recent developments in consumer credit risk assessment consumer credit risk assessment involves the use of risk assessment tools to manage a borrower s account from the time of pre screening a potential application through to the management of the account during its life and possible write off the riskiness of lending to a credit applicant is usually estimated using a logistic regression model though researchers have considered many other types of classifier and whilst preliminary evidence suggest support vector machines seem to be the most accurate data quality issues may prevent these laboratory based results from being achieved in practice the training of a classifier on a sample of accepted applicants rather than on a sample representative of the applicant population seems not to result in bias though it does result in difficulties in setting the cut off profit scoring is a promising line of research and the basel 2 accord has had profound implications for the way in which credit applicants are assessed and bank policies adopted

estimating the effect of hierarchies on information use theory suggests that greater hierarchical distance between a subordinate and his boss makes it more di cult to share abstract and subjective information in decision making a novel data set put together from credit dossiers of large corporate loan applicants enables us to observe the information collected by loan o cers and also how it is used by the ultimate loan approving o cer we flnd that greater hierarchical geographical distance between the information collecting agent and the loan approving o cer leads to less reliance on subjective information and more on objective information by exploiting non linearities in the assignment rules that determine an applicant s hierarchical distance and using information collecting agent flxed efiects we show that our result cannot be driven by endogenous assignment of applicants we also flnd that higher frequency of interactions between the information collecting agent and loan approving o cer both over time and through geographical proximity helps mitigate the efiects of hierarchical distance on information use our results show that hierarchical distance in uences information use and highlights the importance of human touch in communication

natural resources and sub national economic performance does sub national democracy matter abstract the differentiation in the impact of resources on economic growth is often explained by the specifics of institutional factors the aim of this paper is to investigate how sub national political differences influence the effect of natural resources on economic growth using a dataset of russian regions this paper demonstrates that sub national democratization influences the growth effects of resources and considers possible mechanisms for this influence the paper finds that in russia natural resources are only capable of promoting growth in the regions with non democratic political systems that at the same time have an efficient and non corrupt bureaucracy

risk factor contributions in portfolio credit risk models abstract determining contributions to overall portfolio risk is an important topic in risk management for positions instruments and sub portfolios this problem has been well studied and a significant theory built around the calculation of marginal contributions we consider the problem of determining the contributions to portfolio risk of risk factors this cannot be addressed through an immediate extension of techniques for position contributions since the portfolio loss is a nonlinear function of the risk factors we employ the hoeffding decomposition of the portfolio loss into a sum of terms depending on the factors this decomposition restores linearity but includes terms arising from joint effects of groups of factors these cross factor terms provide information to risk managers since they can be viewed as best hedges of the portfolio loss involving instruments of increasing complexity we illustrate the technique on multi factor portfolio credit risk models where systematic factors represent industries geographical sectors etc

credit risk measurement developments over the last 20 years abstract this paper traces developments in the credit risk measurement literature over the last 20 years the paper is essentially divided into two parts in the first part the evolution of the literature on the credit risk measurement of individual loans and portfolios of loans is traced by way of reference to articles appearing in relevant issues of the journal of banking and finance and other publications in the second part a new approach built around a mortality risk framework to measuring the risk and returns on loans and bonds is presented this model is shown to offer some promise in analyzing the risk return structures of portfolios of credit risk exposed debt instruments

how hurricanes affect wages and employment in local labor markets currently a growing literature is emerging on estimating the impact of exogenous shocks using the difference in difference dd tech nique essentially this technique compares the impact of an unexpected event in a particu lar locale called the treatment experimental group to a location or set of locations called a control group similar to the experimental group in all respects except for the shock itself one challenge many dd studies face is how to choose the control group and there is now a growing literature on this joshua a angrist and alan b krueger 1999 jeffrey d kubik and john r moran 2003 and alberto abadie alexis diamond and jens hainmueller 2007 another challenge is whether one can general ize one s results based on a single experimental group as is typical for most dd analysis this paper adopts a generalized difference in dif ference gdd technique outlined in ariel r belasen and solomon w polachek forthcom ing to examine the impact of hurricanes on the labor market this technique incorporates many experimental as well as many control groups and as such this approach addresses a number of shortcomings in current dd analyses we find that earnings of the average worker in a florida county rise over 4 percent within the first quarter of being hit by a major category four or five hur ricane relative to counties not hit and rise about wa percent for workers in florida counties hit by less major category one to three hurricanes concomitantly employment falls between wi and 5 percent depending on hurricane strength on the other hand the effects of hurricanes on neighboring counties have the opposite effects moving earnings down between 3 and 4 percent in the quarter the hurricane struck to better examine the specific shocks we also observe sectoral employment shifts finally we conduct a time series analysis and find that over time there is somewhat of a cobweb with earnings and employment rising and falling each quarter over a two year time period

