Improving Nigeria’s Inflation Forecast with Oil Price: The Role of Estimators

In this study, we propose a supply-side augmented Phillips curve for an oil dependent (Nigerian) economy. We argue for the role of oil price as a good proxy for the supply side of inflation given the structure of the Nigerian economy, which essentially relies on oil revenue. Thus, we compare the forecast results of the oil-based augmented Phillips curve with the traditional variant, as well as time series models such as ARIMA and ARFIMA. We also test for any probable asymmetric response of Nigeria’s inflation forecast to oil price changes. The forecast analyses are conducted for both in-sample and out-of-sample periods using alternative forecast measures. We employ the estimators of Lewellen (J Financ Econ 74:209–235, 2004) and Westerlund and Narayan (J Financ Econ 13(2):342–375, 2015) in order to account for relevant statistical properties of the predictors, and their results are compared with the standard OLS estimator. In addition, we follow the extended version of Westerlund and Narayan, constructed into a linear multi-predictive form by Makin et al. (J Int Money Financ 40:63–78, 2014) and Salisu et al. (Energy Econ, 2018), and a nonlinear (asymmetric) multi-predictive model by Salisu and Isah (Econ Model, 2018). We find that the augmented (oil-based) Phillips curve outperforms its traditional version, as well as time series models for both forecast samples. However, oil price asymmetric effects become evident when large samples are employed. Also, we find that the choice of estimator does matter for accurate inflation forecasts and by implication, accounting for the salient features of the predictors, if they exist, has implications on the forecast performance. Our results are robust to alternative oil price proxies and forecast measures.

     

James M. Buchanan’s 1981 visit to Chile: Knightian democrat or defender of the ‘Devil’s fix’?

Nobel Prize winning economist James M. Buchanan has repeatedly argued that the “political economist should not act as if he or she were providing advice to a benevolent despot” (Boettke Constitutional Political Economy, 25, 110–124, 2014: 112), but an increasingly influential body of scholarship argues that Buchanan provided a wealth of early 1980s policy advice to Augusto Pinochet’s military dictatorship in Chile (e.g., Fischer 2009; Maclean 2017). In particular, Buchanan reportedly provided an analytical defense of military rule to a predominantly Chilean audience when he visited the country in late 1981. This paper draws upon largely ignored archival evidence from the Buchanan House Archives and Chilean primary source material to assess whether Buchanan provided a defense of Pinochet’s “capitalist fascism” (Samuelson 1983) or whether he defended democracy when he visited Chile in 1981. Aside from the importance of this for assessing Buchanan’s own legacy, his constitutional political economy arguments presented in Chile also provide an interesting and distinct perspective on the connection between democracy and growth, which remains highly relevant to current debates. Despite a general agreement about the desirability of democracy, the view that authoritarian regimes can spur “growth miracles”, or might even be a necessary stage in political-economic development, still has prominent supporters (e.g. Sachs 2012).

     

Adam Smith on lotteries: an interpretation and formal restatement

The paper concerns a neglected aspect of the Wealth of Nations (with the notable exception of D. Levy 1999 Levy, D. M. 1999. “Adam Smith’s Katallactic Model of Gambling: Approbation from the Spectator.” Journal of the History of Economic Thought 21 (1): 81–91. doi:10.1017/S1053837200002868.[Crossref] , [Google Scholar]), dealing directly with decision under risk. In a few pages from book I, chapter 10, Adam Smith explicitly named “lotteries” various objects of choice (possible occupations, or investment opportunities, for instance) and provided an analysis which standard expected utility glasses would hardly fit. Taking this into account allows a better understanding of the part played by typical characters like the “projector” or the “sober man”, in such matters as Smith’s conception of entrepreneurship or of the credit market. The use of some modern concepts in decision analysis (inverse stochastic dominance, rank dependent utility, prudence toward risk), is a means to show the existence, in Smith’s work, of an original theory from decision under risk, where his analysis of lotteries in the Wealth of Nations is consistent with statements from his moral philosophy on asymmetric sensitivity to gains and losses and to the regulating part played by the impartial spectator.     

