Pub Date : 2025-12-19DOI: 10.1016/j.econlet.2025.112797
Ferdi Botha, John P. de New
Using a nationally representative household panel for Australia, we observe an apparent significant deterioration in financial literacy between 2016 and 2020 and aim to identify its determinants. This surprising development is attributed to an exogenous change in interview mode from predominantly in-person to telephone, causally induced by the coronavirus pandemic. Measured financial literacy, though not latent true financial knowledge, declined as a result. Analyses of financial literacy or other cognitively demanding subjects must specifically take mode of interview into account, as mode changes can create spurious trends in cognitively demanding survey questions.
{"title":"Financial literacy is falling in Australia, except that it’s not","authors":"Ferdi Botha, John P. de New","doi":"10.1016/j.econlet.2025.112797","DOIUrl":"10.1016/j.econlet.2025.112797","url":null,"abstract":"<div><div>Using a nationally representative household panel for Australia, we observe an apparent significant deterioration in financial literacy between 2016 and 2020 and aim to identify its determinants. This surprising development is attributed to an exogenous change in interview mode from predominantly in-person to telephone, causally induced by the coronavirus pandemic. <em>Measured</em> financial literacy, though <em>not latent true</em> financial knowledge, declined as a result. Analyses of financial literacy or other cognitively demanding subjects must specifically take mode of interview into account, as mode changes can create spurious trends in cognitively demanding survey questions.</div></div>","PeriodicalId":11468,"journal":{"name":"Economics Letters","volume":"259 ","pages":"Article 112797"},"PeriodicalIF":1.8,"publicationDate":"2025-12-19","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145837603","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 : 2025-12-19DOI: 10.1016/j.econlet.2025.112782
Daniel A. Dias, Sophia C. Scott
Using data on U.S. banks’ funding costs, we study how policy rate changes pass through to deposit, non-deposit, and total funding costs when rates rise and when they fall. We find largely similar adjustments across tightening and easing phases: initial differences in the response of deposit and total funding costs are small and short-lived, and longer-horizon changes are statistically similar. Robustness checks with alternative sample start dates point to the same symmetric behavior in larger, more recent samples. Taken together, the results suggest that the familiar “rockets and feathers” asymmetry documented for advertised deposit rates does not extend to realized funding costs.
{"title":"Do banks’ funding costs respond symmetrically to policy rate increases and decreases?","authors":"Daniel A. Dias, Sophia C. Scott","doi":"10.1016/j.econlet.2025.112782","DOIUrl":"10.1016/j.econlet.2025.112782","url":null,"abstract":"<div><div>Using data on U.S. banks’ funding costs, we study how policy rate changes pass through to deposit, non-deposit, and total funding costs when rates rise and when they fall. We find largely similar adjustments across tightening and easing phases: initial differences in the response of deposit and total funding costs are small and short-lived, and longer-horizon changes are statistically similar. Robustness checks with alternative sample start dates point to the same symmetric behavior in larger, more recent samples. Taken together, the results suggest that the familiar “rockets and feathers” asymmetry documented for advertised deposit rates does not extend to realized funding costs.</div></div>","PeriodicalId":11468,"journal":{"name":"Economics Letters","volume":"259 ","pages":"Article 112782"},"PeriodicalIF":1.8,"publicationDate":"2025-12-19","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145798514","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 : 2025-12-17DOI: 10.1016/j.econlet.2025.112791
Ping Yu
This paper shows that the critical values for likelihood ratio inference of the threshold point in Hansen (2000) are too large if we restrict the confidence set as an interval, which can partially explain why Hansen’s confidence interval is conservative when the threshold effect is not too small. We provide appropriate critical values and show that different from conventional critical values, these new critical values are invariant to the structural change in the error and covariate distributions.
