Real Sides Research Articles

Borsa Istanbul Sectoral Connectedness Analysis

This study examines the volatility connectedness among banks, industrials, and services subindices of Borsa Istanbul using the Diebold-Yılmaz connectedness index methodology. The findings indicate that the banks index typically acts as a net receiver of connectedness from industrials and services indices. If the banks index is considered a proxy for the financial side of the Turkish economy while the other two represent the real side, this result aligns with earlier observations on the connectedness between the real and financial sides of economies. Specifically, it suggests that when a proxy for the real side incorporates financial variables, the real side tends to be a net source of connectedness most of the time. As shock propagators, industrials play a dominant role, and the banks index often moves in the opposite direction to the other two sectors.
 Key Words: Real and Financial Sectors, Financial Connectedness, Volatility, Borsa Istanbul.
 JEL Classification: C32, E44, G10.

Political Crisis in the Late Ming dynasty

The Ming Empire is one of the greatest states that existed from the 14th to the 17th centuries. However, 1644 was marked by the fall of the empire and the subsequent seizure of the throne by the Manchus. In this regard, the question arises: what caused the centralized state to fall to a group of rebels and the invaders from the north? The purpose of this study is to identify the main opposing parties of the political crisis in the late Ming Dynasty, study the dynamics of their interactions, and reconceptualize the context of its fall, moving away from the ideologically driven narrative of “faithful officials vs the cunning eunuchs” to delineating the real sides and process of the political struggle. The study covers the time frame from 1597 to 1644. By analyzing the two sources of “Ming Shi” (The Official History of the Ming Dynasty) and “Ming Shilu” (Veritable Records of the Ming Dynasty) and their reflected priorities, the political process during this period was studied, thus answering the questions raised in the research.

“And There Is Hope on the Road”: Nomadland’s American West

Jessica Bruder’s Nomadland: Surviving America in the Twenty-first Century (2017) and Chloé Zhao’s Nomadland (2020) display a contemporary phenomenon which is growing in America, especially in the most western states: people who “choose” the road and mobility as a way of life, thus becoming nomads. The aim of this paper is to reflect on the topic of the American road within this book and movie, on its real and mythical sides, and on issues of mobility. This will inevitably lead to consider the contemporary American West, here too in its real and mythical features. Bearing in mind the strong connection between the American road and the American West, Nomadland contributes to a reimagination and a rethinking of American mobility.

Macro-financial spillovers

We analyse spillovers between the real and financial sides of the US economy, and between those in the US and other advanced economies. The approach developed allows for differences in sampling frequency between financial and macroeconomic data. We find that financial markets are typically net transmitters of shocks to the real side of the economy, particularly during turbulent market conditions. This result holds both for domestic US macro-financial spillovers, and also those between the US and other advanced economies. Our macro-financial spillover measures are found to have significant predictive ability for future macroeconomic conditions in both in-sample and out-of-sample forecasting environments. Furthermore, the predictive ability frequently of our macro-financial measures frequently exceeds that of purely financial systemic risk measures previously employed in the literature for the same task.

Financial fragility and credit risk: A simulation model

Financial and economic crises are not always the same. It is important to understand why some episodes of crisis generate prolonged and systemic recessions. Developing the Financial Instability Hypothesis, Hyman Minsky introduced the idea that in periods of stability, financial actors tend to increase their risk exposure, moving from a stable hedge-dominated structure to an unstable one, characterized by speculative and ultra-speculative (Ponzi) financial positions: hence, stability turns out being destabilizing. Starting from the three different relationships introduced by Minsky (income–debt–hedge, speculative and Ponzi) for financial units, we involve a simple partial equilibrium agent-based model in which firms, the banking sector, the real and financial sides of the economy, interact. This theoretic framework is used as computational laboratory to extend the migration rates open system modelling based on the E(ntry)–S(tay)–L(eave) processes by considering the economic system, the business cycle and with attention to so-called zombie-firms.

COMPARING EFFECTIVENESS OF MONETARY AND FISCAL POLICIES ON REAL AND NOMINAL SIDES OF THE ECONOMY: A MACRO PANEL ANALYSIS OF SELECTED DEVELOPING COUNTRIES

This paper checks the relative effectiveness of monetary and fiscal policies on real and nominal sides of economy in 11 selected developing countries. The paper employed panel (ARDL) method of pooled mean group estimators using the annual data from 1961 to 2020. To check the robustness of PMG results, the study employed panel DOLS and panel FMOLS. The findings of this study indicated that fiscal policy has a stronger effect than monetary policy in case of developing county on real sector. While, the influence of monetary policy is stronger in changing the nominal side of economy such as price level. In addition to this, the findings also revealed that fiscal policy has no impact on nominal side such as price level. Interestingly, the obtained results are according to economic theory. Finally, the results are consistent and have very important policy implication.

Decompositions of a rectangle into non-congruent rectangles of equal area

In this paper, we deal with a simple geometric problem: Is it possible to partition a rectangle into k non-congruent rectangles of equal area? This problem is motivated by the so-called ‘Mondrian art problem’ that asks a similar question for dissections with rectangles of integer sides. Here, we generalize the Mondrian problem by allowing rectangles of real sides. In this case, we show that the minimum value of k for a rectangle to have a ‘perfect Mondrian partition’ (that is, with non-congruent equal-area rectangles) is seven. Moreover, we prove that such a partition is unique (up to symmetries) and that there exist exactly two proper perfect Mondrian partitions for k=8. Finally, we also prove that any square has a perfect Mondrian decomposition for k≥7.

