can explain other robustly observed behaviours, such as disproportionately low savings of individuals on low incomes and non-fungibility between public and private pension wealth. The model is applied to study welfare and savings implications of automatic enrolment into private pensions. The default option effect on plan participation arises due to the fact that counterfactual non-savers have the lowest threshold for accepting the default scheme. Nevertheless, the impact of automatic enrolment on total savings is ambiguous in general, because in addition to the counterfactual non-savers, the default may anchor contributions of a counterfactual active saver to a low default contribution rate. Consequently, although raising the default contribution rate itself has an ambiguous impact on aggregate savings, it always reduces the dispersion in pension wealth accumulation. |
| Keywords: | Planning,Self-Control,Cognitive Costs,Pensions,Automatic Enrolment |
| JEL: | D14 D15 D91 E21 E71 H55 J32 |
| Date: | 2022 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:dicedp:384&r= |
| By: | Takushi Kurozumi (Bank of Japan); Ryohei Oishi (Bank of Japan) |
| Abstract: | We compare Japanese and US inflation dynamics during the post-Global Financial Crisis period by utilizing Bayesian VAR-GMM to estimate several specifications of the New Keynesian Phillips curve. With the estimation method, we derive expectations in the Phillips curve from a VAR and analyze the formation of inflation expectations explicitly. We select the specification with variable elasticity of demand for Japan and that with sticky information for the US, using quasi-marginal likelihood. The selected specifications show that the persistence of inflation expectations formation is higher and trend inflation is lower in Japan than in the US. These findings account for persistently weak inflation developments in Japan: in the presence of firms' cautious price-setting behavior that reflects the purchasing attitude of consumers who are sensitive to price increases, inflation remains low and induces, through the highly persistent formation of inflation expectations, low expected future inflation and hence low trend inflation, which in turn put downward pressure on present inflation through the Phillips curve. |
| Keywords: | New Keynesian Phillips curve; Inflation expectations formation; Variable elasticity of demand; VAR-GMM; Bayesian method |
| JEL: | E31 C11 C26 C52 |
| Date: | 2022–03–22 |
| URL: | http://d.repec.org/n?u=RePEc:boj:bojwps:wp22e03&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: | 2022–03 |
| URL: | http://d.repec.org/n?u=RePEc:acb:cbeeco:2022-685&r= |
| By: | Albuquerque, Bruno (International Monetary Fund); Varadi, Alexandra (Bank of England) |
| Abstract: | We use UK transaction-level data during the Covid-19 pandemic to study whether mortgage payment holidays (PH) can act as a mechanism for smoothing household consumption following negative aggregate shocks. Our results suggest that mortgage PH were accessed by both households with pre-existing financial vulnerabilities and by those with stronger balance sheets, including buy-to-let investors. We also find that the temporary liquidity relief provided by PH allowed liquidity-constrained households to maintain higher annual consumption growth compared to those non-eligible for the policy. Finally, we find that mortgage PH led to higher saving rates for more financially-stable households. |
| Keywords: | Mortgage payment holidays; household behaviour; consumption; high-frequency data; difference-in-differences; panel data |
| JEL: | D14 E21 G51 |
| Date: | 2022–02–25 |
| URL: | http://d.repec.org/n?u=RePEc:boe:boeewp:0963&r= |
| By: | Draca, Mirko (Department of Economics, University of Warwick); Garred, Jason (Department of Economics, University of Ottawa); Stickland, Leanne (Deloitte UK); Warrinnier, Nele (School of Economics and Finance, Queen Mary University of London & LICOS Centre for Institutions and Economic Performance, KU Leuven) |
| Abstract: | How successful are sanctions at targeting the economic interests of political elites in a ected countries? We study the case of Iran, using information on the stock exchangelisted assets of two speci c political entities with signi cant in uence over the direction of Iran's nuclear program. Our identi cation strategy focuses on the process of negotiations for sanctions removal, examining which interests bene t most from news about diplomatic progress. The results indicate the `bluntness' of sanctions on Iran, but also provide evidence of their e ectiveness in generating substantial economic incentives for elite policymakers to negotiate a deal for sanctions relief. JEL Classification: D74 ; H56 ; F51 |
| Keywords: | National Security ; Sanctions ; Iran |
| Date: | 2022 |
| URL: | http://d.repec.org/n?u=RePEc:wrk:warwec:1400&r= |
| By: | George-Marian Aevoae (Alexandru Ioan Cuza University - Faculty of Economics and Business Administration); Alin Marius Andries (Alexandru Ioan Cuza University of Iasi; Romanian Academy - Institute for Economic Forecasting); Steven Ongena (University of Zurich - Department of Banking and Finance; Swiss Finance Institute; KU Leuven; NTNU Business School; Centre for Economic Policy Research (CEPR)); Nicu Sprincean (Alexandru Ioan Cuza University of Iasi) |
| Abstract: | How do changes in Environmental, Social and Governance (ESG) scores influence banks’ systemic risk contribution? We document a beneficial impact of the ESG Combined Score and Governance pillar on banks’ contribution to system-wide distress analysing a panel of 367 publicly listed banks from 47 countries over the period 2007-2020. Stakeholder theory and theory relating social performance to expected returns in which enhanced investments in corporate social responsibility mitigate bank specific risks explain our findings. However, only better corporate governance represents a tool in reducing bank interconnectedness and maintaining financial stability. A similar relationship for banks’ exposure to systemic risk is also found. Our findings stress the importance of integrating banks’ ESG disclosure into regulatory authorities’ supervisory mechanisms as qualitative information. |
| Keywords: | Systemic Risk; Financial Stability, Corporate Social Responsibility (CSR), Environmental, Social and Governance (ESG) Scores |
| JEL: | G01 G21 M14 |
| Date: | 2022–03 |
| URL: | http://d.repec.org/n?u=RePEc:chf:rpseri:rp2225&r= |
| By: | German Rodikov; Nino Antulov-Fantulin |
| Abstract: | Volatility prediction for financial assets is one of the essential questions for understanding financial risks and quadratic price variation. However, although many novel deep learning models were recently proposed, they still have a "hard time" surpassing strong econometric volatility models. Why is this the case? The volatility prediction task is of non-trivial complexity due to noise, market microstructure, heteroscedasticity, exogenous and asymmetric effect of news, and the presence of different time scales, among others. In this paper, we analyze the class of long short-term memory (LSTM) recurrent neural networks for the task of volatility prediction and compare it with strong volatility-econometric models. |
| Date: | 2022–02 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2202.11581&r= |
| By: | Adam Kucera (Czech National Bank, Czech Republic); Evzen Kocenda (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Czech Republic & Institute of Information Theory and Automation, Prague, Czech Republic); Ales Marsal (Slovak National Bank, Slovak Republic & Mendel University in Brno) |
