Showing papers in "Economics Bulletin in 2018"

The impact of positive and negative macroeconomic news surprises: Gold versus Bitcoin

Abstract: We examine the impact of positive versus negative macroeconomic news surprises, originating from large developed economies, on the returns and volatility of gold and Bitcoin prices over the period July 19, 2010 – February 7, 2017. We find an asymmetric impact and evidence that gold is different from Bitcoin. Specifically, gold returns and volatility systematically react to macroeconomic news surprises in a manner consistent with its traditional role as a safe-haven, whereas Bitcoin prices and volatility do not mostly react in a similar manner. Our results are useful for investment decision-making.

Green investment strategies and bank-firm relationship: a firm-level analysis

Abstract: This paper investigates the determinants of firm's green investment strategies in equipment for pollution control. It uses micro-data from a large survey of Italian manufacturing firms from 2001 to 2006. In particular, we test whether the length of the firm-bank relationship affects the firm's probability of investing in environmentally friendly equipment. Our findings show that a longer relationship with the main bank fosters firms' involvement in green investment strategies in order to reduce their environmental impact. Conversely, the presence of a multiple credit relationship could concretely hinder a firm's investments towards environmental innovations.

The Effect of Education, R&D and ICT on Economic Growth in High Income Countries

Abstract: This document examines the causal relationship between information and communications technology (ICT), education, research & development (R&D) and economic growth in high income countries using panel data set from 1990 to 2015. We employ panel data set using various tests such as panel unit root test, panel cointegration in order to detect the relationship between the dependent variable (GDP) and independent variables (ED, RD, MCS and IU). The empirical results of the vector error correction model (VECM) show that there exists a unidirectional relation causality from education and mobile cellular telephone to economic growth, from internet users and mobile cellular telephone to research and development and from education to research and development, while bidirectional causality between internet users and economic growth, between research and development and economic growth, between education, internet users and mobile cellular telephone in the short-run. In addition, the results also show that there is a bidirectional relationship between education, internet users and mobile cellular telephone, while there is a unidirectional relationship from internet users to economic growth and research and development and from mobile cellular telephone to economic growth and research and development in the long-run.

Income diversification and bank performance: evidence from malaysian banks

Abstract: Using annual financial information from Malaysian banks over the period of 2005-2015, we study the diversification effect on bank's performance. Specifically, we test the link between non-interest income and risk-adjusted performance. Our fixed effect panel regression results show that income diversification increases bank's performance confirming risk reduction hypothesis and resource-based view theory. In our view, the less integrated financial market in Malaysia gives advantage for Malaysian banks to achieve better diversification gains. Moreover, the surging of Islamic banking might play important role to the performance of income diversification. Further research is needed to explore further other possibilities that may explain this association.

Efficiency or speculation? A dynamic analysis of the Bitcoin market

Abstract: Bitcoin has recently been labelled as a “dangerous speculative bubble†by Nobel Prize-winning economists Joseph Stiglitz and Robert Shiller, as the Bitcoin's market value now exceeds the GDP of over 130 countries. In this study, the multifractality and efficiency of the Bitcoin price index are tested, using a nonlinear data analysis technique called the multifractal detrended fluctuation analysis (MF-DFA). In addition, we assess the time-variations in the market efficiency level through using a rolling-window framework. Our evidence shows that the efficiency of the Bitcoin market changes over time and this market seems to be more efficient during downward than upward periods. We also find that Bitcoin is marked by a persistent long memory phenomenon in its short- term components, which could be interpreted as a possible speculation by investors.

Was Zidane honest or well-informed? How UEFA barely avoided a serious scandal

Abstract: UEFA European Championship 1996 qualification is known to violate strategy-proofness. It has been proved recently that a team could be better off by exerting a lower effort: it might be optimal to concede some goals in order to achieve a better position among runners-up, and hence avoid a hazardous play-off. We show that it is not only an irrelevant scenario with a marginal probability since France had an incentive to kick two own goals on its last match against Israel.

