the collateral channel how real estate shocks affect corporate investment abstract what is the impact of real estate prices on corporate investment in the presence of financing frictions firms use pledgeable assets as collateral to finance new projects through this collateral channel shocks to the value of real estate can have a large impact on aggregate investment to compute the sensitivity of investment to collateral value we use local variations in real estate prices as shocks to the collateral value of firms that own real estate over the 1993 2007 period the representative us corporation invests 0 06 out of each 1 of collateral jel d22 g31 r30

forecasting exchange rates with commodity prices a global country analysis this paper investigates the predictive properties of import and export prices of commodities on the exchange rates a period from 1993 to 2016 is considered we find that forecasts of the exchange rate adding commodity export and import prices are superior to those neglecting these variables this holds irrespective of whether the countries are net exporters or importers of commodities however the forecasting power was even better in the 1990s and seems to have decreased since that that time nevertheless forecasts can even today be improved considerably by adding commodity prices

the role of wages and auditing during a crackdown on corruption in the city of buenos aires abstract we study the prices paid for basic inputs during a crackdown on corruption in the public hospitals of the city of buenos aires argentina during 1996 97 we find a well defined negative effect on the measures used to capture corruption prices paid by hospitals for basic homogeneous inputs decrease by 15 percent during the first 9 months of the crackdown after this period prices increase but they are still 10 percent lower than those prevailing before the crackdown relative to the precrackdown period higher wages play no role in inducing lower input prices when audit intensity can be expected to be maximal during the first phase of the crackdown but have a negative and well defined effect when audit intensity takes intermediate levels the last phase of the crackdown controlling for fixed effects we find that the wage elasticity of input prices exceeds 20 these results are consistent with the standard model of bribes of gary becker and george stigler

supply and demand driven oil price changes and their non linear impact on precious metal returns a markov regime switching approach abstract this paper examines the nonlinear effect of oil price shocks on precious metal returns using markov regime switching regression we use ready s 2018 approach to decompose oil price changes into supply demand and risk driven shocks results indicate a significant positive impact of demand and supply shocks and a negative impact of risk shocks on precious metal returns although we find evidence of switching between low and high volatility regimes we do not find strong regime effect on supply or demand shocks contemporaneous relationship with precious metal returns however risk shocks influence on precious metal returns is strongly regime dependent these results generally hold for different distributional specification of error terms

multi scale dependence structure and risk contagion between oil gold and us exchange rate a wavelet based vine copula approach abstract this study makes a systemic analysis of dependence and risk contagion among oil gold and the us dollar foreign exchange us fx markets employing the wavelet method and a time varying tri variate vine copula model compared to previous research our empirical findings not only reveal the impact of co variate instead of pairwise analysis but also reveal the patterns of heterogeneity influence in different time horizons both dynamic average dependence and tail dependence show that the three assets are better integrated in the medium run time scales than the short run time scales whereby us fx connects the three assets in the short term while gold does so in the medium term all three multi variate scenarios show that risk contagion is temporal at different time scales the oil market was found to be more sensitive to the upside and downside risk contagion of the gold market in the short run time scales and vice versa asymmetry also shows that both the us fx and gold market are more sensitive to upside and downside risk contagion in the medium run time scales

the impact of oil price shocks on the term structure of interest rates in a structural var framework we study the impact of oil price shocks in the global crude oil market on the dynamics of the entire yield curve in four industrialised countries with different positions on the oil market the us canada norway and south korea responses of the term structure factors to oil market shocks are shown to differ contingent on the underlying sources that drive oil price shocks and the country s dependence on oil oil market specific demand shocks result in increases in the level factor in oil importing countries but have no such effect in oil exporting countries oil supply disruptions have short lived negative responses of the slope factors in the us and canada associated with loosening monetary policy whilst demand side shocks tend to lead to increases the slope in all countries overall oil supply and demand shocks jointly account for a considerable amount of the observed variation in the term structure of interest rates

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

do exchange rates respond asymmetrically to shocks in the crude oil market abstract the paper argues that exchange rates respond asymmetrically to different shocks to the crude oil market we apply kilian s 2009 methodology to disentangle shocks to the crude oil market into distinct demand and supply shocks and examine the response of the u s real and nominal trade weighted u s dollar exchange rate indexes as well as six other bilateral exchange rates to these shocks our analysis indicates that oil supply shocks have no significant effects on exchange rates while global aggregate demand and oil specific demand shocks lead to depreciations we further show that exchange rates respond asymmetrically to shocks in the crude market depending on whether the shocks are large versus small or positive versus negative

china and the relationship between the oil price and the dollar abstract we study cointegration and causality between the real price of oil and the real price of the dollar over the 1974 2004 period our results suggest that a 10 rise in the oil price coincides with a 4 3 appreciation of the dollar in the long run and that the causality runs from oil to the dollar through the development of a theoretical model we then investigate possible reasons why this relationship could be reversed in the future due to the emergence of china as a major player on both the oil and the foreign exchange markets

can the markov switching model forecast exchange rates abstract a markov swirching model is fit for 18 exchange rates at quarterly frequencies the model fits well in sample for many exchange rates by the mean squared error criterion the markov model does not generate superior forecasts to a random walk or the forward rate there appears to ne some evidence that the forecasts of the markov model are superior at predicting the direction of change of the exchange rate

show me the money interjurisdiction political competition and fiscal extraction in china we argue that interjurisdiction competition in authoritarian regimes engenders a specific logic for taxation promotion seeking local officials are incentivized to signal loyalty and competence to their principals through tangible fiscal revenues the greater the number of officials accountable to the same principal the more intense political competition is resulting in higher taxation however too many officials accountable to the same principal leads to lower taxation due to shirking by uncompetitive officials and the fear of political instability using a panel dataset of all chinese county level jurisdictions from 1999 2006 we find strong evidence for an inverse u shaped relationship between the number of county level jurisdictions within a prefecture our proxy for the intensity of political competition and fiscal revenues in most provinces but not so in politically unstable ethnic minority regions the results are robust to various alternative specifications including models that account for heterogeneous county characteristics and spatial interdependence

