Method Of Moments Research Articles

Institutional framework, macroeconomic instability and financial markets: perspective from emerging economies

Purpose The study evaluates the role of institutional framework and macroeconomic instability on financial market development among emerging economies.Design/methodology/approach The study uses panel data compiled from 32 countries from the sub-region of Sub-Sahara Africa (SSA), covering the period starting from 1996 to 2019. Empirical analyses were carried out using the two-step system generalized method of moments (TS-GMM) statistical framework.Findings Reviewed results suggest that institutional quality, effective governance and corruption control have a significant positive impact on financial market development among economies in the sub-region. Further empirical estimates show that macroeconomic risk and macroeconomic uncertainty have significant adverse effects on financial market development. Additionally, reported empirical estimates suggest that an improved institutional framework has the potential to lessen the adverse effect of macroeconomic instability on financial market development among economies in the sub-region.Originality/value The uniqueness of this empirical inquiry compared to related studies in the present literature stems from the fact that studies employing similar empirical approaches on the subject matter for economies in the sub-region are rare. Additionally, the analysis pursued in this study employs critical variables whose impact on financial market performance in the sub-region has not been examined per our review. These variables include indexes such as macroeconomic risk and institutional quality, which are unique to this study based on their construction; these indexes are generated using a principal component analysis procedure with different underlying variables compared to what may be found in the literature.

Can financial inclusion enhance human development? Evidence from low- and middle-income countries

The purpose of this study is to determine if financial inclusion in low-, lower-middle-, and upper-middle-income nations promotes human development. Our aim was accomplished by employing an empirical technique of using the System Generalized Method of Moments (SGMM) and dynamic threshold panel (DTP) data on a sample of 79 nations between 2000 and 2017. Three sub-samples representing low-, lower-, and upper-middle-income nations were created from the entire sample. In general, lower- and upper-middle-income nations’ human development is positively impacted by financial inclusion, according to SGMM empirical studies. Furthermore, the DTP method’s results show that there is a threshold impact for both human development and financial inclusion. The degree of human development in upper-middle-income and lower-middle-income countries is greatly raised by financial inclusion, whether the threshold is met or beyond.

Determination of Insurance Premium Rates with Aggregation Claims at BPJS with Exponential and Gamma Distributions

Badan Penyelenggara Jaminan Sosial (BPJS) is a legal entity that has been provided by the government for the community with the aim of providing protection for all workers in Indonesia from certain socio-economic risks. National development, marked by planned and continuous strides, embodies a commitment to engage all societal, national, and state levels in fostering progress. Encompassing political, economic, socio-cultural, and defense and security realms, the development is meticulously designed to be comprehensive, targeted, integrated, gradual, and sustainable. The overarching objective is to catalyze an augmentation of national capabilities, align the standard of living for the Indonesian people with developed nations, and elevate overall welfare. To establish premium rates, a method involves multiplying the conditional expected value of claim frequency by the size of the claim, considering observed risk characteristics. A claim, in this context, constitutes a formal request to the insurance company, seeking payment in accordance with the terms of the agreement. The primary objective of this study is to establish the insurance premium rates applicable to policyholders (the insured) through the estimation of parameters in the distribution governing aggregate claims. This involves the distribution of both the number of claims and the size of the claims, and the estimation is performed using the moment method. Premium computations are executed based on two key principles: the pure premium principle and the expected value principle. This research produces the conclusion that the Poisson-Gamma aggregate claims distribution has a premium amount of 3.61 times greater than Poisson-Exponential due to the application of the anticipated value principle, namely IDR 4,403,542.94 per month and IDR 1,219,878.45 per month, respectively.  

