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

nonparametric measures of scale economies and capacity utilization an application to u s manufacturing abstract an economic measure of scale efficiency is the ratio of the minimum average cost to the average cost at the actual output level of a firm it is easily measured by the ratio of the total cost of this output under the constant and variable returns to scale assumptions this procedure does not identify the output level where the average cost reaches a minimum this paper proposes a nonparametric method of measuring this output level using dea the relation between this efficient production scale the short run physical capacity output and the most productive scale size mpss is also discussed an empirical application using state level data from u s manufacturing is used to illustrate the procedure the dea findings are further analyzed using a smoothed bootstrap procedure

ranking trade resistance variables using data envelopment analysis abstract in the context of justus von liebig s law of the minimum this study assesses the impacts that trade barriers have on trade resistance between united states u s manufacturing industries and their trade partners an undesirable trade resistance model is presented where trade barriers are undesirable inputs into the production of the undesirable output trade resistance it is then presented how johansen s notion of capacity is utilized to assess trade barriers impacts estimation takes place by employing data envelopment analysis dea results suggest that u s trade partners port logistics are the most limiting trade barrier for the u s manufacturing industries followed by the distance between the u s and its trade partners the tariff imposed by the u s and the tariff imposed by the trading partner

is wti crude oil market becoming weakly efficient over time new evidence from multiscale analysis based on detrended fluctuation analysis abstract this paper extends the work in tabak and cajueiro are the crude oil markets becoming weakly efficient over time energy economics 29 2007 28 36 and alvarez ramirez et al short term predictability of crude oil markets a detrended fluctuation analysis approach energy economics 30 2008 2645 2656 in this paper we test for the efficiency of wti crude oil market through observing the dynamic of local hurst exponents employing the method of rolling window based on multiscale detrended fluctuation analysis empirical results show that short term medium term and long term behaviors were generally turning into efficient behavior over time however in this way the results also show that the market did not evolve along stable conditions for long times multiscale analysis is also implemented based on multifractal detrended fluctuation analysis we found that the small fluctuations of wti crude oil market were persistent however the large fluctuations had high instability both in the short and long terms our discussion is also extended by incorporating arguments from the crude oil market structure for explaining the different correlation dynamics

the economics of small business finance the roles of private equity and debt markets in the financial growth cycle abstract this article examines the economics of financing small business in private equity and debt markets firms are viewed through a financial growth cycle paradigm in which different capital structures are optimal at different points in the cycle we show the sources of small business finance and how capital structure varies with firm size and age the interconnectedness of small firm finance is discussed along with the impact of the macroeconomic environment we also analyze a number of research and policy issues review the literature and suggest topics for future research

are there exploitable inefficiencies in the futures market for oil if the crude oil futures market is not efficient in the fama sense profitable trading opportunities may exist this paper uses an artificial neural network model with moving average crossover inputs to predict price in the crude oil futures market the predictions of price are used to construct buy and sell signals for traders compared to those of benchmark models cumulative returns year to year returns returns over a market cycle and sharpe ratios all favor the ann model by a large factor the significant profitability of the ann model casts doubt on the efficiency of the oil futures market

entrepreneurial tail risk implications for employment dynamics starting a new business is risky this paper asks how entrepreneurial productivity risk has changed over time in the us and how this has affected employment i estimate this risk using micro data on the size distribution of new businesses and their exit rates the paper distinguishes upside and downside risk and analyzes their effects in a tractable dynamic general equilibrium of entrepreneurship at the heart of the model is the decision of potential entrepreneurs whether to start a new business in the face of uninsurable productivity risk applied to us time series data structural estimates suggest that higher upside risk explains much of the high job creation in the late 1990s over the entire sample period time variation in risk explains 40 to 55 of the variation in employment of new businesses reduced form results show that this relationship is strongest in it related industries counterfactual simulations show that the explanatory power of a model with a single risk factor drops by 30 to 50 compared to the baseline estimates

speculative growth hints from the u s economy we propose a framework for understanding episodes of vigorous economic expansion and extreme asset valuations we interpret this phenomenon as a high valuation equilibrium with a low cost of capital based on optimism about future funding the key ingredient for such equilibrium is feedback from increased growth to a decline in the long run cost of capital this feedback arises when an expansion comes with technological progress in the capital sector when fiscal rules generate procyclical fiscal surpluses when the rest of the world has lower expansion potential or high saving needs and when financial constraints are relaxed by the expansion itself

time varying predictability in crude oil markets the case of gcc countries abstract this paper uses a time varying parameter model with generalized autoregressive conditional heteroscedasticity effects to examine the dynamic behavior of crude oil prices for the period february 7 1997 january 8 2010 using data from four countries of the gulf cooperation council we find evidence of short term predictability in oil price changes over time except for several short sub periods however the hypothesis of convergence towards weak form informational efficiency is rejected for all markets in addition we explore the possibility of structural breaks in the time paths of the estimated predictability indices and detect only one breakpoint for the oil markets in qatar and the united arab emirates our empirical results therefore call for new empirical research to further gauge the predictability characteristics and the determinants of oil price changes