| Abstract: | We show that government spending does play a role in shaping the yield curve which has important consequences for the cost of private and government financing. We combine government spending shock identification strategies from the fiscal macro literature with recent advancements in no-arbitrage affine term structure modeling, where we account for time-varying macroeconomic trends in inflation and the equilibrium real interest rate. We stress in our empirical macro-finance framework the importance of timing in the response of yields to government spending. We find that the yield curve responds positively but mildly to a surprise in government spending shocks where the rise in risk-neutral yields is compensated by a drop in nominal term premia. The news shock in expectations about future expenditures decreases yields across all maturities. Complementarily, we also analyze the effect of fiscal policy uncertainty where higher fiscal uncertainty lowers yields. |
| Keywords: | Government Expenditures, Fiscal policy, U.S. Treasury Yield Curve, Affine Term Structure Model |
| JEL: | C38 C51 C58 E43 E47 |
| Date: | 2022–04 |
| URL: | http://d.repec.org/n?u=RePEc:fau:wpaper:wp2022_04&r= |
| By: | Thomas Hasenzagl; Filippo Pellegrino; Lucrezia Reichlin; Giovanni Ricco (OFCE - Observatoire français des conjonctures économiques (Sciences Po) - Sciences Po - Sciences Po) |
| 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 for the US: 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. |
| Keywords: | Real-time forecasting,output gap,Phillips curve,semi-structural models,Bayesian estimation |
| Date: | 2022–02–14 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:hal-03573080&r= |
| By: | Alfarano, Simone; Blanco-Arroyo, Omar |
| Abstract: | This paper studies whether the raise in concentration experienced by the Spanish banking sector has lead to the increase of bank-specific credit supply shocks contribution to aggregate credit supply. We decompose aggregate credit volatility and find that (i) the Spanish banking sector is granular, (ii) the direct effect of bank-specific shocks accounts for the overwhelming majority of the variation in aggregate volatility, contrary to the manufacturing sector, and (iii) the raise in concentration translated into an increase of bank-specific shocks contribution to aggregate volatility. |
| Keywords: | Granular Residual, Idiosyncratic Shocks, Banking Sector, Manufacturing Sec- tor, Concentration, Aggregate Fluctuations |
| JEL: | E44 G21 |
| Date: | 2022–02–12 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:111972&r= |
| By: | Florian Bourgey; Stefano De Marco; Emmanuel Gobet |
| Abstract: | We provide explicit approximation formulas for VIX futures and options in stochastic forward variance models, with particular emphasis on the family of so-called Bergomi models: the one-factor Bergomi model [Bergomi, Smile dynamics II, Risk, 2005], the rough Bergomi model [Bayer, Friz, and Gatheral, Pricing under rough volatility, Quantitative Finance, 16(6):887-904, 2016], and an enhanced version of the rough model that can generate realistic positive skew for VIX smiles - introduced simultaneously by De Marco [Bachelier World Congress, 2018] and Guyon [Bachelier World Congress, 2018] on the lines of [Bergomi, Smile dynamics III, Risk, 2008], that we refer to as "mixed rough Bergomi model". Following the methodology set up in [Gobet and Miri, Weak approximation of averaged diffusion processes. Stochastic Process. Appl., 124(1):475-504, 2014], we derive weak approximations for the law of the VIX random variable, leading to option price approximations under the form of explicit combinations of Black-Scholes prices and greeks. The new challenge we tackle is to handle the fractional integration kernel appearing in rough models and to deal with non-smooth payoffs. We stress that our approach does not rely on small-time asymptotics nor small-parameter (such as small volatility-of-volatility) asymptotics and can therefore be applied to any option maturity and a wide range of parameter configurations. Our results are illustrated by several numerical experiments and calibration tests to VIX market data. |
| Date: | 2022–02 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2202.10413&r= |
| By: | Benjamin Bruder; Nazar Kostyuchyk; Thierry Roncalli |
| Abstract: | This article develops a model that takes into account skewness risk in risk parity portfolios. In this framework, asset returns are viewed as stochastic processes with jumps or random variables generated by a Gaussian mixture distribution. This dual representation allows us to show that skewness and jump risks are equivalent. As the mixture representation is simple, we obtain analytical formulas for computing asset risk contributions of a given portfolio. Therefore, we define risk budgeting portfolios and derive existence and uniqueness conditions. We then apply our model to the equity/bond/volatility asset mix policy. When assets exhibit jump risks like the short volatility strategy, we show that skewness-based risk parity portfolios produce better allocation than volatility-based risk parity portfolios. Finally, we illustrate how this model is suitable to manage the skewness risk of long-only equity factor portfolios and to allocate between alternative risk premia. |
| Date: | 2022–02 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2202.10721&r= |
| By: | Derek Messacar |
| Abstract: | Using administrative data from Canada linked to a financial capability survey, I show that tax-deductible savings plans are often used to manipulate final balances owed to the central tax authority during tax season. This finding implies a strong avoidance motive for saving, where tax filers manipulate final balances rather than total tax liabilities, consistent with loss-aversion. The magnitude of this effect is economically significant. For example, each $100 owed increases the likelihood of contributing by about half a percentage point. There is evidence that the behavior is driven by tax filers with low financial literacy who make disproportionately large contributions in the last 60 days before the annual deadline. |
| Keywords: | Loss-aversion, tax avoidance, savings, regression kink design |
| JEL: | D14 D91 H26 H31 |
| Date: | 2022 |
| URL: | http://d.repec.org/n?u=RePEc:rsi:irersi:8&r= |
| By: | Elisa Luciano; Jean Charles Rochet |
| Abstract: | The risk appetite of insurance companies fluctuates over time in a quasi cyclical fashion. When their capitalization is high (low), companies choose portfolios with a high (small) share of risky assets. We show that this phenomenon may have the same source as the un derwriting cycle, namely recapitalization costs. We build a simple dynamic model of the insurance sector where financial frictions prevent companies from maintaining a target leverage. Portfolio decisions of insurers fluctuate with their aggregate capitalization. The model rationalizes two apparently disjoint pieces of evidence: long-standing empirical evidence on underwriting cycles and more recent evidence on the fluctuations of insurance companies’ risk appetite |
| Keywords: | endogenous risk appetite, macro finance, insurance cycles, insurance asset allocation |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:cca:wpaper:666&r= |
| By: | Xu, Yongdeng (Cardiff Business School) |
