Economics : the Open-Access, Open-Assessment e-Journal 

About: Economics : the Open-Access, Open-Assessment e-Journal is an academic journal published by Kiel Institute for the World Economy. The journal publishes majorly in the area(s): Monetary policy & Inflation. It has an ISSN identifier of 1864-6042. It is also open access. Over the lifetime, 551 publications have been published receiving 8040 citations.

Shadow Economies and Corruption All Over the World: New Estimates for 145 Countries

Abstract: Estimations of the shadow economies for 145 countries, including developing, transition and highly developed OECD economies over 1999 to 2005 are presented. The average size of the shadow economy (as a percent of "official" GDP) in 2004/05 in 96 developing countries is 36.7%, in 25 transition countries 38.8% and in 21 OECD countries 14.8%. An increased burden of taxation and social security contributions, combined with a labour market regulation are the driving forces of the shadow economy. Furthermore, the results show that the shadow economy reduces corruption in high income countries, but increases corruption in low income countries. Finally, the various estimation methods are discussed and critically evaluated.

The Social Cost of Carbon: Trends, Outliers, and Catastrophes

Abstract: estimates of the social cost of carbon are included in a meta-analysis. The results confirm that a lower discount rate implies a higher estimate; and that higher estimates are found in the gray literature. It is also found that there is a downward trend in the economic impact estimates of the climate; that the Stern Review's estimates of the social cost of carbon is an outlier; and that the right tail of the distribution is fat. There is a fair chance that the annual climate liability exceeds the annual income of many people.

On the return-volatility relationship in the Bitcoin market around the price crash of 2013

Abstract: The authors examine the relation between price returns and volatility changes in the Bitcoin market using a daily database denominated in US dollar. The results for the entire period provide no evidence of an asymmetric return-volatility relation in the Bitcoin market. The authors test if there is a difference in the return-volatility relation before and after the price crash of 2013 and show a significant inverse relation between past shocks and volatility before the crash and no significant relation after. This finding shows that, prior to the price crash of December 2013, positive shocks increased the conditional volatility more than negative shocks. This inverted asymmetric reaction of Bitcoin to positive and negative shocks is contrary to what one observes in equities. As leverage effect and volatility feedback do not adequately explain this reaction, the authors propose the safe-haven effect (Baur, Asymmetric volatility in the gold market, 2012). They highlight the benefits of adding Bitcoin to a US equity portfolio, especially in the pre-crash period. Robustness analyses show, among others, a negative relation between the US implied volatility index (VIX) and Bitcoin volatility. Those additional analyses further support the findings and provide useful information for economic actors who are interested in adding Bitcoin to their equity portfolios or are curious about the capabilities of Bitcoin as a financial asset.

Housing wealth isn't wealth

Abstract: A fall in house prices due to a change in fundamental value redistributes wealth from those long housing (for whom the fundamental value of the house they own exceeds the present discounted value of their planned future consumption of housing services) to those short housing. In a closed economy representative agent model (the special case when the birth rate is zero, of the Yaari-Blanchard OLG model used in the paper), there is no pure wealth effect on consumption from a change in house prices if this represents a change in their fundamental value. When the birth rate is positive, higher fundamental house prices driven by the housing demand of future generations will boost current consumption. There is a pure wealth effect on consumption from a change in house prices even in the representative agent model, if this reflects a change in the speculative bubble component of house prices. Two other channels through which a fall in house prices can affect aggregate consumption are (1) redistribution effects if the marginal propensity to spend out of wealth differs between those long housing (the old, say) and those short housing (the young, say) and (2) collateral or credit effects due to the collateralisability of housing wealth and the non-collateralisability of human wealth. A decline in house prices reduces the scope for mortgage equity withdrawal. For given sequences of future after-tax labour income and interest rates, a fall in house prices will then depress consumption in the short run while boosting it in the long run.

Climate risks and carbon prices: Revising the social cost of carbon

Abstract: The social cost of carbon - or marginal damage caused by an additional ton of carbon dioxide emissions - has been estimated by a U.S. government working group at $21/tCO2 in 2010. That calculation, however, omits many of the biggest risks associated with climate change, and downplays the impact of current emissions on future generations. Our reanalysis explores the effects of uncertainty about climate sensitivity, the shape of the damage function, and the discount rate. We show that the social cost of carbon is uncertain across a broad range, and could be much higher than $21/tCO2. In our case combining high climate sensitivity, high damages, and a low discount rate, the social cost of carbon could be almost $900/tCO2 in 2010, rising to $1,500/tCO2 in 2050. The most ambitious scenarios for eliminating carbon dioxide emissions as rapidly as technologically feasible (reaching zero or negative net global emissions by the end of this century) require spending up to $150 to $500 per ton of reductions of carbon dioxide emissions by 2050. Using a reasonable set of alternative assumptions, therefore, the damages from a ton of carbon dioxide emissions in 2050 could exceed the cost of reducing emissions at the maximum technically feasible rate. Once this is the case, the exact value of the social cost of carbon loses importance: the clear policy prescription is to reduce emissions as rapidly as possible, and cost-effectiveness analysis offers better insights for climate policy than cost- benefit analysis.