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1. A generalised stochastic volatility in mean VAR

Author:
Mumtaz, Haroon
Source:
Economics letters 2018 v.173 pp. 10-14
ISSN:
0165-1765
Subject:
algorithms; economics; equations; uncertainty; United States
Abstract:
... This note introduces a VAR with stochastic volatility in mean where the shocks of the volatility equations and the observation equations are allowed to be correlated. We provide a Gibbs algorithm to approximate the posterior distribution and demonstrate the proposed methods by estimating the impact of financial uncertainty shocks on the US economy. ...
DOI:
10.1016/j.econlet.2018.08.044

2. Aggregate implications of the tax reform of 2017: Can taxes guide technology?

Author:
Moscoso Boedo, Hernan
Source:
Economics letters 2018 v.173 pp. 6-9
ISSN:
0165-1765
Subject:
economic investment; human capital; models; taxes; United States
Abstract:
... This paper analyzes the effects of the US tax reform of 2017 using a model of endogenous technological adoption. The lower tax levels induce large human capital investments that are augmented by the endogenous transition towards skill biased technologies. ...
DOI:
10.1016/j.econlet.2018.09.009

3. A lottery Blotto game with heterogeneous items of asymmetric valuations

Author:
Kim, Geofferey Jiyun; Kim, Jerim; Kim, Bara
Source:
Economics letters 2018 v.173 pp. 1-5
ISSN:
0165-1765
Subject:
economics
Abstract:
... We develop a multi-player lottery Blotto game in which each contested item can be valuated differently by involved agents and in which each contested item can be differently valuated from other contested items. We prove that the Blotto game with a finite number of agents has a Nash equilibrium. We characterize all Nash equilibria for the case of two agents. ...
DOI:
10.1016/j.econlet.2018.09.001

4. Are generalized spillover indices overstating connectedness?

Author:
Wiesen, Thomas F.P.; Beaumont, Paul M.; Norrbin, Stefan C.; Srivastava, Anuj
Source:
Economics letters 2018 v.173 pp. 131-134
ISSN:
0165-1765
Subject:
economics; models; variance
Abstract:
... Spillover indices computed from VAR models are intended to measure the connectedness between the variables in the system. The generalized spillover index (gSOI) computed using the generalized forecast error variance decomposition is often considerably larger than the conventional spillover index computed from specific Cholesky decompositions leading to the speculation that the gSOI produces an unr ...
DOI:
10.1016/j.econlet.2018.10.007

5. Asymmetric volatility in cryptocurrencies

Author:
Baur, Dirk G.; Dimpfl, Thomas
Source:
Economics letters 2018 v.173 pp. 148-151
ISSN:
0165-1765
Subject:
asymmetry; financial assets; markets
Abstract:
... This article analyzes asymmetric volatility effects for the 20 largest cryptocurrencies and reports a very different asymmetry compared to equity markets: positive shocks increase the volatility by more than negative shocks. We explain this atypical effect for financial assets with trading activity of uninformed noise traders for positive shocks and trading activity of informed traders for negativ ...
DOI:
10.1016/j.econlet.2018.10.008

6. Bitcoin risk modeling with blockchain graphs

Author:
Akcora, Cuneyt Gurcan; Dixon, Matthew F.; Gel, Yulia R.; Kantarcioglu, Murat
Source:
Economics letters 2018 v.173 pp. 138-142
ISSN:
0165-1765
Subject:
graphs; models; prices; risk
Abstract:
... A key challenge for Bitcoin cryptocurrency holders is managing FX risk. We identify certain sub-graphs (‘chainlets’) which exhibit predictive influence on Bitcoin price and volatility and characterize the types of chainlets that signify extreme losses. ...
DOI:
10.1016/j.econlet.2018.07.039

7. Democratization, contracts and comparative advantage

Author:
Samy Soliman, Felix; Schymik, Jan
Source:
Economics letters 2018 v.173 pp. 73-77
ISSN:
0165-1765
Subject:
exports
Abstract:
... We study how the international spread of democracy shaped the comparative advantage of countries. Using data on the “Third Wave of Democratization” between 1976 and 2000 we find that democratizing countries shifted their exports towards more contract intensive goods that require a larger portion of relationship-specific inputs. This shift is observed on the intensive margin (volumes of industry-le ...
DOI:
10.1016/j.econlet.2018.09.006

