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1 – 10 of 41Jennifer L. Castle and David F. Hendry
Structural models' inflation forecasts are often inferior to those of naïve devices. This chapter theoretically and empirically assesses this for UK annual and quarterly…
Abstract
Structural models' inflation forecasts are often inferior to those of naïve devices. This chapter theoretically and empirically assesses this for UK annual and quarterly inflation, using the theoretical framework in Clements and Hendry (1998, 1999). Forecasts from equilibrium-correction mechanisms, built by automatic model selection, are compared to various robust devices. Forecast-error taxonomies for aggregated and time-disaggregated information reveal that the impacts of structural breaks are identical between these, helping to interpret the empirical findings. Forecast failures in structural models are driven by their deterministic terms, confirming location shifts as a pernicious cause thereof, and explaining the success of robust devices.
Roberta A. Scull and Barbara S. Kavanaugh
Bobbie Scull's bibliography of federal government bibliographies was begun in 1971 as an annual informational publication primarily intended for the faculty at Louisiana State…
Abstract
Bobbie Scull's bibliography of federal government bibliographies was begun in 1971 as an annual informational publication primarily intended for the faculty at Louisiana State University. Later she distributed it to libraries all over the state of Louisiana. In 1973 RSR began to publish these lists on an annual basis. This is the fourth such appearance. In the meantime these bibliographies were cumulated and published in two volumes: Bibliography of U.S. Government Bibliographies 1968–73 and 1974–76. (Pierian Press, 1975, 1979). RSR is proud to continue the annual supplements which are now computer produced at LSU. Although this supplement appears in Volume 8:1 (1980) in the future they will appear in the final issue of the year.
This study aims to elucidate the dynamics of monetary and fiscal policy interactions in Brazil, focusing on the impacts of positive shocks in government consumption and interest…
Abstract
Purpose
This study aims to elucidate the dynamics of monetary and fiscal policy interactions in Brazil, focusing on the impacts of positive shocks in government consumption and interest rates. By comparing rational and behavioral agent responses, it clarifies how these frameworks influence gross domestic product (GDP), inflation, private and government consumption and nominal interest rates.
Design/methodology/approach
The study employs a new Keynesian dynamic stochastic general equilibrium (DSGE) model with Bayesian estimation from 2000Q1 to 2022Q4, capturing rational and behavioral behaviors with adjustments for Brazilian economic idiosyncrasies. Impulse response functions (IRF) assess the dynamic effects of policy shocks, providing a comparative analysis of the two frameworks.
Findings
Behavioral agents show greater initial sensitivity to policy shocks, causing more pronounced fluctuations in GDP, inflation and private consumption compared to rational agents. Over time, the behavioral approach leads to a more robust recovery, while the rational approach results in a quicker return to equilibrium but less pronounced long-term recovery. The study also finds fiscal policy can partially offset the negative impacts of monetary tightening, with a more delayed effect in the behavioral model.
Originality/value
This paper provides insights into the interplay between monetary and fiscal policies under different agent expectations, emphasizing the importance of incorporating behavioral elements into macroeconomic models to better capture policy dynamics in emerging markets.
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Amit Majumder, Megnath Routh and Dipayan Singha
One of the noteworthy developments in the world economy is the cryptocurrency in general and the bitcoin in particular. Although several types of cryptocurrency are in operation…
Abstract
One of the noteworthy developments in the world economy is the cryptocurrency in general and the bitcoin in particular. Although several types of cryptocurrency are in operation in the current digital economy, the most prevalent is the bitcoin, which was launched formally in 2009 by an individual or group known under the pseudonym Satoshi Nakamoto. The value of bitcoin has increased to such an extend that it reached 19.7 billion US dollars by January 2, 2018 (Statista, 2018). As the bitcoin price touches a new high day by day, various terrorist organizations are using this cryptocurrency to anonymously finance their grotesque terrorist activities around the world by bypassing the surveillance mechanism of the banking system of the respective countries. Against this backdrop, this chapter aims to understand the mechanism of cryptocurrencies in general and the bitcoin in particular. Finally, it also endeavors to identify the trend of the bitcoin economy and its impact on nefarious activities in general and terrorism financing in particular. It has been revealed from the study that cryptocurrency economy has become so popular across the world that it has created an alternative virtual economy devoid of regulations from a specific country or a group of countries. By using vector error correction model (VECM), it had been observed that there exists a statistically significant long-run association between terrorist incidences and bitcoin transaction/circulation in the panel of 12 countries for 2010–2016. However, there is a huge concern over its way of operation and its unholy nexus with terrorism financing.
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Ashima Goyal and Prashant Parab
The authors model heterogeneity of inflation expectations across Indian households using the Inflation Expectations Survey of Households data set. Using Carroll-type…
Abstract
The authors model heterogeneity of inflation expectations across Indian households using the Inflation Expectations Survey of Households data set. Using Carroll-type epidemiological models and pooled cross sectional analyses, the authors find that women, homemakers, older people and Tier 2 and 3 city dwellers tend to have higher inflation expectations compared to their counterparts. In the epidemiological model-based analysis, these very cohorts display higher speed of adjustment to news. Overall higher relative adjustment speeds point to the significance of central bank communications.
