Implicit attitudes toward risk: the construction and validation of the measurement method

Methods that are typically used to examine individual differences in risk attitudes (e.g. lotteries, dilemmas, questionnaires) require participants to explicitly declare their willingness to take risk. Therefore, they may be biased by the need for self-presentation or situational characteristics such as time pressure and cognitive constraints that lead to more spontaneous and automatic processing of risk-related information. The aim of this study was to construct an indirect measure of risk attitudes that is free of these methodological limitations. The method based on the Implicit Association Test shows high internal reliability and satisfactory stability over time. It correlates moderately with different explicit measures of risk attitudes that are related to sensation seeking. Finally, it is characterized by a high predictive power. Adding the implicit measure to the set of independent variables representing declarative evaluations of risk attitudes significantly improved the model predicting risky real-life behavior. We argue that the indirect assessment of risk attitudes presented in this paper may be used as an universal measure of people’s risk propensity that is free of biases related to self-presentation and situational factors.     

Building responsive supervision over smaller banks in Europe: an insight from the Principal-Agent perspective

Abstract

The Single Supervisory Mechanism (SSM) is an administrative arrangement of national assistance to the ECB in exercising its exclusive supervisory competence. It sets two systems of assistance: ECB Direct Supervision (for large banks) and Indirect Supervision (for smaller and medium-sized banks) supervision. This paper analyzes dynamics between the ECB Banking Supervision as the principal and NCAs as its agents in the system of ECB Indirect Supervision. It identifies six formal (statutory) accountability and control mechanisms which are put at the ECB’s disposal to monitor the way how the NCAs carry SSM supervisory tasks when exercising the ECB’s exclusive supervisory competences under the SSM Regulation.     

Exchange Rate Regimes and Business Cycle Synchronization

Open Economies Review - This paper studies the effect of seven types of exchange rate regimes on business cycle synchronization, by using a new dataset on bilateral de-facto exchange rate regimes...     

The contribution of immigration from Ukraine to economic growth in Poland

Review of World Economics - From 2014 onwards Poland witnessed an unprecedented inflow of immigrant workers from Ukraine. Coupled with strong labour demand, this surge in labour supply provided a...     

Delegation,Ownership Concentration and R&D Spending: Evidence From Italy

We use data from the Italian manufacturing industry to document a positive correlation between delegation and R&D. This result is robust to controlling for the determinants of R&D such as human capital, capital intensity and sectoral or regional effects. We further investigate the determinants of delegation and find that ownership concentration is significantly related to delegation. Among large firms with a dispersed ownership structure, larger ownership concentration implies less delegation, whereas the opposite emerges with more concentrated ownership. Differences between the Northern and Southern regions in terms of firms' propensity to delegate decisions and engage in R&D also emerge.     

Economic value of carbon sequestration in forests under multiple sources of uncertainty

The purpose of this paper is to calculate the value of stochastic carbon sequestration in climate change mitigation when also carbon dioxide emissions from fossil fuels and abatement costs are stochastic. The replacement cost method is used where the value of carbon sink is calculated as associated cost savings from replacement of more expensive mitigation options for achieving a given emission target. Minimum costs with and without carbon sinks are derived with a safety-first approach in a chance constrained programming framework which also accounts for variability in control costs. The theoretical results show that for high enough risk discount, carbon sink is not included in a cost effective mitigation program even when the carbon sink cost is zero. The empirical application to the EU independent commitment of 20% reduction in carbon dioxides shows large variation in carbon sink value depending on risk discount. Under no uncertainty, the value can correspond to 0.33% of total GDP in EU, but it declines due to the uncertainty associated with forest carbon sink and is zero for high probability levels in achieving the target. Thus, whether or not to recommend the inclusion of carbon sink in the EU climate policy depends on the uncertainty of carbon sinks in relation to other sources and on the importance of reaching stipulated emission reduction targets.     

A microfoundation for normalized CES production functions with factor-augmenting technical change

Based on a tractable “endogeneous technology choice” framework, we provide a microfoundation for aggregate normalized constant elasticity of substitution (CES) production functions with non-neutral, factor-augmenting technical change. In this framework, firms are allowed to choose unit productivities of capital and labor optimally from a technology menu constructed under the assumption that unit factor productivities (UFPs) are independently Weibull-distributed. The Weibull distribution itself is also microfounded here: based on extreme value theory, it is found to be an accurate and robust approximation of the true UFP distribution if technologies consist of a large number of complementary components.     

Crash-neutral currency carry trades

Currency carry trades exploiting violations of uncovered interest rate parity in G10 currencies deliver significant excess returns with annualized Sharpe ratios equal to or greater than those of equity market factors (1990–2012). Using data on out-of-the-money foreign exchange options, I compute returns to crash-hedged portfolios and demonstrate that the high returns to carry trades are not due to peso problems. A comparison of the returns to hedged and unhedged trades indicates crash risk premia account for at most one-third of the excess return to currency carry trades.