Aggregate Economy Research Articles

Perceptions, biases, and inequality

This paper introduces perceived self-efficacy beliefs in an overlapping generations model and studies the effects of behavioral anomalies on human capital investments and aggregate inequality. These beliefs are not inherent but based on a person’s socio-economic background. Ex ante children are homogeneous, but parents are biased about the returns to their children’s education. Based on parental education and job status, parents may be over or under confident but otherwise, they are rational. We witness spillover effects that shift the incentives to educate children from the pessimistic parents to unbiased parents. Biases may induce or hinder investment. Over investment by one parent type may even crowd-out investments of other parent types. We find interesting effects of biases on the aggregate economy when parental warm glow is not low.

Disagreement in economic forecasts and equity returns: risk or mispricing?

PurposeThis paper investigates the role of economic disagreement in the cross-sectional pricing of individual stocks. Economic disagreement is quantified with ex ante measures of cross-sectional dispersion in economic forecasts from the Survey of Professional Forecasters (SPF), determining the degree of disagreement among professional forecasters over changes in economic fundamentals.Design/methodology/approachThe authors introduce a broad index of economic disagreement based on the innovations in the cross-sectional dispersion of economic forecasts for output, inflation and unemployment so that the index is a shock measure that captures different aspects of disagreement over economic fundamentals and also reflects unexpected news or surprise about the state of the aggregate economy. After building the broad index of economic disagreement, the authors test out-of-sample performance of the index in predicting the cross-sectional variation in future stock returns.FindingsUnivariate portfolio analyses indicate that decile portfolios that are long in stocks with the lowest disagreement beta and short in stocks with the highest disagreement beta yield a risk-adjusted annual return of 7.2%. The results remain robust after controlling for well-known pricing effects. The results are consistent with a preference-based explanation that ambiguity-averse investors demand extra compensation to hold stocks with high disagreement risk and the investors are willing to pay high prices for stocks with large hedging benefits. The results also support the mispricing hypothesis that the high disagreement beta provides an indirect way to measure dispersed opinion and overpricing.Originality/valueMost literature measures disagreement about individual stocks with the standard deviation of earnings forecasts made by financial analysts and examines the cross-sectional relation between this measure and individual stock returns. Unlike prior studies, the authors focus on disagreement about the economy instead of disagreement about earnings growth. The authors' argument is that disagreement about the economy is a major factor that would explain disagreement about stock fundamentals. The authors find that disagreement in economic forecasts does indeed have a significant impact on the cross-sectional pricing of individual stocks.

Measurement and Forecasting of China's Financial Stress Index in the A-E-G Coupling Perspective

After the outbreak of the global financial crisis in 2008, many scholars began to quantify financial risks and find alternative variables to reflect financial risks better. The financial stress index is a good alternative. In this paper, nine important factors of economic aggregate, economic benefit, and economic structure are selected to construct China's Financial Stress Index (CFSI). Then, the coupling identification of AHP and entropy weight method (A-E) is carried out, and the CFSI and its fluctuation are predicted by the grey dynamic prediction model GM(1, N). The results show that the CFSI constructed by a-E coupling weight can measure the pressure of China's financial system more accurately, and the CFSI is predicted to show A gentle decline trend from 2022 to 2024. Inspired by previous studies by scholars, this paper tries to construct and predict CFSI from the perspective of A-E-G coupling, combining subjective and objective, and hoping to open new ideas on CFSI construction and prediction.

Relationships between agricultural growth and energy consumption in China: Toda–Yamamoto tests

This article analyzed the causal link between the growth in agricultural output value and total primary energy consumption for both the 1953 to 2020 and 1980 to 2020 periods. The main method applied is the Toda–Yamamoto​ Wald-χ2 test. Empirical results show that from 1953 to 2020, feedback existed between the growth in agricultural output and energy use. From 1980 to 2020, unidirectional Granger causality existed from energy consumption to the aggregate economy and agriculture. Thus, the study suggests the growth hypothesis in energy economics. In the short-run, agricultural growth will not increase energy consumption. However, strict energy-saving measures in the agricultural sector may curb its growth. During the period after 1980, agricultural energy use efficiency improved. Energy consumption was a short-run determinant of agricultural growth.

