Quarterly Review of Economics and Finance最新文献

This paper examines the role of the public health system and inequality during a health crisis (pandemic). We study a two-jurisdiction economy (rich, poor) with two household types (entrepreneurs, workers) and a shock affecting health goods demand and labor productivity. The presence of a public health system helps reduce health consumption inequality and lessens the impact of health shocks on non-health consumption inequality, especially when the pandemic leads to productivity loss. However, it also contributes to increased total consumption inequality, highlighting trade-offs in addressing inequality during a pandemic. Public health provision mitigates pandemic-driven inequality and dampens its rise.

What are the effects of fiscal austerity on income inequality? In this paper I estimate the average treatment effect ($\mathrm{ATE}$) of fiscal consolidations quantifying their dynamic impact by means of dose–response functions. Dose–response functions allow the $\mathrm{ATE}$s to vary by the levels of treatment. I find that austerity indeed increases income inequality, however the increases manifest themselves whenever unannounced fiscal measures are relatively low, lower that 0.20% of GDP or relatively high, higher than 2.17% of GDP. For intermediate levels of fiscal measures income inequality does not change. These results hold for various measures of income inequality.

This paper assesses the performance of Divisia and simple-sum monetary aggregates in explaining changes in key macroeconomic variables in the United States from 1967 to 2022. In the spirit of Friedman and Schwartz, I extract the cyclical components of money, output, and prices and find that money generally leads the latter two variables. Next, I test for Granger causality from monetary aggregates to several measures of real activity. Then, I estimate a more comprehensive VAR consisting of several real and nominal variables. Consistent with previous research, Divisia aggregates outperform their simple-sum counterparts. While the narrower aggregates exhibit a close relationship with output and prices in the earlier years of the sample, the broader aggregates outperform the narrow aggregates over the entire period. This reflects an evolution of the monetary system in which assets included in the broad aggregates have become increasingly important. Finally, I use counterfactual forecasts to find that broad Divisia money played an important role in explaining the severity of the Great Recession and the high inflation of 2021 and 2022.

We implement a state-space modeling to capture jointly the one-year and infinite horizons equity risk premia (ERPs) over a secular period in France. Expected stock returns are represented by mixing traditional expectation processes, expected variances are from GARCHX models and risk prices are stochastic state variables estimated using the Kalman filter method. Represented by the spread between long-and short-term ERPs, the term structure strongly varies over time exhibiting a dominant downward sloping. Both expected variances and risk prices are highly at play in determining the ERPs term structure, the effects of restraints on borrowing and of international stock market contagion completing the explanation. Overall, our modeling provides rather similar results using US data. We finally show that the French ERPs term structure varies with the economic cycle, the cost of capital and the liquidity preference.

This paper aims to analyze the impact of the COVID-19 pandemic on market-based systemic risk and the connectedness of commercial banks in Gulf Cooperation Council countries. The results suggest that systemic risk has increased significantly after the pandemic by employing two very well-known systemic risk measures, the Delta conditional value-at-risk (ΔCoVaR) and the marginal expected shortfall (MES), but heterogeneously across GCC nations. Using the Granger-Causality network method, the results reveal a remarkable rise in the percentage and number of significant connectedness between banks for Kuwait and KSA during the pandemic. Oman and Qatar experienced an unnoticeable increase in bank return connectedness. Furthermore, the study identifies the bank characteristics that provide shelter from the systemic shocks of the pandemic. The study findings indicate that income diversification is the most crucial variable for enhancing bank stability amid the pandemic. Our findings provide policy-related implications for understanding and mitigating risk shock transmission and the containment of systemic financial risk, in addition to multiple future lines of research.

We argue that the utility of specific assets, in our case collectibles, is not only derived from the financial outcome, but also from the conditions that prevail until a financial outcome may be realized. Therefore, we derive a multi-attribute utility function that measures financial returns — using a mean-variance utility function — on the one hand, and non-financial returns — using an experienced utility function — on the other. We then reveal the trade-off between financial and non-financial utility by analyzing 363 owners of collectibles. We divide the owners into the group of collectors and the group of investors, based on their self-reported motivation. Our results suggest that collectors receive almost no utility from financial returns, but rather from experience. The opposite is the case for investors. Our findings help to explain the reported financial underperformance of collectibles and suggest to adjust existing models of utility.

We employ a GARCH-type model to jointly estimate returns, conditional variance and skewness and show that conditional skewness outperforms sample skewness and conditional and sample variance in predicting future Bitcoin returns. Interestingly, the results show that the relationship between conditional skewness and future Bitcoin returns is different depending on the sample period. In the first subsample (2018–2020), a period of relative calm in the Bitcoin market, the relationship is negative, which is in line with that found in the literature. However, in the second subsample (2021–2022), a period of major turmoil in the Bitcoin market, the relationship is positive, which is consistent with that found in previous papers on the relationship between conditional market skewness and future index returns during crisis periods. Based on these results, a dynamic buy and sell strategy of buying or selling Bitcoin based on the estimated conditional skewness is proposed. This dynamic strategy outperforms a static buy-and-hold strategy. The profitability of this strategy can be viewed as the reward that investors demand for bearing the risk associated with the changing conditions in the cryptocurrency market that generate time-varying expected returns.

We examine how strategic interactions, i.e., strategic substitutes (SS) and strategic complements (SC), affect the sensitivity of cash savings to stock price. Using a panel data of U.S. firms over the 1997–2019 period, we show that cash savings are more sensitive to stock price among SS than SC and the intensity of rivals’ interactions in product market increases this sensitivity. These results are consistent with research showing that SS are more responsive to product market competition. We further show that R&D intensities and corporate hedging needs act as two channels through which strategic interactions affects cash holdings. First, R&D intensities increase the sensitivity of cash to stock price. This effect is more pronounced among SS, complementing researching showing stock market reacts more strongly to innovation by SS. Second, we report that hedging needs decrease the sensitivity of cash savings to stock price, especially for SC, consistent with the notion that using differentiated inputs increases hedging costs, hence, SC are more conservative in their liquidity management.

In the context of public deposit insurance organizational models, several interesting questions arise: Why does China's Deposit Insurance Corporation consistently lean toward the cooperative institution model, which is closely aligned with the central bank? Despite fervent advocacy for the independent institution model by the IADI and the U.S. Why does the unwavering stance exist? Is the choice of the cooperative institution model an "ignorant solution" or an "optimal solution" in China? Our work answers these questions for the first time, and we argue that it is the "optimal solution" that policymakers can choose after careful deliberation, not due to stupidity or inexperience. Based on the Honey Badger Algorithm, real options approach and expected loss pricing model, our work verifies the significant advantages of the cooperative institution model over the independent institution model in China. This pivotal distinction, primarily overlooked in the extant literature, suggests that universally accepted perspectives may not be ubiquitously relevant across all national contexts.

Our paper explores the existence and nature of an established relationship between the banks’ function as liquidity creators, their profitability, and the instability of the financial system in Lebanon. Using original, annual observations of Lebanese bank data for the period 1997 – 2019 and employing fixed effect OLS regressions and system GMM to account for the dynamic aspect of our data, we show that liquidity creation is significantly associated with lower financial stability and thus higher instability. Banks’ profitability is positively linked to their systemic stability. The results vary slightly from one estimate to another, but they stand up to robustness tests. Our empirical results have a substantial impact on banks’ control and regulatory approaches in Lebanon and similar developing countries, while contributing to a deeper understanding of systematic and broader financial instabilities in these countries.