Should the monetary policy rule be different in a financial crisis?

This article reviews the finding that standard loss functions in output and inflation are higher during discretionary periods than in periods during which monetary policy is described by a rule, such as the Taylor rule. It shows that the finding is consistent with earlier research, but argues that we really do not know if the Taylor rule would have improved performance during the recent financial crisis. The article then considers modifications of policy rules to deal with changes in interest rate spreads, credit aggregates and banks׳ balance sheets.     

Who pushes the discussion on wind energy? An analysis of self-reposting behaviour on Twitter

Quality & Quantity - Discussions about wind energy and its environmental impact take place routinely over Twitter. Twitterers with a strong interest in the matter may also retweet their own...     

The dynamics of US inflation: Can monetary policy explain the changes?

We investigate the relationship between monetary policy and inflation dynamics in the US using a medium scale structural model. The specification is estimated with Bayesian techniques and fits the data reasonably well. Policy shocks account for a part of the decline in inflation volatility; they have been less effective in triggering inflation responses over time and qualitatively account for the rise and fall in the level of inflation. A number of structural parameter variations contribute to these patterns.     

The monetary policy strategy of the Bank of England in 2020–21: An assessment

Excessive money creation during the Covid pandemic has resulted in Britain's worst episode of inflation since 1990–91. The backdrop to this failure of monetary policy is the Bank of England's aggregate demand/aggregate supply framework together with the Monetary Policy Committee's neglect of broad money. An alternative way to operate monetary policy is urgently needed. A significantly improved monetary policy outcome could be achieved by shifting from trying to steer the economy using interest rates and quantitative easing or quantitative tightening to reliance on the relative stability of income velocity (the ratio of nominal GDP to broad money) as a means of managing aggregate demand.     

Does partnership at work increase trust? An analysis based on the 2004 Workplace Employment Relations Survey

In the late 1990s, partnership at work was embraced with some enthusiasm by a number of stakeholders in employment relations and incorporated in the 1999 Employment Relations Act. The implementation of the Information and Consultation Regulations has also been extensively signalled. We might therefore expect to see some evidence of partnership‐related practices in Britain. The 2004 Workplace Employment Relations Survey (WERS 2004) provides an opportunity to explore the extent of partnership practice, and also, for the first time, to explore its link to trust relations. This article reports evidence from WERS 2004 suggesting that partnership practice remains relatively undeveloped and that it is only weakly related to trust between management and employee representatives and to employees’ trust in management. Direct forms of participation generally have a more positive association with trust than representative forms. There is also modest evidence that trust may be associated with certain workplace outcomes. The case for partnership and more particularly representative partnership as a basis for mutuality and trust is not supported by this evidence.     

Crowdworking: working with or against the crowd?

Journal of Economic Interaction and Coordination - Our current labour market is affected by massive changes like digitalization, automation and globalization, which gives rise to completely new...     

How does interest rate policy affect inflation? A simple general equilibrium model with the interest rate as the policy instrument

This paper analyses the connection between the assumptions often made on the utility functions of economic agents when general equilibrium is considered. Concretely, we analyse the effect of certain assumptions regarding the elasticity of marginal utility for both the existence of equilibrium and, assuming equilibrium exists, for the effect that raising the nominal interest rate has on the equilibrium inflation rate. Typical macroeconomic wisdom states that an increase in the interest rate will decrease inflation, and this seems to have been the basis for real-life macroeconomic policy in several countries. However, this wisdom is based on models in which the money supply, and not the interest rate, is the policy instrument. Using a very simple general equilibrium model of intertemporal consumption, this paper finds sufficient conditions for the negative relationship to hold (and for it not to hold) in the short run, when monetary policy is characterised by a given nominal interest rate. Above all, it is shown how the relative risk aversion characteristics that are assumed of the economic agents are important.     

The impact of ultimate controller’s ownership on cash dividend policy based on a comparative analysis between owner-management and professional-management modes

This study uses Chinese listed firms to examine the relation between the ultimate controller’s ownership and cash dividends under different allocation modes of management rights. The empirical results show that under the professional-management mode, the ultimate controller’s ownership and dividend payments form an inverted U-shaped relation which results from the ultimate controller’s monitoring and collusion with the executive. Under the owner-management mode, the ultimate controller’s ownership and dividend payment levels assume a U-shaped relation which is attributed to its interest encroachment and convergence effect. The shape flip from professional-management to owner-management is the result of the changing opportunity cost of the controller’s dividend payments.     

Risk spillover analysis of China’s financial sectors based on a new GARCH copula quantile regression model

This study employs a new GARCH copula quantile regression model to estimate the conditional value at risk for systemic risk spillover analysis. To be specific, thirteen copula quantile regression models are derived to capture the asymmetry and nonlinearity of the tail dependence between financial returns. Using Chinese stock market data over the period from January 2007 to October 2020, this paper investigates the risk spillovers from the banking, securities, and insurance sectors to the entire financial system. The empirical results indicate that (i) three financial sectors contribute significantly to the financial system, and the insurance sector displays the largest risk spillover effects on the financial system, followed by the banking sector and subsequently the securities sector; (ii) the time-varying risk spillovers are much larger during the global financial crisis than during the periods of the banking liquidity crisis, the stock market crash and the COVID-19 pandemic. Our results provide important implications for supervisory authorities and portfolio managers who want to maintain the stability of China’s financial system and optimize investment portfolios.     

