Journal of Economic Asymmetries最新文献

This study investigates the presence of price asymmetries in the UK retail and wholesale petrol sectors over the period of January 2020–July 2022. The scope of this research is to explore whether petrol prices rise faster than they fall according to changes in input costs, namely fuel and international crude oil prices for the retail and wholesale sector respectively. As the time sample considers the shocks of covid-19 restrictions and rising inflation, the presence of structural breaks is assumed which may contribute to asymmetric behaviour. The Autoregressive Distributive Lag (ARDL) approach is implemented in the pricing equation of the model by formulating four versions for each sector, according to the presence of asymmetries and price-cost margins. The results provide significant evidence of price asymmetries in the retail petrol sector; however, such asymmetries are less pronounced over high margin periods. The wholesale sector is found to be more flexible to changes in crude oil prices as asymmetries are less persistent throughout the sample. Therefore, consumers face rigid petrol prices because of retail firms’ decisions, which should be the focus of policy makers.

This paper investigates the impact of the threshold effect of financial development on the relationship between wealth inequality and economic growth of 13 Middle East-North African (MENA) countries between 1995 and 2019. Applying the fixed-effect threshold panel model introduced by Hansen (1999), we test for a non-linear association between wealth disparity and economic output below and above a threshold value of financial development. The results show that wealth inequality inhibits economic expansion regardless of the level of financial development. Besides, this destructive impact intensifies with increased financial development. Our findings highlight that the rise in the wealth gap especially accompanied by accelerating financial reforms hurts economic growth. The findings of our research provide useful implications for the MENA region. Policymakers should reduce inequality of patrimony by adopting wealth tax to achieve a more equitable capital distribution. Furthermore, governments must adjust the financial development process to make it consistent with wealth equalizing policies and sustainable growth.

Central bank analyses and external communication play an important role in maintaining its credibility, as well as effectiveness of monetary and macroprudential policies. A financial stability report is one of the main channels of communication between central banks and the financial market. The aim of the study is to verify whether the linguistic content of those reports contains early warning signals of an upcoming financial crisis. We carefully select 848 words related to Early Warning Indicators and examine whether their appearance in the 604 financial stability reports published by 18 central banks could have indicated an impending global financial crisis (2007+). We use the novel approach of joint application of text-mining and the concept of receiver operating characteristic curve to compare the frequency of selected words before and after the global financial crisis. According to the results, the linguistic content of financial stability reports does not emit any early warning signals (except for the single case of the Central Bank of Iceland). On the one hand, this may indicate potential weaknesses in the quality of analyses in those reports, but on the other hand, it may show a central bank's deliberate avoidance of actions prompting negative effects of a ‘self-fulfilling prophecy’.

This paper investigates the relationship between investors' attention, as measured by Google search queries, and equity implied volatility during the COVID-19 outbreak. Recent studies show that search investors' behavior data is an extremely abundant repository of predictive data, and investor-limited attention increases when the uncertainty level is high. Our study using data from thirteen countries across the globe during the first wave of the COVID-19 pandemic (January–April 2020) examines whether the search “topic and terms” for the pandemic affect market participants’ expectations about future realized volatility. With the panic and uncertainty about COVID-19, our empirical findings show that increased internet searches during the pandemic caused the information to flow into the financial markets at a faster rate and thus resulting in higher implied volatility directly and via the stock return-risk relation. More specifically for the latter, the leverage effect in the VIX becomes stronger as Google search queries intensify. Both the direct and indirect effects on implied volatility, highlight a risk-aversion channel that operates during the pandemic. We also find that these effects are stronger in Europe than in the rest of the world. Moreover, in a panel vector autoregression framework, we show that a positive shock on stock returns may soothe COVID-related Google searches in Europe. Our findings suggest that Google-based attention to COVID-19 leads to elevated risk aversion in stock markets.

Stewardship theory suggests that CEO duality can provide strong leadership and facilitate the development and coordination of firm strategy. These benefits should affect firm risk and financial performance, particularly when the firm has high information-gathering costs. We use the 2020 coronavirus outbreak as a natural experiment to determine whether CEO duality is beneficial during crisis periods. We find that in 2020, S&P 1500 firms with CEO duality exhibit smaller increases in default probability risk than firms with non-duality in the presence of high information costs. Firms with CEO duality experience a smaller decrease in profitability when information costs are high. We also find that firms with CEO duality offer cumulative abnormal returns significantly higher than those of other firms. CEO duality is more valuable in firms with higher information costs. Our results indicate that CEO duality is valuable during crisis periods, particularly when information costs are high. These results are consistent with stewardship theory and indicate that the concentration of power from CEO duality is beneficial during crisis periods.

