information technology and productivity evidence from country level data this paper studies a key driver of the demand for the products and services of the global it industry returns from it investments we estimate an intercountry production function relating it and non it inputs to gdp output on panel data from 36 countries over the 1985 1993 period we find significant differences between developed and developing countries with respect to their structure of returns from capital investments for the developed countries in the sample returns from it capital investments are estimated to be positive and significant while returns from non it capital investments are not commensurate with relative factor shares the situation is reversed for the developing countries subsample where returns from non it capital are quite substantial but those from it capital investments are not statistically significant we estimate output growth contributions of it and non it capital and discuss the contrasting policy implications for capital investment by developed and developing economies

time consistent public policy in this paper we study how a benevolent government that cannot commit to future policy should trade off the costs and benefits of public expenditure we characterize and solve for markov perfect equilibria of the dynamic game between successive governments the characterization consists of an inter temporal first order condition a generalized euler equation for the government and we use it both to gain insight into the nature of the equilibrium and as a basis for computations for a calibrated economy we find that when the only tax base available to the government is capital income an inelastic source of funds at any point in time the government still refrains from taxing at confiscatory rates we also find that when the only tax base is labour income the markov equilibrium features less public expenditure and lower tax rates than the ramsey equilibrium

economic policy uncertainty financial markets and probability of us recessions we use probit recession forecasting models to assess the ability of economic policy uncertainty indexes developed by baker et al 2013 to predict future us recessions the model specifications include policy indexes on their own and in combination with financial variables such as interest rate spreads stock returns and stock market volatility both in sample and out of sample analysis suggests that the policy uncertainty indexes are statistically and economically significant in forecasting recessions at the horizons beyond five quarters the index based on newspaper reports emerges as the best predictor outperforming the term spread at the longer forecast horizons

the timing of uncertainty shocks in a small open economy abstract foreign measures of uncertainty such as the us epu index are often used as a proxies for domestic uncertainty in small open economies we construct an epu index for sweden and demonstrate that shocks to the domestic index yield different impulse response functions for gdp growth than shocks to the us index in particular a one standard deviation shock to the swedish index delivers its maximum impact in the same quarter lowering gdp growth by slightly less than 0 2 percentage points in contrast a shock to the us index delivers its maximum impact with a one quarter delay other foreign proxies such as the european and german indices also generate effects that peak with a one quarter delay

polarized business cycles abstract four stylized facts motivate this paper i business cycle movements are wider in emerging countries ec than in developed ones ii ec experience greater economic policy uncertainty iii ec are more polarized and less politically stable and iv epu is positively related to political polarization a standard real business cycle model augmented to incorporate political polarization a polarized business cycle pbc model is shown to be consistent with these facts we first derive our results analytically and then quantify the effects of a permanent increase in polarization to the us economy

information technology and time based competition in financial markets this paper studies time based competition in imperfect securities markets linking it investment decisions information processing delays and trading strategies at the it investment stage traders trade off the cost of it against their anticipated trading profits at the trading stage each trader devises a trading strategy based on his new information while taking into account the impact of both his own trades and those of other traders in the market our results illustrate how traders react to market imperfections due to trading costs and information processing delays and how superior traders convert a timeliness advantage into higher trading profits they also shed light on the relationship between the price adjustment process and traders information processing delays timeliness imposes an interesting structure on trader competition traders with longer information processing delays trade less frequently submit smaller orders and enjoy lower profits per trade our analysis of traders it investment decisions demonstrates how factors such as it costs number of traders and the frequency and nature of new information affect the level of it investments we further illustrate how improved it infrastructure translates into competitive advantage

how efficient is the substitution of debt for taxes in influencing demand a 52 country macro theoretic model is developed in order to test the ricardian view that debt and tax finance are equivalent the alternative traditional view is that government expenditures financed by tax revenue affect the economy in profoundly different ways than expenditures financed by bond issuance a rigorous testing of the model indicates that a present value preserving transfer of income from future generations affects the consumption of the current generations in a positive for solvent countries or negative for debt ridden countries way an explanation for this divergence in consumer s behaviour is attempted via the concept of debt illusion

forecasting in the euro area the role of the us long rate this letter analyses the relationship between economic variables in the euro area and the united states and determines the importance of various indicators in forecasting the euro area macroeconomy results using a novel empirical technique show that innovations in the u s long term interest rate long rate explain substantial variation in euro area gdp and inflation this finding is consistent over a historical sample and supports the emphasis placed on u s economic conditions when constructing projections of the euro area macroeconomic outlook the important contribution of the u s long rate most likely indicates its value as a proxy for the state of the global economy

