Prolonged Downturn Research Articles

Analyzing Business Cycles in Azerbaijan: Application of Various Filters and Spectral Analysis

This study investigates the cyclical behavior of Azerbaijan's economy and its non-oil-gas sector through the application of various filtering techniques, including the Hodrick-Prescott, Baxter-King, and Christiano-Fitzgerald filters. Utilizing quarterly GDP data from Q1 2001 to Q4 2023, we analyze the volatility, cycle duration, and significant periods of economic growth and contractions. Our analysis reveals that the Hodrick-Prescott filter shows more pronounced and volatile cyclical components, while the Baxter-King and Christiano-Fitzgerald filters provide smoother and more moderated views. Spectral analysis, employing periodograms smoothed with Bartlett, Hamming, Hann, and Parzen kernel windows, identifies cycle durations ranging from 4.1 to 19.4 quarters for total GDP and 4.3 to 19.4 quarters for non-oil-gas GDP. We find that Azerbaijan's economy exhibits higher volatility compared to advanced economies, likely due to its dependence on oil exports and susceptibility to external shocks. Key periods such as the 2008 financial crisis and the COVID-19 pandemic significantly impacted economic performance, with notable declines identified across all filtering methods. The HP filter indicates a sharp and more prolonged downturn during these crises, whereas the BK and CF filters capture less prolonged and less severe impacts. This research provides a comprehensive understanding of Azerbaijan's business cycles, highlighting the importance of robust methodologies in economic analysis. Our findings contribute to the limited literature on Azerbaijan’s economy and offer valuable insights for policymakers aiming to enhance economic stability and growth.

Socio-Economic Development of European Countries in Times of Crisis: Ups and Downs

This article analyzes the dynamics of the changes in indicators of socio-economic development under conditions of financial and economic crises and their negative consequences. The study proves that financial crises are associated with severe and prolonged downturns in economic activity. The socio-economic development of European countries in times of crises was analyzed. The cyclical nature of the onset of crises was confirmed via the study of the dynamics of socio-economic development indicators. The main emphasis was on the financial crisis of 2008–2009 and the COVID-19 crisis (2020–2021). The main indicators characterizing the crises were identified based on an analysis of literary sources. Their classification was developed according to the following groups: leading indicators, lagging indicators, and client leading indicators of expansion. Based on the correlation analysis, indicators that have a significant impact on socio-economic development and are predictors of crisis onset were identified. The authors suggest considering such leading indicators as increases in the private credit in the GDP, budget deficit, balance of payment deficit, and real interest rate. The major lagging indicators that have strong correlations with the GDP, such as the employment rate, general government debt, stock price volatility, and investment, were identified. Client leading indicators of expansion include unemployment, an increase in the number of new enterprises, an increase in purchasing power, etc. Some indicators, such as unemployment, can be both lagging indicators and client leading indicators of expansion. The negative consequences of the crisis are caused by the crisis itself as well as by the imbalances preceding the crisis. Therefore, the study of the predictors of crisis onset is relevant for timely decision making in order to prevent the negative consequences of the crisis. Based on the identified lagging indicators, the 2008–2009 crisis and the COVID-19 crisis were studied. To study the development processes of these crises, the authors analyzed by quarters the dynamics of the development of the following macroeconomic indicators: the GDP, employment, and investment levels. The similarities and discrepancies were identified in the natures of the emergences and courses of the 2008–2009 crisis and the COVID-19 crisis using the comparison method. The case study of the Eurozone and individual EU countries (Germany, France, Italy, and Spain) was used. Considering the similar courses of the crises, the forecast of the socio-economic development was made using the analyzed indicators during the COVID-19 crisis based on the 2008–2009 crisis data. The forecast approximation indicators were calculated, and a method for constructing further forecasts was selected. Based on retrospective data, the GDP forecast was developed via the use of the extrapolation method for 2023–2024. It is necessary to consider that while forecasting crises caused by unforeseen events and external influences, it is advisable to use qualitative analysis along with quantitative analysis. This article will be useful to researchers, political elites, experts, and financial analysts when developing programs for the socio-economic development of countries.