oil prices and the rise and fall of the us real exchange rate abstract questions of the relative importance of real vs monetary shocks in explaining exchange rate movements still have no widely accepted answer despite their importance both for the research agenda and for policy questions we examine this issue using a variety of empirical techniques for the us effective exchange rate we find that a stable link exists between oil price shocks and the us real effective exchange rate over the post bretton woods period the results suggest that oil prices may have been the dominant source of persistent real exchange rate shocks and that energy prices may have important implications for future work on exchange rate behavior

oil shocks and external balances abstract we provide estimates of the effects of demand and supply shocks in the global crude oil market on several measures of oil exporters and oil importers external balances including the oil trade balance the non oil trade balance the current account capital gains and changes in net foreign assets nfa first we show that the effect of oil demand and supply shocks on the merchandise trade balance and the current account which depending on the source of the shock can be large depends critically on the response of the non oil trade balance our results provide evidence of an intermediate degree of international financial integration second we document the presence of large and systematic valuation effects in response to these shocks valuation effects overall tend to cushion the effect of oil demand and supply shocks on the nfa positions of oil exporters and oil importers third we quantify the overall importance of global business cycle demand shocks as well as oil market specific demand and supply shocks for external balances

do land revenue windfalls create a political resource curse evidence from china abstract by analyzing a panel on the political turnovers of 4390 county leaders in china during 1999 2008 we find that the revenue windfalls accrued to these officials from land sales have undermined the effectiveness of the promotion system for government officials instead of rewarding efforts made to boost gdp growth promotion is positively correlated with signaling efforts and with corruption the robust positive relationship between land revenue windfalls and political turnover or specifically promotion suggests that those who are politically connected to their superiors and those beyond the prime age for promotion are the primary beneficiaries the case for corruption is substantiated by the evidence inferred from anti corruption crackdowns which reveals that the additional effect of land revenue on political turnover and size of bureaucracy a proxy for corruption decreases significantly in crackdowns but that land revenue has no effect on city construction expenditure a proxy for signaling

oil shocks and financial systemic stress international evidence abstract by conducting a structural var analysis on the financial systemic stress in 20 countries this paper provides international evidence that oil structural shocks impact not only stress in individual financial markets but also their connectedness the oil structural shocks explain a large fraction of the variation in the connectedness among various financial markets the effect of oil structural shocks on financial systemic stress is largely dependent on the origins of oil price changes and a country s net oil export position in most oil importing economies financial systemic stress is negatively impacted by supply and aggregate demand shocks and positively impacted by oil market specific demand shocks opposite patterns are detected in oil exporting economies the effects of the spillovers are asymmetrically related with market conditions during normal periods more risks are spilled over from the oil market to financial systems but during financial crises the opposite occurs in periods of financial crises and oil price collapses there is noticeable contagion between the oil market and financial systems

exchange rates of oil exporting countries and global oil price shocks a nonlinear smooth transition approach this paper models logistic and exponential smooth transition adjustments of real exchange rates for six major oil exporting countries in response to different shocks affecting oil prices the logis

the impacts of structural oil shocks on macroeconomic uncertainty evidence from a large panel of 45 countries abstract using local projection methods this paper employs monthly panel data from 1989 to 2017 to examine both linear and nonlinear impulse responses of macroeconomic uncertainty to structural shocks to global oil production aggregate demand oil market specific demand and speculative demand in a large group of 45 economies we find that both oil supply and demand shocks are important drivers of uncertainty there is strong evidence that the impacts of oil price shocks on macroeconomic uncertainty are regime dependent and contingent on the states of investor sentiments and perceived volatility in financial markets the responses of economic uncertainty to oil shocks especially demand side shocks appear to experience a dramatic change in the post global financial crisis period

the impact of oil shocks on exchange rates a markov switching approach abstract this paper uses markov switching models to investigate the impact of oil shocks on real exchange rates for a sample of oil exporting and oil importing countries this is an important topic to study because an oil shock can affect a country s terms of trade which can affect its competitiveness we detect significant exchange rate appreciation pressures in oil exporting economies after oil demand shocks we find limited evidence that oil supply shocks affect exchange rates global economic demand shocks affect exchange rates in both oil exporting and importing countries though there is no systematic pattern of appreciating and depreciating real exchange rates the results lend support to the presence of regime switching for the effects of oil shocks on real exchange rates

oil prices and real exchange rates in this paper we investigate the long run relationship between real oil prices and real exchange rates by using a monthly panel of g7 countries from 1972 1 to 2005 10 we first test whether exchange rates are cointegrated with real oil prices it is shown that real oil prices may have been the dominant source of real exchange rate movements and that there is a link between real oil prices and real exchange rates we then examine the ability of real oil prices to forecast future real exchange returns panel predictive regression estimates suggest that real oil prices have significant forecasting power the out of sample prediction performances demonstrate greater predictability over longer horizons

oil prices and the terms of trade abstract the combination of substantial terms of trade variability and unstable correlation patterns of trade prices with output and trade volumes has led some to suggest a break in the link between trade volumes and prices we find that oil accounts for much of the variation in the terms of trade over the last twenty five years and its quantitative role varies significantly over time and since our dynamic general equilibrium model predicts that the economy responds differently to oil supply shocks than to other shocks changes in their relative importance helps to account for the unstable correlations in the data

