nep-mac New Economics Papers
on Macroeconomics
Issue of 2023‒05‒29
25 papers chosen by
Daniela Cialfi
Universita' di Teramo

  1. It’s Baaack: The Surge in Inflation in the 2020s and the Return of the Non-Linear Phillips Curve By Pierpaolo Benigno; Gauti B. Eggertsson
  2. Does nominal wage stickiness affect fiscal multiplier in a two-agent new Keynesian model? By Ida, Daisuke; Okano, Mitsuhiro
  3. The Energy-Price Channel of (European) Monetary Policy By Gökhan Ider; Alexander Kriwoluzky; Frederik Kurcz; Ben Schumann
  4. Bank capitalization heterogeneity and monetary policy By Peter Paz
  5. The US, Economic News, and the Global Financial Cycle By Christoph E. Boehm; Niklas Kroner
  6. Carbon pricing and inflation volatility By Daniel Santabárbara; Marta Suárez-Varela
  7. Inflation Expectations and Misallocation of Resources: Evidence from Italy By Tiziano Ropele; Yuriy Gorodnichenko; Olivier Coibion
  8. Can We Use High-frequency Yield Data to Better Understand the Effects of Monetary Policy and Its Communication? Yes and No! By Jonathan Hambur; Qazi Haque
  9. The Quality-Adjusted Cyclical Price of Labor By Mark Bils; Marianna Kudlyak; Paulo Lins
  10. Modeling the impact of sanctions on inflation expectations By Matevosova Anastasia
  11. Construction and Analysis of Uncertainty Indices based on Multilingual Text Representations By Viktoriia Naboka-Krell
  12. A house price-at-risk model to monitor the downside risk for the spanish housing market By Gergely Ganics; María Rodríguez-Moreno
  13. Labor Market Effects of Global Supply Chain Disruptions By Mauricio Ulate; Jose P. Vasquez; Roman D. Zarate
  14. Drivers of Private Equity Activity across Europe: An East-West Comparison By Evzen Kocenda; Shivendra Rai
  15. Hedonic Prices and Quality Adjusted Price Indices Powered by AI By Patrick Bajari; Zhihao Cen; Victor Chernozhukov; Manoj Manukonda; Suhas Vijaykumar; Jin Wang; Ramon Huerta; Junbo Li; Ling Leng; George Monokroussos; Shan Wan
  16. Numerical Simulation of Reaching a Steady State: Effects of Economic Rents on Development of Economic Inequality By Harashima, Taiji
  17. Trade disruptions along the global supply chain By Alejandro G. Graziano; Yuan Tian
  18. Search Theory of Imperfect Competition with Decreasing Returns to Scale By Guido Menzio
  19. Trade Credit and Exchange Rate Risk Pass Through By Bryan Hardy; Felipe E. Saffie; Ina Simonovska
  20. Sahel social cohesion research in Burkina Faso and Niger: Research brief By Pul, Hippolyt; Meinzen-Dick, Ruth Suseela; Konde, Bernard B.; Zogho, Donatus; Kuuchille, Emmanuel V.; McCarthy, Nancy; Marivoet, Wim
  21. Is Power to Gas always Beneficial ? The Implications of Ownership Structure By Camille Megy; Olivier Massol
  22. A Heat-Jarrow-Morton framework for energy markets: a pragmatic approach By Matteo Gardini; Edoardo Santilli
  23. Common Correlated Effects Estimation of Nonlinear Panel Data Models By Liang Chen; Minyuan Zhang
  24. Estimation of Characteristics-based Quantile Factor Models By Liang Chen; Juan Jose Dolado; Jesus Gonzalo; Haozi Pan
  25. Why Students Trade? The Analysis of Young Investors behavior By Jones Pontoh

  1. By: Pierpaolo Benigno; Gauti B. Eggertsson
    Abstract: This paper proposes a non-linear New Keynesian Phillips curve (Inv-L NK Phillips Curve) to explain the surge of inflation in the 2020s. Economic slack is measured as firms' job vacancies over the number of unemployed workers. After showing empirical evidence of statistically significant nonlinearities, we propose a New Keynesian model with search and matching frictions, complemented by a form of wage rigidity, in the spirit of Phillips (1958), that generates strong nonlinearities. Policy implications include the thesis that appropriate monetary policy can bring inflation down without a significant recession and that the recent inflationary surge was mostly generated by a labor shortage -- i.e. an exceptionally tight labor market.
