Journal of Economic Asymmetries最新文献

Using NARDL model and Hatemi-j-asymmetric causality test, this work scrutinizes the asymmetric interactions between income inequality and financial development in India. The empirical findings support the existence of asymmetric structures in the finance-inequality nexus. It is found that negative shocks in financial development ameliorate income inequality while as, positive shocks in financial development exacerbate income inequality in an asymmetric manner. Wald's test and asymmetric cumulative dynamic multipliers used in the study also lend credence to the presence of asymmetric structures in the finance-inequality relationship demonstrating the robustness of our estimates. Furthermore, asymmetric causality tests reveal a unidirectional asymmetric causality between positive shocks in financial development and income inequality. The study divulges need to account for asymmetry in finance–inequality which previous studies neglected. National strategies for financial education, financial inclusion for unbanked segments of the population by expanding financial services network to hitherto unbanked areas, tailoring of financial products and services as per the specific needs of people, reducing interest rates on loans to businesses that qualify as small and medium enterprises must be among the top priorities of policy makers.

This study investigates the COVID-19 pandemic's impact on investor behavior in the currency options market, emphasizing its relationship with underlying exchange rates. Using a sample of daily data from select futures continuous calls from September 22, 2016, to December 31, 2021, we introduce a novel variable, “market imperfections,” to quantify the gap between observed and theoretical currency option prices based on the Garman and Kohlhagen model. Through the application of a Markov switching model, we identify pandemic-related changes in investor behavior, characterized by patterns of divergence and convergence. Our research distinguishes between two key behavioral types in the market: fundamentalists and chartists. This study enriches the literature by clarifying how crises, specifically the COVID-19 period, influence investor dynamics and affect market responses. Overall, we provide critical insights into the factors shaping behavior during challenging periods.

Our study aims to explore interactions between equity market returns and exchange rates at different market risk zones proxied by the Chicago Board Options Exchange Volatility Index (VIX). We analyze comovements between daily S&P 500 returns and three different USD exchange rates: the Federal Reserve's Nominal Broad U.S. Dollar Index, the Nominal Advanced Foreign Economies U.S. Dollar Index, and the USD in euro. The comovements are examined at three VIX zones (low, intermediate, and high) that we identify by employing the self-exciting threshold autoregressive SETAR(2,p) tests on daily data from January 03, 2006 to January 23, 2023. We subsequently employ VAR and conditional least square tests for S&P 500 returns and log changes in USD exchange rates with all showing the most robust transmission of shocks between equity returns and exchange rates in the high VIX zone. We further run Markov switching tests to identify specific jump periods from low to high responsiveness of equity returns to the USD exchange rate. Our tests show that interactions between equity returns and exchange rates are asymmetric, i.e., the exchange rate elasticity of equity returns is pronounced during periods of high market volatility and indiscernible at periods of low volatility. These findings may be useful for forecasting equity returns, exchange rates, as well as for asset pricing and portfolio diversification.

The revisions implemented twice a year by the European Commission significantly change not only the forecasts but also the past values of the output gap. Consequently, many possible time series exist. Based on a new approach for estimating a real-time definition of the business cycle, we develop a comparative framework between ex-post and real-time variables using dynamic panel data models with FE, GLS and AB estimators. The real-time version of the output gap solves the important endogeneity issue between the budget balance and the output gap. Considering the period from 1995 to 2021 and the 19 Eurozone countries, our analysis deepens the cyclical nature of fiscal policy, pointing to robust procyclicality. Regardless of the specification, fiscal policy was found to be procyclical, but real-time and ex-post estimates have shown some interesting discrepancies (i.e., on a real-time basis, discretionary budgetary decisions have never been significantly expansionary, and the likely positive effects of automatic stabilisers during economic downturns have been weakened by spending reductions and/or revenue increases). Our findings may help the future reform of the Stability and Growth Pact.

This paper investigated the public debt-growth nexus in Germany using a Nonlinear Autoregressive Distributed Lag (NARDL) model. We first review a history of the public debt problem in Germany from colonial times to the present. Since Germany had trading relationship with the rest of the world, the impact of such a relationship on economic growth is examined by including the current account (CA) as another explanatory variable in addition to public debt. We find that public debt and CA both have asymmetric impacts on the economic growth of Germany. Specifically, an increase in the level of public debt reduces economic growth while a decrease in public debt has no impact. In contrast, an increase in CA raises GDP by more than the increase in public debt-to-GDP ratio reduces GDP growth.

