Congressional districts are political entities with heterogeneous trade policy preferences due to their diverse economic structures. Representation of these interests in Congress is a crucial aspect of trade policymaking that is missing in canonical political economy models of trade. In this paper, we underscore the influence of districts by developing a political economy model of trade with region-specific factors. Using 2002 data from U.S. Congressional Districts, we first characterize the unobserved district-level demand for protection. Extending the model beyond the small country assumption to account for export interests as a force countering protection, we develop a model of national tariff-setting. The model predictions are used to estimate the welfare weights implied by tariff and non-tariff measures enacted nationally. Our supply-side explanation for trade policy, while complementing Grossman and Helpman (1994), reveals district and industry-level patterns of winners and losers, central to understanding the political consequences of trade and the backlash against globalization.
{"title":"Heterogeneous Districts, Interests, and Trade Policy","authors":"Kishore Gawande, Pablo Pinto, Santiago Pinto","doi":"10.21144/wp23-12","DOIUrl":"https://doi.org/10.21144/wp23-12","url":null,"abstract":"Congressional districts are political entities with heterogeneous trade policy preferences due to their diverse economic structures. Representation of these interests in Congress is a crucial aspect of trade policymaking that is missing in canonical political economy models of trade. In this paper, we underscore the influence of districts by developing a political economy model of trade with region-specific factors. Using 2002 data from U.S. Congressional Districts, we first characterize the unobserved district-level demand for protection. Extending the model beyond the small country assumption to account for export interests as a force countering protection, we develop a model of national tariff-setting. The model predictions are used to estimate the welfare weights implied by tariff and non-tariff measures enacted nationally. Our supply-side explanation for trade policy, while complementing Grossman and Helpman (1994), reveals district and industry-level patterns of winners and losers, central to understanding the political consequences of trade and the backlash against globalization.","PeriodicalId":35806,"journal":{"name":"Working Paper - Chr. Michelson Institute","volume":" 18","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2023-11-10","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"135142151","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"An Alternative Measure of Core Inflation: The Trimmed Persistence PCE Price Index","authors":"John O'Trakoun","doi":"10.21144/wp23-10","DOIUrl":"https://doi.org/10.21144/wp23-10","url":null,"abstract":"","PeriodicalId":35806,"journal":{"name":"Working Paper - Chr. Michelson Institute","volume":"54 10","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2023-11-03","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"135819418","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Laura Bakkensen, Quynh Nguyen, Toan Phan, Paul Schuler
An important yet less studied factor in determining the extent of adaptation to climate change is information: are people adequately informed about their vulnerability to future climate-related risks, and does their willingness to adapt depend on this knowledge? Focusing on how communication about projected sea level rise (SLR) affects the willingness to migrate, we implemented a large randomized control survey experiment with a nationally representative sample of more than 7,000 respondents across all provinces in Vietnam. We randomly assign respondents to different information treatments. We find that providing a simple text-based information treatment about the general extent of Vietnam's exposure to projected SLR increases all respondents' willingness to migrate (including respondents living in areas not vulnerable to SLR). However, a more spatially precise map information treatment—providing the general text along with a map showing Vietnam's projected SLR exposure—leads to a more targeted effect: it only significantly increases the willingness to migrate of respondents currently residing in vulnerable areas. Finally, adding doubt to the information treatments—mentioning an official repudiation of the scientific projection of SLR—does not reduce the treatments' impact. Our findings are inconsistent with the commonly used perfect information benchmark, which assumes that people are fully informed about future climate-related risks. They also highlight the importance of providing spatially precise information in facilitating climate adaptation.