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This chapter examines a class of interest rate rules that respond to public expectations and to lagged variables. Varying levels of commitment correspond to varying degrees of…
Abstract
This chapter examines a class of interest rate rules that respond to public expectations and to lagged variables. Varying levels of commitment correspond to varying degrees of response to lagged output and targeting of the price level. If the response rises (unintentionally) above the optimal level, the outcome deteriorates severely. Hence, the optimal level of commitment is sensitive to the method of expectations formation and partial commitment is the robust, optimal policy. The policymaker should adjust the price level toward a target, but complete adjustment is neither necessary nor desirable.
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Jörgen Hellström, Rickard Olsson and Oscar Stålnacke
The purpose of this paper is to measure individual investors’ expectations of risk and return and to evaluate different expectation measures.
Abstract
Purpose
The purpose of this paper is to measure individual investors’ expectations of risk and return and to evaluate different expectation measures.
Design/methodology/approach
The authors measure individual investors’ expectations of risk and return regarding an index fund and two stocks using survey data on a random sample of individual investors in Sweden. The survey contains three different return and four different risk expectation measures. To evaluate the different expectation measures, three different evaluation perspectives are considered.
Findings
The risk expectations obtained from the different measures are positively correlated across respondents, but their average magnitudes differ considerably across measures. The return expectations are also positively correlated, and their magnitudes also differ, but to a lesser extent. Consequently, the same individual can express risk expectations that either underestimate or overestimate the forward risk, depending on the measure that is used. The variations in the expectations mainly relate to differences in the responses to the questions underlying the different measures, rather than to the methods used to obtain the expectations. The results from the evaluation of the measures indicate that the expectation measure proposed by Dominitz and Manski (2011) is the only measure for which it is possible to distinguish between individuals’ expectations, using all three of the evaluation perspectives.
Originality/value
This is, to the best of the authors’ knowledge, the first paper that evaluates different survey measures of individual investors’ expectations of risk and return.
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This paper aims to present a simple behavioural explanation of the prohibition of speculation in Islamic finance.
Abstract
Purpose
This paper aims to present a simple behavioural explanation of the prohibition of speculation in Islamic finance.
Design/methodology/approach
This paper proposes a theoretical model that describes how investors from low income strata of the society may be prone to make sub-optimal decisions when they compare their outcome from a speculative trading activity to that of the counterparty to the trade and perceive inequity to exist.
Findings
When individuals from low income strata of the society compare their current situation with the average income of the society, they perceive themselves to be in a loss. This creates a loss frame within which they then evaluate all future outcomes. When such individuals invest in speculative trading activities and incur a loss, they compare their outcome from the trade to that of the counterparty to the trade. As speculative trades are a zero sum game, the counterparty makes an equivalent gain from the trade. Thus, the comparison leads to a perception of inequity. This perception of inequity is aggravated by the loss frame within which the investor is operating. The aggravated inequity aversion may then motivate the investor to make further sub-optimal decisions like repeated speculative trading activities. The Islamic prohibition on speculative trading activities may serve to protect low income investors from entering into such cycles of sub-optimal decisions.
Originality/value
This paper offers a unique explanation of why day trading and short selling may be prohibited in Islamic capital markets.
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This study aims to examine short- and long-run effects of specific macroeconomic conditions on risk premium estimates on lending.
Abstract
Purpose
This study aims to examine short- and long-run effects of specific macroeconomic conditions on risk premium estimates on lending.
Design/methodology/approach
Empirical estimates are based on error correction and autoregressive distributed lag models.
Findings
The results suggest that, in the short run, inflation expectations, recession expectations and actual inflationary conditions tend to have a significant impact on risk premium estimates; in the long run, however, only inflation expectations and recession expectations are significant in risk premium estimates on lending.
Originality/value
This study examines how specific conditions of uncertainty and expectations influence variability in risk premium estimates on lending in the US economy.
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Dimitrios Anastasiou and Stelios Giannoulakis
This study investigates which expectation formation mechanism governs Eurozone firms regarding their expectations on external finance availability.
Abstract
Purpose
This study investigates which expectation formation mechanism governs Eurozone firms regarding their expectations on external finance availability.
Design/methodology/approach
In this study, we link consecutive surveys from the Survey on the Access to Finance of Enterprises to bring new evidence on how non-financial corporations shape their expectations on external finance availability.
Findings
In line with the past literature, we demonstrate that the data reject the Rational Expectations hypothesis, and we find evidence in favor of the Adaptive Expectation mechanism.
Originality/value
This is the first study studying firms' expectations of external finance availability, implementing survey data of firms' expectations from the SAFE database on a country level. The formation of firm expectations is vital in directing policymakers in designing appropriate monetary policies, as both the employment and inflation targets of central banks around the world are highly dependent on the firm-level decision process.
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