An INAR(1) model with Poisson-Lindley innovations

Abstract: Real count data time series often show the phenomenon of the overdispersion. In this paper, we introduce a first order non-negative integer valued autoregressive process with Poisson-Lindley innovations based on the binomial thinning operator. The new model is particularly suitable for time series of counts exhibiting overdispersion and therefore competes against others recently established. The main properties of the model are derived. The methods of conditional least squares, Yule-Walker and conditional maximum likelihood are used for estimating the parameters. The proposed model is also applied to a weekly sales of soap product data series.

Determinants of foreign direct investment in Africa: An analysis of the impact of financial development

Abstract: This paper investigates the impact of financial development on Foreign Direct Investment (FDI) in 52 African countries under the OLI Dummy's paradigm from 1995 to 2015. The sample is made up of 35 countries without financial market and 17 countries with a financial market. The empirical methodology is based on the Generalized Method of Moments (GMM). Our empirical results show that, money and quasi money, banking credit to private sector and interest rate liberalisation play a positive role on FDI in countries without financial market. Money and quasi money, market capitalisation and financial market value traded positively influence FDI in countries with financial market. The study suggests, with regard to the low level of our estimated coefficients, that African countries need to reinforce their financial reforms.

Fiscal credibility and disagreement in expectations about inflation: evidence for Brazil

Abstract: The present paper analyzes the impact of fiscal credibility on the disagreement in expectations about inflation. We argue that when fiscal credibility is low (high), the uncertainty related to the future behavior of inflation (measured by the disagreement in expectations) is higher (lower). The contributions of our study are twofold. First, we use market expectations reported by the Central Bank of Brazil to build a new fiscal credibility index. This new index takes into account the expectations related to the fiscal effort required to keep gross public debt in a sustainable level. Second, we analyze the influence of fiscal credibility on the disagreement in expectations about inflation. Evidence suggests fiscal credibility is important to reduce the disagreement in expectations about inflation. Thus, the findings indicate that, since fiscal credibility helps reducing the disagreement in expectations, it helps in the process of anchoring inflation expectations, providing better results for the inflation targeting regime.

Determinants of Smallholder Vegetable Farmers Credit Access and Demand in Southwest region, Cameroon

Abstract: The study analyzed the determinants of smallholder vegetable farmer’s access and demand to credit Primary data were collected from hundred randomly selected farmers with the aid of structured questionnaires using multi-stage sampling procedures One common approach used to modeling this situation is the tobit model However, the decision taken by farmers to demand credit is preceded by the decision to have “access to credit†Therefore, a double-hurdle model was specified and used to determine factors influencing credit access and demand Econometric results show that age has a positive and significant value on the quantity equation, but negative and significant on the access equation The study concluded that the spread of lending agencies, membership to farmers’ association, extension service, large farm size increase both access to and demand for credit In addition, small and female farmers should be encouraged to form associations to ensure appropriate information sharing and advantage of non-rationing credit

Role of Energy on Economy The Case of Micro to Macro Level Analysis

Abstract: The present article contributes to the debate on the role of energy variables on firm's stock return, industrial stock return, stock market return and economic growth of Pakistan. In order to investigate the role of oil price, electricity price and electricity consumption, we collect the data of 397 firm listed in Karachi stock exchange, 12 listed industries, KSE-100 index and gross domestic product over the period 1998-2014. By using four econometric techniques; pooled OLS, fixed effect methods, difference GMM and system GMM, oil price confirms significant positive relationship with industry stock return, stock market return and economic growth. On contrary, electricity price verify strong negative effect on firm's stock return, industrial stock return, stock market return and economic growth while electricity consumption indicates different impact across micro and macro level returns. Sector vise results also confirm the adverse impact of electricity price in most of the sectors.

A Note on the Likelihood of the Absolute Majority Paradoxes

Abstract: For three-candidate elections, we compute under the Impartial Anonymous Culture assumption, the conditional probabilities of the Absolute Majority Winner Paradox (AMWP) and the Absolute Majority Loser Paradox (AMLP) under the Plurality rule, the Borda rule, and the Negative Plurality rule for a given number of voters. We also provide a representation of the conditional probability of these paradoxes for the whole family of weighted scoring rules with large electorates. The AMWP occurs when a candidate who is ranked first by more than half of the voters is not selected by a given voting rule; the AMLP appears when a candidate who is ranked last by more than half of the voters is elected. As no research papers have tried to evaluate the likelihood of these paradoxes, this note is designed to fill this void. Our results allow us to claim that ignoring these two paradoxes in the literature, particularly AMWP, is not justified.