{"title":"Charting the Course: How Does Information about Sea Level Rise Affect the Willingness to Migrate?","authors":"Laura Bakkensen, Quynh Nguyen, Toan Phan, Paul Schuler","doi":"10.21144/wp23-09","DOIUrl":"https://doi.org/10.21144/wp23-09","url":null,"abstract":"An important yet less studied factor in determining the extent of adaptation to climate change is information: are people adequately informed about their vulnerability to future climate-related risks, and does their willingness to adapt depend on this knowledge? Focusing on how communication about projected sea level rise (SLR) affects the willingness to migrate, we implemented a large randomized control survey experiment with a nationally representative sample of more than 7,000 respondents across all provinces in Vietnam. We randomly assign respondents to different information treatments. We find that providing a simple text-based information treatment about the general extent of Vietnam's exposure to projected SLR increases all respondents' willingness to migrate (including respondents living in areas not vulnerable to SLR). However, a more spatially precise map information treatment—providing the general text along with a map showing Vietnam's projected SLR exposure—leads to a more targeted effect: it only significantly increases the willingness to migrate of respondents currently residing in vulnerable areas. Finally, adding doubt to the information treatments—mentioning an official repudiation of the scientific projection of SLR—does not reduce the treatments' impact. Our findings are inconsistent with the commonly used perfect information benchmark, which assumes that people are fully informed about future climate-related risks. They also highlight the importance of providing spatially precise information in facilitating climate adaptation.","PeriodicalId":35806,"journal":{"name":"Working Paper - Chr. Michelson Institute","volume":"424 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2023-09-22","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"136062009","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
P. Andreou, Sofia Anyfantaki, C. Cabolis, Konstantinos Dellis
We explore the relation between sound institutions favouring innovation and technology investment and firms’ emissions reduction. Even though emission abatement is achieved at the firm or plant level, we postulate that structural and institutional fac- tors underpinning green innovation, skills and technology adoption at the country level are of material importance. Advances in technology and infrastructure are the main drivers for the reduction of emissions and are, in turn, intrinsically linked to overall country characteristics. Sound institutions can act as enablers and accelerators for firms and industries in the green transition process, hence we find an attenuating effect on emissions conditional on firm attributes.
{"title":"Exploring country characteristics that encourage emissions reduction","authors":"P. Andreou, Sofia Anyfantaki, C. Cabolis, Konstantinos Dellis","doi":"10.52903/wp2023323","DOIUrl":"https://doi.org/10.52903/wp2023323","url":null,"abstract":"We explore the relation between sound institutions favouring innovation and technology investment and firms’ emissions reduction. Even though emission abatement is achieved at the firm or plant level, we postulate that structural and institutional fac- tors underpinning green innovation, skills and technology adoption at the country level are of material importance. Advances in technology and infrastructure are the main drivers for the reduction of emissions and are, in turn, intrinsically linked to overall country characteristics. Sound institutions can act as enablers and accelerators for firms and industries in the green transition process, hence we find an attenuating effect on emissions conditional on firm attributes.","PeriodicalId":35806,"journal":{"name":"Working Paper - Chr. Michelson Institute","volume":"7 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2023-07-31","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"82470173","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
The paper uses daily realised volatility measures in order to gain forecast accuracy over stocks' market implied volatility, as proxied by VIX Index, for forecast horizon of 1, 5, 10 and 22 days ahead. We evaluate forecast accuracy by incorporating a traditional statistical loss function, along with an objective-based evaluation criterion, that is the cumulative returns earned from the different HAR-type volatility models, through a simple yet effective trading exercise on VIX futures. Findings illustrate how illusive the choice between the two metrics may be, as it ends in two contradicting results.
{"title":"Forecasting VIX: the illusion of forecast evaluation criteria","authors":"Stavros Degiannakis, Eleftheria Kafousaki","doi":"10.52903/wp2023322","DOIUrl":"https://doi.org/10.52903/wp2023322","url":null,"abstract":"The paper uses daily realised volatility measures in order to gain forecast accuracy over stocks' market implied volatility, as proxied by VIX Index, for forecast horizon of 1, 5, 10 and 22 days ahead. We evaluate forecast accuracy by incorporating a traditional statistical loss function, along with an objective-based evaluation criterion, that is the cumulative returns earned from the different HAR-type volatility models, through a simple yet effective trading exercise on VIX futures. Findings illustrate how illusive the choice between the two metrics may be, as it ends in two contradicting results.","PeriodicalId":35806,"journal":{"name":"Working Paper - Chr. Michelson Institute","volume":"41 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2023-07-31","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"90148291","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
We construct a novel signal of bank expectations utilizing confidential data and a regulatory constraint imposed on bank internal capital markets during the 2008 crisis that made internal equity injections to commercial bank subsidiaries difficult to reverse. When the US government initiated a $176 billion recapitalization program during the crisis, this constraint made it costly ex-ante for multi-bank holding companies (MBHC) to use these funds for the purpose of recapitalizing subsidiaries against future anticipated losses; in contrast, lending the funds to subsidiaries was exempt from the constraint and thus carried an option value for future reallocations across sibling subsidiaries. Several findings emerge. First, we show that MBHCs treated internal equity injections as a scarce resource when emergency funds arrived, whereas single-bank holding companies did not because the constraint was not costly for them. Second, we find that excess internal equity injections by MBHCs form a signal of their expectations for post-crisis subsidiary outlook—i.e., future profitability, supervisory ratings, and credit originations. Third, the geographical aggregation of these individual bank signals predicts the long-run real effects of the 2008 crisis on small businesses across US states—i.e., post-crisis growth in small business revenues, employment, establishments, payroll, and wages. Our study provides a more direct test of "banks as efficient information producers" (e.g., Diamond (1984), Fama (1985)), and is the first to show that credible signals of this bank knowledge can be extracted from the internal capital markets, allowing regulators to forecast in real time a geographical rank-order for post-crisis real outcomes at small firms. This new policy tool can be seen as a potential side benefit of government-sponsored bank recapitalization programs, of which there have been 33 in the past 40 years worldwide.
