|
on Central and Western Asia |
| By: | Mariacristina De Nardi (College of Liberal Arts, University of Minnesota); Eric French (University of Cambridge); John Bailey Jones (Federal Reserve Bank of Richmond); Rory McGee (University of Western Ontario) |
| Abstract: | While the savings of retired singles tend to fall with age, those of retired couples tend to rise. We estimate a rich model of retired singles and couples with bequest motives and uncertain longevity and medical expenses. Our estimates imply that while medical expenses are an important driver of the savings of middle-income singles, bequest motives matter for couples and high-income singles, and generate transfers to non-spousal heirs whenever a household member dies. The interaction of medical expenses and bequest motives is a crucial determinant of savings for all retirees. Hence, to understand savings, it is important to model household structure, medical expenses, and bequest motives. |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:uwo:hcuwoc:20212&r= |
| By: | Audra J. Bowlus (University of Western Ontario); Lance Lochner (University of Western Ontario); Chris Robinson (University of Western Ontario); Eda Suleymanoglu (Canada Border Services) |
| Abstract: | The canonical supply–demand model of the wage returns to skill has been extremely influential; however, it has faced several important challenges. Several studies show that the standard approach sometimes produces theoretically wrong-signed elasticities of substitution, yields counterintuitive paths for skill-biased technical change (SBTC), and does not account for the observed deviations in college premia for younger vs. older workers. This paper shows that these failings can be explained by mis-measurement of relative skill prices and supplies (based on standard demographic composition-adjustments) and by inadequate ad hoc functional form assumptions about the path for SBTC. Improved estimates of skill prices and supplies that account for variation in skill across cohorts within narrowly defined groups help explain the observed deviation in the college premium for younger vs. older workers, even with perfect substitutability across age. Re-estimating the model with these prices and supplies produces a good fit with better out-of-sample prediction and robustly yields positive elasticities of substitution between high and low skill workers. The estimates suggest greater substitutability across skill and a more modest role for SBTC. We implement two new approaches to modelling SBTC. First, we study the extent to which recessions induce jumps or trend-adjustments in skill bias and find evidence that both features are important (but differ across recessions). Second, we link SBTC to direct measures of information technology investment expenditures and show that these measures explain the evolution of skill bias quite well. Together, these approaches suggest that the ad hoc assumptions for SBTC previously employed in the literature are too crude to fit the data well, leading to the incorrect conclusion that SBTC slowed during the early-1990s and under-estimates of the elasticity of substitution between high and low skill workers. |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:uwo:hcuwoc:20213&r= |
| By: | Azhgaliyeva, Dina (Asian Development Bank Institute); Mishra, Ranjeeta (Asian Development Bank Institute); Yoshino, Naoyuki (Asian Development Bank Institute); Karymshakov, Kamalbek (Asian Development Bank Institute) |
| Abstract: | This study aims to examine the impact of infrastructure on firm performance in nine CAREC countries: Afghanistan, Azerbaijan, Georgia, Kazakhstan, the Kyrgyz Republic, Mongolia, Pakistan, Tajikistan, and Uzbekistan. Empirical analysis is based on the enterprise survey for 2009, 2013, and 2019. Infrastructure is measured by the duration of power outages, electricity expenses as the share of total sales, access to broadband internet and efficiency of customs. Firm performance was measured by total sales, share of utilized capacity, dummy variable if firm exports, and the share of export sales. Results indicate that firm performance measured through sales and capacity utilization is negatively affected by the duration of power outages and electricity expenses. Moreover, access to broadband internet significantly increases the total sales and export sales of small firms, while efficiency of customs increases the exporting activities of medium and large firms. These findings underline that for the development of private sector and international trade in CAREC countries, sustainable access to, and quality of, electricity, telecommunications, and customs efficiency are important objectives for government policy. |
| Keywords: | Central Asia; electricity; telecommunications; infrastructure |
| JEL: | D24 H54 O18 Q41 Q48 |
| Date: | 2021–05 |
| URL: | http://d.repec.org/n?u=RePEc:ris:adbiwp:1265&r= |
| By: | Edouard Djeutem; Mario He; Abeer Reza; Yang Zhang |
| Abstract: | We compare the performance of alternative monetary policy frameworks (inflation targeting, average inflation targeting, price level targeting and nominal GDP level targeting) in a tractable HANK model where incomplete financial markets and idiosyncratic earnings risk introduce precautionary savings and consumption inequality. Financial market incompleteness generates an additional source of societal welfare loss due to cyclical fluctuations in inequality on top of those from inflation and output volatility. We find that history-dependent policies are preferred in this framework. However, if central banks put a high weight on curbing inequality, AIT and IT can be preferred over PLT. |
| Keywords: | Monetary policy framework; Monetary policy transmission; Monetary policy and uncertainty; Economic models |
| JEL: | D31 D52 E21 E31 E58 |
| Date: | 2022–03 |
| URL: | http://d.repec.org/n?u=RePEc:bca:bocawp:22-12&r= |
| By: | Dasgupta, Amil; Fos, Vyacheslav; Sautner, Zacharias |
| Abstract: | We provide a comprehensive overview of the role of institutional investors in corporate governance with three main components. First, we establish new stylized facts documenting the evolution and importance of institutional ownership. Second, we provide a detailed characterization of key aspects of the legal and regulatory setting within which institutional investors govern portfolio firms. Third, we synthesize the evolving response of the recent theoretical and empirical academic literature in finance to the emergence of institutional investors in corporate governance. We highlight how the defining aspect of institutional investors – the fact that they are financial intermediaries – differentiates them in their governance role from standard principal blockholders. Further, not all institutional investors are identical, and we pay close attention to heterogeneity amongst institutional investors as blockholders. |
| Keywords: | institutional investors; corporate governance; exit; voice; shareholder activism; proxy voting advisors; ES/S016686/1 |
| JEL: | F3 G3 |
| Date: | 2021–09–20 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:112114&r= |
| By: | Romani, Ilenia; Galeotti, Marzio; Lanza, Alessandro |
| Abstract: | The funds allocated by the National Recovery and Resilience Plan (NRRP) aim to trigger a multiplier effect on GDP as they are designed to help the recovery after the Covid-19 pandemic. The GDP increase is in turn expected to drive energy consumption up which will increase CO2 emissions, given that fossil fuels still account for 79% of the Italian total primary energy consumption. At the same time, as the NRRPs are part of the EU Green Deal, an important share of the Plan’s investments is aimed at facilitating the green transition, with expected favorable effects on emissions. Which one of these two effects will prevail remains to be ascertained. In this study we have used the GEM (Global Economic Model) by Oxford Economics to build a number of scenarios and generate the relevant simulations aimed at assessing the impact of the Italian NRRP’s interventions on energy consumption and CO2 emissions. To validate the use of GEM we extensively considered the macroeconomic impact on GDP and unemployment rate generated by the model and compare the results to those presented by other institutions and obtained using different models. The results show that when the green investments of the NRRP display their effects, there are climatic benefits in terms of reduced emissions. Compared to the implementation of the NRRP in 2021, however, the reduction in emissions by 2030 is modest and equal to 5%. As those investments largely refer to the adoption of clean technologies, the climate benefits are likely to be more substantial only in subsequent years and over longer horizons. |
| Keywords: | Financial Economics, Political Economy, Production Economics |
| Date: | 2022–02–28 |
| URL: | http://d.repec.org/n?u=RePEc:ags:feemwp:319781&r= |
| By: | Domínguez, Alvaro; Sakamoto, Hiroshi |
