Similarity of differential information with subjective prior beliefs

We present a complete, separable and metrizable topology on the product space of information and (subjective) beliefs. Such a topology formalizes similarity of differential information without the assumption of a common prior, but under the assumption that objectively impossible events are considered impossible by subjective beliefs. As an application to the theory of the consumer, we provide results on the continuity of expected utility and demand functions. We also provide continuity results for the value of information and the insurance premium as defined in the literature.     

Terrorist economic impact evaluation (TEIE) model: the case of Pakistan

Quality & Quantity - The terrorist economic impact evaluation (TEIE) model is a new model to evaluate the intensity of terrorism to measure the economic cost in a state (province) of any...     

A bubble identification mechanism: Evidence from the Chinese stock market

This paper provides a bubble date-stamping mechanism using the agent-based computational finance method. The key steps of the bubble date-stamping mechanism are the construction of the simulated financial market, the computation of the characteristic indexes, and the thresholds of the Price Band in the simulated financial market. The present study adopts the mechanism to identify the bubbles of sample stocks in the Chinese stock market from April 2003 to December 2019. The findings show that the bubbles are primarily distributed in 2006–2008, 2009–2012 and 2014–2018, respectively. Furthermore, we analyse the bubble strength and the price fluctuation during the above three periods. In addition to the bubble date-stamping mechanism, the paper also studies the factors that drive the bubbles in the Chinese stock market from both macro and micro perspectives.     

Political instability and inflation in Pakistan

This study investigates the effects of political instability on inflation in Pakistan. Applying the Generalized Method of Moments technique and using data from 1951 to 2007, we examine this link through two different models. The results of the ‘monetary’ model suggest that the effects of monetary determinants are rather marginal and that they depend upon the political environment of Pakistan. The ‘nonmonetary’ model's findings explicitly establish a positive association between political instability and inflation. This is further confirmed through analysis based on interactive dummies that reveal political instability significantly leading to high (above average) inflation.     

Is Trade Liberalisation Pro-Poor in Pakistan? Evidence from Large-Scale Manufacturing

This article aims to analyse the impact of industry-level trade liberalisation (measured through industry-specific tariff rates) on poverty in Pakistan. Combining data for tariff rates with the Labour Force Survey of Pakistan, we use quantile regression analysis to estimate the impact of changes in tariff rates on workers’ wages (associated with the manufacturing sector of Pakistan) that are at different points of the income distribution. Our findings meaningfully signal that trade liberalisation helps to reduce poverty in the economy. Based on these results, this study provides policy recommendations to reap maximum benefits from trade liberalisation.     

Investment shocks and the comovement problem

Recent work based on sticky price-wage estimated dynamic stochastic general equilibrium (DSGE) models suggests investment shocks are the most important drivers of post-World War II US business cycles. Consumption, however, typically falls after an investment shock. This finding sits oddly with the observed business cycle comovement where consumption, along with hours-worked and investment, moves with economic activity. We show that this comovement problem is resolved in an estimated DSGE model when (i) the cost of capital utilization is specified in terms of increased depreciation of capital, as originally proposed by Greenwood et al. (1988) in a neoclassical setting, or (ii) there is no wealth effect on labor supply. The data, however, favors the first channel. Traditionally, the cost of utilization is specified in terms of forgone consumption following Christiano et al. (2005), who studied the effects of monetary policy shocks. The alternative specification we consider has two additional implications relative to the traditional one: (i) it has a substantially better fit with the data and (ii) the contribution of investment shocks to the variance of consumption is over three times larger. The contributions to output, investment, and hours, are also relatively higher, suggesting that these shocks may be quantitatively even more important than previous estimates based on the traditional specification.     

Productivity impacts of infrastructure development in Asia

This study investigates the impact of infrastructure capital on total factor productivity in selected Asian countries. The scope of the assessment is broadened by exploring the effect of infrastructure development on sectoral differences in total factor productivity. The study calculated the total factor productivity over the period 2006–2016 for 16 manufacturing industries in 19 Asian countries. Further, the impact of lagged infrastructure and endowment is also explored with an eye toward improving different infrastructural measures. The empirical findings show that lagged infrastructure and endowment exert a positive and significant impact on infrastructural improvement. The impact of telecommunications, road, and power infrastructure on sectoral productivity is investigated by applying the fully modified ordinary least squares estimation technique to control the endogeneity problem associated with infrastructure provision. Overall, the empirical findings show that infrastructure provision, particularly the provision of telecommunications and power, is an important factor for explaining patterns of comparative advantage, whereas the provision of roads is important to explain patterns of absolute advantage. The results further indicate that road infrastructure is more important for low technology-intensive industries, while power infrastructure is crucial for high technology-intensive industries.     

Foreign direct investment and its impact on real wages: evidence from Turkish micro-level data

This paper analyzes the role of foreign direct investment (FDI) on wages, using Turkish firm-level data from 2003 to 2010, a period which coincides with significant FDI inflows both in manufacturing and service sector firms in the region. We explore the possibility of increased foreign presence translating into shifts in either labor demand or supply curves thereby resulting in changing the total wage bill or wage per worker in the host country. To empirically test this relationship we employ a dynamic specification of the wage equation. After addressing endogeneity concerns, the results reveal that foreign presence measured in terms of intra- and inter-sectoral linkages is related to higher wage bills in the host economy, hence strengthening the argument for attracting greater foreign investment to enhance labor welfare.     

Impact of ethical leadership on creativity: the role of psychological empowerment

This study examines the relationship between ethical leadership and employee creativity with mediating role of psychological empowerment. Data were collected from 183 supervisor–subordinate dyads in different hotels across Pakistan. Confirmatory factor analysis confirmed the distinctiveness of variables used in our study. The results also confirmed that ethical leadership promotes creativity at workplace, while psychological empowerment mediates the effect of ethical leadership on creativity. The cognitive evaluation theory was used to support findings. Implications are also discussed.