Global financial crisis and dependence risk analysis of sector portfolios: a vine copula approach

We use regular vine (r-vine), canonical vine (c-vine) and drawable vine (d-vine) copulas to examine the dependence risk characteristics of three 20-stock portfolios from the retail, manufacturing and gold-mining equity sectors of the Australian market in periods before, during and after the 2008–2009 global financial crisis (GFC). Our results indicate that the retail portfolio is less risky than the manufacturing counterpart in the crisis period, while the gold-mining portfolio is less risky than both the retail and manufacturing sector portfolios. Both the retail and gold stocks display a higher propensity to yield positively skewed returns in the crisis periods, contrary to the manufacturing stocks. The r-vine is found to best capture the multivariate dependence structure of the stocks in the retail and gold-mining portfolios, while the d-vine does it for the manufacturing stock portfolio. These findings could be used to develop dependence risk- and investment risk-adjusted strategies for investment, rebalancing and hedging which more adequately account for the downside risk in various market conditions.     

Perspectives on evaluation in financial education: Landscape,issues, and studies

This review discusses the heterogeneity in the effectiveness of financial education programs that occurs because of the unique conditions for programs and methods to evaluate them. The authors define six groups served by financial education: children, youth, college students and young adults, working adults, military personnel, and low-income consumers. They then discuss research and evaluation literature for each group with a critical eye on program purpose, content, and evaluation. They also present findings affecting multiple groups on four issues: student loans, homeownership, retirement planning, and financial advising. The accumulated evidence on the effectiveness of financial education is positive, although the results are nuanced and sometimes limited. The authors argue that understanding this broad landscape in studying financial education is critical for future research and evaluation.     

Vertical Intra-Industry Trade and Foreign Direct Investment between Japan and European Countries

In this paper, we provide an overview of the development of vertical intra-industry trade (VIIT) between Japan and various European countries, including both old and new EU members, as well as emerging Central and Eastern European countries. VIIT indices constructed in this paper cover a much wider range of margins of unit price ratio than existing studies. Our empirical model attempts to explain the distributional characteristics of VIIT through foreign direct investments (FDI), in addition to traditional determinants of IIT, such as differences in GDP per capita, average GDP, and smaller and larger GDPs. Our sample covers the period from 1988 to 2004 for bilateral trade between Japan and 31 European countries. Our econometric methodology for these panel data uses fixed-effect model estimation with a variable transformation determined by a Box-Cox approach. We find that intra-industry trade between European countries and Japan increases with their corresponding Japanese FDIs, especially for new EU member countries. Our results also indicate that it is important to measure a wider range of quality based on relative prices rather than the traditional ratio used in the literature.     

Mozambique Metical Exchange Rate Dynamics: Evidence of Fractional Co‐Integration in the USA and South African Rates

This paper studies the exchange rate dynamics of the Mozambique metical with respect to the US dollar and the South African rand. However, instead of using standard I(0)/I(1) techniques, we use long memory and fractionally integrated and co‐integrated models. Our results indicate that the two exchange rates are highly persistent, with orders of integration equal to or above 1. They also seem to be co‐integrated, with an order of integration close to albeit above 0 but with an AR coefficient very close to 1. Thus, although the two series seem to be fractionally co‐integrated, shocks in the long‐run relationship between the two variables are persistent and take a long time to disappear.     

Protection and Trade in Services: A Survey

This paper surveys the literature on trade in services, focusing on the policies that are used to restrict such trade, the gains from liberalization, and the institutional mechanisms that have been adopted in the pursuit of liberalization. The paper argues that technological progress and international trade negotiations are likely to keep liberalization of trade in services a high profile policy issue. It also suggests that the research agenda should focus on developing better estimates of the welfare costs of protectionism in the service sector.     

Efficiency Determinants and Capacity Issues in Angolan Insurance Companies

This paper describes a variety of approaches used to assess the efficiency of a sample of major insurance companies in Angola between 2003 and 2012. Starting out with the bootstrapping technique, several data envelopment analysis (DEA) estimates were generated, allowing the use of confidence intervals and bias correction in central estimates to test for significant differences in efficiency levels and input‐decreasing/output‐increasing potentials. Previous studies have focused on the measurement and explanation of the factors affecting the performance rather than the prediction. The use of neural networks combined with DEA results as part of an attempt to produce a model for insurance companies’ performance with effective predictive ability is investigated. The findings indicate that older insurance companies with Portuguese origin tend to be more efficient. Results also suggest that opportunities for accommodating future demand appear to be scarce.     

Openness of the economy,terms of trade,and arms

It is estimated that world military spending in 2011 amounted to over 2.5% of the world's Gross Domestic Product (GDP). This corresponds to a spending of $233 per person in the world at 2010 constant prices, an amount close to the GDP per capita of the poorest country in the world. Therefore, it is important for economists to understand the allocation of resources to this sector of the economy. I present a model that explores the determinants of a country's level of military spending. I show how greater gains from trade can lead to greater military expenditures to protect them. It is also found that expansion in the demand for a country's tradable commodities, that is, an improvement in that country's terms of trade, will impact defense spending. Several other propositions emerge from the model which are then empirically tested using both pooled and time series data. The statistical results support the model's propositions.