| Abstract: | We reexamine the convergence hypothesis of economic growth. Traditionally, it was analyzed using econometric methods, although estimating long-term economic fluctuations with a linear model is not always ideal. We thus employ a Markov chain stochastic model that divides the logarithmic value of relative income, comparing each country's GDP per capita with the average, into several ranks in descending order of income. Using the most recent data, we total the time-series changes of the income states in each sample, and represent them through probabilities. We observe the changing ergodic distribution and show that the world economy is not growing monotonously, and proceed to correct the population size of each country for rank changes. The transition probability matrix is re-estimated by applying population weights to changes in the income states of each country. When there is no population weighting, the model shows that the world economy may be divided into two peaks as before. However, when using population weights, the model yields more optimistic results. |
| Keywords: | Convergence, World Economy, Markov Chain, C49, D39, O50, R11 |
| Date: | 2022–02 |
| URL: | http://d.repec.org/n?u=RePEc:agi:wpaper:00000193&r= |
| By: | An, Sungbae (KOREA INSTITUTE FOR INTERNATIONAL ECONOMIC POLICY (KIEP)) |
| Abstract: | COVID-19 has changed the way of our lives since it started emerging as a pandemic early 2020. The global experience leave a trauma, and eventually work as a main driver to reconsider and improve our system. The need for change becomes even bigger as the pandemic continues beyond initial expectations. With that, we are now entering the era of the great transformation. The brief focuses on examining the policy environment changed by the COVID-19 pandemic and analyzing the points to be considered when implementing future fiscal and monetary policies. |
| Keywords: | COVID-19; Post Pandemic; fiscal policy; monetary policy |
| Date: | 2022–03–04 |
| URL: | http://d.repec.org/n?u=RePEc:ris:kiepwe:2022_007&r= |
| By: | Heise, Arne |
| Abstract: | In 2009, just before the full outbreak of the global financial crisis, Olivier Blanchard (2009) published an article giving a favourable appraisal of the state of macroeconomics. He came to this verdict on the basis that, after a long period of fierce theoretical debate, the discipline had converged on a model known as new consensus macroeconomics (NCM). In the models that made up NCM, fiscal policy played no role - or, to be more precise, fiscal policy had to follow a balanced-budget rule, with the task of stabilising an economy over the business cycle entrusted entirely to monetary policy (following a Taylor rule). And in the midst of the global financial crisis, Carmen Reinhart and Kenneth Rogoff (2010) proposed the figure of 90% of GDP as a threshold level for public debt which, if exceeded, would harm economic growth, leaving fiscal austerity as the best way to trigger economic recovery. Only a decade later, the economics profession now appears to have taken a very different view on fiscal policy: in order to cope with the next economic crisis, resulting from the coronavirus pandemic, most economists recommend an active fiscal policy stance and even a huge increase in debt-to-GDP levels. This paper will shed some light on these developments in economic policymaking and explore the future of fiscal policy. |
| Keywords: | Fiscal policy,public debt,stabilisation policy |
| JEL: | E62 H30 H62 |
| Date: | 2022 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:cessdp:92&r= |
| By: | Gaffney, Edward; McCann, Fergal |
| Abstract: | The coronavirus (COVID-19) macroeconomic shock was different from previous crises in terms of its speed, the severity of the resulting job losses, the fiscal support provided in response and the stability of house prices. In response to this sudden shock and in line with European Banking Authority guidance, lenders in Ireland offered temporary COVID-19 payment breaks, or moratoria, to homeowners with mortgages. COVID-19 payment breaks had minimal eligibility criteria, did not require a regulatory risk reclassification of loans and had no impact on borrower credit records. All of this enabled a rapid response that minimised costs to both borrowers and lenders. As the initial payment breaks have expired, lenders have typically responded to a relatively small number of requests for further arrears support or restructuring by extending moratoria or other temporary arrangements. Based on the lessons learned from research into the economics of debt relief since the global financial crisis, we view this initial response as appropriate for the specific, temporary economic shock that the Irish economy faced in March 2020. As the pandemic progresses, the optimal future response of policymakers will depend on how both the labour and housing markets evolve. In circumstances such as those that prevailed in early 2021, when uncertainty and additional temporary liquidity shocks affected some sectors, additional extensions of payment moratoria or other short-term arrangements may be appropriate for some borrowers. However, should it appear that income shocks were becoming more permanent, perhaps because of structural shifts in demand, or if house prices were to decline, longer-term solutions might be required, similar to those implemented after the global financial crisis. In light of the successful pandemic response, we also consider the benefits of mortgage contracts that allow households to opt into payment moratoria or reduced payment levels in certain situations. To avoid incentive problems, this optionality would ideally either (i) have to be triggered by the declaration of a national emergency or (ii) perhaps more simply be time-limited or tied to periodic amortisation requirements. In all cases, a major advantage of such optionality would be the automatic nature of the option. This would mean that there was no need for urgent coordination among policymakers or lenders to avoid issues such as credit records or risk classifications being altered as a result of the widespread requirement for payment relief. |
| Date: | 2022–04 |
| URL: | http://d.repec.org/n?u=RePEc:srk:srkops:202220&r= |
| By: | Piyali Das; Chetan Ghate (Institute of Economic Growth, Delhi University, Delhi) |
| Abstract: | In this paper, to study India’s debt dynamics, we assemble a novel data-set on Indian public debt with consistently defined aggregate annual components from 1951–2018, and Centre-State security level data from 2000–2018. Based on aggregate debt data, we quantify the contribution of inflation, real GDP growth, nominal interest rates and primary deficit/surplus towards India’s debt-dynamics. We find that inflation is an important component in financing India’s government debt historically. From the security level data, using the Hall-Sargent methodology, we find that nominal returns on the marketable and non-marketable portions of the Centre’s debt account for the highest contribution towards changes in public debt. Our paper helps inform the debate on the adoption of flexible inflation targeting in India. |
| Keywords: | Debt Decomposition, Fiscal Dominance, Indian Economy, Flexible Inflation Targeting, Public Debt in EMDEs. |
| JEL: | E62 E65 E52 G12 G28 |
| Date: | 2022–02–01 |
| URL: | http://d.repec.org/n?u=RePEc:awe:wpaper:451&r= |
| By: | Ammann, Manuel; Cochardt, Alexander Elmar; Straumann, Simon; Weigert, Florian |
| Abstract: | We exploit variation in the ancestries of U.S. equity mutual fund managers to show that ancestry affects portfolio decisions. Controlling for fund firm location, we find that funds overweight stocks from their managers' ancestral home countries in their non-U.S. portfolio by 132 bps or 20.34% compared with their peers. Similarly, funds overweight industries that are comparatively large in their manager's ancestral home countries. Stocks linked to managers' ancestry do not outperform stocks in the same countries and industries but held by managers of other ancestries. This supports the notion that ancestry-linked investments are not informed but due to familiarity. |
| Keywords: | Culture,Home Bias,Mutual Funds,Portfolio Choice,Fund Managers |
| JEL: | G11 G41 |
| Date: | 2022 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:cfrwps:2204&r= |
| By: | Kathrin Hellmuth; Christian Klingenberg |
| Abstract: | In financial mathematics, it is a typical approach to approximate financial markets operating in discrete time by continuous-time models such as the Black Scholes model. Fitting this model gives rise to difficulties due to the discrete nature of market data. We thus model the pricing process of financial derivatives by the Black Scholes equation, where the volatility is a function of a finite number of random variables. This reflects an influence of uncertain factors when determining volatility. The aim is to quantify the effect of this uncertainty when computing the price of derivatives. Our underlying method is the generalized Polynomial Chaos (gPC) method in order to numerically compute the uncertainty of the solution by the stochastic Galerkin approach and a finite difference method. We present an efficient numerical variation of this method, which is based on a machine learning technique, the so-called Bi-Fidelity approach. This is illustrated with numerical examples. |
| Date: | 2022–02 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2202.07378&r= |
| By: | Rafael Muñoz de Bustillo Llorente (Universidad de Salamanca); Fernando Esteve Mora |
