Pub Date : 2025-12-11DOI: 10.1016/j.econlet.2025.112776
DongIk Kang , Jongsang Park
This study tests for adverse selection in a government sponsored reverse mortgage market where pricing depends only on age, aggregate interest rates, and home value. Using district-level data from South Korea, we apply the “positive-correlation test,” linking coverage to unpriced risk factors such as longevity and housing-price expectations. We find that areas with higher life expectancy show greater participation and coverage. In contrast, slower past housing-price growth predicts greater coverage, particularly for high-value districts. The significant relationship between the unpriced risk factors and coverage reveal the presence of adverse selection in the market for reverse mortgages.
{"title":"Adverse selection in reverse mortgages: Evidence from South Korea","authors":"DongIk Kang , Jongsang Park","doi":"10.1016/j.econlet.2025.112776","DOIUrl":"10.1016/j.econlet.2025.112776","url":null,"abstract":"<div><div>This study tests for adverse selection in a government sponsored reverse mortgage market where pricing depends only on age, aggregate interest rates, and home value. Using district-level data from South Korea, we apply the “positive-correlation test,” linking coverage to unpriced risk factors such as longevity and housing-price expectations. We find that areas with higher life expectancy show greater participation and coverage. In contrast, slower past housing-price growth predicts greater coverage, particularly for high-value districts. The significant relationship between the unpriced risk factors and coverage reveal the presence of adverse selection in the market for reverse mortgages.</div></div>","PeriodicalId":11468,"journal":{"name":"Economics Letters","volume":"259 ","pages":"Article 112776"},"PeriodicalIF":1.8,"publicationDate":"2025-12-11","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145750278","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-12-11DOI: 10.1016/j.econlet.2025.112783
Lijuan Qu
This paper studies optimal monetary policy under incomplete information and strategic uncertainty. We show that heightened strategic uncertainty steers policy toward price stabilization by strengthening the central bank’s price-stabilizing response, while an increase in public relative to private information promotes output stabilization by raising the policy weight on output stability. Under endogenous learning, private learning reinforces price stabilization, whereas public learning strengthens output stabilization.
{"title":"Incomplete information, strategic uncertainty and optimal monetary policy","authors":"Lijuan Qu","doi":"10.1016/j.econlet.2025.112783","DOIUrl":"10.1016/j.econlet.2025.112783","url":null,"abstract":"<div><div>This paper studies optimal monetary policy under incomplete information and strategic uncertainty. We show that heightened strategic uncertainty steers policy toward price stabilization by strengthening the central bank’s price-stabilizing response, while an increase in public relative to private information promotes output stabilization by raising the policy weight on output stability. Under endogenous learning, private learning reinforces price stabilization, whereas public learning strengthens output stabilization.</div></div>","PeriodicalId":11468,"journal":{"name":"Economics Letters","volume":"259 ","pages":"Article 112783"},"PeriodicalIF":1.8,"publicationDate":"2025-12-11","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145750279","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-12-11DOI: 10.1016/j.econlet.2025.112778
Yike Sun , Yimin Wu
We show heterogeneity in risk factors for carry trade risk premia across country groups by decomposing global foreign exchange (FX) volatility innovations into geopolitical risk (GPR), economic policy uncertainty (EPU), and a residual FX market risk factor. Using monthly data for 40 economies (1999M1–2024M6), we orthogonalize innovations and estimate prices using a two-step Fama–MacBeth procedure. Three asymmetries emerge: GPR premia are positive but smaller in advanced economies (AEs) than in emerging and developing economies (EMDEs); EPU premia are positive in AEs and smaller, often negative, in EMDEs; the residual FX factor is priced negatively in AEs and positively in EMDEs.
