Policy Volatility Research Articles

Climate Change Mitigation and Adaptation in Ghana: Strategies and Challenges Faced by Social Enterprises

This research examined how social enterprises mitigate and adapt to climate change in Ghana, examining their strategies and challenges. The study adopted a descriptive research design and involved 379 social enterprises. Questionnaires were administered online, and data were analysed using descriptive statistics and a mean value ranking analysis. The findings revealed that the key strategies employed in climate change mitigation and adaptation include creating new funding models, promoting sustainable agriculture and food systems, forming strategic partnerships and networks, and implementing community-based renewable energy systems. The significant challenges in addressing climate change include competition from large organisations, cultural perspectives towards climate change, policy volatility, and lack of adequate technical skills. Hence, the study recommends developing specialised funding programmes for climate-focused social enterprises, climate change education and awareness campaigns, and capacity building to upgrade technical competencies in clean technologies and climate resilience design.

Examining the Impact of Economic Policy Shocks on Investment: Evidence from Pakistan and its Trade Partners

The objective of this study is to investigate the effect of both internal and external policy ambiguity on aggregate investment in Pakistan and its bilateral trade partners from the fourth quarter of 2010 to the fourth quarter of 2021. To achieve this, study uses economic policy uncertainty index for each country as a proxy for internal policy volatility. External policy volatility is measured by constructing a compound index that accounts for the trade weight of each country's policy uncertainty index. Further to find out the relationship, Panel PMG-ARDL model used and findings indicate that investment decrease with increase in uncertainty. Additionally, the research delves into the nonlinear relationship between investment and uncertainty and results demonstrate a U-shaped relationship between uncertainty and investments. Furthermore, Specific values were calculated to determine whether the effects of policy shocks are positive or negative, showing that internal policy shocks are more harmful than external ones. The study also provides policy implications based on these findings. Since internal policy insecurity has a stronger negative impact on investment than external factors, it is essential for policymakers in Pakistan to prioritize reducing ambiguity in internal policies. Implementing clear, consistent, and stable economic policies can help alleviate the negative effects of uncertainty on investment.

Policy Control as a Strategy for Controlling Inherent Vices of Policy-Making

Policy makers face inherent vices in the policy-making process that can affect the outcomes of the policy process. While it is widely recognized in the literature that these vices lead to policy volatility, to date, virtually no attention has been paid to how these vices can be controlled. In the Netherlands, policy control was introduced as a mechanism to increase the likelihood of implementing effective policy by involving policy controllers at all stages of the policy process. This study shows that policy control can be an mechanism to control inherent vices.

Fiscal policy volatility and capital misallocation: Evidence from China

This paper investigates how domestic policy uncertainty stemming from discretionary fiscal policy disrupts efficient capital allocation across firms. While fiscal policy represents the government’s reaction to economic conditions, its volatility presents firms with considerable uncertainty about conditions affecting their future profitability and consequently disrupts decisions about investment in the presence of capital adjustment costs. Using firm-level data from Chinese manufacturing industries spanning from 1998 to 2007, we find that reducing fiscal policy volatility leads to a decrease in the dispersion of the marginal revenue product of capital, accounting for 8.3 percent of the observed improvement in capital allocation during the sample period. In addition to various fiscal reforms to curb fiscal policy volatility directly, policies contributing to lower capital adjustment costs and lower reliance of firms on government expenditure can alleviate the adverse effects of fiscal policy volatility.

Fiscal policy volatility and capital flight

AbstractIn this paper, we analyse the effect of fiscal policy volatility on capital flight. Based on a sample of 27 African countries over the period 1970–2018 and using System generalised method (GMM) of moments, we show that fiscal policy volatility increases capital flight. Specif‐ically, our baseline results indicate that an increase in fiscal policy volatility by 1% increases capital flight by 1.4%. In other words, an increase in fiscal policy volatility by 100% increases capital flight by 140% or by 40% above the increase in the cause, that is, fiscal policy volatility. These results are robust to additional control variables, alternative methods, samples, and specifications, and may vary with the initial level of capital flight.

Fiscal policy volatility and growth in emerging markets and developing economies

This paper studies the volatility of fiscal policy in a large sample of countries with a focus on emerging markets and developing economies and commodity exporters over 1990–2021. The findings show that fiscal policy has been more volatile in emerging markets and developing economies than in advanced economies, and in commodity exporters relative to non-commodity exporters over this period. The degree of commodity dependence, and institutional and policy variables can explain a large percentage of the cross-country variation in volatility. The existence of fiscal rules, a more liberalized capital account, and more flexible exchange rates are all associated with lower fiscal policy volatility. The paper also shows the negative macroeconomic consequences of this additional volatility on economic growth, finding that, over a 30-year period, it can explain 8 percent of the income gap between the emerging markets and developing economies and advanced economies in the sample.

