Showing papers on "Stock and flow published in 2016"

Minimum Wage Shocks, Employment Flows, and Labor Market Frictions

Abstract: We provide the first estimates of the effects of minimum wages on employment flows in the US labor market, identifying the impact using policy discontinuities at state borders We find that minimum wages have a sizable negative effect on employment flows but not stocks: separations and accessions fall among affected workers We interpret our findings using a job-ladder model, in which minimum wage increases can reduce job-to-job transitions We find that a standard calibration of the model generates predicted relative magnitudes of the employment stock and flow elasticities that are very close to our reduced-form estimates

National Accounting and the Valuation of Ecosystem Assets and Their Services

Abstract: There has long been interest in integrating the value of environmental stocks and flows into standard measures of economic activity and wealth, in particular through the development of adjusted measures of GDP and extended measures of national wealth. This paper examines how the valuation of ecosystem services and ecosystem assets can be undertaken in an integrated national accounting setting. We clarify the relevant valuation principles, most significantly the need to apply the concept of exchange values, and explain why the integration of ecosystem services necessitates an extension of the standard production boundary used in economic measurement. The main implications of an accounting approach are discussed including the need to distinguish benefits from services, the need for valuation methods that exclude consumer surplus, and the importance of aligning measures of income and degradation. Remaining challenges include the treatment of low or negative rents, accounting for ecosystem disservices, and the derivation of values for ecosystem assets. Meeting these challenges and advancing work in this area should be the joint focus of economists, ecologists and accountants.

Stocks and Flows in the Performance Economy

Abstract: The performance economy is a concept which goes beyond most interpretations of a “circular economy”: the focus is on the maintenance and exploitation of stock (mainly manufactured capital) rather than linear or circular flows of materials or energy. The performance economy represents a full shift to servicisation, with revenue obtained from providing services rather than selling goods. While the form of industrial economy which has dominated the industrialised countries since the industrial revolution is arguably appropriate to overcome scarcities in a developing economy, the performance model is applicable in economies close to saturation, when the quantities of new goods entering use are similar to the quantities of goods being scrapped at the end of life.

Building the Material Flow Networks of Aluminum in the 2007 U.S. Economy

Abstract: Based on the combination of the U.S. economic input-output table and the stocks and flows framework for characterizing anthropogenic metal cycles, this study presents a methodology for building material flow networks of bulk metals in the U.S. economy and applies it to aluminum. The results, which we term the Input–Output Material Flow Networks (IO-MFNs), achieve a complete picture of aluminum flow in the entire U.S. economy and for any chosen industrial sector (illustrated for the Automobile Manufacturing sector). The results are compared with information from our former study on U.S. aluminum stocks and flows to demonstrate the robustness and value of this new methodology. We find that the IO-MFN approach has the following advantages: (1) it helps to uncover the network of material flows in the manufacturing stage in the life cycle of metals; (2) it provides a method that may be less time-consuming but more complete and accurate in estimating new scrap generation, process loss, domestic final demand, an...

Capital investment, innovative capacity, and stock returns

Abstract: We study the dynamic implications of capital investment in innovative capacity (IC) on future stock returns, investment, and profitability by modeling the unique effects of IC investment on uncertain option generation/exercise and postexercise revenue. The model highlights the diverse effects of IC investment on expected returns in different postinvestment regimes and yields the novel prediction that, under the neoclassical assumption of nonincreasing revenue returns, IC investment is positively related to subsequent cumulative stock returns with a lag. The model also predicts a positive effect of IC investment on future investment and profitability. We find strong empirical support for these predictions.