Can the government create a vibrant cluster? Understanding the impact of cluster policy on the development of a cluster

Research has debated to what extent policy measures can facilitate or contribute to the development of clusters. This article contributes to this debate by questioning how the government can create a cluster that is self-organizing and vibrant but also maintain sufficient influence to continue using the cluster as a policy instrument. Taking the perspective of cluster members, the article investigates how members perceive the ambiguous role of the government in a government-supported cluster. It analyses to what extent cluster members value a government-supported cluster and whether they perceive the government as one that facilitates or hinders them in self-organizing the cluster. Empirical evidence is derived from a case study of a French cluster established as a result of a cluster policy initiative and which has recently been required to fulfil a new set of objectives by the same government. The findings suggest that government-supported clusters can self-organize if members are given the opportunity, but with the consequence that it becomes difficult for the government to fully control such clusters. To continue steering the cluster’s development, the government would have to leverage the technology gatekeepers’ power by designing policies that allow gatekeepers to translate government objectives into meaningful objectives for themselves.     

Rowing against the wind: how do times of austerity shape academic entrepreneurship in unfriendly environments?

Academic spin-offs (ASOs) help universities transfer knowledge or technology through business projects developed by academic staff. This investigation aims at analyzing the critical factors for spin-off creation at universities operating in crisis-raven, entrepreneurship-unfriendly environments. Such factors revolve around four types of resources: environmental, institutional, organizational, and personal. Focusing on a Southern European context, as an example of an unfriendly environment affected by economic crisis, an entrepreneurial university (the Technical University of Valencia in Spain, UPV) is our research setting. Through a case study approach, we examine the potential of UPV as a springboard for ASOs. Our results show an adverse local environment, a rather favorable influence of institutional and organizational drivers, and a mixed role of personal factors. Our findings illustrate that UPV consistently supports spin-off creation due to a greater (rather positive) reflexivity from its institutional, organizational and personal resources than the (negative) imprinting of the unfriendly environment. This helps counter-balance the structural unfriendliness for academic entrepreneurship, and trigger a crisis-led risk-taking attitude by academic staff. Hence, UPV should continue with its current strategy of supporting academic entrepreneurship, and might transfer best practices to other universities also affected by unfavorable environmental conditions. Generally speaking, we would advise universities facing adverse circumstances to develop rules and mechanisms for academic entrepreneurship, carefully revise and improve malfunctions, and become involved throughout the whole process of spin-off development. All in all, our study advances understanding of how the different drivers for ASO creation can be revamped by universities located in unfriendly environments, having in mind the key role that universities play in fostering social and economic development through academic entrepreneurship in such environments.     

The hidden costs of control revisited: Should a sanctioning policy be announced in advance?

Sanctions are widely used to enhance compliance in principal agent relationships. Although there is ample evidence confirming the predicted positive incentive effect of sanctions, it has also been shown that imposing sanctions may reduce compliance by crowding out intrinsic motivation. We add to the literature on the hidden costs of control by showing that these costs are restricted to situations where the principal actively chooses to sanction low performance and where this choice is known to the agent. In such a situation, the principal's commitment to sanction low performance might indicate that she or he is a distrustful “type” and hence conveys a negative signal. To the contrary, if (a) an agent is not informed about whether low performance will be sanctioned or if (b) the computer determines whether low performance will be sanctioned, the principal's “type” is not revealed, and we find no evidence of crowding out.     

Forecasting expected shortfall: Should we use a multivariate model for stock market factors?

Is univariate or multivariate modeling more effective when forecasting the market risk of stock portfolios? We examine this question in the context of forecasting the one-week-ahead expected shortfall of a stock portfolio based on its exposure to the Fama–French and momentum factors. Applying extensive tests and comparisons, we find that in most cases there are no statistically significant differences between the forecasting accuracy of the two approaches. This result suggests that univariate models, which are more parsimonious and simpler to implement than multivariate factor-based models, can be used to forecast the downside risk of equity portfolios without losses in precision.     

The implementation of monetary policy in New Zealand: What factors affect the 90-day bank bill rate?

This paper discusses the implementation of monetary policy in New Zealand and its flow-on effects on the 90-day bank bill rate over the 1999–2005 period. The effects of external factors are considered as well. Our findings indicate that the maturity spectrum ratio exerted a positive effect on the 90-day bank bill rate while the allotment ratio did not. This interest rate had a tendency to revert to the level set by its Australian counterpart, though at a relatively slow speed. No such link exists between the NZ 90-day rate and the U.S. 90-day rate. Neither the maturity spectrum nor the allotment ratio contributed to the volatility of the most important short-term interest rate in New Zealand.     