    JEL: E12 E3 E30 E40 E50 E60
    Date: 2023–04
  2. By: Ida, Daisuke; Okano, Mitsuhiro
    Abstract: This study examines the effect of nominal wage stickiness on the fiscal multiplier in a two-agent new Keynesian model. We find that under fully flexible nominal wages, an increased share of liquidity-constrained (LC) consumers amplifies the fiscal multiplier in the cases of money-financed (MF) and debt-financed (DF) regimes. In the case of sticky nominal wages, an increase in the share of LC consumers drastically decreases the MF fiscal multiplier. We also demonstrate that even in the presence of nominal wage stickiness and LC consumers, the fiscal multiplier under an MF regime outperforms that under a DF regime. Furthermore, this paper shows that under the fiscal stimulus via a tax cut, an increased share of LC consumers magnifies the fiscal multiplier in the cases of MF and DF regimes. Finally, the degree of nominal price stickiness and the size of government spending are crucial in assessing the effect of fiscal stimulus on output.
    Keywords: Money-financed regime; Debt-financed regime; Nominal wage stickiness; Liquidity-constrained consumers; Two-agent new Keynesian model;
    JEL: E52 E58
    Date: 2023–05–08
  3. By: Gökhan Ider; Alexander Kriwoluzky; Frederik Kurcz; Ben Schumann
    Abstract: This study examines whether central banks can combat inflation that is caused by rising energy prices. By using a high-frequency event study and a Structural Vector Autoregression, we find evidence that the European Central Bank (ECB) and the Federal Reserve (Fed) are capable of doing so by affecting domestic and global energy prices. This “energy-price channel” of monetary policy plays an important role in the transmission mechanism of monetary policy. As many major sources of energy, such as oil, are priced in dollars, fluctuations in the domestic exchange rate vis-a-vis the dollar crucially shapes the transmission of monetary policy to energy prices. On the one hand an appreciation of the euro against the dollar lowers local energy prices (in euro) through cheaper imports. On the other hand lower import prices raise energy demand and thereby increase global energy prices (in dollars). Our counterfactual analysis demonstrates that both effects are present, but the latter effect is stronger than the former.
    Keywords: Inflation, energy prices, monetary policy transmission mechanism
    JEL: C22 E31 E52 Q43
    Date: 2023
  4. By: Peter Paz (Banco de España)
    Abstract: This paper shows that heterogeneity in bank capitalization ratios plays a crucial role in the transmission of monetary policy to bank lending. First, I offer new empirical evidence on how banks’ lending responses to monetary policy shocks depend on their capitalization ratios. Highly capitalized banks reduce their lending more after a monetary tightening, even after controlling for bank liquidity, size and market power in the deposit market. I also document how highly capitalized banks have a riskier portfolio, as measured by loan charge-off rates, and default rates on their loans increase relatively more after a tightening in monetary policy. I then construct a dynamic macroeconomic model that rationalizes the empirical evidence through the interaction of the heterogeneous recovery technologies of banks facing a risk-weighted capital constraint. In particular, after an increase in the policy rate, the model predicts that loan rates and default probabilities increase in both sectors. Highly capitalized banks with a riskier portfolio are more sensitive because the risk-weighted capital constraint affects them more, so they contract lending more. In a counterfactual analysis, I find higher capital requirements amplify the effects of monetary policy.
