ISSN: 2056-3736 (Online Version) | 2056-3728 (Print Version)
Miguel D. Ramirez
Correspondence: Miguel D. Ramirez, Miguel.ramirez@trincoll.edu
Department of Economics, Trinity College, USA
pdf (1176.06 Kb) | doi: https://doi.org/10.47260/bae/724
This paper examines whether public investment spending and inward foreign direct investment (FDI) enhance labor productivity growth in Argentina. Using annual data, it estimates a dynamic labor productivity function for the 1960-2015 period that incorporates the impact of public and private investment spending, education expenditures, the labor force, and export growth. It tests for both single and two-break unit root tests, as well as performing cointegration tests with an endogenously determined regime shift over the 1960-2015 period. Cointegration analysis suggests that a long-term relationship exists among the relevant variables. The error correction (EC) models suggest that (lagged) increases in public investment spending and education have a positive and significant effect on the rate of labor productivity growth Also, the model is estimated for a shorter period (1970-2015) to capture the impact of inward FDI flows. The estimates suggest that (lagged) FDI flows have a positive and significant impact on labor productivity growth, while increases in the labor force have a negative effect. From a policy standpoint, the findings call into question the politically expedient policy in many Latin American countries, including Argentina during the 1990s and 2000s, of disproportionately reducing public capital expenditures on education and infrastructure to meet reductions in the fiscal deficit as a proportion of GDP. The results give further support to pro-investment and pro-growth policies designed to promote public investment spending and attract inward FDI flows.
Complementarity Hypothesis, Education expenditures, Endogenous growth, Foreign Direct Investment (FDI), Gregory-Hansen cointegration single-break test, Lee-Strazicich two-break unit root test, Johansen Cointegration Test, Public Investment, Vector Error Correction model (VECM).
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Hiroyuki Taguchi, Kenichi Tamegawa and Mesa Wanasilp
Correspondence: Hiroyuki Taguchi, htaguchi@mail.saitama-u.ac.jp
Saitama University, Japan
pdf (1176.06 Kb) | doi: https://doi.org/10.47260/bae/723
This paper aims to reassess the performances of inflation targeting adopted by emerging ASEAN countries, Indonesia, the Philippines and Thailand, by examining their monetary policy rules, both through generalized-method-of-moments (GMM) estimations of policy reaction functions and through Bayesian estimations of the New Keynesian dynamic-stochastic-general-equilibrium (DSGE) model. The main findings are summarized as follows. First, the GMM estimations identified inflation-responsive rules fulfilling the Taylor principle, with a forward-looking manner in Indonesia and Thailand and with a contemporaneous way in the Philippines. Second, the Bayesian estimations of the New Keynesian DSGE could reassure the GMM estimation results, as the former estimations produced consistent outcomes with the latter ones on the policy rate reactions to inflation with the Taylor principle.
Taylor principle; Inflation targeting; Emerging ASEAN; Generalized method of moments (GMM); New Keynesian dynamic stochastic general equilibrium (DSGE) model
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Zura Kakushadze
Correspondence: Zura Kakushadze, zura@quantigic.com
Quantigic Solutions LLC, USA
pdf (1176.06 Kb) | doi: https://doi.org/10.47260/bae/722
After a market downturn, especially in an uncertain economic environment such as the current state, there can be a relatively long period with a sideways market, where indexes, stocks, etc., move in channels with support and resistance levels. We discuss option pricing in such scenarios, in both cases of unattainable as well as attainable boundaries, and obtain closed-form option pricing formulas. Our results also apply to FX rates in target zones without interest rate pegging (USD/HKD, digital currencies, etc.).
Option pricing, channel, reflecting boundaries, Brownian motion, volatility, drift, barriers, mean-reversion, mean-repelling, FX, digital currencies, target zone, sideways market, interest rate, attainable boundaries, unattainable boundaries, arbitrage, stock, put, call, binary, knockout, rebate.
