US state-level economic freedom during the COVID-19 pandemic

The COVID-19 pandemic led to extensive new government regulations and lockdown policies that significantly reduced economic freedom across US states. Many of these new pandemic-related regulatory restrictions on economic freedom varied significantly from state to state but are largely missed by the existing Economic Freedom of North America Report (EFNA). This paper adjusts the Our World in Data COVID-19 Stringency Index into a state-level measure of lockdown regulatory freedom and then merges it into the EFNA index to better measure relative economic freedom across US states in 2020. We find significant differences in the relative ranking of economic freedom between states once we adjust for lockdown regulatory restrictions.     

Winds of tapering,financial gravity and COVID-19

Real interest rates have fallen dramatically since the early 1980s. Economic theory states that lower real rates discourage savings while promoting spending. However, today, in the world economy, we face a global saving glut problem in which, even in negative real rates, economic agents keep saving. This situation leads to excess demand for safe assets (US Treasuries), lower bond yields, and higher equity valuations. Thus, the world economy has become more dependent on major economies, especially the United States. In this research, we aim to measure the dependency of the world economy on United States monetary policy. We called this new methodology “financial gravity” and tried to quantify the nature by using panel data analysis. We define monetary dependency (financial gravity) by US Investment flows and their reaction against International Reserves, Credit Default Spreads (CDS), and Foreign Exchange Rates. Our empirical findings support that financial gravity is positively related to international reserves and negatively related to Credit Default Swap Spreads (CDS) and Foreign Exchange rates. We also analyzed the COVID-19 period and found that pandemics positively contributed to world reserve accumulation due to economic lock-down measures, fiscal stimulus packages (unemployment benefits), and decreased global spending.     

The daily relationship between U.S. asset prices and stock prices of American countries

The daily transmission of U.S. comprehensive stock indices to foreign stock markets has been studied extensively, but the transmission may just be that the foreign stock prices respond to news underlying the change in the U.S. stock indices. Besides the regularly economic announcements, news relevant for the U.S. economy may include qualitative news and non-economic events. Due the daily nature of the news, there is no appropriate reference as to its impact on the U.S. or foreign economy and the only accessible reference probably is the change in the financial asset prices. But the U.S. stock index is general in nature and cannot be used to offer specific information about the U.S. economy. Some U.S. asset prices other than stock indices may reveal more specific information about the U.S. economy. Looking into the daily relationship between these U.S. asset prices and stock indices of four American countries in two periods with drastically different economic conditions, this study finds that the daily relationship between these U.S. asset prices and foreign stock prices is consistent with the prevailing U.S. economic fundamentals. From the relationship we identify some U.S. economic conditions foreign stock prices respond to. These economic conditions include real economic shocks, monetary policies, and business default risks.     

The impact of COVID-19 pandemic on the dynamic correlations between gold and U.S. equities: evidence from multifractal cross-correlation analysis

This study exploits multifractal cross-correlation analysis (MFCCA) to investigate the impact of the COVID-19 pandemic on the cross-correlations between gold and U.S. equity markets using 1-min high-frequency data from January 1, 2019, to December 29, 2020. The MFCCA method shows that the pandemic caused an increase of multifractality in cross-correlations between the two markets. Specifically, the cross-correlations of small fluctuations became more persistent while those of large fluctuations became less persistent, explaining the source of multifractality. The findings of this study carry significant implications for investors, academicians, and policymakers. For example, the increase of multifractality of cross-correlation means that the non-linear relationship between gold and U.S. equity returns prevails more during economic downturns. Therefore, academicians may resort to non-linear techniques to evaluate the relationship between gold and U.S. equity markets during the health pandemic. Moreover, investors can know the value of hedging benefits over different investment time horizons during the pandemic. Finally, policymakers can better assess the economic downturns (i.e., those caused by health pandemics) over the dynamics of cross-correlation between gold and equity markets to make sound financial policies.

     

Fiscal News, State Budget Rules, and Tax-Exempt Bond Yields

This paper investigates how state fiscal institutions such as balanced-budget rules and restrictions on state debt issuance mediate the bond market reaction to state fiscal news. We analyze data on the yields of bonds issued by different states, as reported in the “Chubb Relative Value Survey,” along with data on state budget forecasts for the period 1988–1998. We find that unexpected deficits are correlated with higher state bond yields. This effect is smaller for states with tight antideficit rules than for states without these fiscal rules. Unexpected deficits have a particularly large effect in raising bond yields of states with tax limits. These results suggest that bond market participants view fiscal institutions as relevant in assessing the risk characteristics of tax-exempt bonds and that the economic significance of these institutions depends on the state's economic and fiscal circumstances.     

