CAPITAL CONTROLS AND CONFLICT OF INTERESTS

This paper is a normative analysis of the legal restrictions on international financial movements based on a formal model which analyzes the empirical observation that the degree of financial protectionism is associated with changes in the distribution of welfare among agents. The strategic interactions among four types of agents (a trade union, a firm manager, a financial investor and a government) are analyzed, and the optimal amount of capital control is derived as a Nash perfect equilibrium of a non-cooperative game with imperfect information. I conclude that a financial liberalization proposal can be supported by different coalitions of agents, according to the covariance of domestic and foreign returns and the degree of profitability of domestic industrial projects.     

Modeling the Reforms of the Common Agricultural Policy for Arable Crops under Uncertainty

The size of the insurance and wealth effects of a change in the Common Agricultural Policy (CAP) for arable crops is estimated. The impact of price uncertainty is accounted for in the specific decision-making structure of the European Union (EU) arable crop producers under nonlinear mean-variance risk preferences. A system of output supply, input demand, and land allocation equations is estimated on a sample of Italian specialized arable crop farms. The simulation of the impact of the recent reforms confirms that farmers' output responses are consistently affected by the size of the insurance and wealth effects.     

A new class of multidimensional Wishart-based hybrid models

In this article, we present a new class of pricing models that extend the application of Wishart processes to the so-called stochastic local volatility (or hybrid) pricing paradigm. This approach combines the advantages of local and stochastic volatility models. Despite the growing interest on the topic, however, it seems that no particular attention has been paid to the use of multidimensional specifications for the stochastic volatility component. Our work tries to fill the gap: we introduce two hybrid models in which the stochastic volatility dynamics is described by means of a Wishart process. The proposed parametrizations not only preserve the desirable features of existing Wishart-based models but significantly enhance the ability of reproducing market prices of vanilla options.

     

The coordinating power of social norms

Experimental Economics - A popular empirical technique to measure norms uses coordination games to elicit what subjects in an experiment consider appropriate behavior in a given situation (Krupka...     

The effect of female representation on political budget cycle and public expenditure: Evidence from Italian municipalities

This study analyzes the impact of the gender composition of political institutions on the political budget cycle (PBC) and on the size and structure of public expenditure. An instrumental variable approach is implemented to evaluate the influence of female politicians in municipal councils. The introduction of gender quotas for Italian municipalities is used as an exogenous variation in female participation in politics. The results show that: (i) fluctuations in local public spending are only slightly affected by the presence of a wider female representation; (ii) an increase in the number of elected women reduces the overall amount of public expenditure; (iii) this reduction involves fields typically affected by PBC (e.g., roads' maintenance) except those related to females' needs (e.g., kindergarten, primary education, and social care).