energy contagion analysis a new perspective with application to a small petroleum economy abstract we put forward the novel concept of energy contagion i e a deepening of energy finance linkages under crisis conditions in energy markets further we show how to construct tests for energy contagion through correlation co skewness and co volatility channels the samples of our contagion measures are defined in terms of calm and crisis periods in the international crude oil market in particular we compare how these various co moments in the energy finance nexus change during 1 oil booms and slumps using semi parametric rule based algorithms 2 tranquil and turbulent oil price volatility episodes using a non hierarchical k means clustering algorithm energy contagion analysis is essential for financial stability analysis in economies where prosperity is linked to the prices of hard commodities our applications are performed on the oil exchange rate and oil stock market relationships of the small petroleum economy of trinidad and tobago the main results show a negative oil real effective exchange rate dependency a weak oil stock returns association and the existence of several energy contagion channels in both financial relationships which are sensitive to the contemporary global financial crash

an investigation of oil prices impact on sovereign credit default swaps in russia and venezuela abstract in this paper we study the impact of oil price returns on sovereign credit default swaps cds spreads for two major oil producers russia and venezuela using daily spreads from 2008 to 2015 through a time varying transition probabilities markov switching model our results show that crude oil price and its volatility are critical determinants of their sovereign debt we highlight some differences between the two countries depending on the state of the economy moreover global and local factors play a major role in the determination of sovereign cds spreads

do green investments react to oil price shocks implications for sustainable development abstract this study investigates whether green investments are connected to oil price shocks while earlier papers mainly investigate the linkage between clean energy stock and crude oil prices we consider recently introduced environmental indexes consisting of companies that use eco friendly production processes and develop green infrastructures using the markov regime switching regression approach we observe that the effect of crude oil prices on environmental investments appears to be statistically insignificant albeit positive in most of the cases one possible reason behind such a finding is that the oil dependence is limited to the case of eco friendly firms the results further indicate switching between low and high volatility regimes implying that there exist high and low volatility states for green assets given that growing concerns about climate change and energy security would inspire market participants shift towards ethical investments our results could be of interest to investors aiming at decarbonizing their portfolios by including more environmental assets one important finding of our empirical analysis is that green assets are found to be more susceptible to oil market volatility rather than to oil price fluctuations this is a novel finding given that prior literature focusing on the association of oil sectors and green assets mainly consider the information on oil prices rather than oil volatility hence our study aims to conceal an important void in the exiting literature

oil price fluctuations and u s dollar exchange rates adding oil prices to the monetary model of exchange rates we find that oil prices significantly explain movements in the value of the u s dollar usd against major currencies from the 1970s to 2008 our long run and forecasting results are remarkably consistent with an oil exchange rate relationship increases in real oil prices lead to a significant depreciation of the usd against net oil exporter currencies such as canada mexico and russia on the other hand the currencies of oil importers such as japan depreciate relative to the usd when the real oil price goes up

an analysis of the principal agent problem most analyses of the principal agent problem assume that the principal chooses an incentive scheme to maximize expected utility subject to the agent s utility being at a stationary point an important paper of mirrlees has shown that this approach is generally invalid we present an alternative procedure if the agent s preferences over income lotteries are independent of action we show that the optimal way of implementing an action by the agent can be found by solving a convex programming problem we use this to characterize the optimal incentive scheme and to analyze the determinants of the seriousness of an incentive problem

cursed by resources or institutions natural resource abundant countries constitute both growth losers and growth winners and the main difference between the success cases and the cases of failure lays in the quality of institutions with grabber friendly institutions more natural resources push aggregate income down while with producer friendly institutions more natural resources increase income such a theory finds strong support in data a key question we also discuss is if resources in addition alter the quality of institutions when that is the case countries with bad institutions suffer a double resource curse as the deterioration of institutions strenghtens the negative effect of more natural resources

federalism as a commitment to reserving market incentives the authors advance a new perspective in the study of federalism their approach views federalism as a governance solution of the state to credibly preserving market incentives market incentives are preserved if the state is credibly prevented from compromising on future economic success and from bailing out future failures the salient features of federalism decentralization of information and authority and interjurisdictional competition help provide credible commitment or these purposes in addition the authors suggest that some federalism are self sustaining

political competition policy and growth theory and evidence from the us this paper develops a simple model to analyse how a lack of political competition may lead to policies that hinder economic growth we test the predictions of the model on panel data for the us states in these data we find robust evidence that lack of political competition in a state is associated with anti growth policies higher taxes lower capital spending and a reduced likelihood of using right to work laws we also document a strong link between low political competition and low income growth

war politics an economic rational voter framework the frequency of foreign conflict initiations in the united states is found to be significantly greater following the onset of recessions during a president s first term than in other periods the authors develop an economic theory of the political use of wars which links the election cycle war decisions and economic performance consistent with the observed relationships among these events an incumbent leader with an unfavorable economic performance record may initiate a war to force the learning of his war leadership abilities and thus salvage with some probability his reelection this obtains despite voter rationality and informational symmetry copyright 1995 by american economic association

oil price shocks and chinese banking performance do country risks matter abstract this paper contributes to the existing literature by investigating the impacts of oil prices on bank performance through a broad array of camel capital adequacy asset quality management earnings and liquidity indicators in china over the period 2000 2014 to gain further insights into this issue we also discuss whether the correlations change with different dimensions of country risk i e economic financial and political which extant studies ignored the results reveal that oil prices have a significant impact on banking performance as their increase triggers a reduction in banking performance in terms of capitalization management efficiency earning power and liquidity however these adverse effects are mitigated by country stability especially economic stability and political stability these results are important for policy makers who should be cautious when formulating a strategy for macroeconomic stability from the managerial perspective bank managers should consider establishing early warning and response mechanisms on the back of oil price shocks in order to operate under better performance

oil prices exchange rates and emerging stock markets abstract while two different streams of literature exist investigating 1 the relationship between oil prices and emerging market stock prices and 2 the relationship between oil prices and exchange rates relatively little is known about the dynamic relationship between oil prices exchange rates and emerging market stock prices this paper proposes and estimates a structural vector autoregression model to investigate the dynamic relationship between these variables impulse responses are calculated in two ways standard and the recently developed projection based methods the model supports stylized facts in particular positive shocks to oil prices tend to depress emerging market stock prices and us dollar exchange rates in the short run the model also captures stylized facts regarding movements in oil prices a positive oil production shock lowers oil prices while a positive shock to real economic activity increases oil prices there is also evidence that increases in emerging market stock prices increase oil prices