| Abstract: | This paper proposes an Exponential HEAVY (EHEAVY) model. The model specifies the dynamics of returns and realized measures of volatility in an exponential form, which guarantees the positivity of volatility without restrictions on parameters and naturally allows the asymmetric effects. It provides a more flexible modelling of the volatility than the HEAVY models. A joint quasi-maximum likelihood estimation and closed form multi-step ahead forecasting is derived. The model is applied to 31 assets extracted from the Oxford-Man Institute's realized library. The empirical results show that the dynamic of return volatility is driven by the realized measure, while the asymmetric effect is captured by the return shock (not by the realized return shock). Hence, both return and realized measure are included in the return volatility equation. Out-of-sample forecast and portfolio exercise further shows the superior forecasting performance of the EHEAVY model, in both statistical and economic sense. |
| Keywords: | HEAVY model, High-frequency data, Asymmetric effects, Realized variance, Portfolio |
| JEL: | C32 C53 G11 G17 |
| Date: | 2022–03 |
| URL: | http://d.repec.org/n?u=RePEc:cdf:wpaper:2022/5&r= |
| By: | Levy, Daniel; Mayer, Tamir; Raviv, Alon |
| Abstract: | We study the economics and finance scholars’ reaction to the 2008 financial crisis using machine learning language analyses methods of Latent Dirichlet Allocation and dynamic topic modelling algorithms, to analyze the texts of 14,270 NBER working papers covering the 1999–2016 period. We find that academic scholars as a group were insufficiently engaged in crises’ studies before 2008. As the crisis unraveled, however, they switched their focus to studying the crisis, its causes, and consequences. Thus, the scholars were “slow-to-see,” but they were “fast-to-act.” Their initial response to the ongoing Covid-19 crisis is consistent with these conclusions. |
| Keywords: | 2008 Financial Crisis; Financial Crises; Economic Crisis; Great Recession; Textual Analysis; LDA Topic Modeling; Dynamic Topic Modeling; Machine Learning; Securitization; Repo; Sudden Stop |
| JEL: | A11 C38 C55 E32 E44 E52 E58 F30 G01 G20 G21 G28 |
| Date: | 2022–02–13 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:112008&r= |
| By: | John Stachurski |
| Abstract: | Eisenberg and Noe (2001) analyze systemic risk for financial institutions linked by a network of liabilities. They show that the solution to their model is unique when the financial system is satisfies a regularity condition involving risk orbits. We show that this condition is not needed: a unique solution always exists. |
| Date: | 2022–02 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2202.11183&r= |
| By: | Giuliano Toshiro Yajima; Lorenzo Nalin |
| Abstract: | Liabilities denominated in foreign currency have established a permanent role on emerging market firms' balance sheets, which implies that changes in both global liquidity conditions and in the value of the currency may have a long-lasting effect for them. In order to consider the financial conditions that may encourage (discourage) structural change in a small, open economy, we adopt the framework put forward by the "monetary theory of distribution" (MTD). More specifically, we follow the formulation adopted by Dvoskin and Feldman (2019), whereby the financial system is intended as a basic sector that promotes innovation (Schumpeter 1911). In accordance with this, financial conditions are binding only for the innovative entrepreneurs, whose methods of production are not dominant and hence they need to borrow from banks to kickstart their production. Through this device, our model offers an explanation of the technological lock-in experienced by a small, open economy that takes international prices as given. |
| Keywords: | Foreign Exchange Policy; Currency Mismatches; Structural Change |
| JEL: | F37 F31 E7 |
| Date: | 2022–03 |
| URL: | http://d.repec.org/n?u=RePEc:lev:wrkpap:wp_1004&r= |
| By: | Foellmi, Reto; Hepenstrick, Christian; Torun, David |
| Abstract: | The so-called triangle inequality (TI) in international trade should, theoretically, hold for any three countries to avoid cross-border arbitrage. When trade costs change, re-routing opportunities – as captured by the TI – might arise because a shipment through an intermediary becomes cheaper under adjusted trade costs. We show that the widely used “exact hat algebra” approach, which does not require a calibration of trade costs, is unable to measure potential gains from re-routing. In addition, we show that standard empirical estimates of iceberg trade costs often violate the TI and are therefore inconsistent with the theory. We propose an estimation routine that respects the TI and yields estimates that are consistent with the workhorse models. This measure of trade costs allows us to compute the impact of changes in trade barriers while complying with the TI. First, we compute the welfare gains using only “direct” changes in trade costs (the standard approach). Second, we update the trade cost matrix to allow for re-routing whenever the TI is violated. We show that welfare gains are often substantially different (and usually higher) when taking the TI into account. |
| Keywords: | trade costs, re-routing, triangle inequality, welfare |
| JEL: | F10 F14 F17 |
| Date: | 2022–03 |
| URL: | http://d.repec.org/n?u=RePEc:usg:econwp:2022:01&r= |
| By: | Ralph S. J. Koijen (University of Chicago); Robert J. Richmond (New York University); Motohiro Yogo (Princeton University) |
| Abstract: | To understand why valuation ratios vary across firms and over time, a large literature in asset pricing decomposes these ratios into expected returns and expected growth rates of firm fundamentals. This literature leaves two fundamental questions unanswered: (i) what information do investors attend to in forming their demand beyond prices and (ii) how important are different investors in the price formation process? We use a demand system approach to answer both questions. We first show that a small set of characteristics explains the majority of variation in a panel of firm-level valuation ratios across countries. We then estimate an asset demand system using investor-level holdings data, allowing for flexible substitution patterns within and across countries. We use this framework to measure the relative importance of investors — differentiated by type, size, and active share — for connecting firm characteristics to prices and long-horizon expected returns. |
| Keywords: | price formation, investors |
| JEL: | G1 |
| Date: | 2020–06 |
| URL: | http://d.repec.org/n?u=RePEc:pri:econom:2020-34&r= |
| By: | Vincent Tan; Nick Firoozye; Stefan Zohren |
| Abstract: | We present a novel framework for analyzing the optimal asset and signal combination problem. We reformulate the original problem of portfolio selection from a set of correlated assets and signals into one of selecting from a set of uncorrelated trading strategies through the lens of Canonical Correlation Analysis of Hotelling (1936). The new environment of uncorrelated trading strategies offers a pragmatic simplification to the inherent complicated structure of our underlying problem that involves interactions between and within variables. We also operationalize our framework to bridge the gap between theory and practice and showcase improved risk-adjusted returns performance of our proposed optimizer over the classic mean-variance optimizer of Markowitz (1952). |
| Date: | 2022–02 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2202.10817&r= |
| By: | Victoria Dobrynskaya (National Research University Higher School of Economics); Mikhail Dubrovskiy (National Research University Higher School of Economics) |
