Investment Adjustment Research Articles

Can technological progress abate the negative impact of low carbon policies on economic growth in China?

ABSTRACT Whether technological progress can provide a complementary solution that reduces the economic costs of carbon pricing policies, thereby accomplishing a win-win situation for carbon abatement and economic growth? By developing an improved multi-regional dynamic CGE model that integrates investment adjustment costs into the capital accumulation equation, this study provides a lens through which to evaluate the collective impacts of the national carbon market, carbon tax, and technology progress in China. The findings confirm the substantial potential of carbon pricing policies to curtail CO 2 emissions, highlighting their critical role in climate change mitigation. Yet, it also exposes a trade-off, where these policies might impact GDP growth and exports, necessitating a balanced approach to policy design. The outputs of energy sectors are particularly vulnerable to carbon pricing policies, indicating a need for tailored strategies to support these industries in their transition towards sustainability. The study uncovers that the fusion of carbon pricing policies with technological progress can enhance carbon abatement efforts while softening the economic blow, illuminating a path to sustainable development that balances environmental and economic imperatives.

Does air pollution affect the accrual anomaly in the Chinese capital market? From the perspective of investment adjustment strategy

Air pollution poses a threat to human health and economic development and has attracted worldwide attention. China also faces the problem of excessive air pollutant emissions. We use Chinese A-share listed companies from 2007 to 2020 as samples and explore the impact of air pollution on the accrual anomaly. We find that air pollution alleviates the accrual anomaly caused by the investment growth hypothesis but has no significant effect on that caused by the earnings persistence hypothesis. Furthermore, we explore how air pollution mitigates the anomaly from the perspective of investment strategy adjustments. We find that enterprises reduce the overall growth in investments through a strategy of reducing growth in innovation investments and increasing growth in financial investments without a significant impact on the growth in environmental investments. This finding indicates that air pollution can alleviate the anomaly by sacrificing innovative activities. The key to improving efficiency is to improve system construction, which should not be at the expense of the ecological environment.

Does Green Energy Investment Effects on Islamic and Conventional Stock Markets? New Evidence from Advanced Economies

This study investigates the long-run and short-run nexus between renewable energy investment, and Islamic and conventional stock markets in advanced economies, namely the United States, United Kingdom, and European Union over the period from January 1, 2002 to August 1, 2023. The study uses the Nonlinear Autoregressive Distributed Lag (NARDL) model to examine the long-run and short-run asymmetric effects between selected variables under study. The results of empirical model estimation suggested that the green energy investment adjustment is running towards the long- and short-run steady increment regarding positive and negative shocks in conventional and Islamic stock markets. Indeed, the shocks of the green energy investment on conventional stock markets of the US and EU are positively asymmetric in the long run; the UK has an insignificant effect in the long run. Importantly, green energy investment positively has significant effects on conventional and Islamic stock markets in the US. UK and EU (except the conventional stock market of the US). The short-run coefficients of green energy investment have a significant positive effect on Islamic stock markets for the selected U.S, UK, and EU markets. Likewise, the EU conventional stock market has a significant positive effect in the short run. Change in green energy investment has a negatively insignificant impact on Islamic and conventional markets of the EU and the UK. Indeed, short-run coefficients of green energy investment negatively on the U.S. conventional stock market. The increase in green energy investment may result in an increase in the cost of energy generation, which reduces the renewable energy production firm’s profitability and finally decreases the stock market prices in the short run. These findings have important implications for the portfolio diversification and hedging decisions of environmentally concerned investors. In sum, investors should consider the presence of extreme tail dependence between green investments and stock markets an important factor in making more informed and rational choices.

Построение и калибровка DSGE модели для российской экономики с использованием импульсных откликов векторной авторегрессии

The paper proposes a two‐sector macroeconomic model of the Russian economy based on the standard assumptions of New Keynesian DSGE models used to model household consumption, price and wage rigidities, and endogenous capital utilization. We consider two options for describing the investment process: the traditional approach with the investment adjustment costs and the approach using the investment accelerator model. The model parameters are calibrated based on minimizing the distance between the theoretical and “empirical” impulse response functions to the terms of trade shock derived from estimating simple ARX models with terms of trade as an exogenous variable. The constructed model quite accurately reproduces the influence of the terms of trade on the Russian economy for both investment modeling options. Based on the calibrated model, the authors examined the impact of a monetary policy shock on macroeconomic indicators and constructed a historical decomposition of the dynamics of macroeconomic indicators by an extended set of structural shocks to economic variables.

Does ESG reputational risk affect the efficiency and speed of adjustment of corporate investment?

