Different Types Of Shocks Research Articles

Total, quantile, and frequency risk transmission among metal commodities

AbstractThis study investigates the total, quantile, and frequency risk transmission among five widely traded metals namely copper, gold, lead, silver, and zinc using forecast error variance decomposition. The analysis spans from 1 January 2002, to 30 June 2023. Our findings reveal that the total connectedness index (TCI) changed over time, indicating sensitivity to time‐specific developments and major events during different periods. The TCI is influenced more by extreme positive or negative shocks, as the lower and upper quantile TCIs are higher compared to the medium quantile TCI. Furthermore, the short‐term TCIs exhibit higher values than the medium‐ and long‐term TCIs. These variations imply that the TCI is influenced by different types of shocks or mechanisms across different quantiles. Specifically, the short‐term TCIs are driven by global economic policy uncertainty, real global economic activity, and the geopolitical risk index (GPR). However, the medium‐ and long‐term TCIs are solely influenced by the GPR.

Quantifying the Impact of Risk on Market Volatility and Price: Evidence from the Wholesale Electricity Market in Portugal

This research aims to identify suitable procedures for determining the size of risks to predict the tendency of electricity prices to return to their historical average or mean over time. The goal is to quantify the sensitivity of electricity prices to different types of shocks to mitigate price volatility risks that affect Portugal’s energy market. Hourly data from the beginning of January 2016 to December 2021 were used for the analysis. The symmetric and asymmetric GARCH model volatility, as a function of past information, help to eliminate excessive peaks in data fluctuations. The asymmetric model includes additional parameters to separately obtain the impact of positive and negative shocks on volatility. The MSGARCH model is estimated to be in two states, allowing for transitions between low- and high-volatility states. This approach effectively represents the significant impact of shocks in a high-volatility state, indicating an acknowledgment of the lasting effects of extreme events on financial markets. Furthermore, the MSGARCH model is designed to obtain the persistence of shocks during periods of elevated volatility. Accurate price forecasting aids power producers in anticipating potential price trends and allows them to adjust their operations by considering the overall stability and efficiency of the electricity market.

The effects of environmental and non-environmental shocks on livelihoods and migration in Tanzania

Disruptive events and calamities can have major consequences for households in the predominantly agrarian communities of Eastern Africa. Here, we analyze the impacts of environmental and non-environmental shocks on migration in Tanzania using panel models and longitudinal data from the Tanzania National Panel Survey between 2008 and 2013. Shocks are defined as events that lead to losses in income, assets, or both. We find shocks resulting from changes in environmental conditions to be positively related to migration over time with more recent shocks exerting the strongest impact. According to our estimates, the probability of having a household member absent increases by 0.81% with each additional environmental shock encountered in the past 12 months. Different types of shocks have differential effects on migration with the strongest effects being observed for shocks with an immediate impact on household livelihoods, including through livestock losses and crop damage. Households in the sample are differently affected with rural, agriculturally dependent, and poor households without alternative income sources showing the strongest changes in their migration behavior in response to shocks. Our study adds important insights into the relationship between disruptive events and migration in Eastern Africa considering a broad time window and the compounding influence of different shock types. Our findings have a range of policy implications highlighting the need for a comprehensive perspective on household responses in times of distress that considers the interplay of different shock types as well as the role of context in shaping mobility patterns.

Central Bank Communication and Financial and Macro Variables: The Case of European Inflation Targeters

ABSTRACT This paper investigates the effect of central bank communication on financial (interest and exchange rates) and macro (inflation and production) variables in twelve European inflation targeters in 2012–2018. After deriving the tone and topics of communications from policy releases, a heterogeneous panel SVAR is estimated. The results show that the communication effect exists mostly for financial variables; a more pronounced response was found for domestic shocks. The study contributes to the literature by covering economies not at the center of the economic discussion, as well as utilzing a model which can address different types of shocks.

Quantile connectedness of oil price shocks with socially responsible investments

We use a new method to disentangle various sources of oil price shocks and find how these sources are connected to major global environmental, social, and governance (ESG) equity indices under extreme market movements using daily data from October 2007 to March 2022. Our quantile-based connectedness analysis shows that return connectedness considerably amplifies with the size of the shock for both positive and negative shocks, indicating that oil shocks spread more intensely during extreme market movements. We also find that oil shocks originating from unexpected variation in demand and risk substantially contribute to the variation in the ESG returns while supply shocks have relatively little effect when estimated at the median level but the contribution of all different types of shocks remain extremely high when analyzed at the tails. Our results indicate that socially responsible investments are prone to contagion and thus offer limited portfolio diversification benefits under extreme market movements. One clear implication of our study is that investors need to carefully design their risk management and diversification strategies to account for not only the source of the oil shocks but also the magnitude of the oil shock on their green equity investments. We also show that total dynamic connectedness significantly increased during the global financial crisis, European debt crisis, the Brexit episode and the recent COVID-19 outbreak.