exploring the sources of default clustering abstract we study the sources of corporate default clustering in the united states we reject the hypothesis that firms default times are correlated only because their conditional default rates depend on observable and latent systematic factors by contrast we find strong evidence that contagion through which the default by one firm has a direct impact on the health of other firms is a significant clustering source the amount of clustering that cannot be explained by contagion and firms exposure to observable and latent systematic factors is insignificant our results have important implications for the pricing and management of correlated default risk

storms and jobs the effect of hurricanes on individuals employment and earnings over the long term hurricanes katrina and rita devastated the us gulf coast in 2005 we use job level data to compare the evolution of earnings for affected workers in four states with workers from matched control co

house prices home equity based borrowing and the u s household leverage crisis us household leverage sharply increased in the years preceding the 2007 eco nomic recession the top panel of figure 1 shows the steady rise in household debt since 1975 which accelerated beginning in 2002 in just five years the household sector doubled its debt balance in comparison the contemporaneous increase in corporate debt was modest the middle panel shows that the increase in household debt from 2002 to 2007 translated into a striking rise in household leverage as mea sured by the debt to income ratio during the same time period corporate leverage declined the dramatic absolute and relative rise in us household leverage from 2002 to 2007 is unprecedented compared to the last 25 years one reason for the rapid expansion in household leverage during this period is that mortgage credit became more easily available to new home buyers mian and sufi 2009 strong house price appreciation from 2002 to 2006 however which may have been fueled by the availability of mortgage credit to a riskier set of new home buyers could also have had an important feedback effect on household lever age through existing homeowners given that 65 percent of us households already owned their primary residence before the acceleration in house prices the feedback from house prices to borrowing may be an important source of the rapid rise in household leverage that preceded the economic downturn our central goals in this study are to estimate how homeowner borrowing responded to the increase in house prices and to identify which homeowners responded most aggressively we examine this home equity based borrowing channel using a dataset consisting of anonymous individual credit files of a national consumer credit bureau agency we follow a random sample of over 74 000 us homeowners who owned their homes as of 1997 at an annual frequency from the end of 1997 until the end of 2008 the bottom panel of figure 1 plots the growth in debt of 1997 homeowners over time and shows that existing homeowners borrow significantly more debt as their house prices appreciate from 2002 to 2006 while the aggregate trend is suggestive

credit risk and asymmetric information a simplified approach abstract we present a simple model for risky corporate debt debtholders and equityholders have incomplete information about the financial state of the debt issuing company information is incomplete because it is delayed for all agents and it is asymmetrically distributed between debtholders and equityholders we solve for the equityholders optimal default policy and for the credit spreads required by debtholders delayed information accelerates the equityholders optimal decision to default interestingly this effect is small implying only a small impact on credit spreads asymmetric information however has a major impact on credit spreads our model predicts high credit spreads for short term debt as observed empirically in credit markets

expected shortfall and beyond financial institutions have to allocate so called economic capital in order to guarantee solvency to their clients and counterparties mathematically speaking any methodology of allocating capital is a risk measure i e a function mapping random variables to the real numbers nowadays value at risk var which is defined as a fixed level quantile of the random variable under consideration is the most popular risk measure unfortunately it fails to reward diversification as it is not subadditive in the search for a suitable alternative to var expected shortfall es or conditional var or tail var has been characterized as the smallest coherent and law invariant risk measure to dominate var we discuss these and some other properties of es as well as its generalization to a class of coherent risk measures which can incorporate higher moment effects moreover we suggest a general method on how to attribute es risk contributions to portfolio components

the optimal decision rule for fixed size committees in dichotomous choice situations the general result this paper presents a general pairwise choice framework and derives the optimal decision rule for fixed size committees the main result generalizes a number of earlier results in the subject copyright 1997 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