the effects of economic policy uncertainty on china s economy evidence from time varying parameter favar this article explores the effects of china s economic policy uncertainty epu on its fiscal policy monetary policy and a wide range of macro economic variables using a time varying parameter fava

trading mechanisms and stock returns an empirical investigation this paper examines the effects of the mechanism by which securities are traded on their price behavior we compare the behavior of open to open and close to close returns on nyse stocks given the differences in execution methods applied in the opening and closing transactions opening returns are found to exhibit greater dispersion greater deviations from normality and a more negative and significant autocorrelation pattern than closing returns we study the effects of the bid ask spread and the price adjustment process on the estimated return variances and covariances and discuss the associated biases we conclude that the trading mechanism has a significant effect on stock price behavior

utility profits fiscal illusion and local public expenditures the main purpose of this paper has been to examine theoretically and empirically the effects of internal subsidization by municipal utilities on local public expenditures and tax burdens the hypothesis was deduced that internal subsidization severs the link between public benefits received and taxes paid creating a fiscal illusion that induces consumer taxpayers to underestimate the actual cost of government this in turn would lead to larger expenditure levels than would otherwise be forthcoming this hypothesis was tested statistically with a sample of fifty two municipalities in the state of new york which use utility profits to subsidize the general fund and sixty four other municipalities which do not a reduced form public expenditure model was estimated which included a dummy variable to check for any differences in expenditures ceteris paribus between the subsidy cities and others it was found that subsidy cities had larger expenditure levels all other things equal which adds support for the main hypothesis it was also found that while it is possible that utility profits may be substituted for other local revenue sources in the sample of new york municipalities studied internal subsidization is likely to have stimulated expenditures leading to an increase in local tax collections this result adds further support for the main hypothesis

the effect of value line investment survey rank changes on common stock prices abstract the information content of value line investment survey rank changes is investigated the results suggest rank changes affect common stock prices but the effect varies by the type of rank change changes from rank 2 to rank 1 have the most dramatic impact on prices a cross sectional analysis finds small firms have a greater reaction to a rank change than larger firms which supports theories on the frequency of report arrival and precision of information a speed of adjustment test concludes the prices of individual securities adjust to the information in a rank change over a multiple day period

commodity price changes and the predictability of economic policy uncertainty in this study we forecast economic policy uncertainty epu using input on 23 commodity price changes we reveal the significant predictability of epu using three forecast combinations this indicates that commodity price changes can be taken as a leading indicator of epu

economic policy uncertainty shocks economic activity and exchange rate adjustments abstract we investigate the impact of foreign and domestic economic policy uncertainty epu shocks on the uk economy simulations with a structural var model indicate that domestic industrial production declines after a shock to the epu index in the us on the contrary disturbances to domestic uncertainty are an important source of real exchange rate fluctuations historical decomposition shows that a surge in domestic epu after brexit referendum was the reason behind a massive depreciation of the british pound these results are robust to different model specifications

economic policy uncertainty and real output evidence from the g7 countries we use economic policy uncertainty index and impulse response based test to assess the impact of economic policy related uncertainty on real economic activity we use monthly data over the period

dynamic connectedness of uncertainty across developed economies a time varying approach abstract economic uncertainty has attracted a significant part of the modern research in economics proving to be a significant factor for every economy in this study we focus on the transmission channel of uncertainty between developed economies examining potential spillover effects between the u s the e u the u k japan and canada within a time varying framework our empirical results indicate of a significant spillover of uncertainty from the e u to the u s

the existence of equilibrium in discontinuous economic games ii applications in part i of this study we established two existence theorems for mixed strategy equilibrium in games with discontinuous payoff functions see theorems 4 4 and 5 5 in dasgupta and maskin 1986 hereafter d m 1986 in this second part we use the second of these two theorems to prove the existence of mixed strategy equilibrium in some wellknown discontinuous economic games that fail to have pure strategy equilibria the models we analyse are the bertrand edgeworth example of price setting duopolists with capacity constraints see section 2 2 price competition among firms producing differentiated products hotelling 1929 and d aspremont gabszewicz and thisse 1979 see section 2 3 spatial competition eaton and lipsey 1975 and shaked 1975 see section 3 and models of market dependent information rothschild and stiglitz 1976 and wilson 1977 section 4 the paper concludes section 5 with a classification of these models