{"title":"Do Costly Internal Equity Injections Reveal Bank Expectations about Post-Crisis Real Outcomes?","authors":"Arun Gupta, Horacio Sapriza","doi":"10.21144/wp23-03","DOIUrl":"https://doi.org/10.21144/wp23-03","url":null,"abstract":"We construct a novel signal of bank expectations utilizing confidential data and a regulatory constraint imposed on bank internal capital markets during the 2008 crisis that made internal equity injections to commercial bank subsidiaries difficult to reverse. When the US government initiated a $176 billion recapitalization program during the crisis, this constraint made it costly ex-ante for multi-bank holding companies (MBHC) to use these funds for the purpose of recapitalizing subsidiaries against future anticipated losses; in contrast, lending the funds to subsidiaries was exempt from the constraint and thus carried an option value for future reallocations across sibling subsidiaries. Several findings emerge. First, we show that MBHCs treated internal equity injections as a scarce resource when emergency funds arrived, whereas single-bank holding companies did not because the constraint was not costly for them. Second, we find that excess internal equity injections by MBHCs form a signal of their expectations for post-crisis subsidiary outlook—i.e., future profitability, supervisory ratings, and credit originations. Third, the geographical aggregation of these individual bank signals predicts the long-run real effects of the 2008 crisis on small businesses across US states—i.e., post-crisis growth in small business revenues, employment, establishments, payroll, and wages. Our study provides a more direct test of \"banks as efficient information producers\" (e.g., Diamond (1984), Fama (1985)), and is the first to show that credible signals of this bank knowledge can be extracted from the internal capital markets, allowing regulators to forecast in real time a geographical rank-order for post-crisis real outcomes at small firms. This new policy tool can be seen as a potential side benefit of government-sponsored bank recapitalization programs, of which there have been 33 in the past 40 years worldwide.","PeriodicalId":35806,"journal":{"name":"Working Paper - Chr. Michelson Institute","volume":"1 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2023-01-19","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"135301350","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Antonis Kotidis, Dimitris Malliaropulos, E. Papaioannou
In a surprise move during a crisis, the ECB excluded Greek Government Bonds from the set of eligible collateral in monetary policy operations. In turn, Greek banks turned to Emergency Liquidity Assistance (ELA) to meet their funding needs. ELA replenished losses from all funding sources, consistent with its role as LOLR. However, in anticipation to a switch to ELA, banks reduced their interbank and corporate lending as a result of its higher cost and conditionality. Although multi-lender firms compensated for the associated credit crunch, single-lender firms that were not able to establish new lending relationships experienced a reduction in their exports.
{"title":"Public and private liquidity during crises times: evidence from Emergency Liquidity Assistance (ELA) to Greek banks","authors":"Antonis Kotidis, Dimitris Malliaropulos, E. Papaioannou","doi":"10.52903/wp2022304","DOIUrl":"https://doi.org/10.52903/wp2022304","url":null,"abstract":"In a surprise move during a crisis, the ECB excluded Greek Government Bonds from the set of eligible collateral in monetary policy operations. In turn, Greek banks turned to Emergency Liquidity Assistance (ELA) to meet their funding needs. ELA replenished losses from all funding sources, consistent with its role as LOLR. However, in anticipation to a switch to ELA, banks reduced their interbank and corporate lending as a result of its higher cost and conditionality. Although multi-lender firms compensated for the associated credit crunch, single-lender firms that were not able to establish new lending relationships experienced a reduction in their exports.","PeriodicalId":35806,"journal":{"name":"Working Paper - Chr. Michelson Institute","volume":"34 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2022-09-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"85387646","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
his paper examines the current state of play of the Banking Union project aiming at unveiling the weaknesses and gaps of this still incomplete framework. In this context, the implementation so far of the Banking Union legislation sheds light on the vulnerabilities concerning supervisory change, transparency, trust and a proper allocation of bank failure costs since all these criteria are deemed as essential contributing factors to promoting financial stability at European level. Taking into consideration the latest steps towards completing the Banking Union framework until June 2022, this paper aims at depicting the proposed leeway potentially capable to align resilience and flexibility with the view of mitigating any persisting shock-amplifying factor against financial stability.