Social responsibility in a bilateral monopoly with R&D

Abstract: This note examines social responsibility in a linear bilateral monopoly by incorporating a cost-reducing R&D investment and investigates an endogenous timing game. We find that in the presence of R&D, the retailer always adopts social responsibility irrespective of the timing of the game, but the manufacturer adopts only with its leadership in a sequential game where it can take the first-mover advantage. We also show that two sequential choices will be subgame perfect equilibria, but the commitment to the social responsibility by manufacturer is a payoff dominance outcome.

Access to Finance for French Firms: Do boardroom attributes matter?

Abstract: This article aims at studying the influence of boardroom attributes on access to leverage in the French context. The empirical findings lead to several interesting results. They reveal a negative relation between the number of female directors on the board and the total and long-term leverage ratios. Due likely to the risk aversion of women, firms with more gender-diverse boards appear to use less levels of debt. This is consistent with the pecking order theory. The results also show that the size of the board, the frequency of its meetings and the average age of its independent directors positively affect the leverage ratios. They are coherent with the disciplinary role of the board stipulated by the agency theory.

The relationship between energy, pollution, economic growth and corruption: A Partial Least Squares Structural Equation Modeling (PLS-SEM) approach

Abstract: At the end of 2010, the Middle East and North Africa (MENA) region confronted the Arab Spring that caused political instability and heightened economic risks. In fact, it became necessary to correlate in further research the corruption with energy consumption, economic growth and CO2 emissions. This study used time series data from 1996 – 2012 in the MENA region with the main aim to contribute to empirical literature by using the PLS-SEM approach. Results from the PLS-SEM show evidence of economic growth causing CO2 emissions. Second, energy consumption is positively and significantly related to economic growth and also may increase CO2 emissions. Thirdly, this research supports the view that corruption moderates economic growth and worsens the environmental quality in the MENA region. Finally, the use of the PLS-SEM reduces complexity and allows a better understanding of these relationships.

What is the optimal housing choice for a minimal BMI

Abstract: Housing choice is based on several criteria, one of which is the projected health of its residents. Because health-related characteristics vary by gender, these differences may give rise to a conflict of interest between a heterosexual couple when choosing a suitable home, in a similar manner to the battle of sexes game, including the relationship between the type and size of the dwelling unit and obesity. The optimal choice should test the minimal aggregated BMI. Yet, this might leave one of the two sides in a less than optimal situation. We simulate these effects based on real-life data obtained from an Israeli Central Bureau of Statistics two-year longitudinal survey.

Decomposition of the Environmental Kuznets curve for Deforestation in the Congo Basin

Abstract: This study examines the theoretical relationship between economic growth and natural resource depletion. We decompose the determinants of the economic growth into three structural effects (scale, technique, and composition effects). This model is tested with data on deforestation for the countries of the Congo basin. Although the results confirm the existence of scale and composition effects, the impact of the technique effect is contrary to the predictions of theory. These results show that there is no inverted U-shaped between gross domestic product (GDP) and deforestation in the Congo Basin as predicted in the theoretical literature.

Loss Aversion And Student Achievement

Abstract: We conduct a field experiment to test if loss aversion behavior can be exploited to improve student performance in an undergraduate statistics course In one treatment (gains), student grades were reported as points gained, and in the other treatment (losses) grades were reported as points lost When controlling for other factors that affect student performance, we find that students in the loss treatment earned statistically higher grades than students in the gain treatment Although preliminary, the results suggest that a simple manipulation of how grades are framed in the classroom can be a costless way to exploit loss aversion behavior and lead to higher student achievement

On the Distribution Dynamics of Human Development: Evidence from the Metropolitan Regions of Bolivia