liquidity maturity and the yields on u s treasury securities the efrect8 of aaaet liquidity on expected retuma for ts with infinite maturities toc ka are eumined for bonda treuury notes and bills with matched maturities of lellll than 6 months the yield to maturity ill higher on notes which have lower liquidity the yield di1ferential between notes and billa is a decreuing and convex function of the time to maturity the results provide a robult confirmation of the liquidity effect in auet pricing this paper studies empirically the effects of the liquidity of capital assets on their prices amihud and mendelson 1986 1989 proposed that liquidity affects asset prices because investors require a compensation for bearing transaction costs transaction costs paid whenever the asset is traded form a sequence of cash outflows the discounted value of this cost stream proxies for the value 1088 due to illiquidity which lowers the asset s value for any given cash flow that the asset generates 1 as a result the return on assets should be an increasing function of their illiquidity other things equal for stocks the illiquidity effect is expected to be strong because their transaction cost sequence is infinite amihud and mendelson 1986 1989 demonstrated that common stocks with lower liquidity yielded significantly higher average returns after controlling for risk and for other factors these results on the importance of liquidity in the pricing of stocks raise additional questions i does the liquidity effect depend on the specific controls used by amihud and mendelson 1986 1989 1 ii does illiquidity have a similarly strong effect on the pricing of bonds whose maturities are finite and iii if liquidity affects bond yields how is this effect related to the bond s time to maturity

international economic policy uncertainty and stock prices revisited multiple and partial wavelet approach abstract this paper introduces a new dimension to the relationship between economic policy uncertainty epu and stock prices sp by extending the contributions of ko and lee 2015 by using multiple and partial wavelet coherence techniques the vulnerability of sp due to combined and isolated impact of international us epu and domestic policy uncertainty depu is investigated the main findings are a the combined effect of depu and us epu is more significant for developed market s sp b the emerging market s sp are more sensitive to depu and c amongst developed markets japan and european countries are more sensitive to us epu than depu

response of hourly stock prices and trading volume to economic news this paper examines hourly stock returns and trading volume response to announcements about the money supply consumer price index cpi producer price index industrial production and the unemployment rate the empirical results indicate that surprises in announcements about money supply and cpi are significantly associated with stock price changes the announcements of the other three variables do not affect stock prices significantly trading volume is not affected by any of the five economic variable announcements indicating that market participants do not differ substanti ally in the interpretations of the effects of announcements the spee d of adjustment analysis indicates that the effect of information on stock prices is reflected in a short period of one hour or so copyright 1988 by the university of chicago

the temporal price relationship between s p 500 futures and the s p 500 index this paper empirically examines the intraday price relationship between s p 500 futures and the s p 500 index using minute to minute data three stage least squares regression is used to estimate lead and lag relationships with estimates for expiration days of the s p 500 futures compared with estimates for days prior to expiration the results suggest that futures price movements consistently lead index movements by twenty to forty five minutes while movements in the index rarely affect futures beyond one minute

the impact of uncertainty shocks on the volatility of commodity prices in this paper we empirically examine the impact of uncertainty shocks on the volatility of commodity prices using several alternative measures of economic uncertainty for the u s we estimate their effects on commodity price volatility through var analysis we find that the latent uncertainty shocks have the most significant impact on commodity price volatility when compared to observable measures of economic uncertainty in specific our results show that the unobservable economic uncertainty measures of jurado et al 2015 have a significant and long lasting positive effect on the volatility of commodity prices our findings indicate that a positive shock in unobservable macroeconomic and financial uncertainty leads to a persistent increase in the volatility of the broad commodity market index and of individual commodity prices with the macroeconomic effect being more significant finally we show that the impact is stronger in energy commodities compared to agricultural and metals markets

the international transmission of volatility shocks an empirical analysis this paper proposes an empirical model which can be used to estimate the international transmission of volatility shocks using this model we estimate that a one standard deviation increase in the volatility of the shock to us real gdp leads to a decline in uk gdp of 1 relative to trend and a 0 7 increase in uk cpi relative to trend at the two year horizon using a nonlinear open economy dsge model we find that these empirical estimates are consistent with the response to a perturbation to the volatility of foreign supply type shocks while an increase in the volatility of demand shocks has a negligible impact

fiscal illusion budget maximizers and dynamic equilibrium this paper extends previous work in grant induced fiscal illusion in two ways while previous models have focused on the existence of rational comparative static equilibria in the presence of illusion this work focuses on the dynamic process by which steady state equilibria can be achieved furthermore endogeneity in grants is incorporated which necessitates the use of a budget maximizing hypothesis however it is shown that a broader interpretation of the budget maximizing assumption is necessary in order for this characterization to make sense in a grantor recipient framework