This study aims to evaluate the asymmetric price transmission in terms of magnitude and speed between the wholesale and retail levels of the Sri Lankan fruit and vegetable markets. Using monthly data of wholesale and retail prices of 12 vegetable and three fruit varieties in Sri Lanka for the period 2005–2019, the study estimates a Nonlinear Autoregressive Distributed Lag (NARDL) model. Almost all food commodities used in this study (fruit and vegetables) show significant positive vertical asymmetry in price adjustments in the long run. The results indicate that the transmission rate of price increases in the wholesale market is greater than in the retail level when compared to price reductions in the wholesale market. This study suggests relevant policy options to explore and address this issue.

This paper applies an agnostic SVAR approach to study the response of four Andean economies (Bolivia, Colombia, Ecuador, and Peru) to international shocks. More specifically, we look at the response of GDP, the real exchange rate, fiscal and external balances, and inflation to global demand, commodity price, monetary and financial shocks. Our results confirm that the Andean region is highly exposed to changes in external conditions, and especially to global demand fluctuations associated with declines in commodity prices. However, despite the similarities that characterize these countries in terms of their income level or their productive specialization, we find substantial heterogeneity in the effects of the shocks, which we attribute to differences in the shock absorbing capacity of their macroeconomic frameworks. This result underlies the need to put in place external buffers to fully exploit the benefits of a greater presence in international markets, be it in the form of exchange rate flexibility, international reserves, or fiscal and monetary space to act countercyclically.

The impact of COVID-19 on stock market dynamics and other macroeconomic indicators has been extensively researched. However, the question of how it affects corporate vulnerability has received less attention. This article aims to fill this gap by examining the implications of COVID-19 on corporate vulnerability in the United States (US) and China, using daily data from January 2020 to December 2021. The empirical results of cointegration analysis demonstrate that COVID-19 considerably worsen corporate vulnerabilities in the long-term in the US and in the short-term in China. Additionally, non-linear results demonstrate long-run asymmetries in the US and short-run asymmetries in China, confirming the accuracy of error prediction and suggesting that US corporations are more exposed to COVID-19-induced risks. The channels through which COVID-19 may affect corporate vulnerability include changes in consumer behavior and demand, disruptions in supply chains, financial stress, government policies and regulations, and changes in the competitive landscape. This study sheds light on the effects of the COVID-19 pandemic on corporate vulnerability in the US and China, revealing regulatory implications that may necessitate greater government involvement, managerial implications that emphasize risk management and contingency planning, and social implications that highlight the importance of prioritizing stakeholder welfare and embracing digital transformation.

This paper develops a medium-sized monetary DSGE model of unemployment which assumes asymmetric information between entrepreneurs and financial intermediaries resulting in costly state verification financial frictions. The labor sector of the model consists of an insiders-outsiders labor market structure where a monopoly labor union unilaterally sets the nominal wage according to a hysteresis equation. Labor market hysteresis generates an asymmetry between insiders and outsiders. The main purpose of the paper is, firstly, to explore how labor market hysteresis affects the persistence of macroeconomic aggregates after temporary aggregate shocks that simulate a financial crisis; secondly, to investigate the implications of hysteresis for monetary policy. Overall, it is highlighted that a DSGE model that incorporates both financial frictions and employment hysteresis can generate substantial endogenous persistence that resemble a severe financial crisis. Furthermore, welfare analysis indicates a Taylor policy that stabilizes the growth rate of output leads to heavy welfare losses relative to output gap targeting. These losses increase with the degree of hysteresis. In this case, a central bank can benefit from choosing to stabilize wage inflation.

This paper analyzes the asymmetric effects of monetary policy shocks during low and high financial stress regimes in India. We explore the asymmetric effects through various monetary policy transmission channels, namely, interest rate, credit, asset prices, exchange rate, and expectations channels, using threshold vector autoregression (TVAR) models. Financial Stress Index (FSI) is used in the TVAR estimations as the threshold variable that endogenizes the regime-switching. We use a compressive FSI based on the dynamic conditional correlation-generalized autoregressive conditional heteroscedasticity (DCC-GARCH) method. The empirical findings indicate that a contractionary monetary policy shock through various channels has a stronger and more persistent effect on macroeconomic goal variables, output, and inflation during high financial stress than in a low financial stress regime. An expansionary monetary policy shock also shows a more significant effect on output during a high financial stress regime. Also, we found a stronger financial accelerator effect during high financial stress. This finding supports the literature that argues for the emergence of a stronger financial accelerator effect during financial stress. Finally, using nonlinear historical decompositions, we find that interest rate shocks contribute significantly to macroeconomic fluctuations in India.