| Abstract: | The purpose of this working paper, the first of a series of three aiming at studying social classes from an economic perspective, is to review the role played by social classes in economic analysis. With that aim, we will first discuss the use of the concept of social classes in the analysis of classical economists. Then we will present the reasons behind the abandonment of the concept of social classes as an analytical tool by the marginalist school who triumphed in the final quarter of the 19th century, changing the economic paradigm, and by mainstream economists in the 20th Century. Nevertheless, it can be argued that the classical idea of social class (based on the source of income: wages versus profits) has somehow remained alive in modern macroeconomic analysis, if in disguise, behind the concept of functional (or factorial) distribution of income. The last part of the paper reviews the role played by the functional distribution of income in current macroeconomic analysis, and studies how the evolution of the economy and labour relations in the last few decades has made the interpretation of the functional distribution of income in terms of social classes less relevant than in the past. |
| Keywords: | Social Class, Functional Distribution of Income, Labour segmentation |
| Date: | 2022–03 |
| URL: | http://d.repec.org/n?u=RePEc:ipt:dclass:202202&r= |
| By: | Lourenço S. Paz |
| Abstract: | Illicit financial flows have recently attracted the attention of academia, practitioners, and multilateral organizations who consider them harmful to economic development. Some observers suggest that many of these flows occur via the misinvoicing of international trade transactions. This study develops a novel methodology based on the gravity model of international trade to estimate illicit financial flows using publicly available product-level international trade data. |
| Keywords: | Gravity model, Illicit financial flows, International trade, Misinvoicing, Transportation cost |
| Date: | 2022 |
| URL: | http://d.repec.org/n?u=RePEc:unu:wpaper:wp-2022-24&r= |
| By: | Coralie Jaunin (University of Lausanne - School of Economics and Business Administration (HEC-Lausanne); Swiss Finance Institute); Tammaro Terracciano (University of Geneva, GFRI; Swiss Finance Institute) |
| Abstract: | This paper studies the relationship between green funds and firms' attention to sustainability. By using a natural language processing algorithm that extracts topics from texts, we measure the extent to which firms talk about sustainable energy during earnings conference calls. We use our measure to evaluate green funds' response to firms discussing sustainable energy. Our main result is that, when managers discuss sustainable energy topics, green funds respond by investing in the firm, while other funds divest. This corroborates the idea that green funds are essential to change firms' incentives and steer them towards the energy transition. Finally, we document that the overall attention that firms and funds pay to the environment is still very limited, although increasing in recent years. |
| Keywords: | green finance, sustainable investing |
| JEL: | G11 G23 Q01 |
| Date: | 2022–03 |
| URL: | http://d.repec.org/n?u=RePEc:chf:rpseri:rp2219&r= |
| By: | Ilenia Romani (Università degli Studi di Brescia and Fondazione Eni Enrico Mattei); Marzio Galeotti (Università degli Studi di Milano and Fondazione Eni Enrico Mattei); Alessandro Lanza (LUISS and Fondazione Eni Enrico Mattei) |
| Abstract: | The funds allocated by the National Recovery and Resilience Plan (NRRP) aim to trigger a multiplier effect on GDP as they are designed to help the recovery after the Covid-19 pandemic. The GDP increase is in turn expected to drive energy consumption up which will increase CO2 emissions, given that fossil fuels still account for 79% of the Italian total primary energy consumption. At the same time, as the NRRPs are part of the EU Green Deal, an important share of the Plan’s investments is aimed at facilitating the green transition, with expected favorable effects on emissions. Which one of these two effects will prevail remains to be ascertained. In this study we have used the GEM (Global Economic Model) by Oxford Economics to build a number of scenarios and generate the relevant simulations aimed at assessing the impact of the Italian NRRP’s interventions on energy consumption and CO2 emissions. To validate the use of GEM we extensively considered the macroeconomic impact on GDP and unemployment rate generated by the model and compare the results to those presented by other institutions and obtained using different models. The results show that when the green investments of the NRRP display their effects, there are climatic benefits in terms of reduced emissions. Compared to the implementation of the NRRP in 2021, however, the reduction in emissions by 2030 is modest and equal to 5%. As those investments largely refer to the adoption of clean technologies, the climate benefits are likely to be more substantial only in subsequent years and over longer horizons. |
| Keywords: | National Recovery and Resilience Plan, CO2 emissions, Large-scale macroeconomic model, Post-Covid recovery |
| JEL: | E37 E61 E62 Q43 Q54 C30 |
| Date: | 2022–02 |
| URL: | http://d.repec.org/n?u=RePEc:fem:femwpa:2022.08&r= |
| By: | Ono, Shigeki; Iwasaki, Ichiro; 岩﨑, 一郎 |
| Abstract: | This paper performs a meta-analysis of the effect on economic growth of financial development and liberalization in European emerging markets and compares with that in European advanced economies. A meta-synthesis of 893 estimates extracted from 45 studies suggests that finance in emerging markets have a positive effect on growth. Furthermore, our findings indicate that the synthesized effect size in emerging markets was smaller than that in advanced economies. Results from meta-regression analysis and test for publication selection bias, however, show that some synthesis results cannot be reproduced when literature heterogeneity and publication selection bias are taken into consideration. |
| Keywords: | financial development and liberalization, economic growth, meta-analysis, publication selection bias, European emerging markets and advanced economies |
| JEL: | E44 O16 O52 P24 P33 |
| Date: | 2021–12 |
| URL: | http://d.repec.org/n?u=RePEc:hit:rrcwps:94&r= |
| By: | James Chapman; Ajit Desai |
| Abstract: | Predicting the economy’s short-term dynamics—a vital input to economic agents’ decision-making process—often uses lagged indicators in linear models. This is typically sufficient during normal times but could prove inadequate during crisis periods such as COVID-19. This paper demonstrates: (a) that payments systems data which capture a variety of economic transactions can assist in estimating the state of the economy in real time and (b) that machine learning can provide a set of econometric tools to effectively handle a wide variety in payments data and capture sudden and large effects from a crisis. Further, we mitigate the interpretability and overfitting challenges of machine learning models by using the Shapley value-based approach to quantify the marginal contribution of payments data and by devising a novel cross-validation strategy tailored to macroeconomic prediction models. |
| Keywords: | Business fluctuations and cycles; Econometric and statistical methods; Payment clearing and settlement systems |
| JEL: | C53 C55 E37 E42 E52 |
| Date: | 2022–03 |
| URL: | http://d.repec.org/n?u=RePEc:bca:bocawp:22-10&r= |
| By: | Ambaw, Dessie (University of South Australia); Pundit, Madhavi (Asian Development Bank); Ramayandi, Arief (Asian Development Bank); Sim, Nicholas (Singapore University of Social Sciences) |
| Abstract: | Real exchange rate (RER) misalignment, which is the deviation between the actual real exchange rate from its equilibrium, occurs frequently among developing economies. Studies have shown that RER misalignment may have negative economic implications, such as a reduction in economic growth, exports and export diversification, and an increased risk of currency crises and political instability. Using quarterly data for 22 sample economies from 1990 to 2018, this paper investigates the impact of RER misalignment on business cycles in Asia and the Pacific by employing a panel vector autoregression involving consumer price index (CPI) inflation, output gap, short-term interest rate, and RER misalignment. We find that RER overvaluation may lead to a reduction in CPI inflation and short-term interest rate. We also find that Asia and the Pacific is highly heterogeneous wherein the output gaps of some economies, particularly those in Southeast Asia, are more susceptible to RER misalignment shocks. |
| Keywords: | real exchange rate misalignment; business cycle fluctuations |
| JEL: | D74 E32 F31 F41 O11 |
| Date: | 2022–03–08 |
| URL: | http://d.repec.org/n?u=RePEc:ris:adbewp:0651&r= |
| By: | Jonathan Chapman (NYUAD); Mark Dean (Columbia University); Pietro Ortoleva (Princeton University); Erik Snowberg (Caltech); Colin Camerer (Caltech) |
