Aftermath of banking crises: Effects on real and monetary variables

This paper models the effects of a banking crisis, and in particular distinguishes between a short-term crisis, such as a banking panic, and a longer-term crisis, such as a banking insolvency. Using an optimizing framework, it shows that depositors shift from deposits into cash in both types of crises, which results in an increase in the interest rates on deposits and loans, and a contraction in output and consumption. However, when the crisis is resolved in a finite time period, there is an intertemporal substitution of consumption, and consumption is postponed until the crisis is resolved. This in turn results in a further decline in the demand for money, availability of credit and output.     

Monetary News Shocks

We pursue an empirical strategy to identify a monetary news shock in the U.S. economy. We use a monetary policy residual, along with other variables in a vector autoregression (VAR), and identify a monetary news shock as the linear combination of reduced-form innovations that is orthogonal to the current residual and that maximizes the sum of contributions to its forecast error variance over a finite horizon. Real GDP declines in a persistent manner after a positive monetary news shock. This contraction in economic activity is accompanied by a fall in inflation and a rapid increase in the nominal interest rate.     

Non-performing loans, prospective bailouts, and Japan's slowdown

The delay in the government bailout of the financial sector played a key role in Japan's slowdown during the 1990s and early 2000s. This argument is articulated in a general equilibrium model in which the government provides deposit insurance to the financial sector. The existence of non-performing loans, combined with a delay in the bailout, leads to a persistent decline in economic activity. Consistent with Japan's experience, the decline in output is caused not only by a fall in investment, but also by a decline in labor and total factor productivity.     

An expectations-driven interpretation of the “Great Recession”

The boom-years preceding the “great recession” were a time of rapid innovation in the financial industry. We explore the idea that both the boom and eventual bust emerged from overoptimistic expectations of efficiency-gains in the financial sector. We treat the bankruptcy costs facing intermediaries in a costly state verification problem as a stochastic process, and model the boom-bust in terms of an unfulfilled news-shock where the expected fall in costs are eventually not realized. In response to a change in expectations only, the model generates a boom-bust cycle in aggregate activity, asset prices and leverage, and a countercyclical credit spread.     

A price dynamic equilibrium model with trading volume weights based on a price-volume probability wave differential equation

Guided by a price-volume probability wave differential equation in a new mathematical method, we study intraday market dynamic equilibrium in stock market. We select intraday cumulative trading volume distribution over a price range as individual mental representation and determine a price equilibrium point by the maximum volume utility price. We propose the hypothesis that a stock price can deviate away from the equilibrium point in momentum and restore to it in reversal, and the volume distribution embodies market dynamic equilibrium. Then, we examine it by a set of explicit price dynamic equilibrium models with trading volume weights from the differential equation against a large number of the price-volume distribution using tick-by-tick high frequency data in Chinese stock market in 2019. It holds true. We can infer that the theory is applied for a broader scope because it embraces core mathematical components in expected utility theory, prospect theory, and reflexivity theory.     

What is progress in transdisciplinary research?

In disciplinary research progress is reached and assessed by referring to the state of research in a specific field. But what is progress in transdisciplinary research, where several disciplines and further societal actors may be involved? Based on the conception of transdisciplinary research as a collaboration of academic as well as non-academic thought-styles, and based on the understanding of transdisciplinary research as research that develops a comprehensive, multi-perspective, common-good oriented and useful approach to a socially relevant issue, the question of progress is discussed for four view-points: (a) the people concerned about the issue are much less interested in the question of progress in transdisciplinary research than in a better handling of the real world problem; (b) members of a disciplinary, business, governmental or civil society's thought-style, who gain a more comprehensive understanding of an issue through the transdisciplinary research process, are more interested in further elaborating the issue within their thought-style, than in general lessons on progress; (c) progress on the level of personal experience mainly means that members of academic or non-academic thought-styles realize that they are a member of a specific thought-style among others. Progress would be made by integrating this experience in general education and special training; (d) finally a lot of general lessons can be learned and elaborated as tools, cases studies and approaches form the perspective of a thought-style interested in how to understand and manage transdisciplinary research.     

A Factor Allocation Approach to Optimal Bond Portfolio

This paper proposes a new method to a bond portfolio problem in a multi-period setting. In particular, we apply a factor allocation approach to constructing the optimal bond portfolio in a class of multi-factor Gaussian yield curve models. In other words, we consider a bond portfolio problem in terms of a factors’ allocation problem. Thus, we can obtain clear interpretation about the relation between the change in the shape of a yield curve and dynamic optimal strategy, which is usually hard to be obtained due to high correlations among individual bonds. We first present a closed form solution of the optimal bond portfolio in a class of the multi-factor Gaussian term structure model. Then, we investigate the effects of various changes in the term structure on the optimal portfolio strategy through series of comparative statics.     