Dynamic Models of Portfolio Behavior: More on Pitfalls in Financial Model Building

Abstract: In an important article in this Review, William Brainard and James Tobin have emphasized the role played by the wealth constraint in systems of asset demand equations. The wealth constraint gives rise to consistency conditions which must be satisfied by the demand functions when such a system is specified and estimated. As Brainard and Tobin caution, care must be taken to ensure that unrealistic coefficients are not inadvertently imposed on omitted equations by failure to recognize the consistency conditions.' Noting that the wealth constraint applies out of, as well as in, portfolio equilibrium, Brainard and Tobin focus attention on systems in which actual and desired stocks of assets differ. They specify a multivariate stock adjustment model wherein the desired change in holdings of any asset depends in general upon all asset stock disequilibria; the existence of such stock disequilibria can be implicitly rationalized on the basis of costs of adjustment which impinge on the rate of change of at least some assets. In this framework they show that the stock adjustment coefficients must also satisfy certain consistency conditions to ensure that the wealth constraint is satisfied. An important feature of their analysis is that the total change in wealth (savings plus capital gains) is treated as exogenous to the financial sector, and the asset flow demands described above are conditional upon the exogenously given change in wealth. This strategy of separating the portfolio balance decision from the consumption-saving decision is one that Tobin has explicitly used and justified in his 1969 article (especially pp. 15-16), and is one that has been widely and effectively used in modern macroeconometric models. The central argument of the present paper is that this separation of flow-allocation and stock-allocation decisions is not legitimate in the presence of adjustment costs attached to changing the level of individual asset holdings. The existence of adjustment costs means that there is no portfolio balance problem per se (in the sense of allocation of a given level of wealth), but rather a (longer run) problem of determining an optimal time path for each asset and for the level of consumption. Thus a natural extension of the Brainard-Tobin model is to treat saving and portfolio decisions in an integrated fashion.2 Note that the Brainard-Tobin model is perfectly consistent with any model of savings behavior and hence no logical con*Queen's University, and Cowles Foundation for Research in Economics, Yale University. I am grateful to Adrian Pagan, Gordon Sparks, and James Tobin for helpful discussions, and especially to Gary Smith who, as well as patiently discussing many of the issues, provided detailed comments on earlier drafts of this paper. This research was partially supported by a National Science Foundation grant to the Cowles Foundation and by a Canada Council grant to the author. Remaining mistakes and opinions are my own. I This also has implications for the common practice in macro-economic models of leaving the bond market as implicit. Care must be taken to ensure that silly behavior is not inadvertently attributed to bondholders. William Silber, Tobin, and Alan Blinder and Robert Solow have initiated research which "reintroduces" the bond market into macroeconomic models. 21t appears to be a fairly general result that the existence of adjustment costs leads to integrated behavior. M. Ishaq Nadiri and Sherwin Rosen have established a similar result for the theory of the firm, and Robin Mukherjee and Edward Zabel have recently shown that the "separation theorem" prominent in the finance literature on the mean-variance approach to optimal consumption-portfolio behavior fails to hold when transactions costs are introduced. In my 1975 paper (Appendix), I have argued that the integration of saving and portfolio balance decisions also applies in continuous-time models, even though such models are characterized by separate stock and flow budget constraints.

How do road infrastructure investments affect the regional economy? Evidence from Spain

Abstract: This paper analyses the relationship between road infrastructure improvements and investment in capital assets. Using aggregate data at a provincial level for 1977-2008, an equation for machinery and equipment investment is estimated applying Panel Corrected Standard Errors. The results indicate that the long-term elasticities of investment in relation to market potential, GDP and average years of schooling are 0.90, 0.75 and 0.80, respectively. Additionally, the long run impact of a road infrastructure investment policy is assessed. We find that the elasticities of investment in machinery and equipment, capital stock and GDP in relation to travel time are 1.18, 0.33 and 0.11, respectively.

An Introduction to System Dynamics

Abstract: This chapter presents important concepts underlying the system dynamics modeling method. Following an initial definition of the term model, a summary of a successful system dynamics intervention is described. The key elements of system dynamics—stocks and flows—are explained. The process for simulating stock and flow models—integral calculus—is described, with an example of a company’s customer base used to illustrate how stocks change, through their flows, over time. A summary of dimensional analysis for stock and flow equations is provided before the second feature of system dynamics modeling—feedback—is presented. The chapter concludes by summarizing the system dynamics methodology, which is a five-stage iterative process that guides model design, development, test and policy design.