Modeling social,economic, and health perspectives for optimal pandemic policy decision-making

While different control strategies in the early stages of the COVID-19 pandemic have helped decrease the number of infections, these strategies have had an adverse economic impact on businesses. Therefore, optimal timing and scale of closure and reopening strategies are required to prevent both different waves of the pandemic and the negative economic impact of control strategies. This paper proposes a novel multi-objective mixed-integer linear programming (MOMILP) formulation, which results in the optimal timing of closure and reopening of states and industries in each state to mitigate the economic and epidemiological impact of a pandemic. The three objectives being pursued include: (i) the epidemiological impact, (ii) the economic impact on the local businesses, and (iii) the economic impact on the trades between industries. The proposed model is implemented on a dataset that includes 11 states, the District of Columbia, and 19 industries in the US. The solved by augmented ε-constraint approach is used to solve the multi-objective model, and a final strategy is selected from the set of Pareto-optimal solutions based on the least cubic distance of the solution from the optimal value of each objective. The Pareto-optimal solutions suggest that for any control decision (state and industry closure or reopening), the economic impact and the epidemiological impact change in the opposite direction, and it is more effective to close most states while keeping the majority of industries open during the planning horizon.     

A comparison of monthly global indicators for forecasting growth

This paper evaluates the predictive content of a set of alternative monthly indicators of global economic activity for nowcasting and forecasting quarterly world real GDP growth using mixed-frequency models. It shows that a recently proposed indicator that covers multiple dimensions of the global economy consistently produces substantial improvements in forecasting accuracy, while other monthly measures have more mixed success. Specifically, the best-performing model yields impressive gains with MSPE reductions of up to 34% at short horizons and up to 13% at long horizons relative to an autoregressive benchmark. The global economic conditions indicator also contains valuable information for assessing the current and future state of the economy for a set of individual countries and groups of countries. This indicator is used to track the evolution of the nowcasts for the U.S., the OECD area, and the world economy during the COVID-19 pandemic and the main factors that drive the nowcasts are quantified.     

The Value of Work: Rethinking Labor Productivity in Times of COVID-19 and Automation

This article provides a new perspective on the value of work and recommends ways to respond to labor market failures exacerbated by the COVID-19 pandemic and by increased automation. We consider the human right to work, the dangers of pursuing short-term efficiency, and the use of the U.N. Sustainable Development Goals as a framework for inclusive economic innovation. We conclude with recommended policies to build forward and achieve inclusive development.     

Do U.S. and Japanese uncertainty shocks play important roles in affecting transition mechanisms of Japanese stock market?

This research investigates the impacts of U.S. and Japanese uncertainty shocks on the transition mechanisms of the Japan stock market dynamics by utilizing the Markov-switching GARCH-jump model with a time-varying transition probability matrix and analyzes the economic policy uncertainty shock of Japan, the economic policy uncertainty shock of the U.S., and the uncertainty shock about the U.S. equity market volatility. The empirical results demonstrate that the Japan stock market responds to most shocks with the exception of the U.S. economic policy uncertainty shock. The equity market volatility shock of the U.S. plays a more crucial role than the economic policy uncertainty shock of Japan. Furthermore, an increase in the U.S. equity market volatility shock reveals totally different signals in different volatile states. It signals an adverse belief about the Japan stock market in a high-volatile state, but signals an optimism viewpoint about the Japan stock market in a low-volatile state. Finally, the impact of the uncertainty shock about the U.S. stock market volatility is stronger in a high-volatile market than in a low-volatile market.     

Hawkes process modeling of COVID-19 with mobility leading indicators and spatial covariates

Hawkes processes are used in statistical modeling for event clustering and causal inference, while they also can be viewed as stochastic versions of popular compartmental models used in epidemiology. Here we show how to develop accurate models of COVID-19 transmission using Hawkes processes with spatial-temporal covariates. We model the conditional intensity of new COVID-19 cases and deaths in the U.S. at the county level, estimating the dynamic reproduction number of the virus within an EM algorithm through a regression on Google mobility indices and demographic covariates in the maximization step. We validate the approach on both short-term and long-term forecasting tasks, showing that the Hawkes process outperforms several models currently used to track the pandemic, including an ensemble approach and an SEIR-variant. We also investigate which covariates and mobility indices are most important for building forecasts of COVID-19 in the U.S.     

中、美、日实际均衡汇率模型的构建及实证研究

本文基于BEKK-MGARCH模型建立了中、美、日三国的实际均衡汇率方程和方差方程,对1994年以来中国、美国和日本的实际均衡汇率及其波动溢出效应进行了深入细致的分析。结果表明:三个国家的实际均衡汇率受其经济基本面因素的影响不同,人民币实际均衡汇率还受到了美元和日元实际汇率的影响;中美、中日、美日之间的联动关系存在显著的ARCH和GARCH效应。     

Macroeconomic conditions and investment stimuli

Based on a calibrated real options model, this paper examines a tax-subsidy program offered by a government to stimulate corporate investment under business cycles. We derive and discuss optimal incentive policies for different states of the economy. We find that it is optimal for the government to offer a combination of tax cuts and lump-sum subsidy for stimulating levered firms’ investment under business cycles. Furthermore, the government should adopt counter-cyclical tax-subsidy policy, namely a higher (lower) tax cuts and a larger (smaller) lump-sum subsidy during recessions (booms). In particular, we provide a possible explanation why many governments around the world have reduced and even implemented negative interest rates to stimulate the economy during the COVID-19 pandemic in 2020. Finally, our conclusions also predict that the break-even tax-subsidy program always provides effective investment stimulus under business cycles.     