economic policy uncertainty shocks and stock bond correlations evidence from the us market abstract this paper examines the effects of economic policy uncertainty shocks on stock bond correlations for the us market we devise a general framework which distinguishes a positive shock from a negative one and nests either as its special case the results show that innovations in the policy uncertainty index impact negatively and asymmetrically on the subsequent stock bond correlations which are characterized by a structural break and positive type asymmetry

municipal utilities and local public finance a simultaneous model our results confirm the existence of a positive direct effect of cross subsidies from municipally owned water utilities on city spending while the results are consistent with the hypothesis that internal subsidization creates a fiscal illusion they are also consistent with vote maximizing behavior that is the demand for cross subsidies is found to depend on factors that reflect the city s fiscal position including its spending level in the absence of a contribution the results of the logit estimation suggest that annual contributions are discretionary and explained primarily by a city s fiscal health our results also confirm the existence of a simultaneous relationship between municipal spending and utility contributions and the need for a simultaneous estimation technique this bias affects all prior studies of the interaction between utility revenue contributions and local public finance variables and future studies must be aware of the simultaneous nature of the underlying relationship

how markets process information news releases and volatility we examine the impact of scheduled macroeconomic news announcements on interest rate and foreign exchange futures markets we find these announcements are responsible for most of the observed time of day and day of the week volatility patterns in these markets while the bulk of the price adjustment to a major announcement occurs within the first minute volatility remains substantially higher than normal for roughly fifteen minutes and slightly elevated for several hours nonetheless these subsequent price adjustments are basically independent of the first minute s return we identify those announcements with the greatest impact on these markets we examine the impact on interest rate and foreign exchange markets of scheduled macroeconomic news releases such as the employment report the consumer price index cpi and the producer price index ppi many market participants believe that such announcements have a major impact on financial markets indeed a small industry devoted to predicting the figures to be released in upcoming releases has evolved in recent years with the exception of the weekly money supply figures however the impact of such announcements on financial markets has received scant attention 1 this is doubly surprising given the considerable research interest in market volatility since these news releases are a potential source of much of this volatility consider for instance figure 1 as shown there prices in interest rate and foreign exchange futures markets are much more volatile between 8 30 and 8 35 a m eastern time et than during any other five minute trading period including

is there a role for uncertainty in forecasting output growth in oecd countries evidence from a time varying parameter panel vector autoregressive model this paper uses a time varying parameter panel vector autoregressive tvp pvar model to analyze the role played by domestic and us news based measures of uncertainty in forecasting the growth of industrial production of 12 organisation for economic co operation and development oecd countries based on a monthly out of sample period of 2009 06 to 2017 05 given an in sample of 2003 03 to 2009 05 there are only 46 of cases where domestic uncertainty can improve the forecast of output growth relative to a baseline monetary tvp pvar model which includes inflation interest rate and nominal exchange rate growth besides output growth moreover including us uncertainty does not necessarily improve the forecasting performance of output growth from the tvp pvar model which includes only the domestic uncertainty along with the baseline variables so in general while uncertainty is important in predicting the future path of output growth in the 12 advanced economies considered a forecaster can do better in majority of the instances by just considering the information from standard macroeconomic variables

international spillovers of policy uncertainty using the baker et al 2013 index of policy uncertainty for six developed countries this paper estimates spillovers of policy uncertainty we find that spillovers account for slightly more than one fourth of the dynamics of policy uncertainty in these countries with this share rising to one half during the financial crisis the us and uk are responsible for a large fraction of the spillovers since the financial crisis while the remaining countries are all net receivers of policy uncertainty shocks during and after this period

long memory economic policy uncertainty and forecasting us inflation a bayesian varfima approach abstractwe compare inflation forecasts of a vector autoregressive fractionally integrated moving average varfima model against standard forecasting models u s inflation forecasts improve when controlling for persistence and economic policy uncertainty epu importantly the varfima model comprising of inflation and epu outperforms commonly used inflation forecast models

the empirical analysis of fiscal illusion this paper examines the empirical analysis of the five main hypotheses subsumed under the generic term fiscal illusion after placing these hypotheses within a common theoretical framework the paper attempts to evaluate empirical research into the revenue complexity hypothesis the revenue elasticity hypothesis the flypaper effect renter illusion and debt illusion