    Keywords: monetary policy, banks, heterogeneity
    JEL: E43 E52 E58 E60 G21
    Date: 2022–10
  5. By: Christoph E. Boehm; Niklas Kroner
    Abstract: We provide evidence for a causal link between the US economy and the global financial cycle. Using intraday data, we show that US macroeconomic news releases have large and significant effects on global risky asset prices. Stock price indexes of 27 countries, the VIX, and commodity prices all jump instantaneously upon news releases. The responses of stock indexes co-move across countries and are large - often comparable in size to the response of the S&P 500. Further, US macroeconomic news explains on average 23 percent of the quarterly variation in foreign stock markets. The joint behavior of stock prices, bond yields, and risk premia suggests that systematic US monetary policy reactions to news do not drive the estimated effects. Instead, the evidence points to a direct effect on investor’ risk-taking capacity. Our findings show that a byproduct of the United States' central position in the global financial system is that news about its business cycle has large effects on global financial conditions.
    Keywords: Global Financial Cycle; Macroeconomic announcements; International spillovers; Stock returns; VIX; Monetary Policy; High-frequency event study
    JEL: E44 E52 F40 G12 G14 G15
    Date: 2023–02–25
  6. By: Daniel Santabárbara (Banco de España); Marta Suárez-Varela (Banco de España)
    Abstract: Carbon pricing initiatives, designed to increase the relative prices of greenhouse gas-intensive goods and services, could not only push up CPI inflation but also affect its volatility. Existing empirical literature has only found that carbon pricing schemes are generally associated to a transitory effect on the level of inflation. This paper assesses empirically the effects of carbon pricing on inflation volatility for both carbon tax and cap-and-trade schemes (also known as emission trading systems). Our work finds strong evidence that cap-and-trade schemes are associated with larger volatility in CPI headline inflation, while no significant effect is found in the case of carbon taxes. This effect seems to feed only through the energy component, and does not seem to affect the volatility of core inflation. In addition, we find that under cap-and-trade schemes, both the increase in the underlying price of emissions and the expansion in the activities covered by these initiatives are associated with greater inflation volatility. These findings have important policy implications, given that inflation volatility could complicate the conduct of monetary policy. Since the ambition to mitigate climate change in the years to come is expected to be implemented through broader coverage of carbon pricing, central banks should monitor those developments closely.
    Keywords: carbon pricing, emission trading systems, carbon tax, inflation, inflation volatility
    JEL: E31 E32 E52 E58 Q48 Q58
    Date: 2022–09
  7. By: Tiziano Ropele; Yuriy Gorodnichenko; Olivier Coibion
    Abstract: Using Italian data that includes both inflation forecasts of firms and external information on their balance sheets, we study the causal effect of changes in the dispersion of beliefs about future inflation on the misallocation of resources. We find that as disagreement increases, so does misallocation. In times of low inflation, the aggregate TFP loss of the dispersed expectations-induced misallocation is low, but we argue that it likely becomes quite significant in times of high inflation.
    JEL: E3 E5 E7
    Date: 2023–04
  8. By: Jonathan Hambur (Reserve Bank of Australia); Qazi Haque (University of Adelaide)
    Abstract: Understanding the effects of monetary policy and its communication is crucial for a central bank. This paper explores a new approach to identifying the effects of monetary policy using high-frequency data around monetary policy decisions and other announcements that allows us to explore different facets of monetary policy, specifically: current policy action; signalling or forward guidance about future rates; and the effect on uncertainty and term premia. The approach provides an intuitive lens through which to understand how policy and its communication affected expectations for rates and risks during certain historical periods, and more generally. For example, it suggests that: (i) signalling/forward guidance shocks tended to raise expected future policy rates in the mid-2010s as the RBA highlighted rising risks in housing markets; (ii) COVID-19-era monetary policy worked mainly through affecting term premia rather than expectations for future policy rates, unlike pre-COVID-19 policy; and (iii) shocks to the expected path of rates are predictable based on data available at the time, which suggests that markets systematically misunderstand how the RBA reacts to data, highlighting the importance of clear communication. We also explore the macroeconomic effects of these different shocks. The effects of shocks to current policy are similar to those estimated in previous papers, and existing issues such as the 'price puzzle' remain, while the effects of other shocks are imprecisely estimated. Although the approach provides little new information on the macroeconomic effects of monetary policy, it does highlight the importance of these other facets of policy in moving interest rates and suggests additional work in this space could be valuable.