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

nonlinearity and intraday efficiency tests on energy futures markets using high frequency data this paper first time comprehensively examines the intraday efficiency of four major energy crude oil heating oil gasoline natural gas futures markets in contrast to earlier studies which focus on in sample evidence and assume linearity the paper employs various nonlinear models and several model evaluation criteria to examine market efficiency in an out of sample forecasting context overall there is evidence for intraday market inefficiency of two of the four energy future markets heating oil and natural gas which exists particularly during the bull market condition but not during the bear market condition the evidence is also robust against the data snooping bias and the model overfitting problem and its economic significance can be very substantial

entrepreneurship and economic theory this article discusses economic theories of entrepreneurship drawing principally on work conducted in labour economics microeconomics macroeconomics and financial economics the article explains how incentives and constraints of various kinds affect occupational choices and entrepreneurial innovation as well as how entrepreneurial decisions affect macroeconomic performance implications for public policy are drawn

can unemployment insurance spur entrepreneurial activity evidence from france we evaluate the effect of downside insurance on self employment we exploit a large scale reform of french unemployment benefits that insured unemployed workers starting businesses the reform significantly increased firm creation without decreasing the quality of new entrants firms started postreform were initially smaller but their employment growth productivity and survival rates are similar to those prereform new entrepreneurs characteristics and expectations are also similar finally jobs created by new entrants crowd out employment in incumbent firms almost one for one but have a higher productivity than incumbents these results highlight the benefits of encouraging experimentation by lowering barriers to entry

the effects of oil price shocks on the iranian economy abstract the iranian economy is highly vulnerable to oil price fluctuations this paper analyzes the dynamic relationship between oil price shocks and major macroeconomic variables in iran by applying a var approach the study points out the asymmetric effects of oil price shocks for instance positive as well as negative oil price shocks significantly increase inflation we find a strong positive relationship between positive oil price changes and industrial output growth unexpectedly we can only identify a marginal impact of oil price fluctuations on real government expenditures furthermore we observe the dutch disease syndrome through significant real effective exchange rate appreciation

employment effects of financial constraints during the great recession abstract employment declined substantially during the 2007 2009 recession especially in small and young firms using confidential firm level data of the universe of firms and a difference in differences methodology this paper estimates that financial constraints reduced employment growth by 4 to 8 percentage points in small firms relative to large firms and by 7 to 9 percentage points in young relative to old firms i find that the effect of financial constraints on small firms is driven to a large extent by young firms i then document that financial constraints affected employment growth in small and young firms strongly through the entry and exit of firms

unemployment equilibria and input prices theory and evidence from the united states the paper develops an efficiency wage model where input prices affect the equlibrium rate of unemployment we show that a simple framework based on only two prices the real price of oil and the real rate of interest is able to explain the main post war movements in the rate of u s joblessnss the equations do well in forecasting unemployment many out of sample and provide evidence that the oil price spike associated with iraq s invasion of kuweit appears to be a component of the mystery recession which followed

economic consequences of housing speculation by exploiting variation in state capital gains taxation as an instrument we analyze the economic consequences of housing speculation during the u s housing boom in the 2000s we find that housing speculation anchored in part on extrapolation of past housing price changes led not only to greater price appreciation economic expansions and housing construction during the boom in 2004 2006 but also to more severe economic downturns during the subsequent bust in 2007 2009 our analysis supports supply overhang and local household demand as two key channels for transmitting these adverse effects

toward efficiency in the crude oil market the official opec prices of crude oil before the collapse in the oil market in the mid 1980s can be interpreted as contract prices and analysed on the basis of the theory of futures or forward markets this paper uses the generalized method of moments estimation technique to test for efficiency in the relationship between the official prices and the ex post spot prices at the time of delivery efficiency is rejected for the sample period 1978 1985 as a whole but evidence is found of improvements over time further the gmm wald and hansen tests although asymptotically equivalent are shown to differ greatly when applied to a small sample of monthly oil price data