foreign policy uncertainty shocks and us macroeconomic activity evidence from china this paper investigates the spillover effects of economic policy uncertainty epu from china on us real macroeconomic variables in both expansion and recession periods we use monthly data and estimate a smooth transition var stvar model over the recent period we find robust evidence that chinese uncertainty significantly affects us economic activity during busts while no effect is perceptible during booms the results also underline that chinese epu is a determinant of policy uncertainty unemployment and industrial production in us

property taxes tax cost illusion and desired education expenditures the extensive tax cost illusion found in the marshall survey is interesting both in terms of its magnitude and the direction of its impact counter to the common view that tax illusion will result in higher expenditures there appears to be at least one case where the overestimation of tax cost has the potential of leading to lower expenditure levels

user delay costs and internal pricing for a service facility this paper studies optimal pricing and capacity decisions for a service facility in an environment where users delay cost is important the model assumes a general nonlinear delay cost structure and incorporates the tradeoff between the delay cost and capacity cost we find necessary and sufficient conditions for the optimality of a pricing rule that charges out service resources at their marginal capacity cost we examine the issue of budgetary balance and find that net value maximization entails a budget deficit for the service facility that is the service facility should be evaluated as a deficit center the results provide guidelines under which the optimal magnitude of the deficit can be determined

why a stubborn conservative would run a deficit policy with time inconsistent preferences a conservative government in favor of a low level of public consumption knows that it will be replaced by a government in favor of a larger level of public consumption we show that the resulting level of public consumption is in between the levels the two governments would choose if each were in power both in the present and in the future in particular we show that if the conservative government is more stubborn in a particular sense than the succeeding government the conservative government will borrow more than it would had it remained in power in the future

the tax versus debt controversy in a multivariate cointegrating system the empirical literature is replete with evidence that budget deficits and government debt affect traditional view or do not appreciably affect ricardian equivalence private consumption however the validity of the relative empirical estimates can be questioned to the extent that they do not adequately distinguish among countries with varying levels of indebtedness the present paper attempts to address this problem by using johansen s cointegration technique and by sorting the sample countries into groups according to the ratio of debt to gdp the empirical evidence generated finds support for the debt illusion hypothesis as a means of expounding variations in consumers behaviour among countries with varying degrees of indebtedness

should the euro area be run as a closed economy the european economic and monetary union emu has created a new economic area larger and closer with respect to the rest of the world area specifi cs hocks are thus more important in emu than country specific shocks used to be in the previous states e g in germany it is thus not surprising that the models used to determine optimal monetary policy in the euro area for instance smets and wouters 2004 assume that this works essentially as a closed economy hit by domestic shocks i e the same assumption made in standard models of u s monetary policy see e g christiano et al 1999 where all shocks are domestic with the only possible exception of energy price shocks this paper studies monetary policy in the euro area looking at the variable most directly related to current and expected monetary policy the yield on long term government bonds we explore how the behaviour of european long term rates has been affected by emu and whether the response of long term rates to monetary policy has got any closer to that consistent with a closed economy we find that the level of long term rates in europe is almost entirely explained by u s shocks and by the systematic response of u s and european variables to these shocks the systematic component of european monetary policy responds to u s variables more than it does to local variables this was true for the bundesbank before emu and remains true for the ecb since the start of emu we also find that unpredictable fluctuations in long term rates are driven by shocks to term premia not to monetary policy this means that the ecb can affect long rates only through the systematic component of its monetary policy which as we have seen mostly responds to u s variables monetary policy shocks induced by the ecb have virtually no effect on long rates claiming that monetary policy in the euro area can be determined as if the region were a closed economy is thus not consistent with the empirical evidence on

economic policy uncertainty and risk spillovers in the eurozone this paper focuses on the impact of economic policy uncertainty on risk spillovers within the eurozone and contributes to these two growing literatures to this end we adapt the two step procedure developed by adrian and brunnermeier forthcoming in the framework of financial systemic risk to the sovereign bond market accordingly we attempt i to measure the extent to which distress affecting one given country s sovereign spreads can affect the eurozone s bond market as a whole and then ii to identify the determinants of risk spillovers by estimating a panel data model with macroeconomic state variables and economic policy uncertainty epu indices introduced by baker et al 2013 as regressors epu indices considered concern the four largest eurozone countries i e germany france italy and spain as well as the united states the model is estimated with quarterly data for ten countries representing the bulk of debt issuances within the eurozone over a period ranging from q4 2008 to q2 2013 which is characterized by historically high dispersion of sovereign bond spreads either across time or across countries our results support the idea that economic policy uncertainty in the core economies of the eurozone i e germany and france as well as in the largest periphery countries i e italy and spain can create an environment likely to exacerbate the transmission of risk arising from abnormal developments of individual countries sovereign spreads to the eurozone bond market as a whole in this respect our results plead for larger effort of eurozone leaders to reduce the uncertainty surrounding their economic policy in periods of crisis not only to avoid adverse effects on their own economies but also to reduce the risk of a destabilization of the eurozone sovereign bond market as a whole