    Keywords: high-frequency data; affine term structure model; multidimensional policy shocks; monetary policy transmission
    JEL: C58 E43 E52 E58
    Date: 2023–05
  9. By: Mark Bils; Marianna Kudlyak; Paulo Lins
    Abstract: Typical measures of wages, such as average hourly earnings, fail to capture cyclicality in the effective cost of labor in the presence of (i) cyclical fluctuations in the quality of worker-firm matches, or (ii) wages being smoothed within employment matches. To address both concerns, we estimate cyclicality in labor’s user cost exploiting the longrun wage in a match to control for match quality. Using NLSY data for 1980 to 2019, we identify three channels by which hiring in a recession affects user cost: It lowers the new-hire wage; it lowers wages going forward in the match; but it also results in higher subsequent separations. All totaled, we find that labor’s user cost is highly procyclical, increasing by more than 4% for a 1 pp decline in the unemployment rate. For large recessions, like the Great Recession, that implies a decline in the price of labor of about 15%.
    Keywords: wages; wage rigidity; cyclicality
    JEL: E24 E32 J30 J41 J63 J64
    Date: 2023–03–20
  10. By: Matevosova Anastasia (Department of Economics, Lomonosov Moscow State University)
    Abstract: In 2022, Russian economy faced unprecedented sanctions pressure from the collective West. Against this background, the government and the Central Bank need to constantly monitor the economic situation in the Russian Federation in order to take timely and effective measures. A high-frequency indicator of inflation expectations based on big data can help in the solution of this problem. In the article the author presents significant shortcomings leading to the inapplicability of existing common approaches to assessing inflation expectations under sanctions. Based on the constructed high-frequency indicators of inflation expectations, contribution of sanctions to the formation of inflation expectations and sanctions concerns, the impact of sanctions on the inflation expectations of Russian population is analyzed.
    Keywords: sanctions, inflation expectations, high-frequency indicator, inflation
    JEL: F51 E31 D84 C55 C82
    Date: 2023–05
  11. By: Viktoriia Naboka-Krell (University Giessen)
    Abstract: The work by Baker et al. (2016), who propose a dictionary based method and estimate the level of economic policy uncertainty (EPU) based on the occurrence of specific terms in ten leading newspapers in the USA, is among the first ones to detect the potential of text data in economic research. Following this line of research, this paper proposes automated approaches to construction of EPU indices for different countries based on newspapers’ texts. First, multilingual fastText word embeddings and BERT text embeddings are used in order to define relevant EPU key words and EPU related articles, respectively. Further, multilingual conceptualized topic modeling introduced by Bianchi et al. (2021) is performed and EPU related topics are detected. It is shown that the constructed EPU indices based on fastText embeddings Granger cause the economic activity in all of the considered countries, namely Germany, Russia, and Ukraine. Also, some of the topics uncovered by multilingual conceptualized topic modeling have proved to Granger cause the economic activity in all of the considered countries.
    Keywords: text-as-data, fastText emeddings, BERT, economic policy uncertainty, natural language processing
    Date: 2023
  12. By: Gergely Ganics (Banco de España); María Rodríguez-Moreno (Banco de España)
    Abstract: We present a house price-at-risk (HaR) model that fits the historical developments in the Spanish housing market. By means of quantile regressions we show that a model including quarterly real house price growth, a misalignment measure and a consumer confidence index is able to accurately forecast the developments in the Spanish housing market up to two years ahead. We also show how the HaR model can be used to monitor the downside risk.