{"title":"Carry trades and risk factors heterogeneity: Three asymmetries","authors":"Yike Sun , Yimin Wu","doi":"10.1016/j.econlet.2025.112778","DOIUrl":"10.1016/j.econlet.2025.112778","url":null,"abstract":"<div><div>We show heterogeneity in risk factors for carry trade risk premia across country groups by decomposing global foreign exchange (FX) volatility innovations into geopolitical risk (GPR), economic policy uncertainty (EPU), and a residual FX market risk factor. Using monthly data for 40 economies (1999M1–2024M6), we orthogonalize innovations and estimate prices using a two-step Fama–MacBeth procedure. Three asymmetries emerge: GPR premia are positive but smaller in advanced economies (AEs) than in emerging and developing economies (EMDEs); EPU premia are positive in AEs and smaller, often negative, in EMDEs; the residual FX factor is priced negatively in AEs and positively in EMDEs.</div></div>","PeriodicalId":11468,"journal":{"name":"Economics Letters","volume":"259 ","pages":"Article 112778"},"PeriodicalIF":1.8,"publicationDate":"2025-12-11","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145750280","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-12-09DOI: 10.1016/j.econlet.2025.112771
Jacint Balaguer
Using data from the 2023 Spanish municipal elections, we show that newly elected mayors who replace incumbents from a different ideological bloc reduce their own pay upon taking office — by about 6 and 13 percentage points of the legal maximum in left-to-right and right-to-left turnovers, respectively — relative to reelected incumbents. No such adjustment occurs when the incoming mayor shares the predecessor’s ideological orientation. The pattern of results is consistent with a costly-signaling mechanism in which ideological outsiders use early pay cuts to credibly convey otherwise hard-to-observe attributes. More broadly, the findings suggest a previously unexplored way in which electoral turnover may shape local political behavior.
{"title":"Do newly elected mayors cut their own pay?","authors":"Jacint Balaguer","doi":"10.1016/j.econlet.2025.112771","DOIUrl":"10.1016/j.econlet.2025.112771","url":null,"abstract":"<div><div>Using data from the 2023 Spanish municipal elections, we show that newly elected mayors who replace incumbents from a different ideological bloc reduce their own pay upon taking office — by about 6 and 13 percentage points of the legal maximum in left-to-right and right-to-left turnovers, respectively — relative to reelected incumbents. No such adjustment occurs when the incoming mayor shares the predecessor’s ideological orientation. The pattern of results is consistent with a costly-signaling mechanism in which ideological outsiders use early pay cuts to credibly convey otherwise hard-to-observe attributes. More broadly, the findings suggest a previously unexplored way in which electoral turnover may shape local political behavior.</div></div>","PeriodicalId":11468,"journal":{"name":"Economics Letters","volume":"259 ","pages":"Article 112771"},"PeriodicalIF":1.8,"publicationDate":"2025-12-09","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145750277","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-12-05DOI: 10.1016/j.econlet.2025.112767
Haokai Ning , Ruihui Li , Zifan Bi
We investigate the role of cross-ownership in shaping optimal export policy under demand uncertainty in a Cournot duopoly. Governments choose between export subsidies and voluntary export restraints (VERs) prior to the resolution of uncertainty, seeking to shift oligopoly rents toward domestic firms. In a symmetric Nash equilibrium, where both governments adopt the same policy instrument, higher cross-ownership weakens export protection and raises expected welfare. In an asymmetric Nash equilibrium, where governments pursue different policy instruments, the impact of cross-ownership on export protection and expected welfare is more complex, depending on the instruments adopted. We further demonstrate that the critical threshold of demand uncertainty at which a Nash equilibrium emerges is directly linked to the extent of cross-ownership.
{"title":"Choice of export policy for oligopolistic industries with cross-ownership under uncertainty","authors":"Haokai Ning , Ruihui Li , Zifan Bi","doi":"10.1016/j.econlet.2025.112767","DOIUrl":"10.1016/j.econlet.2025.112767","url":null,"abstract":"<div><div>We investigate the role of cross-ownership in shaping optimal export policy under demand uncertainty in a Cournot duopoly. Governments choose between export subsidies and voluntary export restraints (VERs) prior to the resolution of uncertainty, seeking to shift oligopoly rents toward domestic firms. In a symmetric Nash equilibrium, where both governments adopt the same policy instrument, higher cross-ownership weakens export protection and raises expected welfare. In an asymmetric Nash equilibrium, where governments pursue different policy instruments, the impact of cross-ownership on export protection and expected welfare is more complex, depending on the instruments adopted. We further demonstrate that the critical threshold of demand uncertainty at which a Nash equilibrium emerges is directly linked to the extent of cross-ownership.</div></div>","PeriodicalId":11468,"journal":{"name":"Economics Letters","volume":"259 ","pages":"Article 112767"},"PeriodicalIF":1.8,"publicationDate":"2025-12-05","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145693000","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-12-05DOI: 10.1016/j.econlet.2025.112768
Hanping Xu , Bin Wu , Enxian Chen
This paper establishes an asymptotic implementation result in large congestion-type games. We show that if players in a large finite congestion-type game adopt the Nash equilibrium distribution of the corresponding continuum game, the resulting strategy profile forms an -Nash equilibrium with . This provides a simple and practical way for players to achieve near-optimal outcomes without knowing the exact number of participants.