Location of trade,return comovements,and diversification benefits: Evidence from Asian country ETFs

Using data from the Asian country ETFs and their MSCI indices, this paper examines whether trading location affects return comovements and diversification benefits. Our empirical results show that the magnitude of return comovements for the Asian country ETFs is higher than the corresponding MSCI indices. Moreover, our empirical findings indicate that the factors, including investor sentiment, market conditions, and economic fundamentals of the U.S. market, have greater effects on the return comovements for the Asian country ETFs than their underlying MSCI indices. Finally, the evidence presents a higher diversification benefit for the Asian MSCI indices than the Asian country ETFs.     

Freedom and gross in-migration: an empirical study of the post-great recession experience

Determinants of migration, including policy variables such as tax rates, have been extensively studied by regional scientists over the past several decades. The development of the Economic Freedom of North America Index has allowed researchers to test the relationship between migration patterns and economic freedom, with recent studies finding that net in-migration is positively related to economic freedom. Using a new cross-section measure of economic and personal freedom at the state level, we investigate the relationship between gross in-migration and economic freedom on the one hand and then between gross in-migration and total freedom on the other hand. This empirical study of domestic U.S. migration during the post-Great Recession period finds clear evidence that migrants prefer to move to those states affording higher levels of economic freedom and higher levels of total freedom.     

Investments in education and welfare in a two-sector,random matching economy

We consider a random matching model where heterogeneous agents choose optimally to invest time and real resources in education. Generically, there is a steady state equilibrium where some agents, but not all of them, invest. Regular steady state equilibria are constrained inefficient in a strong sense. The Hosios (1990) condition is neither necessary nor sufficient for constrained efficiency. We also provide restrictions on the fundamentals sufficient to guarantee that equilibria are characterized by overeducation (or undereducation), present some results on their comparative statics properties, and discuss the nature of welfare improving policies.     

Women and poverty: Beyond earnings and welfare

Women’s poverty rates are higher than men’s, with single mothers having extremely high poverty rates. This article first briefly examines poverty measures and U.S. poverty rates among men and women. The author then describes and evaluates three categories of economic research on poverty: the lack or inadequacy of employment and earnings; family structure and welfare; and earnings capacities, care-giving responsibilities and employment. Finally the author assesses the policies to alleviate women’s poverty derived from these explanations.     

Manufacturing and Rural Economies in the United States: The Role of Nondurable Producers, Labor Costs and State Taxes

This paper investigates the preferences of manufacturers in deciding whether to locate in metropolitan or nonmetropolitan (rural) areas. Using 1997 state-level data and OLS regression estimation, it was determined that nondurable goods manufacturers prefer rural areas, while durable goods manufacturers are indifferent as to area. However, both sets of manufacturers prefer to locate in larger states. Wage rates are not significant in the regressions, while durable manufacturers appear sensitive to state taxes. Some policy conclusions for local economic developers are derived from these findings.     

Convergence-divergence of U.S. State unemployment rates

The dispersion of U.S. state unemployment rates and those of many industrialized countries has been observed to maintain persistent dispersion. This paper, by using a model of conditional expectation, investigates the question wheter there was a tendency toward convergence or divergence of the U.S. state unemployment rates. The paper identifies the states that persistently performed above or below unemployment expectations on average for the period 1978–1999. Data were provided by the U.S. Bureau of Labor Statistics.(JELR10)     

Slowdown of credit flows in Jordan in the wake of the global financial crisis: Supply or demand driven?

This paper estimates a disequilibrium model of credit supply and demand to evaluate the relative role of these factors in the slowdown of credit flows in the Jordanian economy in the wake of the global financial crisis. The empirical analysis suggests that the credit stagnation is mainly driven by the restricted credit supply amid tighter monetary policy conditions in Jordan relative to the United States, as evidenced by the widened interest differential between the Central Bank of Jordan (CBJ) re-discount and the U.S. Federal Reserve funds rates. Although it appears that demand side factors related to the slowdown of economic activity have also had an impact, their role has been relatively modest. The estimation results imply that economic policies targeted towards stimulating the supply of credit are likely to be a more effective tool for expanding credit flows relative to demand stimulating policies.     

Firm and regional economic outcomes associated with a new,broad measure of business innovation

ABSTRACT

Most innovation-oriented studies use measures such as patent activity or research expenditures, likely ignoring the role of more home-grown upgrades or opportunity-recognizing activity common in businesses across the U.S. This study develops a broader ‘innovation index’ using a new survey of businesses that provides a wide lens for capturing innovative practices. The index is used in a series of regressions testing the relationship between innovation and both firm and regional-level economic outcomes. Results from the firm-level regressions show that the innovation index has a positive and significant relationship with wages paid to employees and product market growth. The regional analysis demonstrates that innovation is correlated with several regional economic variables, including median household income, and that spatial spillovers from innovation exist in some instances.