FAS - Dép. Sc. économiques - Corps professoral - Cahiers de recherche
http://hdl.handle.net/1866/152
Thu, 11 Feb 2016 06:35:13 GMT2016-02-11T06:35:13ZLiquidity traps, capital flows
http://hdl.handle.net/1866/12959
Acharya, Sushant; Bengui, Julien <br />2015-12-17 <br />This paper explores the role of capital flows and exchange rate dynamics in shaping the global economy's adjustment in a liquidity trap. Using a multi-country model with nominal rigidities, we shed light on the global adjustment since the Great Recession, a period where many advanced economies were pushed to the zero bound on interest rates. We establish three main results: (i) When the North hits the zero bound, downstream capital flows alleviate the recession by reallocating demand to the South and switching expenditure toward North goods. (ii) A free capital flow regime falls short of supporting efficient demand and expenditure reallocations and induces too little downstream (upstream) flows during (after) the liquidity trap. (iii) When it comes to capital flow management, individual countries' incentives to manage their terms of trade conflict with aggregate demand stabilization and global efficiency. This underscores the importance of international policy coordination in liquidity trap episodes. <br />Article <br />Tue, 26 Jan 2016 20:45:53 GMThttp://hdl.handle.net/1866/129592016-01-26T20:45:53ZInference for nonparametric high-frequency estimators with an application to time variation in betas
http://hdl.handle.net/1866/12855
Kalnina, Ilze <br />2015-07-24 <br />We consider the problem of conducting inference on nonparametric high-frequency estimators without knowing their asymptotic variances. We prove that a multivariate subsampling method achieves this goal under general conditions that were not previously available in the literature. We suggest a procedure for a data-driven choice of the bandwidth parameters. Our simulation study indicates that the subsampling method is much more robust than the plug-in method based on the asymptotic expression for the variance. Importantly, the subsampling method reliably estimates the variability of the Two Scale estimator even when its parameters are chosen to minimize the finite sample Mean Squared Error; in contrast, the plugin estimator substantially underestimates the sampling uncertainty. By construction, the subsampling method delivers estimates of the variance-covariance matrices that are always positive semi-definite.
We use the subsampling method to study the dynamics of financial betas of six stocks on the NYSE. We document significant variation in betas within year 2006, and find that tick data captures more variation in betas than the data sampled at moderate frequencies such as every five or twenty minutes. To capture this variation we estimate a simple dynamic model for betas. The variance estimation is also important for the correction of the errors-in-variables bias in such models. We find that the bias corrections are substantial, and that betas are more persistent than the naive estimators would lead one to believe. <br />Article <br />Thu, 07 Jan 2016 19:42:46 GMThttp://hdl.handle.net/1866/128552016-01-07T19:42:46ZShould a non-rival public good always be provided centrally?
http://hdl.handle.net/1866/12854
Gravel, Nicolas; Poitevin, Michel <br />2015-11-06 <br />This paper discusses the problem of optimal design of a jurisdiction structure from the view point of a utilitarian social planner when individuals with identical utility functions for a non-rival public good and private consumption have private information about their contributive capacities. It shows that the superiority of a centralized provision of a non-rival public good over a federal one does not always hold. Specifically, when differences in individuals’ contributive capacities are large, it is better to provide the public good in several distinct jurisdictions rather than to pool these jurisdictions into a single one. In the specific situation where individuals have logarithmic utilities, the paper provides a complete characterization of the optimal jurisdiction structure in the two-type case. <br />Article <br />Thu, 07 Jan 2016 19:33:36 GMThttp://hdl.handle.net/1866/128542016-01-07T19:33:36ZNonparametric estimation of the leverage effect: a trade-off between robustness and efficiency
http://hdl.handle.net/1866/12853