Inflation and Growth: Impatience and a Qualitative Equivalence

This paper studies the role of an endogenous time preference on the relationship between inflation and growth in the long run in both the money-in-utility-function (MIUF) and transactions-costs (TC) models. We establish a qualitative equivalence between the two models in a setup without a labor–leisure tradeoff. When the time preference is decreasing (or increasing) in consumption and real balances, both the MIUF and TC models are qualitatively equivalent in terms of predicting a negative (or positive) relationship between inflation and growth in a steady state. Both a decreasing and an increasing time preference in consumption are consistent with the arguments found within the literature. While a decreasing time preference in real balances corroborates with empirical evidence, there is no evidence in support of an increasing time preference in real balances.     

The Swedish State unemployment insurance and the reinsurance problem of the funds

Abstract

In 1901 the town of Gent appropriated a municipal grant to societies paying benefit to their members in case of unemployment. The decision was founded on a committee report principally written by the lawyer Louis Varlez. The societies should claim individual contributions of the members constituting the right to unemployment allowance under certain conditions. In order to prevent a dissipating risk selection the sphere of activity of a society should join with some society existing before. Such societies had been erected at several places as well in Belgium as in other states, in Gent as early as in 1867. In most cases they were attached to trade unions. It may thus be said that a subsidized unemployment insurance was — for the first time — introduced in Gent 1901. The principles applied are usually called the »Gentsystem». In general accordance with this system state subsidized unemployment insurance was introduced in France 1905, in Norway 1906 and in Denmark 1907. Later several states have established unemployment insurance on a voluntary basis. In modern voluntary state insurance, however, a decisivestress is laid upon the fact that the allowance shall be regulated in accordance with the general rules for public relief of unemployment. Some conditions of the insurance scheme are thus compulsorily laid down in the regulations concerning the subsidy. In some states the unemployment insurance has been wholly established on a compulsory basis. For the first time a compulsory insurance was introduced in England in 1911 covering certain occupational groups. Compulsory unemployment insurance has then been erected in Italy 1919, Poland 1924, Bulgaria 1925 and Norway 1938. In 1938 a law bearing on a change of the voluntary unemployment insurance of Belgium to a compulsory one is being prepared.     

Optimal Contracts in a Continuous-Time Delegated Portfolio Management Problem

This article studies the contracting problem between an individualinvestor and a professional portfolio manager in a continuous-timeprincipal-agent framework. Optimal contracts are obtained inclosed form. These contracts are of a symmetric form and suggestthat a portfolio manager should receive a fixed fee, a fractionof the total assets under management, plus a bonus or a penaltydepending upon the portfolio's excess return relative to a benchmarkportfolio. The appropriate benchmark portfolio is an activeindex that contains risky assets where the number of sharesinvested in each asset can vary over time, rather than a passiveindex in which the number of shares invested in each asset remainsconstant over time.     

Inflation and Innovation in a Schumpeterian Economy with North–South Technology Transfer

This study analyzes how inflation affects innovation and international technology transfer via cash‐in‐advance constraints on R&D. We consider a North–South quality‐ladder model that features innovative Northern R&D and adaptive Southern R&D. We find that higher Southern inflation causes a permanent decrease in technology transfer, a permanent increase in the North–South wage gap, and a temporary decrease in the Northern innovation rate. Higher Northern inflation causes a temporary decrease in the Northern innovation rate, a permanent decrease in the North–South wage gap, and ambiguous effects on technology transfer. Finally, we calibrate the model to China–U.S. data to perform a quantitative analysis.     

Stock markets fragmentation,volatility and final investors

The 2000s in equity markets are marked by two major regulatory shocks: RegNMS in the United States, and MiFID in the European Union. Simultaneously, there is a massive increase in the proportion of high-frequency trading, and market orders volume. However, trading volumes do not significantly increase. We propose a theoretical model describing the effects of stock markets fragmentation on two types of investors optimization problems: “intermediary” high-frequency and “final” investors. Volatility has a permanent and a transitory component, whose weights depend on market fragmentation via the share of non-marketable orders of intermediary investors. The trading volume of final investors depends on market fragmentation both directly via transaction costs, and indirectly via total volatility. Finally a shock in fragmentation may lead to a decrease in trading volume, enhanced in the case of an equity markets crisis by a rise in the components of volatility.     