| Abstract: | We consider a variety of cryptocurrency and equity risk factors as potential forces that drive cryptocurrency returns and carry risk premiums. In a cross-section of 2,000 biggest cryptocurrencies, only downside market risk, cryptocurrency size and policy uncertainty factors are systematically priced with significant premiums. Momentum premium has vanished in the recent years. Equity market risk, particularly equity downside market risk, appears to be more important than cryptocurrency market risk, suggesting greater linkages between cryptocurrency and equity markets than we used to think. Global and US equity factors are the most relevant for the cryptocurrency market |
| Keywords: | cryptocurrency, asset pricing; risk factors, factor models, alternative investments |
| JEL: | D14 G12 G15 |
| Date: | 2022 |
| URL: | http://d.repec.org/n?u=RePEc:hig:wpaper:86/fe/2022&r= |
| By: | Gurjeet Singh |
| Abstract: | The paper focuses on predicting the Nifty 50 Index by using 8 Supervised Machine Learning Models. The techniques used for empirical study are Adaptive Boost (AdaBoost), k-Nearest Neighbors (kNN), Linear Regression (LR), Artificial Neural Network (ANN), Random Forest (RF), Stochastic Gradient Descent (SGD), Support Vector Machine (SVM) and Decision Trees (DT). Experiments are based on historical data of Nifty 50 Index of Indian Stock Market from 22nd April, 1996 to 16th April, 2021, which is time series data of around 25 years. During the period there were 6220 trading days excluding all the non trading days. The entire trading dataset was divided into 4 subsets of different size-25% of entire data, 50% of entire data, 75% of entire data and entire data. Each subset was further divided into 2 parts-training data and testing data. After applying 3 tests- Test on Training Data, Test on Testing Data and Cross Validation Test on each subset, the prediction performance of the used models were compared and after comparison, very interesting results were found. The evaluation results indicate that Adaptive Boost, k- Nearest Neighbors, Random Forest and Decision Trees under performed with increase in the size of data set. Linear Regression and Artificial Neural Network shown almost similar prediction results among all the models but Artificial Neural Network took more time in training and validating the model. Thereafter Support Vector Machine performed better among rest of the models but with increase in the size of data set, Stochastic Gradient Descent performed better than Support Vector Machine. |
| Date: | 2022–02 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2202.09359&r= |
| By: | Ronan Le Velly (UMR Innovation - Innovation et Développement dans l'Agriculture et l'Alimentation - Cirad - Centre de Coopération Internationale en Recherche Agronomique pour le Développement - Montpellier SupAgro - Centre international d'études supérieures en sciences agronomiques - Montpellier SupAgro - Institut national d’études supérieures agronomiques de Montpellier - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement) |
| Abstract: | In this review article, the author explains that actor-network theory comprehends market innovation as a joint reconfiguration of the different socio-technical components of the market. He then distinguishes eight "framing" processes identified in the literature and thus proposes a typology of concrete practices of market innovation. Finally, he specifies the contributions and limits of this perspective and highlights its managerial implications. |
| Abstract: | Dans cet article de synthèse, l'auteur explique que l'ancrage dans la théorie de l'acteur-réseau amène à concevoir l'innovation marchande comme une reconfiguration conjointe des différentes composantes sociotechniques du marché. Il distingue ensuite huit processus de "cadrage" identifiés dans la littérature et propose ainsi une grammaire des pratiques concrètes de constitution des marchés innovants. Il précise enfin les apports et limites de cette perspective et en souligne les implications managériales. |
| Keywords: | Théorie de l'acteur-réseau,Innovation |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-03566943&r= |
| By: | Jens Klose (THM Business School Giessen); Peter Tillmann (Justus-Liebig-University Giessen) |
| Abstract: | Policymakers imposed constraints on public life in order to contain the Covid-19 pandemic. At the same time, fiscal and monetary policy implemented a large range of of expansionary measures to limit the economic consequences of the pandemic and stimulate the recovery. In this paper, we assess the response of the equity market as a high-frequency indicator of economic activity to containment and stabilization policies for 29 European economies. We construct indicators of containment and stabilization policies and estimate a range of panel VAR models. The main results are threefold: First, we find that stock markets are highly responsive to containment and stabilization policies. We show that domestic fiscal policy as well as monetary policy support the recovery as reflected in the stock market. Second, expansionary fiscal policy conducted at the European level reduces rather raises stock prices. Third, we estimate the model over subsamples and show that the counter-intuitive stock market response to EU policies is driven by the responses in medium- and high-debt countries. These countries' stock markets are also particularly susceptible to monetary policy announcements. |
| Keywords: | COVID-19, stabilization policies, lockdown-measures, panel VAR |
| JEL: | E44 E52 E62 |
| Date: | 2022 |
| URL: | http://d.repec.org/n?u=RePEc:mar:magkse:202208&r= |
| By: | Markus Brunnermeier (Princeton University); Rohit Lamba (Pennsylvania State University); Carlos Segura-Rodriguez (Banco Central de Costa Rica) |
| Abstract: | Big data, machine learning and AI inverts adverse selection problems. It allows insurers to infer statistical information and thereby reverses information advantage from the insuree to the insurer. In a setting with two-dimensional type space whose correlation can be inferred with big data we derive three results: First, a novel tradeoff between a belief gap and price discrimination emerges. The insurer tries to protect its statistical information by offering only a few screening contracts. Second, we show that forcing the insurance company to reveal its statistical information can be welfare improving. Third, we show in a setting with naive agents that do not perfectly infer statistical information from the price of offered contracts, price discrimination significantly boosts insurer’s profits. We also discuss the significance our analysis through three stylized facts: the rise of data brokers, the importance of consumer activism and regulatory forbearance, and merits of a public data repository. |
| Keywords: | Insurance, Big Data, Informed Principal, Belief Gap, Price Discrimination |
| JEL: | G22 D82 D86 C55 |
| Date: | 2020–04 |
| URL: | http://d.repec.org/n?u=RePEc:pri:econom:2020-50&r= |
| By: | Alari Paulus |
| Abstract: | The sensitivity of business fixed investment to one of its key determinants, the user cost of capital, has been little investigated with firm-level data that captures firm heterogeneity to the full extent. I study the determinants of business fixed investment in Estonia, using the universe of business statements for non-financial firms in 1994-2020 from administrative records. The results with various panel data models provide strong support for a theoretical long-term relationship between the gross investment rate, and changes in production output and the user cost of capital. I find that the capital stock is modestly responsive to changes in output and the user cost of capital, with elasticities less than 0.5 in absolute size, and that different estimation strategies yield broadly similar results. Elasticities differ by firm size, but sectoral variation is relatively limited. User cost elasticities also exhibit notable variation over time, while output elasticities are much more stable. I also find that investments in machinery and equipment are more elastic than investments in buildings and structures. |