do oil price shocks matter evidence for some european countries this paper analyzes the oil price macroeconomy relationship by means of analyzing the impact of oil prices on inflation and industrial production indexes for many european countries using quarterly data for the period 1960 1999 first we test for cointegration allowing for structural breaks among the variables second and in order to account for the possible non linear relationships we use different transformation of oil price data the main results suggest that oil prices have permanent effects on inflation and short run but asymmetric effects on production growth rates furthermore significant differences are found among the responses of the countries to these shocks

oil and the macroeconomy since world war ii all but one of the u s recessions since world war ii have been preceded typically with a lag of around three fourths of a year by a dramatic increase in the price of crude petroleum this does not mean that oil shocks caused these recessions evidence is presented however that even over the period 1948 72 this correlation is statistically significant and nonspurious supporting the proposition that oil shocks were a contributing factor in at least some of the u s recessions prior to 1972 by extension energy price increases may account for much of post opec macroeconomic performance

crude oil and the macroeconomy tests of some popular notions a note perhaps no other economic events in the post world war ii era have generated as much attention as the series of crude oil price shocks that have jolted the world economy since the opec boycott of 1973 a tremendous amount of space in the popular and professional literature has been devoted to analyzing the impacts of these shocks on the developed economies and the adjustments these shocks have induced one residual of this literature has been a general impression that since 1973 the functional relationship between crude oil prices and the developed macroeconomies has been dramatically and fundamentally altered yet to our knowledge no one has formally tested this impression recent evidence of hamilton 1983 suggests that crude oil prices had a strong impact on the u s business cycle well before 1973 further while textbook treatments of oil price shocks tend to highlight cost push inflationary effects the research of berndt and wood 1975 1979 and wilcox 1983 indicates the net complementarity between energy and capital in the u s economy is quite strong both before and after 1973 thus oil price shocks may have stronger real effects than generally believed in this paper we formally test three popular notions associated with the so called

global economic activity and crude oil prices a cointegration analysis abstract this paper empirically investigates the cointegrating relationship between crude oil prices and global economic activity the kilian economic index is used as an indicator of global economic activity based on a supply demand framework and the cointegration theory we find that real futures prices of crude oil are cointegrated with the kilian economic index and a trade weighted us dollar index and crude oil prices are influenced significantly by fluctuations in the kilian economic index through both long run equilibrium conditions and short run impacts we also develop an empirically stable data coherent and single equation error correction model ecm which has sensible economic properties empirical results based on the ecm show that the adjustment implied by a permanent change in the kilian economic index is a relatively drawn out process

housing price booms and crowding out effects in bank lending analyzing the period 1988 2006 we document that banks that are active in strong housing markets increase mortgage lending and decrease commercial lending firms that borrow from these banks have significantly lower investment this is especially pronounced for firms that are more capital constrained or borrow from more constrained banks various extensions and robustness analyses are consistent with the interpretation that commercial loans were crowded out by banks responding to profitable opportunities in mortgage lending rather than with a demand based interpretation the results suggest that housing prices appreciations have negative spillovers to the real economy which were overlooked thus far received november 29 2016 editorial decision january 12 2018 by editor david hirshleifer authors have furnished an internet appendix which is available on the oxford university press web site next to the link to the final published paper online

homeowner borrowing and housing collateral new evidence from expiring price controls i empirically analyze how changes to the collateral value of real estate assets affect homeowner borrowing behavior while previous research has documented a positive relationship between house prices and home equity based borrowing a key empirical challenge has been to disentangle the role of collateral constraints from that of wealth effects in generating this relationship to isolate the role of collateral constraints i exploit the expiration of resale price controls on owner occupied housing units created through an inclusionary zoning regulation in montgomery county maryland because the duration and stringency of the price controls are set by formula and known in advance their expiration has no effect on expected lifetime wealth but directly shocks collateralized borrowing capacity using data on all transactions and loans secured against every property in the county from 1997 2012 i estimate that the marginal propensity to borrow out of increases in housing collateral induced by expiring price controls is between 0 04 and 0 13 the magnitude of this effect is correlated with a homeowner s initial leverage and indicates that a significant fraction of the additional borrowing arising from house price increases is due to relaxing collateral constraints additional analysis of residential investment and ex post loan performance further suggests that borrowers used at least some portion of the extracted funds to finance current consumption and investment expenditures these results highlight the importance of collateral constraints for homeowner borrowing and suggest a potentially important role for house price growth in driving aggregate consumption