Dynamic reliability analysis of angular contact ball bearing based on maximum entropy quadratic fourth moment method*

ABSTRACT Bearing failure occurs when the dynamic contact stress exceeds the yield strength of the bearing material during operation. To minimise the risk of bearing failure, a new reliability theory method is proposed based on the stress-strength model of bearings, incorporating random input variables to analyse the reliability of angular contact ball bearings (ACBBs) and quantify their dynamic performance. The maximum entropy quadratic fourth moment method is used to calculate the probability distribution of maximum orthogonal shear stress-strength of bearing, and the maximum entropy principle is used to obtain the approximation of the minimum human error factors. Additionally, reliability-based sensitivity indices are derived to investigate the parametric significance of random input variables. Using B218 bearing as an example, the engineering application of this method in dynamic reliability and reliability-based sensitivity analysis is illustrated. Monte Carlo simulation is performed to verify the accuracy and effectiveness of the method to provide benchmark results. The results show that the Poisson’s ratio have a greater influence on the dynamic reliability of ACBBs than other parameters. Improving parameters such as ball diameter, raceway groove curvature radius and contact angle can also improve the reliability of bearings to some extent.

225 Genomic diversity of Katahdin sheep and impacts on genomic prediction

Abstract In the late 1950s, Katahdin hair sheep were developed as a composite breed of medium size and moderate prolificacy, with potential to express resistance to gastrointestinal nematodes. With its increasing popularity and the recent adoption of genomic prediction in the Katahdin breeding program, evaluating the genetic diversity in this breed is necessary. Prediction accuracies rely on the strength of genetic relationships. That strength often increases with selection using genomically-enhanced estimated breeding values; however, it carries the risk of decreasing diversity. We aim to characterize the genetic diversity present in the breed and the subsequent impact on the accuracies of genomic predictions. Genotypes on Katahdin sheep from member flocks in the National Sheep Improvement Program were used. Data from two medium density 50k bead chips and one high density 600k bead chip were merged and limited to shared autosomal single nucleotide polymorphisms (SNP). After quality control, there were 9,705 animals and 31,984 SNP remaining. Only for analyses of inbreeding and heterozygosity, linkage disequilibrium (LD) pruning was performed; variants with an LD score exceeding 0.8 were removed with 29,904 SNP remaining. To determine the extent of population structure, principal component (PC) analysis was conducted with PC one and PC two explaining 4.9% and 3.8% of the variation in the population, respectively. When examining subpopulations, a single ancestral population explained 99.9% of the genetic variation among animals. When clustered by identity-by-state, all animals were placed in a single cluster. Inbreeding coefficients were estimated with four methods: method of moments, variance-standardized relationship minus one, excess homozygosity, and correlation between uniting gametes. Across methods, average inbreeding coefficients ranged from 1.14% to 1.20% with Pearson and Spearman correlations ranging from -0.51 to 0.91 (Table 1). Historical effective population sizes (Ne) were estimated for earlier generations, and a linear regression fit to predict more recent Ne. At the founding of the breed, historical Ne was estimated to be 310, and the current Ne was estimated to be 150. Effects of Ne on the accuracy of genomic predictions were examined for reference population sizes ranging from 1k to 25k for traits of low (0.1), moderate (0.3), and high (0.5) heritabilities. The corresponding number of effective chromosomal segments were 2NeL, where L was the length of the genome in morgans (26M). Accuracies of genomic predictions increased as the reference population size grew, with only marginal gains once the population exceeded 15k. Overall, there were no detectable genetic subpopulations in the Katahdin breed. Current levels of inbreeding were low. With a small Ne the breed can achieve high accuracy for genomic predictions by aiming for a reference population of 15k animals. Negative impacts on genetic diversity due to genomic selection are not of immediate concern.

Informal Institutions and Audit Pricing: Cross-Country Evidence of National Culture and Audit Fees