The Sensitivity of International Comparisons of Capital Stock Measures to Different "Real" Exchange Rates

Abstract: Gross national investment flows can be discounted and accumulated to form measurements of national capital stocks for cross-national comparisons of capital abundance. The formation of these capital stock figures can depend substantially on the method by which investment measured in different currencies is translated into real investment figures that are comparable across time and across countries. Three different methods for forming time-series of real investment figures are considered here. One of these methods translates foreign currencies into dollars in each year using the current exchange rate and then divides by the U.S. deflator for gross investment to form a series on real investment. The second method accumulates real investment in the local currency deflated by the home country price deflator for gross national investment and then translates into dollars using the base year (1966) exchange rate. The third measure of capital substitutes the purchasing power parity rates from Robert Summers and Alan Heston (1984) in place of observed exchange rates. These three capital stock comparisons are contrasted and used here in a latent variable model of trade. The conclusion from this data analysis is that although the measures of capital stock can differ substantially for some countries, these differences matter very little when capital stock is treated as one variable in explaining the composition of trade. The data do suggest some slight preference for the third measure of capital based on the purchasing power parity ex

Tax policy and farm capital investment: Section 179 expensing and bonus depreciation

Abstract: Purpose – The purpose of this paper is to estimate the impact of Internal Revenue Code cost recovery provisions – Section 179 and “bonus depreciation” – on farm capital investment. Design/methodology/approach – The authors construct a synthetic panel of data consisting of cohorts of similar farms based on state and production specialization using the USDA’s Agricultural Resource Management Survey for years 1996-2012. Employing panel data methods, the authors are able to control for time-invariant fixed effects, as well as the effects of past investment on current investment. Findings – The authors estimate statistically significant investment demand elasticities with respect to the Section 179 expensing deduction of between 0.28 and 0.50. A change in bonus depreciation, on average, had little impact on capital investment. Practical implications – The estimates suggest there is a modest effect of the cost recovery provisions on investment overall, but a stronger effect on farms that have more than $10,000 ...

Using decomposition analysis to forecast metal usage in the building stock

Abstract: As large amounts of materials are used and have accumulated in buildings and civil engineering projects, it is necessary to understand material flow in terms of construction sectors for resource management. The consumption, discard and in-use stock of four metals (steel, aluminium, copper and zinc) in Japan's building stock are forecast through to 2050. To clarify the factors that affect metal stocks and flows in construction, the metal consumption was decomposed into annual new floor area constructed and metal intensity (i.e. the amount of metal used per unit floor area). The decomposition was meaningful for understanding characteristic patterns of factors of different metals and for envisaging future scenarios based on past trends. It was estimated that the annual new floor area constructed will remain at current levels, whereas metal intensity will have a significant impact on stocks and flows. The methodology developed in this study can be used to evaluate the impact of technology changes that would t...

Macroeconomic Determinants of Stock Price Variations: An Economic Analysis of KSE-100 Index

Abstract: The main objective of this study is to assess the macroeconomic determinants of stock price variability in Pakistan. The quarterly data on macroeconomic variables (Gross Domestic Product, Foreign Direct Investment, Interest Rates, Exports, Money Supply and Unemployment Rate) and KSE-100 Index as proxy of stock price variation for the period of 1992:01 to 2012:04 is taken for the empirical investigation. Johansen co-integration test and VECM is used for this purpose. The analysis of this study specifies that the foreign direct investment, interest rates, export and unemployment rate have significant and negative impact on KSE-100 index, while money supply has found to be a significant and positive determinant of stock prices. On the other hand gross domestic product have a positive but insignificant impact on stock prices in Pakistan.