asymmetric effects of oil price shocks on stock returns evidence from a two stage markov regime switching approach abstractthe asymmetric effects of oil price shocks on stock returns have attracted the attention of many researchers in the past several decades most of these researchers studies however do not separate out the sources of oil price shocks when examining the asymmetric effects in this article we address this limitation using a two stage markov regime switching approach our results indicate that oil supply and demand shocks have a null or minimal impact on stock returns in a low volatility regime and a statistically significant impact in a high volatility regime we observe that oil demand shocks affect stock returns significantly more than oil supply shocks a positive aggregate demand shock significantly increases stock returns whereas a positive oil specific demand shock markedly decreases stock returns these results have important implications for policymakers and investors

the relationship between oil prices and exchange rates revisiting theory and evidence abstract this paper reviews existing theoretical and empirical research on the relationship between oil prices and exchange rates we start with theoretical transmission channels which point to bi directional causality empirical research is classified and shows that the evidence varies substantially depending on sample country choice and empirical method yet there are some common patterns i strong links between exchange rates and oil prices are frequently observed over the long run and ii either exchange rates or oil prices are a potentially useful predictor of the other variable in the short run but the effects are strongly time varying we also identify some important avenues for future research

dynamic link between oil prices and exchange rates a non linear approach abstract we explore the non linear relationship between crude oil prices and exchange rates of major currencies from quantitative and structural perspectives by utilizing bivariate normal mixture model the correlation coefficients between oil prices and exchange rates demonstrate that their dependences typically start from 2004 then dynamically change over time then we investigate whether business cycle and oil price shocks as two possible exogenous factors affect the dependence structure of oil fx linkage we find significant structural heterogeneity during economic expansion while little evidence of heterogeneity in recession this finding provides alternative interpretations for the enhanced dependence between oil prices and exchange rates and generates implications of financialization in commodity market in terms of oil price shocks kilian 2009 the normal mixture model captures significant heterogeneity implying that unstable oil fx dependence structure is frequently associated with oil aggregate demand shocks and oil specific demand shocks with an emphasis on the dynamic weights of two underlying states we interestingly find that structural heterogeneities coincide with a variety of geopolitical and economic events the application of normal mixture not only provide us knowledge of non linear relationship between oil prices and exchange rates but also guidance for investors in risk management and portfolio diversification complementary to the traditional portfolio theory based on normal distribution

does oil corrupt evidence from a natural experiment in west africa abstract this paper explores the oil discovery announcements in sao tome and principe 1997 1999 to assess the role of natural resources in determining corruption for this purpose we use a natural experiment framework which contrasts sao tome and principe to cape verde a control west african country sharing the same colonial past and important recent economic and political shocks our measurement is based on tailored household surveys we conducted in both island countries the unique survey instrument was retrospective and used personal histories to elicit memories from the respondents we analyze changes in perceived corruption across a wide range of public services and allocations we find clearest increases on vote buying education namely in the allocation of scholarships and customs ranging from 31 to 40 of the subjective scale we interpret these findings as symptoms of increased competition for core state resources

stackelberg equilibria in managerial delegation games abstract managerial compensation packages do not only influence managers behavior but also have an impact on competing firms in a managerial delegation game investigating the latter aspect it is shown that the inherent prisoner s dilemma situation can be resolved without changing the normally studied setup or timing in the first stage owners choose an incentive function for their managers in the second stage they choose the weights assigned to that function besides profits and in the third stage managers play a cournot game solving this continuous optimization problem with the implicit function theorem shows that choosing an incentive from the set of multiplicative incentives i e any generalized affine transformation of the product of both firms quantities which includes e g relative profit ensures that the stackelberg outcome is among the set of equilibrium outcomes furthermore it is the unique outcome if the rival owner opts for one of the well known incentives like sales revenue or market share the general approach used allows demonstrating that with no other linear incentive a stackelberg outcome results and that incentives like profit to cost ratio should be avoided selecting a multiplicative incentive is a dominant strategy of the game

oil price and usd naira exchange rate crash can economic diversification save the naira abstract naira lost half of its foreign exchange value in less than two years following 2014 oil price crash and has not recovered despite numerous government s attempts this study thus evaluated the potential of economic diversification proxied by non oil export performance in saving the naira by analysing a nexus between oil price exchange rate and nonoil export estimation of a rearranged current account equation within autoregressive distributed lag ardl and vector autoregressive var models using monthly data from january 2008 to december 2015 yielded the following results there is a direct relationship between oil price and exchange rate and this affirms that sharp decline in the former induced the latter s deterioration increase in non oil exports led to appreciation of usd naira exchange rate both in the short run and the long run import on the other hand induced depreciation of the exchange rate in the long run diversification by increasing export revenue and reducing import bills therefore has a great potential to improve the value of naira

commodity currencies and the real exchange rate abstract this paper examines whether the real exchange rates of commodity exporting countries and the real prices of their commodity exports move together over time using international monetary fund imf data on the world prices of 44 commodities and national commodity export shares we construct new monthly indices of national commodity export prices for 58 commodity exporting countries over 1980 2002 evidence of a long run relationship between national real exchange rate and real commodity prices is found for about one third of the commodity exporting countries the long run real exchange rate of these commodity currencies is not constant as would be implied by purchasing power parity based models but is time varying being dependent on movements in the real price of commodity exports