    Keywords: house price-at-risk, house prices, quantile regressions
    JEL: C31 E37 G01 R31
    Date: 2022–12
  13. By: Mauricio Ulate; Jose P. Vasquez; Roman D. Zarate
    Abstract: We examine the labor market consequences of recent global supply chain disruptions induced by COVID-19. Specifically, we consider a temporary increase in international trade costs similar to the one observed during the pandemic and analyze its effects on labor market outcomes using a quantitative trade model with downward nominal wage rigidities. Even omitting any health related impacts of the pandemic, the increase in trade costs leads to a temporary but prolonged decline in U.S. labor force participation. However, there is a temporary increase in manufacturing employment as the United States is a net importer of manufactured goods, which become costlier to obtain from abroad. By contrast, service and agricultural employment experience temporary declines. Nominal frictions lead to temporary unemployment when the shock dissipates, but this depends on the degree of monetary accommodation. Overall, the shock results in a 0.14% welfare loss for the United States. The impact on labor force participation and welfare across countries varies depending on the initial degree of openness and sectoral deficits.
    Keywords: supply chain disruptions; trade costs; downward nominal wage rigidity; Supply Chain
    JEL: F10 F11 F16 F40 F66
    Date: 2023–02–27
  14. By: Evzen Kocenda (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague; Institute of Information Theory and Automation of the CAS, Prague; CESifo Munich; IOS Regensburg.); Shivendra Rai (Institute of Economic Studies, Charles University, Prague, Czech Republic)
    Abstract: We investigate the key macroeconomic and institutional determinants of fundraising and investment activities and compare them across Europe, covering 13 Central and Eastern European (CEE) and 16 Western European (WE) countries. Five macroeconomic variables and nineteen institutional variables are selected. These variables are studied using panel data analysis with fixed effects and random effects models over an eleven-year observation period (2010-2020). Bayesian Model Averaging (BMA) is applied to select the key variables. Our results suggest that macroeconomic variables have no significant impact on fundraising and investment activity in either region. Investment activity is a significant driver of fundraising across Europe. Similarly, fundraising and divestment activity are significant drivers of investments across Europe. Institutional variables, however, affect fundraising and investment activity differently. While investment freedom has a significant effect on funds raised in the WE and CEE countries, government integrity and trade freedom are both significant determinants of investments in both European regions. In addition, the results demonstrate that, in contrast to the WE region, fundraising in the CEE region is not country specific.
    Keywords: Private equity (PE), Fundraising, Investment, Central and Eastern Europe (CEE), Western Europe (WE), Bayesian Model Averaging (BMA)
    JEL: C11 C23 C52 E22 G15 G24 G28 O16
    Date: 2023–05
  15. By: Patrick Bajari; Zhihao Cen; Victor Chernozhukov; Manoj Manukonda; Suhas Vijaykumar; Jin Wang; Ramon Huerta; Junbo Li; Ling Leng; George Monokroussos; Shan Wan
    Abstract: Accurate, real-time measurements of price index changes using electronic records are essential for tracking inflation and productivity in today's economic environment. We develop empirical hedonic models that can process large amounts of unstructured product data (text, images, prices, quantities) and output accurate hedonic price estimates and derived indices. To accomplish this, we generate abstract product attributes, or ``features, '' from text descriptions and images using deep neural networks, and then use these attributes to estimate the hedonic price function. Specifically, we convert textual information about the product to numeric features using large language models based on transformers, trained or fine-tuned using product descriptions, and convert the product image to numeric features using a residual network model. To produce the estimated hedonic price function, we again use a multi-task neural network trained to predict a product's price in all time periods simultaneously. To demonstrate the performance of this approach, we apply the models to Amazon's data for first-party apparel sales and estimate hedonic prices. The resulting models have high predictive accuracy, with $R^2$ ranging from $80\%$ to $90\%$. Finally, we construct the AI-based hedonic Fisher price index, chained at the year-over-year frequency. We contrast the index with the CPI and other electronic indices.