Climate policy volatility hinders renewable energy consumption: Evidence from yardstick competition theory

Researchers have a high affirmative agreement on climate change and the need for policies to stimulate renewable energy consumption. However, there is little consensus among policymakers who are supposed to implement the solutions researchers propose. This phenomenon has led to extensive research on the effects of climate policy uncertainty (CPU) on energy consumption. We develop a yardstick competition model to examine the effect of climate policy volatility (CPV) on primary energy consumption in the U.S. residential sector. Our approach employs a Dirichlet process mixture linear model (DPM-LM) to account for unobserved heterogeneity and excess kurtosis. The results revealed that all three CPV estimators (Garman-Klass, Parkinson, and Rogers-Satchell) adversely affected the demand for hydrocarbon gas liquids (HGL) and biomass energy. In contrast, they positively affected the consumption of natural gas. The control variables (price and GDP) were consistent with the a priori expectations. This paper concludes that CPV creates a disincentive to increasing renewable energy demand. It is, therefore, critical for policymakers to consider ways of stabilizing climate policy and arriving at specific, measurable, achievable, realistic and definite time-bound goals and policies. It is equally important for policymakers to use science-based ex-post measures to inform the climate policy debate.

Inflation targeting and fiscal policy volatility: Evidence from developing countries

This paper studies the effect of inflation targeting (IT) on fiscal policy volatility. Using data for 83 developing countries over 1985-2020, estimations based on impact analysis methods reveal that IT adoption reduces fiscal policy volatility. This result is robust when using a wide set of alternative specifications related to additional control variables, different samples, alternative measures of the main variables, or alternative estimation methods. Consequently, contributing to the ongoing literature on fiscal policy volatility, our results suggest that reforms of the monetary policy management in the form of IT adoption may provide a useful policy for fighting fiscal discretion towards a reduction of fiscal policy volatility.

Quantifying Health Policy Uncertainty in China Using Newspapers: Text Mining Study.

From the severe acute respiratory syndrome (SARS) outbreak in 2003 to the COVID-19 pandemic in 2019, a series of health measures and policies have been introduced from the central to the local level in China. However, no study has constructed an uncertainty index that can reflect the volatility, risk, and policy characteristics of the health environment. We used text mining analysis on mainstream newspapers to quantify the volume of reports about health policy and the total number of news articles and to construct a series of indexes that could reflect the uncertainty of health policy in China. Using the Wisenews database, 11 of the most influential newspapers in mainland China were selected to obtain the sample articles. The health policy uncertainty (HPU) index for each month from 2003 to 2022 was constructed by searching articles containing the specified keywords and calculating their frequency. Robustness tests were conducted through correlation analysis. The HPU index was plotted using STATA (version 16.0), and a comparative analysis of the China and US HPU indexes was then performed. We retrieved 6482 sample articles from 7.49 million news articles in 11 newspapers. The China HPU index was constructed, and the robustness test showed a correlation coefficient greater than 0.74, which indicates good robustness. Key health events can cause index fluctuations. At the beginning of COVID-19 (May 2020), the HPU index climbed to 502.0. In December 2022, China's HPU index reached its highest value of 613.8 after the release of the "New Ten Rules" pandemic prevention and control policy. There were significant differences in HPU index fluctuations between China and the United States during SARS and COVID-19, as well as during the Affordable Care Act period. National health policy is a guide for health development, and uncertainty in health policy can affect not only the implementation of policy by managers but also the health-seeking behavior of the people. Here, we conclude that changes in critical health policies, major national or international events, and infectious diseases with widespread impact can create significant uncertainty in China's health policies. The uncertainty of health policies in China and the United States is quite different due to different political systems and news environments. What is the same is that COVID-19 has brought great policy volatility to both countries. To the best of our knowledge, our work is the first systematic text mining study of HPU in China.