Synopsis The research problem In this study, we examined the effect of an important informal institution, namely, national culture, on audit fees in an international context. Motivation In recent years, extant literature has increasingly focused on country-level differences in the audit environment, as these might have a significant influence on how financial statement audits are conducted across the globe. We contribute to this stream of literature by investigating the impact of national culture on audit fees. The test hypotheses Based on the demand- and supply-side perspectives of audit fees, we hypothesized that national culture dimensions — namely, uncertainty avoidance, power distance, individualism versus collectivism, and masculinity versus femininity — affect audit fees. Target population We used a sample of 27,670 firm-year observations across 22 countries over the 2002–2019 period. Adopted methodology We used ordinary least squares (OLS) regressions as baseline technique and entropy-balanced method (EBM) and system-generalized method of moments (GMM) to address endogeneity concerns. Analyses We examined the impact of Hofstede’s four national culture dimensions — uncertainty avoidance, power distance, individualism versus collectivism, and masculinity versus femininity — on audit fees. We also tested the robustness of results using alternative measures of national culture, subsample analyses, and additional firm-level factors. Findings Consistent with our hypotheses, we find that audit fees are higher (lower) in countries with higher uncertainty avoidance, individualism, and masculinity (power distance) scores. Our further analyses reveal that earnings management proxied by abnormal accruals does not impact the relationship; however, country-level creditor rights influence audit fees in high power distance and masculine cultures. We also note that national culture influences auditor choice and audit opinion. Our main findings are robust to alternate proxies and subsample analysis, as well as to address potential endogeneity concerns. Overall, our findings offer important implications for firms operating in global markets and for the audit profession.

Turbulent Periods, Earnings Management and the Role of Auditors

The present study attempts to test the impact of audit, non-­audit fees, auditor tenure, auditor size, and financial distress on earnings management during turbulent periods for the five largest Eurozone countries. The motivation of the current study is to provide fresh evidence on these relationships during global financial crisis and sovereign debt crisis. We use the generalized methods of moments and ordinary least squares method for a sample of listed firms across the five largest Eurozone countries. We found that auditor tenure and auditor size carry no significant effect on earnings management during the financial crisis and sovereign debt crisis period as compared to the pre-crisis period for both cases. However, audit, non-audit fees and financial distress affect earnings management during the Eurozone crises periods. The results imply that stricter accounting regulation is needed during turbulent periods and investors should be careful with their investments.

Do Cross-Border Mergers and Acquisitions by Emerging Market Enterprises Enhance Long-Term Productivity? The Host Country Market Size Effect Moderated by Technological Absorption Efforts

The purpose of this study was to establish a spatial structural framework to explore how cross-border mergers and acquisitions (M&As) in emerging markets can enhance long-term productivity and select the appropriate host country market structures. Utilizing cross-border M&A data from Chinese companies from 2008 to 2016, we developed a moderated U-shaped mediation model. Employing Two-Stage Least Squares and the Generalized Method of Moments for endogeneity analysis, we offer robust empirical insights. Our findings illustrate that enterprise productivity progression from cross-border M&As is significantly influenced by a U-shaped mediation of the host country’s market size effect, which is further moderated by the technological distance between the home and host countries. A high technological distance intensifies the U-shaped mediation of market size effects on enterprise productivity, while low technological distances result in an inverted U-shaped curve, indicating that such markets may boost short-term productivity but limit long-term growth. Conversely, larger markets with greater technological distances better support sustained productivity increases, even requiring persistent technological absorption efforts. This study underscores the necessity of selecting appropriate host country market structures and effectively managing the acquisition timeline to positively impact both short- and long-term productivity. By conceptualizing firm-level technological absorption efforts as the technological gap between the home and host countries, this study highlights the crucial moderating role that the technological gap plays in influencing long-term productivity at the macro level, providing new insights into the economic geographic strategic decisions and spatial planning for emerging market enterprises in cross-border acquisitions.

Optimal Control of Chromate Removal via Enhanced Modeling Using the Method of Moments

Optimal Control of Chromate Removal via Enhanced Modeling Using the Method of Moments

A Machine Learning and Quantile Analysis of FINTECH and Resource Efficiency in achieving Sustainable Development in OECD Countries

This study aims to examine the impact of fintech investments and resource efficiency on sustainable development in OECD countries between 2010 and 2019. Various estimation techniques, including the Method of Moments (MMQREG), machine learning-based Kernel-based Regularized Least Squares (KRLS), and Generalized Method of Moments (GMM) Methods, have been utilized in this study. MMQREG and KRLS are both estimators that examine the relationship between variables in all ranges, increasing the reliability of the findings. The research results indicate that fintech investments and resource efficiency support sustainable development. Additionally, institutional quality, environmentally friendly technologies, and foreign trade are found to have a positive impact on sustainable development. These findings suggest that financial technology and resource management can play a significant role in promoting both economic and environmental sustainability.