AbstractThis study explores the relationship between environmental, social, and governance (ESG) reputational risk and investment efficiency. We provide evidence that ESG reputational risk relates to higher corporate suboptimal investment (underinvestment) and a lower speed of adjustment back to the optimal investment level. Our findings hold for parametric and nonparametric estimations of underinvestment and are robust to several techniques that address endogeneity and self‐selection. Overall, our study highlights the important role of ESG reputational risk in determining corporate investment efficiency.

Does Private Information Always Hurt Retail Investors? The Impact of Private Information on Cost of Equity: Moderating Role of Investment Adjustment

Private information puts naïve traders at a significant trading disadvantage and at the same it provide crucial signals managers for investment adjustment. These two forces have opposing effects on the cost of equity, and the overall effect is determined by which force dominates. For clinching this effect, this study finds out how investment adjustment plays the moderating role between private information and COE. The study employs data of non-financial firms listed on PSX from 2008 to 2019. Further, the study employs a two-step system GMM dynamic panel estimator to analyze the data. The findings of the study show that companies with a low investment adjustment flexibility known as “value firms” do not gain as much from information incorporated in market prices compared to firms having high flexibility in adjusting investment “growth firms.” This study adds to the literature by revealing unique insight on the effect of investment adjustment in reducing the influence of private information on COE and corporate investment as well. JEL classification: D82, G14, G410.

Are all economic fluctuations bad for consumers?

Are business cycles always costly? This paper sheds new light on this question in the context of a two-sector neoclassical business cycle model by focusing on the roles of the origin of shocks and the degree of real frictions that restrict factor reallocation both inter-temporally (investment adjustment cost) and intra-temporally (inter-sectoral factor immobilities). We find that under the benchmark parameterization, investment-specific technology shocks are welfare-improving while consumption-specific technology shocks are welfare-detrimental, regardless of the degree of real frictions. While aggregate TFP shocks can be both depending on the degree of real frictions, welfare-improving business cycles are not supported by empirical evidence.

Measuring dynamic inefficiency through machine learning techniques

This paper contributes by developing new models for assessing dynamic inefficiency that incorporate machine learning techniques. In particular, the new approaches apply decision trees models for the estimation of dynamic production technologies that account for investment adjustment costs. Methodologically, the new models build on the recently developed techniques of Efficiency Analysis Trees (EAT) and Convexified Efficiency Analysis Trees (CEAT) and extend them even further to a dynamic framework comprising dynamic EAT and CEAT models. The study compares dynamic inefficiency scores estimated assuming the new models against the traditional dynamic free disposal hull (FDH) and dynamic data envelopment analysis (DEA). Our empirical application focuses on dairy manufacturing firms in the main dairy processing countries in the European Union for the years 2014 and 2018. The results show that inefficiency related to the dynamic CEAT or EAT is higher than their corresponding values calculated through the dynamic DEA or FDH. The discriminating power of dynamic DEA (dynamic FDH) drastically improves when switching to dynamic CEAT (dynamic EAT). Finally, the differences between countries are observed regarding the development of dynamic inefficiency in the period associated with milk quota abolition.

Analysis of the International Real Estate Financial Investment of Chinese Real Estate Enterprises

With the relatively tight policy adjustment of the government's outbound investment in the general environment and the impact of COVID-19, Chinese real estate enterprises have been challenged and international investment has lost money for a while. In the fierce competition, real estate companies represented by Wanda and Vanke Group successfully used the transformation and upgrading of enterprises to survive, while some of real estate companies (e.g., Evergrande Group) faced a crisis of collapse due to failure of adjusting their business strategies in a timely manner. This paper studies the investment status and development trend of Chinese real estate enterprises in international markets, and analyze the risks and countermeasures of major Chinese enterprises in international real estate financial investment in the past six years. Wanda Real Estate's decision to shift from asset-heavy to asset-light is worth learning. Vanke's business strategy conforms to the green environmental protection requirements of social development and is worth looking forward to in the future development prospects. The enlightenment given to us by Evergrande is that when facing international investment, we must adapt measures to local conditions and choose investment methods suitable for our own enterprises in order to develop steadily in international markets. These results shed light on guiding further exploration of international investment for real estate companies.

