| 11. |
- Christiano, Lawrence J., et al.
(författare)
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Introducing financial frictions and unemployment into a small open economy model
- 2011
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Ingår i: Journal of Economic Dynamics and Control. - : Elsevier BV. - 0165-1889 .- 1879-1743. ; 35:12, s. 1999-2041
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Tidskriftsartikel (refereegranskat)abstract
- Which are the main frictions and the driving forces of business cycle dynamics in an open economy? To answer this question we extend the standard new Keynesian model in three dimensions: we incorporate financing frictions for capital, employment frictions for labor and extend the model into a small open economy setting. We estimate the model on Swedish data. Our main results are that (i) a financial shock is pivotal for explaining fluctuations in investment and GDP. (ii) The marginal efficiency of investment shock has negligible importance. (iii) The labor supply shock is unimportant in explaining GDP and no high frequency wage markup shock is needed.
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| 12. |
- Di Corato, Luca
(författare)
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Financing flexibility: The case of outsourcing
- 2017
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Ingår i: Journal of Economic Dynamics and Control. - : Elsevier BV. - 0165-1889. ; 76, s. 35-65
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Tidskriftsartikel (refereegranskat)abstract
- We investigate the relationship between the extent and timing of vertical flexibility and the financial choices of a firm. By vertical flexibility we mean partial/total and reversible outsourcing of a necessary input. A firm simultaneously selects the vertical setting and the financial sources of investment in flexibility, in particular debt and venture capital. A loan may come from a lender that requires the payment of a fixed coupon over time and an option to buy out the firm in certain circumstances. Debt leads to the same level of flexibility of an unlevered firm. Yet investment occurs earlier. The injection of venture capital reduces the quest for vertical flexibility and speeds up investment. Then, there arises a fresh substitutability between a financial (venture capital) and a real variable (vertical flexibility). (C) 2017 Elsevier B.V. All rights reserved.
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| 13. |
- Ewald, Christian Oliver, et al.
(författare)
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On the adaptation of the Lagrange formalism to continuous time stochastic optimal control : a Lagrange-Chow redux
- 2024
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Ingår i: Journal of Economic Dynamics and Control. - : Elsevier. - 0165-1889 .- 1879-1743. ; 162
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Tidskriftsartikel (refereegranskat)abstract
- We show how the classical Lagrangian approach to solving constrained optimization problems from standard calculus can be extended to solve continuous time stochastic optimal control problems. Connections to mainstream approaches such as the Hamilton-Jacobi-Bellman equation and the stochastic maximum principle are drawn. Our approach is linked to the stochastic maximum principle, but more direct and tied to the classical Lagrangian principle, avoiding the use of backward stochastic differential equations in its formulation. Using infinite dimensional functional analysis, we formalize and extend the approach first outlined in Chow (1992) within a rigorous mathematical setting using infinite dimensional functional analysis. We provide examples that demonstrate the usefulness and effectiveness of our approach in practice. Further, we demonstrate the potential for numerical applications facilitating some of our key equations in combination with Monte Carlo backward simulation and linear regression, therefore illustrating a completely different and new avenue for the numerical application of Chow's methods.
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| 14. |
- Fang, Dawei, 1983, et al.
(författare)
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How tournament incentives affect asset markets: A comparison between winner-take-all tournaments and elimination contests
- 2017
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Ingår i: Journal of Economic Dynamics and Control. - : Elsevier BV. - 0165-1889. ; 75, s. 1-27
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Tidskriftsartikel (refereegranskat)abstract
- We investigate the impact of investment managers׳ tournament incentives on investment strategies and market efficiency, distinguishing between winner-take-all tournaments (WTA), where a minority wins, and elimination contests (EC), where a majority wins. Theoretically, we show that investment managers play heterogeneous strategies in WTA and homogeneous strategies in EC, and markets are more prone to mispricing in WTA than in EC. Experimentally, we find that investment managers play more heterogeneous strategies in WTA than in EC, but this does not trigger significant differences in prices. Moreover, prices in WTA and EC do not differ significantly from markets composed of linearly incentivized subjects.
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| 15. |
- Fischer, Thomas
(författare)
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Thomas Piketty and the rate of time preference
- 2017
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Ingår i: Journal of Economic Dynamics and Control. - : Elsevier BV. - 0165-1889. ; 77, s. 111-133
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Tidskriftsartikel (refereegranskat)abstract
- Using a standard model in which the individual consumption path is computed solving an optimal control problem, we investigate central claims of Piketty (2014). Rather than r > g (confirmed in the data) r−ρ>g – with ρ being the rate of time preference – matters. If this condition holds and the elasticity of substitution in the production function is larger than one, the capital share converges to one in the long run. Nevertheless, this does not have major impact on the distribution of wealth. The latter, however, converges to maximum inequality for heterogeneous time preferences or rates of interest (either persistent or stochastic). For the latter, the presence of finite life times leads to a distribution with finite wealth inequality featuring fat tails.
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| 16. |
- Gustavsson, Magnus, 1972-, et al.
