Cryptocurrencies and Cagan’s model of hyperinflation

The drivers of the prices of Bitcoin and Ethereum are studied within a framework based on Cagan’s model of hyperinflation. In the model, the prices of the cryptocurrencies are driven by stochastic adoption and velocity shocks as well as endogenous expectations of future prices. The model is estimated with data for prices, transaction volumes, and money supplies. A majority of price fluctuations in both currencies can be attributed to shocks in adoption, velocity shocks are much less important. The money demand sensitivity to expected price changes is estimated to be larger for Bitcoin than for Ethereum, and both have higher sensitivity than fiat currencies during episodes of hyperinflation.     

Dynamics of capital account and current account in Sri Lanka

This paper enquires the dynamics of current account and capital account in Sri Lanka for the period 2001:Q1 to 2016:Q1 and also examines the role of some policy variables such as exchange rate and interest rate in this dynamics. Estimated autoregressive distributed lag (ARDL) bound testing approach to cointegration followed by error correction representation of the ARDL model have found that current account is caused by capital account and exchange rate, where capital account causes to produce a deficit in current account. In the dynamic adjustment of current account due to exchange rate, an evidence of J-curve phenomenon is noticed. Capital account is neither caused by current account nor by exchange rate but interest rate has a positive impact on it. Robustness of these findings is testified by the vector autoregression model, Wald test of Granger causality followed by an impulse response analysis and a variance decomposition analysis. These analyses, in addition, establish a negative impact of interest rate on current account. With the best of knowledge this is the first study that reveals the dynamics of current and capital account of Sri Lanka. Such a dynamics is critical from the policy perspective. Policy makers should caution before capital account liberalization.     

On credit and output: Is the supply of credit relevant?

The consensus that changes in the supply of credit were irrelevant to making monetary policy decisions existed among macroeconomists during the second half of the twentieth century. Transmission of shocks to the real economy through changes in the supply of credit, however, played an important role in the recent U.S. financial crisis. This paper explores the extent to which policymakers should consider changes in the supply of credit when making forecasts and monetary policy decisions. More specifically, it considers whether a measure of real credit balances offers consistent and stable information, beyond that of a real interest rate and real money balances, about future output gaps during the U.S. post-war era. Results yield evidence that changes in real credit balances are the only variable, among those considered, to provide consistent and stable information about future output gaps over the entire sample period. Each information variable, however, provides relatively little value added for forecasting future output gaps, beyond a simple autoregressive model. To improve upon forecasts and monetary policy decisions, policymakers therefore should consider a broader range of information variables and occasionally reassess the relative weightings assigned to each.     

Pharmaceutical cost‐sharing systems and savings for healthcare systems from parallel trade

This paper studies the consequences of parallel trade in a two‐country model. It compares a coinsurance scheme (consumers pay a percentage of the drug price) and an indemnity insurance scheme (reimbursement is independent of the drug price) with respect to changes in copayments and public health expenditure. In the destination country, copayments for patients decrease to a larger extent under indemnity insurance, whereas reductions in public health expenditure occur only under coinsurance. In the source country, copayments increase less under coinsurance, whereas health expenditure is reduced more under indemnity insurance. In both countries, total expenditure under parallel trade is lower.     

Do overweight and obesity prevalence rates converge in Europe?

We exploit recently published data to evaluate the long-run evolution of overweight and obesity rates among European economies between 1975 and 2016. We find that overweight rates for both females and males converge in Europe. In particular, the convergence is driven by the nations in the EU. This fact is consistent with food patterns as well as trade, agricultural, and health policies that are common among EU members. Across our model specifications, the steady-state average overweight rate ranges between 60% and 77% for European female individuals and lies above 82% for their male counterparts. Confidence intervals suggest that such gender differences are statistically significant. In the EU, the point estimates of these rates are 62% and 91%, respectively. Obesity prevalence in Europe would reach long-term rates of 39% and 45% for females and males respectively, whereas these rates would be similar in the EU (approximately 28%).     

Copyright: a systemic marketplace icon

This article argues that copyright is a systemic marketplace icon because of the breadth of its effects on market operations. Copyright determines how intellectual property rights for creative work are allocated between the different actors involved in production and consumption, and must balance the civic priority of public access to creative work with the market-driven principle of rewarding private interests for their effort. This duality tends to polarise opinion about its implementation by rights holders, because very different ideological assumptions underpin civic and market objectives. Copyright discourses reveal how these ideological struggles play out among interested parties, who use the concept of copyright to make arguments about how markets should be structured, how creative work should be exchanged, and how consumers should behave. In the process, copyright is constructed, explained, branded and promoted as an object to which market actors must orient themselves if they wish to conduct themselves appropriately, and as a rationale for material changes to market structures. At the same time, copyright discourses reveal the implications of copyright, which invoke both the market and democracy, for the quality of democracy, the circulation of creativity, and the availability of public knowledge, and help explain why ideological struggles over copyright are so difficult to resolve.     

Gold price dynamics and the role of uncertainty

This study focuses on the dynamics of the gold price against bonds, stocks and exchange rates based on a disaggregation of the underlying relationships across different frequencies applying a wavelet decomposition. To analyze joint extreme movements (i.e. tail dependence), we adopt a copula approach, which helps us to assess the dependence between the returns of gold and other assets in calm and turmoil market times and therefore the hedge and safe haven functions of gold. We also examine whether gold prices are directly affected by changes in macroeconomic uncertainty, economic policy uncertainty and/or CPI forecasters disagreement. Analyzing data for nine economies for a sample period starting in 1985, we find that the role of gold changes significantly after the collapse of Lehman Brothers in 2008. Gold is unable to serve as a hedge or safe haven in the classical sense while the findings for the period prior to 2008 mostly suggest that gold is able to shield investors. Uncertainty measures display a surprising and time-varying relationship with the path of the gold price. While economic policy uncertainty is positively correlated with gold price changes, macroeconomic uncertainty and inflation uncertainty among forecasters are both negatively related to gold price changes.     

Estimating yield curves of the U.S. Treasury securities: An interpolation approach

Following the approach of interpolation, this paper proposes the multiple exponential decay model to fit yield curves for both the U.S. TIPS market and the conventional Treasury security market. Several estimation methods, including the unconstrained/constrained nonlinear minimization, quadratic programming, and the iterative linear least squares, are applied to estimate the unknown parameters according to different curve‐fitting purposes. Comparisons between the proposed model and the alternatives show that the multiple exponential decay successfully (1) adapts to a variety of shapes associated with yield curves, (2) (partially) keeps in line with the economic interpretations of Nelson–Siegel summarized by Diebold and Li ( 2006 ), and (3) dominates the competing models in curve‐fitting performance measured by mean fitted‐price errors over the sample period. In addition, the exact specification of a nonparametric interpolation model is pinned down by applying three statistical tools, which enable us to jointly take into account validity, optimality, and parsimoniousness of the proposed model.