    Date: 2023–04
  16. By: Harashima, Taiji
    Abstract: It is not easy to numerically simulate the path to a steady state because there is no closed form solution in dynamic economic growth models in which households behave generating rational expectations. In contrast, it is easy if households are supposed to behave under the MDC (maximum degree of comfortability)-based procedure to reach a steady state where MDC indicates the state at which a household feels most comfortable with its combination of incomes and assets. In this paper, I simulate the development of economic inequality when households obtain economic rents heterogeneously and behave under the MDC-based procedure. The results of simulations indicate that if a government does not intervene, the level of economic inequality continues to increase, but if it intervenes appropriately, households can reach a stabilized (steady) state that is not approximately but “purely” optimal in the sense that they can feel they are at MDC.
    Keywords: Balanced growth path; Economic rent; Economic inequality; Government transfer; Heterogeneity; Simulation; Steady state
    JEL: C60 D63 E10 H30 I30
    Date: 2023–04–27
  17. By: Alejandro G. Graziano; Yuan Tian
    Abstract: In 2020, a pandemic generated by a novel virus caused a large and abrupt decline in world trade, only comparable within the last half-century to the Great Trade Collapse during the 2008-09 Financial Crisis. This collapse followed naturally from the difficulty of locally producing, transporting, and consuming goods in the affected regions worldwide. In this paper, we study the impact of these disruptive local shocks on international trade flows during the COVID-19 pandemic. Using rich product-level import data from Colombia, we first show that import collapse at the onset of the pandemic was due to a decrease in import quantities, and the import recovery in later periods was partially explained by a rise in both foreign export prices and shipping costs. Using smartphone data tracking local human mobility changes to identify local shocks, we decompose the trade effects into shocks originating from exporter cities, seaports, and importer cities. We find that while the decline in quantity was driven by both changes in exporter and importer shocks, the increase in price was entirely driven by exporter shocks. Using data on port calls made by container ships, we document a decline in port productivity during the pandemic. We show that mobility changes at port locations induced a decline in port efficiency and a rise in freight costs. We also document a positive correlation between product-level domestic inflation and mobility shocks to foreign exporters.
    Keywords: International trade, local shocks, COVID-19 pandemic, shipping costs, mobility, supply chain, inflation
    Date: 2023
  18. By: Guido Menzio
    Abstract: I study a version of the search-theoretic model of imperfect competition by Burdett and Judd (1983) in which sellers face a strictly increasing rather than a constant marginal cost of production. The equilibrium exists and is unique, and its structure depends on the extent of search frictions. If search frictions are large enough, the price distribution is non-degenerate and atomless. If search frictions are neither too large nor too small, the price distribution is non-degenerate with an atom at the lowest price. If search frictions are small enough, the price distribution is degenerate. The equilibrium is efficient if and only if the price distribution is degenerate and, hence, if and only if search frictions are small enough. In contrast, in Burdett and Judd (1983), the equilibrium price distribution is always non-degenerate and atomless and the equilibrium is always efficient. As in Burdett and Judd (1983), the equilibrium goes from monopolistic to competitive as search frictions decline.
    JEL: D43 D83 J31
    Date: 2023–04
  19. By: Bryan Hardy; Felipe E. Saffie; Ina Simonovska
    Abstract: We show that trade credit mitigates exchange rate risk pass through along supply chains. We develop a theory of trade credit provision along supply chains that involve large intermediate-good suppliers and small final-good producers, both of which face bank borrowing constraints. Motivated by empirical findings, we assume that large suppliers borrow in foreign currency, while small final-good producers borrow in domestic currency at higher rates. Trade credit loosens borrowing constraints and allows for higher production scale. Additionally, the model predicts that unconstrained suppliers fully absorb increasing costs of borrowing in foreign currency when domestic currency depreciates: specifically, suppliers settle for lower profits but maintain unchanged trade credit lines with their trade partners. We verify the model's predictions using firm-level data for over 11, 000 large firms in 19 emerging markets over the 2004-2020 period.