economic policy uncertainty in the us does it matter for the euro area abstract we investigate the effects of a us economic policy uncertainty shock on some euro area macroeconomic aggregates via structural vars we model the indicators of economic policy uncertainty recently developed by baker et al 2013 jointly with the aggregate price indexes and alternative indicators of the business cycle for the two above indicated economic areas according to our svars a one standard deviation shock to us economic policy uncertainty leads to a statistically significant fall in the european industrial production and prices of 0 12 and 0 06 respectively the contribution of the us uncertainty shock on the european aggregates is shown to be quantitatively larger than the one exerted by an euro area specific uncertainty shock

tax uncertainty and business activity abstract we investigate the extent to which uncertainties about tax policies affect business activities we develop a statewide tax uncertainty measure tu measure and show that it captures state corporate tax uncertainty by comparing adjacent counties across state borders we show that increasing tax uncertainty by one standard deviation a 30 increase in the tu measure leads to a 0 17 point per year decrease in the growth rate of establishments over two years the result holds after conducting a variety of robustness checks and is not likely to be driven by general state policy uncertainties

does economic policy uncertainty in the u s influence stock markets in china and india time frequency evidence this paper uses continuous and discrete wavelet tools to evaluate the dynamic correlation and causality between the u s economic policy uncertainty epu and stock markets in china and india from

the existence of equilibrium in discontinuous economic games i theory the article presents information about the existence of equilibrium in discontinuous economic games in this paper and its sequel presents study the existence of nash equilibrium in games where agents payoff functions are discontinuous the enquiry is motivated by a number of recent studies that have uncovered serious existence problems in seemingly innocuous economic games in the sequel to this paper authors have explained the utility function in the economic games referred to earlier are neither continuous nor quasi concave however they demonstrate that the payoff functions in mildly modified versions of these constructs exhibit two weaker forms of continuity which together with the requirement of quasi concavity suffice for the existence of an equilibrium from this one may conclude that at least in the modified versions of these models discontinuities in the payoff functions are not the real source of the problem rather it is the failure of the payoff functions to the quasi concave which is responsible for the non existence of equilibrium these observations bear on the existence of nash equilibrium in pure strategies

time varied causality between us partisan conflict shock and crude oil return abstract to investigate the causality between us partisan conflict shock and crude oil return this paper utilizes bootstrap full sample granger causality and bootstrap rolling window sub sample granger causality tests although no evidence supports the causal nexus between partisan conflict shock and crude oil return with full sample data time varied causality is observed for particular sub samples such difference can be attributed to the parameter non constancy in the var system in terms of the empirical results the us partisan conflict shock causes the fluctuations of the crude oil market in 2008 2009 and 2014 2015 however such influence is temporary inversely the crude oil return causes us partisan shock in 1985 1986 1991 1994 1998 2000 and 2012 2013 these findings indicate crude oil market significantly affects political stability of the us especially during the periods of the gulf war and opec production cut the empirical results are robust in terms of both sample setting variation and window size selection

uncertainty and crude oil returns we use a copula approach to investigate the effect of uncertainty on crude oil returns using copulas to construct multivariate distributions of time series data permit the calculation of the dependence structure between the series independently of the marginal distributions further we implement the copula estimation using a rolling window method to allow for a time varying effect of equity and economic policy uncertainty on oil returns the results show that higher uncertainty as measured by equity and economic policy uncertainty indices significantly increase crude oil returns only during certain periods of time that is we find a positive dependence prior to the financial crisis and great recession interestingly estimation of the copula over the entire sample period leads to a negative dependence between the equity and economic policy indices and the crude oil return

price discovery in the u s treasury market automation vs intermediation this paper examines the contribution to price discovery by electronic and voice based trading systems in the u s treasury market evidence shows that the electronic trading system has more price discovery and that trading automation increases the speed of incorporating information into prices however human trading generates significant price discovery though its volume is low the relative contribution of a trading system to price discovery depends on liquidity volatility volume trade size and order imbalance the voice based trading system contributes more to price discovery when trade size is large and liquidity is low these findings provide important implications for the design of electronic markets for securities with different characteristics and trading environments this paper was accepted by wei xiong finance

