Is there one safe-haven for various turbulences? The evidence from gold,Bitcoin and Ether

This paper aims to investigate the safe-haven properties of gold and two cryptocurrencies, Bitcoin and Ether. Safe havens are the financial assets that allow investors to protect their portfolios within the market turmoil. The research sample covers five years and includes several downturns on the financial markets, starting from the Chinese stock market turbulences in 2015/2016 and ending up with the recent pandemic outbreak in 2020. We find that only gold used to be a strong safe-haven against the stock market indices. Yet, this property evaporated during the crisis caused by the COVID pandemic. Occasionally, cryptocurrencies could have been considered weak safe-havens against the examined instruments. Ether acted more often as a weak safe-haven against DAX or S&P500, while Bitcoin played this role against FTSE250, STOXX600 and S&P500.     

The effects of economic news on commodity prices

We assess how commodity prices respond to macroeconomic news and show that commodities have been relatively insensitive to such news over daily frequencies between 1997 and 2009 compared to other financial assets and major exchange rates. Where commodity prices are influenced by news, there is a pro-cyclical bias and these sensitivities have risen as commodities have become increasingly financialized. However, models based on news still do a relatively poor job of forecasting commodity prices at daily frequencies. We also find some asymmetries in how commodity prices respond to news, most notably for gold, which alone among commodities acts as a safe-haven when “bad” economic news emerges.     

Are precious metals a hedge against exchange-rate movements? An empirical exploration using bayesian additive regression trees

We use Bayesian additive regression trees to reexamine whether investments in precious metals are a hedge against exchange-rate movements. We quantify the relative importance of several major exchange rates, and we study how the marginal effects differ across times of appreciations/depreciations and across times of small/large exchange-rate fluctuations. Results show that investments in gold and silver are strong hedges against depreciations of major exchange rates. The hedging properties of palladium and platinum are mainly confined to the Australian dollar and Canadian dollar. We also study whether precious metals investments are a safe-haven in times of large exchange-rate movements.     

Is Bitcoin a better hedging and safe-haven investment than traditional assets against currencies? Evidence from the time-frequency domain approach

Many studies have discussed hedges and safe havens against stocks, but few studies focus on the hedging/safe-haven performance of assets against the currency market over different time horizons. This paper studies the connectedness, hedging and safe-haven properties of Bitcoin/gold/crude oil/commodities against six currencies across multiple investment horizons, placing a particular focus on the performance of these assets during the recent COVID-19 outbreak. Our findings suggest that the overall dependence between assets and the currency market is the strongest in the short term, and Bitcoin is the least dependent across all investment horizons. The dynamic relationships between the four assets and the currency market vary with timescales. Bitcoin offers better hedging capability in the long term and commodities emerge as the most favorable option for the optimal portfolio of currency over all time horizons. Further analysis shows that assets are better at helping investments reduce risk in the initial stages of the pandemic, and gold is an effective and robust safe haven for currencies.     

Economic uncertainty and national bitcoin trading activity

This study analyzes the dynamics between bitcoin trading, price activities, and economic surprise shocks from a broad and novel perspective on a national level. We start by estimating the response of bitcoin trading in terms of volume and volatility to economic surprises. Following this, we extend our framework by applying a Generalized AutoRegressive Conditional Heteroskedasticity model to get an indication of the volatility reaction of national bitcoin activities to economic surprise shocks. Our results show that local and global shocks affect local bitcoin activities and trading volatilities, confirming that economic events affect bitcoin markets. We argue that increased trading activity, coupled with a price reaction, indicates that bitcoin might be considered a hedge or safe haven asset against economic uncertainty. We find evidence that bitcoin is treated as a speculative asset against negative economic policy uncertainty shocks in Canada pre-Covid-19. These results change during the Covid-19 pandemic, leading to a significant structural break. Here, we find indications that bitcoin might be treated as a safe-haven asset in New Zealand and Australia. This shows that bitcoin behaves differently depending on the studied country, underlining the importance of country-level studies. It also shows that bitcoin is a new asset that is evolving rapidly and that the period in which it is studied is important.     

How can investors build a better portfolio in small open economies? Evidence from Asia’s Four Little Dragons

This study investigates the role of hedging and portfolio design among stocks, exchange rates, and gold in small open economies (SOEs) from 4 January 2000 to 31 March 2020. We adopt the trivariate dynamic conditional correlation-fractionally integrated asymmetric power ARCH model and unconditional quantile regression model, and our findings show that the hedging role of the U.S. dollar (USD) and gold against stocks differs under regular and extreme market conditions. The USD can act as a powerful hedge asset for stocks in regular market periods. Moreover, during the global financial crisis and COVID-19 outbreak, the safe-haven effect of gold becomes stronger for almost all stocks, whereas the USD can serve as a strong safe haven against stock markets of Korea, Taiwan, and Singapore when stock returns are extremely low. In terms of portfolio designing, we find that adding the USD and gold to portfolios improves their hedging effectiveness, and the optimally weighted stock-USD-gold portfolio is the best portfolio strategy, irrespective of referring to return or risk.     