    JEL: E30 F2 F3 F4 G15 G3
    Date: 2023–03
  20. By: Pul, Hippolyt; Meinzen-Dick, Ruth Suseela; Konde, Bernard B.; Zogho, Donatus; Kuuchille, Emmanuel V.; McCarthy, Nancy; Marivoet, Wim
    Abstract: The World Food Programme (WFP) supports communities to mitigate the impact of and build resilience to natural and human-made shocks and stressors that contribute to food insecurity and destabilize people’s livelihoods. WFP’s interventions, therefore, aim to equip communities with the knowledge, skills, and tools to avert or mitigate the impact of cyclical natural events such as droughts and floods through asset and capacity building in affected communities. In the Sahelian areas of Burkina Faso and Niger (as part of a broader regional program also covering Chad, Mali, and Mauritania), WFP promotes climate-resilient agricultural infrastructure and systems to help address issues of land degradation, deforestation, dwindling pasturelands, and depletion of water sources, which all trigger competition for productive resources and migration of people and livestock into better-resourced areas. The interventions also aim to address the impacts of violent conflict from within and outside communities in the Sahelian belt of the two countries, especially those related to extremist groups operating in the area. Though primarily designed to increase community assets for productive purposes, WFP’s support for the rehabilitation of lands, construction of water-harvesting and retention structures, reforestation and protection of farmlands and pastures, and soil fertility improvement interventions also aims to increase the availability of, reduce intergroup competition for, and ensure equitable access to these resources. In this way, WFP hopes to reduce conflicts over community resources. The use of participatory and collaborative processes for mobilizing and engaging communities should also contribute to increased dialogue within and between different communities and promote peaceful coexistence among the different groups. In particular, the requirement of collaborative approaches to development of communal assets is intended to create spaces of encounter and dialogue that could ease tensions, promote equity in the distribution and use of the created assets, and build relationships among various stakeholders and community groups to ensure that actions for resilience building have the support of government, development partners, and other decision-makers at several administrative levels.
    Keywords: BURKINA FASO; NIGER; WEST AFRICA; AFRICA SOUTH OF SAHARA; AFRICA; resilience; shocks; food insecurity; livelihoods; natural disasters; climate change adaptation; agricultural systems; conflict; migration; infrastructure; resources; WFP
    Date: 2023
  21. By: Camille Megy (CentraleSupélec, IFPEN - IFP Energies nouvelles - IFPEN - IFP Energies nouvelles, IFP School); Olivier Massol (IFPEN - IFP Energies nouvelles - IFPEN - IFP Energies nouvelles, IFP School, CentraleSupélec, City University London)
    Abstract: Power-to-gas (PtG), a technology that converts electricity into hydrogen, is expected to become a core component of future low-carbon energy systems. While its economics and performance as a sector coupling technique have been well studied in the context of perfectly competitive energy markets, the distortions caused by the presence of large strategic players with a multi-market presence have received little attention. In this paper, we examine them by specifying a partial equilibrium model that provides a stylized representation of the interactions among the natural gas, electricity, and hydrogen markets. Using that model, we compare several possible ownership organizations for PtG to investigate how imperfect competition affects its operations. Evidence gained from these market simulations show that the effects of PtG vary with the multi-market profile of its operator. Producers of fossil-based hydrogen tend to make little use of PtG, whereas renewable power producers use it more to increase the electricity prices. Although PtG operations are profitable and can be welfare-enhancing, the social gain is either very tiny or negative when PtG is strategically operated in conjunction with variable renewable generation. In that case, PtG also raises environmental concerns as it stimulates the use of polluting thermoelectric generation.