The health gap and its effect on economic outcomes

This study investigates the effect of health on the economy by focusing on the health gap within a country. The number of child deaths has declined in most developing economies for several decades, but the gap across income classes within a country remains significant. It is well established that as an economy develops, mortality tends to decline. Consequently, people decrease the number of children and increase the average years of schooling. However, not all people change their lifestyles simultaneously in each country. In this study, we develop a model with heterogeneous households and show that a difference in infant mortality affects the aggregate economy in the long run. The model demonstrates that a larger gap within a country deteriorates the underdevelopment trap and hurts the macroeconomy even if infant mortality declines at the macro level.

Challenges and Support during Project Stage: A Case Study of Women Entrepreneurs of Udupi District

Women entrepreneurs are the women who initiate a business, gather all resources, take risks, face challenges, provide employment to others, and manage the business independently. "Women Entrepreneurship” means an act of business ownership and business creation that empowers women economically in a position in society. Women entrepreneurship provides effective framework for sustainable development of the country. It helps in sustainable revitalization of GDP of a country by generating the employment. Women Entrepreneurship needs to be encouraged, prompted and supplemented by the benefit of the aggregate economy of the country. In this study, the researcher attempted to examine challenges faced and support received by the women entrepreneur during project stage in the district of Udupi. The research paper is based on the primary data. The collected data is analysed using Simple Percentage Method, Ranking Method. The study found that very few women entrepreneurs have professional qualification and have received formal training. Furthermore, most women were housewives prior to entering the business and lacked practical experience. The majority of women entrepreneurs have experienced difficulties with finance, meeting regulatory standards, and technical difficulties, including project reports, and have benefited from support from family members, particularly spouses. Keywords: Women Entrepreneurs, Challenges, Support, Start-up Problems, Project Planning

Transposed Second-Generation Environmental Kuznets Curve, Changing Climate Patterns, and Selected Development Indicators

This paper examined the impact of changing climate patterns (represented by square and cubic CO2 emissions) on selected development drivers (proxy by gross domestic product [GDP] per capita [GDPC] and official development assistance [ODA]). Environmental Kuznets curve (EKC) provided the theoretical backdrop of this study, referred to as the core second-generation EKC (SGEKC) hypothesis. SGEKC was modified to obtain the transposed SGEKC. The transposed SGEKC was conceptualized based on the one-way criticism of the EKC. An unbalanced PMG (ARDL) method was utilized to investigate the impact of the changing climate patterns on GDPPC–(to capture EKC hypothesis) and ODA–(to capture pollution haven hypothesis) in the West African Monetary Zone (WAMZ). This study, therefore, leveraged data from world development indicators between 1970 and 2019. The result showed that the one-way impact of CO2 emissions on GDPC has a long-run N-shaped. The outcome of the GDPC model (in the transposed SGEKC hypothesis) is consistent with the core SGEKC hypothesis. On the other hand, the impact of CO2 emissions on the ODA showed an inverted N-shaped in the long run. The inverted N-shaped relationship does not support pollution-haven hypothesis in the long-run. The results, therefore, imply that the changing climate patterns have a more disruptive impact on income per capita and less on ODA. In the short-run, the result showed the existence of an inverted-N and N-shapes for GDPC (SGEKC does not hold) and ODA (presence of pollution haven) respectively. In conclusion, changing climate patterns present a long-run threat to the economy of WAMZ which in turn could disrupt economic agents’ interactions, de-optimize economic aggregates and economic equilibrium, as well as negatively affect the attainment of a long-run regional development objectives. This study recommends that WAMZ’s government(s) should fast-track the implementation of robust carbon pricing mechanism and abatement policy that would enable climate mitigation policy, improve the regions nationally determined contributions (NDCs) targets, and insulate the economies from policy uncertainty associated with climate change.

