Are Full Employment and Social Cohesion Possible Under Financialization?

Unemployment and unequal income distribution were singled out by J.M. Keynes, in the General Theory, as major faults of capitalist economies. This paper argues that there is a negative relationship between financialization and unemployment. In particular, we develop a simple Post Keyneian/Kaleckian model and explore distribution as well as institutional channels through which financialization might have negatively affected the employment performance of capitalist economies, undermining the social cohesion and egalitarian development. Furthermore, we argue that in the face of financialization full employment is likely to be attainable under the institutionalization of an Employer of Last Resort (hereafter ELR) policy strategy.     

Exchange Rates and Stock Prices in the MENA Countries: What Role for Oil?

This paper considers the linkage between stock prices and exchange rates in four MENA (Middle East and North Africa) emerging markets. In contrast to the existing evidence that uses a global market index to uncover such a relationship it is found that for the sample countries oil prices emerge as the dominant factor in the above relationship. The paper considers the presence of regime shifts and evidence is found of cointegration only for the period following the 1999 oil price shock. Readjustment towards equilibrium in each stock market occurs via oil price changes. Finally, a number of robustness checks are performed and persistence profiles produced.     

CEO Pay Contracts and IFRS Reconciliations

Abstract

We examine whether UK managers exploit the discretion provided in the UK GAAP to IFRS reconciliation process to manage earnings and whether this earnings management is associated with the structure of the managers' compensation contracts. We use a comprehensive data set of mainly hand-collected information from the firms' annual reports to provide evidence that, given the existence of an accounting-related vesting target in their pay schemes, CEOs use UK GAAP to IFRS reconciliations as an earnings management tool. We test our hypotheses under a number of different specifications, including a propensity score matching analysis. Our study contributes to the literature on the relation between earnings management and contractual incentives by focusing on a major structural change in accounting policies.     

Accounting Accruals and Stock Returns: Evidence from European Equity Markets

Abstract

In this paper, I show a generalisation of the negative relation of traditional accruals and percent accruals with future returns in 11 of 16 European countries. Positive abnormal returns from hedge portfolios on both accrual measures summarise the economic significance of this generalisation. The magnitude of returns obtained from traditional accruals is higher than that obtained from percent accruals, contrary to existing evidence from the U.S. capital market. The magnitude of the accrual effect on stock returns based on both accrual measures is stronger in countries with higher individualism, lower uncertainty avoidance, higher equity-market development, higher equity-market liquidity, lower transaction costs, higher analyst coverage, lower analyst optimism, and lower ownership concentration. In markets where minorities have legal protection against expropriation by corporate insiders and where accrual accounting is permitted, the accrual effect based only on percent accruals is positive. Earnings opacity does not appear to exhibit a significant influence. Overall, the evidence suggests that cross-country differences in culture, equity-market setting, analysts' research output, investor protection, and ownership structure play an important role in explaining variation on the magnitude of the accrual anomaly in Europe.     

The dynamics of inflation: a study of a large number of countries

Over the last twenty years the statistical properties of inflation persistence has been the subject of intense investigation and debate without reaching a unanimous conclusion yet. In this article we attempt to shed further light to this debate using a battery of econometric techniques in order to provide robust evidence on the degree of inflation persistence and whether this has changed during the period in which several countries have followed inflation-targeting regimes or new monetary regimes. We consider the inflation rates of thirty developed and emerging economies using quarterly data for the period 1958 to 2007 which include alternative monetary policy regimes. The coefficient of the inflation parameter is estimated by Ordinary Least Squares (OLS), Autoregressive Moving Average (ARMA) and Autoregressive Fractionally Integrated Moving Average (ARFIMA) models. Furthermore, the grid-bootstrap Median Unbiased (MUB) estimator approach developed by Hansen (1999) is used to estimate the finite sample OLS estimates coupled with the 95% symmetric confidence interval. We also examine parameter stability of persistence coefficients by estimating a model with time-varying parameters.     

Volatility and Spillover Effects of Yen Interventions

We consider the effects of interventions by the Bank of Japan's (BoJ) on the intraday volatility of the US dollar/Japanese yen (USD/JPY) exchange rates and their spillovers to volatility of the euro/JPY exchange rates. We use 15‐minute data during the period 2000–2004 and employ multivariate generalized autoregressive conditional heteroskedasticity (GARCH) modeling and quartile plots of intraday volatility to analyze the intraday effects of the BoJ interventions on exchange rate volatility. The results indicate that the BoJ interventions decrease daily volatility of the USD/JPY exchange rate but increase the volatility of the euro/JPY series. On intervention days, the intraday volatility has different patterns to those on non‐intervention days.     

Is the Middle East an Optimum Currency Area? A Comparison of Costs and Benefits

This paper examines the macroeconomic costs and benefits of adopting a common currency for 13 Middle Eastern countries. Economic theory suggests that the main benefit is enhanced price stability, while the main cost is higher business-cycle volatility if the member country’s output is not sufficiently correlated with the area’s, as a whole. Using data from 1980–2005, the paper finds that the estimated cost and benefit measures exhibit substantial variability across the countries and are sometimes positively correlated. Moreover, focusing on the results for the last decade, it seems that many Middle Eastern countries (such as Bahrain, Kuwait, Libya, Oman, Qatar, Saudi Arabia, Syria and United Arab Emirates) have achieved remarkable convergence both in business-cycle synchronization and inflation outcomes.

A first look at online reputation on Airbnb,where every stay is above average

Marketing Letters - Judging by the millions of reviews left by guests on the Airbnb platform, this trusted community marketplace for accommodations is fulfilling its mission of matching travelers...     

A Bayesian encompassing test using combined value-at-risk estimates

The Value at Risk (VaR) is a risk measure that is widely used by financial institutions in allocating risk. VaR forecast estimation involves the conditional evaluation of quantiles based on the currently available information. Recent advances in VaR evaluation incorporate conditional variance into the quantile estimation, yielding the Conditional Autoregressive VaR (CAViaR) models. However, the large number of alternative CAViaR models raises the issue of identifying the optimal quantile predictor. To resolve this uncertainty, we propose a Bayesian encompassing test that evaluates various CAViaR models predictions against a combined CAViaR model based on the encompassing principle. This test provides a basis for forecasting combined conditional VaR estimates when there are evidences against the encompassing principle. We illustrate this test using simulated and financial daily return data series. The results demonstrate that there are evidences for using combined conditional VaR estimates when forecasting quantile risk.     

Financial literacy and its consequences: Evidence from Russia during the financial crisis

The ability of consumers to make informed financial decisions improves their ability to develop sound personal finance. This paper uses a panel data set from Russia, an economy in which household debt has grown at an astounding rate, to examine the importance of financial literacy and its effects on behavior. The paper studies both the financial and real consequences of financial illiteracy. Even though consumer borrowing increased very rapidly in Russia, only 41% of respondents demonstrate an understanding of interest compounding and only 46% can answer a simple question about inflation. Financial literacy is positively related to participation in financial markets and negatively related to the use of informal sources of borrowing. Moreover, individuals with higher financial literacy are significantly less likely to report experiencing a negative income shock during 2009 and have greater availability of unspent income and higher spending capacity. The relationship between financial literacy and availability of unspent income is higher in 2009, suggesting that financial literacy may better equip individuals to deal with macroeconomic shocks.