Market power, human capital efficiency and bank performance in Kenya

PurposeThe study evaluates the influence of human capital efficiency (HCE) and market power on bank performance.Design/methodology/approachThe study employs two measures of bank performance: profitability and stability. Unbalanced panel data of 35 banks operating in Kenya for 2005–2020 collected from published financial statements is utilized. The study employs the feasible generalized least squares (FGLS) method in the analysis and the two-step system generalized method of moments (GMM) for robustness check.FindingsThe study affirms an inverted U-shaped relationship between market power and bank performance. The effect of market power on bank profitability is enhanced when a bank has highly efficient human capital. Further, HCE significantly impacts bank stability for banks with low HCE. Interestingly, a further increase in HCE narrows the net interest margins for banks with high HCE, conferring welfare benefits to customers as interest rate spreads shrink.Practical implicationsThis study provides important insights into the role of human capital in bank performance. First, banks ought to invest in promoting HCE through training and development. As regulators root for bank consolidation, attention to HCE is imperative for fostering profitability and stability.Originality/valueThe study fills an essential gap in the literature by evaluating the effect of firm-level market power on bank performance in an emerging market. We adopt a novel stochastic frontier estimator to generate the Lerner index. Further, this is the first study known to the authors to evaluate the effect of market power on bank performance in the context of human capital efficiency variations.

Sustainable accounting quality and its impact on financial success aligned with SDGs

Purpose Financial and nonfinancial disclosures (sustainable accounting) are crucial in the annual financial reports of many firms. This study aims to explore the dynamic relationship between sustainability disclosure quality (SDQ) and financial performance (FP) within mandatory disclosure frameworks. SDQ is evaluated across six dimensions, encompassing both the quality and quantity of disclosures, aiming to understand their reciprocal influence. Design/methodology/approach Using the generalized method of moments (GMM), this research analyzes data from 2013 to 2019, focusing on 99 listed Indian firms within the S&P Bombay stock exchange (BSE) 500 index. The study uses rigorous measurement criteria to assess SDQ and uses statistical methods to unveil the causal link between SDQ and FP. Findings The results show a positive causal connection between SDQ and FP, where organizations with good FP make relatively higher disclosures across FP proxies than their counterparts. Additionally, the study investigates the impact of research and development (R&D) expenditure and dividend payments (DIVD) on SDQ. Notably, lower R&D spending is associated with higher quality SDs, and companies with superior SDQ exhibit increased DIVD. Practical implications The findings advocate for strengthened regulatory compliance, incentivized sustainable practices and heightened reporting standards for a transparent business environment and achieving the relevant United Nations Sustainable Development Goals. Originality/value This research contributes original insights by uncovering the intricate relationship between SDQ and FP, shedding light on the impact of R&D expenditure and DIVD on SDQ. These findings contribute to a nuanced understanding of the interplay between FP and sustainability reporting within the context of mandatory disclosure frameworks.

Toward better understanding of anharmonic structural, thermodynamic, and elastic properties of CaSiO3 perovskite under extreme conditions via statistical moment method

CaSiO3 perovskite is thought to be the third most abundant minerals in both the Earth’s transition zone and lower mantle but its structural, thermodynamic, and elastic properties have not been well characterized. In this work, for the first time, we apply the statistical moment method (SMM) to determine analytical expressions of thermoelastic quantities such as isothermal and adiabatic elastic moduli, Grüneisen parameter, Young’s and shear moduli, compression wave and shear velocities including the full anharmonic effects of thermal lattice vibrations of perovskite crystals with cubic structure. The theoretical results are applied for numerical calculations for cubic CaSiO3 perovskite, which is a strongly anharmonic system, at temperatures and pressures up to 4000 K and 180 GPa corresponding to the extreme conditions of the Earth’s lower mantle. Our results for temperature and pressure dependences of unit cell volume, thermal expansivity, isochoric and isobaric heat capacities, Grüneisen parameter, isothermal and adiabatic elastic moduli, Young’s and shear moduli, compression wave and shear velocities are important signs of anharmonic effects under high temperatures and pressures. The SMM results are compared with experiments and other calculations. The present study provides an effective theoretical approach for finding the structural, thermodynamic, and elastic properties of strongly anharmonic materials under extreme conditions.