8. Designing efficient and incentive compatible mechanisms is almost impossible in quasi-linear environments

Author:
Yi, Jianxin; Wang, Hefei; Li, Yong
Source:
Economics letters 2018 v.173 pp. 113-117
ISSN:
0165-1765
Subject:
economics
Abstract:
... In quasi-linear environments, classic theories state that it is possible to design efficient and incentive-compatible mechanisms, such as Vickrey, Clarke and Groves (VCG) mechanisms. However, once financial constraints are taken into account, we find that almost no financial constraint is compatible with efficiency and individual incentives over unrestricted domains and some restricted domains. Th ...
DOI:
10.1016/j.econlet.2018.09.018

9. Earnings test, non-actuarial adjustments and flexible retirement

Author:
Börsch-Supan, Axel; Härtl, Klaus; Leite, Duarte N.
Source:
Economics letters 2018 v.173 pp. 78-83
ISSN:
0165-1765
Subject:
labor; longevity; simulation models
Abstract:
... In response to the challenges of increasing longevity, many countries have introduced “flexibility reforms” for their public pension systems. A key measure of these reforms is the abolishment of earnings tests. It is claimed that these reforms increase labor supply and therefore the financial sustainability of pension systems. We build a simulation model to show that abolishing an earnings test ma ...
DOI:
10.1016/j.econlet.2018.09.020

10. Easy to read, easy to cite?

Author:
Dowling, Michael; Hammami, Helmi; Zreik, Ousayna
Source:
Economics letters 2018 v.173 pp. 100-103
ISSN:
0165-1765
Subject:
macroeconomics; quantitative analysis; readability
Abstract:
... Ease of readability of Economics Letters abstracts, and number of works cited in an article, is positively related to future citations. Readability appears to particularly matter for mathematical and quantitative methods and macroeconomics papers, while number of works cited is generally important across all articles. ...
DOI:
10.1016/j.econlet.2018.09.023

11. Effective tax rates, endogenous mark-ups and heterogeneous firms

Author:
Irlacher, Michael; Unger, Florian
Source:
Economics letters 2018 v.173 pp. 51-54
ISSN:
0165-1765
Subject:
models; prices; production costs; profits and margins; taxes; trade liberalization
Abstract:
... We provide a new explanation why the effective tax rate is smaller for larger firms, even in the absence of common channels such as profit shifting and lobbying activities. This result emerges in a heterogeneous firms model with endogenous markups based on Melitz & Ottaviano (2008). Our framework features imperfect pass-through of corporate taxes into prices and partial deductibility of production ...
DOI:
10.1016/j.econlet.2018.08.035

12. Financial stability under model uncertainty

Author:
Kantur, Zeynep; Özcan, Gülserim
Source:
Economics letters 2018 v.173 pp. 65-68
ISSN:
0165-1765
Subject:
assets; inflation; model uncertainty; models; monetary policy; prices
Abstract:
... This paper studies how asset price model misspecification affects the conduct of monetary policy under commitment in a New Keynesian model using robust control techniques. We find that monetary policy reacts aggressively to both asset price and inflation shocks to guard herself against worst-case outcome. ...
DOI:
10.1016/j.econlet.2018.09.019

13. Fiscal stimulus and systematic monetary policy: Postwar evidence for the United States

Author:
Rüth, Sebastian K.
Source:
Economics letters 2018 v.173 pp. 92-96
ISSN:
0165-1765
Subject:
fiscal policy; interest (finance); models; monetary policy; United States
Abstract:
... I provide structural VAR evidence that U.S. fiscal stimulus programs induce a systematic loosening of interest rates outside of zero-lower-bound episodes. I characterize this policy easing by the Fed as an indirect reaction to disinflationary dynamics unleashed by fiscal stimulus—a finding I corroborate via Taylor-rule estimations. The supporting monetary policy stance amplifies the impact of the ...
DOI:
10.1016/j.econlet.2018.09.015