ВПЛИВ ДЕМОГРАФІЧНОГО ФАКТОРУ НА СОЦІАЛЬНО–ЕКОНОМІЧНУ СТАБІЛЬНІСТЬ КИТАЮ

This research analyzes the demographic situation in China and its impact on socio-economic stability. Stable and balanced demographic reproduction is an important condition for the development of any economy, state and society. The implementation of effective social policy in China requires constant monitoring of the living standards of various social groups. Usually, in periods of deep and prolonged economic downturns, fiscal crisis, the state is forced to cut social spending, reduce the package of social services. Public services must justify budget expenditures in terms of costs and benefits. It is important that the monitoring and evaluation of budget expenditures is carried out efficiently and with minimal financial costs, so that the groups of the population who need it most can be identified. Scientific analysis of the Human Development Index and Population Reference Bureau data from 1950 to 2100 in China, Austria, Switzerland, the United States and the Netherlands shows a direct proportional economic dependence: the growth rate of gross domestic product (GDP) directly depends on the growth rate population and GDP growth per capita. Using the statistics recorded in the Seventh National Census of China, it is possible to trace the relationship between the level of socio-economic development of the country and its demographic situation. The author identifies 5 models of gender and age structure of the population: triangle, umbrella, helmet, spinning top, hat. Until 1979, China had an umbrella model with a high level of population growth. After the “one family – one child” policy, the situation has changed. The current demographic situation is reminiscent of the helmet model, the main characteristics of which show a decrease in the birth rate, a decrease in the working age population and an increase in the share of older people, which leads to excessive overload of the country's pension system. This pattern is described by the formula 4: 2: 1, which characterizes the situation when the Chinese government must, on the one hand, stimulate population growth, and on the other hand, be aimed at meeting the needs of older people and creating conditions for a new system of economic relations "longevity economy" or "silver economy".

Elemental and isotopic evidence for the presence of a microbial thriving environment during the deposition of Early Cambrian Xiaoerbulake Formation in the Tarim Basin, NW China

Microbial communities regained prominence in the Cambrian after a prolonged downturn in the Neoproterozoic, but the reasons for their revival are unclear. The earliest microbialites formed during this period within the Tarim Basin are well displayed in the Xiaoerbulake Formation in the Keping area. Major, trace, rare earth element (REE) analyses were carried out using samples collected from two sections of the Xiaoerbulake Formation which present two different palaeogeographical settings, namely, the intraplatform and platform margin. The samples were divided into seven groups based on their REE + Y (yttrium) distributions. Among these, the YG3, YG4, and PG3 groups correspond to microbial boom phases. The high contents of Al and other nutrient elements (e.g., P, Ni, U, Cu, Fe, Mn) in these three groups indicate that the microbial booms are controlled by nutrient concentration of different sources. In relatively deep‐water settings, aeolian dust and suspension particles modified the seawater geochemical characteristics to form shale‐like (REE + Y)N patterns. The nutrient‐rich fine‐grained deposits were blown up by storms and released nutrients. This eutrophication ultimately promoted microbial development and is demonstrated by light rare earth element enrichment patterns. In shallow‐water environments, microbes seemed to prefer quiet conditions, with sufficient nutrients provided by fluvial influx. In contrast, excess clastic materials inputs, be they carbonate or terrigenous debris, are unfavourable to the development of microbialites. Hence, it is expected that seawater REE preserved in ancient carbonates are capable of providing information on the impacts of seawater geochemical conditions on the evolution of microbialites.

Italy and the Little Divergence in Wages and Prices: New Data, New Results

We present new wage indices for skilled and unskilled construction workers in Italy. Our data avoid multiple issues pestering earlier wages, making our new indices the first consistent ones for early-modern Italy. Our improved wages, obtained from the St. Peter’s Church in Rome, consolidate the view that urban Italy began a prolonged downturn during the seventeenth century. They also offer sustenance to the idea that epidemics instigated the decline. Comparison with new construction wages for London shows that Roman workers outearned their early-modern English counterparts. This suggests that high wages alone were not enough to trigger industrialization.

Are Long-Duration Treasuries the Best Hedge for Equities?