an analytic approach to credit risk of large corporate bond and loan portfolios abstract we derive an analytic approximation to the credit loss distribution of large portfolios by letting the number of exposures tend to infinity defaults and rating migrations for individual exposures are driven by a factor model in order to capture co movements in changing credit quality the limiting credit loss distribution obeys the empirical stylized facts of skewness and heavy tails we show how portfolio features like the degree of systematic risk credit quality and term to maturity affect the distributional shape of portfolio credit losses using empirical data it appears that the basle 8 rule corresponds to quantiles with confidence levels exceeding 98 the limit law s relevance for credit risk management is investigated further by checking its applicability to portfolios with a finite number of exposures relatively homogeneous portfolios of 300 exposures can be well approximated by the limit law a minimum of 800 exposures is required if portfolios are relatively heterogeneous realistic loan portfolios often contain thousands of exposures implying that our analytic approach can be a fast and accurate alternative to the standard monte carlo simulation techniques adopted in much of the literature

information aggregation rationality and the condorcet jury theorem the condorcet jury theorem states that majorities are more likely than any single individual to select the better of two alternatives when there exists uncertainty about which of the two alternatives is in fact preferred most extant proofs of this theorem implicitly make the behavioral assumption that individuals vote sincerely in the collective decision making a seemingly innocuous assumption given that individuals are taken to possess a common preference for selecting the better alternative however in the model analyzed here we find that sincere behavior by all individuals is not rational even when individuals have such a common preference in particular sincere voting does not constitute a nash equilibrium a satisfactory rational choice foundation for the claim that majorities invariably do better than individuals therefore has yet to be derived

employment impacts of upstream oil and gas investment in the united states abstract we use dynamic panel methods at the state level to understand how the increase in exploration and production of oil and natural gas since the mid 2000s has impacted employment we find robust statistical support for the hypothesis that changes in drilling do in fact have an economically meaningful and positive impact on employment the strongest impact is contemporaneous though months later in the year also experience statistically and economically meaningful growth once dynamic effects are accounted for we estimate that an additional rig count results in the creation of 31 jobs immediately and 315 jobs in the long run robustness checks suggest that these multipliers could be even bigger our results imply that the national impact of upstream investment remains small perhaps due to the sector s small size and inter state migration

who wins in an energy boom evidence from wage rates and housing this article presents evidence on the distributional effects of energy extraction by examining the effect of the recent u s energy boom on wage rates and housing the boom increased local wage rates in almost every major occupational category the increase occurred regardless of whether the occupation experienced a corresponding change in employment suggesting a tighter labor market that benefited local workers wage rates also increased substantially across the entire wage rate distribution although the percentage increase was slightly higher at the bottom of the distribution than at the top local housing values and rental prices both increased thereby benefiting landowners for renters the increase in prices was completely offset by a contemporaneous increase in income the results suggest that bans on drilling have negative monetary consequences for a large share of local residents jel j23 q33 r31

geographic dispersion of economic shocks evidence from the fracking revolution abstract we track the geographic and temporal propagation of local economic shocks from new oil and gas production generated by hydrofracturing each million dollars of new production produces 80 000 in wage income and 132 000 in royalty and business income within a county within 100 miles one million dollars of new production generates 257 000 in wages and 286 000 in royalty and business income roughly two thirds of the wage income increase persists for two years assuming no general equilibrium effects new extraction increased aggregate us employment by as many as 640 000 and decreased the unemployment rate by 0 43 during the great recession jel d86 l14 l81 l82

optimal voting rules modern social choice theory following kenneth arrow treats voting as a method for aggregating diverse preferences and values an earlier view initiated by marquis de condorcet is that voting is a method for aggregating information voters opinions differ because they make errors of judgment absent these errors they would all agree on the best choice the goal is to design a voting rule that identifies the best choice with highest probability this paper examines maximum likelihood estimation surprisingly the optimal rule can also be axiomatized by variations of arrow s axioms

the architecture of economic systems hierarchies and polyarchies the authors present new ways of looking at economic organizations andsystems individuals judgments entail errors they sometimes reject good projects and accept bad projects the architecture of an economicsystem specifying how the decision making units are organized togetherwithin a system who gathers what information and who communicates what with whom affects its performance both because it influences thenature of errors that individuals make within the system and becauseit has a critical effect on the aggregation of individuals errors theperformance of two polar architectures decentralized polyarchical versus centralized hierarchical decision making authorities are analyzed and compared copyright 1986 by american economic association