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Jean-Charles Marin, Bryan B-Trudel, Kazimierz Zaras and Mamadou Sylla
Correspondence: Jean-Charles Marin, jcmarin2@me.com
Université du Québec en Abitibi-Témiscamingue, Rouyn-Noranda, Canada
pdf (1176.06 Kb) | doi: https://doi.org/10.47260/bae/721
The objectives of this article is to target poverty using Dominance-based Rough Set Approach (DRSA) to help the United Nation’s Countries develop objectives for sustainable development. There are 12 variables divided into 2 perspectives. The first is an economical and technological perspective composed of 6 variables. The second is a sociological and political perspective composed of 6 variables. The methodology proposed classifies all the United Nation’s countries according to three different categories: [A] Developed countries; [B] Emerging economies that need support to acquire category A status; [C] Under Developed countries ranked the lowest and needing special support with regard to the criterion or criteria considered. Using this classification, DRSA provides decision rules to explain the classification and indicating precisely what are the conditions to be part of a higher category. Also, the results indicate what are the conditions to be part of the Under Developed countries category and therefore helps targeting poverty and proposing, at the same time, objectives to improve this classification. Finally, we used Multiple Linear Regressions with selected decision rules to test selected decision rules as the Gross National Income per capita as the dependent variable.
International development, United Nations States, International aid, Economic growth, Strategic objectives, Sustainable Development.
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Nikolaos Papanikolaou
Correspondence: Nikolaos Papanikolaou, nikolaos.papanikolaou@lehman.cuny.edu
Lehman College, Bronx, New York, USA
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This paper examines the Census Bureau’s Current Population Survey (CPS) of full-time wage and salary workers to determine the underlying functional form of the size distribution of income from 1996 to 2008. There has been a lot of attention on income inequality Pre and Post Great Recession of 2008-2009. This paper applies the tools developed in a new field of economics called Econophysics. The analysis uses parametric and nonparametric methods to determine the size distribution of wage and salary income. The findings suggest that the underlying functional form of labor income is approximately distributed as an exponential distribution, while non-labor income is underscored by a Pareto distribution.
Size Distribution of Labor Income, Income Inequality, Boltzmann-Gibbs Distribution, Optimal Bandwidth, Kernel Density Estimator, Census Bureau, Exponential Distribution, Pareto Distribution.
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Panayiotis Tzeremes
Correspondence: Panayiotis Tzeremes, tzeremes@econ.uth.gr
Department of Economics, University of Thessaly, Greece
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The paper proposes a conditional range directional distance estimator by modifying the range directional distance model utilizing the probabilistic characterization of directional distance functions (DDF). Moreover, as an illustrative example the paper applies the proposed estimator on a sample of 89 multinational corporations for the period 2006-2012. The paper examines the effect of firms’ market value on their estimated operational performance levels. Inefficiency measures are estimated over the examined period. The results reveal a nonlinear (U-shape) relationship between firms’ market value and their operating efficiency levels. Finally, the analysis from applying the local linear estimator reveals that lower market values are associated with higher operating inefficiencies, whereas, higher market values are associated with higher operating efficiencies.
Productivity, Firm’ production, Efficiency, Market value, Microeconomic analysis
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Hiroaki Sakurai
Correspondence: Hiroaki Sakurai, hsakurai@shonan.bunkyo.ac.jp
Bunkyo University, Japan
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This paper examines the productivity of foreign aid in Vietnam, in two ways. First, the effect of foreign aid upon economic growth in Vietnam as a whole is studied using time series data from 1994 to 2017. Second, the effect of the yen loan, or governmental aid loan from Japan, in 34 provinces out of 63 is studied using panel data from 2001 to 2016. The effect of foreign aid is still uncertain, and the aim is to clarify it. Two points are found. First, no effect of foreign aid to Vietnam has been found using the time series data for the entire country. Second, the increase in productivity due to the yen loan has not been estimated, either. Although the impact from the foreign aid to the economic growth is not estimated, it may include Vietnamese special reasons. Since the main portion of foreign aid to Vietnam came after 1994, most infrastructure facilities are contributing relatively in a short term. This finding is likely to change in future, since infrastructure established recently with the loan will continue to contribute to economic growth in Vietnam.