DOES INITIAL ACCESS TO BANK LOANS PREDICT START‐UPS' FUTURE DEFAULT PROBABILITY? EVIDENCE FROM ITALY

In Europe, several countries have established public loan guarantee funds throughout direct/indirect loan programs to facilitate the access of SMEs and start‐ups to bank credit. This paper investigates whether start‐ups' level of access to bank loans during the early stage represents an imprinting factor with effects on the likelihood of survival once the firm reaches maturity. We rely on a firm‐level longitudinal data set of 49,111 Italian startups born from 2003 to 2005. Implementing a 2SLS regression analysis we show that the initial level of start‐up bank debt negatively influences the probability of default controlling for firm characteristics and performance. (JEL G21, M20, H32)     

Threshold Effects of Inflation on Economic Growth: Is Africa Different?

This study examines nonlinearities in the inflation-growth nexus in Africa. The study employs a novel dynamic panel threshold regression method developed by Kremer et al. [(2013). Inflation and growth: New evidence from a dynamic panel threshold analysis. Empirical Economics, 44, 861–878. doi:10.1007/s00181-012-0553-9] that extends Hansen’s [(1999). Threshold effects in non-dynamic panels: Estimation, testing, and inference. Journal of Econometrics, 93, 345–368. doi:10.1016/S0304-4076(99)00025-1] non-dynamic panel threshold model as well as Caner and Hansen [(2004). Instrumental variable estimation of a threshold model. Econometric Theory, 20, 813–843. doi:10.1017/S0266466604205011] cross-sectional threshold model to deal with potential endogeneity problems. The findings of this study confirm a non-linear relationship between inflation and economic growth in Africa. More specifically, the results show that the inflation threshold values are 6.7% for the whole sample, 9% for the sub-sample of low-income countries and 6.5% for middle-income countries. The regression results suggest that relatively lower level of inflation appears to be in favor of higher economic growth only in African middle-income countries. However, inflation rate beyond a certain threshold is more likely to be detrimental to economic growth for all the cases. These results are robust by considering additional control variables and using three-year averages of the data. The findings of this study may be useful to African monetary policymakers as they decide on inflation targets to adopt to avoid the detrimental effects of high inflation while reaping the growth benefits of low inflation.     

Comment on Johnson’s creating dimensional stock-flow inconsistency in Binswanger’s model

Binswanger (2009 Binswanger, M. 2009. “Is There a Growth Imperative in Capitalist Economies? A Circular Flow Perspective.” Journal of Post Keynesian Economics 31:707–727. doi:10.2753/pke0160-3477310410.[Taylor &; Francis Online], [Web of Science ®] , [Google Scholar]) constructed a model of a pure credit money economy with production to demonstrate the existence of growth imperative in such economies. This model entails a misspecification because money may disappear from the economy at the alleged minimal steady state growth rate (Gilányi 2015 Gilányi, Z. 2015. “A Brief Note on Mathias Binswanger’s Model.” Journal of Post Keynesian Economics 37:590–596. doi:10.1080/01603477.2015.1049927.[Taylor &; Francis Online], [Web of Science ®] , [Google Scholar]). Johnson (2015 Johnson, R. 2015. “Capitalism’s Growth Imperative: An Examination of Binswanger and Gilányi.” Journal of Post Keynesian Economics 37:597–622. doi:10.1080/01603477.2015.1049928.[Taylor &; Francis Online], [Web of Science ®] , [Google Scholar]) attributes this inconsistency to the confusion between the stock of outstanding loans at the end of period and the flow of loans taken during the period; that he calls dimensional stock-flow inconsistency. On the grounds of this criticism he modifies some flows to eliminate the problem raised by Gilányi. Binswanger (2015 Binswanger, M. 2015. “The Growth Imperative Revisited, a Rejoinder to Gilányi and Johnson.” Journal of Post Keynesian Economics 37:648–660. doi:10.1080/01603477.2015.1050333.[Taylor &; Francis Online], [Web of Science ®] , [Google Scholar]) omits this criticism because it is a simple misinterpretation of his model; rather he explains the inadequacy of Johnson’s specification of flows. Doing so, he makes believe that there is still an unsettled debate on whether to treat loans as stocks or as flows in his model. This note demonstrates that both model specifications are dimensionally stock-flow consistent. Hence, Johnson’s criticism is just a narrative behind the rationale of altering flows in the model; the controversy is not on dimensional stock-flow inconsistency but on the logically coherent specification of the magnitude of flows in the model.     