accuracy of mortgage portfolio risk forecasts during financial crises abstract this paper explores whether factor based credit portfolio risk models are able to predict losses in severe economic downturns such as the recent global financial crisis gfc within standard confidence levels the paper analyzes i the accuracy of default rate forecasts and ii whether forecast downturn percentiles value at risk var are sufficient to cover default rate outcomes over a quarterly and an annual forecast horizon uninformative maximum likelihood and informative bayesian techniques are compared as they imply different degrees of uncertainty we find that quarterly var estimates are generally sufficient but annual var estimates may be insufficient during economic downturns in addition the paper develops and analyzes models based on auto regressive adjustments of scores which provide a higher forecast accuracy the consideration of parameter uncertainty and auto regressive error terms mitigates the shortfall

local high tech job multipliers in europe examining employment growth in local labor markets across europe this article finds that each worker in a high skilled occupation creates up to five extra jobs in local less skilled intensive services in the same region however it is also shown that there exist persistent differences in the size of this local high tech job multiplier across regions in particular we find that the multiplier is larger in regions with higher immigration an abundance of less skilled workers and lower gross output per capita at the country level we also show that this results in local high tech job multipliers that are larger in southern european countries than in the rest of europe

calibration of the default probability model abstract in this paper we study the calibration problem for the merton vasicek default probability model robert merton on the pricing of corporate debt the risk structure of interest rate journal of finance 29 1974 449 470 we derive conditions that guarantee existence and uniqueness of the solution using analytical properties of the model we propose a fast calibration procedure for the conditional default probability model in the integrated market and credit risk framework our solution allows one to avoid numerical integration problems as well as problems related to the numerical solution of the nonlinear equations

do changes in oil prices affect welfare programs evidence from kern county abstract in this paper the intertemporal causal relationship between oil prices and welfare programs in kern county is studied using monthly data between 1999 7 and 2016 8 results from the autoregressive distributed lag ardl bounds testing approach show that there is stable long run equilibrium relationship between calfresh caseloads oil prices and unemployment they also show that adjustment in calfresh participation due to changes in oil prices and unemployment is slow and a 10 increase in unemployment led to a 3 3 increase in calfresh enrollment results from a modified granger causality method indicated causality running from unemployment to calworks and no causality from oil prices to calworks participation the girf confirmed that calworks is more responsive to changes in unemployment than to oil price shocks the fevdc results demonstrated that contributions of the oil price shocks in explaining variations in calworks were negligible

i can hear my neighbors fracking the effect of natural gas production on housing values in tarrant county tx abstract in this study we estimate the effect of hydraulically fractured natural gas wells on residential real estate prices we exploit variation in distance to nearby gas wells in home sale prices to estimate this effect in contrast to previous studies we focus on a relatively densely populated area a section of the dallas ft worth arlington urban area using a dataset of 127 556 observations from tarrant county texas over the period 2005 2011 we find robust evidence that increased proximity to a well leads to reduced home sale prices existence of wells within 3500 ft of a property reduces property values by approximately 1 5 3 we demonstrate that the reduction seems to be driven by unconventional rather than conventional wells and that well construction causes an added 1 2 reduction in home value

the economic impact of the coal boom and bust in this paper we examine the impact of the coal boom in the 1970s and the subsequent coal bust in the 1980s on local labour markets in kentucky ohio pennsylvania and west virginia we address two main questions in our analysis how were non mining sectors affected by the shocks to the mining sector how did these effects differ between sectors producing local goods and those producing traded goods we find evidence of modest employment spillovers into sectors with locally traded goods but not into sectors with nationally traded goods

relationship lending hierarchical distance and credit tightening evidence from the financial crisis abstract this paper examines the firms credit availability during the 2007 2009 financial crisis using a dataset of 5331 bank firm relationships provided by borrowers credit folders of three italian banks it aims to test whether a strong lender borrower relationship can produce less credit rationing for borrowing firms even during a credit crunch period the results show that exclusivity of the relationship can mitigate the firm credit rationing we also verify the influence of lending organizational structure during crisis a new measure of distance in lending technologies has been introduced the hierarchical distance calculated as the distance between the branch that originates the loan and the location of the hierarchical level responsible for financing decision our findings document a negative impact of distance on credit availability consistent with the idea that proximity facilitates the transmission of soft information