(författare)
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Does the labor-income process contain a unit root? : Evidence from individual-specific time series
- 2014
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Ingår i: Journal of Economic Dynamics and Control. - : Elsevier. - 0165-1889 .- 1879-1743. ; 47, s. 152-167
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Tidskriftsartikel (refereegranskat)abstract
- Calibrations of models related to life-cycle behavior of consumption and saving often invoke the important assumption of a unit root in individuals' labor-income process. We for the first time test this assumption using methods for univariate time series. Based on longitudinal register data from 1968 to 2005, we first estimate an autoregressive model for each individual using a method for approximately median-unbiased estimation. We then exploit the resulting distribution of the individual-specific estimates to draw inference about the presence of a unit root. Results indicate that earnings for the representative worker are governed by a process where shocks to earnings have moderate persistence and are both economically and statistically significantly different from having permanent effects. These results question the heavy use of unit-root processes for earnings.
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| 17. |
- Hart, Robert
(författare)
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Non-renewable resources in the long run
- 2016
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Ingår i: Journal of Economic Dynamics and Control. - : Elsevier BV. - 0165-1889. ; 71, s. 1-20
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Tidskriftsartikel (refereegranskat)abstract
- We model a competitive economy in which production is dependent on labor and a non-renewable resource, the stock of which is inhomogeneous. We solve the model analytically and show how in infinite time the economy moves away from an initial balanced growth path (b.g.p.) and towards a mature b.g.p. The characteristics of the initial b.g.p. match historical observations of slowly declining resource price and consumption growth tracking global product. The mature b.g.p. depends on the nature of the stock; the more steeply cross-sectional area declines with depth, the faster the rate of price increase. We show how the theoretical model may be adapted and parameterized to explain and predict the evolution of markets for specific resources, applying the model in two cases, copper and petroleum. (C) 2016 Elsevier B.V. All rights reserved.
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| 18. |
- Holmén, Martin, 1966, et al.
(författare)
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Do option-like incentives induce overvaluation? Evidence from experimental asset markets
- 2014
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Ingår i: Journal of Economic Dynamics and Control. - : Elsevier BV. - 0165-1889. ; 40, s. 179-194
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Tidskriftsartikel (refereegranskat)abstract
- One potential reason for bubbles evolving prior to the financial crisis was excessive risk taking stemming from option-like incentive schemes in financial institutions. By running laboratory asset markets, we investigate the impact of option-like incentives on price formation and trading behavior. The main results are that (i) we observe significantly higher market prices with option-like incentives than linear incentives. (ii) We further find that option-like incentives provoke subjects to behave differently and to take more risk than subjects with linear incentives. (iii) We finally show that trading at inflated prices is rational for subjects with option-like incentives since it increases their expected payout. © 2014 Elsevier B.V.
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| 19. |
- Huber, Jürgen, et al.
(författare)
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The impact of a financial transaction tax on stylized facts of price returns-Evidence from the lab
- 2012
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Ingår i: Journal of Economic Dynamics & Control. - : Elsevier BV. - 0165-1889. ; 36:8, s. 1248-1266
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Tidskriftsartikel (refereegranskat)abstract
- As the introduction of financial transaction taxes is increasingly discussed by political leaders we explore possible consequences such taxes could have on markets. Here we examine how "stylized facts", namely fat tails and volatility clustering, are affected by different tax regimes in laboratory experiments. We find that leptokurtosis of price returns is highest and clustered volatility is weakest in unilaterally taxed markets (where tax havens exist). Instead, tails are slimmest and volatility clustering is strongest in tax havens. When an encompassing financial transaction tax is levied, stylized facts hardly change compared to a scenario with no tax on all markets. (C) 2012 Elsevier B.V. All rights reserved.
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| 20. |
- Iacopini, Matteo, et al.
(författare)
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Bayesian mixed-frequency quantile vector autoregression : Eliciting tail risks of monthly US GDP
- 2023
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Ingår i: Journal of Economic Dynamics and Control. - : Elsevier. - 0165-1889 .- 1879-1743. ; 157
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Tidskriftsartikel (refereegranskat)abstract
- Timely characterizations of risks in economic and financial systems play an essential role in both economic policy and private sector decisions. However, the informational content of low-frequency variables and the results from conditional mean models provide only limited evidence to investigate this problem. We propose a novel mixed-frequency quantile vector autoregression (MF-QVAR) model to address this issue. Inspired by the univariate Bayesian quantile regression literature, the multivariate asymmetric Laplace distribution is exploited under the Bayesian framework to form the likelihood. A data augmentation approach coupled with a precision sampler efficiently estimates the missing low-frequency variables at higher frequencies under the state-space representation.The proposed methods allow us to analyse conditional quantiles for multiple variables of interest and to derive quantile-related risk measures at high frequency, thus enabling timely policy interventions. The main application of the model is to detect the vulnerability in the US economy and then to nowcast conditional quantiles of the US GDP, which is strictly related to the quantification of Value-at-Risk, the Expected Shortfall and distance among percentiles of real GDP nowcasts.
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