The neo-Goodwinian model reconsidered

This paper examines the relationship between aggregate demand and the wage share in the US using a vector autoregression methodology. It finds evidence of Goodwin-cycle effects – that is, profit-led demand and a profit-squeeze effect – in baseline estimates using assumptions traditionally used in the aggregative literature. However, estimates that examine the relationship between demand and the two components of the wage share (the real wage rate and labor productivity) indicate that these results are highly sensitive to ordering restrictions relating demand and labor productivity and that different types of shocks to the wage share may have differing effects on demand. The results suggest two possible interpretations of the initial Goodwin-cycle finding, depending on the assumptions used to identify the demand–productivity relationship. One suggests that the initial estimates reflect a causal relationship in which the effects are driven by a positive effect of productivity on demand and a negative effect of demand on productivity. The other suggests that the initial Goodwin-cycle finding may be spurious, as it interprets contemporaneous pro-cyclical variation in labor productivity as a profit-led demand effect, thereby obscuring an underlying wage-led relationship.

Creative industries and disaster resilience: A focus on arts- and culture-based industries in Indonesia

This study aims to determine the mechanisms through which creative industries build resilience to disasters in the Global South. Existing studies on the resilience of creative industries have been dominated by the context of economic crises in urban Europe and digital-based sectors. We examine the extent to which arguments based on this literature are applicable to arts- and culture-based creative industries in the Global South, which have different characteristics and face different types of shocks, including natural hazards. We develop a conceptual framework that enables a comprehensive comprehension of the disaster resilience exhibited by creative industries, considering their unique characteristics and dynamics. We employ qualitative research methods in which a case study is set in three villages in Lombok and Yogyakarta regions, Indonesia, that represent different strengths of attachments to tradition and times taken to build resilience after disasters. Semi-structured interviews are conducted with local stakeholders, and the resulting data is analyzed using an interactive model. Our findings show that arts- and culture-based creative industries have inherent capacities that help them carry out with their businesses after disasters, namely creativity, the ability to maintain their market segments, and motivation for cultural preservation and empowerment. Nonetheless, it is imperative to convert these abilities into the capacity to find new knowledge and identify opportunities for enhancing resilience. The role of external assistance matters in building resilience, especially from physical damages and losses, but it remains the capacity of business owners to organize their businesses to be able to face any new challenges.

Health financing: the impact of shocks and its role in health system resilience

Abstract Introduction Health financing plays a vital role in the performance of the health system. Shocks can have a major impact on health financing but health financing can also protect aspects of the health system during shocks. Understanding the health financing function, how different types of shocks - including pandemics and the current cost-of-living crisis -- affect health financing, and how health financing can be resilient in the presence of shocks is of utmost importance Methods A framework for understanding health financing and how a shock can affect health financing was developed by the European Observatory on Health Systems and Policies. Health financing is broken down into revenue raising, pooling, purchasing and the governance of health financing, referred to as sub-functions of health financing. We use this framework to explore country examples in an effort to identify the ways in which health financing systems are resilient to different types of shocks. Findings There a range of examples demonstrating resilience to shocks across the sub-functions of health financing. First, there are counter-cyclical financing mechanisms where the revenues allocated to health are automatically adjusted to compensate for unemployment shocks (e.g. Lithuania). Second, there are purchasing practices that ensure resources are allocated appropriately within the health system when there are significant changes in utilization patterns, (e.g. Belgium during COVID-19). Third, automatic adjustment of prices occurs, paid by the health system to compensate for inflationary pressures. Fourth,good practices in the governance of health financing involve adjusted coverage policies to improve access to services when households were under severe financial strain (e.g. Ireland). Conclusions There are many different ways to ensure that health financing is resilient to shocks. Policymakers must consider the role of their health financing systems when developing preparedness plans.