Are Firms More Willing to Seek Green Technology Innovation in the Context of Economic Policy Uncertainty? —Evidence from China

Frequent shifts in economic policies not only inject uncertainty into the economic landscape but also pose significant challenges to corporate endeavors in green technological innovation. Drawing on a dataset of Chinese A-share listed companies spanning 2008 to 2020, this research delves into the repercussions of economic policy uncertainty on the green technological pursuits of manufacturing firms and elucidates the underlying dynamics at play. The empirical evidence underscores a marked reluctance among companies to champion green technological innovation in the face of economic policy ambiguity, a stance that holds water even after rigorous robustness checks. Delving into the mechanisms, the study pinpoints heightened financial constraints and a diminishing risk appetite within the managerial ranks as pivotal deterrents steering firms away from green innovation projects amidst such uncertainty. Intriguingly, the adverse interplay between economic policy uncertainty and green innovation is especially accentuated in firms marked by tenuous government–business affiliations, pronounced monopolistic inclinations, lax intellectual property safeguards, minimal pollution footprints, and a skewed labor-to-capital composition. This investigation augments the scholarly discourse on the nexus between economic policy volatility and corporate green innovation, shedding light on strategic imperatives for emerging economies as they chart out future environmental blueprints and cultivate a conducive milieu for green innovation.

Does cooperative membership stabilize farm income volatility? Evidence from the pig sector in China

PurposeFarm income in the agricultural sector is susceptible to natural and market risks. A large body of literature has studied the effects of cooperative membership on household welfare, technical efficiency, productivity and production behavior, yet little has been known about the impact of cooperative membership on farm income volatility. This paper aims to fill this research gap by investigating the relationship between cooperative membership and farm income volatility of Chinese pig farmers and drawing policy implications.Design/methodology/approachThis paper examines the effect of cooperative membership on farm income volatility, using data from a two-round survey of pig farmers in China. The authors employ an endogenous switching regression model to address the selection bias issues associated with unobserved factors simultaneously affecting farmers' participation in agricultural cooperatives and income earning activities.FindingsUsing household panel from a two-round survey of 193 pig farmers in China, this analysis highlights two key findings: (1) agricultural cooperative membership has significant and positive effect on farm income stability and (2) the impact of cooperative membership on farm income stability varies with production scale.Originality/valueThis research makes two contributions to the literature. First, this study contributes to the scant literature exploring the relationship between agricultural cooperatives and farm income stability. Second, to the best of the authors' knowledge, this is the first study that explores such relationship in a livestock sector. The pig sector in China and around the developing world has been increasingly challenged by multifaceted risks (e.g. price fluctuations, epidemic diseases, environmental regulations), and understanding the role of agricultural cooperatives in farm income stability of pig farmers is of great practical and policy significance.

Research on the Impact of Global Economic Policy Uncertainty on Manufacturing: Evidence from China, the United States, and the European Union

Events such as COVID-19 and the Russia–Ukraine conflict have significantly increased the uncertainty and volatility of global economic policies. In the context of economic globalization, the key question we investigate is whether global economic policy uncertainty will have different impacts on the manufacturing of the three major economies in China, the United States, and Europe Union. This study employs the time-varying parameter vector autoregressive (TVP-VAR) model to examine how global economic policy uncertainty (GEPU) affected manufacturing from March 2008 to March 2023. The empirical results show that the effects of GEPU are time varying; its short-term effects on Chinese manufacturing are slightly greater than its medium- and long-term effects, whereas its medium- and long-term effects on manufacturing in the United States (US) and European Union (EU) are significantly greater than its short-term effects. The impact of European debt crisis, the China–US trade war and Russia–Ukraine conflict on EU manufacturing is higher than that of China and the US, and the impact of the COVID-19 pandemic on China’s manufacturing is much smaller than that of the US and the EU; thus, Chinese manufacturing has a greater capacity for risk mitigation than US and EU manufacturing. This study not only provides a new perspective on the study of global economic policy uncertainty; it also provides new empirical evidence on how global economic policy uncertainty affects the manufacturing sector in China, the US and Europe and provides policymakers with guidance for decision making.

무역정책 불확실성의 전이가 한·중·일의 환율변동성에 미치는 영향

Purpose – This study aims to analyze the spillover effect of trade policy uncertainty (TPU) in the United States and three Northeast Asian countries (Korea, China, and Japan). Additionally, this study examines the effect of net pairwise directional connectedness (NPDC), derived from TPUs on exchange rate volatility (ERV), as well as the causal relationship between NPDC and ERV. Design/Methodology/Approach – This study derives NPDC using the dynamic connectedness method, as developed by Diebold and Yilmaz (2012), from January 2000 to May 2022. Furthermore, the study applies the panel pooled mean group (PMG) technique and panel causality methodology, developed by Dumitrescu and Hurlin (2012), from August 2005 to May 2022 to analyze the impact of NPDC on ERV and their causal relationships. Findings – According to the analysis, the United States-China trade dispute increased the volatility of trade policy through the contraction of international trade, and COVID-19 affected the TPU regarding the stagnation of global production activities and lack of effective demand. Furthermore, this study confirms the empirical results that an increase in NPDC magnifies ERV, and there is bidirectional causality between ERV and NPDC according to time lags. Research Implications – Investors and trade firms must closely examine the interrelationship between NPDC and ERV, and effectively deal with foreign exchange markets and international trade uncertainties to reduce system risks in Northeast Asia.