forecasting and decomposition of portfolio credit risk using macroeconomic and frailty factors this paper presents a dynamic portfolio credit model following the regulatory framework using macroeconomic and latent risk factors to predict the aggregate loan portfolio loss in a banking system the latent risk factors have three levels global across the entire banking system parent sectoral for the intermediate loan sectors and sector specific for the individual loan sectors the aggregate credit loss distribution of the banking system over a risk horizon is generated by monte carlo simulation and a quantile estimator is used to produce the aggregate risk measure and economic capital the risk contributions of the individual sectors and risk factors are measured by combining the hoeffding decomposition with the euler capital allocation rule for the u s banking system we find that the real gdp growth rate the global and sector wide frailty risk factors and their spillovers significantly affect loan defaults and the impacts of the frailty factors are not only economy wide but also sector specific we also find that the frailty risk factors make more significant risk contributions to the aggregate portfolio risk than the macroeconomic factors while the macroeconomic factors help to improve the accuracy and efficiency of the credit risk forecasts

the alaskan labor market during the pipeline era built between 1974 and 1977 the trans alaska pipeline was the largest privately financed construction project in world history the alaskan labor market during the pipeline era provides an ideal opportunity to view labor market responses to a large anticipated and temporary shock to labor demand the paper presents several theoretical models of market responses to temporary demand shocks and then assesses the ability of each model to explain the alaskan data among the findings are that alaskan wages were very flexible labor supply was quite elastic on both the intensive hours per worker and extensive number of workers margins and even a major short run demand shock need not have a long run impact

the distributional impacts of an energy boom in western canada in the energy rich region of western canada inequality rose over the past two decades while poverty declined begging the question of whether the recent energy boom was a contributing factor this study uses measures of inequality and poverty across local labor markets that vary in energy extraction intensity to identify these distributional impacts the evidence shows that overall the boom increased inequality and decreased poverty there are however a few notable cases where these relationships are reversed the significance and relative magnitude of growth across and between distributional segments were consistent with these findings

credit contagion from counterparty risk standard credit risk models cannot explain the observed clustering of default some times described as credit contagion this paper provides the first empirical analysis of credit contagion via direct counterparty effects we find that bankruptcy announce ments cause negative abnormal equity returns and increases in cds spreads for credi tors in addition creditors with large exposures are more likely to suffer from financial distress later this suggests that counterparty risk is a potential additional channel of credit contagion indeed the fear of counterparty defaults among financial institu tions explains the sudden worsening of the credit crisis after the lehman bankruptcy in september 2008

macroeconomic effects and frailties in the resolution of non performing loans resolution of non performing loans is a key determinant of bank credit default losses this paper analyzes macroeconomic and systematic frailty effects of the default resolution time for a sample of 17 395 defaulted bank loans in usa great britain and canada we find that frailties have a huge impact on the resolution times in a representative sample portfolio median resolution times more than double in a recession when compared to an expansion this leads to highly skewed distributions of losses and considerable systematic risk of the bank portfolio

labor market impacts of u s tight oil development the case of the bakken abstract there has been a recent boom in natural gas and oil production in the us due to high energy prices and technological advances in hydraulic fracturing and horizontal drilling while north dakota oil production has increased significantly since 2005 with the development of bakken formation the impact on the rest of the economy including agriculture historically the largest industry in north dakota has received little attention we employ a variant of the corden neary resource development model to test the impact of the oil boom in north dakota caused by technical change on employment and wages in two tradable sectors of the state economy agriculture and energy alongside the rest of the state s economy using a vector error correction vec model marking the very first use of the dynamic vector autoregression var analysis in this theoretical framework it was determined that the oil boom as represented by the number of rigs in the state led to an increase in employment and wages in energy sector as expected but also in the rest of the economy oil development activity had no significant impact on agricultural wages both energy sector equations employment and wage suggest relative independence of these variables from the movements in agriculture and the rest of the economy and being impacted mostly by the changes in energy sector itself seasonality does not play significant role in energy sector employment and wages unlike in agriculture and the rest of the economy