Wage cyclicalities and labor market dynamics at the establishment level: Theory and evidence

Abstract: This paper analyzes the effects of different wage cyclicalities on labor market flow dynamics at the establishment level. We derive a model that allows for heterogeneous wage cyclicalities across firms over the business cycle and confront the theoretical results with the new AWFP dataset, which comprises the entire universe of German establishments. In line with theory, establishments with more procyclical wage movements over the business cycle have a more countercyclical hires rate and employment behavior. This result is robust when we look at certain sectors and states. Wage cyclicalities do not only have the expected qualitative impact on stocks and flows, but the quantitative responses are also in line with the proposed model. More generally, our empirical results provide support for theories that lead to an effect of wage rigidities on labor market flow dynamics.

Human capital estimation in higher education

Abstract: The concept of human capital (HC) could be defined, from an economical viewpoint, as a stock variable representing the capacity of an individual to produce a sustained flow of income due to its investment in (higher) education and work experience. This paper focuses on the empirical estimation of the graduates' latent variable HC, composed of two principal dimensions, Educational HC and Work Experience HC, within a realistic structural model, allowing causal relationship among endogenous and exogenous indicators, taking into account possible effects of external covariates. New administrative archives and a novel methodological approach are used. The methodology is applied to estimate HC of graduates in several universities of the Milan area in the early stages of their working career. The empirical results confirm the structure of the Italian job market, where investment in HC through higher education plays only a marginal role for explaining the economic performance.

Finance and Growth in China, 1995-2013: More Liquidity or More Development?

Abstract: We study the relation of financial development with income growth in China over 1995–2013. In panel and GMM analyses of province-level data, we find that accounting for the short-term spending effect of credit flows on growth, the effect of credit stocks to GDP (the traditional measure of financial development) is negative or insignificant. To identify the channels, we study the effects on GDP aggregates. Our findings suggest that credit expansion held back consumption growth by claiming resources for investment in gross capital formation and net exports. This effect is stronger with more rapid credit growth. The findings are consistent with an investment bias in China’s development path.

Judgments Based on Stocks and Flows: Different Presentations of the Same Data Can Lead to Opposing Inferences

Abstract: Time-series data—measurements of a quantity over time—can be presented as stocks (the quantity at each point in time) or flows (the change in quantity from one point in time to the next). In a seri...

Energy Price Uncertainty and Investment: Firm Level Evidence from Indian Manufacturing Sector

Abstract: Uncertainty whatsoever has undoubtedly been deemed to be malevolent to the interests of investors. Theories of partial irreversibility of investment argue that uncertainty at the micro level negatively impacts the firm’s investment and thereby, at least, slow the process of capital accumulation. Therefore, the present study, empirically analyzes how energy price uncertainty affects investment decisions of manufacturing firms in India. A variety of panel data models are estimated using Generalized Method of Moments (GMM) with data pertaining to Indian manufacturing firms over the period 1992- 93 to 2013- 14. Results are consistent with irreversible investment literature on the supply side of production, which shows that energy uncertainty has a negative effect on the capital accumulation in the manufacturing sector and this effect transpires in the form of firm's inability to adjust its actual capital stock to match up to its potential desired capital stock as proposed by the investment theories. Keywords : Energy Price Uncertainty, Irreversible Investment, Energy Intensity JEL Classifications : C23, D80, E20, Q41.

Impact of Asymmetric Information on the Investment Sensitivity to Stock Price and the Stock Price Sensitivity to Investment

Abstract: Purpose: The purpose of the study is to find out the relation between the stock price and investment and to explore the consequence of information asymmetry on the stock price sensitivity to investment and investment sensitivity to the stock prices for the manufacturing firms that are working in Pakistan and listed at KSE.Methodology: Study was conducted by 99 firms listed at KSE and 1386 observations for the period of 2001-2014. Empirical studies were conducted based on two hypotheses by using price non-synchronous, price delay, firms' size and age as a proxy of asymmetric information and change in asset as a measure of investment.Findings: Overall results show that there is an insignificant negative correlation between the sensitivity of investment to stock prices and there is an insignificant positive correlation between the sensitivity of stock prices to the investment. The critical findings of the study are that the management must learn from the market during the decision making.Practical Implications: The research has significant impact on investors, firm management, Government and as well as for the young potential in the field of research.Originality/Value: The paper fills the research gap. It studies the impact of asymmetric information on the investment sensitivity to stock price, and the stock price sensitivity of investment in Karachi stock Exchange (Pakistan) for the first time.

