Economics Letters最新文献

Using novel quarterly data of 29 U.S. states from 2005:I to 2015:IV, we revisit the link between consumer confidence and economic activity. We find that an innovation in consumer confidence is followed by a significant and persistent increase in consumption and output but a temporary decline in inflation. These findings suggest that the supply-side (news) interpretation of consumer confidence receives more empirical support than the demand-side (animal spirit) interpretation in our sample.

We use stock-day level data on the market share of algorithmic trading to analyze whether algorithmic trading affects the frequency of mini flash crashes in the Austrian stock market. We use an instrumental variables approach and the Petrin and Train (2010) control function approach to address endogeneity concerns. We find no evidence that algorithmic trading significantly affects the probability of the occurrence of mini flash crashes.

Financial markets are known to respond to ECB policy announcements, yet these reactions could often reflect adjustments to heightened market expectations influenced by prior media coverage. News may have gained importance following the ECB's adoption of a “data-dependent” policy regime amidst persistent inflation in the Euro Area. Our empirical findings confirm this and underscore the complex interactions between media news and expectations in shaping market dynamics and reactions both before and during official policy announcements.

We investigate the belief-based mechanism that potentially drives the equity home bias puzzle using a novel experimental design. We find that geographical information causally shapes investor beliefs, leading to a home bias effect in beliefs. Participants expect higher returns and lower risk from local stocks compared to non-local ones. Loss probability strongly predicts risk perception, but its effect weakens when the stock is local. Yet, we do not find a home bias in investment choices.

Based on a sample of Chinese heavily polluting firms from 2008 to 2019, we examine the impact of the adoption of the emissions rights mortgage (ERM) policy on firm-level green investment. We find that an ERM policy significantly enhances firms’ green investment. This effect is more salient when financial constraints are higher, local marketization levels are higher, and local governments’ environmental concerns are higher. Our study provides empirical evidence and policy implementations for the further development of financial instruments based on emissions rights and other environmental rights, which show that ERM is a sound policy to promote a sustainable environment.

We examine the impact of mergers on product quality in the U.S. agri-food industry. Our difference-in-differences analyses provide evidence that following a one standard deviation increase in merger activity there is a 48.1% decrease in pounds of food recalled and an 18.7% decrease in the total number of recalls. A significant implication of our analysis is that increased concentration increases product quality.

Will the adoption of AI by businesses substitute for worker tasks or jobs? This is a core question for which relatively scarce evidence exists—especially in the wake of recent advances in generative AI. Using a new large-scale business survey by the U.S. Census Bureau, we find that AI use is having a much greater impact on worker tasks than on employment levels at the firm level. About 27% of firms using AI report replacing worker tasks, but only about 5% experience employment change due to AI use. These rates are expected to increase to nearly 35% and 12%, respectively, in the near future.