Kalnina, Ilze; Xiu, Dacheng <br />2015-11-22 <br />We consider two new approaches to nonparametric estimation of the leverage effect. The first approach uses stock prices alone. The second approach uses the data on stock prices as well as a certain volatility instrument, such as the CBOE volatility index (VIX) or the Black-Scholes implied volatility. The theoretical justification for the instrument-based estimator relies on a certain invariance property, which can be exploited when high frequency data is available. The price-only estimator is more robust since it is valid under weaker assumptions. However, in the presence of a valid volatility instrument, the price-only estimator is inefficient as the instrument-based estimator has a faster rate of convergence. We consider two empirical applications, in which we study the relationship between the leverage effect and the debt-to-equity ratio, credit risk, and illiquidity. <br />Article <br />Thu, 07 Jan 2016 19:24:27 GMThttp://hdl.handle.net/1866/128532016-01-07T19:24:27ZOn the individual optimality of economic integration
http://hdl.handle.net/1866/12794
Castro, Rui; Koumtingué, Nelnan <br />2015-11 <br />Which countries find it optimal to form an economic union? We emphasize the risk-sharing benefits of economic integration. Consider an endowment world economy model, where international financial markets are incomplete and contracts not enforceable. A union solves both frictions among member countries. We uncover conditions on initial incomes and net foreign assets of potential union members such that forming a union is welfare-improving over standing alone in the world economy. Consistently with evidence on economic integration, unions in our model occur (i) relatively infrequently, and (ii) emerge more likely among homogeneous countries, and (iii) rich countries. <br />Article <br />Thu, 17 Dec 2015 18:55:36 GMThttp://hdl.handle.net/1866/127942015-12-17T18:55:36ZCross-sectional dependence in idiosyncratic volatility
http://hdl.handle.net/1866/12689
Kalnina, Ilze; Tewou, Kokouvi <br />2015-07 <br />This paper introduces a framework for analysis of cross-sectional dependence in the idiosyncratic volatilities of assets using high frequency data. We first consider the estimation of standard measures of dependence in the idiosyncratic volatilities such as covariances and correlations. Next, we study an idiosyncratic volatility factor model, in which we decompose the co-movements in idiosyncratic volatilities into two parts: those related to factors such as the market volatility, and the residual co-movements. When using high frequency data, naive estimators of all of the above measures are biased due to the estimation errors in idiosyncratic volatility. We provide bias-corrected estimators and establish their asymptotic properties. We apply our estimators to high-frequency data on 27 individual stocks from nine different sectors, and document strong cross-sectional dependence in their idiosyncratic volatilities. We also find that on average 74% of this dependence can be explained by the market volatility. <br />Article <br />Mon, 07 Dec 2015 17:23:27 GMThttp://hdl.handle.net/1866/126892015-12-07T17:23:27ZAmbiguity on the insurer's side: the demand for insurance
http://hdl.handle.net/1866/12688
Amarante, Massimiliano; Ghossoub, Mario; Phelps, Edmund <br />2014-10 <br />Empirical evidence suggests that ambiguity is prevalent in insurance pricing and underwriting, and that often insurers tend to exhibit more ambiguity than the insured individuals (e.g., [23]). Motivated by these findings, we consider a problem of demand for insurance indemnity schedules, where the insurer has ambiguous beliefs about the realizations of the insurable loss, whereas the insured is an expected-utility maximizer. We show that if the ambiguous beliefs of the insurer satisfy a property of compatibility with the non-ambiguous beliefs of the insured, then there exist optimal monotonic indemnity schedules. By virtue of monotonicity, no ex-post moral hazard issues arise at our solutions (e.g., [25]). In addition, in the case where the insurer is either ambiguity-seeking or ambiguity-averse, we show that the problem of determining the optimal indemnity schedule reduces to that of solving an auxiliary problem that is simpler than the original one in that it does not involve ambiguity. Finally, under additional assumptions, we give an explicit characterization of the optimal indemnity schedule for the insured, and we show how our results naturally extend the classical result of Arrow [5] on the optimality of the deductible indemnity schedule. <br />Article <br />Mon, 07 Dec 2015 17:16:29 GMThttp://hdl.handle.net/1866/126882015-12-07T17:16:29ZAmbiguity on the insurer's side: the demand for insurance
http://hdl.handle.net/1866/12275