{"title":"New critical values for likelihood ratio inference of threshold regression","authors":"Ping Yu","doi":"10.1016/j.econlet.2025.112791","DOIUrl":"10.1016/j.econlet.2025.112791","url":null,"abstract":"<div><div>This paper shows that the critical values for likelihood ratio inference of the threshold point in Hansen (2000) are too large if we restrict the confidence set as an interval, which can partially explain why Hansen’s confidence interval is conservative when the threshold effect is not too small. We provide appropriate critical values and show that different from conventional critical values, these new critical values are invariant to the structural change in the error and covariate distributions.</div></div>","PeriodicalId":11468,"journal":{"name":"Economics Letters","volume":"259 ","pages":"Article 112791"},"PeriodicalIF":1.8,"publicationDate":"2025-12-17","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145798132","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 : 2025-12-17DOI: 10.1016/j.econlet.2025.112794
Fernando Del Río , Francisco Rebelo
This paper extends the Klump et al. (2007) normalization procedure to Variable Elasticity of Substitution (VES) production functions. Normalization addresses identification issues in VES model estimation, allowing joint estimation of substitution elasticities and factor-augmenting technical change, while offering a tractable extension of the normalized supply-side system that bridges the gap between CES and more flexible VES specifications.
本文将Klump et al.（2007）的归一化方法推广到可变替代弹性（VES）生产函数。标准化解决了VES模型估计中的识别问题，允许对替代弹性和因素增强技术变化进行联合估计，同时提供了标准化供应侧系统的易于处理的扩展，弥合了CES和更灵活的VES规范之间的差距。
{"title":"Normalizing VES production functions: extending the supply-side system approach","authors":"Fernando Del Río , Francisco Rebelo","doi":"10.1016/j.econlet.2025.112794","DOIUrl":"10.1016/j.econlet.2025.112794","url":null,"abstract":"<div><div>This paper extends the Klump et al. (2007) normalization procedure to Variable Elasticity of Substitution (VES) production functions. Normalization addresses identification issues in VES model estimation, allowing joint estimation of substitution elasticities and factor-augmenting technical change, while offering a tractable extension of the normalized supply-side system that bridges the gap between CES and more flexible VES specifications.</div></div>","PeriodicalId":11468,"journal":{"name":"Economics Letters","volume":"259 ","pages":"Article 112794"},"PeriodicalIF":1.8,"publicationDate":"2025-12-17","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145836851","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 : 2025-12-16DOI: 10.1016/j.econlet.2025.112789
Israel Nunes de Almeida Junior , Rafael Baptista Palazzi , Marcelo Cabus Klotzle
We examine how the 2024 U.S. presidential election affected herding behavior in cryptocurrency markets using a synthetic difference-in-differences approach. Treating Bitcoin as the affected unit and 28 major altcoins as the control pool, we find that the election significantly reduced Bitcoin’s cross-sectional absolute deviation relative to its pre-event mean. The effect persists after controlling for market volatility, liquidity (the Amihud measure), and momentum, and is validated by placebo tests. Our findings suggest that political uncertainty triggers market segmentation in digital assets, with Bitcoin increasingly functioning as a distinct asset class rather than as part of the broader cryptocurrency universe.
{"title":"Breaking from the herd: Evidence from the 2024 U.S. election","authors":"Israel Nunes de Almeida Junior , Rafael Baptista Palazzi , Marcelo Cabus Klotzle","doi":"10.1016/j.econlet.2025.112789","DOIUrl":"10.1016/j.econlet.2025.112789","url":null,"abstract":"<div><div>We examine how the 2024 U.S. presidential election affected herding behavior in cryptocurrency markets using a synthetic difference-in-differences approach. Treating Bitcoin as the affected unit and 28 major altcoins as the control pool, we find that the election significantly reduced Bitcoin’s cross-sectional absolute deviation relative to its pre-event mean. The effect persists after controlling for market volatility, liquidity (the Amihud measure), and momentum, and is validated by placebo tests. Our findings suggest that political uncertainty triggers market segmentation in digital assets, with Bitcoin increasingly functioning as a distinct asset class rather than as part of the broader cryptocurrency universe.</div></div>","PeriodicalId":11468,"journal":{"name":"Economics Letters","volume":"259 ","pages":"Article 112789"},"PeriodicalIF":1.8,"publicationDate":"2025-12-16","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145798518","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 : 2025-12-16DOI: 10.1016/j.econlet.2025.112744
Federico Boffa , Piersilvio De Bortoli , Andrea Nicolodi
We develop a model with environmentally-conscious consumers whose utility depends on their perception of imperfectly observable firms’ environmental investments, and consumers differ in their level of sophistication. Firms can engage in greenwashing, i.e, in sending a costly message overstating their level of actual investments. We show that in equilibrium firms engage in greenwashing, and that greenwashing is complement to authentic green investments, rationalizing the available empirical evidence. We also show that both greenwashing and genuine investment decrease when consumers’ sophistication increases, and that a two product monopolist induces less (more) greenwashing and actual investments than two single product duopolists when products are substitutes (complements). Our findings imply a novel tradeoff between policies aimed at discouraging greenwashing or at fostering consumers’ awareness and the equilibrium level of genuine environmental investments.