imperfect competition and the effects of energy price increases on economic activity the authors show that modifying the standard neoclassical growth model by assuming that competition is imperfect makes it easier to explain the size of the declines in output and real wages that follow increases in the price of oil plausibly parameterized models of this type are able to mimic the response of output and real wages in the united states the responses are particularly consistent with a model of implicit collusion where markups depend positively on the ratio of the expected present value of future profits to the current level of output copyright 1996 by ohio state university press

older and slower the startup deficit s lasting effects on aggregate productivity growth abstract declining firm entry and the aging incumbent firms have meaningful implications for sluggish u s aggregate productivity growth we provide a framework to characterize the contributions to industry productivity growth across the firm age distribution then apply it to firm level census data several findings emerge the relationship between firm age and productivity growth is downward sloping and convex the magnitudes are substantial but fade quickly selection and reallocation predominantly drive higher productivity growth of young firms our results suggest a cumulative drag on aggregate productivity of 3 1 since 1980 and are expanded upon with an iv strategy and standard model of firm dynamics

inner and outer approximations of technology a data envelopment analysis approach this paper discusses inner and outer approximation to a technology given by a data set of prices and quantities

the efficiency of the crude oil markets evidence from variance ratio tests this study examines the random walk hypothesis for the crude oil markets using daily data over the period 1982 2008 the weak form efficient market hypothesis for two crude oil markets uk brent and us west texas intermediate is tested with non parametric variance ratio tests developed by wright j h 2000 alternative variance ratio tests using ranks and signs journal of business and economic statistics 18 1 9 and belaire franch j and contreras d 2004 ranks and signs based multiple variance ratio tests working paper department of economic analysis university of valencia as well as the wild bootstrap variance ratio tests suggested by kim j h 2006 wild bootstrapping variance ratio tests economics letters 92 38 43 we find that the brent crude oil market is weak form efficiency while the wti crude oil market seems to be inefficiency on the 1994 2008 sub period suggesting that the deregulation have not improved the efficiency on the wti crude oil market in the sense of making returns less predictable

identifying the oil price macroeconomy relationship an empirical mode decomposition analysis of us data this paper employs the empirical mode decomposition emd method to filter cyclical components of us quarterly gross domestic product gdp and quarterly average oil price west texas intermediate wti the method is adaptive and applicable to non linear and non stationary data a correlation analysis of the resulting components is performed and examined for insights into the relationship between oil and the economy several components of this relationship are identified however the principal one is that the medium run component of the oil price has a negative relationship with the main cyclical component of the gdp in addition weak correlations suggesting a lagging demand driven component and a long run component of the relationship were also identified comparisons of these findings with significant oil supply disruption and recession dates were supportive the study identifies a number of lessons applicable to recent oil market events including the eventuality of persistent oil price and economic decline following a long oil price run up in addition it was found that oil market related exogenous events are associated with short to medium run price implications regardless of whether they lead to actual supply losses

the short and long run efficiency of energy precious metals and base metals markets evidence from the exponential smooth transition autoregressive models abstract the aim of this paper is to investigate the long and short run relationship between spot and futures prices of the energy precious metals and base metals markets we analyze daily data from january 1985 to february 2019 the empirical findings based on the cointegration test which follows a nonlinear process suggest that the spot prices of energy and metals assets have long run relationships with their futures prices nonparametric granger causality test results also indicate bi directional causality among futures and spot prices these findings indicate that the energy and metals markets are informationally efficient in the sense of fama 1970

on the short and long run efficiency of energy and precious metal markets this article contributes to the related literature by empirically investigating the efficiency of nine energy and precious metal markets over the last decades employing several pronounced models we test for both short and the long run efficiency using in addition to linear cointegration models nonlinear cointegration and error correction models ecms which allow the efficiency intensity to change per regime our findings can be summarized as follows i futures prices are found to be cointegrated with spot prices but they do not constitute unbiased predictors of future spot prices ii the hypothesis of risk neutrality is rejected iii the short run efficiency hypothesis is rejected suggesting that using past futures price returns improves the modeling and forecasting of future spot prices and iv the nonlinear modeling suggests the presence of two distinct regimes wherein the first regime the efficiency hypothesis is supported whereas in the second it is rejected the empirical findings have important implications for producers hedgers speculators and policymakers