| Keywords: | business investment, user cost of capital, corporate taxation, firm panel data |
| JEL: | D22 E22 H32 |
| Date: | 2022–03–24 |
| URL: | http://d.repec.org/n?u=RePEc:eea:boewps:wp2022-2&r= |
| By: | Guillermo Arenas Díaz (Dipartimento di Politica Economica, DISCE, Università Cattolica del Sacro Cuore); Andrés Barge-Gil (Department of Economic Analysis, Complutense University of Madrid, ICAE and GRIPICO, Madrid, Spain); Joost Heijs (Department of Applied Economics, Structure and History, Complutense University of Madrid, Madrid, Spain); Alberto Marzucchi (Gran Sasso Science Institute, Social Sciences, L'Aquila, Italia) |
| Abstract: | This paper analyses the effects of product innovations introduced by firms in upstream and downstream sectors and firms in the same sector on firm employment. To this aim, we extend the Harrison et al. (2014) model to analyse the relationship between firm innovation and employment to account for innovation in the same and related sectors. We employ panel data for the innovation activities of Spanish firms together with input–output data. The results show that product innovation by firms in the same sector harms the firm's employment, which is consistent with a business-stealing mechanism. A negative effect on employment is found for the introduction of new products in upstream sectors, which results in the reduction of labour in the focal firm. The type of labour that is displaced by innovations introduced by both same-sector and upstream firms is predominantly low-skilled. No significant effects are found for innovations introduced in downstream industries. |
| Keywords: | same sector, downstream and upstream sectors, product innovation, employment growth |
| JEL: | J23 O31 O33 L6 |
| Date: | 2022–02 |
| URL: | http://d.repec.org/n?u=RePEc:ctc:serie5:dipe0026&r= |
| By: | Céline van Essen (CPB Netherlands Bureau for Economic Policy Analysis); Arjan Lejour (CPB Netherlands Bureau for Economic Policy Analysis); Jan Möhlmann (CPB Netherlands Bureau for Economic Policy Analysis); Simon Rabaté (CPB Netherlands Bureau for Economic Policy Analysis); Arjan Bruil (CBS); Wouter Leenders (UC Berkeley) |
| Abstract: | How high is income inequality in the Netherlands? How progressive are taxes and how much income does government spending redistribute? This study presents the most exhaustive responses for the Netherlands to these questions to date. We combine detailed administrative records on the universe of the Dutch population with national accounts aggregates to provide a thorough description of income inequality before and after taxation and government spending. Overall, taxes and government spending reduce the top 10%'s income share from 31% to 26%. We decompose this difference between pre- and post- tax income and show two main results. First, the tax system is regressive due to high consumption taxes, flat social contributions and a low tax on capital income. Second, the entire reduction in inequality comes from government spending that is targeted at the bottom of the distribution. We finally provide a wide set of alternative scenarios to investigate the sensitivity of our results to different distributional assumptions. Our main conclusions are robust to this sensitivity analysis. |
| JEL: | D3 H2 H3 H5 |
| Date: | 2022–03 |
| URL: | http://d.repec.org/n?u=RePEc:cpb:discus:436&r= |
| By: | Fred Espen Benth; Nils Detering; Luca Galimberti |
| Abstract: | We propose a new methodology for pricing options on flow forwards by applying infinite-dimensional neural networks. We recast the pricing problem as an optimization problem in a Hilbert space of real-valued function on the positive real line, which is the state space for the term structure dynamics. This optimization problem is solved by facilitating a novel feedforward neural network architecture designed for approximating continuous functions on the state space. The proposed neural net is built upon the basis of the Hilbert space. We provide an extensive case study that shows excellent numerical efficiency, with superior performance over that of a classical neural net trained on sampling the term structure curves. |
| Date: | 2022–02 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2202.11606&r= |
| By: | Markus Brunnermeier (Princeton University); Sebastian Merkel (Princeton University); Yuliy Sannikov (Stanford University) |
| Abstract: | This paper incorporates a bubble term in the standard FTPL equation to explain why countries with persistently negative primary surpluses can have a positively valued currency and low inflation. It also provides an example with closed-form solutions in which idiosyncratic risk on capital returns depresses the interest rate on government bonds below the economy’s growth rate. |
| Keywords: | Fiscal policy, Monetary Economics |
| JEL: | E44 E52 E63 |
| Date: | 2020–05 |
| URL: | http://d.repec.org/n?u=RePEc:pri:econom:2020-47&r= |
| By: | Michael Irlacher |
| Abstract: | A striking pattern in transaction-level data is the concentration of international shipments in the hands of a few large firms. One common feature of dominating high-performance firms is that they produce multiple products and ship them to many destinations. Motivated by the emergence of highly detailed data at the firm-product-destination level, a series of theoretical and empirical papers studies the role of multi-product firms (MPFs) in international trade. This survey reviews the evidence on the importance of MPFs in international markets and highlights the key theoretical as well as empirical results that the literature has produced in the last decade. |
| Keywords: | Survey; Multi-product firms; International Economics; Theory; Empirics |
| JEL: | F10 F12 F14 |
| Date: | 2022–02 |
| URL: | http://d.repec.org/n?u=RePEc:jku:econwp:2022-01&r= |
| By: | Simone MORICONI (IESEG School of Management, Univ. Lille, CNRS, UMR 9221 - LEM – Lille Economie Management, F-59000 Lille, France, CESifo Munich); Tuna ABAY (European University Institute) |
| Abstract: | This paper investigates the welfare properties of an economy where firms are man- agerial, i.e., composed of two complementary units, each run by its own manager. We show that in the market equilibrium, welfare is generally lower in the case of managerial firms than in that of standard production firms due to the private costs that managers bear to coordinate their operating decisions within the firm. In this organizational set- ting, we also derive a number of interesting results regarding the welfare effects of tax- ation. We show that while a lump-sum tax is welfare-neutral, a nonlump-sum tax may have negative, positive or zero net effect on welfare, depending on market conditions, tax levels, and the structure of managerial incentives. In some cases, these welfare ef- fects are due to ‘tax-induced’ changes in the ownership structure of firms in the industry equilibrium. |
| Keywords: | : managerial firms, welfare, taxation |
| JEL: | D21 D60 H21 L23 |
| Date: | 2022–03 |
| URL: | http://d.repec.org/n?u=RePEc:ies:wpaper:e202203&r= |
| By: | Gian Italo Bischi (Department of Economics, Society & Politics, Università di Urbino Carlo Bo); Germana Giombini (Department of Economics, Society & Politics, Università di Urbino Carlo Bo); Giuseppe Travaglini (Department of Economics, Society & Politics, Università di Urbino Carlo Bo) |