Economic policy uncertainty,investor sentiment and financial stability—an empirical study based on the time varying parameter-vector autoregression model

This paper applies the time varying parameter-vector autoregression model to explore the dynamic relationship between economic policy uncertainty, investor sentiment and financial stability in China in different periods and at different time points. The empirical results show that economic policy uncertainty has an obvious negative impact on investor sentiment before 2012 and financial stability in the short term, and the influence of economic policy uncertainty on investor sentiment is greater than that of economic policy uncertainty on financial stability. These influences were more significant during the period of the global financial crisis in 2008. Moreover, investor sentiment had a positive and gradually increasing effect on financial stability, while after 2010, the positive impact gradually weakened. Furthermore, economic policy uncertainty is negatively affected by financial stability, and the effect of financial stability on investor sentiment is positive. In terms of mediating effects, economic policy uncertainty has an indirect impact on financial stability through investor sentiment and vice versa. This paper provides a new solution to economic problems explored in behavioral finance research. Additionally, Chinese government agencies can achieve the goal of preventing financial crises and maintaining financial stability by monitoring investor sentiment and implementing targeted economic policies.

     

Insights into the effect of traffic congestion on distribution network characteristics – a numerical analysis based on navigation service data

This research studies effects that the average increase in travel times due to road traffic congestion has on characteristics of an existing distribution network. It presents the most detailed estimate of ‘on-the-road’ effects on distribution network characteristics up to now, from the network modelling perspective and from the processed data point of view. A concrete network model allowing for the representation of all relevant transportation flows is presented. The processed traffic information relies on navigation service data. The use of such data allows the requirements that arise for the traffic analysis of a whole distribution network to be met. It is shown that this data source may considerably contribute in forthcoming research. The effects of traffic congestion are quantified to get insights into the extent to which regular traffic congestion affects distribution network characteristics and to understand the mitigating effect when the number of distribution centres is increased.     

How much nominal rigidity is there in the US economy? Testing a new Keynesian DSGE model using indirect inference

We evaluate the Smets-Wouters New Keynesian model of the US postwar period, using indirect inference, the bootstrap and a VAR representation of the data. We find that the model is strongly rejected. While an alternative (New Classical) version of the model fares no better, adding limited nominal rigidity to it produces a ‘weighted’ model version closest to the data. But on data from 1984 onwards - the ‘great moderation’ - the best model version is one with a high degree of nominal rigidity, close to New Keynesian. Our results are robust to a variety of methodological and numerical issues.     

Do high-speed railways accelerate urban land expansion in China? A study based on the multi-stage difference-in-differences model

High-speed railway (HSR) have become the main transportation mode in China and a crucial contributing factor for the formation and development of urban and regional spatial structure. This study aims to investigate the effects and mechanisms of HSR on urban land expansion in China. The multi-stage difference-in-differences (DID) estimation method is used to explore the cases of 35 mega cities. The main results are presented as follows. 1) Opening HSR can positively influence urban land expansion, as evidenced by the 9.5% increase in the urban land expansion index after such opening. 2) The increase in the number of HSR station and route can accelerate urban land expansion. Each newly added station increases the urban land expansion index by 2.4%, and urban land expansion increases 4.8% when a new HSR route is added. 3) The positive effects of the opening of HSR on urban land expansion generally have a time lag of five years. 4) Compared with cities in the east, the midwestern ones are more vulnerable to the impact of HSR. The net effect of HSR on urban land expansion for midwestern cities is 10.9% higher than that for cities in the east. Furthermore, the mechanisms of the effect of HSR on urban land expansion are the industrial agglomeration effect of HSR and the incentive effect of local governments’ land finance alongside the development of HSR.     

Moral suasion: An alternative tax policy strategy? Evidence from a controlled field experiment in Switzerland

With data gained from a controlled field experiment in Switzerland this paper analyses the effects of moral suasion on the timely paying and the timely filling out of the tax form 2001. Comparisons of different tax filing years and multiple regression estimations have been done using these two factors as dependent variables to check if there is a significant difference between the control group and the treatment group. In February 2002 the treatment group received a letter signed by the communes fiscal commissioner containing normative appeals. Results indicate that moral suasion has hardly any effect on taxpayers compliance behaviour. The strongest effect can be observed for the variable tax payments.Received: February 2003, Accepted: June 2004 JEL Classification: H260, H710BennoTorgler: Special thanks are due to the tax administration of Trimbach, especially to Adolf Müller and Gary Bitterli, who offered me the opportunity to collect the data and assisted the project. Furthermore I acknowledge the financial support of the WWZ-Forum and Swiss National Science Foundation and comments and suggestions from Doris Aebi, René L. Frey, the editor Kai A. Konrad and two anonymous referees.     

Predictable returns and asset allocation: Should a skeptical investor time the market?

We investigate optimal portfolio choice for an investor who is skeptical about the degree to which excess returns are predictable. Skepticism is modeled as an informative prior over the R²$R^2$ of the predictive regression. We find that the evidence is sufficient to convince even an investor with a highly skeptical prior to vary his portfolio on the basis of the dividend-price ratio and the yield spread. The resulting weights are less volatile and deliver superior out-of-sample performance as compared to the weights implied by an entirely model-based or data-based view.