The authors study the link between bond maturity and equity diversification in developed economies across the last six decades. Although correlations between equities and interest rates have been largely similar for different bond maturities, yield-curve dynamics have varied considerably across episodes of stock-market stress. All interest rates tend to fall during sharp market crashes, but US, German, and UK yield curves steepened over prolonged downturns, and the Japanese yield curve flattened. As a result, 20-year bonds had estimated returns similar to 10-year bonds during equity downturns in the United States and Germany, were 26% lower in the United Kingdom, and outperformed only in Japan. The diversification gains of maturity extension are linked to macroeconomic factors, including monetary policy, expected inflation, and the shape of the yield curve. Yield curves tend to decline most during conventional easing but steepen considerably, whereas quantitative easing can instead flatten yields. These findings suggest that duration management may be best as an active investment discipline. TOPICS:Developed markets, financial crises and financial market history Key Findings • Yield-curve dynamics can vary considerably across episodes of stock-market stress. Although all interest rates tend to fall during sharp market crashes, US, German, and UK yield curves steepened considerably over prolonged downturns, and the Japanese yield curve flattened. • Long-maturity bonds have offered mixed incremental diversification benefits. Twenty-year bonds had estimated returns similar to 10-year bonds during equity downturns in the United States and Germany, were 26% lower in the United Kingdom, and outperformed only in Japan. • Diversification gains of maturity extension are linked to monetary policy. Yield curves tend to decline most during conventional easing but steepen considerably, whereas quantitative easing can instead flatten yields. This suggests that duration management should be an active investment discipline.

Price Break Points and Impact Process Evaluation in the EU ETS

ABSTRACTThe paper identifies break points in the European Union Emissions Trading Scheme (EU ETS) from 2005 to 2018 using multiple structural change model, and illustrates the impact process of these break points on expected carbon returns and volatility using bilaterally modified dummies. Our results show five break points: April 27 and November 10, 2006, in phase I; November 17, 2008, November 3, 2014, and October 4, 2016, in phases II and III. On average, the two break points in phase I have a negative impact on carbon expected returns while the three break points in phases II and III have a positive impact. Only the break point on April 27, 2006, significantly increases the volatility of carbon prices. Our results affirm the effectiveness of successive short-, medium-, and long-term policy adjustments that aim to change the prolonged downturn in carbon price.

“Walking the talk” in times of recession: the case of corporate social responsibility in Greece

PurposeThis study aims to examine the actions of corporate social responsibility (CSR) at a national business context that is firmly defined by prolonged financial crisis. It does so by using a critical view on CSR disclosures in an attempt to get to the heart of the real matter of CSR, from both a thematic content and strategic orientation perspective.Design/methodology/approachThis study is based on a sample of 50 firms that operate in the Greek market and belong to the most significant sectors of the national economy. Their CSR disclosures are content-analyzed, providing a body of 836 pragmatic CSR actions.FindingsThe key findings of the study denote differences among the examined sectors, with banks and financial services being the most active in terms of CSR actions. Regarding the thematic content, firms choose mainly to implement actions with a societal character, while in terms of strategic orientation, they opt for CSR actions that serve existing cause-related programs without any brand presence. Moreover, profound interest appears for the external business environment, whereas the number of CSR actions with employees’ participation is limited.Practical implicationsThe study offers a descriptive account of the actual CSR engagement in Greece amid a prolonged downturn, thus shedding light on the current CSR trends and deficits and helping decision makers embed CSR as an integral part of their business operation.Originality/valueDuring adverse economic conditions, this study captures potential discrepancies between the “walk” (doing) and the “talk” (self-reporting) of CSR. In so doing, it contributes to CSR literature by exploring both the “what” and the “how” these actions are implemented.

Energy price shocks, household location patterns and housing crises: Theory and implications

The U.S. housing collapse in 2007 is widely blamed for inducing a financial crisis that spread to the real economy and caused a severe and prolonged downturn. This paper develops a model to investigate the role of gasoline price shocks in triggering the housing market collapse and identifies a new channel through which energy price shocks affect the financial market and the macro economy. Results suggest that unanticipated gasoline price shocks increase the cost of work commutes, lower the value of homes away from the city center, and increase foreclosure rates as homeowners either cannot afford mortgage payments amid elevated gas expenditures or seek to abandon underwater homes. The model predicts that gasoline price shocks disproportionately affect suburban households that face greater exposure due to longer commutes and lower incomes. Empirical evidence from the 2007–08 housing collapse is presented to corroborate this theory.