Amarante, Massimiliano; Ghossoub, Mario; Phelps, Edmund <br />2014-10 <br />Empirical evidence suggests that ambiguity is prevalent in insurance pricing and underwriting, and that often insurers tend to exhibit more ambiguity than the insured individuals (e.g., [23]). Motivated by these findings, we consider a problem of demand for insurance indemnity schedules, where the insurer has ambiguous beliefs about the realizations of the insurable loss, whereas the insured is an expected-utility maximizer. We show that if the ambiguous beliefs of the insurer satisfy a property of compatibility with the non-ambiguous beliefs of the insured, then there exist optimal monotonic indemnity schedules. By virtue of monotonicity, no ex-post moral hazard issues arise at our solutions (e.g., [25]). In addition, in the case where the insurer is either ambiguity-seeking or ambiguity-averse, we show that the problem of determining the optimal indemnity schedule reduces to that of solving an auxiliary problem that is simpler than the original one in that it does not involve ambiguity. Finally, under additional assumptions, we give an explicit characterization of the optimal indemnity schedule for the insured, and we show how our results naturally extend the classical result of Arrow [5] on the optimality of the deductible indemnity schedule. <br />Article <br />Wed, 23 Sep 2015 19:36:54 GMThttp://hdl.handle.net/1866/122752015-09-23T19:36:54ZBaby-boom, baby-bust and the Great Depression
http://hdl.handle.net/1866/11347
Bellou, Andriana; Cardia, Emanuela <br />2014-11 <br />The baby-boom and subsequent baby-bust have shaped much of the history of the second half of the 20th century; yet it is still largely unclear what caused them. This paper presents a new unified explanation of the fertility Boom-Bust that links the latter to the Great Depression and the subsequent economic recovery. We show that the 1929 Crash attracted young married women 20 to 34 years old in 1930 (whom we name D-cohort) in the labor market possibly via an added worker effect. Using several years of Census micro data, we further document that the same cohort kept entering into the market in the 1940s and 1950s as economic conditions improved, decreasing wages and reducing work incentives for younger women. Its retirement in the late 1950s and in the 1960s instead freed positions and created employment opportunities. Finally, we show that the entry of the D-cohort is associated with increased births in the 1950s, while its retirement turned the fertility Boom into a Bust in the 1960s. The work behavior of this cohort explains a large share of the changes in both yearly births and completed fertility of all cohorts involved. <br />Article <br />Thu, 15 Jan 2015 13:50:15 GMThttp://hdl.handle.net/1866/113472015-01-15T13:50:15ZWelfare criteria from choice: the sequential solution
http://hdl.handle.net/1866/11346
Horan, Sean; Sprumont, Yves <br />2015-01 <br />We study the problem of deriving a complete welfare ordering from a choice function. Under the sequential solution, the best alternative is the alternative chosen from the universal set; the second best is the one chosen when the best alternative is removed; and so on.
We show that this is the only completion of Bernheim and Rangel's (2009) welfare relation that satisfies two natural axioms: neutrality, which ensures that the names of the alternatives are welfare-irrelevant; and persistence, which stipulates that every choice function between two welfare-identical choice functions must exhibit the same welfare ordering. <br />Article <br />Wed, 14 Jan 2015 20:11:03 GMThttp://hdl.handle.net/1866/113462015-01-14T20:11:03ZObject allocation via deferred-acceptance: strategy-proofness and comparative statics
http://hdl.handle.net/1866/11345
Ehlers, Lars; Klaus, Bettina <br />2014-12 <br />We study the problem of assigning indivisible and heterogenous objects (e.g., houses, jobs, offices, school or university admissions etc.) to agents. Each agent receives at most one object and monetary compensations are not possible. We consider mechanisms satisfying a set of basic properties (unavailable-type-invariance, individual-rationality, weak non-wastefulness, or truncation-invariance).
In the house allocation problem, where at most one copy of each object is available, deferred-acceptance (DA)-mechanisms allocate objects based on exogenously fixed objects' priorities over agents and the agent-proposing deferred-acceptance-algorithm. For house allocation we show that DA-mechanisms are characterized by our basic properties and (i) strategy-proofness and population-monotonicity or (ii) strategy-proofness and resource-monotonicity.