Expected benefits and perceived risks of cloud computing: an investigation within an Italian setting

Over the past several years, cloud computing has increasingly been regarded as able to improve efficiency within organisations. The aim of this study is to address under-investigated issues related to the implementation of cloud computing, with a particular focus on expected benefits and the perception of risks. Towards this aim, on the basis of an adapted version of the technology acceptance model, we carried out a semi-structured survey among first-time cloud computing users to identify expected benefits and perceived risks. The survey of this study included a sample of 130 individuals in 65 enterprises located within Italy. We chose an Italian setting because it is characterised by an increasing number of programmes that emphasise the importance of cloud computing and support its wide dissemination. The findings of this study identify possible areas for improvement within the implementation phases of cloud computing.     

Finite Prandtl number 2-D convection at high Rayleigh numbers

Finite Prandtl number thermal convection is important to the dynamics of planetary bodies in the solar system. For example, the complex geology on the surface of the Jovian moon Europa is caused by a convecting, brine-rich global ocean that deforms the overlying icy “lithosphere”. We have conducted a systematic study on the variations of the convection style, as Prandtl numbers are varied from 7 to 100 at Rayleigh numbers 106 and 108. Numerical simulations show that changes in the Prandtl number could exert significant effects on the shear flow, the number of convection cells, the degree of layering in the convection, and the number and size of the plumes in the convecting fluid. We found that for a given Rayleigh number, the convection style can change from single cell to layered convection, for increasing Prandtl number from 7 to 100. These results are important for determining the surface deformation on the Jovian moon Europa. They also have important implications for surface heat flow on Europa, and for the interior heat transfer of the early Earth during its magma ocean phase. Electronic Supplementary Material is available if you access this article at http://dx.doi.org/10.1007/s10069-002-0004-4. On that page (frame on the left side), a link takes you directly to the supplementary material.     

Introduction to the Special Issue: Subterranean Geopolitics

ABSTRACT

Recent scholarship in political geography and allied disciplines such as Anthropology and Architecture has used registers such as the elemental and volumetric to explore the calculative, material, technical, and atmospheric interventions in, on, through and beneath the earth’s surface. In this special issue, our contributors engage in a ‘subterranean turn’, as they drill down, dive into, travel through and speculate with underground and underwater domains. Although varied in their geographical environments and locales, and diverse in their time-frames, the papers speak to four themes that constitute a ‘subterranean geopolitics.’ First, the subterranean is conceptualised as volume with distinct material qualities including height, pressure, depth and shape. There are multiple undergrounds on offer. Second, the subterranean is integral to nation-state building and geopolitical strategies of control, enclosure and exclusion. Third, there is evidence of and for subterranean infrastructures aplenty. States and other actors want to design, experiment and plan with the underground and underwater environments. Finally, the subterranean is never divorced from calculative, legal and technical regimes of regulation, and the cultivation of expertise – scientific, military, engineering – is a crucial element in these contributions to subterranean geopolitics. Taken together, the nine papers in this special issue offer a rich array of case studies including the nineteenth-century volcanic eruption in the Mediterranean (Hawkins 2018 Hawkins, H. 2018. A volcanic incident’: Towards a geopolitical aesthetics of the subterranean. Geopolitics. online published 25th September 2018. doi:10.1080/14650045.2017.1399877.[Taylor & Francis Online] , [Google Scholar]), subterranean nationalism in the South Atlantic (Benwell), lead mining in nineteenth-century English Peak District (Endfield and Van Lieshout 2019 Endfield, G., and C. Van Lieshout. 2019. Water and vertical territory: Teh volatile and hidden historical geographies of Derbyshire’s lead mining soughs, 1650s–1830s. Geopolitics. online published 9th October 2018. doi:10.1080/14650045.2018.1486299.[Taylor & Francis Online] , [Google Scholar]), a transnational gas pipeline running through Italy (Barry and Gambino 2019 Barry, A., and E. Gambino. 2019. Pipeline geopolitics: Subaquatic materials and the tactical point. Geopolitics. online published 14th March 2019. doi: 10.1080/14650045.2019.1570921.[Taylor & Francis Online] , [Google Scholar]), subterranean security in Israel/Palestine (Slesinger 2019 Slesinger, I. 2019. A cartography of the unknowable: Technology, territory and subterranean agencies in Israel’s management of the gaza tunnels. Geopolitics. online published 8th February 2018. doi:10.1080/14650045.2017.1399878.[Taylor & Francis Online] , [Google Scholar]), natural gas infrastructure (Forman 2019 Forman, P. 2019. Security and the subsurface: Natural gas and the visualisation of possibility spaces. Geopolitics. online published 17th October 2018. doi:10.1080/14650045.2018.1513918.[Taylor & Francis Online] , [Google Scholar]), deep sea mining off Papua New Guinea (Childs 2019b Childs, J. 2019b. Extraction in four dimensions: Time, space and the emerging geo(-)politics of deep-sea mining. Geopolitics. online published 14th June 2018. doi:10.1080/14650045.2018.1465041.[Taylor & Francis Online] , [Google Scholar]), US military planning in and under Greenland’s inland ice (Bruun 2018 Bruun, J. 2018. Invading the whiteness: Science, (sub)terrain, and US militarisation of the Greenland ice sheet. Geopolitics. online published 17 November 2018. doi:10.1080/14650045.2018.1543269.[Taylor & Francis Online] , [Google Scholar]), and managing the shipping routes of the English Channel (Peters 2019 Peters, K. 2019. Deep routeing and the making of ‘Maritime Motorways’: Beyond surficial geographies of connection for governing global shipping. Geopolitics. online published 1st February 2019. doi:10.1080/14650045.2019.1567499.[Taylor & Francis Online] , [Google Scholar]).     