Determinants of Household Vulnerability in Networks with Formal Insurance and Informal Risk-Sharing

Effective risk management is key to strengthening the resilience of the most vulnerable. Insurance products can help achieve this goal. Yet, in particular in low-income countries, not all can afford the regular premiums. Instead, informal risk-sharing within social networks plays a crucial role in protecting against unpredictable environmental shocks such as droughts and floods. However, this support may not reach households in need if income is heterogeneously distributed and poor households are not connected to those with sufficient resources to share. To study the determinants of vulnerability to extreme events when insurance is available but not affordable to all, we aggregate outcomes of an empirically informed agent-based model in a regression model. We show that not only a household's own financial situation is important for shock resilience, but also the household's position in the network and the financial situation of connected households. We demonstrate the transferability of our results by achieving high prediction accuracy for an empirical risk-sharing network of a village in the Philippines. The study demonstrates how model-based results can help detect vulnerable households. This can be used to develop a reliable identification tool to leverage external support and effectively target subsidies for different types of shocks.

How does a region react to different types of shocks? The case of a Brazilian T&C industrial region

PurposeThis study aims to empirically investigate how an industrial region has reacted to different shocks – competitive, market and environmental – through its economic subsystems – its firms, workers and institutions – in a longitudinal perspective for the period 1985–2021.Design/methodology/approachThe authors used a mixed-method approach applied to a case study of the Brazilian T&C industrial region. The authors used two data sources and two stages for data collection. The first stage involved documentary research and the second in-depth interviews. The analysis of qualitative data took place in two stages. In the first, the authors applied content analysis, and in the second stage, the authors used the exploratory statistical technique of simple correspondence analysis and the categorical data.FindingsThe results provide evidence that different types of shock provoke different reactions. However, the shock–reaction relationship is invariable over time. The authors observed proportionality in the size of the shock and the regional actors involved in the regional response – firms, workers and institutions.Originality/valueThe authors went a step further, presenting empirical research on the shock–reaction relationship using the “type of shock” as a variable. This paper provides a holistic understanding of the factors behind regional resilience through insights into the role that resources, structures, institutions and actors play in the regional response to distinct types of shocks, reaching four main conclusions.

Resilience in Food Systems: Concepts and Measurement Options in an Expanding Research Agenda

The idea of “resilience” increasingly appears in development dialogue and discussion of food systems. While the academic concept of resilience has roots in diverse disciplines, climate change and the coronavirus disease 2019 (COVID-19) pandemic have led to a rapid intensification of interest in the concept as it applies to food systems. Both the broad conceptual roots and the swift increase in attention pose dangers of conceptual dilution, contradiction, and confusion as agronomists and other analysts of food systems incorporate the resilience concept into their work. In this publicly funded research, the authors present the results of an extensive search of literature and subsequent analysis. The overview examines conceptualizations of resilience more broadly, followed by a similar review within the food systems domain. The authors consider connections among related concepts under the broader umbrella of food security, such as vulnerability and risk, and discuss challenges and opportunities in the investigation of food system resilience. The review of concepts serves as a precursor to an investigation of measurement options in a rapidly expanding body of empirical research, as measurement should flow clearly from conceptualization. The analysis here presents various resilience measures at different levels and breaks down their components as they apply to food systems, identifying commonalities and divergences. The authors identify a glut of resilience conceptualizations and measurements but indicate avenues for consolidation and precision. The range of options means that researchers can likely find suitable existing subconcepts and measurements for their own work across many different types of shocks. The authors also discuss policy and practical applications, including connections to the United Nations’ Sustainable Development Goals and food system responses to climate change and pandemics.

Do we need to consider multiple inter-bank linkages for systemic risk in China’s banking industry? Analysis based on the multilayer network

We construct an inter-bank multilayer network that includes direct linkages through interbank transactions and indirect linkages through bond investment, and investigate the systemic risk in Chinese commercial banks in case of credit shocks, liquidity shocks and asset price shocks. According to our study, indirect linkages contribute more to systemic risk than direct linkages, and systemic risks from different types of shocks have different characteristics. We also find an intriguing non-linear effect in the aggregation of different linkages in the multiplex structure by comparing the total risk and the sum of systemic risk of all layers. This study suggests that the regulator should pay attention to the pervasiveness and dynamics of systemic risk, with a particular focus on risk contagion caused by indirect linkages among commercial banks.

