Demand for meat and dairy products by Turkish households: a Bayesian censored system approach

We extend the Tobit (censored) linear equation system procedure to utility‐theoretic demand functions, along with a mapping mechanism to impose the adding‐up restriction implied by consumer utility maximization theory—a theoretical restriction very often ignored in previous empirical studies with censored demand systems. In this context, the Bayesian Markov Chain Monte Carlo (MCMC) procedure is applied to the censored linear approximate almost ideal demand system (LAIDS) for 12 food products, using data from the Turkish Household Expenditure Survey. All own‐price elasticities are negative and expenditure elasticities positive. Uncompensated own‐price elasticities for rural households are generally much higher than those for their urban peers, though demand for most food products are own‐price elastic for both types of households. The differential patterns in demand elasticities between urban and rural households become even more evident (almost twice) as relatively more expensive foodstuffs are consumed, showing that accessibilities to alternative products have made rural Turkish households more cognizant toward price changes in foods. Household characteristics play a key role in food expenditures, notably so in urban areas, and regional and seasonal differences are also present.     

Demand for cigarettes in Turkey: an application of count data models

Household cigarette demand in Turkey is examined using the zero-inflated negative binomial model to account for a large portion of households not reporting cigarette smoking or purchase and estimated using the data from the national household survey implemented in 2003. Data were divided into two main groups: families with and without teenagers. Results identify relevant household head and household characteristics needed to develop effective public policy to prevent the decision to begin to smoke and to reduce cigarette purchase to lower the future growth of government healthcare expenditures. Specifically, healthcare expenditure share, income, and cigarette-price elasticities are relevant in lowering cigarette purchases. The calculated price elasticities for cigarette demand falls within the range determined by studies conducted for developed countries including the member states of the European Union. An estimate of the effect of an increase in the excise tax lowering demand is provided.     

Estimating volatility clustering and variance risk premium effects on bank default indicators

Review of Quantitative Finance and Accounting - Default risk increases substantially during financial stress times due to mainly the two reasons: volatility clustering and investors’ desire...     

Persistence and non-linearity in US unemployment: A regime-switching approach

This article examines persistence and nonlinearity in the US unemployment rate in the post-war period by using a regime-switching unit root test. The empirical results indicate that a regime-switching unit root test outperforms conventional unit root tests and describes unemployment behavior better over the business cycle in the sample. While shocks to US unemployment dissipate in expansions, shocks to the unemployment rate seem to be persistent in recessions, supporting the hysteresis hypothesis. This is consistent with the usual explanation of hysteresis that workers may lose valuable job skills in protracted recessions.     

HOUSEHOLD ALCOHOL AND TOBACCO EXPENDITURES IN TURKEY: A SAMPLE‐SELECTION SYSTEM APPROACH

Household characteristics variables are used to quantify alcohol and tobacco participation and spending level decisions for households in Turkey using a sample‐selection system. Statistical tests support separate analyses for urban and rural households and joint estimation of the equation system to ameliorate biases and improve statistical efficiency of estimates. Household characteristics play important roles in determining binary consumption decisions and levels of spending on tobacco but play less definitive roles in alcohol spending, for both urban and rural households. Differences are found in consumption behaviors between the two types of households. (JEL C24, D12, I18)     

The impact of license regulation on the number of recreation trips: is it worth considering?

A two-stage nonlinear least-squares model (2NLS) with an endogenous treatment effect on recreation trips describes the behavior of recreationists with and without a fishing/hunting license. The proposed 2NLS is applied to the derivation of the policy-relevant average gains in the presence of an endogeneity bias to a license fee implementation program regulated by states. Recreationists who purchased a license are likely to recreate more than are the nonlicensed holders because the regulation may reduce congestions at sites where licensee visit often. The license regulation has a greater impact on the use of natural resources after controlling observed and unobserved confounders which might be correlated with the probability of being a license holder and with the final outcome, the number of recreation trips. We confirm that the individual without a permit regards the recreation trip as less valuable than does the individual having a license permit. We also found that the likelihood of purchasing a license among young adult recreationists is not at the level the states may desire. In addition, the number of trips demanded is more responsive to the nontransportation-related implicit travel cost than to the transportation-related implicit travel cost, although travel implicit costs are price inelastic.      

The diversity of models as a means to better explanations in economics

ABSTRACT

In Economics Rules, Rodrik [(2015). Economics rules: Why economics works, when it fails, and how to tell the difference. Oxford: Oxford University Press] argues that what makes economics powerful despite the limitations of each and every model is its diversity of models. Rodrik suggests that the diversity of models in economics improves its explanatory capacities, but he does not fully explain how. I offer a clearer picture of how models relate to explanations of particular economic facts or events, and suggest that the diversity of models is a means to better economic explanations.     

Philosophy of Economics Rules: introduction to the symposium

ABSTRACT

Economists have long been criticized for their use of highly idealized models. In Economics rules: Why economics works, when it fails, and how to tell the difference [Oxford: Oxford University Press, 2015] Dani Rodrik responds to this criticism by offering an account of models that emphasizes the diversity of models in economics. Rodrik’s account presents a rare opportunity for economists and philosophers of economics to engage in a mutually beneficial exchange that could improve our understanding of the power and limits of economics, and the rights and wrongs of the dismal science. The symposium on Rodrik’s Economics Rules is the first attempt to seize this opportunity.     

Predictability of Emerging Market Local Currency Bond Risk Premia

This article investigates the source of predictability of emerging market (EM) local currency bond risk premia by using a dynamic factor approach based on a large panel of economic and financial time series. We find strong predictable variation in EM local currency excess bond returns that is associated with macroeconomic activity. We provide evidence that the main predictor variables are the factors based on real economic activity that are highly correlated with measures of industrial and manufacturing production; however, factors based on global financial factors also contain information about the future local currency bond returns. The predictive power of the extracted factors is both statistically significant and economically important. Our research has important implications for policymakers and pension fund managers.     

Nonlinearity and nonstationarity in international art market prices: evidence from Markov-switching ADF unit root tests

This study investigates the presence (or lack thereof) of nonlinear dynamics and nonstationarity in international art market prices using quarterly data for the period 1990–2011. We first test whether art market price indices follow stochastic trends or whether they are stationary by means of linear unit root tests. Next, we estimate the Markov regime-switching ADF model and test whether the linear or the nonlinear regime-switching model provides a better characterization of the global art market price series. We find that all art market price indices (except for Drawings) exhibit nonlinearity. To our knowledge, our study is the first one in the literature to suggest that a nonlinear (Markov regime-switching) model provides a better characterization of the behavior of price dynamics in international art markets. In particular, our findings indicate that the market for the overall global art market, paintings, old masters, sculptures, photographs, prints, and contemporary art might indeed be stationary while exhibiting nonlinear regime-switching properties. On the other hand, the market for drawings and the Nineteenth century art are found to be nonstationary. Overall, despite the common ground of a regime-switching framework, we still find that the sub-segments of the art market have their own inner regime switching dynamics and hence they can evolve differently overtime.