Effects of Currency Devaluations on the Economic Growth in Developing Countries: The Role of Foreign Currency-Denominated Debt

Assuming that a developing country has to denominate its debts in the currencies of the principal creditor countries, how is the country??s economic performance affected when currency devaluation occurs? The aim of this paper is to prove that devaluation can be contractionary and that its occurrence can be the result of a self-fulfilling prophecy. Assuming credit constraints on firms?? borrowing capacity and nominal price rigidities, a sharp change in the value of the domestic currency leads to an increase in the real costs of foreign currency-denominated debt. Hence, firms?? profits as well as their borrowing capacity decrease, provoking a drop in future investment and output. Moreover, expectations about future output can alone trigger a currency devaluation, confirming the initial expectations in a self-fulfilling way. Finally, it is discussed in an empirical analysis the impact of devaluation on the economic growth in a sample of five countries.     

Attitudes and related perceptions about product placement: a comparison of Finland,Italy and the United States

The primary goal of our study is to explore cross-national differences in attitudes and perceptions about product placements, after investigating measurement invariance. Our cross-national focus includes three countries that have not been compared previously: Finland, Italy and the USA, which differ significantly in terms of the evolution/maturity of product placement markets, regulatory structures and cultural contexts. Motivated by earlier studies, we investigate the cross-national measurement invariance of scales to measure four research constructs related to the product placement domain (attitude toward credibility of advertising, attitude toward advertising-in-general, attitude toward placement-in-general and attitude toward regulation of placements). Our research also extends earlier work focused on similar constructs from a cross-national perspective. Results from multi-group analyses using a structural equation modeling approach indicate important and statistically significant differences in latent means between the three countries for all four constructs of research interest. Substantive explanations of these differences and their implications for future practice and research are discussed.     

The environmental,social and economic effects of recent technological changes in sugarcane on the State of São Paulo,Brazil

From 2007 to 2017, the Agro‐Environmental Protocol of the Sugar and Energy Sector was in force, an agreement between sugarcane mill owners and the State Government of São Paulo, Brazil, proposing to eliminate sugarcane burning as a method to facilitate the harvest. Simultaneously, the sugarcane harvest was becoming widely mechanized while, under the interests of capital accumulation, the mills were entering the information and communication technology era and providing the agricultural processes with more precise and immediate management and technological controls, similar to those implemented in the mills' administrative and industrial operations in the 1990s. Short‐term factors, including environmental factors, favoured sugarcane technological changes. As a result, there was a mass layoff of rural workers and an increasing number of people/workers in agricultural mechanization, transportation and maintenance of machinery and administrative as well. The whole process highlighted the differences between mills, resulting in small and medium sugarcane farmers and mills to become the most impacted, in operational and financial terms, by the accelerating mechanization of the sugarcane industry as a whole.     

Deviations from Fundamentals in US and EU Stock Markets: A Comparative Analysis

Abstract

A ‘two-stage growth’ discounted cash flow (DCF) model is built to test whether changes in the underlying market fundamentals help to explain movements in stock prices. Empirical results on two samples of US and EU stocks show that the ‘fundamental’ earning price ratio (E/P) explains a significant share of cross-sectional variation of the observed E/P, this impact being stronger in the US market. It is also found that: (i) the fundamental component of the E/P has superior explanatory power than simpler measures of expected earnings growth; (ii) ‘non-fundamental’ components, interpreted as signals reducing asymmetric information (such as firm size, the number of forecasts and the chartist momentum), mitigate the role of the fundamentals; (iii) current deviations from the fundamentals are affected by ex post adjustment of publicly available information in the EU sample. It is argued that differences in regulatory environments and in the composition of investors between the US and EU financial systems may help to explain these comparative findings. Results appear consistent with the ‘market integrity hypothesis’ postulating that reliance on publicly observable fundamentals is higher when insider trading is lower.     

Status, the Distribution of Wealth, and Growth

We analyze a simple model of endogenous growth in which individuals care about both consumption and their rank in the distribution of wealth. We show that the steady-growth rate of the economy increases with both the strength of the status-seeking motive and the initial equality of the wealth distribution. Contrary to the basic model of endogenous growth, the equilibrium growth rate is not necessarily smaller than in the social optimum, and we identify the circumstances under which the two coincide.     

Modelling systemic price cojumps with Hawkes factor models

Instabilities in the price dynamics of a large number of financial assets are a clear sign of systemic events. By investigating portfolios of highly liquid stocks, we find that there are a large number of high-frequency cojumps. We show that the dynamics of these jumps is described neither by a multivariate Poisson nor by a multivariate Hawkes model. We introduce a Hawkes one-factor model which is able to capture simultaneously the time clustering of jumps and the high synchronization of jumps across assets.     

Aggregation of exponential smoothing processes with an application to portfolio risk evaluation

In this paper we propose a unified framework to analyse contemporaneous and temporal aggregation of a widely employed class of integrated moving average (IMA) models. We obtain a closed-form representation for the parameters of the contemporaneously and temporally aggregated process as a function of the parameters of the original one. These results are useful due to the close analogy between the integrated GARCH (1, 1) model for conditional volatility and the IMA (1, 1) model for squared returns, which share the same autocorrelation function. In this framework, we present an application dealing with Value-at-Risk (VaR) prediction at different sampling frequencies for an equally weighted portfolio composed of multiple indices. We apply the aggregation results by inferring the aggregate parameter in the portfolio volatility equation from the estimated vector IMA (1, 1) model of squared returns. Empirical results show that VaR predictions delivered using this suggested approach are at least as accurate as those obtained by applying standard univariate methodologies, such as RiskMetrics.     

Does Social Capital Reduce Moral Hazard? A Network Model for Non‐Life Insurance Demand*

We study the effect of social capital in an environment in which formal, marketed insurance contracts coexist with informal agreements. We show that in the absence of peer monitoring and social pressure, non‐marketed contracts crowd out formal ones due to moral hazard. We prove, by means of an equilibrium concept typical of the network literature, that social capital can reduce moral hazard in informal agreements. We then show that under certain conditions, social capital increases the demand for marketed insurance contracts. The theoretical model we outline provides us clear guidance to measure social capital in a provincial‐level data set. The empirical model, which is estimated controlling for panel and spatial structure, supports our claim that social capital increases the demand for non‐life insurance.