The Internal and External Factors That Determined Private Investment in Ecuador 2007–2020

This article studies how electoral processes and internal factors of the Ecuadorian economy affect the dynamics of the country’s business expectations. The hypothesis that the free market and socialist political models in an economy generate different reactions in the expectations of the agents, according to the prevailing macroeconomic context, is tested. The empirical analysis is based on time series tools on quarterly data between 2006 and 2021. The results show that the dynamics of investment adjustment to the relationships of internal factors, electoral processes, and other variables explain 84% of this behavior. This is more accelerated in political contexts that promote the free market and maintain social, political, and economic stability, showing an overreaction of agents to negative economic news following the loss-aversion hypothesis.

Drivers of within- and among-individual variation in risk-taking behaviour during reproduction in a long-lived bird.

Plastic and selective mechanisms govern parental investment adjustments to predation threat. We investigated the relative importance of plasticity and selection in risk-taking propensity of incubating female common eiders Somateria mollissima facing unprecedented predation in SW Finland, Baltic Sea. Using a 12-year individual-based dataset, we examined within- and among-individual variation in flight initiation distance (FID), in relation to predation risk, nest detectability, individual traits and reproductive investment (NFID = 1009; Nindividual = 559). We expected females nesting in riskier environments (higher predation risk, lower nest concealment) to mitigate environmentally imposed risk by exhibiting longer FIDs, and females investing more in current reproduction (older, in better condition or laying larger clutches) to display shorter FIDs. The target of predation-adult or offspring-affected the mechanisms adapting risk-taking propensity; females plastically increased their FID under higher adult predation risk, while risk-avoiding breeders were predominant on islands with higher nest predation risk. Risk-taking females selected thicker nest cover, consistent with personality-matching habitat choice. Females plastically attenuated their anti-predator response (shorter FIDs) with advancing age, and females in better body condition were more risk-taking, a result explained by selection processes. Future research should consider predator type when investigating the fitness consequences of risk-taking strategies.

Family responses to resource scarcity

Resource scarcity, manifested through limited time, money or space, is a prevalent aspect of family life. Drawing on depth interviews with 30 families from diverse demographic backgrounds, this study develops a framework to demonstrate how families respond to resource scarcity. Our research examines how multi-dimensional, concurrent and/or consecutive life events, such as job changes, house moves, or childbirth, create a mismatch between available and required resources to trigger situational resource scarcity. We identify different patterns of adjustments in consumption and resource investment over time, based on families’ chronic resources and reliance on support networks. Notably, the greater flexibility afforded by multiple family members is constrained by collective goals, domains of control, tensions and negotiations.

재정지출 성과에 대한 만족도 연구

In January 2021, the Local Autonomy Act was completely amended, and the era of 'decentralization 2.0' came into operation. The core of local autonomy can be said to be resident autonomy and fiscal decentralization, and the key to securing the soundness of local autonomy can be said to reflect the preferences of the residents well. This can be shown by how satisfied the residents are with the budget organized through the resident participation in the budget making process. The purpose of this study is to examine the satisfaction of residents in Chungcheongnam-do with respect to the direction of fiscal expenditure and next year's investment in the Chungcheongnam-do participation budgeting. As a result of a survey on fiscal expenditure satisfaction and future investment directions for budgeting in Chungcheongnam-do, it was found that social welfare, general public administration, public order, and safety were generally dissatisfied. As a result of a survey on the direction of future fiscal expenditure investment adjustment, it was found that an increase in public order and safety and environmental fields was needed, and cuts were needed in general public administration and social welfare fields. In addition, it is also necessary to present a direction for seeking mid- to long-term and sustainable policy projects rather than one-time short-term projects in future fiscal expenditure investments.

A dissection of Indian growth using a DSGE filter

In order to build a strong and sustainable recovery post the COVID-19 pandemic, we need to draw important observations from the growth experience of the past. In this context, this paper uses a dynamic stochastic general equilibrium (DSGE) model that takes into account persistent growth rate shocks to decompose the Indian GDP into potential output and output gap. Apart from analysing the trajectory of potential output-output gap, it also examines their underlying drivers. The results suggest that a combined deceleration in neutral and investment-specific technology growth post 2016, brought down the potential growth to around 6 per cent in 2020Q1. The output gap also witnessed a persistent decline since 2018Q1, primarily due to weak demand and a rise in investment adjustment costs reflecting heightened stress in the investment and financial sectors. A forecasting exercise is also undertaken which shows that the estimates of output gap from the model possess competing inflation forecasting ability compared to HP filtered output gap.