Abstract: Bolivia has experienced large socioeconomic transformations in the last decades. Among them, almost half of the population currently lives in the main metropolitan regions of the country. Motivated by the potential for growth and development convergence in these regions, this article documents the evolution of human development disparities and convergence patterns over the 1992-2013 period. Using a distribution dynamics framework, this article evaluates both the transitional dynamics and the long-run equilibrium of the cross-regional distribution of human development. Results from the transitional dynamics analysis suggest that the formation of multiple clusters of convergence is a salient feature of inequality reduction in human development. On the other hand, results from the long-run equilibrium analysis suggest that the process of regional convergence is characterized by the transformation of a trimodal distribution into a left-skewed unimodal distribution. The article concludes emphasizing that the cross-regional distribution of human development in Bolivia is quite sticky at its left tail, and as a result, the least developed regions are still relatively far from achieving complete convergence in the long run.

Is the relationship between external debt and human development non-linear? A PSTR approach for developing countries

Abstract: This paper examines the relationship between external debt and human development for a panel data set of 95 developing countries observed during the period 2002 – 2015. By performing a Panel Smooth Threshold Regression (PSTR) model developed by GonzA lez et al. (2005), estimation results show that this relationship is non-linear and characterized by the presence of an optimal threshold of external debt equals to 41.7775%. Below this debt threshold, external debt has a positive effect on human development. Any 1% increase in the external debt ratio induces an increase in the HDI of 0.02%. However, above the debt threshold, external debt becomes detrimental to human development since HDI decreases by 0.01% when external debt ratio increases by 1%. In a low external debt regime, countries are encouraged not to exceed this threshold to benefit from the leverage effect, and to modify the structure of imports while avoiding unnecessary ones. In a high external debt regime, countries are complelled to reduce their external debt ratio to reach the optimal threshold, avoid the waste of highly remunerated foreign resources and know how to allocate them to the most productive sectors, and control their demographic growth.

Free cash flow and corporate profitability in emerging economies: Empirical evidence from Vietnam

Abstract: This paper examined the relationship between free cash flow and corporate profitability of Vietnamese listed firms. Basing on the agency theory of free cash flow, several previous studies proposed a negative relationship between free cash flow and corporate profitability. In this study, we argue that the presence of information asymmetry in the financial market of developing economies may limit the access to external sources of finance. Thus, free cash flow may serve as a cheaper alternative source of finance. This benefit may reduce, nullified, or even outweigh the agency cost caused by excess free cash flow. The empirical analysis results basing on a sample of 208 Vietnamese listed non-financial firms in the period from 2012 to 2016 showed that free cash flow seems to have a positive effect on the corporate profitability of Vietnamese listed firms.

Direct and indirect government venture capital investments in Europe

Abstract: This paper provides evidence of the broad government presence in the European venture capital industry. Two forms of intervention are considered: first, direct stand-alone government venture capital funds and, second, indirect private funds to which governments commit funds as limited partners. The overall government presence seems to be much more important than previously documented, as we find that the government intervenes, on average, in 42.2% of venture capital investments in Europe. We also show that European countries are heterogeneous in their use of these two channels, and we consider possible early explanations for this choice of policy mix. Lastly, we provide some evidence on the consequences of these policies in terms of SME's perceived access to financing.

Time-Frequency varying beta estimation - a continuous wavelets approach

Abstract: The Beta coefficient theorized by the CAPM is estimated by the Market Line. By hypothesis, the Beta is stable over time but empirical studies on it volatility don't confirm this fact. One of them is related to with agent heterogeneity hypothesis. In this paper; we study this hypothesis by continuous wavelets decomposition of the market line components. We use the wavelet Coherence to calculate a time-frequency Beta. We apply this methodology on three French listed stocks (AXA-LVMH-ORANGE) with different OLS beta for the daily period from 2005 to 2015. We show that the coherence and the time-frequency Betas improve our understanding of the equity characteristics and nature according to their time and frequency dynamics. AXA and LVMH have globally an high coherence with the market whereas ORANGE coherence is low (whatever frequencies). These results can affect the time-frequency betas values. By analyzing the betas we see different evolutions and dynamics which can be considered by portfolio managers to optimize their investment horizon. The continuous wavelets is a powerful tool for emphasize the timefrequency instabilities of betas. The hypothesis of heterogeneity of agents have an impact on systematic risk estimations and need to be considered in financial calculations.

