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.     

Irreversible investment,ambiguity and equity default swaps

We study the impact of ambiguity on the pricing and timing of the option to invest. There is a funding gap to undertake the investment, which is covered by entering into an equity-for-guarantee swap. Our model predicts that the more ambiguity-averse the agents, the less the option value, the later the investment and the higher the guarantee cost and the leverage. If the entrepreneur is more ambiguity-averse than the insurer, the investment threshold slightly rises as the perceived ambiguity increases, and on the contrary, if the entrepreneur is less ambiguity-averse than the insurer, the investment threshold increases sharply as the perceived ambiguity rises.     

Insurance activity,real output,and geopolitical risk: Fresh evidence from BRICS

This paper fills some empirical gaps by evaluating the causal associations among insurance premiums, real output, and geopolitical risk in BRICS (Brazil, Russia, India, China, South Africa) from 1985 to 2017. We utilize a newly-developed Granger-causality quantile analysis to assess the causal relationships among the series under consideration in each distribution quantile. Our empirical results reveal unidirectional causality that runs from real output and geopolitical risk to insurance activities in Brazil and South Africa. We also observe bi-directional lower-tail causality among real output, insurance premiums, and geopolitical risk in Russia. Findings also present bi-directional causality among real output, insurance premiums, and geopolitical risk at different quantiles. Knowledge of these causal relationships can prevent governments from conducting a ‘one-size-fits-all’ policy.     

Real earnings management around CEO turnovers

Following CEO turnovers, US firms adjust real business activities to manage earnings downwards (REM bath). This effect is most pronounced in firms with low levels of institutional ownership. REM baths early in CEOs’ tenure can be confounded with legitimate adjustments to business activities. However, we show that they are not accompanied by increases in R&D or capital expenses, nor are they explained by restructuring expenses. CEOs with short tenure record more negative REM measures in their first year of tenure, when compared with CEOs with long tenure.     

货币传导异质性与实体经济流动性配置的“马太效应”

货币政策支持实体经济高质量发展的关键在于疏通货币政策传导机制,引导流动性进入重点领域和薄弱环节,因此货币资金的配置效率至关重要。本文基于交互效应面板分位数回归,测度货币政策对实体企业流动性的异质性效应。研究发现:在样本期内,实体经济流动性配置陷入了资金越充裕的企业越易于获得融资,越易于获得融资的企业资金越充裕的窘境。这种流动性配置的“马太效应”具体表现为,货币政策对尾部企业的支持力度不及头部企业的一半;虚拟经济对尾部企业的“分流效应”高达头部企业的3倍,从而强化了流动性配置的失衡。因此,当前密集出台的一系列普惠政策有助于提升流动性配置效率,进一步完善调控模式的关键在于健全现代化金融体系,增强货币政策的靶向性和针对性。     

The impact of real exchange rate shocks on manufacturing workers: An autopsy from the MORG

We study the impact of large real exchange rate shocks on workers in sectors initially more exposed to international trade using the Current Population Survey’s (CPS) Merged Outgoing Rotation Group (MORG) from 1979 to 2010 combined with new annual measures of imported inputs, a proxy for offshoring. We find that in periods when US relative prices are high, and imports surge relative to exports, workers in sectors with greater initial exposure to international trade were more likely to be unemployed or exit the labor force a year later, but did not experience significant declines in wages conditional on being employed. Contrary to the usual narrative, we find negative wage effects for higher-wage, but not lower-wage workers, particularly for those who are less-educated.     

Financial development,portfolio investments and the real economy in Africa

According to the conservative view, capital flows enhance economic growth. Focussing on Africa’s real economy, this study investigates the linkage between portfolio investments and real sector growth, and whether financial sector development strengthens this association. The study covers 30 countries over the period 1990–2017. We adopt the Lewbel instrumental variable general method of moments (IV-GMM) two-step robust estimator, which relies on heteroscedasticity for identification, while dealing with instrument insufficiency, unavailability, endogeneity and omitted variable bias. We found that portfolio equity has no growth impact on Africa’s real sector. Debt flows deter the growth of the overall real sector as well as the manufacturing and industrial sectors, but have no impact on agriculture and service growth. We found that financial development does strengthen the positive association between capital flows and economic growth, but this is dependent on the type of sector and portfolio investment, as well as on the degree of financial development. We control for known determinants of economic growth.     

Real-time co-creation and nowness service: lessons from tourism and hospitality

Brands take advantage of technology, social media and constant connectivity to foster organic consumer engagement and interactions towards co-creating personalised customer service. Real-time service offers dynamic engagement with connected consumers. Brands in tourism and hospitality use technology to dynamically enhance consumer experience through co-creation. The integration of real-time consumer intelligence, dynamic big data mining, artificial intelligence, and contextualisation can transform service co-creation by mobilising recourses in the ecosystem. Nowness service emerges by dynamically engaging consumers in experience cocreation in real time. It has five interconnected characteristics that revolutionise the tourism and hospitality, namely: real-time, co-creation, data-driven, consumer-centric and experience co-creation.     

Characteristics and implications of Chinese macroeconomic data revisions

The research examining macroeconomic data for developed economies suggests that an understanding of the nature of data revisions is important both for the production of accurate macroeconomic forecasts and for forecast evaluation. This paper focuses on Chinese data, for which there has been substantial debate about data quality for some time. The key finding in this paper is that, while it is true that the Chinese macroeconomic data revisions are not well-behaved, they are not very different from similarly-timed U.S. macroeconomic data revisions. The positive bias in Chinese real GDP revisions is a result of the fast-growing service sector, which is notably hard to measure in real time. A better understanding of the revisions process is particularly helpful for studies of the forecast errors from surveys of forecasters, where the choice of the vintage for outcomes may have an impact on the estimated forecast errors.