Manchester School最新文献

International economic exchanges have become more frequent, and the degree of the mutual influences of investor sentiment in the stock markets of various countries has been increasing. Therefore, the study of cross-country spillover effects of investor sentiment is of great relevance to the analysis of financial market linkage and the diffusion mechanisms between countries. This study examined the directions and levels of investor sentiment spillovers in 10 countries from 2003 to 2020 by constructing aggregate and directional spillover indices and analyzing the static and dynamic characteristics as well as the network structures of the spillover effects. The results revealed that (1) investor sentiment had significant cross-country spillover effects and their intensities were time-varied, with the total sentiment spillover index rising sharply in response to extreme events, such as the subprime mortgage crisis, the European sovereign debt crisis, the United Kingdom's (U.K.) Brexit policy, and the coronavirus pandemic. (2) The spillover effects were impacted by the level of economic and financial development. Overall, developed countries had higher levels of spillover than did developing countries. (3) Countries that were highly correlated with extreme events had stronger spillover effects. For example, the United States and the U.K. were the main net “exporters” of sentiment during the subprime crisis, and Germany became the top “exporter” during the European sovereign debt crisis. Our findings have important implications for policymakers who aim to understand capital markets correlations and promote regulatory coordination across countries.

We develop an endogenous growth model with expanding variety in which asymmetric information frictions arise when R&D firms need access to external funding to finance their R&D investments and public expenditure affects the magnitude of hidden costs, in turn affecting the severity of asymmetric information frictions. We show that public expenditure affects growth by influencing risk sharing, thereby identifying a new channel, unlike the standard mechanism used in the literature that emphasizes the role of public expenditure in directly improving the productivity of the private sector.

Using a cross section of matched data from the employee and management questionnaires of the European Company Survey for 28 nations, this paper investigates the determinants of worker commitment and the potential contribution of commitment to establishment performance. An index of worker commitment is constructed from employer perceptions of the motivation of workers and their retention and absenteeism propensities, while the determinants of commitment are fashioned from observations taken from the worker representation side, ordered along dimensions such as perceived organizational trust and involvement. The commitment index is then linked to establishment performance outcomes. Key findings from the commitment equation are the positive role of trust in management, the quality of information exchanged, and the degree of worker representation influence in respect of major decisions taken by management. In turn, commitment emerges as a key correlate of establishment financial performance and labor productivity growth. Our supplemental sensitivity analysis is supportive of the interpretation of commitment as a driver of performance.

This paper empirically investigates the Gibson Paradox and the Fisher Effect for the UK during different metallic and non-metallic regimes. The paper applies long-span monthly data on the long-term interest rate and the price index from 1790 to 1931. The ARDL cointegration is employed to study the long-term relationship. Significant evidence is provided for the paradox during the uninterrupted gold standard era of the UK (1821–1914). We also find evidence of the paradox during the short-term gold exchange standard era (1925–1931). Further results also confirm the Fisher Effect during the 1821–1914 period, providing some backing to its ability to explain the paradox. This is further asserted by the short-run mutual influence between the rate of interest and the inflation rate.

Financial markets are expected to predict macroeconomic conditions as movement in the former depends upon expectations of future performance for the latter. However, existing evidence is mixed. We argue that this arises because the stock return and term structure series typically used in studies, fail to sufficiently capture investor risk preferences. For US data, we use the variance risk premium (VRP) and default yield (DFY) to better capture such a risk measure and demonstrate that these variables exhibit greater evidence of predictive power for key macroeconomic series. In addition to VRP and DFY, we include further variables that may also capture market risk. Given similar dynamics between different risk measures and the potential for multicollinearity in estimation, we consider variable combinations. Using results obtained through predictive regressions, out-of-sample forecasting and a probit model designed to capture periods of expansion and contraction, we show that these combination variables can predict future movements in macroeconomic conditions as well as results using individual variables. Of key interest, combinations that include the VRP and DFY are preferred across all macro-series.

This research investigates the relationship between real interest rate parity and the interest parity puzzle across several economies in the Asia-Pacific region. Unlike previous studies, we establish a comprehensive theoretical framework for parity and utilize macroeconomic and financial market data from 15 economies in the region to examine it. Our findings indicate that most countries exhibit mild deviations from parity, with real interest rate differentials strongly correlated with changes in the real exchange rate and interest-exchange rate interaction terms, particularly in middle-income economies. While interest parity puzzle is also observed in high-income economies, it is less prevalent in most middle-income economies. Our analysis reveals that income levels are key drivers of deviations from parity in this model, with interaction terms also playing a crucial role in most cases. The implication here is that for carry trades, investors place significant importance on risk factors, especially in economies with relatively low risk. This insight helps to clarify a puzzle in this area. Therefore, it is imperative that investors should take into account the impact of interest-exchange rate interaction terms when making carry trade decisions. Lastly, we underscore the significance of ex ante price forecast approaches in achieving parity.

We consider a government that purchases a public good or a private good for public consumption from a heterogenous group of professionals (such as scientists, doctors, or lawyers) in an environment characterized by an extremely high level of information asymmetry. Specifically, we assume that the government needs information from a self-regulatory organization (SRO) of agents (such as a research council, a medical board, or a bar association) to draft the contract. We show that the government information disadvantage is minimized when the SRO is dictatorial, that is, when it follows the preferences of the efficient agents.

This study revisits the excess entry theorem for quantity and price competition with substitutes and complements in a Kantian oligopoly. In such an oligopoly, we demonstrate that the equilibrium market outcomes are the same between the aforementioned two types of competition regimes with substitutes and complements, and in particular, each firm's equilibrium price and consumer surplus do not depend on the number of firms. Therefore, in quantity and price competition with substitutes and complements in a Kantian oligopoly, the excess entry theorem holds that the number of firms is larger under free entry than under the second-best social optimality. Finally, in the two types of competition with substitutes and complements, we characterize the ranking orders of the number of firms between free entry and the second-best social optimality in Kantian and Nashian oligopolies.

We explore the social efficiency of free entry in a pure network goods market where Cournot oligopolistic competition prevails and consumers have passive expectations. Focusing on network compatibility between firms, we consider the cases of two network systems: a firm-specific system and a single industry-wide network system. We demonstrate the following results. In the firm-specific network system, the number of firms under free entry is socially excessive compared with the second-best criteria. However, in the single industry-wide network system, if the elasticity of network effects in relation to the expected network sizes is sufficiently large, the number of firms under free entry is socially insufficient compared with the second-best criteria. Otherwise, socially excessive entry arises. We also examine the same issue in the case of a mixed network goods market.

This study investigates mixed markets in which a social welfare-maximizing public firm and a private firm engage in behavior-based price discrimination (BBPD). A total of two cases are considered: one where domestic shareholders completely own the private firm and one where foreign shareholders completely own it. In the domestic mixed duopoly, BBPD is irrelevant from the viewpoint of domestic social welfare. This is because poaching does not occur. In the international mixed duopoly, BBPD improves domestic social welfare, as BBPD reduces the outflow of the private firm's profit to foreign shareholders. In both cases, privatization is more undesirable under BBPD than uniform pricing.