{"title":"Banking union: state of play and proposals for the way forward","authors":"Kornilia Vikelidou, Athanasios Tagkalakis","doi":"10.52903/wp2022303","DOIUrl":"https://doi.org/10.52903/wp2022303","url":null,"abstract":"his paper examines the current state of play of the Banking Union project aiming at unveiling the weaknesses and gaps of this still incomplete framework. In this context, the implementation so far of the Banking Union legislation sheds light on the vulnerabilities concerning supervisory change, transparency, trust and a proper allocation of bank failure costs since all these criteria are deemed as essential contributing factors to promoting financial stability at European level. Taking into consideration the latest steps towards completing the Banking Union framework until June 2022, this paper aims at depicting the proposed leeway potentially capable to align resilience and flexibility with the view of mitigating any persisting shock-amplifying factor against financial stability.","PeriodicalId":35806,"journal":{"name":"Working Paper - Chr. Michelson Institute","volume":"14 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2022-07-20","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"87143645","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
A. Milionis, N. Galanopoulos, P. Hatzopoulos, Aliki Sagianou
One of the most important risks in the actuarial industry is the longevity risk. The accurate prediction of mortality rates plays a crucial role in the management of the aforementioned risk. Such predictions are performed by modelling the mortality rates using mortality models. Aiming at possible improvements in such forecasts, in this work we examine the effect of data transformation and “linearization” on the quality of time series forecasts of mortality rate data. By the term time series “linearization” is meant the treatment of causes that disrupt the underlying stochastic process measured by a time series. The dataset consists of the time series of the period indices uncovering the mortality trend for England-Wales according to published mortality models. Results indicate a clear improvement in interval forecasts. However, the result on point forecasts is not as clear as is the case of interval forecasts. The documented improvement in interval forecasts can significantly affect the Solvency Capital Requirement, and subsequently the Solvency Ratio for a pension fund. Such an improvement might put some pension providers at a competitive advantage as they have less capital locked in their liabilities. In addition, it was confirmed that the transformed-linearized time series of mortality rates satisfy to a higher extent the need for normality as compared to the original series.
{"title":"Forecasting actuarial time series: a practical study of the effect of statistical pre-adjustments","authors":"A. Milionis, N. Galanopoulos, P. Hatzopoulos, Aliki Sagianou","doi":"10.52903/wp2022297","DOIUrl":"https://doi.org/10.52903/wp2022297","url":null,"abstract":"One of the most important risks in the actuarial industry is the longevity risk. The accurate prediction of mortality rates plays a crucial role in the management of the aforementioned risk. Such predictions are performed by modelling the mortality rates using mortality models. Aiming at possible improvements in such forecasts, in this work we examine the effect of data transformation and “linearization” on the quality of time series forecasts of mortality rate data. By the term time series “linearization” is meant the treatment of causes that disrupt the underlying stochastic process measured by a time series. The dataset consists of the time series of the period indices uncovering the mortality trend for England-Wales according to published mortality models. Results indicate a clear improvement in interval forecasts. However, the result on point forecasts is not as clear as is the case of interval forecasts. The documented improvement in interval forecasts can significantly affect the Solvency Capital Requirement, and subsequently the Solvency Ratio for a pension fund. Such an improvement might put some pension providers at a competitive advantage as they have less capital locked in their liabilities. In addition, it was confirmed that the transformed-linearized time series of mortality rates satisfy to a higher extent the need for normality as compared to the original series.","PeriodicalId":35806,"journal":{"name":"Working Paper - Chr. Michelson Institute","volume":"15 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2022-06-17","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"91379039","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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