Once we allow for multiple identical copies of objects, on the one hand the first characterization breaks down and there are unstable mechanisms satisfying our basic properties and (i) strategy-proofness and population-monotonicity. On the other hand, our basic properties and (ii) strategy-proofness and resource-monotonicity characterize (the most general) class of DA-mechanisms based on objects' fixed choice functions that are acceptant, monotonic, substitutable, and consistent. These choice functions are used by objects to reject agents in the agent-proposing deferred-acceptance-algorithm. Therefore, in the general model resource-monotonicity is the «stronger» comparative statics requirement because it characterizes (together with our basic requirements and strategy-proofness) choice-based DA-mechanisms whereas population-monotonicity (together with our basic properties and strategy-proofness) does not. <br />Article <br />Tue, 13 Jan 2015 21:22:54 GMThttp://hdl.handle.net/1866/113452015-01-13T21:22:54ZCross-sectoral variation in the volatility of plant-level idiosyncratic shocks
http://hdl.handle.net/1866/11344
Castro, Rui; Clementi, Gian Luca; Lee, Yoonsoo <br />2014-06 <br />We estimate the volatility of plant–level idiosyncratic shocks in the U.S. manufacturing sector. Our measure of volatility is the variation in Revenue Total Factor Productivity which is not explained by either industry– or economy–wide factors, or by establishments’ characteristics. Consistent with previous studies, we find that idiosyncratic shocks are much larger than aggregate random disturbances, accounting for about 80% of the overall uncertainty faced by plants. The extent of cross–sectoral variation in the volatility of shocks is remarkable. Plants in the most volatile sector are subject to about six times as much idiosyncratic uncertainty as plants in the least volatile. We provide evidence suggesting that idiosyncratic risk is higher in industries where the extent of creative destruction is likely to be greater. <br />Article <br />Tue, 13 Jan 2015 21:07:45 GMThttp://hdl.handle.net/1866/113442015-01-13T21:07:45ZOn the individual optimality of economic integration
http://hdl.handle.net/1866/11343
Castro, Rui; Koumtingué, Nelnan <br />2014-08 <br />Which countries find it optimal to form an economic union? We emphasize the risk-sharing benefits of economic integration. Consider an endowment world economy model, where international financial markets are incomplete and contracts not enforceable. A union solves both frictions among member countries. We uncover conditions on initial incomes and net foreign assets of potential union members such that forming a union is welfare-improving over standing alone in the world economy. Consistently with evidence on economic integration, unions in our model occur (i) relatively infrequently, and (ii) emerge more likely among homogeneous countries, and (iii) rich countries. <br />Article <br />Tue, 13 Jan 2015 20:59:48 GMThttp://hdl.handle.net/1866/113432015-01-13T20:59:48ZExplaining the evolution of educational attainment in the U.S.
http://hdl.handle.net/1866/11053
Castro, Rui; Coen-Pirani, Daniele <br />2014-07 <br />We study the evolution of educational attainment of the 1932–1972 cohorts using a calibrated model of investment in human capital with heterogeneous learning ability. The inter-cohort variation in schooling is driven by changes in skill prices, tuition, and education quality over time, and average learning ability across cohorts. A version of the model with static expectations is successful in accounting for the main patterns in the data. Rising skill prices for college explain the rapid increase in college graduation till the 1948 cohort. The measured decline in average learning ability contributes to explain the stagnation in college graduation between the 1948 and 1972 cohorts. <br />Article <br />Fri, 03 Oct 2014 14:30:06 GMThttp://hdl.handle.net/1866/110532014-10-03T14:30:06ZSize invariant measures of association: characterization and difficulties
http://hdl.handle.net/1866/11052
Negri, Margherita; Sprumont, Yves <br />2014-08 <br />A measure of association is row-size invariant if it is unaffected by the multiplication of all entries in a row of a cross-classification table by a same positive number. It is class-size invariant if it is unaffected by the multiplication of all entries in a class (i.e., a row or a column). We prove that every class-size invariant measure of association as-signs to each m x n cross-classification table a number which depends only on the cross-product ratios of its 2 x 2 subtables. We propose a monotonicity axiom requiring that the degree of association should increase after shifting mass from cells of a table where this mass is below its expected value to cells where it is above .provided that total mass in each class remains constant. We prove that no continuous row-size invariant measure of association is monotonic if m ≥ 4. Keywords: association, contingency tables, margin-free measures, size invariance, monotonicity, transfer principle. <br />Article <br />Fri, 03 Oct 2014 14:24:45 GMThttp://hdl.handle.net/1866/110522014-10-03T14:24:45Z