A refracted Lévy process with delayed dividend pullbacks

ABSTRACT The threshold dividend strategy, under which dividends are paid only when the insurer's surplus exceeds a pre-determined threshold, has received considerable attention in risk theory. However, in practice, it seems rather unlikely that an insurer will immediately pull back the dividend payments as soon as its surplus level drops below the dividend threshold. Hence, in this paper, we propose a refracted Lévy risk model with delayed dividend pullbacks triggered by a certain Poissonian observation scheme. Leveraging the extensive literature on fluctuation identities for spectrally negative Lévy processes, we obtain explicit expressions for two-sided exit identities of the proposed insurance risk process. Also, penalties are incorporated into the analysis of dividend payouts as a mechanism to penalize for the volatility of the dividend policy and account for an investor's typical preference for more stable cash flows. An explicit expression for the expected (discounted) dividend payouts net of penalties is derived. The criterion for the optimal threshold level that maximizes the expected dividend payouts is also discussed. Finally, several numerical examples are considered to assess the impact of dividend delays on ruin-related quantities. We numerically show that dividend strategies with more steady dividend payouts can be preferred (over the well-known threshold dividend strategy) when penalty fee become too onerous.

UKRAINIAN FINANCIAL MARKET DURING THE WAR: REALITIES OF FUNCTIONING

Introduction. The war in Ukraine has a significant impact on the financial sector in general and the financial market, in particular. Without exaggeration, the year 2022 became a turning point for the Ukrainian financial market, as well as an indicator for the entire global financial system regarding its stability and flexibility, speed of response to challenges and adaptability, the ability and readiness to introduce innovations, acceptance of challenges by all market stakeholders. The main triggers of the functioning of the financial market are the rapid and client-oriented digitalization of services; volatility of regulatory policy due to Russia's military actions in Ukraine; immediate response to changes in conditions of limited access to financial resources; quick adaptation to work with clients under conditions of strict limitation of financial transactions. The answers to these challenges were: virtualization of services through cooperation with Fin-Tech companies and, as a result, the emergence of new tools in the financial services sector; forced transition and the inevitability of acceptance of new online offers by financial intermediaries; diversification and hedging of savings by converting them into currency-equivalent deposits and cryptocurrencies; modification of mobile banking applications. The purpose of the article to is analyze the realities of the functioning of the financial market of Ukraine during the war and to scientifically justificate the challenges of the financial sector in the conditions of the isolation of the financial market due to the introduction of martial law; identify the key development challenges, the latest financial and military activity trends; identify the channels of implementation of financial innovations by intermediaries of the financial services market; outline the triggers for the development of the financial market of Ukraine and understand the prospects for the introduction of new business models for financial market participants. Results. It was found that the financial market of Ukraine is a "key financial front" for ensuring the stability of the entire financial system; the war has a huge impact on the functioning of all components of the market and is an "indicative marker" of the mood in the country. It is shown that in conditions of systemic challenges and threats, innovative approaches in the field of financial technologies have a significant impact on the financial market landscape, which are widely implemented in all its areas, expand the functionality of financial intermediaries, offer diversification of tools and work methods, expand opportunities for participants, modernize existing norms and rules and, most importantly, establish new traditions and develop new habits in all participants of the financial market. It is argued that the main reason for radical changes and innovations, both in regulatory policy and in the daily activities of financial market participants, is the war in Ukraine, which became a catalyst for the revision of many policies and approaches to activity. It has been demonstrated that new vectors of financial sector development are crystallizing in the financial environment, which are aimed at: digitization and automation of most financial processes; raising access to financial services to a qualitatively new level; creation of new offers in the field of financial services with an emphasis on their inclusiveness and accessibility through the use of remote customer service channels using virtual communication technologies. It has been proven that during the russian aggression, the financial market developed high loyalty and flexibility when introducing new products; established a network of new partnerships; changed the focus of activity to the effective use of technological solutions in the financial sphere. It is substantiated that the key determinants of the functioning of the financial market in the conditions of martial law are: deep understanding of the essence of market problems; adaptation of the legislative field and flexibility of prudential supervision; introduction of innovations in the development of new financial products and digitization of existing products; creation of favorable conditions for the activity of financial intermediaries in the market. Conclusions. Based on the results of the conducted research, the following conclusions were drawn: new trends regarding the development and introduction of the latest financial tech nologies in the activities of financial intermediaries are outlined in the financial market; in modern realities, changes are taking place in the landscape of the domestic financial market – the war became a catalyst for the "survival" of both institutions and products; repurposing to remote work with clients creates a platform for promoting new products and introducing new business models.