how do oil price shocks affect the output volatility of the u s energy mining industry the roles of structural oil price shocks abstract this paper focuses on how explicit structural shocks that characterize the endogenous character of international oil price change affect the output volatility of the u s crude oil and natural gas mining industries to this end we employ a modified structural vector autoregressive model svar to decompose real oil price changes into four components u s supply shocks non u s supply shocks aggregate demand shocks and oil specific demand shocks mainly driven by precautionary demand the results indicate that output volatility of the u s crude oil and natural gas mining industry has significantly negative responses to u s supply shocks aggregate demand shocks and oil specific demand shocks while lacks significant response to non u s supply shocks variance decomposition and historical decomposition confirm that u s supply shocks occupy most explaining variations in output volatility among the four structural oil shocks moreover the oil specific demand shocks explain more variation than that of aggregate demand shocks for the crude oil mining industry but the opposite is true for the natural gas mining industry

booming sector and de industrialisation in a small open economy this paper presents a theoretical analysis of the dutch disease the phenomenon whereby a boom in one traded goods sector squeezes porfitability in other traded goods sectors both by directly bi

is there a peso problem evidence from the dollar pound exchange rate 1976 1987 one of the most puzzling aspects of the floating exchange rate regime since 1973 has been the apparent irrationality embedded in investors exchange rate expectations this paper investigates whether exchange rate forecasts although biased are still rational the idea is that investors can be rational and yet make repeated mistakes if the true model of the exchange rate is evolving over time the author s results support the hypothesis that the exchange rate has followed a switching regime process moreover the switching regime model estimated can explain about 75 percent of the bias implied by the forward market and the survey data copyright 1993 by american economic association

asymmetric information incentives and intrafirm resource allocation this paper considers the question how should a firm allocate a resource among divisions when the productivity of the resource in each division is known only to the division manager obviously if the divisions as represented by their managers are indifferent among various allocations of the resource the headquarters can simply request the division managers to reveal their private information on productivity knowing that the managers have no incentive to lie the resource allocation problem can then be solved under complete or at least symmetric information this aspect is a flaw in much of the recent literature on this topic i e there is nothing in the models considered which makes divisions prefer one allocation over another thus although in some cases elaborate allocation schemes are proposed and analyzed they are really unnecessary in the model we develop a division can produce the same output with less managerial effort if it is allocated more resources and effort is costly to the manager we further assume that this effort is unobservable by the headquarters so that it cannot infer divisional productivity from data on divisional output and managerial effort given these assumptions we seek an optimal resource allocation process our results show that certain types of transfer pricing schemes are optimal in particular if there are no potentially binding capacity constraints on production of the resource then an optimal process is for each division to choose a transfer price from a schedule announced by the headquarters division managers receive a fixed compensation minus the cost of the resource allocated to them at the chosen transfer price resources are allocated on the basis of the chosen transfer prices if there is a potentially binding constraint on resource production a somewhat more complicated but similar scheme is required

the empirical relationship between energy futures prices and exchange rates abstract this paper investigates the interaction between energy futures prices and exchange rates results are presented to show that futures prices for crude oil heating oil and unleaded gasoline are co integrated with a trade weighted index of exchange rates this is important because it means that there exists a long run equilibrium relationship between these four variables granger causality results for both the long and short run are presented evidence is also presented that suggests exchange rates transmit exogenous shocks to energy futures prices

incentive contracts when production is subcontracted abstract the problem of pricing for products under subcontracting is set in an agency theory format characteristics of decentralization moral hazard and adverse selection are inherent in this problem optimal incentive compensation function and the transfer price are analyzed the results are illustrated with an example of logarithm utility functions

oil shocks competition and corporate investment evidence from china abstract this paper aims to investigate the impact of three classical oil shocks on the chinese corporate investment by using firm level data moreover we assess the role of product market competition in the relationship between oil shocks and corporate investment our empirical results show that oil aggregate demand and specific demand shocks negatively affect corporate investment while oil supply shocks show a positive effect notably compared to the non energy related industry the corporate investment of energy related industry is more sensitive to these oil shocks furthermore we find high competitive pressure can mitigate the impact of oil specific demand shocks on the corporate investment of energy related industry but competition presents a limited effect on the relationship between other oil shocks and corporate investment

real exchange rates and switching regimes abstract we suggest that the real exchange rate between the major currencies in the post bretton woods period can be described by a stationary 2 state markov switching ar 1 model based on the forecast performance we find that this model outperforms two competing models where the real exchange rate is nonstationary we also find that the existence of different regimes as in the markov switching model is consistent with the common finding of unit roots in real exchange rates

corruption and the composition of government expenditure abstract this paper asks whether predatory behavior by corrupt politicians distorts the composition of government expenditure corruption is found to reduce government spending on education in a cross section of countries

does exchange rate management affect the causality between exchange rates and oil prices evidence from oil exporting countries abstract the bi directional causality between exchange rates and oil prices of oil exporting countries has been widely investigated since the oil crisis in the 1970s the classical theoretical framework assumes that countries adopt free floating exchange rate arrangements and empirical studies seldom consider exchange rate restrictions when investigating oil exporters that always manage exchange rates to address these limitations this study designs a comparative analysis for three groups of oil exporting economies that adopt different foreign exchange rate policies the analysis aims to examine whether and how intervention behavior may distort the causal relationship between exchange rates and oil prices we first show the non linear causality relationships for countries with free floating exchange rate arrangements in both long and short terms then we establish how the managed floating policy can eliminate the impact of oil prices on exchange rates in bull markets but fail to prevent exchange rate depreciation in bear markets in bear markets a negative non linear feedback from exchange rates to oil prices prevails in these countries however contrary to common wisdom the strict soft pegged exchange rate arrangement cannot remove all the linkages between exchange rates and oil prices a small but significant response of exchange rates toward oil prices is detected for kuwait and saudi arabia a similar effect for kazakhstan is only found in bear markets in addition this study re investigates the relationship between exchange rate and the domestic currency price of oil the conclusions are similar except that the relationship is weakened in free floating countries but strengthened in managed floating countries during the bear market periods