| Abstract: | We study the pattern of correlations across a large number of behavioral regularities, with the goal of creating an empirical basis for more comprehensive theories of decision- making. We elicit 21 behaviors using an incentivized survey on a representative sample (n = 1,000) of the U.S. population. Our data show a clear and relatively simple structure underlying the correlations between these measures. Using principal components analysis, we reduce the 21 variables to six components corresponding to clear clusters of high correlations. We examine the relationship between these components, cognitive ability, and demographics. Common extant theories explain some of the patterns in our data, but each theory we examine is also inconsistent with some patterns. |
| Keywords: | Econographics, Reciprocity, Altruism, Trust, Costly Third-Party Punishment, Inequality Aversion, Risk Aversion, Common-Ratio Effect, Endowment Effect, WTA, WTP, Ambiguity Aversion |
| JEL: | C90 D64 D81 D90 D91 |
| Date: | 2020–11 |
| URL: | http://d.repec.org/n?u=RePEc:pri:econom:2020-75&r= |
| By: | Alhonita YATIE |
| Abstract: | This paper studies the impact of fear, uncertainty and market volatility caused by the Ukraine-Russia war on crypto-assets returns (Bitcoin and Ethereum) and Gold returns. We use the searches on Wikipedia trends as proxies of uncertainty and fear and two volatility indices: S&P500 VIX and the Russian VIX (RVIX). The results show that Bitcoin, Ethereum and Gold failed as safe havens during this war. |
| Keywords: | War, Russia, Ukraine, crypto-assets, Gold, Safe haven |
| JEL: | H56 G32 G12 G15 |
| Date: | 2022 |
| URL: | http://d.repec.org/n?u=RePEc:grt:bdxewp:2022-07&r= |
| By: | Stefan Avdjiev; Tsvetana Spasova |
| Abstract: | We conduct a comprehensive empirical investigation of the link between inequality and financial openness. We document that the relationship varies considerably not only over time, but also across the main components of total external liabilities, which have been largely overlooked by the existing literature. In emerging market economies (EMEs), an increase in a country's external liabilities is associated with an initial rise and a subsequent fall in inequality. This appears to be driven by the fact that the channels through which financial openness increases inequality tend to be active immediately, while the inequality-decreasing channels tend to operate with a lag. The link between financial openness and inequality tends to be substantially weaker in advanced economies than in EMEs. |
| Keywords: | financial openness, gini-based inequality measures, foreign direct investments, external liabilities. |
| JEL: | F30 F40 O11 |
| Date: | 2022–03 |
| URL: | http://d.repec.org/n?u=RePEc:bis:biswps:1010&r= |
| By: | Pietro Biroli (University of Zurich); Titus Galama (University of Southern California); Stephanie von Hinke (University of Bristol); Hans van Kippersluis (Erasmus University Rotterdam); Cornelius Rietveld (Erasmus University Rotterdam); Kevin Thom (University of Wisconsin) |
| Abstract: | Economists and social scientists have debated the relative importance of nature (one’s genes) and nurture (one’s environment) for decades, if not centuries. This debate can now be informed by the ready availability of genetic data in a growing number of social science datasets. This paper explores the potential uses of genetic data in economics, with a focus on estimating the interplay between nature (genes) and nurture (environment). We discuss how economists can benefit from incorporating genetic data into their analyses even when they do not have a direct interest in estimating genetic effects. We argue that gene–environment (G × E) studies can be instrumental for (i) testing economic theory, (ii) uncovering economic or behavioral mechanisms, and (iii) analyzing treatment effect heterogeneity, thereby improving the understanding of how (policy) interventions affect population subgroups. We introduce the reader to essential genetic terminology, develop a conceptual economic model to interpret gene–environment interplay, and provide practical guidance to empirical researchers. |
| Keywords: | Gene-by-Environment Interplay, Polygenic Indices, Social Science Genetics ALSPAC |
| JEL: | D1 D3 I1 I2 J1 |
| Date: | 2022–03–02 |
| URL: | http://d.repec.org/n?u=RePEc:tin:wpaper:20220019&r= |
| By: | Jongrim Ha; M. Ayhan Kose; Franziska Ohnsorge |
| Abstract: | Recent energy and food price surges, in the wake of Russia’s invasion of Ukraine, have exacerbated inflation pressures that are unusually high by the standards of the past two decades. High and rising inflation has prompted many emerging market and developing economy (EMDE) central banks and some advanced-economy central banks to increase interest rates. Inflation is expected to ease back towards targets over the medium-term as recent shocks unwind, but the 1970s experience is a reminder of the material risks to this outlook. As inflation remains elevated, the risk is growing that, to bring inflation back to target, advanced economies need to undertake a much more forceful monetary policy response than currently anticipated. If this risk materializes, it would imply additional increases in borrowing costs for EMDEs, which are already struggling to cope with elevated inflation at home before the recovery from the pandemic is complete. EMDEs need to focus on calibrating their policies with macroeconomic stability in mind, communicating their plans clearly, and preserving and building their credibility. |
| Keywords: | Global Inflation, Commodity Price, War in Ukraine, Global Recession, Great Inflation, Monetary Policy Tightening |
| JEL: | E31 E32 E37 Q43 |
| Date: | 2022–04 |
| URL: | http://d.repec.org/n?u=RePEc:een:camaaa:2022-29&r= |
| By: | Jongrim Ha (World Bank); M. Ayhan Kose (World Bank; Brookings Institution; CEPR; CAMA); Franziska Ohnsorge (World Bank; CEPR; CAMA) |
| Abstract: | Recent energy and food price surges, in the wake of Russia’s invasion of Ukraine, have exacerbated inflation pressures that are unusually high by the standards of the past two decades. High and rising inflation has prompted many emerging market and developing economy (EMDE) central banks and some advanced-economy central banks to increase interest rates. Inflation is expected to ease back towards targets over the medium-term as recent shocks unwind, but the 1970s experience is a reminder of the material risks to this outlook. As inflation remains elevated, the risk is growing that, to bring inflation back to target, advanced economies need to undertake a much more forceful monetary policy response than currently anticipated. If this risk materializes, it would imply additional increases in borrowing costs for EMDEs, which are already struggling to cope with elevated inflation at home before the recovery from the pandemic is complete. EMDEs need to focus on calibrating their policies with macroeconomic stability in mind, communicating their plans clearly, and preserving and building their credibility. |
| Keywords: | Global Inflation; Commodity Price; War in Ukraine; Global Recession; Great Inflation; Monetary Policy Tightening. |
| JEL: | E31 E32 E37 Q43 |
| Date: | 2022–03 |
| URL: | http://d.repec.org/n?u=RePEc:koc:wpaper:2202&r= |
| By: | Betzer, André; Gider, Jasmin; Limbach, Peter |
| Abstract: | This study documents economically meaningful and persistent financial advisor fixed effects in target firms' abnormal stock returns shortly prior to takeover announcements.Additional difference-in-differences analyses suggest that advisors are associated with lower pre-bid stock returns after their senior staff were defendants in SEC insider trading enforcement actions. Returns are higher for advisors with more previously advised deals and those located in NYC. The evidence helps explain the prevalent phenomenon of pre-bid stock returns. It contributes to the inconclusive literature on banks' exploitation of private information gained via advisory services, which is limited to disclosed, traceable activities indicative of information leakage. |
| Keywords: | Financial Advisors,Mergers and Acquisitions,Information Leakage,Target Runups |
| JEL: | G14 G15 G21 G34 K42 |
| Date: | 2022 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:cfrwps:2203&r= |
| By: | Michael Christl (European Commission - JRC); Ilias Livanos (European Centre for the Development of Vocational Training (CEDEFOP)); Andrea Papini (European Commission - JRC); Alberto Tumino (European Commission - JRC) |
| Abstract: | This paper provides a first assessment of the fiscal and distributional consequences of the ongoing structural changes in the labour markets of EU Member States, mostly driven by technological progress and ageing. Cedefop 2020 Skill forecasts, EUROSTAT population projections and the forecast on pension expenditures from the 2021 Ageing Report depict a scenario of an ageing population, an inverted U-shaped unemployment trend and potentially polarising labour markets, the latter mostly driven by a surge in high-skill occupations. This analysis makes use of the microsimulation model EUROMOD and reweighting techniques to analyse the fiscal and distributional impacts of these trends, given the current tax-benefit policies. The results suggest that the macro trends will increase pressure on government budgets. The analysis also shows evidence of the capacity of the current tax-benefit systems to counterbalance the increases in income inequality and poverty risks triggered by the expected future labour markets developments. |