14. Global risk aversion and emerging market return comovements

Author:
Demirer, Riza; Omay, Tolga; Yuksel, Asli; Yuksel, Aydin
Source:
Economics letters 2018 v.173 pp. 118-121
ISSN:
0165-1765
Subject:
markets; models; risk; South Africa; Turkey (country)
Abstract:
... Utilizing the recently developed measure of global risk aversion by Xu (2017), we show that global risk aversion is a significant determinant of international equity correlations, consistently across all emerging markets examined. The positive effect of risk aversion on emerging market comovements is particularly strong for South Africa and Turkey and is consistent with contagion effects. The resu ...
DOI:
10.1016/j.econlet.2018.09.027

15. Heterogeneous impacts of the Supplemental Nutrition Assistance Program on food insecurity

Author:
Deb, Partha; Gregory, Christian A.
Source:
Economics letters 2018 v.173 pp. 55-60
ISSN:
0165-1765
Subject:
Supplemental Nutrition Assistance Program; food security; households; models; probability
Abstract:
... We study the effects of SNAP participation on food insecurity allowing for a priori unspecified heterogeneous treatment effects. Using finite mixture models, we identify a low food security class comprising almost 60% of the samples for whom SNAP participation increases the probability of no food insecurity by 14–37 percentage points across specifications and decreases the probability of very high ...
DOI:
10.1016/j.econlet.2018.09.011

16. Identification of participation constraints in contracts

Author:
Luo, Yao
Source:
Economics letters 2018 v.173 pp. 84-87
ISSN:
0165-1765
Subject:
markets; models; utility functions
Abstract:
... In a contractual relationship, the agent forgoes outside opportunities to engage in a transaction with the principal. This paper studies the nonparametric identification of contract models with participation constraints. We employ a cost shifter as an exclusion restriction, which changes marginal cost but not the agent type distribution. First, the distribution of agent heterogeneity is identified ...
DOI:
10.1016/j.econlet.2018.09.024

17. Income dynamics when shocks occur during the year

Author:
Eika, Lasse
Source:
Economics letters 2018 v.173 pp. 27-29
ISSN:
0165-1765
Subject:
income; variance
Abstract:
... This paper suggests a persistent income process specification where income flows may shift during the year. The variance of persistent shocks is shown to be consistently estimated also with traditional specifications restricting shocks to occur only between years. ...
DOI:
10.1016/j.econlet.2018.09.013

18. Independence systems in gross-substitute valuations

Author:
Huang, Chao
Source:
Economics letters 2018 v.173 pp. 135-137
ISSN:
0165-1765
Subject:
economics
Abstract:
... Objects may exhibit substitutabilities, complementarities as well as independencies for agents. In this paper we show that under the Kelso–Crawfordgross substitutes condition, the sets of mutual independent objects form a matroid. Hence the structure of independent objects under the gross substitutes condition has much in common with the independence system of a graph or a vector space. ...
DOI:
10.1016/j.econlet.2018.10.001

19. Is timing everything in horse betting? Bet amount, timing and bettors’ returns in pari-mutuel wagering markets

Author:
Suhonen, Niko; Saastamoinen, Jani; Kainulainen, Tuomo; Forrest, David
Source:
Economics letters 2018 v.173 pp. 97-99
ISSN:
0165-1765
Subject:
data collection; markets; models; monopoly; profits and margins
Abstract:
... Noise trader models suggest that ‘smart money’ profits from uninformed speculators. This paper investigates how rates of return are associated with the timing of a bet and the amount staked in a pari-mutuel horse betting market. We employ a novel data set measured at the level of individual bettors on the Finnish monopoly operator’s online platform. Our findings suggest that, relative to other bet ...
DOI:
10.1016/j.econlet.2018.09.021

20. It’s too annoying: Who drops out of educational text messaging programs and why

Author:
Fricke, Hans; Kalogrides, Demetra; Loeb, Susanna
Source:
Economics letters 2018 v.173 pp. 39-43
ISSN:
0165-1765
Subject:
children; economics; education; parents
Abstract:
... Text-message programs are increasingly popular as low-cost interventions aimed at improving a variety of health and education outcomes. This study analyzes participant opt out decisions from a set of text messaging programs aimed at fostering parent–child interactions and improving school readiness. Exploiting random assignment of parents of young children to programs and rich data on text message ...
DOI:
10.1016/j.econlet.2018.08.029