The Asymmetric Behaviour of Spanish Unemployment Persistence

Abstract: One of the key features of unemployment rate is its persistence, normally described as hysteresis. This note applies fractional integration techniques to show that Spanish unemployment is highly persistent and exhibits asymmetric behaviour, specifically its degree of persistence is higher during recessions (when unemployment is going up) compared to expansions (when it is going down). Further work should investigate whether this is a stylised fact also in other countries exhibiting hysteresis.

Governance in Africa: Convergence or Divergence?

Abstract: This research focuses on governance in Africa, precisely on the evolution or change in governance. Our results suggest that there is a negative relationship between the state of governance of the initial period and the current governance. However, this relationship is only significant when controlling other parameters. Therefore this is evidence of the existence of a conditional convergence. Also, the sigma convergence has not been found: there is less divergence.

Institutions or human capital: which is more important for economic performance? Evidence from Brazil

Abstract: We investigate the role of institutions and human capital on economic performance of Brazilian municipalities. We use instrumental variables with two-stage least squares estimators for capturing causal relationships. We found evidence that institutional quality has an important and robust effect on the income of municipalities. However, there is no robust evidence for the role of human capital. These results are similar to what Acemoglu, Galleano and Robinson (2014) documented in their research conducted with cross-country data. Human capital is likely to be a consequence of institutions.

Price cycles in the German retail gasoline market - Competition or collusion?

Abstract: This paper analyses the cyclical price setting behavior of petrol stations in the German retail gasoline market. High-frequency price cycles can be observed, as gasoline stations undercut each other successively in price over the day followed by a sharp increase in price in the evening. These asymmetric price cycles are compared with theoretical Edgeworth cycles whereby some differences and contradictions are identified. The results of the empirical analysis suggest a strategy of intertemporal price discrimination between different types of consumers. Gasoline stations undercut each other successively over the day to attract consumers with price-elastic demand. However, this undercutting phase is stopped by simultaneous price increases to exploit the inflexible and price-inelastic consumers.

A note on Stackelberg equilibrium in duopoly: Strategic use of corporate social responsibility

Abstract: This paper demonstrates that in a duopoly model with firms being concerned about profit as well as corporate social responsibility (CSR), the outcome of game may coincide with the Stackelberg outcome. We argue that owner of the firm may use CSR orientation as a strategy to become Stackelberg leader in the quantity competition game.

Foreign Investment, Domestic Investment and Economic Growth in China: Does Foreign Investment Crowd in or Crowd out Domestic Investment?

Abstract: This study assesses the effects of foreign direct investment (FDI) on domestic investment and economic growth, in addition to the extent to which foreign investment either crowds in or crowds out domestic investment in China. Yearly data from 30 Chinese provinces for the period 2000–2014 has been used. Pedroni and Kao tests confirmed the existence of long-run relations. We found positive and significant effects of FDI and domestic investment on the economic growth of China using DOLS, FMOLS and GMM estimators; however, domestic investment made a higher contribution to the growth and development of the Chinese economy. As regards crowding in or crowding out, FMOLS showed a neutrality hypothesis, while DOLS and GMM demonstrated that FDI crowded out domestic investment. We conclude that the effects of FDI on domestic investment (in other words, on the economy) are not always favorable.

The desirability of the supply function competition under demand uncertainty

Abstract: In this paper, we consider an oligopolistic industry with demand uncertainty and study the welfare comparison between the supply function competition and the stochastic Cournot competition. We prove that the expected consumer surplus is always higher under the supply function competition. By numerical computations we also show that the expected profits of the oligopolistic firms can be higher under the supply function competition only if the demand uncertainty is above a critical threshold. This threshold is increasing in the number of firms, while decreasing in the slope of the demand curve and the marginal cost of producing a unit output.