contribution of crude oil price to households budget the weight of indirect energy use we propose a new method to evaluate the burden of oil price on any set of goods and services and apply it to french households this method takes into account the contribution of indirect energy consumption which constitutes typically one half of the energy used by a typical french household it yields an average burden of 4 4 in 2006 with a higher relative burden for households with lower income older members and rural dwelling

housing wealth and labor supply evidence from a regression discontinuity design abstract this paper uses the discontinuity in house size generated by chinese housing policies to identify the effect of housing wealth on labor supply the analysis finds a substantial deterrent effect of housing wealth on labor supply much of the housing wealth effect comes from the labor participation decision with the effect on employed workers being ambiguous females young generation and households with high repayment capacity are more responsive to gains in housing wealth

house prices borrowing constraints and monetary policy in the business cycle i develop a general equilibrium model with sticky prices credit constraints nominal loans and asset prices changes in asset prices modify agents borrowing capacity through collateral value changes in nominal prices affect real repayments through debt deflation monetary policy shocks move asset and nominal prices in the same direction and are amplified and propagated over time the financial accelerator is not constant across shocks nominal debt stabilises supply shocks making the economy less volatile when the central bank controls the interest rate i discuss the role of equity debt indexation and household and firm leverage in the propagation mechanism finally i find that monetary policy should not target asset prices as a means of reducing output and inflation volatility

house prices collateral and self employment this paper explores the role of the collateral lending channel to facilitate small business starts and self employment in the period before the financial crisis of 2008 we document that between 2002 and 2007 areas with a bigger run up in house prices experienced a strong increase in employment in small businesses compared to employment in large firms in the same industries this increase in small business employment was particularly pronounced in industries that need little startup capital and can thus more easily be financed out of increases in housing as collateral our results highlight the importance of the collateral lending channel during the period of the house price boom in the creation of small establishments we show that this effect is separate from the aggregate demand channel that relies on home equity based borrowing leading to increased demand and employment creation

number of siblings credit constraints and entrepreneurship in china with an under developed financial market borrowing from relatives becomes an important funding source in starting one s own business in china this paper examines the positive effect of number of

is efficiency of crude oil market affected by multifractality evidence from the wti crude oil market in this paper we investigate the dynamics of relationship between efficiency and multifractality of wti crude oil market based on the cross correlation analysis and the nonlinear granger causality analysis we find that the inefficiency and multifractality of the wti crude oil returns interact positively in a nonlinear mechanism this suggests that the increase of multifractality degree will lead to the lower degree of market efficiency and vice versa our findings have some important implications for oil price forecasting and portfolio management

credit rationing income exaggeration and adverse selection in the mortgage market we examine the role of borrower concerns about future credit availability in mitigating the effects of adverse selection and income misrepresentation in the mortgage market we show that the majority of additional risk associated with low doc mortgages originated prior to the great recession was due to adverse selection on the part of borrowers who could verify income but chose not to we provide novel evidence that these borrowers were more likely to inflate or exaggerate their income our analysis suggests that recent regulatory changes that have essentially eliminated the low doc loan product would result in credit rationing against self employed borrowers abstract from author

are the crude oil markets becoming weakly efficient over time a test for time varying long range dependence in prices and volatility this paper analyzes the efficiency of crude oil markets brent and west texas intermediate by means of estimating the fractal structure of these time series we test for time varying degrees of long range dependence using the rescaled range hurst analysis and find evidence that this market has become more efficient over time these results are robust for controlling for short term autocorrelation by means of a shuffling procedure

crude oil market efficiency and modeling insights from the multiscaling autocorrelation pattern abstract empirical research on market inefficiencies focuses on the detection of autocorrelations in price time series in the case of crude oil markets statistical support is claimed for weak efficiency over a wide range of time scales however the results are still controversial since theoretical arguments point to deviations from efficiency as prices tend to revert towards an equilibrium path this paper studies the efficiency of crude oil markets by using lagged detrended fluctuation analysis dfa to detect delay effects in price autocorrelations quantified in terms of a multiscaling hurst exponent i e autocorrelations are dependent of the time scale results based on spot price data for the period 1986 2009 indicate important deviations from efficiency associated to lagged autocorrelations so imposing the random walk for crude oil prices has pronounced costs for forecasting evidences in favor of price reversion to a continuously evolving mean underscores the importance of adequately incorporating delay effects and multiscaling behavior in the modeling of crude oil price dynamics