what goes up must come down the recent economic cycles of the four most oil and gas dominated states in the us abstract the recent boom and bust in the us oil and natural gas sector provide a unique opportunity to assess whether the impacts of energy development are symmetric across the differing phases of the energy cycle this study uses the synthetic control method to examine the boom and bust effects for the four most oil and gas dominated states louisiana north dakota oklahoma and wyoming the four states are chosen as case studies because of their status as top oil and gas producers and the stronger influence of the oil and gas sector on their overall economies the results reveal differing employment impacts across the four states in both the short and long run and asymmetry during the boom and bust phases variation in the overall impacts and asymmetry of impacts across the boom bust cycle are suggested to be at least in part connected to state and local government expenditures

local labor market impacts of energy boom bust boom in western canada abstract the impacts of energy price boom and bust are analyzed through the differential growth in employment and earnings between local labor markets with and without energy resources in western canada the estimated differentials attributed to the boom induced labor demand shocks show significant direct and indirect impacts on the earnings and employment within the energy extraction and other non energy local sectors respectively the local job multipliers indicate that job creation within the energy extraction sector leads to modest job creation within the non energy local sectors during boom periods for every ten energy extraction jobs created during a boom period approximately three construction jobs two retail jobs and four and a half service jobs are created

the effects of a natural gas boom on employment and income in colorado texas and wyoming improvements in technology have made it profitable to tap unconventional gas reservoirs in relatively impermeable shale and sandstone deposits which are spread throughout the u s mostly in rural areas proponents of gas drilling point to the activity s local economic benefits yet no empirical studies have systematically documented the magnitude or distribution of economic gains i estimate these gains for counties in colorado texas and wyoming three states where natural gas production expanded substantially since the late 1990s i find that a large increase in the value of gas production caused modest increases in employment wage and salary income and median household income the results suggest that each million dollars in gas production created 2 35 jobs in the county of production which led to an annualized increase in employment that was 1 5 of the pre boom level for the average gas boom county comparisons show that ex ante estimates of the number of jobs created by developing the fayetteville and marcellus shale gas formations may have been too large

ameliorating majority decisiveness through expression of preference intensity in pairwise voting when a simple majority rule produces a winner that winner is robust to the minority s preferences the typical means of protecting the minority from the decisiveness of the majority is by increasing the required majority or by augmenting the simple majority rule with constitutional constraints in the former case the required majority q becomes larger than one half and this implies that the q majority rule becomes biased in favor of one of the alternatives usually the status quo in the latter case the augmented rule becomes biased in favor of the minority the main issue examined in this paper is whether the amelioration of majority decisiveness can be attained by unbiased voting rules that allow some restricted expression of preference intensities our results clarify that the use of scoring rules provides a positive answer to the above question when voters resort to variable degrees of coordinated strategic voting the results are illustrated in the special cases of the plurality and the borda rules

local labor markets and natural resources a synthesis of the literature a primary way that natural resources affect a locality is through the demand for labor with greater extraction requiring more workers shifts in labor demand can be measured through changes in employment and earnings the main labor market outcomes or through changes in the population and income more generally these changes may spillover into the nonresource economy leading to greater overall effects or possibly crowd out be spread unequally across the population thereby altering the distribution of income and the poverty rate or influence educational attainment as people choose between additional schooling and work in this review the literature linking natural resources to local labor markets is synthesized by organizing existing studies according to their resource measurement and the outcomes that they consider this synthesis provides an accessible guide to a literature that has boomed in recent years it also identifies promising avenues for future research and lays a foundation to further generalize the evidence through an eventual meta analysis

empirical credit cycles and capital buffer formation abstract we model 1927 1997 us business failure rates using an unobserved components time series model clear evidence is found of cyclical behavior in default rates we also detect significant longer term movements in default rates and default correlations in a multi year backtest experiment we show that accommodation of default rate dynamics has important consequences for credit risk capitalization requirements static or myopic variants of credit portfolio models miss significant periods of credit risk accumulation empirically congruent dynamic models by contrast provide more timely warning signals of credit risk build up in this way they may mitigate some of the pro cyclicality concerns

