Covid-19, Economic Growth and South African Fiscal Policy

Following years of fast-rising debt levels, we show that the Covid-19 crisis worsened an already deteriorating fiscal position in South Africa. To restore fiscal sustainability in the aftermath of the crisis some commentators argue that higher government expenditure will grow GDP sufficiently to stabilise the debt/GDP ratio. We reject this, showing that although a real increase in expenditure stimulates economic growth (a short-run, once-off effect), the public expenditure/GDP ratio exceeds the level at which an increase in the ratio positively impacts growth. We then explore the past efforts of government to maintain or restore fiscal sustainability by estimating a fiscal reaction function using a Markov-switching model. Following the impact of the Covid-19 crisis on the budget, we subsequently establish the deficit, expenditure and revenue adjustments that the government will have to make to restore fiscal sustainability. Finally, we consider the merits of introducing a debt ceiling.     

A Tale of Three Countries: What is the Relationship Between COVID-19, Lockdown and Happiness?

The COVID-19 pandemic led many governments to implement lockdown regulations to curb the spread of the virus. Though lockdowns do minimise the physical damage caused by the virus, there may also be substantial damage to population well-being. Using a pooled data set, we analyse the relationship between a mandatory lockdown and happiness in three diverse countries: South Africa, New Zealand and Australia. These countries differ amongst others in terms of lockdown regulations and duration. The primary aim is to determine, whether a lockdown is negatively associated with happiness, notwithstanding the characteristics of a country or the strictness of the lockdown regulations. Second, we compare the effect size of the lockdown on happiness between these countries. We use Difference-in-Difference estimations to determine the association between lockdown and happiness and a Least Squares Dummy Variable estimation to study the heterogeneity in the effect size of the lockdown by country. Our results show that a lockdown is associated with a decline in happiness, regardless of the characteristics of the country or the type and duration of its lockdown regulations. Furthermore, the effect size differs between countries in the sense that the more stringent the stay-at-home regulations are, the greater it seems to be.     

Predicting the antecedents of consumers' intention toward purchase of mutual funds: A hybrid PLS-SEM-neural network approach

The current study intends to identify the behavioural antecedents of investors' attitude and investment intention toward mutual funds using a robust SEM-ANN approach. It focuses on novel factors in the purview of the COVID-19 pandemic, increasing digitalization and social media usage. The research outcome indicates that attitude (ATB), awareness (AW) and investment decision involvement (IDI) have a significant positive relation with investment intention (BI). In contrast, perceived barrier (PBR) negatively relates to investment intention. Herd behaviour (HB) and social media influence (SMI) do not influence investment intention toward mutual funds. Moreover, all the tested predictors share direct relation with the attitude toward mutual fund investment, barring perceived risk (PR), which has an inverse relationship. As per the outcome of ANN sensitivity analysis, attitude is the most crucial determinant of investment intention. It is followed by awareness (AW), perceived barriers (PBR) and investment decision involvement (IDI). Among the significant determinants of attitude, self-efficacy (SE) is the most important determinant, followed by perceived usefulness (PU), perceived emergency (PEMER), subjective norms (SN) and perceived risk (PR).     

The contribution of macroprudential policies to banks' resilience: Lessons from the systemic crises and the COVID-19 pandemic shock

This study examines the effectiveness of macroprudential policies in reducing the banks' risk during the COVID-19 pandemic and compares these results with the systemic banking crises years. Based on a sample of 624 banks across 40 countries during the period 2006–2020, we find that loosening capital-aimed macroprudential policies effectively reduced banks' risk during the COVID-19 pandemic, while this behavior led to increased risk during the systemic crises years. In contrast, tightening the remaining macroprudential policies during the systemic crises years and during the pandemic proved effective in reducing banks' risk. Furthermore, we show that the magnitude of the impact of macroprudential policies was stronger during the systemic crisis than that during the pandemic. Finally, we show that the results are driven by the capital requirement prudential policy, both during the systemic crisis and the COVID-19 pandemic, although the conservation buffer and the leverage limit also contributes to the ineffectiveness of these policies during the COVID-19 pandemic. The banks' leverage and loan growth also play an enhancing role of the effects of the macroprudential policies.     

Covid-19-tested food labels

While the transmission of virus SARS-CoV-2 via food is rare, some Chinese food retailers are considering a Covid-19-tested food label. However, how consumers may support such a label is unknown. We quantify Chinese consumers’ willingness to pay (WTP) for food carrying a Covid-19-tested label using an online choice experiment. We find that the WTPs for such a label are always positive for all food products considered. The amount of WTP depends on the entities authenticating the labels, country of origin of the food, and consumers’ socio-demographic status. Contrary to expectation, the knowledge on Covid-19 does not affect consumer preferences for the Covid-19-tested food labels. Our benefit and cost analysis suggests a possible large benefit of creating and administering a Covid-19-tested food label. This study provides insights for policymakers, global food manufacturers, and retailers to create marketing strategies to alleviate consumer food safety concerns associated with Covid-19.     