Six Steps Commutation Torque and Dynamic Characteristics of Spherical Brushless Direct Current Motor

This paper presents developing a new three-degrees of freedom (DOF) electromagnetic actuator referred to here as a spherical brushless direct current (SBLDC) motor. The SBLDC motor consists of permanent magnets (PMs) in a rotor and three layers of electromagnets (EMs) in a stator. The EMs in the middle layer of the stator generate a spinning torque, and the other two layers, placed symmetrically with respect to the middle, produce a tilting torque. Winding layouts of the EMs in each layer are analytically studied for decoupling between spinning and tilting torque. Furthermore, a six steps commutation is proposed to independently control the tilting torque as well as the spinning torque. The commutation torque model is validated by the moment method based distributed multipoles (MMDMP) according to various tilting angles and directions. Then, the commutation torque model is further utilized to develop open-loop control and analyze stability with respect to equilibria. Finally, the performance of the SBLDC motor and control system is verified experimentally using commercial brushless direct current motor (BLDC) drivers. The results show the substantial potential of the SBLDC motor in automation and mobility applications requiring orientation control with high-speed spinning.

Statistical moment method in studying the melting of tungsten: a comprehensive review

Statistical moment method in studying the melting of tungsten: a comprehensive review

Role of labor market dynamics in influencing global female labor force participation

PurposeThe global non-attainment of the Sustainable Development Goal (SDG) 5 indicates the issue of rising gender inequality. Educated women shying away from the labor force is worsening it. The labor market dynamics might shape the female labor force participation (FLFP). The present study recommends a policy framework by analyzing this dynamism across 125 countries over 1990–2020.Design/methodology/approachThe Two-step System Generalized Method of Moments is used to address endogeneity bias. Dynamism in policy environment is captured by relaxing the Ceteris Paribus condition in the empirical model.FindingsResults show that the moderation of labor market factors has increased with the attainment of Secondary and Tertiary Education. Results also highlight that these factors promote FLFP through prospective opportunities but also hinder female participation through employer’s discrimination despite educational attainment.Originality/valueStudies have examined the role of education on FLFP. However, prior research has not investigated the role of labor market factors in influencing the impact of education on FLFP. The consideration of these factors will help in addressing the global policy lacuna by recommending a policy framework for enhancing FLFP through internalization of the externalities exerted by the labor market factors, and thereby, help the countries attaining the SDG 5 objectives.

Market power and bank risks: insights from India and Bangladesh

Purpose This study aims to investigate whether various types of risks faced by the publicly listed commercial banks of India and Bangladesh are driven by market power and provides comparative insights from both economies. Design/methodology/approach By using the adjusted Lerner index to gauge bank market power and applying the generalised methods of moments (GMM) regression approach, the research delved into the relationship between bank market power and three distinct facets of risk across a sample of 26 publicly listed commercial banks in India and 22 listed banks in Bangladesh spanning from 2011 to 2022. Findings The results indicate that for Bangladesh, both “competition fragility” and “competition stability” viewpoints coexist simultaneously across all risk types, supporting a nonlinear relationship between market power and risk. However, in the Indian context, a nonlinear association exists only in the case of credit risk, while the relationship with insolvency risk is linear, substantiating the “competition fragility view”. Apart from market power and bank-specific variables, GDP growth rate has emerged as a prominent driver across all risk categories in both countries. Research limitations/implications The filtration of banks is a limitation that might have influenced the outcomes. This study recommends that the Reserve Bank of India encourages further bank consolidation. Along the same line, Bangladesh Bank should closely oversee the growing competitive landscape. Furthermore, the regulators must monitor the elevated levels of non-performing loans to reduce credit risk so as to bolster the stability of their respective banking sectors. Originality/value This comparative study is the first attempt to analyse the market power and risk relationship and includes a novel bank-specific variable, i.e. technology, apart from other established variables.