This study explores the impact of three major risk and uncertainty indices (Geopolitical Risk (GPR), Economic Policy Uncertainty (EPU), and Oil Market Volatility (OVX)) on the Dow Jones Islamic Market (DJIM) World and the ten major sectoral Islamic equity indices. The investigation further evaluates whether the impact of these uncertainties varies between Islamic sectoral indices and the global benchmark. Our time-varying analysis shows that most Islamic equity indices are more resilient in hedging against GPR and EPU shocks compared to OVX shocks. Furthermore, the Quantile-on-Quantile results establish a positive correlation between DJIM World and most Islamic equity indices with GPR, demonstrating their robust capabilities to hedge against GPR shocks. These hedging abilities are more pronounced in the consumer goods, oil & gas, and financial sectors. The dependence structures between extreme EPU shocks and the DJIM world and consumer goods, financials, healthcare, and industrial sectors are positive only in bearish conditions, suggesting hedging benefits are predominantly limited to lower quantiles. Yet, the basic materials and oil & gas sectors can hedge EPU shocks better than the DJIM world and other sectors, depending on market states. Notably, no Islamic equity indices show resilience against OVX shocks. Our findings have prominent portfolio risk management and policy implications for investors and policymakers. These findings hold significant implications for portfolio risk management and policy strategies for investors and policymakers.

The oscillation of COVID-19 growth has had a sustaining impact on financial markets. This study investigates the asymmetric impact of COVID-19 growth and recovery on financial markets. Examining ten epicenters of the virus from 01/01/2021 to 31/12/2021, we utilize a stepwise regression methodology and a diverse set of control variables. Controlling for volatility, credit risk, liquidity risk, monetary policy, gold, and oil, our findings indicate a significant impact of COVID-19 on equity indices. Vaccination growth correlates with positive price movements in the USA, UK, China, Japan, France, and Spain. Simultaneously, negative price trends align with virus growth in the USA, UK, China, Japan, Spain, and World models. A nexus of causality between COVID-19, global oil markets, and equity prices is identified, while credit and liquidity risks emerged as significant risk factors in China. Our results highlight the pertinence of swift vaccine developments, lockdown interventions, and central bank responses, providing valuable insights to governments, regulators, and all financial market stakeholders.

We investigate the impact of an exogenous economic crisis on investors' response to corporate earnings announcements. We use COVID-19 as an exogenous shock as an unanticipated macroeconomic event. Given the general fear and economic uncertainty, the COVID-19 pandemic provides a natural setting to investigate how investors reacted to earnings announcements. Did the investors excessively punish the stock for negative performance (since it confirmed their general fear), or did they reward good performers excessively since beating expectations was especially tough in the crisis? We find that the pandemic exacerbated investors' responses to earnings announcements. We further find that investors' reactions to significant positive earnings surprises were more prominent than to large negative ones. Our results are robust to alternate specifications and parallel trend analysis. We contribute to the literature by providing evidence on how the uncertainty caused by an economic crisis can impact investors’ response to earnings news.

What is the distributional consequence of a financial crisis? Does income inequality follow the boom-bust pattern that is typically associated with a financial crisis? Does the financial crisis primarily affect the wealthy and the recession mainly affect the rest of the population? Is the inequality impact of a financial crisis-induced recession different from that of a normal recession? They are important questions with policy implications which are little understood at present. Our paper fills this gap in the literature by carefully addressing these questions in a panel of 17 advanced economies for 1955–2016. Our results suggest that financial crises have statistically significant and long-lasting adverse effects on income distribution. So are the inequality effects of financial crisis-induced recessions in sharp contrast to those of normal recessions. The results are not driven by the 2008–2009 global financial crisis episode. Interestingly, the effects of financial crises (or financial recessions) systematically differ across the indicators of inequality and time horizons, shedding some light on channels linking financial crises and inequality. Careful robustness checks confirm our results.

We investigate the effect of the ongoing war between Russia-Ukraine on the global financial market as financial market is sensitive to extreme events and related news. In addition, we are examining the magnitude of war effect on different country groups. Taking the event of a Russian attack on Ukraine, we use the event study method to examine the price impacts of the Russia-Ukraine war 2022 on the global stock market. In addition, we examine the cross-sectional variation in abnormal returns using country-specific variables. Further, we conduct a robustness check to validate the main results for the cross-sectional variation. We find that stock indices show the negative AARs and CAARs after the announcement of the invasion. However, the magnitude of negative return varies for different regions. The developed countries experienced more negative price reactions than emerging countries. In addition, EMEA (Europe, Middle East, and Africa) is the most affected area on a geographical division basis, whereas the American division does not show significant price reactions. Further, countries with higher GDP experienced less sell-off in their indices. We also find that the trade-to-GDP ratio negatively impacts the abnormal returns in the post-event window, indicating that countries with more percentage of the trade in their GDP have been affected to a greater extent.