Is bitcoin a safe haven or a hedging asset? Evidence from China

Based on daily data about Bitcoin and six other major financial assets (stocks, commodity futures (commodities), gold, foreign exchange (FX), monetary assets, and bonds) in China from 2013 to 2017, we use a VAR-GARCH-BEKK model to investigate mean and volatility spillover effects between Bitcoin and other major assets and explore whether Bitcoin can be used either as a hedging asset or a safe haven. Our empirical results show that (i) only the monetary market, i.e., the Shanghai Interbank Offered Rate (SHIIBOR) has a mean spillover effect on Bitcoin and (ii) gold, monetary, and bond markets have volatility spillover effects on Bitcoin, while Bitcoin has a volatility spillover effect only on the gold market. We further find that Bitcoin can be hedged against stocks, bonds and SHIBOR and is a safe haven when extreme price changes occur in the monetary market. Our findings provide useful information for investors and portfolio risk managers who have invested or hedged with Bitcoin.     

Models of static and dynamic technical efficiency of municipal libraries in the Czech Republic

This article deals with the modelling of the static and dynamic technical efficiency under conditions of municipal libraries of municipalities with 1000–5000 inhabitants. The aim of this article is to determine the level of the technical efficiency and the factors that influence the results of modelling of the static and dynamic technical efficiency of 34 selected municipal libraries for the years of 2011 and 2015. The first model tests the technical efficiency of conventional services of public libraries. The second model tests the technical efficiency of municipal libraries’ operation. The third model tests the technical efficiency of the key revenues and expenditures. The results in the static models estimate the average technical efficiency of municipal libraries in the interval (0.691–0.759) for the input-oriented models, and in the interval (1.413–2.005) for the output-oriented models. In the dynamic models, the majority of municipal libraries in 2015 showed lower technical efficiency and productivity in comparison with the year of 2011. The factors influencing the level of efficiency and its course include the inputs and the outputs, and their combinations within individual models.     

Tax-benefit systems and differences in aggregate labour force participation: Comparative evidence from the Czech Republic and Hungary

This paper investigates the extent to which cross-country differences in aggregate participation rates can be explained by differences in tax-benefit systems. We take the example of two countries, the Czech Republic and Hungary, which – despite a lot of similarities – differ markedly in labour force participation rates. Using comparable individual-level labour supply estimates, we simulate how the aggregate participation rate would change in one country if the other country’s tax and social welfare system were adopted. The estimation results for the two countries are quite similar, suggesting that individual preferences are essentially identical in the two countries. The simulation results show that about one-third of the difference in the participation rates of the 15–74 year-old population and more than two-thirds of the participation of the prime-age population can be explained by differences in the tax-benefit systems.     

Negative equity and wages

We examine the relationship between housing equity and wage earnings using nine waves of the national American Housing Survey from 1985 to 2003. Employing a rich set of time and place controls, a synthetic mortgage instrumental variable strategy, and a first difference estimator we find that people underwater on their mortgage command a significantly lower wage than other homeowners. The finding survives a number of robustness checks for reverse causality and unobserved heterogeneity. We also explore other determinants of “house lock” including loss aversion, a low existing mortgage interest rate and property tax assessment caps, but do not find these factors mitigate the effect of negative equity on wages.     

Central limit theorems and uniform laws of large numbers for arrays of random fields

Over the last decades, spatial-interaction models have been increasingly used in economics. However, the development of a sufficiently general asymptotic theory for nonlinear spatial models has been hampered by a lack of relevant central limit theorems (CLTs), uniform laws of large numbers (ULLNs) and pointwise laws of large numbers (LLNs). These limit theorems form the essential building blocks towards developing the asymptotic theory of M-estimators, including maximum likelihood and generalized method of moments estimators. The paper establishes a CLT, ULLN, and LLN for spatial processes or random fields that should be applicable to a broad range of data processes.     

Distributional implications of informal economy in the EU countries: Accounting for the spread of tax evasion benefits and cultural characteristics

This study provides evidence about the impact of informal economy on income inequality by using annual cross-country panel data from 28 European Union countries observed during the period 2005–2017. Particular attention is dedicated to the cultural setting which is expected to impact taxpayers’ behaviour and thereby income distribution. The study reveals a relationship between the size of the underground economy and income inequality, which is negative when approaching domestic informality and positive when international tax evasion by individuals is related to the top-bottom income disparity. Moreover, a delay of one-year is needed for these effects to occur, sustaining the hypothesis of secondary consequences of the informality. The study also shows that a set of cultural peculiarities are relevant for the nexus of international tax evasion by individuals and income polarisation. The inequality enhancing effect of the offshore activities is larger in countries with high degree of uncertainty avoidance and power distance, and low level of indulgence and long-term orientation respectively.     

The impact of the European social fund on youth education and employment

The effectiveness of the European Union's Cohesion Policy in reducing regional socio-economic gaps remains an open empirical issue, while evidence as to how the policy is affected by specific territorial factors and which social groups benefit most from it remains sparse. This article seeks to address this gap by disentangling the impact of the European Social Fund (ESF) on youth education and employment prospects. Drawing on macro-level data for the European NUTS-2 regions, we assess the impact that this fund has on different education-specific youth population shares and employment rates. In the case of education, we find that the receipt of funding is associated with a human capital polarization of regional populations. Specifically, we identify a positive impact of the ESF on population shares with lower-secondary and tertiary education, and a simultaneous negative impact on the share of those with upper-secondary education. In the case of employment, we find a positive response for youth of all education levels. A heterogeneity analysis indicates that both the education and employment responses of the youth population to the receipt of the ESF are strongly influenced by local specialization in high-skilled activities.     

Proposal for calculating regulatory capital requirements for reverse mortgages

In the current context in which many people worry about the sustainability of pension systems, reverse mortgages are gaining popularity because they are a way to supplement elderly people's incomes. However, it is necessary to provide banks with an adequate risk measurement and management procedure for reverse mortgages to increase the commercialization of these products, which will result in greater well-being for the retirement age population. In this paper, we propose a method to measure risk and estimate the regulatory capital requirements for a portfolio of reverse mortgages owned by a financial institution according to Basel II and III. The method considers house price risk, mortality risk and interest rate risk; consequently, regulatory capital requirements need to be computed using a Monte Carlo simulation procedure. The proposed method is general and can accommodate several scenarios for reverse mortgage specifications, including fixed or variable mortgage rates and different income stream schemes (with the lump sum as a particular case). The results for the U.K. show that reverse mortgage providers face higher risk when the lender initially advances a higher amount, with the lump-sum case indicating the highest risk, for relatively younger borrowers, the female population, higher interest rates and floating mortgage rates.     

ECONOMIC SANCTIONS REVISITED: ADDITIONAL INSIGHTS INTO WHY THEY FAIL

Economic sanctions have a poor track record in achieving their objectives. In most cases, they are ineffective in bringing about policy change, cause increased suffering in the sanctioned country and reduce opportunities for business. This paper provides additional insights into why sanctions fail by examining two overlooked factors: power–dependency theory and pressure for political stability.     

Sequential bargaining with common values

We study the alternating-offers bargaining problem of assigning an indivisible and commonly valued object to one of two players who jointly own this object. The players are asymmetrically informed about the object’s value and have veto power over any settlement. There is no depreciation during the bargaining process which involves signalling of private information. We characterise the perfect Bayesian equilibrium outcome of this game which is unique if offers are required to be strictly increasing. Equilibrium agreement is reached gradually and non-deterministically. The better informed player obtains a rent.