A New Approach to Currency Depreciation

Currency depreciation has been studied conventionally in terms of three hypotheses—the elasticities approach, the monetary approach and the absorption approach. In this paper we offer another hypothesis called the price approach, wherein the balance of payment disequilibrium results from an inappropriate price level. Specifically, a country has a trade surplus if the equilibrium price level is below that compatible with balanced trade; by contrast, it has a trade deficit if the price level is above that compatible with balanced trade. We illustrate the price approach with the experience of currency devaluations that have occurred in emerging markets since 1997.     

Economics in Crisis: Severe and Logical Contradictions of Classical, Keynesian, and Popular Trade Models

The paper examines three popular models that form the foundation of modern economics. The author concludes that two of the three, the classical and the Keynesian, are seriously deficient in logic, whereas the third, dealing with gains from trade, is partially lacking in logic. Classical and neo–Keynesian approaches require desired investment to expand during recessions, whereas the trade model requires real GDP to rise without any rise in employment, capital stock, or technology. The paper offers an alternative macro framework that is free from the limitations of conventional models. Money is either neutral or non–neutral, depending on whether the economy is operating below or at full capacity. Wages are strictly determined in the labor market, yet employment is influenced by aggregate demand. The alternative model thus combines the attractive features of classical and Keynesian frameworks.     

Prediction of the Indian summer monsoon using a stacked autoencoder and ensemble regression model

The study of climatic variables that govern the Indian summer monsoon has been widely explored. In this work, we use a non-linear deep learning-based feature reduction scheme for the discovery of skilful predictors for monsoon rainfall with climatic variables from various regions of the globe. We use a stacked autoencoder network along with two advanced machine learning techniques to forecast the Indian summer monsoon. We show that the predictors such as the sea surface temperature and zonal wind can predict the Indian summer monsoon one month ahead, whereas the sea level pressure can predict ten months before the season. Further, we also show that the predictors derived from a combination of climatic variables can outperform the predictors derived from an individual variable. The stacked autoencoder model with combined predictors of sea surface temperature and sea level pressure can predict the monsoon (June-September) two months ahead with a 2.8% error. The accuracy of the identified predictors is found to be superior to the state-of-the-art predictions of the Indian monsoon.     

Term Structure of Interest Rates with Regime Shifts

We develop a term structure model where the short interest rate and the market price of risks are subject to discrete regime shifts. Empirical evidence from efficient method of moments estimation provides considerable support for the regime shifts model. Standard models, which include affine specifications with up to three factors, are sharply rejected in the data. Our diagnostics show that only the regime shifts model can account for the well–documented violations of the expectations hypothesis, the observed conditional volatility, and the conditional correlation across yields. We find that regimes are intimately related to business cycles.     

The REIT Modernization Act of 1999

This article examines two effects of the passage of the REIT Modernization Act (RMA) of 1999: its impacts on REIT shareholder wealth and changes in REIT systematic risk in the period following its passage. The results indicate a modest positive wealth effect associated with the legislative events leading to its enactment. Our estimates of the wealth gain probably underestimate the true wealth gain because of the partially anticipated nature of the legislative process. We also document a significant decline in the systematic risk of REITs subsequent to the passage of the RMA. The evidence suggests that this decline is not attributable to a provision of the RMA that allows REITs to establish taxable subsidiaries.     

Dark tourism through the lens of attachment theory and domestic tourists

This study explores the factors that affect domestic tourist attachment to dark tourism destinations by developing a hybrid model using several methods, including structural equation modeling (SEM) and fuzzy analytical hierarchy process (FAHP), predicated on attachment theory. The study collected data from 60 tourism experts and 622 domestic tourists. The study found that tourist motivation, national identity, tourism impacts, and destination attachment are all crucial factors that explain domestic tourist behavior towards dark tourism. The results of the mediation analysis indicate that destination attachment mediates the relationship between tourist motivation, national identity, and negative tourism impact with tourist satisfaction. The FAHP results show that place identity has the highest influence while place dependence has the lowest influence in shaping domestic tourists' selection of dark tourist destinations. The study's findings provide valuable insights for tour operators and destination managers to meet domestic tourists' expectations of dark tourism, adding to the existing knowledge related to the factors that impact dark tourism.     

Secured debt and managerial incentives

Financial theory holds that firms can control agency costs through the use of short-term and secured debt. We examine the relation between the use of secured debt and the incentive of the manager to increase the risk of the firm, as measured by vega. We find that firms utilize secured debt to a lesser extent when managerial volatility sensitivity is higher. Our results suggest that these same firms employ short-term debt as the primary tool to control risk-shifting. Managers with a high risk appetite avoid secured debt, but appear to do so without compromising the interests of the shareholders.     

Wage Stagnation in Japan

In the last ten years, a number of economists have tried to explain the observed decline or stagnation in the real wages of the US labor force in spite of slow but steady rise in labor productivity. This paper reports a similar affliction for the Japanese labor market since 1973. The explanation for stagnant wages in spite of respectable productivity gains in Japan lies in the vast appreciation of the yen versus the dollar, and ultimately in the highly regulated retail distribution.     

Traded and Nontraded Goods and Real Wages

The paper explains most, if not all, observations made by the empirical literature regarding the behavior of skilled and unskilled real wages in the United States, especially those since 1980. Generalizing the Stopler–Samuelson theorem, the authors show that the nontraded sector is critical to explaining the effects of changes in the price of traded goods on relative and absolute wages. Factor‐intensities play their role as in the traditional Stolper–Samuelson model, but the output of the nontraded sector matters as well. Specifically, freer trade benefits capital and hurts both the skilled and unskilled labor if the import as well as the nontraded sectors contract. This is a new result to the literature on Stolper–Samuelson issues.