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Risk-sharing is a crucial issue in order to evaluate the performance of a monetary union. By implementing conventional econometric techniques, this paper intends to…
Risk-sharing is a crucial issue in order to evaluate the performance of a monetary union. By implementing conventional econometric techniques, this paper intends to estimate the degree of risk-sharing through the cross-ownership of assets within 11 European countries in the period 1971–2014. We show that risk-sharing has been increasing after the launch of the euro due to increased cross-ownership of assets. Nevertheless, we also show that despite the extreme needs for adjustment mechanisms as a reaction to asymmetric shocks in the EMU during the crises, the estimated market risk-sharing mechanism seems to have remained marginal in this period. We also show that the degree of asymmetry (potential benefits from risk-sharing) has declined with the start of the EMU, but it has sharply increased during the crises period. This implies that EMU countries have needed good functioning risk-sharing mechanisms during the crisis, while in this period their estimated performance does not seem to have improved. We interpret these results as the evidence of a missing element of the EMU that forced governments to intervene by means of fiscal policy to tackle the imbalances deriving from the financial crisis. Therefore, we conclude that the weakness in the risk-sharing has been one of the channels that allowed the global financial crisis to mutate in a sovereign debt crisis in the EMU.
Purpose: The purpose of this paper is to investigate whether inequality aversion is influenced by the risk level. Recently empirical evidence points to deviations from selfish behavior of Homo economicus. Thus, people are not motivated solely by their own monetary payoffs, but are also concerned about issues of equality and fairness. This paper distinguishes between inequality aversion and risk aversion and discusses whether the level of risk affects these motivations.
Design: In an experimental framework the attitude toward inequality is separated from the attitude toward risk. A risky environment is generated by a set of lotteries. The subjects had to determine the method for payment, equally (CG) or nonequally (IG), for three lotteries with different levels of risk. The inequality preferences are measured by the level of the selected probability for CG.
Findings: The main finding of this paper is that preferences for inequality are influenced by level of risk. We found that aversion to inequality was stronger when the level of risk was higher. In the low and medium risk lotteries participants preferred the individual gamble – the nonegalitarian method. Only in the high-risk lottery the participants preferred the common gamble that assured them equal payments.
Originality/value: The paper distinguishes between inequality aversion and risk aversion and subjects are allowed to trade one off against the other. Thus, it contributes to the understanding of the interrelationship between income inequality and risk.
Purpose: This chapter discusses the need for climate change risk mitigation and why it is not the responsibility of Central Banks to mitigate climate change risk.…
Purpose: This chapter discusses the need for climate change risk mitigation and why it is not the responsibility of Central Banks to mitigate climate change risk.
Methodology: This chapter uses critical discourse analysis to explain why central banks should not have the responsibility for climate change risk mitigation.
Findings: This chapter argues that the responsibility for managing climate change risk should lie with elected officials, other groups and institutions but not Central Banks. Elected officials, or politicians, should be held responsible to deal with the consequence of climate change events. Also, international organizations and everybody can take responsibility for climate change while the Central Bank can provide assistance – but Central Banks should not lead the climate policy making or mitigation agenda.
Implication: The policy implication is that the responsibility for climate change risk mitigation should be shifted to politicians who are elected officials of the people. Also, international climate change organizations or groups can take responsibility for mitigating the climate change risk of member countries. Finally, citizens in a country or region should have equal responsibility for climate change. Climate information should be provided to every citizen to help them prepare for future climatic conditions.
Originality: This chapter propagates the idea that Central Banks should take a lead role in dealing with the problems of climate change. This chapter is the first chapter to contest a Central Bank-led climate change risk mitigation agenda.
Although the significance of travel risks is well documented, the process through which people assess their vulnerability and ultimately take on preventive measures needs…
Although the significance of travel risks is well documented, the process through which people assess their vulnerability and ultimately take on preventive measures needs clarification. Motivated by concern with traveler’s underestimation of risks, this chapter provides a crucial next step by introducing new theory to explain how people calibrate travel risks. The conceptual model incorporates constructs from motivational theories, cognitive appraisal, and emotionality. Future studies adopting this model will broaden the nature and scope of research on travel risk while helping government and industry to increase the reach and relevance of travel health and safety messages.