Modeling housing supply and demand using system dynamics

Abstract: Purpose The housing sector in Egypt represents a considerable share of the gross domestic product (GDP) and accordingly the economy. Further, it is considered vital for any population around the world, because it provides the shelter needed by people. Egyptian housing market is facing many problems which need to be solved. The paper aims to discuss these issues. Design/methodology/approach This research reviews and analyzes the Egyptian public and private housing market’s key variables. As such, it highlights the importance of informed decision making through detailed analysis and study of the market, especially when planning for the future by any housing market stakeholder. The research proposes the use of system dynamics (SD) modeling to analyze the market by creating a stock and flow model using STELLA modeling and simulation software. Findings The results reveal that the expected newly established families will be nearly 800,000 families in year 2015/2016. Out of these numbers, 600,000 families require economic housing units, while the expected supply is nearly 300,000 units. Originality/value A study is made for the economic housing market, which is a very big housing market and population segment that has been suffering from negligence for years.

Determinants of lending activity in the Euro area

Abstract: Empirical estimations of the drivers for loan extension mainly apply the outstanding stock of bank credit as the dependent variable. This paper picks up the critique of Behrendt (2016), namely that such estimations may lead to misleading results, as the change of the stock is not only driven by extended loans, but also by repayments, write-downs, revaluations and securitisation activity. This paper specifically applies a variable of new credit extensions for eight Euro area countries in a simultaneous equation panel model to evaluate potential determinants for credit extension, and compares the findings with a conventional specification using the outstanding stock. It is found that the new lending variable performs exceedingly better in respect to the underlying theory than the stock variable. This result has vast implications for the conduct of monetary policy while looking at credit trends. As most determinants have different coefficients, not only by magnitude, but also by significance and sign, central banks might react in a different way to changing trends in lending when looking at the stock variable rather than the underlying credit extension.

Estimates of Public, Housing and Other Private Sectors Net Capital Stocks for the Cyprus Economy: 1995Q1-2015Q4

Abstract: The Cyprus Statistical Service (Cystat) computes annual data for the net capital stock and capital depreciation by NACE Rev. 2 classification using the Perpetual Inventory Method (PIM). This data is available with a two-year lag, whilst quarterly data, including a breakdown by institutional sector, is not produced. On the basis of the latest vintage of annual data, this paper provides a quarterly breakdown of net capital stock for the total economy and its depreciation for the period 1995-2015 in constant 2005 prices. We further present a quarterly breakdown by institutional sector, namely public, housing and other private sector.

A Novel Model of Stock Data Mining with M/G/1 Queue for Evaluation of Stock Crash

Abstract: Data mining is the process of searching the information from a large amount of data. In order to evaluate the stock crash this paper proposes general decrementing service M/G/1 queue system with multiple adaptive vacations to find information related to stock crash in data about Shanghai Composite Index. We use the probability generating function (P.G.F.) of stationary queue length and LST of waiting time, and their stochastic decomposition to calculate Existing money flow. Existing Money flow calculation model is improved based on the stationary queue length and LST of waiting time. We program to achieve the stock of existing money flow algorithm, and get the number of existing money flow. The improved algorithm can early warn the stock market crash. The empirical result shows that: There will be a rise in price before the Stock Market Crash, and the stock of existing money inflow begin to decrease. The stock market crash fell for at least six months. The stock market crash fell by at least fifty-five percent. Most of the stock market crash fell by over seventy-percent. The stock market crash down time is inversely proportional to the magnitude of the decline. If the down time is short, the magnitude of the decline is large. If the down time is long, the magnitude of the decline is small. The stock market crash is great harm to investors.

Annual Data on Investment and Capital Stocks

Abstract: As part of the estimation of capacity for publication of its G.17 statistical release on industrial production and capacity utilization, the Federal Reserve Board produces annual information on the real capital stock and real investment for detailed industries within the manufacturing sector.