Disentangling the transmission channel NPLs-cost of capital-lending supply

This paper analyses the effects of non-performing loans (NPLs) on the cost of capital, and on lending and liquidity supply, for a sample of 225 Eurozone banks over the period 2002Q1-2016Q4. Our results demonstrate that NPLs increase the cost of capital, which reduces both lending supply and liquidity creation. This phenomenon is comparatively more significant for periphery county banks than for core country banks.     

Variance and skew risk premiums for the volatility market: The VIX evidence

We extract variance and skew risk premiums from volatility derivatives in a model-free way and analyze their relationships along with volatility index and equity index returns. These risk premiums can be synthesized through option trading strategies. Using a time series of option prices on the VIX, we find that variance swap excess return can be partially explained by volatility index and equity index excess returns while these latter variables carry little information for the skew swap excess return. The results sharply contrast with those obtained for the equity index option market underlining very specific characteristics of the volatility derivative market.     

Why not now? Intended timing in entrepreneurial intentions

International Entrepreneurship and Management Journal - Understanding the formation of entrepreneurial intention is critical, given that it is the first step in the entrepreneurial process. Little...     

Intraday patterns and trading strategies in the Spanish stock market

Different rating and investment companies have recently pointed out Spain’s brightening growth outlook, which has energized the Spanish stock market. By anticipating greater interest in the behaviour of the Spanish stock market, we show that the best trading strategy is that in which the investor enters long or short after the opening of the New York Stock Exchange (NYSE) till the end of the trading day at 17:30. This strategy should be complemented with that of entering long or short from the opening of the trading day till the closing price before the opening of the NYSE in no-coincidence phases.     

Do we need a global VAR model to forecast inflation and output in South Africa?

This study determines whether the global vector autoregressive (GVAR) approach provides better forecasts of key South African variables than a vector error correction model (VECM) and a Bayesian vector autoregressive (BVAR) model augmented with foreign variables. The article considers both a small GVAR model and a large GVAR model in determining the most appropriate model for forecasting South African variables. We compare the recursive out-of-sample forecasts for South African GDP and inflation from six types of models: a general 33 country (large) GVAR, a customized small GVAR for South Africa, a VECM for South Africa with weakly exogenous foreign variables, a BVAR model, autoregressive (AR) models and random walk models. The results show that the forecast performance of the large GVAR is generally superior to the performance of the customized small GVAR for South Africa. The forecasts of both the GVAR models tend to be better than the forecasts of the augmented VECM, especially at longer forecast horizons. Importantly, however, on average, the BVAR model performs the best when it comes to forecasting output, while the AR(1) model outperforms all the other models in predicting inflation. We also conduct ex ante forecasts from the BVAR and AR(1) models over 2010:Q1–2013:Q4 to highlight their ability to track turning points in output and inflation, respectively.     

Vertical price transmission in the Turkish poultry market: the avian influenza crisis

This article assesses the impact of the Avian Influenza (AI) outbreak in the Turkish poultry market by focusing on price transmission at producer and retail levels. The relationship and patterns of transmission between producer and retail prices are analysed by estimating a Regime-Switching Vector Error Correction Model with three regimes. An AI information index variable is developed and used to determine regime-switching. Results suggest that consumer prices adjust to disequilibrium caused by the AI crisis, while producer prices are sticky and slowly responsive.     

Assessing tax reforms through the elasticity of reported income: an empirical analysis for Spain

This paper demonstrates the usefulness of the elasticity of reported income to assess tax reforms from the perspectives of tax revenue and well-being. Employing different identification strategies, evidence is provided of the value of the elasticity of gross reported income in Spain and, based on this elasticity, a detailed assessment is made of the impact of the increase in marginal tax rates which the Spanish government approved in 2012. We use microdata from the Taxpayers Panel of the Institute for Fiscal Studies. The mean value of this elasticity for Spain is 0,363 with considerable heterogeneity depending on taxpayers’ characteristics.     

Selectivity, Pulse Fishing and Endogenous Lifespan in Beverton-Holt Models

Optimal management in a multi-cohort Beverton-Holt model with any number of age classes and imperfect selectivity is equivalent to finding the optimal fish lifespan by chosen fallow cycles. Optimal policy differs in two main ways from the optimal lifespan rule with perfect selectivity. First, weight gain is valued in terms of the whole population structure. Second, the cost of waiting is the interest rate adjusted for the increase in the pulse length. This point is especially relevant for assessing the role of selectivity. Imperfect selectivity reduces the optimal lifespan and the optimal pulse length. We illustrate our theoretical findings with a numerical example. Results obtained using global numerical methods select the optimal pulse length predicted by the optimal lifespan rule.     

The Institutional Revelation: A comment on Douglas W. Allen’s The Institutional Revolution

Institutions are a central topic in economic history. Allen’s work differs in that he is interested in institutions per se, not as a means to economic performance and prosperity. The purpose of this book is to explain the institutions of the premodern world and to show why they changed. His argument is that in a Principal-Agent situation, before the Industrial Revolution, it was harder for the Principal to attribute whether the failure of the project was due to acts of nature or some acts of the agent, hence the “strange” institutions. In a modern world, with a much improved monitoring technology, we can use more “efficient” institutions, hence the Institutional Revolution. Although innovative and interesting, the author over-stresses his argument. Much more than monitoring in a principal-agent relationship is needed to explain the Industrial Revolution and the changes in institutions associated with it.     

Cobb-Douglas preferences under uncertainty

This paper axiomatizes Cobb-Douglas preferences under uncertainty. First, we extend the original Trockel (Econ Lett 30:7–10, 1989)’s axiomatic foundation to a general state space framework based on the Strong Homotheticity Axiom, obtaining also the incomplete case a la Bewley (Decis Econ Financ 25:79–110, 2002). We show that this key axiom for the Cobb-Douglas expected utility specification is refuted by Ellsberg’s uncertainty aversion behavioral pattern. Our main result provides a set of meaningful axioms characterizing Cobb-Douglas min-expected utility preferences, an important class of uncertainty averse preferences for studying the consequences of ambiguity in finance and other fields. Finally, we present briefly how to obtain more general representations like the variational case.