| Keywords: | income distribution, budget, deficit, job polarisation, population ageing |
| JEL: | J11 J21 H68 |
| Date: | 2022–03 |
| URL: | http://d.repec.org/n?u=RePEc:ipt:taxref:202202&r= |
| By: | Brown, Nerissa C.; Elliott, W. Brooke; Wermers, Russ; White, Roger M. |
| Abstract: | Mobile internet devices reduce trading frictions and information search costs for investors, but also introduce attention-competing activities,such as social networking. We use exogenous nationwide and city-level outages of the Blackberry Internet Service (BIS) to investigate the effect of mobile internet technology on investors'information-gathering vs. attention-diverting activities. We find that trading volume and trading frequency surge by about 5% on days when mobile internet systems go dark, consistent with a greater role for devices (when not dark) in diverting the limited attention of investors away from information-gathering and trading - even when they are used by presumably more sophisticated investors. |
| Keywords: | mobile technology,investor activity,stock market liquidity,limited attention,distraction |
| JEL: | D83 G12 G14 L86 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:cfrwps:2110&r= |
| By: | Easaw, Joshy (Cardiff Business School); Golinelli, Roberto (Department of Economics, University of Bologna, ITALY); Heravi, Saeed (Cardiff Business School) |
| Abstract: | The purpose of this paper is to investigate the nature of professionals’ inflation forecasts inattentiveness. We introduce and empirically investigate a new generalized model of inattentiveness due to informational rigidity. In doing so, we outline a novel model that considers the non-linear relationship between inattentiveness and aggregate uncertainty, which crucially distinguishes between macro-economic and data (measurement error) uncertainty. The empirical analysis uses the Survey of Professional Forecasters data and indicates that inattentiveness due to imperfect information explains professional forecasts’ dynamics. |
| Keywords: | Forecasting Popular Votes Shares; Electoral Poll; Forecast combination, Hybrid model; Support Vector Machine |
| Date: | 2022–03 |
| URL: | http://d.repec.org/n?u=RePEc:cdf:wpaper:2022/7&r= |
| By: | Michael Curran (Department of Economics, Villanova School of Business, Villanova University); Patrick O'Sullivan (Schroders Investment Management, 1 London Wall Place, London, UK.); Ryan Zalla (Economics Department, University of Pennsylvania, 133 South 36th Street, Philadelphia, PA 19104, USA.) |
| Abstract: | We investigate whether sophisticated volatility estimation improves the out-of-sample performance of mean-variance portfolio strategies relative to the naive 1/N strategy. The portfolio strategies rely solely upon second moments. Using a diverse group of portfolios and econometric models across multiple datasets, most models achieve higher Sharpe ratios and lower portfolio volatility that are statistically and economically significant relative to the naive rule, even after controlling for turnover costs. Our results suggest benefits to employing more sophisticated econometric models than the sample covariance matrix, and that mean-variance strategies often out-perform the naive portfolio across multiple datasets and assessment criteria. |
| Keywords: | mean-variance, naive portfolio, volatility |
| JEL: | G11 G17 |
| Date: | 2022–02 |
| URL: | http://d.repec.org/n?u=RePEc:vil:papers:52&r= |
| By: | Karsten Kohler |
| Abstract: | The paper offers a monetary perspective on the role of capital flows in the Eurozone's north-south divide. It argues that finance-centric narratives in Comparative Political Economy rightly emphasise financial instability in the periphery, but that the role of capital flows therein requires clarification. The paper draws on post-Keynesian monetary theory, coherent accounting, and balance-of-payments data to make three main points. First, the focus on the financial account as a driver of current accounts should be abandoned in favour of an analysis of gross capital flows. Gross flows need not stem from excess savings in core countries and can be independent from trade flows. Second, speculative portfolio flows into bond markets and foreign direct investment into real estate are causally more important than interbank flows in driving financial instability. Third, rising spreads in the periphery during the Eurozone crisis and the outbreak of the pandemic were not triggered by balance-of-payments problems but by a reversal of speculative flows in government bond markets. The argument suggests that Comparative Political Economy should dedicate more attention to institutions that render peripheral countries particularly susceptible to speculative capital flows into asset markets. |
| Keywords: | Gross capital flows, balance-of-payments, current account imbalances, Eurozone crisis, sudden stop, comparative political economy, post-Keynesian macroeconomics |
| JEL: | E12 F32 F36 F41 O57 |
| Date: | 2022–03 |
| URL: | http://d.repec.org/n?u=RePEc:pke:wpaper:pkwp2211&r= |
| By: | David Newton (University of Bath - School of Management); Steven Ongena (University of Zurich - Department of Banking and Finance; Swiss Finance Institute; KU Leuven; NTNU Business School; Centre for Economic Policy Research (CEPR)); Ru Xie (University of Bath, School of management); Binru Zhao (University of Bath - School of Management) |
| Abstract: | Is bank- versus market-based financing different in its attitudes towards Environmental, Social, and Governance (ESG) risk? Using a novel sample covering 3,783 U.S. public firms from 2007 to 2020, we study how firm-level ESG risk affects its financing outcomes. We find that companies with higher ESG risk borrow less from banks than from markets, potentially to avoid bank monitoring and scrutiny. The Social and Governance components, in particular, matter. Furthermore, firms suffering higher numbers of negative ESG reputation shocks are less likely to continue to rely on bank credit in response to lenders' threats to end the lending arrangements. Finally, our results indicate that firms' ESG risk reduces after borrowing from banks but increases after bond issuance, suggesting that banks are more effective than public bond markets in shaping borrowers' ESG performance. |
| Keywords: | ESG Risk, Debt Structure, Capital Structure; Debt Choices, Bank Monitoring |
| JEL: | G20 G21 G30 G32 |
| Date: | 2022–03 |
| URL: | http://d.repec.org/n?u=RePEc:chf:rpseri:rp2222&r= |
| By: | Vasily Astrov (The Vienna Institute for International Economic Studies, wiiw); Mahdi Ghodsi (The Vienna Institute for International Economic Studies, wiiw); Richard Grieveson (The Vienna Institute for International Economic Studies, wiiw); Mario Holzner (The Vienna Institute for International Economic Studies, wiiw); Michael Landesmann (The Vienna Institute for International Economic Studies, wiiw); Olga Pindyuk (The Vienna Institute for International Economic Studies, wiiw); Robert Stehrer (The Vienna Institute for International Economic Studies, wiiw); Maryna Tverdostup (The Vienna Institute for International Economic Studies, wiiw) |
| Abstract: | The Russian invasion of Ukraine has triggered a humanitarian, economic, financial and political crisis that will reverberate across Europe. In this Policy Note we analyse the short- and medium-term implications of the conflict. We find that the most severe economic and financial impact will be in Ukraine and Russia. Much of Ukraine is already devastated by the war, with around 19m people and over half of the country’s GDP in the regions currently directly affected. Meanwhile we estimate that Russian GDP will contract by 7-8% this year, and inflation will accelerate to close to 30% by the end of 2022. For the rest of Europe, the impact will be felt via various channels, with the most significant so far being inflation on the back of high energy prices. If the EU were to ban imports of energy from Russia, or if Russia itself limits or stops gas exports to the EU, the trade impacts would be much more significant. The medium- and long-term outlook for Ukraine, Russia and the rest of Europe has been changed radically by the events of the last few weeks. For Ukraine, if one part of the country is occupied and the other part remains independent, economic outcomes will be very divergent, but the non-occupied part would see many refugees return, would receive massive Western financial support and could look forward to greater integration with the EU. For Russia, the economy will lose its access to Western technological transfer, and this cannot be fully compensated by China; an already meagre medium-term growth outlook has now deteriorated further. Meanwhile there are four main areas of structural change and lasting impact for the EU and Europe more broadly the EU will get more serious about defence, the green transition will gather pace, broader Eurasian economic integration will be unwound, and the EU accession prospects for countries in Southeast Europe could (and should) improve. |
| Keywords: | Ukraine, Russia, EU, US, sanctions, energy, CEE |
| JEL: | F51 E31 |
| Date: | 2022–03 |
| URL: | http://d.repec.org/n?u=RePEc:wii:pnotes:pn:59&r= |
| By: | Guillermo Ordoñez (University of Pennsylvania and NBER); Facundo Piguillem (EIEF and CEPR) |