Long-run and short-run determinants of sovereign bond yields in advanced economies

We analyze determinants of sovereign bond yields in 22 advanced economies over the 1980–2010 period using panel cointegration techniques. The application of the cointegration methodology allows distinguishing between long-run (debt-to-GDP ratio, potential growth) and short-run (inflation, short-term interest rates, etc.) determinants of sovereign borrowing costs. We find that in the long run, government bond yields increase by about 2 basis points in response to a 1 percentage point increase in government debt-to-GDP ratio and by about 45 basis points in response to a 1 percentage point increase in the potential growth rate. In the short run, sovereign bond yields deviate from the level determined by the long-run fundamentals, but about half of the deviation adjusts in one year. When considering the impact of the global financial crisis on sovereign borrowing costs in euro area countries, the estimations suggest that spreads against Germany in some European periphery countries exceeded the level determined by fundamentals in the aftermath of the crisis, while some North European countries have benefited from “safe-haven” flows.     

The transmission of US economic policy uncertainty shocks to Asian and global financial markets

This paper proposes a novel approach to investigating the spillover effects of US economic policy uncertainty shocks on the global financial markets. Employing a factor-augmented vector autoregression (FAVAR), we model US economic policy uncertainty jointly with the latent factors extracted from equity prices, exchange rates, and commodity prices. We find that US economic policy uncertainty affects these factors significantly. A country-level analysis shows heterogeneous responses to an increase in US economic policy uncertainty. With regard to equities, US economic policy uncertainty adversely affects equity prices. However, its impact on the Chinese equity market is relatively small. As for foreign exchange markets, while many currencies depreciate in response to an increase in US economic policy uncertainty, the US dollar and the Japanese yen appreciate, reflecting their safe-haven status. The Chinese yuan, whose nominal exchange rate is closely linked to the US dollar, also appreciates in response to uncertainty shocks.     

Upside/Downside spillovers between oil and Chinese stock sectors: From the global financial crisis to global pandemic

This paper examines the effects of the COVID-19 outbreak, recent oil price fall, and both global and European financial crises on dependence structure and asymmetric risk spillovers between crude oil and Chinese stock sectors. Using time-varying symmetric and asymmetric copula functions and the conditional Value at Risk measure, we provide evidence of positive tail dependence in most sectors using copula and conditional Value-at-Risk techniques. We can see the average dependence between oil and industries during the oil crisis. Moreover, we find strong evidence of bidirectional risk spillovers for all oil-sector pairs. The intensity of risk spillovers from oil to all stock sectors varies across sectors. The risk spillovers from sectors to oil are substantially larger than those from oil to sectors during COVID-19. Furthermore, the return spillover is time varying and sensitive to external shocks. The spillover strengths are higher during COVID-19 than financial and oil crises. Finally, oil do not exhibit neither hedge nor safe-haven characteristics irrespective of crisis periods.     

Political ideology,social capital,and government innovativeness: evidence from the US states

We use the number of finalists and winners recognized by the Innovations in American Government Awards (IAGA) programme to measure state government innovativeness from 1986 to 2013. The measure is moderately related to two existing state policy innovativeness indexes. The fifty states vary remarkably and persistently in government innovativeness, which is more driven by internal antecedents than external ones. We find that between-state effects outperform within-state effects in explaining government innovativeness. We also reveal that government ideology, citizen ideology, and social capital are positively related to government innovativeness. The index developed in this study can be used in pertinent studies, and the findings contribute to the literature on public sector innovation.     

The regime-switching risk premium in the gold futures market

A bivariate Markov-switching model identifies two regimes in the futures-price and risk-premium models. The persistent underlying states have very different implications for spot and risk-premium forecasts. In the “low” state, a positive bias predicts spot price appreciation. The “high” state is associated with lower spot appreciation and higher risk premiums. The regime-switching framework provides a new perspective on the intertemporal role of gold as a hedge or safe-haven asset. The gold spot-price appreciation regime is shown to be correlated with higher inflation rates and the complement regime is associated with high market returns and stock market risk premia. Since the state-space methodology procedure can be employed using only past data, forecasts of the persistent unobserved underlying state of the gold price appreciation regime will be augmented as more data becomes available.     

Fisher's Introductory Text

A bstract .   In this essay, James Tobin discusses Fisher's Elementary Principles of Economics (1912 ). This essay was first published in the American Economic Review: Papers and Proceedings , 87 (May 1997): pp. 430–432. We are grateful to the American Economic Association for permission to republish this essay.     