economics of modern energy boomtowns do oil and gas shocks differ from shocks in the rest of the economy abstract the us shale boom has intensified interest in how the expanding oil and gas sector affects local economic performance research has produced mixed results and has not compared how energy shocks differ from equal sized shocks elsewhere in the economy what emerges is that the estimated impacts of energy development vary by region empirical methodology as well as the time horizon that is considered this paper captures these dimensions to present a more complete picture of energy boomtowns utilizing us county data we estimate the effects of changes in oil and gas extraction employment on total employment growth as well as growth by sector we compare this to the effects of equal sized shocks in the rest of the economy to assess whether energy booms are inherently different the analysis is performed separately for nonmetropolitan and metropolitan counties using instrumental variables we difference over 1 3 6 and 10 year time periods to account for county fixed effects and to assess responses across different time horizons the results show that in nonmetro counties energy sector multiplier effects on total county employment first increase up to 6 year horizons and then decline for 10 year horizons we also observe positive spillovers to the non traded goods sector while spillovers are small or negative for traded goods in metro counties there are no significant effects on total employment although positive spillovers are present in some sectors yet equal sized shocks in the rest of the economy produce more jobs on average than oil and gas shocks suggesting that policymakers should seek more diversified development

costs benefits and the malleability of public support for fracking abstract public opinion plays an important role in shaping the policy debate over hydraulic fracturing at both the state and national level however most americans report having little to no information about this controversial practice that has transformed the u s energy market employing an experiment embedded on a nationally representative survey we examine how citizens respond to arguments concerning the costs and benefits of fracking and incorporate them into their policy preferences arguments emphasizing the economic benefits of fracking bolster support for the technique however these gains are completely canceled if paired with a discussion of fracking s environmental costs additionally we find mixed evidence of partisan motivated reasoning in how this information is processed individuals whose partisan attachments and preexisting beliefs about global climate change conflict are particularly responsive to arguments about the benefits and costs of fracking our results have important implications for scholars and policymakers concerned with partisan polarization in public opinion toward energy and environmental policy

how disasters affect local labor markets the effects of hurricanes in florida this study improves upon the difference in difference approach by examining exogenous shocks using a generalized difference in difference gdd technique that identifies economic effects of hurricanes based on the quarterly census of employment and wages data worker earnings in florida counties hit by a hurricane increase up to 4 percent whereas earnings in neighboring counties decrease over time workers experience faster earnings and slower employment growth than workers in unaffected counties hurricanes have a greater impact in coastal and panhandle counties and powerful hurricanes have greater economic effects than weaker ones further the gdd technique is applicable to analyze a wider range of exogenous shocks than hurricanes

the impact of fracking activities on oklahoma s housing prices a panel cointegration analysis abstract fracking drilling has opened a discussion on the role of technological developments in economies engaged in shale oil and gas formations oil and natural gas production opened new possibilities for employment benefits and housing prices decreases this paper explores for the first time the impact of fracking on housing prices across oklahoma s counties spanning the period 2000 2015 through panel methods the findings show a positive effect on housing prices while this positive effect gains statistical significance only over the period after the 2006 fracking boom the results survive a robustness check that explicitly considers distance and groundwater dependency issues

common failings how corporate defaults are correlated we test the doubly stochastic assumption under which firms default times are correlated only as implied by the correlation of factors determining their default intensities using data on u s corporations from 1979 to 2004 this assumption is violated in the presence of contagion or frailty unobservable explanatory variables that are correlated across firms our tests do not depend on the time series properties of default intensities the data do not support the joint hypothesis of well specified default intensities and the doubly stochastic assumption we find some evidence of default clustering exceeding that implied by the doubly stochastic model with the given intensities why do corporate defaults cluster in time several explanations have been explored first firms may be exposed to common or correlated risk factors whose co movements cause correlated changes in conditional default probabilities second the event of default by one firm may be contagious in that one such event may directly induce other corporate failures as with the collapse of penn central railway in 1970 third learning from default may generate default correlation for example to the extent that the defaults of enron and worldcom revealed accounting irregularities that could be present in other firms they may have had a direct impact on the conditional default probabilities of other firms our primary objective is to examine whether cross firm default correlation that is associated with observable factors determining conditional default probabilities the first channel on its own is sufficient to account for the degree of time clustering in defaults that we find in the data