Financial contagion in banking networks with community structure

Monitoring and controlling financial contagion in banking systems is a challenging task, and micro-structural network contagion models are becoming fundamental policy tools for supervisors. A large body of literature studies the theoretical properties of the diffusion of financial shocks in banking networks, measuring the spread of different types of shocks in relationship to the structural properties. Recent studies have highlighted the relevance of network communities i.e. groups of banks with connections among them stronger than to the rest of the system. In the European Union, such communities may be related to country divisions, as a result of the progressive integration of national banking systems.In this work we study whether and how the presence of a community structure affects the diffusion of liquidity shocks in a simulated banking systems. As a starting hypothesis communities may influence contagion in two ways: a higher transitivity (or clustering) could generate loops that amplify contagion; on the other hand, shocks could be “trapped” in a community avoiding the transmission to the entire system. We find that the presence of communities highly affects contagion, increasing the amount of distress transmitted and the number of banks involved. The results are robust across a broad range of network specifications. We also test the potential effects on contagion risk of several stylized policies: the introduction of higher liquidity requirements, the definition of liquidity requirements based on network indicators, and interventions to improve the confidence in the market by individual banks (obtained for instance by policies that enhance transparency). Results can be of interest for regulators willing to study the diffusion of liquidity risk and to set up macro-prudential policy interventions.

Complex risk contagions among large international energy firms: A multi-layer network analysis

This paper introduces a multi-layer network approach to explore risk contagions in a sample of top energy firms in the world. Large energy companies play a very important role in the international energy market. Mapping their responses to different types of shocks provides profound implications for understanding how international energy markets work, and could also create significant value for investors in the energy sector. Specifically, we distinguish three layers of risk spillovers, covering return correlations as well as upper tail and lower tail dependence. Through a multi-layer network setting, we identify both within layer linkages and inter-layer linkages. In addition, the dynamic evolution of this network structure is explored through a rolling-window approach, which enables us to evaluate the level of structural stability. Our empirical results unveil three regional clusters and a dynamic power shifting pattern in the international energy sector. Overall, this multi-layer network approach allows us to detect complex risk contagion patterns in financial markets and could be generalized to other scenarios.

Should We Insure Workers or Jobs During Recessions?

What is the most efficient way to respond to recessions in the labor market? To this question, policymakers on the two sides of the pond gave diametrically opposed answers during the COVID-19 crisis. In the United States, the focus was on insuring workers by increasing the generosity of unemployment insurance. In Europe, instead, policies were concentrated on saving jobs, with the expansion of short-time work programs to subsidize labor hoarding. Who got it right? In this article, we show that far from being substitutes, unemployment insurance and short-time work exhibit strong complementarities. They provide insurance to different types of workers and against different types of shocks. Short-time work can be effective at reducing socially costly layoffs against large temporary shocks, but it is less effective against more persistent shocks that require reallocation across firms and sectors. We conclude that short-time work is an important addition to the labor market policy-toolkit during recessions, to be used alongside unemployment insurance.

Relational Contracts and Development

This article reviews an emerging body of evidence on relational contracts, defined as informal arrangements sustained by the value of future interactions. We focus on developing and international markets, which are often characterized as contexts with weak formal contract enforcement. We introduce relational contracting between firms as a governance form alternative to both firms and markets. We then review evidence on the prevalence of long-term relationships between firms and discuss why this governance form might be particularly common in developing countries. After introducing a simple framework, we discuss the measurement of relational contracting between firms. We review an approach that takes dynamic incentive compatibility constraints to the data to quantify the value of future interactions and illustrate how different types of shocks can be used to uncover the inner functioning of relational contracting. We also review structural models and conclude with policy implications and promising avenues for future research.

When could Macroprudential and Monetary Policies be in Conflict?

This paper aims to provide a comprehensive analysis of the potential conflicts between macroprudential and monetary policies within a DGSE model with financial frictions. The identification of conflicts is conditional on different types of shocks, policy instruments, and policy objectives. We first find that conflicts are not systematic but are fairly frequent, especially in the case of supply-side and widespread shocks such as investment efficiency and bank capital shocks. Second, monetary policy and countercyclical capital requirements generate conflicts in many circumstances. By affecting interest rates, they both “get in all the cracks”, albeit with their respective targets generally moving in opposite directions. Nonetheless, monetary policy could reduce its adverse financial side effects by responding strongly to the output gap. Third, countercyclical loan-to-value caps, as sector-specific instruments, cause fewer conflicts. Thus, they can be more easily implemented without concerns about generating spillovers, whereas smooth coordination is required between state-contingent capital requirements and monetary policy.