    Keywords: Power-to-Gas, Sector Coupling, Hydrogen, Renewable Energy Sources, Multi-Market Oligopoly, Mixed Complementarity Problem
    Date: 2023–02–01
  22. By: Matteo Gardini; Edoardo Santilli
    Abstract: In this article we discuss the application of the Heat-Jarrow-Morton framework Heath et al. [26] to energy markets. The goal of the article is to give a detailed overview of the topic, focusing on practical aspects rather than on theory, which has been widely studied in literature. This work aims to be a guide for practitioners and for all those who deal with the practical issues of this approach to energy market. In particular, we focus on the markets' structure, model calibration by dimension reduction with Principal Component Analysis (PCA), Monte Carlo simulations and derivatives pricing. As application, we focus on European power and gas markets: we calibrate the model on historical futures quotations, we perform futures and spot simulations and we analyze the results.
    Date: 2023–05
  23. By: Liang Chen; Minyuan Zhang
    Abstract: This paper focuses on estimating the coefficients and average partial effects of observed regressors in nonlinear panel data models with interactive fixed effects, using the common correlated effects (CCE) framework. The proposed two-step estimation method involves applying principal component analysis to estimate latent factors based on cross-sectional averages of the regressors in the first step, and jointly estimating the coefficients of the regressors and factor loadings in the second step. The asymptotic distributions of the proposed estimators are derived under general conditions, assuming that the number of time-series observations is comparable to the number of cross-sectional observations. To correct for asymptotic biases of the estimators, we introduce both analytical and split-panel jackknife methods, and confirm their good performance in finite samples using Monte Carlo simulations. An empirical application utilizes the proposed method to study the arbitrage behaviour of nonfinancial firms across different security markets.
    Date: 2023–04
  24. By: Liang Chen; Juan Jose Dolado; Jesus Gonzalo; Haozi Pan
    Abstract: This paper studies the estimation of characteristic-based quantile factor models where the factor loadings are unknown functions of observed individual characteristics while the idiosyncratic error terms are subject to conditional quantile restrictions. We propose a three-stage estimation procedure that is easily implementable in practice and has nice properties. The convergence rates, the limiting distributions of the estimated factors and loading functions, and a consistent selection criterion for the number of factors at each quantile are derived under general conditions. The proposed estimation methodology is shown to work satisfactorily when: (i) the idiosyncratic errors have heavy tails, (ii) the time dimension of the panel dataset is not large, and (iii) the number of factors exceeds the number of characteristics. Finite sample simulations and an empirical application aimed at estimating the loading functions of the daily returns of a large panel of S\&P500 index securities help illustrate these properties.
    Date: 2023–04
  25. By: Jones Pontoh
    Abstract: Interestingly the numbers of young traders in Jakarta Stock Exchange had been increasing in recent years. Even in the middle of the global crisis caused by covid19 pandemic, in December 2021 according to KSEI, Individual investors were dominated by young investors. Data presented by KSEI showed that 60 percent of the investors listed in Indonesian Stock Exchange were young investors. Other data shows that 28 percent of the investors listed were shockingly students. It was interesting to study the behavior of young and Rookie investors at the branch of stock market in Manado State University. Basically, they varied in how to make decision to trade on the stock exchange. The problems were discussed by qualitative approach. Descriptive analysis was conducted prior to interviews. Data will be collected through data observation techniques and interviews. The study succeeded in investigating the investment behavior of young or Rookie investors at Manado State University in accordance with investment decision making and the perception of behavioral control. The perception of behavioral control greatly influenced investors decision making. Students were greatly influenced by lecturer, friends and more experienced investors. The results of the interview provide information that before they determine their behavior, first they do stock analysis, both technical and fundamental analysis. These facts shows that students investors were well literate.
    Date: 2023–05

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