psychological pressure in competitive environments evidence from a randomized natural experiment much like cognitive abilities emotional skills can have major eects on performance and economic outcomes this paper studies the behavior of professional subjects involved in a dynamic competition in their own natural environment the setting is a penalty shoot out in soccer where two teams compete in a tournament framework taking turns in a sequence of ve penalty kicks each as the kicking order is determined by the random outcome of a coin ip the treatment and control

ratings migration and the business cycle with application to credit portfolio stress testing the turmoil in the capital markets in 1997 and 1998 has highlighted the need for systematic stress testing of banks portfolios including both their trading and lending books we propose that underlying macroeconomic volatility is a key part of a useful conceptual framework for stress testing credit portfolios and that credit migration matrices provide the specific linkages between underlying macroeconomic conditions and asset quality credit migration matrices which characterize the expected changes in credit quality of obligors are cardinal inputs to many applications including portfolio risk assessment modeling the term structure of credit risk premia and pricing of credit derivatives they are also an integral part of many of the credit portfolio models used by financial institutions by separating the economy into two states or regimes expansion and contraction and conditioning the migration matrix on these states we show that the loss distribution of credit portfolios can differ greatly as can the concomitant level of economic capital to be assigned

oil abundance and income inequality the paper empirically investigates the impact of natural resource abundance in particular oil on income disparities it employs common correlated effects pooled mean group methodology for estimation to account for the cross country heterogeneity and cross section dependence in the oil inequality nexus in a sample of developed and developing countries we find that oil abundance as well as oil dependence reduce income inequality this inequality reducing effect is highly likely to operate from better education attainments and improved health status due to oil booms

analytical methods for hedging systematic credit risk with linear factor portfolios abstract multi factor credit portfolio models are used widely today for managing economic capital and pricing collateralized debt obligations cdos and asset backed securities commonly practitioners allocate capital to the portfolio components sub portfolios counterparties or transactions the hedging of credit risk is generally also focused on the deltas of underlying names we present analytical results for hedging portfolio credit risk with linear combinations of systematic factors based on the minimization of systematic variance of portfolio losses we solve these problems within a multi factor merton type credit portfolio model and apply them to hedge systematic credit default losses of loan portfolios and cdos

importance sampling for portfolio credit risk monte carlo simulation is widely used to measure the credit risk in portfolios of loans corporate bonds and other instruments subject to possible default the accurate measurement of credit risk is often a rare event simulation problem because default probabilities are low for highly rated obligors and because risk management is particularly concerned with rare but significant losses resulting from a large number of defaults this makes importance sampling is potentially attractive but the application of is is complicated by the mechanisms used to model dependence between obligors and capturing this dependence is essential to a portfolio view of credit risk this paper provides an is procedure for the widely used normal copula model of portfolio credit risk the procedure has two parts one applies is conditional on a set of common factors affecting multiple obligors the other applies is to the factors themselves the relative importance of the two parts of the procedure is determined by the strength of the dependence between obligors we provide both theoretical and numerical support for the method

dynamic hedging of synthetic cdo tranches with spread risk and default contagion the paper is concerned with the hedging of credit derivatives in particular synthetic cdo tranches in a dynamic portfolio credit risk model with spread risk and default contagion the model is constructed and studied via markov chain techniques we discuss the immunization of a cdo tranche against spread and event risk in the markov chain model and compare the results with market standard hedge ratios obtained in a gauss copula model in the main part of the paper we derive model based dynamic hedging strategies and study their properties in numerical experiments

government loan guarantees and the credit decision making structure governments can alleviate the problem of banks denying credit to high risk borrowers and excluding weaker sectors from borrowing by introducing state guaranteed loan programs the main contribution of this paper is the elucidation of the importance of the bank s credit decision making structure in ensuring overall effectiveness of loan guarantees in particular the government can use the guarantee as an instrument for credit inducement and for affecting the bank s decision making system i e its degree of centralization bias towards approval of loans and reliance on objective loan specific information

the economic aftermath of resource booms evidence from boomtowns in the american west the current us oil and gas boom is injecting labour capital and revenue into communities near reserves will these communities be cursed with lower long run incomes in the wake of the boom we study the oil boom and bust cycle of the 1970s and 1980s to gain insights using annual data on drilling to identify western boom and bust counties we find substantial positive local employment and income effects during the boom in the aftermath of the bust however we find that incomes per capita decreased and unemployment compensation payments increased relative to what they would have been if the boom had not occurred