A Calculation Model of Carbon Emissions Based on Multi-Scenario Simulation Analysis of Electricity Consumption

In order to reach the peak of carbon emission in China by 2030 and to meet the low-carbon conversion of energy and the growing demand for electricity, this study aims to propose a more accurate and scientific method to calculate the carbon emissions of the entire power industry chain. This paper analyzes the historical actual operation data of the energy and power industry from 2000 to 2020, and originally proposes a carbon emission calculation model based on a multi-scenario simulation analysis of electricity consumption. This paper is an original study from the perspective of the whole industry chain of electricity production, transmission, and consumption. Firstly, a carbon emission model of the power system is established based on the carbon emission composition and transmission mechanism of the whole power industrial chain, which consists of calculation models for carbon emissions from overall electricity demand and carbon emissions from electricity network losses. Secondly, the concept of carbon emission coefficient is proposed, and the key parameters of the carbon emission coefficient of the power system are obtained through the econometric model. On this basis, the carbon emission coefficient is obtained by regression fitting of multiple key parameters according to historical data. Finally, electricity consumption per unit output value (ECPUOV) and per capita electricity consumption (PCEC) are used to predict electricity consumption in the next 15 years. This paper also makes a quantitative analysis of the relationship between CO2 emissions from the power system and electricity consumption. This paper takes G province, which ranks first in total energy consumption and economic aggregate in China, as an example and calculates its CO2 emissions and achievement of peak CO2 emissions by multi-scenario analysis. The case study results show that the low carbon scenario(LC) is the best route for G province to peak CO2 emissions from energy consumption. The method proposed in this paper can set an achievable goal of 2030 carbon peaking for the government and industry policymakers, and find a feasible implementation path.

General guidelines for the optimal economic aggregation of prosumers in energy communities

Energy communities are regulatory tools promoting aggregations of users to foster the shift towards a renewable distributed generation. First in the literature, this paper addresses together three main aspects affecting the convenience of these aggregations: the complementarity between generation and demand of different prosumers, the criterion allocating the operating costs of energy communities, and the application of demand-response programs. The goal is quantifying the relative weight of these aspects using Mixed-Integer Linear Programming to minimize the operating costs of citizen and renewable energy communities, where prosumers are connected to the grid as single entity, or separately. Incentive- or price-based demand-response programs and a novel cost allocation criterion, which rewards the members with the highest economic benefit in passing from simple consumers to prosumers, are applied to each community configuration. Results allow identifying general guidelines for the optimal economic operation of energy communities: i) complementarity may reduce costs by 15–20%, ii) a fairer cost allocation criterion may reduce the bills of prosumers using free-of-charge renewables by 20–30% compared to those using dispatchable sources, and iii) price-based demand-response may reduce community costs beyond 50%. Eventually, directions of further research, as the impact of energy communities on a national power system, are drawn.

The evolving risks of the 21st century and their effective management

Risk management institutions can be reinvented in the 21st century in response to the changing nature of economic uncertainties and changing information technology. The COVID-19 pandemic and its effects on the economy provide an example of new kinds of uncertainties to be managed. National and international contracts should manage risks to claims on better-defined economic aggregates and prices of factors of human capital to make for better economic measurements and better risk management opportunities. The failures of international management of the COVID-19 pandemic, including failure to control the spread of misinformation, provide lessons for such new financial arrangements

Price responsiveness of commercial demand for natural gas in the US

To estimate price responsiveness of commercial demand for natural gas in the US, we use five parametric specifications to conduct panel data analysis of a newly developed sample of 17,280 monthly observations for the lower 48 states in 1991–2020. We find that the US commercial natural gas demand is price inelastic, with statistically significant (p-value ≤ 0.05) static own-price elasticity estimates of −0.137 to −0.245, short-run −0.152 to −0.261 and long-run −0.281 to −0.463. These estimates vary by choice of a sample period, choice of a parametric specification, treatment of cross-section dependence, assumption of partial adjustment, and exclusion of fixed effects. Further, they vary by season and region and their size has been slowly declining over time. Finally, commercial natural gas shortage cost declines with the size of own-price elasticity estimates. The policy implications of these findings are: (a) price-induced conservation's likely limited effect on the US commercial natural gas demand justifies continuation of energy efficiency standards and demand-side-management programs for deep decarbonization; and (b) demand response programs such as real time pricing and reliability differentiation efficiently allocate limited supply of natural gas during a shortage among heterogenous end-users, thus reducing an economy's aggregate natural gas shortage cost.