macroeconomic policy uncertainty shocks on the chinese economy a gvar analysis abstractthis article studies the spillovers of economic policy uncertainty epu from developed economies to china in terms of the source extent and persistence by estimating a global vector autoregressive gvar model with both financial and trade variables acting as the transmission channels our findings confirm the existence of international transmissions of policy uncertainty while the patterns differ markedly the us epu appears to be the most significant cause of the fall of export industrial production equity price and exchange rate meanwhile the eu epu is also to be blamed for the depreciation of rmb in contrast to industrial production which shows the largest negative impact chinese inflation increases to a relatively smaller extent with the epu shocks ranking as the us japanese and the eu regardless of the minor impact on a long term interest rate the short term interest rate in china reacts positively to the european and us epu shocks despite the independent national monetary poli

uncertainty and the macroeconomy evidence from an uncertainty composite indicator this article proposes a uncertainty composite indicator uci based on three distinct sources of uncertainty namely financial political and macroeconomic for the us economy on the period 1985 2015 for that we use a dynamic factor model summarizing efficiently six individual uncertainty proxies namely two macroeconomic and financial uncertainty factors based on the unpredictability a measure of micro economic uncertainty the implied volatility index the corporate bond spreads and an index of economic policy uncertainty we then compare the effects of uncertainty on economic activity when the uci is used instead of individual uncertainty proxies in structural var models the interest of our uci is to synthesize theses effects within one measure of uncertainty overall the uci was able to account for the most important dynamics of uncertainty which play an important role in business cycles

does us partisan conflict matter for the euro area this paper highlights the international transmission of political uncertainty originated from a us partisan conflict shock a newly identified shock that transmits a type of uncertainty beyond the economic policy uncertainty spillovers identified by colombo 2013 using the recently developed us partisan conflict index uspc developed by azzimonti 2014 we find that a one standard deviation uspc shock leads to a 0 2 percent decline in european industrial production we also show that compared with us policy uncertainty shocks a shock to us partisan conflict creates deeper and more persistent spill over effects to the euro area

fiscal policy in general equilibrium this paper studies four classic fiscal policy experiments within a quantitatively restricted neoclassical model the authors main findings are as follows 1 permanent changes in government purchases can lead to short run and long run output multipliers that exceed one 2 permanent changes in government purchases induce larger effects than temporary changes 3 the financing decision is quantitatively more important than the resource cost of changes in government purchases and 4 public investment has dramatic effects on private output and investment these findings stem from important dynamic interactions of capital and labor absent in earlier equilibrium analyses of fiscal policy copyright 1993 by american economic association

uncertainty shocks and unemployment dynamics in u s recessions abstract what are the effects of uncertainty shocks on unemployment dynamics we answer this question by estimating non linear smooth transition vars with post wwii u s data the relevance of uncertainty shocks is found to be much larger than that predicted by standard linear vars in terms of i magnitude of the reaction of the unemployment rate to such shocks and ii contribution to the variance of the prediction errors of unemployment at business cycle frequencies the ability of different classes of dsge models to replicate our results is discussed

on the transmission mechanism of country specific and international economic uncertainty spillovers evidence from a tvp var connectedness decomposition approach abstract we investigate the internal and external categorical economic policy uncertainty epu spillovers between the us and japan using a novel extension of the tvp var connectedness approach of antonakakis and gabauer 2017 the decomposition of our approach gives us insights about the dynamics with and without international spillovers which has essential policy implications our results suggest that monetary policy uncertainty is the main driver followed by uncertainties associated with fiscal currency market and trade policies furthermore we find that the fukushima daiichi accident can be interpreted as a negative trade shock that spread internationally

fiscal policy under loose commitment due to time inconsistency or political turnover policymakers promises are not always fulfilled we analyze an optimal fiscal policy problem where the plans made by the benevolent government are periodically revised in this loose commitment setting the properties of labor and capital income taxes are significantly different than under the full commitment and no commitment assumptions because of the occasional reoptimizations the average capital income tax is positive even in the long run also the autocorrelation of taxes is lower their volatility with respect to output increases and the correlation between capital income taxes and output changes sign our method can be used to analyze the plausibility and the importance of commitment in a wide class of dynamic problems