optimal transfer pricing schemes for work averse division managers with private information abstract this paper models a decentralized firm under information asymmetry and effort disutility on the part of managers we assume that managers choose efforts before observing some private information however after the effort choice managers receive private information on their cost parameters which they report to the headquarters there exist many situations in which managers need to take efforts before obtaining private information for example the regular maintenance effort on the machine the effort on rd 2 under certain demand conditions managers cannot receive any information rent benefit for their private information even if they have the option to renege on the contract after obtaining their private information

commodity prices interest rates and the dollar this paper sheds light on recent fluctuations in commodity prices we investigate whether a decline in real interest rates and the us dollar contributes to higher commodity prices and whether commodity prices display overshooting behavior in response to changes in real interest rates we analyze the behavior of real prices of crude oil food metals and industrial raw materials the analysis is based on structural var models estimated on quarterly data over the period 1990q1 2007q4 our results suggest that commodity prices increase significantly in response to reductions in real interest rates moreover oil prices and prices of industrial raw materials tend to display overshooting behavior in response to such interest rate changes the evidence also suggests that a weaker dollar leads to higher commodity prices shocks to interest rates and the dollar are found to account for substantial shares of fluctuations in commodity prices

transparency political polarization and political budget cycles in oecd countries we investigate the effects of fiscal transparency and political polarization on the prevalence of electoral cycles in fiscal balance while some recent political economy literature on electoral cycles identifies such cycles mainly in weak and recent democracies in contrast we show conditioning on a new index of institutional fiscal transparency that electoral cycles in fiscal balance are a feature of many advanced industrialized economies using a sample of 19 oecd countries in the 1990s we identify a persistent pattern of electoral cycles in low er transparency countries while no such cycles can be observed in high er transparency countries furthermore we find in accordance with recent theory that electoral cycles are larger in politically more polarized countries

incumbent behavior vote seeking tax setting and yardstick competition this paper develops a model of the political economy of tax setting in a multijurisdictional world where voters choices and incumbent behavior are determined simultaneously voters are assumed to make comparisons between jurisdictions to overcome political agency problems this forces incumbents into a yardstick competition in which they care about what other incumbents are doing we provide a theoretical framework and empirical evidence using u s state data from 1960 to 1988 the results are encouraging to the view that vote seeking and tax setting are tied together through the nexus of yardstick competition

an approach to transfer pricing under uncertainty from the perspective of agency theory newer insights perhaps can be gained into issues of decentralization and transfer pricing transfer pricing can be viewed as a mechanism which simultaneously establishes proper incentives for the agent such as a divisional manager or a subcontractor and induces an optimal decision on the quantity of production when such a decision is delegated in a decentralized setting in this paper we consider a principal such as top management who delegates a production decision to an agent and wishes to induce proper decisions through proper compensation the word proper refers to whatever is optimal under the circumstances including uncertainty divergence of preferences and information asymmetry one example of such setting see below for a discussion of another scenario is the relation between a contractor principal and a subcontractor agent whereby production is subcontracted because of economies of scale and scope and there is no intermediate market for the transferred product the problem of devising an optimal transfer price mechanism in a world of certainty was addressed by ronen and mckinney henceforth rm 1971 they did not consider whether their transfer price mechanism generalizes to a world of uncertainty moreover their mechanism assumed that the divisional managers agents wish to maximize their respective divisional accounting profits and that there is only information asymmetry no moral hazard 1

is there a homogeneous causality pattern between oil prices and currencies of oil importers and exporters although the link between oil prices and dollar exchange rates has been frequently analyzed a clear distinction between prices and nominal exchange rate dynamics and a clarification of the issue of causality has not been provided in addition previous studies have mostly neglected nonlinearities which for example may stem from exogenous oil price shocks using monthly data for various oil exporting and oil importing countries this study contributes to the clarification of those issues we discriminate between long run and time varying short run dynamics using a markov switching vector error correction model in terms of causality the results differ between the economies under observation but suggest that the most important causality runs from exchange rates to oil prices with a depreciation of the dollar triggering an increase in oil prices on the other hand changes in nominal oil prices are responsible for ambiguous real exchange rate effects mostly through the price differential and partly also through a direct influence on the nominal exchange rate overall the fact that the adjustment pattern frequently differs between regimes underlines the fact that the relationships are subject to changes over time suggesting that nonlinearities are an important issue when analyzing oil prices and exchange rates

modelling systemic risk and dependence structure between the prices of crude oil and exchange rates in brics economies evidence using quantile coherency and ngcovar approaches abstract in this study we examine the dependence structure and systemic risk between return series of the prices of crude oil and the brics exchange rates to us using the quantile coherency methods of barunik and kley 2015 and the nonparametric conditional value at risk granger causality test hereafter ngcovar of diks and wolski 2018 over the period 2005 2017 further we use the hiemstra and jones 1994 hereafter hj and diks and panchenko 2005 hereafter dp tests for comparison purposes our findings indicate that all countries reveal significant negative dependence in the long run dynamics between oil prices and brazilian indian and south african currencies hj and dp tests suggest that lagged crude oil prices have predictive power for the brazilian and russian exchange rates furthermore a robust unidirectional lagged dependence exists from the brazilian exchange rate to crude oil prices concerning the chinese indian and south african currencies we find no contagion effects from to those countries to the oil market for russia there is limited evidence of contagion effects these findings provide insights for regulators and international investors

regime switching model of us crude oil and stock market prices 1859 to 2013 this paper examines the relationship between us crude oil and stock market prices using a markov switching vector error correction model and a monthly data set from 1859 to 2013 the sample covers the entire modern era of the petroleum industry which typically begins with the first drilled oil well in titusville pennsylvania in 1858 we estimate a two regime model that divides the sample into high and low volatility regimes based on the variance covariance matrix of the oil and stock prices we find that the high volatility regime more frequently exists prior to the great depression and after the 1973 oil price shock caused by the organization of petroleum exporting countries the low volatility regime occurs more frequently when the oil markets fell largely under the control of the major international oil companies from the end of the great depression to the first oil price shock in 1973 using the national bureau of economic research business cycle dates we also find that the high volatility regime more likely occurs when the economy experiences a recession