Foreign Aid, Productivity, Vietnam
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Erotokritos Varelas
Correspondence: Erotokritos Varelas, varelas@uom.edu.gr
University of Macedonia, Greece
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This article argues that the possibility there can be output unreported to the authorities, prompts expectations about the size of this output which can destabilize increasingly an economy experiencing otherwise a uniform oscillation. It follows logically that the “stability” of uniform fluctuations will be preserved if the policy maker aims at such fluctuations in unreported output too, but of exactly opposite direction (“double cycle” hypothesis), lessening in effect the fluctuation of overall output as well. The economy is one modeled in terms of the interplay between its banking sector and the government budget. Our conclusions hold independently of the source of unreported output allowing thus one to identify for analytical convenience this output with everything the term connotes except tax evasion. Assuming that borrower-lender asymmetric information leads to a fraction only of bank lending to be financing capital change, instability becomes a matter of the expectations about this fraction too, about credit rationing; much more so when the capital change involves both sectors of the economy. The link between the two types of expectations is that they are both shaped by the stage of the business cycle, making the “double cycle” target attainable by means of the manipulation of “lending” or the same, credit-rationing expectations. The introduction of money or bank industry structure into the analysis does not appear to alter these conclusions; nor does the examination of the subject in terms of labor in the place of capital ̶ examination enabled analytically through the use of a CES production function.
Unreported output, expectations, banking, government budget, double cycle, stability
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Zura Kakushadze and Willie Yu
Correspondence: Zura Kakushadze, zura@quantigic.com
Quantigic Solutions LLC, USA
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We give explicit algorithms and source code for extracting factors underlying Treasury yields using (unsupervised) machine learning (ML) techniques, such as nonnegative matrix factorization (NMF) and (statistically deterministic) clustering. NMF is a popular ML algorithm (used in computer vision, bioinformatics/computational biology, document classification, etc.), but is often misconstrued and misused. We discuss how to properly apply NMF to Treasury yields. We analyze the factors based on NMF and clustering and their interpretation. We discuss their implications for forecasting Treasury yields in the context of out-of-sample ML stability issues.
non-negative matrix factorization, NMF, clustering, k-means, Treasury, yield, machine learning, maturity, time series, out-of-sample, in-sample, weight, factor, exposure, source code, principal component, correlation, forecasting, interest rate, stability, level, slope, steepness, curvature, fixed income, term structure, yield curve.
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Andrey Kudryavtsev
Correspondence: Andrey Kudryavtsev, andreyk@yvc.ac.il
Department of Economics and Management, The Max Stern Yezreel Valley College, Israel
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The study explores the correlation between the immediate and the longer-term stock returns following analyst recommendation revisions. In line with previous studies, documenting that recommendation revisions are followed by significant stock price drifts , I suggest that if a recommendation revision is followed by a relatively large short-term stock price drift, then it may indicate that the new information is more completely reflected by the respective stock's price, creating significantly less reasons for subsequent longer-term price drift, which therefore, should be significantly less pronounced compared to the one following another recommendation revision which is not immediately followed by a significant price drift in a short run. Employing a sample of recommendation revisions, I establish that positive (negative) one-, three- and six-month stock price drifts after recommendation upgrades (downgrades) are significantly more pronounced if the latter are immediately followed by relatively low (high) short-term (5- or 10-day) cumulative abnormal returns. The effect remains robust after accounting for additional company-specific (size, Market-Model beta, historical volatility) and event-specific (number of recommendation categories changed in the revision, analyst experience) factors.
Analyst Recommendation Revisions; Behavioral Finance; Overreaction; Stock Price Drifts.
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