R&D intensity of investment across Europe before and after the crisis

In this paper we investigate the comovements between the R&D intensity of private investment and GDP growth in different European Union (EU) areas over the period 1999–2014. Our empirical analysis shows that only core countries display a common countercyclical mechanism leading to an increased intensity of R&D over prolonged downturns. The lack of an effective countercyclical pattern of R&D intensity over the evolution of GDP growth in periphery countries makes this area highly vulnerable to persistent recessions, with potentially harmful consequences for long‐term growth. For recent EU members the evidence of acyclicality should be evaluated in the light of the catching‐up process still at work in this area. Our analysis suggests that any successful EU innovation policy should not disregard the potential divergence in R&D performance due to the dispersion of the countercyclical properties of the investment intensity in productivity enhancing activities in the different EU areas.

Guest Editorial: We Need To Celebrate Our Successes if We Want the Next Generation To Be Part of Our Future

Guest editorial The prolonged downturn in commodity prices that started in the summer of 2014 has seen more than 350,000 people globally lose their jobs in the oil and gas industry to date. However, as BP’s mantra “lower for longer” evolves into Shell’s phrase “lower forever” and we adapt to the reality of working with an oil price around $50/bbl, signs of recovery are beginning to occur. The US shale sector, with its relatively low operational expenditure costs and rapid rig up time, has led that revival, and it is anticipated that deepwater projects, which have also experienced cost reductions over the past 3 years, will follow in time. However, in line with every other time this cyclical sector has come out of a downturn, the anticipated increase in activity is matched by concerns over how and where the industry will find the recruits required to fuel a resurgence, either through attracting former employees back or encouraging new, young people to join. Attempts to attract new employees can be hampered by negative perceptions of oil and gas in some parts of the world. This challenge was reinforced recently by a poll from Ernst & Young (EY) among 1,200 consumers and 100 industry executives in the US. Held in the first quarter of this year, the US Oil and Gas Perception poll found that only 26% of Generation Z (aged 16–19) and 45% of millennials (aged 20–35) without a set career path found jobs in the industry appealing. A surprising 39% of teenagers actually ranked it as “very unappealing.” Two out of three believed the industry causes problems rather than solves them and just 36% thought it had a positive effect on local and global communities. Furthermore, the majority from the younger generation perceived oil and gas jobs to be blue collar, dangerous, and physically demanding, and just 39% thought it provided long-term financial stability. Such assumptions do not extend to every corner of the world (there is generally considerable interest and enthusiasm in Africa and Asia, for example), but one could argue that a perception challenge toward the benefits of working in oil and gas does exist within societies in Western Europe and North America. As an industry, our efforts to promote the positive and exciting aspects of our job have often fallen short of convincing the wider public of the crucial role oil and gas plays in sustaining the global economy and modern life. As a result, compared with other industries, we do have to work harder to recruit for some roles. Maybe we take for granted the technical achievements that many companies make to overcome ever-more-complex challenges and that often astound the outside world when it hears of them?

The Cushioning Benefits of Biased Beliefs

We present a model of dynamic investment and production in which producers may have biased beliefs in which they overextrapolate recent demand conditions into the future. This bias leads producers' beliefs to exhibit insufficient mean reversion, as these producers underestimate the degree of mean reversion in the demand process. In a volatile industry, while biased beliefs lead firms to make sub-optimal investment decisions in the short-run, they can be beneficial in the long-run by counteracting the general trend in the industry, the industry against prolonged downturns and aiding faster recovery. As an empirical case study, we consider oil exploration in Alaska. We present evidence that firms in this industry were subject to extrapolation bias, leading to drilling of lower-profit wells after recent price increases. Calibration of our model to Alaska oil exploration shows that the cushioning effect can be large: in a typical episode of oil price decline arising from a sequence of adverse demand shocks, the cushioning effect reduces the decline of the oil price by 8.2% and accelerates the price recovery by 27%. This showcases the potential positive implications that biased beliefs can have on industry dynamics.