| Abstract: | In this paper we study the dynamic relationship between the pub- lic debt ratio and the real interest rate. Specifically, by means of a macroeconomic model of simultaneous di erence equations - one for the debt ratio and the other for the real interest rate - we focus on the role of monetary policy, fiscal policy and risk premium in affecting the stability of the debt ratio and the existence of steady states, if any. We show that, in a dynamic framework, fiscal rules may not be enough to control the pattern of the debt ratio, and the adoption of a monetary policy, in the form of an interest rate rule, is necessary to control the pattern of the debt ratio for assuring its sustainability over time. Notably, the creation or disappearance of steady states, or periodic (stable) cycles, can generate scenarios of multistability. While we obtain clear evidence that an active monetary policy has a stabilizing effect on both the real interest rate and the debt ratio, we also find that, in some scenarios, fiscal policy is not sucient to avoid explosive patterns of the debt ratio. |
| Keywords: | Public debt; Interest rate; Instability; Chaos |
| Date: | 2022 |
| URL: | http://d.repec.org/n?u=RePEc:urb:wpaper:22_01&r= |
| By: | Paloma Péligry (CEPS - Centre d'Economie de l'ENS Paris-Saclay - Université Paris-Saclay - ENS Paris Saclay - Ecole Normale Supérieure Paris-Saclay); Xavier Ragot (ECON - Département d'économie (Sciences Po) - Sciences Po - Sciences Po - CNRS - Centre National de la Recherche Scientifique, OFCE - Observatoire français des conjonctures économiques (Sciences Po) - Sciences Po - Sciences Po, CNRS - Centre National de la Recherche Scientifique) |
| Abstract: | The purpose of this article is to analyze, more than ten years after the financial crisis of 2007, the convergence or divergence of the diversity of capitalism, focusing on the fiscal systems. Studying 29 countries, we first analyse the evolution of the taxation of households, firms, labour, consumption and capital. Then we use recent statistical method to indentify three types of fiscal systems: liberal, intermediate, and social-democratic, which can be ranked in ascending order of tax rates, confirming known typologies in the diversity of capitalism literature. The first result of this analysis is that only the tax rate on corporate profits shows signs of downward convergence over the period. The other tax rates, on labour or capital tax on households, show rather signs of divergence. Second, we show the divergence of the liberal and social-democratic group over the period. The European countries are converging towards the social-democratic model, with the exception of Great Britain, which is moving towards the liberal model over the period. Hence, the analysis shows that the divergence of fiscal systems is compatible with the convergence of certain taxes on the most mobile factors during a strong period of trade internationalization. Thus, the financial crisis does not seem to contribute to the convergence, but to the divergence of fiscal systems. |
| Keywords: | fiscal systems,globalization,capital taxation |
| Date: | 2022–02–03 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:hal-03554224&r= |
| By: | Stéphane Auray (CREST-Ensai and Université du Littoral Côte d’Opale, France); Michael B. Devereux (Vancouver School of Economics, University of British Columbia, Canada); Aurélien Eyquem (Université Lumière Lyon2, France) |
| Abstract: | Countries distort trade patterns (‘trade wars’) to gain strategic advantage relative to one another. At the same time, monetary policies are set independently and have spillover effects on partner countries (‘currency wars’). We combine these two scenarios, and show that they interact in deep and interesting ways. The stance of monetary policy has substantial effects on the equilibrium degree of protection in a Nash equilibrium of the monetary and trade policy game. Trade wars lead to higher equilibrium inflation rates. Cooperation in monetary policy leads to both higher inflation and greater degree of trade protection. By contrast, when monetary policy is constrained by pegged exchange rates or the zero lower bound on interest rates, equilibrium tariffs are lower. Finally, when one country has the dominant currency in trade, it gains a large advantage in a trade war. |
| Keywords: | Protectionism, Currency Wars, Trade Wars |
| JEL: | F30 F40 F41 |
| Date: | 2021–09–19 |
| URL: | http://d.repec.org/n?u=RePEc:crs:wpaper:2021-15&r= |
| By: | Lisa Taruttis (Chair for Management Sciences and Energy Economics, University of Duisburg-Essen) |
| Abstract: | Improving the energy efficiency of residential buildings is of paramount importance to reduce CO2 emissions and hence to achieve a climate-neutral building stock – the objective of the German government for 2045. Thereby, a focus on the existing building stock is needed, as regulations for new buildings are already quite tight in terms of energy efficiency, and a large proportion of the dwelling stock of 2045 already exists today. For the important segment of rental housing, split incentives are often invoked as an impediment for energy-related investments. Yet this implicitly takes the tenant-landlord relationship as given. On the market where prospective renters meet the dwelling offers, competitive forces and rational behavior on both sides would imply that the monthly net rent should reflect (with opposite sign) differences in expected monthly heating costs – other things being equal. We test this hypothesis by specifying a hedonic price model that reflects this gross-cost-of-renting perspective and applying it on a detailed dataset including dwelling and neighborhood characteristics. As a case study, we use data for the German state of North Rhine-Westphalia, which implies that variations in regulatory and meteorological conditions are small, while large socioeconomic differences across subregions exist (e.g., in terms of purchasing power or unemployment rates). Drawing on 844,229 observations from 2014 to 2020 on a small spatial scale, we find a premium for more efficient apartments; however, it is rather small. The expected energy cost savings exceed the premium by approximately a factor of six. Rather, we find large discounts if apartments use heating technologies that are known to be inefficient. The paper explores various explanations for these outcomes, considering both landlord and renter behavior as well as institutional settings. |
| Keywords: | Hedonic Analysis, Rental market, Housing market, Energy Efficiency, Residential Buildings |
| JEL: | C21 Q40 R21 R31 |
| Date: | 2022–02 |
| URL: | http://d.repec.org/n?u=RePEc:dui:wpaper:2202&r= |
| By: | Elisabetta Iossa (Unknown); Patrick Rey (TSE - Toulouse School of Economics - UT1 - Université Toulouse 1 Capitole - Université Fédérale Toulouse Midi-Pyrénées - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement); Michael Waterson (Unknown) |
| Abstract: | The paper studies competition for the market in a setting where incumbents (and, to a lesser extent, neighboring incumbents) benefit from a cost advantage. The paper first compares the outcome of staggered and synchronous tenders, before drawing the implications for market design. We find that the timing of tenders should depend on the likelihood of monopolization. When monopolization is expected, synchronous tendering is preferable, as it strengthens the pressure that entrants exercise on the monopolist. When instead other firms remain active, staggered tendering is preferable, as it maximizes the competitive pressure that comes from the other firms. |
| Keywords: | Dynamic procurement,incumbency advantage,local monopoly,competition,asymmetric auctions,synchronous contracts,staggered contracts |
| Date: | 2021–10–13 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-03551028&r= |
| By: | Orea, Luis; Álvarez, Inmaculada C.; Servén, Luis |