An Empirical Analysis of Jiangxi Province’s Financial Development, Economic Growth, and Environmental Pollution

Since the reform and opening up in 1978, the economic development in China has experienced a rapid growth stage. Statistics show that annual GDP has grown at an average rate of nearly 10%, and the annual per capita GDP growth rate has also approached 9%. With the rapid economic growth, the problem of environmental pollution across the country has become increasingly serious, and the environmental quality has been deteriorating, which has attracted the attention of many parties in the whole society. The relationship between economic growth and environmental quality has become a hot issue in various fields. First of all, this article introduces basic concepts such as economic development, environmental quality, environmental Kuznets curve, and the relationship between economic development and environmental quality. Afterwards, it analyzes the current situation of Jiangxi Province’s economy and environment from the aspects of Jiangxi Province’s economic aggregate, industrial structure, development mode, overall law of environmental quality, and industrial waste release. Secondly, this study constructs the evaluation index system of the economic and environmental relationship in Jiangxi Province and uses the principal component analysis method to screen the primary economic and environmental indicators, providing evaluation criteria for the establishment of the economic development and environmental quality relationship model of Jiangxi Province. Third, the relationship between the main economic environment indicators after the principal component analysis is simulated, and the EKC model of Jiangxi Province is established. The research results show that the environmental Kuznets curve in Jiangxi Province is not all the typical inverted U shape in developed countries, that is, environmental pollution does not necessarily show a trend of first rising and then falling with the increase of per capita income, but it appears as N-shaped, half of the inverted U shape, and even repeated fluctuations.

Economic Growth Effect of Public Health Investment and Its Impact on Living Environment.

Based on the concern of Chinese residents for health and the improvement of related service demand, this paper studies the economic growth effect of public health investment and its impact on living environment by analyzing the determination coefficient estimated by Spearman and nonlinear curve. The results show that the impact of increasing government financial public health investment on regional economic growth rate is not only related to regional economic aggregate and development level, but also related to regional education level and regional publicity level in logical analysis. The improvement of residents' living environment brought by public infrastructure investment can effectively stimulate residents' concept of health consumption and then make the economy of nonpublic health undertakings achieve a higher growth rate. The economic growth rate brought by nonpublic health undertakings is also an important component of the local economic growth rate. It can be seen that strengthening the infrastructure construction of urban living environment can not only improve the overall living environment quality of the city, but also promote the development of the city and the development speed of the city.

Using stochastic hierarchical aggregation constraints to nowcast regional economic aggregates

Recent decades have seen advances in using econometric methods to produce more timely and higher frequency estimates of economic activity at the national level, enabling better tracking of the economy in real-time. These advances have not generally been replicated at the sub-national level, likely because of the empirical challenges that nowcasting at a regional level presents, notably, the short time series of available data, changes in data frequency over time, and the hierarchical structure of the data. This paper develops a mixed-frequency Bayesian VAR model to address common features of the regional nowcasting context, using an application to regional productivity in the UK. We evaluate the contribution that different features of our model provide to the accuracy of point and density nowcasts, in particular, the role of hierarchical aggregation constraints. We show that these aggregation constraints, imposed in stochastic form, play a crucial role in delivering improved regional nowcasts; they prove more important than adding region-specific predictors when the equivalent national data are known, but not when this aggregate is unknown.

Nonlinear dynamics in real economy and financial markets: The role of dividend policies in fluctuations

This paper investigates how dividend policies may influence the creation and propagation of cycles between real economy and financial markets. We focus on the effect of a constant dividend policy on the stability of the aggregate economy, by means of a discrete dynamical framework in which managers, individuals and financial mediators coexist. We show the counter-intuitive effect of the dividend payout ratio: in a developed economy, an increase in dividends leads to a lower stock price level due to the cross-feedback effect between markets. Moreover, in non-developed economies the choice of managers and individuals may not influence the propagation of fluctuations, while in developed economies, high payout ratios and high sensitivity to market trends trigger a cross-feedback effect between the two markets that amplifies their volatility and drags the whole economy into fluctuations and cycles.