| Abstract: | The flow of savings as a fraction of disposable income (saving rate) and the stock of savings as a fraction of total wealth (savings ratio) are tightly connected. We use a standard dynamic model to show that they may move in opposite directions when financial and/or human capital change dramatically. Making this link theoretically explicit provides an internally consistent measure of savings ratios based on saving rates and other publicly available data. We implement this measure for the four largest economies: U.S., China, Germany and Japan, and identify periods in which saving rates and savings ratios have moved in opposite directions. We find that those departures are not explained by capital gains, but instead by changes in the value of human capital. |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:eie:wpaper:2116&r= |
| By: | Rammer, Christian; Es-Sadki, Nordine |
| Abstract: | Obtaining indicators on innovation activities of firms has been a challenge in economic research for a long time. The most frequently used indicators - R&D expenditure and patents - provide an incomplete picture as they represent inputs and throughputs in the innovation process. Output measurement of innovation has strongly been relying on survey data such as the Community Innovation Survey (CIS), but suffers from several short-comings typical to sample surveys, including incomplete coverage of the firm sector, low timeliness and limited comparability across industries and firms. The availability of big data sources has initiated new efforts to collect innovation data at the firm level. This paper discusses recent attempts of using digital big data sources on firms for generating firm-level innovation indicators, including Websites and social media. It summarises main challenges when using big data and proposes avenues for future research. |
| Keywords: | Big data,innovation indicators,CIS,literature review |
| JEL: | O30 C81 |
| Date: | 2022 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:zewdip:22007&r= |
| By: | Jon D. Wisman |
| Abstract: | John Maynard Keynes rejected the strict assumption of rational behavior embraced by neoclassical economists, providing causal importance to instincts, habits, and intuition. However, he mostly failed, as did they, to incorporate in his analysis that human decisions are frequently, if not most often, dependent upon the decisions of others. Further, and more particularly, he failed to grant importance to the fact that humans struggle for the recognition and social status necessary for social and self-respect. Thorstein Veblen also rejected the neoclassical expression of rational behavior, and 37 years before Keynes's The General Theory, focused upon interdependence in decision making and status competition by drawing upon Charles Darwin's theory of evolutionary biology to ground in science his theory of human behavior. Had Keynes read Veblen's The Theory of the Leisure Class (1899), he may have recognized the need in his own theory to account for interpersonal decision making and especially of incorporating the struggle for social recognition and status. This article examines how drawing upon aspects of Veblen's work would have enriched the explanatory power of Keynes's economics as well as that of those engaged in furthering Keynes's project. It concludes with reflections on the necessity that economic analysis, and social science generally, be constructed upon a scientifically-grounded conception of human behavior. |
| Keywords: | Marginal propensity to consume, Conspicuous consumption, Darwinism, Instinct, Status, Emulation |
| JEL: | B22 B41 E12 E71 |
| Date: | 2022 |
| URL: | http://d.repec.org/n?u=RePEc:amu:wpaper:2022-05&r= |
| By: | Mark Knell (NIFU); Simone Vannuccini (SPRU, University of Sussex) |
| Abstract: | This chapter is about radical innovation and disruptive technological change. Discovering the nature and mechanisms of disruptive technological change can help to understand the long-run dynamics of innovation and map profound transformation in socio-economic systems. The chapter considers four concepts essential for the understanding radical and disruptive technological change: long waves, techno-economic paradigms, general purpose technologies (GPTs), and disruptive technologies. We conclude with some insights on the emerging technologies in the latest techno-economic paradigm. The tools and concepts given here remain the cornerstone of a useful theory of innovation and change even in our current complex socio-technical landscape. |
| Keywords: | Radical innovation, Kondratiev, long wave cycle, Schumpeter, perennial gale of creative destruction, technological discontinuities, techno-economic paradigm, technological revolution, great surge of development, general purpose technology, disruptive technology, emerging technology |
| JEL: | O31 |
| Date: | 2022–04–04 |
| URL: | http://d.repec.org/n?u=RePEc:jrp:jrpwrp:2022-005&r= |
| By: | Ralph Koijen (University of Chicago); Motohiro Yogo (Princeton University) |
| Abstract: | Variable annuities, which package mutual funds with minimum return guarantees over long horizons, accounted for $1.5 trillion or 35% of U.S. life insurer liabilities in 2015. Sales decreased and fees increased during the global financial crisis, and insurers made guarantees less generous or stopped offering guarantees to reduce risk exposure. These effects persist in the low interest rate environment after the global financial crisis, and variable annuity insurers suffered large equity drawdowns during the COVID-19 crisis. We develop and estimate a model of insurance markets in which financial frictions and market power determine pricing, contract characteristics, and the degree of market completeness. |
| Keywords: | Insurance, Financial Crisis, Risk |
| JEL: | G22 G32 |
| Date: | 2022–03 |
| URL: | http://d.repec.org/n?u=RePEc:pri:econom:2022-3&r= |
| By: | Thereza Balliester Reis (Department of Economics, SOAS University of London) |
| Abstract: | Financial inclusion (FI) has become a key policy for poverty reduction in developing countries. However, there is no consensus on what FI comprises, who should be included and who will deliver this inclusion. The different interpretations of the concept may lead to implementations that do not correspond to the original intent. Moreover, by making certain assumptions implicit, FI may be a policy that merely replicates microfinance initiatives. In order to illustrate the inconsistencies in the existing literature, this article displays a literature review of 67 studies about the definition of FI. Built on the systematic review approach, studies are selected based on inclusion and exclusion criteria, as well as an explicit search strategy, thus providing a reliable and replicable outcome. After identifying the studies, we present a critical discussion about the underlying theoretical and empirical implications of the definitions of FI. This assessment enables a better understanding of FI and its framing. To conclude, a plain definition is suggested to ensure transparency and comparability of FI research. |
| Keywords: | Financial inclusion; financial development; systematic review; definition |
| JEL: | B50 G50 O12 |
| Date: | 2021–12 |
| URL: | http://d.repec.org/n?u=RePEc:soa:wpaper:246&r= |
| By: | Kara Reynolds |
| Abstract: | Between 2018 and 2020, the United States imposed massive new tariffs under a variety of trade laws, most notably the Section 301 tariffs against China. This new protection is extensive in magnitude and breadth; tariffs range from 10 to 30 percent and cover 50 percent of US consumer imports from China and 16 percent of total US consumer imports. Using data from the Consumer Expenditure Survey, I find that the new taxes are highly regressive; the lowest income consumers pay more than 1.2 percent of their after-tax income to fight these trade wars, while the wealthiest consumers pay just 0.18 percent of their after-tax income. I find additional evidence that women and parents are paying an unfair share of efforts to put America first. |
| Keywords: | Tariffs, Section 301, Consumer Loss |
| JEL: | F13 F61 F14 |
| Date: | 2022 |
| URL: | http://d.repec.org/n?u=RePEc:amu:wpaper:2022-02&r= |
| By: | Weshah Razzak (School of Economics and Finance, Massey University, Palmerston North) |
| Abstract: | We show that the share of oil in real output is relatively large, nearly 60 percent. Effectively, the government of Iraq– not the people – owns and manages the oil wealth. This dependence on oil as the main income is also consistent with the rentier economy and the Resource Curse phenomenon. The interest elasticity of oil production with respect to global oil consumption is greater than one. This high dependence on oil as income and the sensitivity of oil production to global oil consumption would not be sustainable in the future, where there is a growing global aversion to hydrocarbon production and consumption. The developed countries aim at zero carbon by 2050. We show that the expected decline in global consumption of oil has an adverse effect on the Iraqi economy. We provide stress tests and produce dynamic stochastic projections from 2020-2050 under a number of adverse scenarios. A quick transfer of ownership of oil to the Iraqi people should guarantee a functional democracy and a better future for the Iraqis. |