International business careers in the United States: salaries,advancement and male—female differences

This paper uses a survey of 514 professional employees to analyse salaries and careers in international business in the United States. Internationally oriented skills are inconsistently rewarded, and persons in internationally focused occupations are compensated at about the same level as their domestically oriented counterparts. Women receive smaller pay-offs than men for qualifications, including international ones. Thus, the human resource management practices of many American firms may not be consistent with these firms' strategies for competing in global markets.     

Reconciling the evidence of Card and Krueger (1994) and Neumark and Wascher (2000)

We employ the original Card and Krueger (American Economic Review 1994; 84: 772–793) and Neumark and Wascher (American Economic Review 2000; 90: 1362–1396) data together with the changes‐in‐changes estimator to re‐examine the evidence for the effect of minimum wages on employment. Our study reconciles the controversial positive average employment effect reported by the former study and the negative average employment effect reported by the latter study. Our main finding, which is supported by both datasets, is that the controversial result remains valid only for small fast‐food restaurants. Copyright © 2011 John Wiley & Sons, Ltd.     

The impact of the foreign corrupt practices act on us exports

In 1977 the Foreign Corrupt Practices Act (FCPA) was enacted to penalize US firms and their employees for paying bribes to foreign government officials. If bribe payments influence the awarding of contracts and the FCPA regulation differentially affects US exporters compared to foreign competitors, then US exporters' bribe-paying ability and market share would be expected to decline. This study provides empirical evidence that the FCPA had a negative effect on US exports to non-Latin American countries but not to bribery prone ones in Latin America.     

Testing the Political Replacement Effect: A Panel Data Analysis*

This article tests for the existence of the political replacement effect, as suggested by Acemoglu and Robinson: [American Political Science Review, Vol. 100, pp. 115–131]. They argue that the implementation of market‐oriented reform is crucially driven by the political calculus of incumbent governments: they implement economic policy change if such a choice is not expected to reduce their chances to retain power. This implies a non‐monotonic relationship between the level of political competition and the extent of economic reform. We test this hypothesis using data for 102 countries over the period 1980 to 2005. Our results strongly support the theory.     

Urban Segregation and Metropolitics in Latin America: The Case of Bogotá, Colombia

The patterns of spatial socioeconomic segregation in Latin American cities are changing rapidly as a result of suburbanization and metropolization. However, the political consequences of these urban spatial processes are not well understood. This article uses Orfield's framework of analysis to test the hypothesis that spatial segregation at the metropolitan level is driving political polarization between Latin American cities and their suburbs. With Bogotá as a testing ground, we look for evidence that the mechanisms described by Orfield are at play. We conclude that metropolitan spatial segregation does not drive metropolitan politics in Bogotá and explore some of the theoretical implications thereof.     

Income and Democracy: A Smooth Varying Coefficient Redux

Acemoglu et al. (American Economic Review 2008; 98 : 808–842) find no effect of income on democracy when controlling for fixed effects in a dynamic panel model. Work by Moral‐Benito and Bartolucci (Economics Letters 2012; 117 : 844–847) and Cervellati et al. (American Economic Review 2014; 104 : 707–719) suggests that the original model might have been misspecified and proposes alternative specifications instead. We formally test these parametric specifications by implementing Lee's (Journal of Econometrics 2014; 178 : 146–166) dynamic panel test of linear parametric specifications against a general class of nonlinear alternatives robustly and reject all these specifications. However, using a more flexible model proposed by Cai and Li (Econometric Theory 2008; 24 : 1321–1342) we find that the relationship between income and democracy appears to be mediated by education, but results are not statistically significant. Copyright © 2016 John Wiley & Sons, Ltd.     

The cycle of violence in the Second Intifada: Causality in nonlinear vector autoregressive models

We contest Jaeger and Paserman's claim (Jaeger and Paserman , 2008. The cycle of violence? An empirical analysis of fatalities in the Palestinian–Israeli conflict. American Economic Review 98 (4): 1591–1604) that Palestinians did not react to Israeli aggression during Intifada 2. We address the differences between the two sides in terms of the timing and intensity of violence, estimate nonlinear vector autoregression models that are suitable when the linear vector autoregression innovations are not normally distributed, identify causal effects rather than Granger causality using the principle of weak exogeneity, and introduce the “kill‐ratio” as a concept for testing hypotheses about the cycle of violence. The Israelis killed 1.28 Palestinians for every killed Israeli, whereas the Palestinians killed only 0.09 Israelis for every killed Palestinian.     

Debt overhang and economic growth–the Asian and the Latin American experiences

Debt overhang may impede a country's investment and growth. Accordingly, the World Bank initiated debt relief programs. However, doubts have been raised regarding the empirical validity of the debt overhang hypothesis. We employ panel data for testing the existence of debt overhang for Latin American and Asian borrowers. A variety of dynamic panel data econometric estimations as well as dynamic and system GMM estimations are conducted. Our results indicate that debt overhang impeded growth in Latin American economies severely and the impact was moderately negative in the Asian region.