does euro or dollar pegging impact the real exchange rate the case of oil and commodity currencies the aim of this paper is to investigate the equilibrium exchange rates for commodity and oil currencies as well as the discrepancies of their observed exchange rates to these equilibriums to this end first we estimate a long term relationship between the real effective exchange rate and economic fundamentals including the commodity terms of trade the estimation relies on panel cointegration techniques and covers annual data from 1980 to 2007 our results show that real exchange rates co move with commodity prices in the long run and respond to oil price somewhat less than to commodity prices second we assess the degree of misalignment of these currencies as the gap between their observed exchange rate and the estimated equilibrium exchange rate we show that these misalignments are not significantly related to the exchange rate regimes adopted by the countries either pegged or floating however for pegged currencies the size of misalignments significantly depends on the anchor currency either the euro or the dollar a comparison of misalignments of pegged commodity and oil currencies across different periods confirms these results during periods of dollar euro overvaluation currencies pegged to the dollar euro tend to be overvalued the reverse being true when the dollar euro is undervalued consequently pegged currencies are often driven away from their equilibria by wild fluctuations in the key currencies on which they are anchored

political foundations of the resource curse in this paper we argue that the political incentives that resource endowments generate are the key to understanding whether or not they are a curse we show 1 politicians tend to over extract natural resources relative to the efficient extraction path because they discount the future too much and 2 resource booms improve the efficiency of the extraction path however 3 resource booms by raising the value of being in power and by providing politicians with more resources which they can use to influence the outcome of elections increase resource misallocation in the rest of the economy 4 the overall impact of resource booms on the economy depends critically on institutions since these determine the extent to which political incentives map into policy outcomes countries with institutions that promote accountability and state competence will tend to benefit from resource booms since these institutions ameliorate the perverse political incentives that such booms create countries without such institutions however may suffer from a resource curse

oil prices and exchange rates the quotations show a sharply divergent pattern in the response of the foreign exchange market to announcements of oil price increases during the first oil shock news about oil price rises led to a strengthening of the dollar whereas during the i979 surge of oil prices the reverse was generally true when the news was not so bad as feared the dollar fell back in i974 but rose in i979 in 1980 the pattern shifted once again back to dollar appreciation is there a rational fundamental explanation for the behaviour of the foreign exchange market or is it a matter of traders responding to what other traders arbitrarily think it is difficult to resolve this question but some insight can be provided through an analytical examination of the relationship between oil price increases and exchange rates the paper begins with a theoretical framework for analysing the relation between oil prices and exchange rates and then uses the theory to explain the behaviour of the foreign exchange market

the differential effects of oil demand and supply shocks on the global economy abstract we employ a set of sign restrictions on the impulse responses of a global var model estimated for 38 countries regions over the period 1979q2 2011q2 as well as bounds on impact price elasticities of oil supply and oil demand to discriminate between supply driven and demand driven oil price shocks and to study the time profile of their macroeconomic effects across a wide range of countries and real financial variables we show that the above identification scheme can greatly benefit from the cross sectional dimension of the gvar by providing a large number of additional cross country sign restrictions and hence reducing the set of admissible models the results indicate that the economic consequences of a supply driven oil price shock are very different from those of an oil demand shock driven by global economic activity and vary for oil importing countries compared to energy exporters while oil importers typically face a long lived fall in economic activity in response to a supply driven surge in oil prices the impact is positive for energy exporting countries that possess large proven oil gas reserves however in response to an oil demand disturbance almost all countries in our sample experience long run inflationary pressures an increase in real output a rise in interest rates and a fall in equity prices

a model of the demand for investment banking advising and distribution services for new issues this paper presents a theory of the demand for investment banking advising and distribution services for the case in which the investment banker is better informed about the capital market than is the issuer and the issuer cannot observe the distribution effort expended by the banker the optimal contract under which the offer price decision is delegated to the better informed banker in order to deal with the adverse selection and moral hazard problems resulting from the informational asymmetry and the observability problem is characterized the model demonstrates a positive demand for investment banking advising and distribution services and provides an explanation of the underpricing of new issues an investment banker performs three functions which may be of value to an issuer of new securities underwriting advising and distribution this paper presents a theory of the demand for investment banking advising and distribution services based on an informational asymmetry between an issuer of new securities and an investment banker ultimately a theory of the organization of the financial intermediary industry is required that would predict which firms would use which types of financial intermediaries for which purposes and which firms would raise capital without engaging the services of a financial intermediary only a limited set of such predictions are developed here in the context of a model of a fixedprice offering under a negotiated contract in which the investment banker is

fiscal incentives and policy choices of local governments evidence from china abstract this paper examines how fiscal incentives affect the policy choices of local governments in the context of china based on exogenous changes in the intergovernmental revenue sharing scheme we construct a simulated instrumental variable to resolve the endogeneity problem we find evidence that local governments shifted their efforts from fostering industrial growth to urbanizing china i e to developing the real estate and construction sectors when their retention rate of enterprise tax revenue was reduced the increase from the new revenue source compensated for half of the losses in revenue that resulted from the reassignment of fiscal rights the reassignment had also the effect of retarding the industrial growth of domestically owned firms in particular

the political resource curse this paper studies the effect of additional government revenues on political corruption and on the quality of politicians both with theory and data the theory is based on a political agency model with career concerns and endogenous entry of candidates the data refer to brazil where federal transfers to municipal governments change exogenously at given population thresholds allowing us to implement a regression discontinuity design the empirical evidence shows that larger transfers increase observed corruption and reduce the average education of candidates for mayor these and other more specific empirical results are in line with the predictions of the theory jel d72 d73 h77 o17 o18