Marx, Sraffa and Classical Price Theory

Abstract Five major propositions in classical price theory are discussed. First, Marx explicitly follows Smith’s analytical starting point to show that prices differ from labor values not because of competition or capitalist relations (wages and profits), but only when the latter interact with intersectoral capital–labor differences. Second, Okishio, Morishima and others long ago demonstrated that Marx’s transformation procedure was an iterative process, and Marx himself refers to a ‘standard’ industry immune to this process. Third, Sraffa correctly argues, in favor of Marx, that empirical economic aggregates are essentially the same in prices and values. Fourth, as matrix size increases the subdominant eigenvalues of IO matrices approach a smooth limiting curve, so contrary to Bródy, the first step in any price or quantity iterative process (such as Marx’s) does not become increasingly exact. Finally, Sraffa prices in large US matrices are overwhelmingly simple and extremely well approximated by Bienenfeld’s quadratic form.

Modeling to inform economy‐wide pandemic policy: Bringing epidemiologists and economists together

Modeling to inform economy‐wide pandemic policy: Bringing epidemiologists and economists together

Sentiments and real business cycles

We introduce sentiments under incomplete information in an otherwise standard real business cycle model. Individual firms receive signals about their idiosyncratic demand shocks, which are confounded by sentiments. Sentiments coordinate the optimal decisions of individual firms through their extraction of aggregate economic conditions from the signals. We show that there exists a sentiment-driven rational expectations equilibrium, in addition to a fundamental equilibrium. Optimism stimulates the aggregate economy, leading to positive comovements between output, consumption, investment, and hours worked. We calibrate a full-fledged dynamic stochastic general equilibrium model based on U.S. aggregate data and find that sentiment shocks substantially amplify aggregate fluctuations and contribute to real business cycles.

Nigerian economic growth: Dependence of agricultural development on oil exploration

The implication of oil industries in Nigeria on the development of her agricultural sector was evaluated in this study. Oil exploration in Nigeria dates back to 1937 and has seen the rise of numerous oil industries in oil-producing states of the country. However, the oil boom has ushered various drawbacks to other key sectors of the Nigerian economy, such as the agricultural sector. This research therefore investigated at the operations of the oil as it affects the country’s agricultural sector and the economic development in general. Data were collected by questionnaire, interview, and observation in a 24-person sample size, while the study area is in the oil-producing states of Nigeria. The results revealed that oil industry employed less than 10% of the work force of the aggregate economy respectively where as 49% are self-employed as farmers, petty traders. Overall, food production declined in the country due to year of neglect on the agricultural sector, coupled with lack of policies and strategies to diversify the Nigerian economy. It is therefore expected that the findings of this study will provide more insight into the crucial need to re-vitalize the agricultural sector of Nigeria to ensure food security for her ever-increasing population.

A Study on Improving the Financing Environment of Small and Micro Enterprises – Based on Taizhou Model

China’s small and micro enterprises have always had the typical characteristics of “five, six, seven, eight, nine,” which are important supports to expand employment and improve people’s livelihood. However, the current proportion of these enterprises in obtaining bank loans does not commensurate with the proportion of small, medium, and micro enterprises in the total economic aggregate. The financing dilemma of small and micro enterprises still exists. In consideration of the financing status of small and micro enterprises, this study analyzes the constraints of small and micro enterprises in financing, such as the difficulty in mortgage, difficulty in obtaining loans, and difficulty in guaranteeing. This study sorts out Taizhou’s practical experience and links its operation mechanism of “two platforms, one fund, and one index.” Finally, by learning from its successful experience, how to utilize the environment and the trend of big data will be further discussed, so as to form a scalable and sustainable financing method and path. This will provide a reference for improving the financing environment of small and micro enterprises.