{"title":"Green and guilty: The interplay of environmental quality and greenwashing","authors":"Federico Boffa , Piersilvio De Bortoli , Andrea Nicolodi","doi":"10.1016/j.econlet.2025.112744","DOIUrl":"10.1016/j.econlet.2025.112744","url":null,"abstract":"<div><div>We develop a model with environmentally-conscious consumers whose utility depends on their perception of imperfectly observable firms’ environmental investments, and consumers differ in their level of sophistication. Firms can engage in greenwashing, i.e, in sending a costly message overstating their level of actual investments. We show that in equilibrium firms engage in greenwashing, and that greenwashing is complement to authentic green investments, rationalizing the available empirical evidence. We also show that both greenwashing and genuine investment decrease when consumers’ sophistication increases, and that a two product monopolist induces less (more) greenwashing and actual investments than two single product duopolists when products are substitutes (complements). Our findings imply a novel tradeoff between policies aimed at discouraging greenwashing or at fostering consumers’ awareness and the equilibrium level of genuine environmental investments.</div></div>","PeriodicalId":11468,"journal":{"name":"Economics Letters","volume":"260 ","pages":"Article 112744"},"PeriodicalIF":1.8,"publicationDate":"2025-12-16","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145974725","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 : 2025-12-16DOI: 10.1016/j.econlet.2025.112790
Julien Pascal
I show that the Parameterized Expectations Algorithm (PEA) can be naturally generalized via the bias-corrected Monte Carlo (bc-MC) operator, initially proposed to solve economic models using neural networks. When combined with a parameterized expectations approach and under a linearity assumption on the conditional expectation, the gradient of the bc-MC loss function is equal to that of the PEA in a neighborhood of the model’s solution. This leads to a new variance-reduced computational approach to solve economic models, which I refer to as the bc-MC-PEA, extending the PEA to multiple innovation draws for each state vector draw.
{"title":"A generalization of the Parameterized Expectations Algorithm","authors":"Julien Pascal","doi":"10.1016/j.econlet.2025.112790","DOIUrl":"10.1016/j.econlet.2025.112790","url":null,"abstract":"<div><div>I show that the Parameterized Expectations Algorithm (PEA) can be naturally generalized via the bias-corrected Monte Carlo (bc-MC) operator, initially proposed to solve economic models using neural networks. When combined with a parameterized expectations approach and under a linearity assumption on the conditional expectation, the gradient of the bc-MC loss function is equal to that of the PEA in a neighborhood of the model’s solution. This leads to a new variance-reduced computational approach to solve economic models, which I refer to as the <em>bc-MC-PEA</em>, extending the PEA to multiple innovation draws for each state vector draw.</div></div>","PeriodicalId":11468,"journal":{"name":"Economics Letters","volume":"259 ","pages":"Article 112790"},"PeriodicalIF":1.8,"publicationDate":"2025-12-16","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145798517","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 : 2025-12-16DOI: 10.1016/j.econlet.2025.112792
Dylan Jin-Ngo
The rise of high-skilled, temporary workers has reshaped market power dynamics, derived from labor turnover costs, in the primary labor market. We provide a preliminary framework extending the insider-outsider theory of employment and unemployment to account for the role of the “quasi-insider”. Reducing the market power of insiders, firms can exploit productivity-wage arbitrage to pass along labor turnover costs to new employees. We highlight a resulting second-order effect on the reduction of aggregate unemployment.
