Valuing Mortgage Insurance Contracts in Emerging Market Economies

We develop a new option-based method for the valuation of mortgage insurance contracts in closed form in an economy where agents are risk neutral. While the proposed valuation method is general and can be used in any market, it may be particularly useful in emerging market economies where other existing methods may be either inappropriate or are too difficult to implement because of the lack of relevant data. As an application, we price a typical Serbian government-backed mortgage insurance contract.     

The effect of globalization on union bargaining and price-cost margins of firms

In recent years, Europe has witnessed an accelerated process of economic integration. This paper analyzes how increased economic integration has affected labor and product markets. We use a panel of Belgian manufacturing firms to estimate price-cost margins and union bargaining power and show how various measures of globalization affect them. Import competition puts pressure on both markups and union bargaining power, especially when there is increased competition from low wage countries. This suggests that increased globalization is associated with a moderation of wage claims in unionized countries, which should be associated with positive effects on employment.

Comparison of Mean-Risk Efficient Portfolios in Asia-Pacific Capital Markets

In order to analyze the performance of mean-risk efficient portfolios, several methods of portfolio comparison have been developed. In this paper we analyze the second-order stochastic dominance efficiency of portfolios on the mean-risk efficient frontier assuming that the risk is represented by standard deviations and concordance matrices set up on the basis of Pearson's linear correlation, Spearman's rho, or Kendall's tau. Empirical analysis of the market returns of selected Asia-Pacific stock markets is carried out considering both the U.S. dollar and euro as reference currencies, and different periods: before and during the subprime crisis. Measures and portfolios on the mean-risk efficiency frontier that should be of interest to at least one risk-averse investor are empirically documented.     

Data driven rank test for the change point problem

Data driven test procedure for detection of change is introduced and its properties are studied. The new solution is max-type statistic related to data-driven rank tests for two-sample subproblems. Simulations show that the new test possesses high and stable power. The test is consistent at essentially any alternative. Asymptotic null distribution of the test is derived. The work of the first two authors has been partially supported by the grants GAČR 201/06/0186 and MSM 02160839.     

Rose effect and the euro: is the magic gone?

This paper presents an updated meta-analysis of the effect of currency unions on trade, focusing on the euro area. Using meta-regression methods such as the funnel asymmetry test, evidence for strong publication bias is found. The estimated underlying effect for currency unions other than the eurozone reaches more than 60%. However, according to the meta-regression analysis, the euro’s trade promoting effect corrected for publication bias is insignificant. The Rose effect literature shows signs of the economics research cycle: reported t-statistic is a quadratic concave function of the publication year. Explanatory meta-regression (robust fixed effects and random effects), that can explain about 70% of the heterogeneity in the literature, suggests that results published by some authors might consistently differ from the mainstream output and that study outcomes are systematically dependent on study design (usage of panel data, short- or long-run nature, number of countries in the data set).     

The impact of tariffs on profits in the United States and other major trading countries

Zusammenfassung Die Auswirkungen von Z?llen auf die Gewinne der Unternehmen in den Vereinigten Staaten und anderen gr?▾eren Handelsl?ndern. - In diesem Aufsatz wird das Michigan-Modell benutzt, um die Auswirkungen der Protektion auf die gesamten Gewinne und die Stückgewinne in den USA und anderen wichtigen Handelsnationen zu untersuchen. Es ergibt sich, da▾ die Protektion die Gewinne in den Exportsektoren st?rker verringert, als sie die Gewinne derjenigen Sektoren verbessert, die mit Importen konkurrieren. Allerdings bleiben die Gesamtgewinne aus der Kombination von exportorientierten und importsubstituierenden Unternehmen im allgemeinen von den bestehenden Z?llen unbeeinflu▾t. Au▾erdem finden die Gewinntransfers zwischen Exporteuren und importsubstituieren-den Unternehmen meistens innerhalb der gleichen Branche und nicht zwischen verschiedenen Branchen statt. Deshalb erh?hen allgemeine tarif?re Ma▾nahmen kaum die Gewinne von US-Industrien. Nur Tarife, die auf bestimmte Produktgruppen gerichtet sind, k?nnten derartige Wirkungen haben.

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Résumé L’effet des droits de douane sur les profits dans les Etats Unis et des autres pays principaux commer?ants. - Dans cet article le modèle Michigan de production mondiale et de commerce est appliqué pour analyser l’effet de la protection sur les profits totaux et par unité dans les Etats Unis et des autres pays principaux commer?ants. Les auteurs trouvent que la protection réduit les profits dans les secteurs exportatrices plus qu’elle stimule les profits dans les secteurs en concurrence avec les importations. Cependant, les profits totaux des entreprises exportatrices et en concurrence avec les importations ensemble ne sont pas affectés par des droits de douane existants. De plus, la majorité des transferts des profits entre les entreprises exportatrices et en concurrence avec les importations se passe dans la même industrie au lieu d’entre des industries. C’est pourquoi, il est conclu que des mesures générales tarifaires probablement n’augmentent pas les profits des industries des E.U. Ce ne sont que les droits de douane sur des groupes des biens spécifiques qui exercent un tel effet.

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Resumen El impacto de los aranceles sobre los beneficios en los Estados Unidos y otros países de importancia en el comercio international. - En este trabajo se utiliza el modelo de productión y comercio mundiales de Michigan para analizar el impacto de la protectión arancelaria sobre los beneficios totales y por unidad en los Estados Unidos y otros países de importancia en el comercio international. Los resultados indican que la protectión disminuye los beneficios en los sectores de exportatión y estimula los beneficios en las industrias que compiten con las importaciones, superando el primer efecto al segundo. Los beneficios totales de las empresas de exportatión y sustitución de importaciones juntas, empero, generalmente no son afectados por los aranceles existentes. Además, la mayor parte de la transferencia de beneficios entre exportadores y empresas de sustitución de importaciones tiene lugar dentro de la misma industria y no entre industrias diferentes. Por ello, medidas arancelarias de tipo general no son susceptibles de mejorar los beneficios de las industrias de los EE UU. Solamente aranceles que afecten a determinados grupos de productos podrían tener ese efecto.

     

What if they take it all? Heterogeneous impact of sickness absence reform

I investigate the effect of sickness absence reform in the Czech Republic, which reduced benefits paid during the first three days of sickness absence to zero. I find a substantial decrease in the incidence of sickness absence, which is about 15 percent of the pre‐reform mean. I find that workers in occupations with high flexibility and fewer routine tasks are more likely to reduce their sickness absences.     

The persistence of economic sentiment: a trip down memory lane

Journal of Economic Interaction and Coordination - Although various indicators of economic sentiment are often assessed in macroeconomic studies, the generating process of economic sentiment itself...     

A profit-to-provisioning approach to setting the countercyclical capital buffer

In this paper, we propose a new profit-to-provisioning approach that can be used in the macroprudential decision-making process. We construct new Banking Prudence Indicators (BPI) that largely capture the risk of cyclicality of profit and loan loss provisions and should monitor the forward-looking ability of the expected credit loss approach under International Financial Reporting Standard 9. We evaluate the performance of our newly proposed BPIs using two econometric exercises. Overall, they exhibit good statistical properties, are relevant to the countercyclical capital buffer decision-making process, and might contribute to a more precise assessment of both systemic risk accumulation and risk materialization.