E-commerce and supply chain resilience during COVID-19: Evidence from agricultural input e-stores in China

COVID-19 has caused major disruptions to agricultural supply chains around the world. Researchers and policy-makers are interested in identifying means to reduce the disruptive effects caused by the pandemic. We investigate the impacts of COVID-19 on the operation of e-commerce stores (in short, e-stores) specialising in agricultural inputs. The difference-in-differences method (DID) is employed to estimate the causal relationship between COVID-19 and online sales of agricultural inputs using data from 54,244 agricultural input e-stores registered in 118 prefecture-level cities across 15 provinces and hosted on two major Chinese e-commerce platforms. The results show that COVID-19 led to a substantial growth in monthly sales of agricultural input e-stores, and this growth of online sales varied across store scales and by types of agricultural inputs. In particular, e-stores selling seeds and seedlings experienced a larger growth in sales than stores selling agricultural machinery and implements, and the mid- and larger-scaled e-stores experienced more growth of sales than micro- and small-scaled e-stores. Further analysis reveals that the growth of online sales of agricultural inputs was driven mainly by an increase in the quantity of customer orders (QCO). The findings of this paper underscore the importance of e-commerce in ensuring the resilience of the agricultural supply chain during the pandemic period.     

Feedback and the success of irrational investors

We provide a model in which irrational investors trade based upon considerations that have no inherent connection to fundamentals. However, trading activity affects market prices, and because of feedback from security prices to cash flows, the irrational trades influence underlying cash flows. As a result, irrational investors can, in some situations, earn abnormal (i.e., risk-adjusted) profits that can exceed the abnormal profits of rational informed investors. Although the trading of irrational investors cause prices to deviate from fundamental values, stock prices follow a random walk.     

ASEAN's New Frontiers: Integrating the Newest Members into the ASEAN Economic Community

Since Vietnam, Lao People's Democratic Republic (PDR), Myanmar, and Cambodia joined the Association of Southeast Asian Nations (ASEAN) in the 1990s, concerns have been raised over a Development Divide. The real division is between ASEAN members participating in the integrated East Asian economy and those that do not. The older ASEAN members have become more efficient traders, and Cambodia, Laos, Myanmar, and Vietnam must reform faster if they are to catch up. Cambodia, Lao PDR, and Myanmar are not meeting the challenge, but Vietnam may be leaving the laggards, and the Philippines is lagging the leaders. The challenge is how to avoid a two‐tier ASEAN with fast‐growing modern economies coexisting besides inward‐looking poor countries.     

Roles of rural non-farm employment (RNFE) in India: Why RNFE,the conveyor of a shock like COVID 19 is also the key to recovery?

We assess the role of Rural Non-Farm Employment (RNFE) in livelihoods and in likely impacts of shocks like COVID 19. In India’s agri-food system, the preponderance of small farmers with low endowments of human and financial capital implies that, RNFE has been the principal source of poverty reduction. Yet, RNFE is also the most adversely affected by shocks like COVID 19 and the measures adopted to prevent disease spread. To assess the roles of RNFE and possible effects of shocks, we uniquely utilize the recent rounds of nationally representative Periodic Labor Force Surveys (PLFS). To assess the “potential impact” of COVID 19 on workers, by using the large dataset, we match similar workers in different states of employment (SOE) where SOE may partly reflect the situation post shock. Job loss, reduction in work hours, movement across types of employment, casualization within RNFE is possible due to shocks to RNFE. We estimate that SOE in RNFE have significant association with poverty and income. With the data on COVID lockdown periods, we then validate the results to pair with the prospectively assessed impacts. Notwithstanding the effect of shocks, RNFE has the unique potential in recovery, being the prime rural income generator and risk mitigator apart from being characterized by comparatively high growth in female employment and in socially disadvantaged groups in India.     

Effect of COVID-19 lockdowns on city-center and suburban housing markets: Evidence from Hangzhou,China

In 2020, governments worldwide enforced lockdowns to contain the spread of COVID-19, severely impeding aspects of daily life such as work, school, and tourism. Consequently, numerous economic activities were affected. Before the COVID-19 outbreak, city-center housing markets in areas surrounding popular tourist attractions performed better than did suburban housing markets because of the output of the tourism industry. This study examines the changes in the performance of city-center and suburban housing markets in regions with popular tourist attractions after the lockdown. Specifically, the dynamics of city-center and suburban housing markets in Hangzhou, where West Lake is located, and the changes in the information transfer between these housing markets after the lockdown are explored. Transaction data from January 1, 2019 to September 30, 2020 are used to perform analysis, in which adjusted housing prices and asking prices are employed to measure market performance and sellers’ pricing strategies, and transaction volume and time on the market are used to measure market liquidity and transaction frequency. The results reveal that the effects of lockdowns differ between city-center and suburban housing markets. After the lockdown, a substantial structural change is observed in the suburban housing market; the volatility risk of housing prices decreases substantially, causing an increase in transaction premiums. Housing prices and transaction volume increase in the city-center housing market after the lockdown; this is possibly because of the influence from the overall housing market booms. In addition, because sellers raise their asking prices and the transaction time is extended, the sellers in the city-center housing market are particularly influenced by the disposition effect. This leads to a reversal in the lead–lag relationship between the city center and suburban housing markets in terms of informativeness. Specifically, before the lockdown, the city-center market transfers information to the suburban market, but after the lockdown, the suburban market transfers information to the city-center market. The COVID-19 pandemic has changed the world in many aspects; this paper finds that it will also change the development pattern of the real estate market in different locations.