Surviving the Downturn: Oil Executives See Continued Tough Times Ahead

Surviving the Downturn: Oil Executives See Continued Tough Times Ahead Trent Jacobs, JPT Senior Technology Writer, Stephen Rassenfoss, JPT Emerging Technology Senior Editor Enough dust has settled over the past year to give the global oil and gas business a clearer view of its new landscape. Holding little back, speakers at the annual IHS CERAWeek conference in February discussed how the industry has been shaped by the disruptive impact of North American shale production and predicted that many more months of financial pressure will spell the end for some companies. The current industry situation is often compared with the last prolonged downturn in the 1980s—used by many in the oil patch as the measuring stick for rough times. But for Ali Al-Naimi, the Saudi Arabian minister of petroleum, the contributing factors are different this time around. Speaking in Houston at the annual gathering of top executives from operators, national oil companies, the service sector, and government, he explained that today’s crude market includes an expanded roster of producing nations and is under the influence of financial instruments that did not exist 3 decades ago. Al-Naimi then disputed the idea that his country is engaged in a global battle for market share that some claim is prolonging the bust. “Let me say for the record, again, we have not declared war on shale or on production from any given country or company— contrary to all the rumors that you hear and see,” he said. “We are responding to challenging market conditions and seeking the best possible outcome in a highly competitive environment.” Nevertheless, Al-Naimi also argued that the market is simply not big enough for high-cost producers, and said they have three options: lower their costs, borrow more money, or liquidate. “It sounds harsh, and unfortunately it is, but it is the most efficient way to rebalance markets,” he said. “Cutting low-cost production to subsidize higher-cost supplies only delays an inevitable reckoning.” On the topic of a potential production freeze proposed by a minority group of the Organization of Petroleum Export Countries (OPEC) and Russia, Al-Naimi said such a move could happen but ruled out any notion that Saudi Arabia would cut oil production. World Must ‘Tighten Valves’ on Methane Emissions Joel Parshall, JPT Features Editor The importance of reducing emissions of methane, a short-lasting but powerful atmospheric greenhouse gas (GHG), received close attention from panelists at an IHS CERAWeek strategic dialogue, Tightening the Valves on Global Methane Emissions. A frequently asked question is “why all this focus on methane,” said Mark Brownstein, vice president for climate and energy at the Environmental Defense Fund (EDF). “Isn’t the issue carbon dioxide [CO2]? Actually, it’s both.” Methane emissions remain in the atmosphere for much less time than CO2 but are a far more powerful pollutant while they last. “It’s thought that 25% of the warming that we’re experiencing right now on the planet is because of methane emissions,” Brownstein said. “A 45% reduction in oil and gas industry methane emissions would have the same impact over 20 years as closing one-third of the world’s coal [-fired power] plants.”

Behaviour of the Islamic Stock Market in a Prolonged Downturn in the Global Market : Empirical Evidence from Malaysia

By focusing on Malaysian data, this study investigates the response of the Islamic stock market to changes in major macroeconomic variables such as industrial output, money supply, unemployment rate, exchange rate and foreign interest rate. It focuses on the period from January 2010 to December 2014 to capture the period of a prolonged downturn in the global financial market due to the U.S. financial crisis which started in 2007. The study adopts the co-integration approach of the Auto Regressive Distributed Lag (ARDL) model in order to capture the long-run relationship between the variables. The results show that the Islamic stock price reacts positively to the domestic factors, namely industrial activities, money supply, unemployment rate and real effective exchange rate disturbances. Interestingly, it reacts negatively to the foreign interest rate, suggesting investors’ “flight to quality” behaviour during a downturn in the global equity market.

Dynamics of Banks' Capital Accumulation

We construct a dynamic neoclassical model of banking capital where the dynamics are governed by the process of financial capital accumulation and credit risk realizations in a structure where stylized banking characteristics are maintained. This is aimed at focusing on how the profit‐maximizing capital ratio of banks evolves and how it reacts to exogenous shocks particularly so during periods of prolonged downturn of the economy. We examine impulse responses of our model to credit risk shock, business cycle shock, and monetary policy shock. The convergence of financial capital to its optimal level is also explored.