{"title":"Asymptotic Nash implementation in large congestion-type games","authors":"Hanping Xu , Bin Wu , Enxian Chen","doi":"10.1016/j.econlet.2025.112768","DOIUrl":"10.1016/j.econlet.2025.112768","url":null,"abstract":"<div><div>This paper establishes an asymptotic implementation result in large congestion-type games. We show that if players in a large finite congestion-type game adopt the Nash equilibrium distribution of the corresponding continuum game, the resulting strategy profile forms an <span><math><msub><mrow><mi>ɛ</mi></mrow><mrow><mi>n</mi></mrow></msub></math></span>-Nash equilibrium with <span><math><mrow><msub><mrow><mi>ɛ</mi></mrow><mrow><mi>n</mi></mrow></msub><mo>∼</mo><mi>O</mi><mrow><mo>(</mo><msup><mrow><mi>n</mi></mrow><mrow><mo>−</mo><mn>1</mn><mo>/</mo><mn>2</mn></mrow></msup><mo>)</mo></mrow></mrow></math></span>. This provides a simple and practical way for players to achieve near-optimal outcomes without knowing the exact number of participants.</div></div>","PeriodicalId":11468,"journal":{"name":"Economics Letters","volume":"259 ","pages":"Article 112768"},"PeriodicalIF":1.8,"publicationDate":"2025-12-05","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145750276","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-12-04DOI: 10.1016/j.econlet.2025.112758
Feng Yao , Manuel A. Hernandez
Sharp and volatile fertilizer price movements can hinder adoption and reduce agricultural productivity, especially among vulnerable smallholders. Using a nonparametric location-scale approach to model price returns, we quantify the conditional value-at-risk (CVaR) — the high return threshold exceeded with low probability — to identify excessive price spikes in potash, urea, and di-ammonium phosphate (DAP) markets. We use the bias-corrected estimator from Martins-Filho et al. (2018) and propose a simpler estimator based on Hill (1975). Backtesting results indicate superior performance of the Hill-based estimator, supporting its value as a convenient method for detecting unusual fertilizer price surges amid recurring global volatility.
{"title":"When prices spike: Identifying excessive volatility in fertilizer markets","authors":"Feng Yao , Manuel A. Hernandez","doi":"10.1016/j.econlet.2025.112758","DOIUrl":"10.1016/j.econlet.2025.112758","url":null,"abstract":"<div><div>Sharp and volatile fertilizer price movements can hinder adoption and reduce agricultural productivity, especially among vulnerable smallholders. Using a nonparametric location-scale approach to model price returns, we quantify the conditional value-at-risk (CVaR) — the high return threshold exceeded with low probability — to identify excessive price spikes in potash, urea, and di-ammonium phosphate (DAP) markets. We use the bias-corrected estimator from Martins-Filho et al. (2018) and propose a simpler estimator based on Hill (1975). Backtesting results indicate superior performance of the Hill-based estimator, supporting its value as a convenient method for detecting unusual fertilizer price surges amid recurring global volatility.</div></div>","PeriodicalId":11468,"journal":{"name":"Economics Letters","volume":"259 ","pages":"Article 112758"},"PeriodicalIF":1.8,"publicationDate":"2025-12-04","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145749768","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-12-04DOI: 10.1016/j.econlet.2025.112728
Marijn A. Bolhuis , Judd N.L. Cramer , Karl Oskar Schulz , Lawrence H. Summers
As the US economy bounced back from the post-pandemic inflation surge, consumer sentiment remained depressed even though unemployment was low, and inflation was falling. This confounded economists, who historically rely on these two variables to gauge how consumers feel about the economy. We propose that borrowing costs, which grew at rates they had not reached in decades, do much to explain this gap. The cost of money is not currently included in traditional price indexes, indicating a disconnect between the measures favored by economists and the effective costs borne by consumers. We show that the lows in US consumer sentiment that cannot be explained by unemployment and official inflation are strongly correlated with borrowing costs and consumer credit supply. Concerns over borrowing costs, which have historically tracked the cost of money, were at their highest levels since the Volcker-era. We then develop alternative measures of inflation that include borrowing costs and can account for almost three-quarters of the gap in US consumer sentiment in 2023.