On relative performance,remuneration and risk taking of asset managers

We analyze the asset management problem when the manager is remunerated through a scheme based on the performance of the fund with respect to a benchmark and his/her choices are driven by a power utility function. We show that it is not the asymmetric-fulcrum type feature of the scheme that makes the difference in preventing excessive risk taking in case of a poor performance. To prevent gambling when the performance deteriorates, it is important not to provide a fixed fee to the asset manager, and that remuneration is sensitive to a very poor relative performance as in the case of a capital stake or of a management fee with flow funds. We provide empirical evidence on the mutual fund industry showing excessive risk taking in case of a very poor performance and limited risk taking in case of overperformance with respect to the benchmark. These results agree with a remuneration scheme including a fixed fee and a cap.     

美国经济金融20心年运行情况与形势展望

文章回顾了2012年美国经济金融运行情况,其主要特点包括：经济温和增长,失业率缓慢回落;房地产市场复苏成为亮点,私人投资和消费增长放缓;贸易赤字有所收敛,物价涨幅震荡走低;国债收益率总体走低;美元指数窄幅震荡;美联储两次QE明确利率指引等。文章随后分析了美国经济金融运行中存在的突出问题,并对其经济前景和货币财政政策动向进行展望。     

Trade and domestic tax reforms in the presence of a public good and different neutrality conditions

This paper develops a perfectly competitive general-equilibrium model of a small open economy with production of private traded goods and of a public good which is financed by revenues from trade and domestic taxes. Within this framework we consider the effects on public good provision and on welfare of the following tax reforms: (i) a producer-price-neutral reduction in export taxes and a corresponding increase in production taxes, (ii) a consumer-price-neutral reduction in tariffs and a corresponding increase in consumption taxes, and (iii) a partial tax-revenue-neutral reform in trade and domestic taxes.     

A theory of acquisition markets: mergers versus tender offers, and golden parachutes

We develop a model of the acquisition market in which the acquirerhas a choice between two takeover mechanisms: mergers and tenderoffers. A merger is modeled as a bargaining game between theacquiring and target firms; whereas a tender offer is modeledas an auction in which bidders arrive sequentially an competefor the target. At any stage of the bargaining game the acquiringfirm can stop negotiating and make a tender offer. In equilibrium,there is a unique level of synergy gains below which the acquiringfirm makes only a merger attempt as it expects to lose in thecompetition resulting from a tender offer. For synergy gainsabove this level, tender offers can occur. However, to get tenderoffers, target shareholders must give their managers gold parachutesthat give higher payoffs in tender offers than in mergers.     

Technology shocks and labor market dynamics: Some evidence and theory

A positive technology shock may lead to a rise or a fall in per capita hours, depending on how hours enter the empirical VAR model. We provide evidence that, independent of how hours enter the VAR, a positive technology shock leads to a weak response in nominal wage inflation, a modest decline in price inflation, and a modest rise in the real wage in the short-run and a permanent rise in the long-run. We then examine the ability of several competing theories to account for this VAR evidence. Our preferred model features sticky prices, sticky nominal wages, and habit formation. The same model also does well in accounting for the labor market evidence in the post-Volcker period.     

How security prices respond to a surge in investor attention: Evidence from Google Search of ADRs

This study examines the day-to-day impact of a surge in investor attention on security prices within a four-week investment horizon. Focusing on a sample of ADRs traded in the U.S. stock markets between 2004 and 2015, we measure the surge in investor attention by constructing a dummy variable based on the Search Volume Index (SVI) obtained from Google Trends. We find strong evidence that a surge in investor attention is associated with a same-day positive abnormal return. But the positive association between investor attention and stock return disappears or even reverses quickly after day zero. ADRs originated from developing countries and developed countries appear to be equally responsive to a surge in investor attention.     

Can regulation de-bias appraisers?

This paper examines the effect of a regulatory action (the Home Valuation Code of Conduct) that was designed to reduce the incidence of inflated collateral valuations. We identify the impact of the regulation using a difference-in-difference identification strategy. Our baseline results confirm that the regulation reduced inflated valuations in refinance transactions by 16% in the large lender sample, compared to small lenders and a placebo sample. The effect is most significant in low-liquidity and low-distress markets, but not in other markets. We find that the regulation had a significant impact on loan to value ratio and interest rate, and it also led to a significant increase in defaults but a decrease in prepayments.