oil and the macroeconomy since the 1970s economists have long been intrigued by empirical evidence that suggests that oil price shocks may be closely related to macroeconomic performance this interest dates back to the 1970s the 1970s were a period of growing dependence on imported oil unprecedented disruptions in the global oil market and poor macroeconomic performance in the united states thus it was natural to suspect a causal relationship from oil prices to u s macroeconomic aggregates since then a large body of work has accumulated that purports to establish this link on theoretical grounds and to provide empirical evidence in its support we do not attempt a comprehensive survey of this literature but rather provide an idiosyncratic synthesis of what we view as the key issues in this debate and the insights gained over the last 30 years the timing seems right for such an account although the experience of the 1970s continues to play an important role in discussions of the link between oil and the macroeconomy there have been a number of new oil price shocks since the 1970s notably the 1986 collapse of oil prices and the 2000 boom in oil prices as well as the oil price increases associated with the 1990 1991 gulf war and the 2003 iraq war given this richer case history we are arguably in a better position than two decades ago to distinguish the idiosyncratic features of each oil crisis from the systematic effects increases in oil prices have been held responsible for recessions periods of excessive inflation reduced productivity and lower economic growth in this paper we review the arguments supporting such views first we highlight some of the conceptual difficulties in assigning a central role to oil price shocks in explaining

how does risk management influence production decisions evidence from a field experiment weather is a key source of income risk especially in emerging market economies this paper uses a randomized controlled trial involving indian farmers to study how an innovative rainfall insurance product affects production decisions the authors find that insurance provision induces farmers to invest more in higher return but rainfall sensitive cash crops particularly among educated farmers this shift in behavior occurs ex ante when realized monsoon rainfall is still uncertain the results suggest that financial innovation can mitigate the real effects of uninsured production risk

curb your enthusiasm optimistic entrepreneurs earn less abstract this paper concerns the implications of biased beliefs on entrepreneurial earnings amongst self employed business owners income is decreasing in optimism measured whilst still an employee controlling for earnings in paid employment self employment earnings of those with optimism above the mean are some 30 less than those with optimism below the mean for employees it is optimists that have higher earnings these and associated results suggest that mistaken expectations lead to entry errors as a test of external validity future divorcees turn out to be financial optimists indicating our measure captures an intrinsic psychological trait associated with rash decisions

firm leverage consumer demand and employment losses during the great recession this article argues that firms balance sheets were instrumental in the transmission of consumer demand shocks during the great recession using micro level data from the u s census bureau we find that establishments of more highly levered firms experienced significantly larger employment losses in response to declines in local consumer demand these results are not driven by firms being less productive having expanded too much prior to the great recession or being generally more sensitive to fluctuations in either aggregate employment or house prices likewise at the county level we find that counties with more highly levered firms experienced significantly larger declines in employment in response to local consumer demand shocks accordingly firms balance sheets also matter for aggregate employment our results suggest a possible role for employment policies that target firms directly besides conventional stimulus

testing the evolution of crude oil market efficiency data have the conn utilising a time varying gar 1 tgarch 1 1 model with different frequency data we investigate the weak form efficiency of major global crude oil spot markets in europe the us the uae and china for the period from december 2001 to august 2013 our empirical results with weekly data indicate that all four markets have reached efficiency with few brief inefficient periods during the past decade whereas the daily crude oil returns series suggest intermittent and inconsistent efficiency we argue that the weekly friday series fit the data better than the average series in autocorrelation tests the evidence suggests that all four markets exhibit asymmetries in return volatility reactions to different information shocks and that they react more strongly to bad news than to good news the 2008 financial crisis has significantly affected the efficiency of oil markets furthermore a comovement phenomenon and volatility spillover effects exist among the oil markets policy recommendations consistent with our empirical results are proposed which address three issues implementing prudential regulations establishing an asian pricing centre and improving transparency in crude oil spot markets

on the predictability of energy commodity markets by an entropy based computational method this paper proposes a novel computational method for assessing the predictability of commodity market time series by predicting the entropy of the series under investigation assessing the predictability of a time series is the first mandatory step in order to further apply low risk and efficient price forecasting methods according to conventional entropy based analysis where the entropy is always ex post estimated high entropy values characterize unpredictable series while more stable series exhibits lesser entropy values here we predict i e ex ante the entropy regarding the future behavior of a series based on the observation of historical data our prediction is performed according to the optimum least squares minimization algorithm usually used in many computational aspects of management science preliminary results applied to energy commodity futures show the effectiveness of the proposed method for application to energy market time series