| Keywords: | Iraq, oil share, private ownership, FM-OLS, VAR, Stress Testing |
| JEL: | C1 C53 D24 E17 Q3 Q34 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:mas:dpaper:2102&r= |
| By: | Banerjee, Sudipto (National Institute of Public Finance and Policy); Sane, Renuka (National Institute of Public Finance and Policy); Sharma, Srishti (National Institute of Public Finance and Policy); Suresh, Karthik (National Institute of Public Finance and Policy) |
| Abstract: | This paper presents the history of disinvestment in India between March 1991 to December 2020. The history can be divided into four broad phases: 1991-1999 (Phase I), 1999-2004 (Phase II), 2004-2014 (Phase III), and 2014-2020 (Phase IV). There have been relatively few strategic sales, and governments have largely preferred the minority sale route. |
| Date: | 2022–03 |
| URL: | http://d.repec.org/n?u=RePEc:npf:wpaper:22/373&r= |
| By: | Kilström, Matilda (Stockholm School of Economics); Roth, Paula (Research Institute of Industrial Economics (IFN)) |
| Abstract: | In this paper, we study the role of risk-sharing in entrepreneurship-driven innovation. Studying entrepreneurship and innovation entails modeling an occupational choice and an effort choice. Risk-sharing may increase the number of individuals who become entrepreneurs by limiting the downside risk. The effort of entrepreneurs may, however, be hampered by high risk-sharing if this limits the returns faced by successful entrepreneurs relative to unsuccessful entrepreneurs. We construct a simple theoretical model where risk-sharing may be either private or provided through the welfare state by means of taxation. We show that, in addition to the occupational and effort choice dimensions, the level of public risk-sharing also matters for the characteristics of entrepreneurs. |
| Keywords: | Innovation; Institutions; Growth risk-sharing; Inequality; Incentives |
| JEL: | D64 E02 O30 O33 O43 O47 |
| Date: | 2021–02–16 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:iuiwop:1424&r= |
| By: | Teng Andrea Xu; Jiahua Xu |
| Abstract: | Decentralized Finance (DeFi) services are moving traditional financial operations to the Internet of Value (IOV) by exploiting smart contracts, distributed ledgers, and clever heterogeneous transactions among different protocols. The exponential increase of the Total Value Locked (TVL) in DeFi foreshadows a bright future for automated money transfers in a plethora of services. In this short survey paper, we describe the business model for different DeFi domains - namely, Protocols for Loanable Funds (PLFs), Decentralized Exchanges (DEXs), and Yield Aggregators. We claim that the current state of the literature is still unclear how to value thousands of different competitors (tokens) in DeFi. With this work, we abstract the general business model for different DeFi domains and compare them. Finally, we provide open research challenges that will involve heterogeneous domains such as economics, finance, and computer science. |
| Date: | 2022–02 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2202.07742&r= |
| By: | Marco Del Negro; Aidan Gleich; Shlok Goyal; Alissa Johnson; Andrea Tambalotti |
| Abstract: | Yesterday’s post analyzed the drivers of the surge in inflation over the course of 2021 through the lens of the New York Fed DSGE model. In today’s post, we use the model to study how alternative monetary policy strategies might contribute to bringing inflation back down to 2 percent. Our main finding is that there is no monetary silver bullet. Due to a flat Phillips curve—a well–documented feature of the economic environment of the last three decades—monetary policy can only achieve faster disinflation at a considerable cost in terms of forgone economic activity. This is true regardless of the systematic approach followed by the central bank in the model to pursue its objective. |
| Keywords: | DSGE; inflation; macroeconomics; monetary policy |
| JEL: | E2 E52 |
| Date: | 2022–03–02 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fednls:93783&r= |
| By: | Mahmoud Fatouh (University of Essex); Ioana Neamtu (Bank of England); Sweder van Wijnbergen (University of Amsterdam) |
| Abstract: | We assess the impact of contingent convertible (CoCo) bonds and the wealth transfers they imply conditional on conversion on the risk-taking behaviour of the issuing bank. We also test for regulatory arbitrage: do banks try to maintain risk-taking incentives by issuing CoCo bonds, when regulators reduce them through higher capitalization ratios? While we test for, and reject sample selection bias, we show that CoCo bonds issuance has a strong positive effect on risk-taking behaviour, particularly with conversion parameters that reduce dilution of existing shareholders upon conversion. Higher economic volatility amplifies the impact of CoCo bonds on risk-taking. |
| Keywords: | contingent convertible bonds, risk-taking, bank capital structure, selection bias |
| JEL: | G01 G11 G21 G32 |
| Date: | 2022–02–27 |
| URL: | http://d.repec.org/n?u=RePEc:tin:wpaper:20220017&r= |
| By: | Hans Henrik Sievertsen; Sarah Smith |
| Abstract: | Women’s voices are likely to be even more absent from economic debates than headline figures on female under-representation suggest. Focusing on a panel of leading economists we find that men are more willing than women to express an opinion and are more certain and more confident in their opinions, including in areas where both are experts. Women make up 21 per cent of the panel but 19 per cent of the opinions expressed and 14 per cent of strong opinions. We discuss implications for the economics profession and for promoting a genuine diversity of views. |
| Date: | 2022–03–07 |
| URL: | http://d.repec.org/n?u=RePEc:bri:uobdis:22/761&r= |
| By: | Andersson, Martin (Department of Economic History, Lund University); Palacio, Andrés (Department of Economic History, Lund University); von Borries, Alvaro (Department of Human Geography, Lund University) |
| Abstract: | Episodes of economic shrinking have declined since the 1980s in Latin America and the Caribbean (LAC). This paper asks why. We propose that the reduction in the frequency and rate of shrinking reveals the dynamic transition from being natural states towards becoming open access societies. To provide empirical support to the argument, we rest on the notion of social capabilities. Hence, societies that invest in their social capabilities are more likely to reduce the frequency of shrinking and become better off in the long run. Using survival models, we test three capabilities (transformative, distributive and regulative) that, we argue, reflect an increase in the resilience to economic shrinking. The results suggest that the transformative capability has not lowered the risk of shrinking in the region. Neither has the distributive capability despite the increases in productive employment during the 2000s. In contrast, regulative capability seems to reduce the risk of shrinking. We conclude that the institutional transformations in LAC are part of the explanation of why economic shrinking has receded. Compared to previous decades, this is an essential step towards open access societies. However, the persistent dependence on a few natural resources seems to hinder progressive transformation and remains a menace to sustainable catching up of the countries in the region. |
| Keywords: | economic shrinking; income convergence; natural states; social capabilities |
| JEL: | O47 O57 |
| Date: | 2022–02–11 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:luekhi:0236&r= |
| By: | Valerio Astuti |
| Abstract: | In Ref. [1] the authors show that under minimal hypothesis, in a free, growing economy the wealth concentration as measured by the Gini coefficient $G_t$ is bounded to reach its maximum, $G_t \to 1$. Under their hypothesis the wealth growth is on average proportional to the wealth itself, thus leaving no room for a salary component independent of the individual's wealth. In addition the state of zero wealth is absorbing, meaning that once an individual loses all its wealth, it is forced to remain in that state. Here we further generalize the result of Ref. [1], introducing a salary component of wealth growth and thus allowing for the possibility to escape from the state of zero wealth. We arrive at the same conclusions of the previous study, unless a minimum salary component is introduced and kept proportional to the average wealth. |
| Date: | 2022–02 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2202.05789&r= |
| By: | Antoine Didisheim (Swiss Finance Institute, UNIL); Bryan T. Kelly (Yale SOM; AQR Capital Management, LLC; National Bureau of Economic Research (NBER)); Semyon Malamud (Ecole Polytechnique Federale de Lausanne; Centre for Economic Policy Research (CEPR); Swiss Finance Institute) |