The relationship between financial stability and transparency in social-environmental policies

PurposeThis work analyzes, through social-environmental reports, whether banks with higher transparency in social-environmental policies better safeguard financial stability in Brazil.Design/methodology/approachThe analysis is carried out through a panel database analysis of the 42 largest Brazilian banks, representing 98% of the Brazilian financial system. Seeking to avoid spurious results, we followed rigorous methodological standards. Hence, we conducted an empirical analysis using a dynamic panel data model, we used the difference generalized method of moments (D-GMM) and the system generalized method of moments (S-GMM).FindingsThe results show that the higher the transparency of social-environmental policies, the lower the chance of possible stress on the financial stability of Brazilian banks. In sum, this study builds evidence that disclosing risks related to policies about sustainability can enhance financial stability. It is essential to highlight that social-environmental transparency does not have as direct objective financial stability.Originality/valueThe manuscript submitted represents an original work that analyzes whether banks with higher transparency in social-environmental policies better safeguard financial stability. Some countries, such as Brazil, have their potential for sustainable policies spotlighted due to their green territory and diverse natural ecosystems. Besides having green potential, Brazil is a developing country with a well-developed financial system. These characteristics make Brazil one of the best laboratories for studying the relationship between transparency in social-environmental policies and financial stability.

Does Institutional Setting Contribute to the Public Debt — Income Inequality Relationship in Developing Economies?

In the context of increasing globalization, income inequality is one severe problem in several countries because it widens the income gap between the rich and the poor, which leads to social instability. Narrowing this gap has become one of the main agendas in many developing countries to satisfy the millennium goals proposed by the United Nations. Meanwhile, government expenditure is one crucial fiscal instrument as it contributes significantly to running the economy and overcoming economic cyclicality. In particular, governance/institutional can positively adjust the public debt — income inequality relationship in developing economies. The purpose of the study to identify the impact of institutional quality, public debt and their interaction on income inequality on a balanced data panel of 34 developing economies for the period 2002–2020. For monitoring endogenous problems and serial autocorrelation in empirical equations, two-step and one-step system GMM (Generalized Method of Moments) assessments are used. The results from the study show that public debt and the quality of institutions increase income inequality, but their interaction narrows it. These results seem to be counter-intuitive. Besides, education enhances income inequality in these economies. The results of the study provide some policy recommendations for reducing the inequalities in society through public debt and the quality of institutions in developing economies. Accordingly, governments in developing economies should use spending financed by public debt to support low-income individuals through social transfers throughout economic development. Importantly, they should spend more on education and health to help the poor improve their skills and knowledge, narrowing the income difference between the rich and the poor. In particular, they should be prudent in controlling and managing public debt to avoid a public debt crisis and social instability.

Workers’ Remittances to Sub-Saharan Africa: Do Institutional Quality and Financial Development Matter?

This paper examines the effects of institutions and financial development on workers’ remittances in sub-Saharan Africa. To achieve the objectives, a two-step system generalized method of moment (GMM) was utilized on a panel dataset of 38 countries in the region from 2005 to 2022. Empirical findings from the study reveal that some institutional indicators, namely, control of corruption, government effectiveness, political stability and rule of law have a significant impact in attracting remittances to SSA. Further evidence reveals that financial development indicators notably domestic credit to the private sector and domestic credit to the private sector by banks have a significant impact on remittances inflow in the region. Financial development indicators are found to complement some of the institutional indicators, such as control of corruption, political stability, government effectiveness, and rule of law on the inflow of remittances to the region. Government efforts should be geared toward improving the institutional framework and ensuring financial market development to increase the amount of remittances inflow to the region.