random fractal structures in north american energy markets this paper uses daily observations on west texas intermediate wti crude oil prices at chicago and henry hub natural gas prices at la over the deregulated period of the 1990s and various tests from statistics and dynamical systems theory to support a random fractal structure for north american energy markets in particular this evidence is supported by the vassilicos et al 1993 multifractal structure test and the ghashghaie et al nature 381 1996 767 turbulent behavior test

time varying long range dependence in energy futures markets abstract this study aims to investigate the presence of long range dependence in energy futures markets using a daily dataset covering from 1990 to 2013 which includes crucial events for energy markets such as invasion of iraq and global financial crisis of 2008 we estimate time varying generalized hurst exponents of several energy futures contracts with different times to maturity using a rolling window approach results reveal that efficiency of energy futures markets is clearly time varying and changes drastically over the sample period for futures contracts with 1 4 months to maturities crude oil and gasoline are found to be more efficient compared to others on the other hand for contracts with 5 9 months to maturities crude oil and natural gas futures are more efficient for almost every different month to maturity heating oil and gas oil futures are found to be the least efficient markets moreover in general the efficiency of energy futures markets is found to be decreasing dramatically when time to maturity is increasing several implications are discussed

decomposing capacity utilization in data envelopment analysis an application to banks in india abstract this paper briefly reviews the existing methods of capacity utilization in nonparametric framework from economic perspectives and then suggests an alternative in the light of limitations therein in the spirit of work by coelli et al coelli t j grifell tatje e perelman s 2002 capacity utilisation and profitability a decomposition of short run profit efficiency international journal of production economics 79 261 278 we propose two methods radial and non radial to decompose the input based physical technological capacity utilization into various meaningful components viz technical inefficiency ray economic capacity utilization and optimal capacity idleness a case study of indian banking industry is taken as an example to illustrate the potential application of these two methods of decomposition our two broad empirical findings are that first competition created after financial sector reforms generates high efficiency growth and reduces excess capacity second the cost gap of the short run cost from the actual cost is higher for the nationalized banks over the private banks indicating that the former banks though old do not reflect their learning experience in their cost minimizing behavior

commodity futures and market efficiency we propose a comprehensive treatment of the leverage effect i e the relationship between returns and volatility of a specific asset focusing on energy commodities futures namely brent and wti crude oils natural gas and heating oil after estimating the volatility process without assuming any specific form of its behavior we find the volatility to be long term dependent with the hurst exponent on a verge of stationarity and non stationarity to overcome such complication we utilize the detrended cross correlation and the detrending moving average cross correlation coefficients and we find the standard leverage effect for both crude oils and heating oil for natural gas we find the inverse leverage effect additionally we report that the strength of the leverage effects is scale dependent finally we also show that none of the effects between returns and volatility is detected as the long term cross correlated one these findings can be further utilized to enhance forecasting models and mainly in the risk management and portfolio diversification

the benefits of lending relationships evidence from small business data this paper empirically examines how ties between a firm and its creditors affect the availability and cost of funds to the firm we analyze data collected in a survey of small firms by the small business administration the primary benefit of building close ties with an institutional creditor is that the availability of financing increases we find smaller effects on the price of credit attempts to widen the circle of relationships by borrowing from multiple lenders increases the price and reduces the availability of credit in sum relationships are valuable and appear to operate more through quantities rather than prices

household inequality entrepreneurial dynamism and corporate financing economic theories provide conflicting hypotheses on how wealth inequality affects entrepreneurial dynamism to empirically investigate its impact we construct local measures of household wealth inequality based on financial rents home equity and 1880 farmland we identify its effects on entrepreneurship by instrumenting it with land distribution under the 1862 homestead act or us states removal of death taxes wealth inequality decreases firm entry and exit and the proportion of high tech businesses across metropolitan statistical areas there is also less redistribution into public goods supportive of entrepreneurship such as schooling and the judiciary income per capita consequently grows more slowly

housing wealth and household consumption in urban china using a large chinese household survey data set we investigate the effect of home value appreciation on urban household consumption the paper identifies the causal effect of housing wealth using