the multilateral relationship between oil and g10 currencies abstract the relationship between oil and currencies is expected to be multilateral in nature however the use of the us dollar price of oil to measure this relationship can suffer from aggregation bias which is caused by the well known numeraire effect the quotation of oil in us dollars in this paper we remove the numeraire effect from the us dollar price of oil by creating a global multilateral price of oil which is quoted relative to multiple currencies this allows us to estimate an unbiased multilateral relationship between oil and g10 currencies we find that the global price of oil moves multilaterally with a group of oil currencies the norwegian krone the australian dollar the canadian dollar and the british pound in contrast the japanese yen and the swiss franc move multilaterally against the group of oil currencies and not against the global price of oil

does political instability affect exchange rates in arab spring countries abstractthis article investigates the dynamic relationship between political instability and exchange rates in five arab spring countries over the period 1992q1 2016q4 we include macroeconomic fundamentals to identify the transmission channels through which political instability may affect exchange rates based on var and ardl models our results report that political instability is associated with a significant drop in the value of domestic currencies of these countries economic growth is found to be the key mechanism channel we find also that the dependence between variables is more emphasized in the short run than in the long run

incentives information and organizational form we model an organization as a hierarchy of managers erected on top of a technology here consisting of a collection of plants in our framework the role of a manager is to take steps to reduce the adverse consequences of shocks that affect the plants beneath him we argue that different organizational forms give rise to different information about managers performance and therefore differ according to how effective incentives can be in encouraging a good performance in particular we show that under certain assumptions the m form multi divisional form is likely to provide better incentives than the u form unitary form because it promotes yardstick competition i e relative performance evaluation more effectively we conclude by presenting evidence that the assumptions on which this comparison rests are satisfied for chinese data

the causal nexus between oil prices and equity market in the u s a regime switching model abstract the aim of this paper is to analyse the causal link between monthly oil futures price changes and a sub grouping of s p 500 stock index changes the causal linkage between oil and stock markets is modelled using a vector autoregressive model with time varying parameters so as to reflect changes in granger causality over time a markov switching vector autoregressive ms var model in which causal link between the series is stochastic and governed by an unobservable markov chain is used for inferring time varying causality although we do not find any lead lag type granger causality the results based on the ms var model clearly show that oil futures price has strong regime prediction power for a sub grouping of s p 500 stock index during various sub periods in the sample while there is a weak evidence for the regime prediction power of a sub grouping of s p 500 stock indexes the regime prediction non causality tests on the ms var model show that both variables are useful for making inference about the regime process and that the evidence on regime prediction causality is primarily found in the equation describing a sub grouping of s p 500 stock market returns the evidence from the conditional non causality tests shows that past information on the other series fails to improve the one step ahead prediction for both oil futures and stock returns

federalism chinese style the political basis for economic success in china china s remarkable economic success rests on a foundation of political reform providing a considerable degree of credible commitment to markets this reform reflects a special type of institutionalized decentralization that the authors call federalism chinese style this form of decentralization has three consequences first it fosters competition not only in product markets but also among local governments for labor and foreign capital this competition in turn encourages local government experimentation and learning with new forms of enterprises regulation and economic relationships second it provides incentives for local governments to promote local economic prosperity finally it provides a significant amount of protection to local governments and their enterprises from political intrusion by the central government

dynamic relationship of oil price shocks and country risks abstract this study investigates the dynamic relationship between oil price shocks and country risks using a structural var framework for a sample of both net oil exporting and net oil importing countries over the period january 1994 december 2014 the results reveal that country risk is significantly affected by oil price shocks but the impacts are different unanticipated positive oil price shocks trigger a reduction addition in country risk for net oil exporting country net oil importing countries as to the responses of oil prices to country risk shock evidence show that country risk shocks have a delayed significantly positive impacts on oil price for oil exporting country with respect to the effects of subcomponents of country risk we find evidence that economic and political risk have a significant impact on supply side shocks in net oil exporting countries like canada while economic and political risk have a significant effect on supply side shocks and oil specific demand shocks in net oil importing countries like the us these results are particularly important to policy makers and government

the effects of oil price shocks on asian exchange rates evidence from quantile regression analysis abstract this paper investigates the effects of oil price shocks on asian exchange rates we employ quantile regression analysis and allow for structural breaks and asymmetry our results indicate that positive and negative oil price shocks have asymmetrical effects on exchange rate returns that vary in significance size and sign throughout the distribution of exchange rate returns the impact of oil price shocks is also affected by market conditions bearish and bullish currency markets during bullish markets in domestic currencies at lower quantiles of currency movements in terms of u s dollar exchange rates rising oil prices cause further appreciation for indonesia korea the philippines and thailand currencies during bearish markets in the domestic currencies at higher quantiles of exchange rate movements in terms of u s dollar exchange rates rising falling oil price causes further currency depreciation for indonesia malaysia thus currencies respond differently to oil price shocks under extreme bullish or bearish currency market conditions and the impact of rising or falling oil prices on foreign exchange markets can vary by country and market conditions

oil and the macroeconomy when prices go up and down an extension of hamilton s results in an important paper hamilton 1983 demonstrated a strong correlation between oil price changes and gross national product growth in u s data however his study pertained to a period in which all the large oil price movements were upward and thus it left unanswered the question whether the correlation persists in periods of price decline moreover the price variable he used was somewhat distorted by price controls in the 1970s this note investigates whether hamilton s results continue to hold when the sample is extended to include the recent oil market collapse and the oil price variable is corrected for the effects of price controls particular attention is given to the possibility of asymmetric responses to oil price increases and decreases as suggested in the structural employment literature loungani 1986 davis 1987 hamilton 1988 like hamilton i based my investigation on the gnp equation in sims s 1 980b six variable quarterly vector autoregressive model