Financially Unstable Households

One of Hyman Minsky’s most important contributions is the Financial Instability Hypothesis (FIH), which explains why capitalist economies experience periods of optimism (booms) and pessimism (bust). At the beginning of a cycle, businesses take on more debt, but they are conservative, and the principal is easily paid back (a hedge position). As optimism grows, so does risk-taking and businesses take on more debt. At some point they can only afford to pay interest on that debt (speculative position). In the most extreme case, businesses take on so much debt that they can neither pay the principal nor make interest payments (Ponzi position). Minsky wrote about financial instability (e.g., 1975 Minsky, Hyman. 1975. John Maynard Keynes. New York: Columbia University Press.[Crossref] , [Google Scholar], 1982 Minsky, Hyman. 1982. Can “It” Happen Again?: Essays on Instability and Finance. Armonk, NY: M.E. Sharpe. [Google Scholar]) before U.S. households had taken on large levels of debt. Minsky focused on businesses since they were the debt drivers. Today household debt is at record levels, so it makes sense to understand how financially unstable U.S. households are and what this means for the economy. We begin the article by arguing that Minsky’s categories should be applied to households; then we operationalize them using the Federal Reserve’s Survey of Consumer Finances. This enables us to measure changes in household financial instability using a Minsky-inspired framework and draw some conclusions.     

Institutionalized Communication in Markets and Firms

How markets and firms function is critically related to what knowledge and information is exchanged between whom, how quickly. Exchange of (symbolic) information needs to be properly institutionalized in order to be understood by others, on the one hand, but, on the other hand, cannot avoid being ambiguous to some degree as well (Dolfsma et al. 2011 Dolfsma, Wilfred, John Finch, and Robert McMaster. 2011. “Identifying Institutional Vulnerability: The Importance of Language, and System Boundaries.” Journal of Economic Issues 45 (4): 805–818.[Taylor &; Francis Online], [Web of Science ®] , [Google Scholar]). Ambiguity allows for the dissent that allows for innovation in the broadest sense of the term. Institutionalization of communication is community-specific. The tension between institutionalization of and ambiguity in communication explains why innovations cannot depart too much from what is known and accepted in a community to be (ultimately) accepted as a legitimate novelty. The view of markets and firms as settings for institutionalized communication and knowledge exchange offers a perspective that institutional economists are well positioned for to offer insights on.     