Moving out of China? Evidence from Japanese multinational firms

This study examines the firm-level and macroeconomic factors affecting foreign divestment in China. It employs a unique dataset of Japanese multinational enterprises (MNEs) from 1995 to 2016. Based on survival analysis, we find that affiliate size, profitability, labor productivity, and export proportion to Japan are negatively associated with MNEs’ divestment probability. Moreover, the probability of divestment increases with the size of the parent firm and its experience in the Chinese market but decreases with business relatedness between affiliate and parent firms, industrial minimum effective scale, and market concentration. We further examine the determinants of different divestment modes and post-divestment investment adjustment across regions and industries. Finally, we find that the Diaoyu/Senkaku Islands conflict and an increase in the minimum wage significantly raise the probability of Japanese divestment.

Application of Data Mining in the Settlement Management of Distribution Network Projects

With the development of intelligent technology, the distribution network has also ushered in a new round of upgrading and transformation. New technologies, equipment, and platforms will be introduced to bring innovative blood to the distribution network. This paper proposes a data mining settlement management method for distribution network projects. The improved K-means method is used to estimate the coefficients of each link of the project investment. When a large deviation of a certain coefficient is found, the investment adjustment is made immediately to avoid the overall investment. This method can save costs for infrastructure construction, through the data mining deeper, can form a standard, intelligent analysis method, realize based data acquisition to the output results from the application of rapid transformation, realize the material equipment price forecast and project construction cost and fast estimation, provide project decision-making more scientific and accurate, and make the whole process of project cost more accurate.

What drives fluctuations of labor wedge and business cycles? Evidence from Japan

The literature has empirically shown that the labor wedge worsens during recessions. Taking this statement into consideration, this study poses two questions: First, what is the main driving force of the labor wedge, and second, is the main driver of the labor wedge the same as that of business cycles? In this study, we employ a commonly used medium-scale dynamic stochastic general equilibrium model with nominal and real frictions to analyze which structural shocks drive the fluctuation of the labor wedge and of business cycles. The model is estimated using Japanese data. Our estimation strategy is a particularly novel approach. In standard Bayesian estimation, the prior distribution of the parameters for the standard deviations of the structural shocks is the inverse gamma distribution, which does not support zero value and assumes the existence of structural shocks. By contrast, we employ a more flexible prior distribution of the parameters for the standard deviations of structural shocks and measurement errors to allow for the non-existence of structural shocks. Under the standard prior distribution, the estimation results imply that the labor wedge is mainly driven by preference and transitory technology shocks, whereas the investment adjustment cost shock is the most important for the business cycle fluctuations. However, under our relaxed prior distribution, which allows for the non-existence of structural shocks, the estimation results imply that both the labor wedge and business cycles are mainly driven by permanent technology and investment adjustment cost shocks.

Time-Consistent Investment and Contribution Adjustment Strategies for a Multi-Cohorts Db Pension Plan Under Smooth Ambiguity Utility

Time-Consistent Investment and Contribution Adjustment Strategies for a Multi-Cohorts Db Pension Plan Under Smooth Ambiguity Utility

Infrastructure Connectivity and Enterprise Performance: Quasi-natural Experiment based on China Railway Express

The Belt and Road initiatives (BRI) has promoted the trade exchanges between China and the countries along the route. The opening of the CHINA RAILWAY Express (CR express), its core achievement, has promoted the infrastructure connection between China and other countries, and has a profound impact on the development of Chinese enterprises. Under the profound adjustment of the current international investment and trade pattern and the rules of multilateral investment and trade, it is of great practical significance and theoretical value to study the impact of the opening of CR express on enterprise performance. Based on the micro data of 8,770 A-share manufacturing listed companies from 2009 to 2015, this paper constructs Differences-in-Differences model (DID) to investigate the impact of the launch of CR express on enterprise performance. The study found that the opening of CR expresses significantly improved enterprises performance. Moreover, with the increase of the distance between the spokes, the promoting effect is gradually weakened. This paper reveals the promotion and influencing mechanism of the opening of CR express on enterprise performance, which has some enlightening effect on the further research of CR express station planning and other issues.

Asymmetric Effects of Monetary Policy on the Armenian Economy

Whether inflation and output respond symmetrically or asymmetrically to the same size of contractionary and expansionary monetary policy shock has important policy implications. This paper shows the presence of asymmetric responses in Armenian inflation and output to positive and negative monetary policy shocks of the same size by employing econometric models. Contractionary policy decreases inflation less than expansionary policy increases it. Output reacts in the opposite way. An estimated small open economy DSGE model with sticky wages and investment adjustment costs explains about half of the asymmetry observed in the monetary policy transmission mechanism. This paper finds that the main part of inflation reaction asymmetry is a result of a highly convex Phillips curve for the importers. The nonlinearities of the internal economy explain the predominant part of the asymmetry in output reaction.