{"title":"An extension of the insider-outsider labor market theory: The inclusion of quasi-insiders","authors":"Dylan Jin-Ngo","doi":"10.1016/j.econlet.2025.112792","DOIUrl":"10.1016/j.econlet.2025.112792","url":null,"abstract":"<div><div>The rise of high-skilled, temporary workers has reshaped market power dynamics, derived from labor turnover costs, in the primary labor market. We provide a preliminary framework extending the insider-outsider theory of employment and unemployment to account for the role of the “quasi-insider”. Reducing the market power of insiders, firms can exploit productivity-wage arbitrage to pass along labor turnover costs to new employees. We highlight a resulting second-order effect on the reduction of aggregate unemployment.</div></div>","PeriodicalId":11468,"journal":{"name":"Economics Letters","volume":"260 ","pages":"Article 112792"},"PeriodicalIF":1.8,"publicationDate":"2025-12-16","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145923905","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 : 2025-12-14DOI: 10.1016/j.econlet.2025.112787
Wenyao Hu , Heng Emily Wang , Yue Han
This study develops a text-based measure of firm-level tariff exposure using the sections on business operations and risk factors in corporate fillings from 2024. Firms with higher tariff exposure experience significantly lower abnormal returns around the April 2, 2025 “Liberation Day” tariff announcement in the short term. Subgroup analyses show that the effect is most pronounced among firms with high leverage, strong growth and valuations, high advertising intensity, and low earnings quality. Collectively, disclosure-based tariff exposure emerges as a priced forward-looking risk, providing implications for mandated risk language disclosure, policy uncertainty, and risk channels in asset pricing.
{"title":"Tariff exposure and liberation day reactions: Initial evidence from corporate filings","authors":"Wenyao Hu , Heng Emily Wang , Yue Han","doi":"10.1016/j.econlet.2025.112787","DOIUrl":"10.1016/j.econlet.2025.112787","url":null,"abstract":"<div><div>This study develops a text-based measure of firm-level tariff exposure using the sections on business operations and risk factors in corporate fillings from 2024. Firms with higher tariff exposure experience significantly lower abnormal returns around the April 2, 2025 “Liberation Day” tariff announcement in the short term. Subgroup analyses show that the effect is most pronounced among firms with high leverage, strong growth and valuations, high advertising intensity, and low earnings quality. Collectively, disclosure-based tariff exposure emerges as a priced forward-looking risk, providing implications for mandated risk language disclosure, policy uncertainty, and risk channels in asset pricing.</div></div>","PeriodicalId":11468,"journal":{"name":"Economics Letters","volume":"259 ","pages":"Article 112787"},"PeriodicalIF":1.8,"publicationDate":"2025-12-14","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145798515","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 : 2025-12-13DOI: 10.1016/j.econlet.2025.112786
Tomáš Želinský, Martina Mysíková
We develop a cash-flow-informed residual-income (RI) framework that subtracts non-discretionary expenditures (housing costs, loan payments, transportation) from disposable income (DI) to reassess poverty in Europe. Using EU-SILC 2020 microdata and Eurostat methodology, we estimate and compare RI- and DI-based poverty rates. The RI results show higher poverty prevalence and stronger alignment with subjective hardship. Poverty-status transitions and subgroup analyses indicate mortgage holders, renters, and transport-dependent households are RI-poor but not DI-poor. Results further imply that deducting major fixed costs alters assumed household economies of scale. RI measures offer a nuanced view of economic hardship and can inform targeted policies.
{"title":"Reassessing poverty measurement in Europe using a cash-flow-informed residual-income framework","authors":"Tomáš Želinský, Martina Mysíková","doi":"10.1016/j.econlet.2025.112786","DOIUrl":"10.1016/j.econlet.2025.112786","url":null,"abstract":"<div><div>We develop a cash-flow-informed residual-income (RI) framework that subtracts non-discretionary expenditures (housing costs, loan payments, transportation) from disposable income (DI) to reassess poverty in Europe. Using EU-SILC 2020 microdata and Eurostat methodology, we estimate and compare RI- and DI-based poverty rates. The RI results show higher poverty prevalence and stronger alignment with subjective hardship. Poverty-status transitions and subgroup analyses indicate mortgage holders, renters, and transport-dependent households are RI-poor but not DI-poor. Results further imply that deducting major fixed costs alters assumed household economies of scale. RI measures offer a nuanced view of economic hardship and can inform targeted policies.</div></div>","PeriodicalId":11468,"journal":{"name":"Economics Letters","volume":"259 ","pages":"Article 112786"},"PeriodicalIF":1.8,"publicationDate":"2025-12-13","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145798516","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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