Much ado about nothing? The controversy over the validity of the Coase theorem

The controversy over the theoretical validity of the ‘Coase theorem’ is closely linked to the controversy over the correct statement of it, since the principal need is to determine what valid generalizations can be made on the basis of Coase’s 1960 Coase, R. H. 1960. “The Problem of Social Cost.” Journal of Law and Economics 3:1–44.[Crossref], [Web of Science ®] , [Google Scholar] examples. The present article does not aim to review the content of the controversy as such, but rather to question the reasons behind it: why so much noise about a proposition that is patently unrealistic (because of its assumption of zero transaction costs)? I argue that the prominence of the controversy, namely of the question of the validity (and statement) of the ‘Coase theorem’, can be analytically explained by the roles this ‘theorem’ plays in microeconomics: it is critical (of the standard theory of market failures), heuristic (drawing out the consequences of the efficiency assumption), and normative (conveying an optimistic view of the efficiency of exchange). I stress that these roles depend on the nature of the exchange defined in the formulation of the ‘theorem’. And I conclude that they rest upon the cooperative bargaining version, and therefore on an optimistic belief in the ability of people to find efficient agreements.     

An inquiry into the Ramsey-Hotelling connection

Ramsey’s 1928 Ramsey, F. P. 1928. “A Mathematical Theory of Saving.” Economic Journal 38 (152): 543–559. doi:10.2307/2224098[Crossref] , [Google Scholar] paper on saving and Hotelling’s 1931 article on exhaustible resources are considered to be two seminal contributions in economic dynamics. They have been associated because of their temporal proximity, use of the calculus of variations, and because of Hotelling’s citation of Ramsey. This connection however needs to be precisely investigated and characterized. On the basis of archival material, this paper shows that, on the interpersonal and theoretical ground, the connection is quite thin, but that significant parallels are found in Ramsey’s and Hotelling’s expectations with mathematical economics for the progress of science and for informing public decision.     

The J-Curve phenomenon in European transition economies: A nonlinear ARDL approach

This article examines the J-curve phenomenon for 16 European transition economies. While previous studies assume a linear relationship between the exchange rate and the trade balance, this paper allows for nonlinearity. Following Bahmani-Oskooee and Fariditavana (2015 Bahmani-Oskooee, M., and H. Fariditavana. 2015. “Nonlinear ARDL Approach, Asymmetric Effects and the J-curve.” Journal of Economic Studies 42 (3): 519–530. doi:10.1108/JES-03-2015-0042.[Crossref], [Web of Science ®] , [Google Scholar], 2016 Bahmani-Oskooee, M., and H. Fariditavana. 2016. “Nonlinear ARDL Approach and the J-curve Phenomenon.” Open Economies Review 27 (1): 51–70. doi:10.1007/s11079-015-9369-5.[Crossref], [Web of Science ®] , [Google Scholar]), the empirical method used is the nonlinear cointegrating autoregressive distributed lag (NARDL) model of Shin et al. (2013 Shin, Y., B. Yu, and M. J. Greenwood-Nimmo. 2013. “Modelling Asymmetric Cointegration and Dynamic Multipliers in a Nonlinear ARDL Framework.” In Festschrift in Honor of Peter Schmidt, edited by William C. Horrace and Robin C. Sickles. New York, NY: Springer Science and Business Media. [Google Scholar]) in which short-run and long-run nonlinearities are introduced via positive (appreciation) and negative (depreciation) partial sum decompositions of the real exchange rate. We argue that the lack of support for the J-curve phenomenon could be due to the linearity assumption. This issue is examined by utilizing the linear and the NARDL models. Using the linear autoregressive distributed lag (ARDL) model, we are unable to find support for the J-curve phenomenon in any case. However, when the NARDL model is used, we are able to find evidence for the J-curve in 12 out of the 16 countries. This suggests that allowing for nonlinearity in the adjustment process is important when studying the J-curve phenomenon.     

BRIC and GIPS – who drives who? Evidence from newly developed asymmetric causality tests

We investigate the asymmetric causal interaction between the stock markets of the GIPS (Greece, Ireland, Portugal and Spain) and those of the BRIC (Brazil, Russia, India and China) based on a newly developed asymmetric causality test by Hatemi-J (2012) [Hatemi-J, A. 2012. “Asymmetric Causality Tests with an Application.” Empirical Economics 43: 447–456. doi:10.1007/s00181-011-0484-x]. We confirm a significant stock market interaction between the two blocs in which the BRIC drives the GIPS but not vice versa. Thus, the BRIC seems to be more influential on the GIPS than the GIPS on the BRIC. However, this interaction occurs only during downmarket conditions but not during upmarket times. The BRIC pulls down the GIPS during bad times but does not pull them up during good times. These results have significant implications for international policymakers and provide further evidence on the existence of asymmetric causal interactions between financial markets.     