Financial development, financial instability, and fiscal policy volatility: International evidence

This paper investigates the effects of financial development and financial instability on fiscal policy volatility using system GMM estimator based on panel data of 96 countries from 1990 to 2019. We find that higher levels of financial development are associated with lower fiscal policy volatility, but an increase in financial instability would lead to greater volatility in fiscal policy. We also find that the harmful effect of financial instability on fiscal policy conduct would be alleviated in the normal phase of the financial cycle but would be magnified during expansionary, recessionary and crisis periods. This paper extends the existing literature by highlighting the role of finance in fiscal policy volatility, where a large and stable financial system is conducive to the smooth conduct of fiscal policy.

Impact and Recovery of Coastal Tourism Amid COVID-19: Tourism Flow Networks in Indonesia

This study aims to explore tourism changes in coastal tourism destinations before and during the COVID-19 pandemic from the perspective of regional resilience. A mixed method of a social network and spatial analysis was used to evaluate inbound tourists’ geotagged photos of Indonesia on Flickr from 2018–2022 as metadata. The DBSCAN algorithm and Markov chains were used to comprehensively analyze the hotspot areas and the patterns of tourism movement trajectories amid a complicated recovery. The results demonstrate that: (1) The distribution of geotagged photos before and during the pandemic generally exhibited stage and regional unevenness. The main clusters were Java and the Nusa Tenggara Islands, with the rest displaying a scattered distribution. (2) The tourism flow network was unevenly distributed, and the nodes had obvious core and edge areas. Owing to the crisis, the tourism flow network realized a change in form from network to line and point. (3) Its impact on Indonesian inbound tourism may persist in the short term, and the volatility of national anti-pandemic policies influences the resilience of tourism flow during COVID-19. The dominance of the core nodes highlights the network’s resistance to disruptions due to the prominence of the location of network connections during the pandemic, and marginal nodes reflect the vulnerability to pandemic shocks owing to the hypocentricity of the nodes and the thinness of the connections within and outside the islands. These results provide marketing and promotion policies for the sustainable development of coastal areas.

Monetary Policy Uncertainty and Inflation Expectations*

AbstractDo inflation expectations react to changes in the volatility of monetary policy? They have, but only until the global financial crisis. This paper investigates whether increasing the dispersion of monetary policy shocks, which is interpreted as elevated uncertainty surrounding monetary policy, affects the inflation expectation formation process. Based on US data since the 1980s and a stochastic volatility‐in‐mean structural VAR model, we find that monetary policy uncertainty reduces both inflation expectations and inflation. However, after the Great Recession this link has disappeared, even when controlling for the Zero Lower Bound.

Data revisions and the effects of monetary policy volatility

I quantify the role of data revisions in estimating the impact of monetary policy-induced volatility on business cycle fluctuations. To that end, I construct real-time and final data-based measures of policy volatility. The results suggest that the effects of the two measures are qualitatively similar. However, the impact of real-data volatility on output is lower than that of final data volatility. These findings suggest that the business cycle implications of policy-induced volatility, found in the literature, are possibly overstated.

Dividend Policy and Stock Price Volatility: A Study on Indonesian Manufacturing Companies

The purpose of this study was to examine and analyze the effect of dividend policy on stock price volatility in manufacturing companies listed on Indonesia Stock Exchange from 2019-2020. This study also examines other factors that ar thought to have an effect on dividend policy and stock price volatility, such as: firm size, earning voolatility, and leverage. This research method uses a quantitative approach, using secondary data derived from the company’s annual financial report. Purposive sampling method uses in this study. The sample used was 62 companies with a total of 124 observations. This study use multiple regression method. SPSS 16 is an analytical tool used in this study. The empirical findings of this study indicate that dividend policy has a negative effect on stock price volatility. If the dividends paid increases, the possibility of stock price volatility will decrease. The control variable of firm size dan leverage have no effect on stock price volatility. Furthermore, it is also found that there is a positive influence between the control variable of earning volatility and stock price volatility.