| Abstract: | We introduce a methodology for designing and training deep neural networks (DNN) that we call “Deep Regression Ensembles" (DRE). It bridges the gap between DNN and two-layer neural networks trained with random feature regression. Each layer of DRE has two components, randomly drawn input weights and output weights trained myopically (as if the final output layer) using linear ridge regression. Within a layer, each neuron uses a different subset of inputs and a different ridge penalty, constituting an ensemble of random feature ridge regressions. Our experiments show that a single DRE architecture is at par with or exceeds state-of-the-art DNN in many data sets. Yet, because DRE neural weights are either known in closed-form or randomly drawn, its computational cost is orders of magnitude smaller than DNN. |
| Keywords: | Deep learning, Neural network, Random features, Ensembles |
| Date: | 2022–03 |
| URL: | http://d.repec.org/n?u=RePEc:chf:rpseri:rp2220&r= |
| By: | Pim Pinitjitsamut; Wisarut Suwanprasert |
| Abstract: | This paper examines informal loans in Thailand using household survey data covering 4,800 individuals in 12 provinces across Thailand’s six regions. We proceed in three steps. First, we establish stylized facts about informal loans. Second, we estimate the effects of household characteristics on the decision to take out an informal loan and the amount of informal loan. We find that age, the number of household members, their savings, and the amount of existing formal loans are the main factors that drive the decision to take out an informal loan. The main determinations of the amount of informal loan are the interest rate, savings, the amount of existing formal loans, the number of household members, and personal income. Third, we train three machine learning models, namely K–Nearest Neighbors, Random Forest, and Gradient Boosting, to predict whether an individual will take out an informal loan and the amount an individual has borrowed through informal loans. We find that the Gradient Boosting technique with the top 15 most important features has the highest prediction rate of 76.46 percent, making it the best model for data classification. Generally, Random Forest outperforms the other two algorithms in both classifying data and predicting the amount of informal loans. |
| Keywords: | Informal Loans; Machine Learning; Shadow Economy; Thailand; Loan Sharks |
| JEL: | E26 G51 O16 O17 |
| Date: | 2022–02 |
| URL: | http://d.repec.org/n?u=RePEc:pui:dpaper:173&r= |
| By: | Olivier Armantier; Argia M. Sbordone; Giorgio Topa; Wilbert Van der Klaauw; John C. Williams |
| Abstract: | We propose a new approach to assessing the anchoring of inflation expectations using “strategic surveys.” Namely, we measure households’ revisions in long-run inflation expectations after they are presented with different economic scenarios. A key advantage of this approach is that it provides a causal interpretation in terms of how inflation events affect long-run inflation expectations. We implement the method in the summer of 2019 and the spring-summer of 2021 when the anchoring of long-run inflation expectations was in question. We find that the risk of unanchoring of expectations was reasonably low in both periods, and that long-run inflation expectations were essentially as well anchored in August 2021 as in July 2019, before the COVID-19 pandemic. |
| Keywords: | inflation; expectations; anchoring; strategic surveys |
| JEL: | D12 D84 E31 E52 |
| Date: | 2022–02–01 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fednsr:93774&r= |
| By: | Kara Reynolds; Benjamin H. Liebman |
| Abstract: | Although trade wars have existed throughout modern history, there is little empirical evidence as to how countries choose which products to target for retaliatory tariffs. We develop a political economy model of trade policy to explain a country’s choice of product for retaliation and test the implications of this model using the choices of seven countries in two retaliation episodes: (1) the US imposition of steel and aluminum tariffs in 2018 and (2) the US passage of the Continued Dumping and Subsidy Offset Act (CDSOA) in 2000. The empirical results indicate that countries are more likely to sanction products with higher trade values and those in which they can extract terms-of-trade welfare, suggesting that trade wars move countries back to a terms-of-trade driven prisoner’s dilemma equilibrium. We find a significant amount of heterogeneity in the degree to which countries consider the political importance of producers when developing their retaliation list; for example, only the EU and Canada targeted products produced in politically important locales in 2018. |
| Keywords: | retaliation, trade wars, political economy of trade protection |
| JEL: | F13 |
| Date: | 2022 |
| URL: | http://d.repec.org/n?u=RePEc:amu:wpaper:2022-01&r= |
| By: | Sarracino, Francesco; O'Connor, Kelsey J. |
| Abstract: | We propose a measure of well-being efficiency to assess countries' ability to transform inputs into subjective well-being (Cantril ladder). We use the six inputs (real GDP per capita, healthy life expectancy, social support, freedom of choice, absence of corruption, and generosity) identified in the World Happiness Reports and apply Data Envelopment Analysis to a sample of 126 countries. Efficiency scores reveal that high ranking subjective well-being countries, such as the Nordics, are not strictly the most efficient ones. Also, the scores are uncorrelated with economic efficiency. This means that the implicit assumption that economic efficiency promotes well-being is not supported. Well-being efficiency can be improved by changing the amount (scale) or composition of inputs and their use (technical efficiency). For instance countries with lower unemployment, and greater healthy life expectancy and optimism are more efficient. |
| Keywords: | subjective well-being,World Happiness Report,efficiency,Data Envelopment Analysis |
| JEL: | I31 E23 D60 O47 O15 |
| Date: | 2022 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:glodps:1061&r= |
| By: | Halvarsson, Daniel (Ratio Institute); Lark, Olga (Department of Economics, Lund University); Gustavsson Tingvall, Patrik (National Board of Trade, Södertörn University) |
| Abstract: | In this paper, we study foreign ownership as a vehicle for transferring gender norms across international borders. Specifically, we analyze how the wage differential between men and women in Swedish firms is affected by the degree of gender inequality in the home country of foreign investors. The results suggest that gender norms of the home country matter—the gender wage gap in foreign-owned subsidiaries appears to increase with the degree of gender inequality prevailing in the investors' home market. This finding is identified from within job-spell variation in wages and proves robust across a series of specifications. |
| Keywords: | Foreign ownership; Gender inequality; Gender wage gap; Internationalization; Gender norms |
| JEL: | F66 J16 J31 |
| Date: | 2022–03–25 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:lunewp:2022_006&r= |
| By: | Ziheng Wang; Justin Sirignano |
| Abstract: | We develop a new continuous-time stochastic gradient descent method for optimizing over the stationary distribution of stochastic differential equation (SDE) models. The algorithm continuously updates the SDE model's parameters using an estimate for the gradient of the stationary distribution. The gradient estimate is simultaneously updated, asymptotically converging to the direction of steepest descent. We rigorously prove convergence of our online algorithm for linear SDE models and present numerical results for nonlinear examples. The proof requires analysis of the fluctuations of the parameter evolution around the direction of steepest descent. Bounds on the fluctuations are challenging to obtain due to the online nature of the algorithm (e.g., the stationary distribution will continuously change as the parameters change). We prove bounds for the solutions of a new class of Poisson partial differential equations, which are then used to analyze the parameter fluctuations in the algorithm. |
| Date: | 2022–02 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2202.06637&r= |
| By: | Pierre Koning (Vrije Universiteit Amsterdam); Paul Muller (Vrije Universiteit Amsterdam); Roger Prudon (Vrije Universiteit Amsterdam) |
| Abstract: | Workers with fixed-term contracts typically have worse health than workers with permanent contracts. We show that these differences in health translate into a substantially higher (30%) risk of applying for disability insurance (DI) in the Netherlands. Using unique administrative data on health and labor market outcomes of all employees in the Netherlands, we decompose this differential into: (i) selection of workers types into fixed-term contracts; (ii) the causal impact of temporary work conditions on worker health; (iii) the impact of differential employer incentives to reintegrate ill workers; and (iv) the differential impact of labor market prospects on the decision to apply for DI benefits. We find that selection actually masks part of the DI risk premium, whereas the causal impact of temporary work conditions on worker health is limited. At the same time, the differences in employer commitment during illness and differences in labor market prospects between fixed-term and permanent workers jointly explain more than 80% of the higher DI risk. |
| Keywords: | Disability Insurance, Temporary Work, Employer Incentives, Worker Health |
| JEL: | H53 J08 I1 |
| Date: | 2022–03–22 |
| URL: | http://d.repec.org/n?u=RePEc:tin:wpaper:20220024&r= |