On the Instability of Tunisian Money Demand: Some Empirical Issues with Structural Breaks

This paper focuses on the causes of instability of money demand in Tunisia between 1973 and 2013. It has been argued that the main explanatory factors of money demand are national income, monetary market rate and exchange rate. We tested Ambler and McKinnon hypothesis (1985), which assumes that instability is explained by the absence of the nominal exchange rate in the specification of money demand. We found that structural changes are explained by the dependence of the national economy to world shocks, the IMF’s structural adjustment programme at the end of 1986.

     

Labour values and energy values: some developments on the common substance of value since 1867

Abstract

Marx’s Das Kapital (1867) singled out labour as the common substance of value in all commodities. Costanza (1980 Costanza, Robert. 1980. “Embodied Energy and Economic Valuation.” Science 210 (4475): 1219–1224. doi:10.1126/science.210.4475.1219[Crossref], [PubMed], [Web of Science ®] , [Google Scholar]) in Science chose energy and propagated energy values (a century after Engels criticised Podolinsky on energy). Mainstream economists quickly questioned Marx’s logic. Pareto advocated simultaneous equations, unaware of their use by Mühlpfordt and Dmitriev. Contributions by Charasoff and Potron were also overlooked. Already in 1927, Leontief and Sraffa knew how to replace labour values by other commodity values. Generalising Sraffa’s subsystems and using “percentage formulas” for price-value deviations, I discuss some empirical results for labour or energy theories of value.     

Investment evaluation of cloud computing in the European business sector

The importance of cloud computing is acknowledged both at national and entrepreneurial level. Its potential in business has been already described in many studies (Dillon et al., 2010; Bayrak et al., 2011; Nuseibeh, 2011; Repschlaeger et al., 2013). However, many European countries do not exploit it much in spite of many positive responses made by respected consulting companies. The reasons for this are a very low level of changes in companies, ignorance of opportunities of the given technology and, consequently, an inability to count the return of investment. Therefore, the aim of this article is to introduce a tool for the investment evaluation of cloud computing, which corresponds to the needs of the European business environment and to the properties of this technology. Furthermore, the cost Benefit Analysis (CBA) method is explored. This method is adjusted for cloud computing on the basis of companies’ requirements, which were collected from quantitative and qualitative surveys and from the interviews with experts in cloud computing from academic and business environments. In addition, individual stages of the CBA method used in cloud computing are described.     

“Si él lo necesita”: Gypsy fairness in Vallecas

“Si él lo necesita” (if he really needs it) was the most common argument given by the subjects who accepted the zero offer in the ultimatum game (strategy method) during experiments conducted among illiterate (adult) gypsies in Vallecas, Madrid. Interestingly the acceptance of the zero offer was not a rare case but, in contrast, was the modal value. This is even more remarkable if we consider that the 97% of the subjects proposed the equal split. Electronic Supplementary Material Supplementary material is available in the online version of this article at http://dx.doi.org/10.1007/s10683-006-9126-0. JEL Classification D63 · D64 · C93 · J15     

The Williamsonian Ambiguity on Authority and Power in Transaction Cost Economics

Power has traditionally been rejected from economics and more particularly from the economics of the firm. Although he proposes building an interdisciplinary approach to the firm, Williamson rejects power from the economics of transaction costs. However, regarding the theoretical and behavioral hypotheses he makes, we can raise the following question: does the Williamsonian approach to the firm have intrinsic properties for developing a theory of power? After analyzing Williamson’s argument on power/authority, this paper aims to shed light on the fact that the 2009 Williamson, Oliver E. 2009. “Pragmatic Methodology: A Sketch, with Applications to Transaction Cost Economics,” Journal of Economic Methodology 16 (2): 145-157.[Taylor &; Francis Online] , [Google Scholar] Nobel Prize winner has built a theory based on power that he rejects due to a questionable methodological choice. Conversely, we defend the thesis according to which power cannot be removed from the economics of the firm and transaction cost economics–at the risk of providing a distorted picture of the reality of capitalism.