Fiscal Policy in a Depressed Economy

In a depressed economy, with short-term nominal interest rates at their zero lower bound, ample cyclical unemployment, and excess capacity, increased government purchases would be neither offset by the monetary authority raising interest rates nor neutralized by supply-side bottlenecks. Then even a small amount of hysteresis—even a small shadow cast on future potential output by the cyclical downturn—means, by simple arithmetic, that expansionary fiscal policy is likely to be self-financing. Even if it is not, it is highly likely to pass the sensible benefit-cost test of raising the present value of future potential output. Thus, at the zero bound, where the central bank cannot or will not but in any event does not perform its full role in stabilization policy, fiscal policy has the stabilization policy mission that others have convincingly argued it lacks in normal times. Whereas many economists have assumed that the path of potential output is invariant to even a deep and prolonged downturn, the available evidence raises a strong fear that hysteresis is indeed a factor. Although nothing in our analysis calls into question the importance of sustainable fiscal policies, it strongly suggests the need for caution regarding the pace of fiscal consolidation.

Dealing with rough times: a capabilities development approach to surviving and thriving

AbstractLeaders during a deep and prolonged downturn should introduce organizational practices that build capability in the organization, not only to withstand the uncertainties of rough times better, but also to emerge stronger for the future. We present a set of organization design changes that can create closer connections to the marketplace and better use knowledge in the organization to introduce new ways to deliver value while consuming fewer resources. During rapid change and extreme threats, steering the ship is not sufficient. Leaders must introduce approaches that tap employees' energies throughout the organization. © 2009 Wiley Periodicals, Inc.

Africa faces up to global turmoil

As evidence mounts that the international economic crisis is provoking a deep and prolonged downturn in the world economy, Africa is feeling more and more of its negative effects, says UN Under-Secretary-General and Special Adviser on Africa Cheick Sidi Diarra. Most seriously, Mr. Diarra explains in an interview with Africa Renewal, the global slowdown is reducing the prices of commodity exports, “the main basis of African economies.” Developed countries are also likely to “give priority to their own internal markets,” contributing to a decline in foreign direct investments in Africa and other developing regions.

SLUGGISH OUTLOOK FOR CHEMISTS

FOR THE FIFTH CONSECUTIVE YEAR, THE JOB MARKET remains depressed for chemical scientists and engineers. In this 2006 Employment Outlook, C&EN reporters attempt to give readers an overview of a topic near and dear to the hearts—and wallets—of virtually everyone. In the opening section on demand, Associate Editor Aalok Mehta talks to the majorplayers in both the academic and industrial job markets and reports that, in general, hiring levels for new chemists will roughly mirror those of last year or be slightly reduced in comparison. That's not good news, as last year's employment situation still showed little sign of recovery from the prolonged downturn that has been affecting the chemical industry for years now, Mehta says. Next year's hiring forecast is complicated by a number of situations. Increasing raw material costs have hit the chemical and related industries hard. Hurricanes Katrina and Rita have exacerbated an already uncertain economy by battering manufacturing facilities and oil ...

MADRID EXPO HINTS AT AWAITED UPTURN

EXECUTIVES AT THE 2005 CPHI conference in Madrid last week said business in the custom synthesis of active pharmaceutical ingredients (APIs) and advanced intermediates is coming back after a prolonged downturn. The industry's landscape is also shifting, with one traditional player exiting the business, another spinning off fine chemicals, and several stalwarts reorganizing and investing. And there is speculation that consolidation in the sector, which has been oversupplied for more than five years, is not over. SAFC, the fine chemicals business launched by Sigma-Aldrich in 2004, is currently investing $12 million to double capacity at the high-potency API plant in Madison, Wis., that it acquired last year with its purchase of Tetrionics. According to President Frank Wicks, SAFC is also expanding its cytotoxic and bacterial fermentation capability in Jerusalem. Overall, Wicks said, business was up 18% in the first six months of this year, not counting acquisitions. Clariant, which has reorganized ...