Emerging economies in the 2000s: Real decoupling and financial recoupling

The paper documents an intriguing development in the emerging world in the 2000s: a decoupling from the business cycle of advanced countries, combined with the strengthening of the co-movements in the main emerging market assets that predates the synchronized selloff during the crisis. In addition, the paper tests the hypothesis that financial globalization, to the extent that it creates a common, global investor base for EM, could lead to a tighter asset correlation despite the weaker economic ties. While an examination of the impact of alternative financial globalization proxies yield no conclusive result, a closer look at global emerging market equity and bond funds show that the latter indeed foster financial recoupling during downturns, reflecting the fact that they trade near their respective benchmarks and respond to withdrawals by liquidating holdings across the board.     

Homeownership as a Constraint on Asset Allocation

Personal preferences and financial incentives make homeownership desirable for most families. Once a family purchases a home they find it impractical (costly) to frequently change their ownership of residential real estate. Thus, by deciding how much home to buy, a family constrains their ability to adjust their asset allocation between residential real estate and other assets. To analyze the impact of this constraint on consumption, welfare, and post-retirement wealth, we first investigate an individual’s optimal asset allocation decisions when they are subject to a “homeownership constraint.” Next, we perform a “thought experiment” where we assume the existence of a market where a homeowner can sell, without cost, a fractional interest in their home. Now the housing choice decision does not constrain the individual’s asset allocations. By comparing these two cases, we estimate the differences in post-retirement wealth and the welfare gains potentially realizable if asset allocations were not subject to a homeownership constraint. For realistic parameter values, we find that the homeowner would require a substantial increase in total net worth to achieve the same level of utility as would be achievable if the choice of a home could be separated from the asset allocation decision. The robustness of the analysis is evaluated with respect to the model’s parameters and initial state variables. We find that changes in the values of the constraint (i.e., the value of the home) and the expected real rate of home value appreciation are the only state variables or parameter that is associated with a large change in asset allocation and/or the burden imposed by the housing constraint. This finding suggests the importance of a detailed examination of the impact of inter-regional differences in home prices and expected rates of appreciation on asset allocation and post-retirement wealth.     

Transfers in Spanish State Retirement Pensions

A central issue in the recent reforms of state pensions in Spain has been to increase the proportionality between contributions and benefits along actuarially fair lines. The aim of this paper is to quantify the transfer component of social security retirement pensions, with transfer being understood as the difference between the pension effectively received and that which would be received under a system of actuarial fairness. The analysis is placed within a life-cycle framework, with particular reference to the distributive effects by income level. The results show that, in the past, there was a marked bias in favour of the objective of intergenerational and intragenerational redistribution, to the detriment of the objective of income insurance. This paper examines the factors that determine the final value of the transfer component within the entire Spanish pensions system.     

Unemployment and labour force participation in Spain

This article examines the relationship between the unemployment rate and the labour force participation rate in Spain. Cointegration analysis is performed for aggregate, male and female time-series. Results suggest that there is no a long-run relationship between the two variables for the aggregate and male cases. However, the findings support a long-run relationship between the two variables for the female time-series. Thus, the unemployment invariance hypothesis is supported in the two former cases but not in the latter.     

Quantile serial dependence in crude oil markets: evidence from improved quantilogram analysis with quantile wild bootstrapping

We examine the quantile serial dependence in crude oil prices based on the Linton and Whang’s quantile-based portmanteau test which we improved by means of quantile wild bootstrapping (QWB). Through Monte Carlo simulation, we find that the quantile wild bootstrap-based portmanteau test performs better than the bound testing procedure suggested by Linton and Whang. We apply the improved test to examine the efficiency of two crude oil markets – WTI and Brent. We also examine if the dependence is stable via rolling sample tests. Our results show that both WTI and Brent are serially dependent in all, except the median quantiles. These findings suggest that it may be misleading to examine the efficiency of crude oil markets in terms of mean (or median) returns only. These crude oil markets are relatively more serially dependent in non-median ranges.     

Mapping global sustainability report scoring: a detailed analysis of Europe and Asia

This study maps the General Reporting Initiative (GRI) relations for a set of global enterprises. Enterprise interrelationships are built using the Mutual Information (MI) of the data reported by enterprises. From the MI topology, we describe interrelationships among the enterprises using chord diagrams to represent the inter- and intra-connectivity between geographical regions and economic sectors globally, by continent and country. Detailed maps are presented for European and Asian regions/sectors, including the relationship between Europe and Asia’s top reporting countries. Our findings reinforce previous research regarding the role of Europe as a driver of sustainability and its influence worldwide. We also determined that Spain is a major player in Europe and that Northern Europe does not have the assumed leading role mentioned in related studies. Eastern Asia is, by far, the leader of the region, and the GRI maps demonstrate the preponderant role of China in the region and the minimal role of India. MI topology maps outline the behavior of the economic sectors, for all the studied regions. Furthermore, a measure that relates the inter- to intra-connections is presented to describe the internal an external relationships among regions/sectors.     

Dynamics of volatility transmission between the U.S. and the Chinese agricultural futures markets

The U.S. and China are two of the biggest players in the world agricultural market. The literature documents that volatility in the U.S. agricultural futures market spills over significantly to that of China. This article provides further insights into the spillovers from China to the U.S. as well as the time horizon and dynamics of the bidirectional spillovers through the application of a multivariate extension of the heterogeneous autoregressive model, in relation to four commodities – soybean, wheat, corn and sugar. The results confirm the existence of significant spillovers from the U.S. to China for four commodities, which are primarily generated by the shorter-term volatility components in the U.S., and provide evidence for the increasing pricing power of the Chinese market. The findings are robust against various specifications and have important investment and policy implications.