Portuguese Economic Journal, 2024, Volume 23, Nº 3, 2024
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- CBDC, cash, and financial intermediary in HANKPublication . Yang, Yujie; Zhang, Chenxing; Hou, WenwenThe introduction of interest-bearing Central Bank Digital Currency (CBDC) presents central banks with an additional instrument for implementing monetary policy. This article develops a Heterogeneous Agents New Keynesian model, incorporating financial frictions, to investigate the transmission mechanism and wealth distribution effects of digital currency interest rate from two distinct perspectives: (i) the interaction between the central bank and financial intermediaries and (ii) the substitution dynamics between cash and digital currency. By comparing models that include and exclude financial intermediaries, our research uncovers that in a society where CBDC is fully implemented, the reverse actions of financial intermediaries can hinder the efficacy of the central bank’s monetary policy and result in elevated costs associated with policy formulation. Additionally, the lever-age effect of financial intermediaries exacerbates wealth inequality and contributes to the expansion of investment, thereby promoting an increase in economic output. Comparing societies where CBDC entirely replaces cash with those where CBDC coexists alongside cash, this paper demonstrates that the presence of cash mitigates significant economic fluctuations triggered by CBDC, while the complete elimination of cash amplifies wealth inequality. Consequently, it is crucial for the central bank to account for the behavior of financial intermediaries when adjusting digital currency interest rate and explore the development of an appropriate interest rate mechanism tailored to digital currency. Simultaneously, maintaining cash circulation for a specific period can act as an economic stabilizer.
- Evaluating ensemble learning techniques for stock index trend prediction: a case of ChinaPublication . Wei, Xiaolu; Tian, Yubo; Li, NaStock index trend prediction is a very important topic in the finance. The purpose of this paper is to compare six ensemble learning related techniques for stock index direction prediction, including four boosting methods (Categorical Boosting (Cat Boost), Light Gradient Boosting Machine (LightGBM), eXtreme Gradient Boosting (XGBoost) and Gradient Boosting Decision Tree (GBDT)), one bagging method (Random Forest (RF)) and one tree-structured machine learning method (Decision Tree (DT)). The Shanghai Composite Index is chosen for experimental evaluation. A factor library of seventy-two technical factors, thirty-five macro factors and seven micro factors are our inputs. Our predictions are one month ahead, and each pre diction model is evaluated by the Area Under Curve (AUC). The results indicate that ensemble learning techniques perform well in stock index prediction, with all AUC values above 0.5. RF is considered as the top algorithm with an AUC value of 0.7355 before feature selection and 0.6736 after feature selection. Also, we predict the stock index trend using a comprehensive factor library and three single factor libraries, respectively. The results show that forecasting stock index directions with a complete factor library is of great importance, which could achieve more stable forecasting results. This study contributes to literature in that it is, to the best of our knowledge, the first to make an extensive evaluation of ensemble learning related methods by constructing a comprehensive factor library and three single factor libraries.
- Income redistribution and carbon emissions in PortugalPublication . Ridzuan, SulhiPortugal’s income tax system is very progressive and has a greater redistributive effect than the European Union average. This progressive income redistribution, however, comes at a cost to the environment. This note finds that—using Portuguese time series data over the period 1970–2018—income redistribution increases carbon dioxide emissions in the long run. This is consistent with the theoretical literature, which suggests that redistributing income increases consumption among the bottom class group (and thereby emissions). We propose some policy recommendations to help policymakers find a balance between social equity and climate goals. In addition, this note also shows that the most common proxy of income redistribution used in the empirical literature may be inappropriate and lead to false conclusions.
- Normal beta exponential stochastic frontier model: Maximum simulated likelihood approachPublication . Nigusie, Misgan DesaleThis paper considers the beta exponential distribution as a distribution function of inefficacy score in a stochastic frontier model. The beta exponential distribution is a three-parameter distribution, and it is more flexible than commonly used probability density functions in a stochastic frontier model (SFM). This new model, a “Normal Beta Exponential SFM”, nests another five SFMs. This paper presents a simulated log-likelihood function and simulated inefficiency estimator of a normal-beta exponential SFM, a closed form log-likelihood function and closed form inefficiency estimator of a normal-weighted exponential SFM, and an empirical study using a normal-beta exponential SFM. In our empirical study, we have used a likelihood ratio test to compare the performance of SFMs and a normal-beta exponential SFM fits the data better than other nested special case SFMs. Furthermore, the empirical result shows that parameters of a normal-beta exponential SFM can be estimated with less standard error or high certainty than a normal-gamma SFM.