unit root properties of crude oil spot and futures prices in this article we examine whether wti and brent crude oil spot and futures prices at 1 3 and 6 months to maturity contain a unit root with one and two structural breaks employing weekly data over the period 1991 2004 to realise this objective we employ lagrange multiplier lm unit root tests with one and two endogenous structural breaks proposed by lee and strazicich 2003 minimum lagrange multiplier unit root test with two structural breaks review of economics and statistics 85 1082 1089 2004 minimum lm unit root test with one structural break working paper no 04 17 department of economics appalachian state university we find that each of the oil price series can be characterised as a random walk process and that the endogenous structural breaks are significant and meaningful in terms of events that have impacted on world oil markets

market efficiency of oil spot and futures a mean variance and stochastic dominance approach this paper examines the market efficiency of oil spot and futures prices by using both mean variance mv and stochastic dominance sd approaches based on the west texas intermediate crude oil data for the sample period 1989 2008 we find no evidence of any mv and sd relationships between oil spot and futures indices this infers that there is no arbitrage opportunity between these two markets spot and futures do not dominate one another investors are indifferent to investing spot or futures and the spot and futures oil markets are efficient and rational the empirical findings are robust to each sub period before and after the crises for different crises and also to portfolio diversification

the 2014 oil bust causes and consequences abstract this article suggests that the 2014 oil price collapse was possibly triggered by the falling euro versus the us dollar specifically the usd eur exchange rate likely adjusted to the sudden economic growth outlook divergence between the us and the eu as evident by the relative short term interest rate spread measures and triggered a strong dollar trade which is negative for the crude oil prices thus in our view the 2014 oil price bust is another episode of oil price inefficiency similar to the 2008 oil bubble the key argument presented in this article is that as long as there are temporary economic growth divergences between the us and the eu the resulting exchange rate volatility is likely to create the pricing inefficiencies in crude oil which in fact are mean reverting as the economic growth divergences eventually dissipate

the labor market effects of credit market information we exploit a natural experiment to provide one of the first measurements of the causal effect of negative credit information on employment and earnings we estimate that one additional year of negative credit information reduces employment by 3 percentage points and wage earnings by 1 000 in comparison the decrease in credit is only one fourth as large negative credit information also causes an increase in self employment and a decrease in mobility further evidence suggests this cost of default is inefficiently borne by those most creditworthy among previous defaulters received april 5 2017 editorial decision september 2 2017 by editor andrew karolyi authors have furnished an internet appendix which is available on the oxford university press web site next to the link to the final published paper online

the dynamics of crude oil price differentials abstract crude oil price differentials are modelled as a two regime threshold autoregressive tar process using the method proposed by caner and hansen caner m hansen b e threshold autoregression with a unit root econometrica 2001 69 1555 1596 while standard unit root tests suggest that the prices of crude oil of different varieties move closely together such that their price differential is stationary the tar results indicate strong evidence of threshold effects in the adjustment process to the long run equilibrium these findings suggest that crude oil prices are linked and thus at the very general level the oil market is one great pool adelman m a international oil agreements the energy journal 1984 5 1 9 however differences in the dynamics of adjustment suggest that within this one pool oil markets are not necessarily integrated in every time period and hence the dynamics of crude oil price differentials may not follow a stationary process at all times although the development of a liquid futures market around the crude oil benchmarks has helped make some distant markets more unified arbitrage is not costless or risk free and temporary breakdowns in the benchmarks can lead to decoupling of crude oil prices

causal effect of credit guarantees for small and medium sized enterprises evidence from italy we evaluate the effectiveness of a partial credit guarantee program implemented in a large italian region that aimed to improve the access to credit of small and medium enterprises using unique microdata from a broad set of firms we show that the policy increased the long term loans for beneficiary firms while the total volume of bank loans was unaffected furthermore targeted firms benefited from a substantial decrease in interest rates however there is some evidence that firms are more likely to default as a consequence of the treatment conversely the results do not point to any significant effect on investments

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

efficiency of crude oil markets evidences from informational entropy analysis abstract the role of crude oil as the main energy source for the global economic activity has motivated the discussion about the dynamics and causes of crude oil price changes an accurate understanding of the issue should provide important guidelines for the design of optimal policies and government budget planning using daily data for wti over the period january 1986 march 2011 we analyze the evolution of the informational complexity and efficiency for the crude oil market through multiscale entropy analysis the results indicated that the crude oil market is informationally efficient over the scrutinized period except for two periods that correspond to the early 1990s and late 2000s us recessions overall the results showed that deregulation has improved the operation of the market in the sense of making returns less predictable on the other hand there is some evidence that the probability of having a severe us economic recession increases as the informational efficiency decreases which indicates that returns from crude oil markets are less uncertain during economic downturns