| Abstract: | In this paper, we provide an empirical assessment of the effects of infrastructure provision on structural change and aggregate productivity using industry-level data for a set of developed and developing countries over 1995-2010. A distinctive feature of our empirical strategy is that it allows the measurement of the resource reallocation directly attributable to infrastructure provision. To achieve this, we propose a two-level top-down decomposition of aggregate productivity that combines and extends several strands of the literature. In our empirical application, we find significant production losses attributable to misallocation of inputs across firms, especially among African countries. Our empirical application also shows that infrastructure provision has stimulated aggregate TFP growth through both within and between-industry productivity gains. |
| Date: | 2022 |
| URL: | http://d.repec.org/n?u=RePEc:oeg:wpaper:2022/01&r= |
| By: | Ali-Yrkkö, Jyrki; Mattila, Juri; Pajarinen, Mika; Ylhäinen, Ilkka |
| Abstract: | Abstract This study examines mergers and acquisitions and their economic impact on companies. The study examined which companies in Finland become the targets of acquisitions, how the economic activities of the target companies develop after the change of ownership and whether there is a difference between domestic and foreign acquisitions in these respects. The study was conducted using firm-level data that included nearly 2,000 acquisitions, supplemented by a qualitative review of 19 research interviews. The results of the study show that companies’ innovation activities have a positive relation to the likelihood of being acquired, especially by foreign buyers. However, foreign acquisitions did not have a significant impact on the development of the value added, productivity, profitability or employment of target companies when compared with the control group. |
| Keywords: | Mergers and acquisitions, M&A, Impact, Foreign ownership, Foreign company, Productivity |
| JEL: | D22 F23 G34 O30 |
| Date: | 2022–03–23 |
| URL: | http://d.repec.org/n?u=RePEc:rif:report:125&r= |
| By: | Vicente Esteve (Universidad de Valencia and Universidad de Alcalá, Spain); María A. Prats (Universidad de Murcia, Spain) |
| Abstract: | We address the issue of the sustainability Spain's external debt, using data for the period 1970-2020. To detect episodes of potentially explosive behavior of the Spanish net foreign assets over GDP ratio and the current account balance over GDP ratio, as well as episodes of external adjustments over this long period, we employ a recursive unit root test approach. Our empirical analysis leads us to conclude that there is some evidence of bubbles in the ratio between Spanish net foreign assets and the GDP. In contrast, the evidence that the ratio between the Spanish current account balance and the GDP had explosive subperiods is very weak.The episode of explosive behavior identified in the position of net foreign assets during the period 2002-2015 was the result of the country's economic expansion 1995-2007. The results also show an external adjustment during the period 2008-2019 after the start of a cyclical economic recession. |
| Keywords: | external imbalances; sustainability; intertemporal external budget constraint; explosiveness; recursive unit root test |
| JEL: | F32 F36 F37 F41 C22 |
| Date: | 2022–03 |
| URL: | http://d.repec.org/n?u=RePEc:eec:wpaper:2202&r= |
| By: | Dorinel Bastide (UEVE - Université d'Évry-Val-d'Essonne, Université Paris-Saclay, LaMME - Laboratoire de Mathématiques et Modélisation d'Evry - UEVE - Université d'Évry-Val-d'Essonne - ENSIIE - Université Paris-Saclay - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, BNP-Paribas , Stress Testing Methodologies & Models - BNP-Paribas); Stéphane Crépey (LPSM (UMR_8001) - Laboratoire de Probabilités, Statistiques et Modélisations - SU - Sorbonne Université - CNRS - Centre National de la Recherche Scientifique - UP - Université de Paris, UFR 929 - Sorbonne Université - UFR de Mathématiques - SU - Sorbonne Université); Samuel Drapeau (University of Shanghai [Shanghai], Shanghai Jiaotong University, SAIF - Shanghai Advanced Institute of Finance); Mekonnen Tadese (Woldia University) |
| Abstract: | We present a one-period XVA model encompassing bilateral and centrally cleared trading in a unified framework with explicit formulas for most quantities at hand. We illustrate possible uses of this framework for running stress test exercises on a financial network from a clearing member's perspective or for optimizing the porting of the portfolio of a defaulted clearing member. |
| Date: | 2022–02–11 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:hal-03554577&r= |
| By: | Zeyd Boukhers; Azeddine Bouabdallah; Matthias Lohr; Jan J\"urjens |
| Abstract: | Since the birth of Bitcoin in 2009, cryptocurrencies have emerged to become a global phenomenon and an important decentralized financial asset. Due to this decentralization, the value of these digital currencies against fiat currencies is highly volatile over time. Therefore, forecasting the crypto-fiat currency exchange rate is an extremely challenging task. For reliable forecasting, this paper proposes a multimodal AdaBoost-LSTM ensemble approach that employs all modalities which derive price fluctuation such as social media sentiments, search volumes, blockchain information, and trading data. To better support investment decision making, the approach forecasts also the fluctuation distribution. The conducted extensive experiments demonstrated the effectiveness of relying on multimodalities instead of only trading data. Further experiments demonstrate the outperformance of the proposed approach compared to existing tools and methods with a 19.29% improvement. |
| Date: | 2022–02 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2202.08967&r= |
| By: | Imane Ouadghiri; Mathieu Gomes (CleRMa - Clermont Recherche Management - ESC Clermont-Ferrand - École Supérieure de Commerce (ESC) - Clermont-Ferrand - UCA [2017-2020] - Université Clermont Auvergne [2017-2020]); Jonathan Peillex; Guillaume Pijourlet |
| Abstract: | This study investigates whether investor attention to the fossil fuel divestment (FFD) movement is related to the stock returns of firms involved in extracting fossil fuels. We consider three complementary indicators of investor attention to the FFD movement: (1) the US weekly Google Search Volume Index on the topic "fossil fuel divestment," (2) the US weekly media coverage of fossil fuel divestment, and (3) the number of weekly visits to the "fossil fuel divestment" page on Wikipedia. Based on a sample of weekly returns on 1,850 US firms over the period 2012-2020, our econometric estimations report a positive relationship between investor attention to FFD and excess stock returns for US fossil fuel-related firms. Therefore, contrary to what the FFD campaigners might expect, the stigmatization of the fossil fuel industry does not drive down the stock returns on fossil fuel-related firms. |
| Keywords: | fossil fuel-related firms,investor attention,stock returns,fossil fuel divestment |
| Date: | 2022–01–29 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-03549713&r= |
| By: | Taiga Saito (Graduate School of Economics, The University of Tokyo); Akihiko Takahashi (Graduate School of Economics, The University of Tokyo) |