{"title":"The cost of money is part of the cost of living","authors":"Marijn A. Bolhuis , Judd N.L. Cramer , Karl Oskar Schulz , Lawrence H. Summers","doi":"10.1016/j.econlet.2025.112728","DOIUrl":"10.1016/j.econlet.2025.112728","url":null,"abstract":"<div><div>As the US economy bounced back from the post-pandemic inflation surge, consumer sentiment remained depressed even though unemployment was low, and inflation was falling. This confounded economists, who historically rely on these two variables to gauge how consumers feel about the economy. We propose that borrowing costs, which grew at rates they had not reached in decades, do much to explain this gap. The cost of money is not currently included in traditional price indexes, indicating a disconnect between the measures favored by economists and the effective costs borne by consumers. We show that the lows in US consumer sentiment that cannot be explained by unemployment and official inflation are strongly correlated with borrowing costs and consumer credit supply. Concerns over borrowing costs, which have historically tracked the cost of money, were at their highest levels since the Volcker-era. We then develop alternative measures of inflation that include borrowing costs and can account for almost three-quarters of the gap in US consumer sentiment in 2023.</div></div>","PeriodicalId":11468,"journal":{"name":"Economics Letters","volume":"259 ","pages":"Article 112728"},"PeriodicalIF":1.8,"publicationDate":"2025-12-04","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145750281","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-12-03DOI: 10.1016/j.econlet.2025.112756
Karsten Schweikert
We derive the asymptotic distribution of Hasbrouck information shares and provide a large sample approximation to conduct standard hypothesis tests. The finite sample properties are studied with simulation experiments. While the resulting tests are properly sized and have sufficient power against the null, the size properties are distorted if the null hypothesis is located at the bounds. We therefore suggest a specific test for the “one central market” hypothesis. Additionally, we provide a generalized Wald test to test for equality of shares.
{"title":"Asymptotic inference for Hasbrouck information shares","authors":"Karsten Schweikert","doi":"10.1016/j.econlet.2025.112756","DOIUrl":"10.1016/j.econlet.2025.112756","url":null,"abstract":"<div><div>We derive the asymptotic distribution of Hasbrouck information shares and provide a large sample approximation to conduct standard hypothesis tests. The finite sample properties are studied with simulation experiments. While the resulting tests are properly sized and have sufficient power against the null, the size properties are distorted if the null hypothesis is located at the bounds. We therefore suggest a specific test for the “one central market” hypothesis. Additionally, we provide a generalized Wald test to test for equality of shares.</div></div>","PeriodicalId":11468,"journal":{"name":"Economics Letters","volume":"258 ","pages":"Article 112756"},"PeriodicalIF":1.8,"publicationDate":"2025-12-03","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145681699","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-12-02DOI: 10.1016/j.econlet.2025.112754
Huy Viet Hoang, Giang Thi Minh Vu
Using the fixed effect estimator on a U.S. firm dataset from 2012 to 2021, this study reveals that greater dependence on natural resources significantly increases supply chain risk. The mechanism analysis identifies that supply chain risk intensifies when firms face greater volatility in input material costs and maintain lower inventory reserves, supporting the inventory management channel. Additional evidence shows that this unfavorable impact is amplified following major global shocks, namely the 2016 Paris Agreement and the 2018 U.S.–China trade war. These findings collectively underscore the need for enhanced input diversification, inventory resilience, and adaptive strategies in managing nature-related risks.
{"title":"Does nature dependence drive firms’ supply chain risk?","authors":"Huy Viet Hoang, Giang Thi Minh Vu","doi":"10.1016/j.econlet.2025.112754","DOIUrl":"10.1016/j.econlet.2025.112754","url":null,"abstract":"<div><div>Using the fixed effect estimator on a U.S. firm dataset from 2012 to 2021, this study reveals that greater dependence on natural resources significantly increases supply chain risk. The mechanism analysis identifies that supply chain risk intensifies when firms face greater volatility in input material costs and maintain lower inventory reserves, supporting the inventory management channel. Additional evidence shows that this unfavorable impact is amplified following major global shocks, namely the 2016 Paris Agreement and the 2018 U.S.–China trade war. These findings collectively underscore the need for enhanced input diversification, inventory resilience, and adaptive strategies in managing nature-related risks.</div></div>","PeriodicalId":11468,"journal":{"name":"Economics Letters","volume":"259 ","pages":"Article 112754"},"PeriodicalIF":1.8,"publicationDate":"2025-12-02","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145692999","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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