- Publisher correction to: The impact of Petrobras spending on economic cyclesPublication . Inacio Jr., Edmundo; Ribeiro, Cassio Garcia; Baltar, Carolina Troncoso; Li, YanchaoIn the abstract, the below statement: The results suggest that the multiplier impacts during recessions (0.10 BRL) are bigger than those during economic expansion periods (0.05 BRL). The accumulated multiplier of Petrobras’s investment expenditures (0.43 BRL) is higher compared to current spending, especially in periods of recession (0.37 BRL). Moreover, the forecast error variance decomposition showed the impact the changes in the Petrobras government spending had on the Brazilian GDP growth in periods of expansion and contraction. should have been: The results suggest that multiplier impacts during recessions are bigger than those during economic expansions. The accumulated multiplier of Petrobras’s investment expenditures is higher compared to current spending, especially in periods of recession. Moreover, the forecast error variance decomposition showed the impact that changes in government spending in Petrobras had on the Brazilian GDP growth in periods of expansion and contraction.
- Re examining the real interest rate parity hypothesis under temporary gradual breaks and nonlinear convergencePublication . Hasanov, Mübariz; Omay, Tolga; Abioglu, VasifThis paper investigates the real interest parity hypothesis by testing stationarity of real interest rate differentials for 52 countries with respect to the USA. Taking account of the fact that both asymmetric adjustment and gradual temporary breaks may better character ize the dynamics of real interest rate differentials, we propose a new test that allows for two temporary shifts together with asymmetric adjustment towards the equilibrium. We employ the newly proposed test procedure along with the conventional ADF test as well as nonlinear KSS and OSH tests to examine stationarity of real interest rate differentials. Among the main results, we find that the newly proposed unit root test procedure highly outperforms the existing unit root tests in terms of rejecting the null hypothesis of unit root. Our results suggest that real interest rate differentials can be characterized by a stationary process with asymmetric adjustment around gradual and temporary shifts of mean
- The impact of Petrobras spending on economic cyclesPublication . Inacio Jr., Edmundo; Ribeiro, Cassio Garcia; Baltar, Carolina TroncosoPublic spending influences a country’s economic activities due to its effect on aggregate demand. Although existing research has focused on government expenditures to understand the multiplier impacts of public spending, there is scant literature focusing on the spending of state-owned enterprises (SOEs), especially in strategic sectors such as the oil sector. This study analyzes the spending behaviour of an important Brazilian SOE, Petrobras, to understand its consequences to the Brazilian economic activity. The results suggest that multiplier impacts during recessions are bigger than those during economic expansions. The accumulated multiplier of Petrobras’s investment expenditures is higher compared to current spending, especially in periods of recession. Moreover, the forecast error variance decomposition showed the impact that changes in government spending in Petrobras had on the Brazilian GDP growth in periods of expansion and contraction.
- The macroeconomic impact of COVID 19 on occupationsPublication . Li, XinruWe adopt a pandemic-macroeconomic model to simulate the macroeconomic impact of COVID-19 on various occupations under both laissez-faire and government lockdown scenarios. We integrate a SIR model of virus transmission into a simplified neoclassical model and categorize occupations into two groups based on their ability to work remotely. Subsequently, we assess the shock impact of the pandemic on GDP, consumption, and working hours of flexible and rigid occupations. We find that these three variables declined during the pandemic, yet the consumption varied among individuals with different health status. The labour market experienced a recession, with workers in flexible occupations experiencing a relatively milder impact compared to those in rigid occupations. A larger proportion of remote work mitigated the recessionary effects, although it accentuated the disparities between occupations’ income and working hours. The implementation of lockdown policies detrimentally affects welfare, similar to the pandemic itself, but the impact on flexible and rigid occupations differs from that in a laissez-faire scenario.