| Abstract: | This paper considers a new problem for portfolio optimization with a choice of a probability measure, particularly optimal investment problem under sentiments. Firstly, we formulate the problem as a sup-sup-inf problem consisting of optimal investment and a choice of a probability measure expressing aggressive and conservative attitudes of the investor. This problem also includes the case where the agent has conservative and neutral views on risks represented by Brownian motions and degrees of conservativeness differ among the risk. Secondly, we obtain an expression of the volatility process of a backward stochastic differential equation related to the conservative sentiment in order to investigate cases where the sup-sup-inf problem is solved. Specifically, we take a Malliavin calculus approach to solve the problem and obtain an optimal portfolio process. Finally, we provide an expression of the optimal portfolio under the sentiments in two examples with stochastic uncertainties in an exponential utility case and investigate the impact of the sentiments on the portfolio process. |
| Date: | 2022–03 |
| URL: | http://d.repec.org/n?u=RePEc:cfi:fseres:cf534&r= |
| By: | John Landon-Lane (Rutgers University) |
| Abstract: | This paper investigates sentiment in the US economy from 1920 to 1934 using digitized articles from the Wall St Journal. We derive a monthly sentiment index and use a ten variable vector error correction model to identify sentiment shocks that are orthogonal to fundamentals. We show the timing and strength of these shocks and their resultant effects on the economy using historical decompositions. Intermittent impacts of up to fifteen percent on Industrial Production, ten percent on the S&P 500 and Bank loans and, thirty-seven basis points for the Credit risk spread, suggest a large role for sentiment. Select number of author(s): : 1 |
| Keywords: | Great Depression, General Theory, Behavioural Economics |
| JEL: | D89 E32 E70 |
| Date: | 2022–03–15 |
| URL: | http://d.repec.org/n?u=RePEc:rut:rutres:202201&r= |
| By: | Paula Prenzel; Niels Bosma; Veronique Schutjens; Erik Stam |
| Abstract: | A growing empirical literature has established a positive relationship between cultural diversity and entrepreneurship rates, often attributing this effect to innovative benefits of diversity. However, not all entrepreneurship is inherently innovative, raising the question of whether cultural diversity may increase the relative prevalence of entrepreneurs pursuing innovative instead of more replicative strategies. This study investigates the relationship between regional cultural diversity and the innovation-orientation of early-stage entrepreneurs and considers moderating factors by decomposing shares of foreign-born population by origin within and outside of the EU and by education level. Combining survey data from the Global Entrepreneurship Monitor with various measures of cultural diversity, we carry out a multilevel analysis for 166 European regions. The results suggest that entrepreneurs in more culturally diverse regions are significantly more likely to exhibit innovation-orientation. We find some evidence that this effect is supported by cognitive proximity as the share of EU-born foreign population is driving this result. Moreover, our analysis suggests that the effect of cultural diversity on innovative entrepreneurship is not due to human capital availability or moderated by entrepreneurs' absorptive capacity but rather stems from the diversity in cultural background itself. |
| Keywords: | cultural diversity, entrepreneurship, innovation, European regions, multilevel analysis |
| JEL: | F22 L26 O30 R1 |
| Date: | 2022–02 |
| URL: | http://d.repec.org/n?u=RePEc:egu:wpaper:2205&r= |
| By: | Ralph S. J. Koijen (University of Chicago); Motohiro Yogo (Princeton University) |
| Abstract: | Using international holdings data, we estimate a demand system for financial assets across 36 countries. The demand system provides a unified framework for decomposing variation in exchange rates, long-term yields, and stock prices, interpreting major economic events such as the European sovereign debt crisis, and estimating the convenience yield on US assets. Macro variables and policy variables (i.e., short-term rates, debt quantities, and foreign exchange reserves) account for 55 percent of the variation in exchange rates, 57 percent of long-term yields, and 69 percent of stock prices. The average convenience yield is 2.15 percent on US long-term debt and 1.70 percent on US equity. |
| Keywords: | demand system, international |
| JEL: | E52 F31 G12 |
| Date: | 2020–06 |
| URL: | http://d.repec.org/n?u=RePEc:pri:econom:2020-33&r= |
| By: | Lahcen Bounader (International Monetary Fund); Guido Traficante (European University of Rome) |
| Abstract: | This paper studies robustly optimal monetary policy in a behavioral New Keynesian model, where the private sector has myopia, while the central bank has Knightian uncertainty about the degree of myopia of the private sector and the degree of price stickiness. In such a setup the central bank solves an optimal robust monetary policy problem. We show that under uncertainty in myopia the Brainard’s attenuation principle holds, while under uncertainty on price stickiness, alone or in addition to myopia, monetary policy becomes more aggressive. |
| Keywords: | Optimal monetary policy, bounded rationality, min- max, parameter uncertainty |
| JEL: | E |
| Date: | 2022 |
| URL: | http://d.repec.org/n?u=RePEc:inf:wpaper:2022.01&r= |
| By: | Bulent Guler (Indiana University Bloomington); Yasin Kursat Onder (Ghent University); Temel Taskin (Bank of Canada) |
| Abstract: | This paper studies sovereign debt and default dynamics under alternative disclosure arrangements in a sovereign default model incorporated with asymmetric information and long-term debt. Government is assumed to have access to both international bond financing and non-Paris club lending (a hidden and collateralized debt). Our results show that with a shift from partial disclosure to full disclosure regime governments can borrow at more favorable terms conditional on the same levels of debt and income. However, due to lack of commitment, favorable bond prices encourage governments to borrow more and experience higher default rates in the long-run equilibrium of the full disclosure regime. As a result, the switch from partial disclosure to full disclosure generates small welfare losses contrary to conventional wisdom. |
| Keywords: | Hidden debt, Sovereign debt, Sovereign default, Collateralized debt, Asymmetric information, Debt disclosure |
| Date: | 2022–03 |
| URL: | http://d.repec.org/n?u=RePEc:inu:caeprp:2022004&r= |
| By: | Bertrand Garbinti (CREST-ENSAE-Institut Polytechnique Paris); Pierre Lamarche (CREST-INSEE); Fredérique Savignac (Banque de France) |
| Abstract: | We study how the marginal propensity to consume out of wealth (MPC) varies across households depending on the level and composition of their wealth. We build a unique household-level panel dataset which combines wealth and consumption surveys for five European countries to estimate country-specific marginal propensity to consume out wealth. We use instrumented household-level panel regressions. First, we show that the MPC out of total wealth is higher for lowwealth households, whatever the country. Second, we find that the MPC out of housing assets is significant and decreasing along the wealth distribution in all countries. Third, we show that the observed cross-country heterogeneity in MPC is strongly correlated with the use of mortgages, suggesting a collateral channel. Finally, we conduct a simulation exercise to investigate to what extent heterogeneous MPC and wealth inequality affect consumption inequality. |
| Keywords: | consumption, marginal propensity to consume out of wealth, collateral channel, household surveys |
| JEL: | D12 E21 C21 |
| Date: | 2022–01–19 |
| URL: | http://d.repec.org/n?u=RePEc:crs:wpaper:2022-02&r= |