determining firm level it investments to facilitate value chain activities should spillovers accruing to value chain members be incorporated abstract in recent years the relationship between intermediaries in a value chain has undergone significant changes in which information technology it has played a critical role of importance is the formation of alliances between channel members and the effect of it investments on these evolving relationships a critical aspect of a firm s it investment is that it not only provides gains for the investing firm but also creates positive spillovers for value chain members these spillovers are attributable to the fact that firm level it investments result in the automation and or reengineering of internal processes downstream in this paper we address the issue as to how a firm should determine its investment in an it system which is primarily designed to facilitate value chain activities under the assumptions of perfect information in terms of potential gains for value chain members from this it investment and the fact that each member may need to be guaranteed some minimum gain i e a reservation utility to adopt the it we model the it investment decision under two alternative strategies the first strategy referred to as the myopic strategy is where the firm simply makes the it investment decision by maximizing its own gains and ignoring those of the value chain under an alternative strategy referred to as the global strategy the firm decides to make the it investment decision by simultaneously maximizing not only its own gains but also the gains accruing to the entire value chain in this case the firm could make a sub optimum decision regarding the it investment from its own perspective however under the latter strategy the firm could also structure a simultaneous one time charge for each value chain member which could compensate for this sub optimum decision after modeling both these strategies we then proceed to characterize conditions under which each strategy is the preferred choice for the firm through an illustration of our framework we show that the global strategy dominates the myopic strategy in a number of situations

a new economic policy uncertainty index for spain abstract we explore how sensitive is the influential economic policy uncertainty epu index baker et al 2016 to certain key features of the construction methodology our results for the case of spain both as regards the chronology of economic policy related events as well as the effects of uncertainty shocks on the economy show the relevance of fine tuning two key methodological choices i the richness of the keywords and expressions used and ii the newspaper coverage thus our results are not to be read only as regards the case under study spain but rather convey a more general message

international economic policy uncertainty and stock prices wavelet approach this paper examines the link between economic policy uncertainty and stock price in both a time and frequency domain wavelet analysis reveals that the relationship is generally negative but changes over time exhibiting low to high frequency cycles moreover the timing of frequency changes overlaps when us policy uncertainty comoves with other countries policy uncertainty

forecasting tourist arrivals using origin country macroeconomics this study utilizes both disaggregated data and macroeconomic indicators in order to examine the importance of the macroeconomic environment of origin countries for analysing destinations tourist arrivals in particular it is the first study to present strong empirical evidence that both of these features in tandem provide statistically significant information of tourist arrivals in greece the forecasting exercises presented in our analysis show that macroeconomic indicators conducive to better forecasts are mainly origin country specific thus highlighting the importance of considering the apparent sharp national contrasts among origin countries when investigating domestic tourist arrivals given the extent of the dependency of the greek economy on tourism income but also given the perishable nature of the tourist product itself results have important implications for policy makers in greece

which determinant is the most informative in forecasting crude oil market volatility fundamental speculation or uncertainty abstract this paper aims to identify the most informative determinant in forecasting crude oil market volatility we use a new garch class model based on mixed data sampling regression and the dynamic model averaging combination method to examine the predicting power of the determinants we integrate both the global economic policy uncertainty gepu indices and several national economic policy uncertainty epu indices with traditional determinants such as global oil demand supply and speculation our analysis suggests that the epu indices comprehensively integrate the information contained in other determinants specifically gepu indices and the u s s epu index have superior predictive powers for west texas intermediate spot oil volatility this finding highlights the importance of epu indices implying that they are key factors to consider when determining crude oil market volatility

fragility and the effect of international uncertainty shocks abstract when economic systems are fragile even modest shocks for example a shock to international capital movements can have strong negative effects on key macroeconomic fundamentals this paper proposes a large scale bayesian vector autoregression with factor stochastic volatility to investigate the macroeconomic consequences of international uncertainty shocks in g7 countries and shows that uncertainty increases fragility the factor structure enables us to identify an international uncertainty shock by assuming that it is the joint volatility process that determines the dynamics of the variance covariance matrix of the common factors to allow for first and second moment shocks we moreover assume that the uncertainty factor enters the var equation as an additional regressor our findings suggest that an international uncertainty shock has negative effects across all economies and variables under consideration leading to strong declines in output prices exports interest rates and equity prices the precise degree of fragility varies across countries a simple correlation exercise suggests that structural differences may be partially responsible for the observed differences

on international uncertainty links bart based empirical evidence for canada we use the indexes of economic policy uncertainty epu developed by baker et al 2015 for canada and seven china france germany japan russia united kingdom and united states other countries to study international uncertainty links by means of a bayesian additive regression trees bart algorithm using partial dependence plots relative importance measures and permutation tests we shed light on how epu in canada is linked to epu in seven other countries