Industry Interconnectedness and Regional Economic Growth in Germany

Urban systems, and regions more generally, are the epicenters of many of today’s social issues. Yet they are also the global drivers of technological innovation, and thus it is critical that we understand their vulnerabilities and what makes them resilient to different types of shocks. We take regions to be systems composed of internal networks of interdependent components. As the connectedness of those networks increases, it allows information and resources to move more rapidly within a region. Yet, it also increases the speed and efficiency at which the effects of shocks cascade through the system. Here we analyzed regional networks of interdependent industries and how their structures relate to a region’s vulnerability to shocks. Methodologically, we utilized a metric of economic connectedness called tightness which quantifies a region’s internal connectedness relative to other regions. We calculated tightness for German regions during the Great Recession, comparing it to each region’s economic performance during the shock (2007–2009) and during recovery (2009–2011). We find that tightness is negatively correlated with changes in economic performance during the shock but positively during recovery. This suggests that regional economic planners face a tradeoff between being more productive or being more vulnerable to the next economic shock.

POINT-OF-CARE ECHOCARDIOGRAPHY IN PRONE PATIENTS ON MECHANICAL VENTILATION: A PROSPECTIVE CASE SERIES

TOPIC: Imaging TYPE: Original Investigations PURPOSE: Point-of-care echocardiography plays an important role in evaluating critically ill patients admitted to the intensive care unit (ICU). Obtainable hemodynamic data has shown to be helpful in differentiating between different types of shocks and guiding management. However, this tool was frequently limited in the current COVID-19 pandemic due to the increasing number of critically ill patients requiring prone positioning for profound hypoxemia. Current literature has limited data regarding feasibility and utility of Point-of-Care Echocardiography in prone patients. METHODS: This a prospective case series involving a total of 21 patients with acute respiratory failure in the setting of COVID-19 pneumonia, requiring mechanical ventilation and prone-positioning, who were randomly enrolled over 4 months period. All patients underwent a bedside echocardiogram to visualize the apical four-chamber and five-chamber views, with the goal of assessing left ventricular function, right ventricular function and right ventricular size. The view was obtained with placing the phased array probe below the left nipple with the transducer indicator pointing toward patient left shoulder followed by moving the probe medially and laterally to obtain the best view. All images were reviewed by an independent board-certified cardiologist to assess quality and interpretability of images. RESULTS: Total of 21 patients were randomly included over a period of 4 months. Mean age was 56 years old with equal gender distribution (male 52%) and median BMI of 21 (IQR 24.8-37.8). Majority patients were ventilated with assist control/volume control mode with median PEEP of 12 (IQR 10-14) and tidal volume of 6 cc/Kg (IQR 6-7.5). LV function was normal in 14/21 (66%), decreased in 5/21 (23%), and unobtainable 2/21 (10%). Right ventricular function was normal on 14/21 (66%), decreased in 4/21 (19%), unobtainable 3/21 (14%). Median VTI was 18.9 (SD + 6.3), mean TAPSE was 17.6 (SD +6), median E/E’ 6.25 (IQR 5-8). 19/21 images were available for review by cardiology. Out of those, 12/19 (63%) scans considered of an adequate image quality and interpretability. While no difference in images quality noted between genders, a BMI of 35 and more significantly correlated with poor images [4/5 (80%) vs. 3/11 (21%);p=0.01]. In addition, left lateral prone positioning was more likely to be associated with adequate quality 5/6 (83%) as compared to other positions 6/11 (54%). CONCLUSIONS: Point-of-care echocardiography to obtain apical cardiac views is feasible in certain prone patients and can be optimized by left lateral positioning. Further studies are needed to explore and standardize the role of echocardiography in patients requiring prolonged proning. CLINICAL IMPLICATIONS: Point-of-care echocardiography can be adequate enough to provide valuable quantitative and qualitative hemodynamic data in critically ill proned patients. DISCLOSURES: No relevant relationships by Yaser Dawod, source=Web Response No relevant relationships by Benjamin Kenigsberg, source=Web Response No relevant relationships by Syed Nazeer Mahmood, source=Web Response No relevant relationships by Anantha Mallia, source=Web Response

Visualizing Spatial Economic Supply Chains to Enhance Sustainability and Resilience

This article presents a spatial supply network model for estimating and visualizing spatial commodity flows that used data on firm location and employment, an input–output table of inter-industry transactions, and material balance-type equations. Building on earlier work, we proposed a general method for visualizing detailed supply chains across geographic space, applying the preferential attachment rule to gravity equations in the network context; we then provided illustrations for U.S. extractive, manufacturing, and service industries, also highlighting differences in rural–urban interdependencies across these sectors. The resulting visualizations may be helpful for better understanding supply chain geographies, as well as business interconnections and interdependencies, and to anticipate and potentially address vulnerabilities to different types of shocks.