The legacy of Wynne Godley

Godley’s approach is macroeconomic without micro-foundations, based on national accounts with an integrated treatment of the real and financial sides of the economy, stock flow consistent (SFC). In this framework the main economic imbalances at the national and world levels have been usefully analyzed. The SFC approach is well suited to study some of the post-corona period main issues (management of the increasing public debt, specificities of the euro zone system). But the difficulties of the task must not be underestimated (efforts to develop empirical SFC models, modeling the supply side).

New Realities of Teaching Philosophy in Teacher Training University

The proposed scientific article is devoted to the effective aspects of modern philosophy teaching in secondary and higher pedagogical educational institutions of the country. The authors for many years work in Taraz state pedagogical University as a result of studying the subject “Philosophy” offer future teachers a system of quality humane education, formed from the spheres of philosophy of education, pedagogical philosophy, philosophical anthropology, philosophy of culture, ethnography. The article reveals the philosophy of teacher training with a philosophical justification of pedagogy. The main goal is to develop the discipline of philosophy, which directly contributes to the implementation of pedagogical University students in favorable conditions of professional and social adaptation to their profession. When mastering their profession, the student is faced with positive and negative consequences of the future profession. One of the most common problems in our study was that the student in any situation in contact with the real sides of his profession in the course of pedagogical practice, was able to skillfully overcome their emotions and humanely respond to emerging problems with a philosophical view. Positive skills, formed through the study of the subject of philosophy, help the student of the pedagogical University to develop the path from theory to practice through pedagogical praxiology, to optimize the negative moments, to overcome difficulties, to help them in mastering their profession.

An Empirical Stock-Flow Consistent Macroeconomic Model for Denmark

This paper emphasizes the need for understanding the interdependencies between the real and financial sides of the economy in macroeconomic models. While the real side of the economy is generally well explained in macroeconomic models, the financial side and its interaction with the real economy remains poorly understood. This paper makes an attempt to model the interdependencies between the real and financial sides of the economy in Denmark while adopting a stock-flow consistent approach. The model is estimated using Danish data for the period 1995–2016. The model is simulated to create a baseline scenario for the period 2017– 30, against which the effects of two standard shocks (fiscal shocks and interest rate shocks) are analyzed. Overall, our model is able to replicate the stylized facts, as will be discussed. While the model structure is fairly simple due to different constraints, the use of the stockflow approach makes it possible to explain several transmission mechanisms through which real economic behavior can affect the balance sheets, and at the same time capture the feedback effects from the balance sheets to the real economy. Finally, we discuss certain limitations of our model.

Macro-Financial Spillovers

We analyse spillovers between the real and financial sides of the US economy allowing for differences in sampling frequency between financial and macroeconomic data. We find that financial markets are typically net transmitters of shocks to the real side of the economy, particularly during turbulent market conditions. Our macro-financial spillover measures are found to have significant predictive ability for future US macroeconomic conditions in both in-sample and out-of-sample forecasting environments. Furthermore, the predictive ability of our macro-financial measures frequently exceeds that of purely financial systemic risk measures previously employed in the literature for the same task.

On prescribing the convergence behavior of the conjugate gradient algorithm

The conjugate gradient (CG) algorithm is the most frequently used iterative method for solving linear systems Ax = b with a symmetric positive definite (SPD) matrix. In this paper we construct real symmetric positive definite matrices A of order n and real right-hand sides b for which the CG algorithm has a prescribed residual norm convergence curve. We also consider prescribing as well the A-norms of the error. We completely characterize the tridiagonal matrices constructed by the Lanczos algorithm and their inverses in terms of the CG residual norms and A-norms of the error. This also gives expressions and lower bounds for the l2 norm of the error. Finally, we study the problem of prescribing both the CG residual norms and the eigenvalues of A. We show that this is not always possible. Our constructions are illustrated by numerical examples.

Financialisation as structural change: measuring the financial content of things

In this article, we present a multi-sectoral treatment of financialisation based on input–output analysis. Our main innovation introduces financialisation as an increase in financial content per unit of output produced. In this way, we may investigate changes in relative importance of financial activities, taking into account direct and indirect interactions among sectors. Although methods focusing on the disaggregation of input–output tables have been largely explored in past decades, they have received limited attention in the literature on financialisation. We aim to refocus on multi-sectoral issues by offering a simple structure of analysis to assess the interconnections between the real and financial sides of the economy. Using a 15 and 14-sector level of aggregation, we study the experiences of the United States and Brazil for the period 1947–2015 and 1995–2011, respectively.

A economia monetária de Cantillon e o debate moderno entre ortodoxia e heterodoxia

Resumo O artigo retoma a contribuição de Richard Cantillon à ciência econômica no século XVIII. Apesar de distante no tempo, o arcabouço analítico do autor proporciona reflexões importantes acerca dos fenômenos monetários contemporâneos. Um dos elementos mais significativos é a consideração do ponto de injeção da moeda na economia, permitindo uma compreensão minimamente adequada da relação entre os chamados lados monetário e real da economia. Cantillon já fazia, portanto, uma crítica ao postulado quantitativista, o qual estabelecia uma relação de proporcionalidade entre moeda e preços. Como consequência de sua análise, fica claro que o aumento da quantidade de moeda gera efeitos reais duradouros na economia.

Visualising economic crises using accounting models

We build and argue for new visualizations of the Irish economy based on a stock flow consistent model of the national accounts. The 2007/8 Irish crisis came from the financial sector, and these visualisations capture the interconnections between the real and financial sectors of the economy. The visualizations increase the data-density thirty to fifty times more than line graphs typically used by policy makers to guide their decisions. The many connections between the real and financial sides of the economy are made more explicit.

Trade-Finance Nexus: Was it Distorted in the Aftermath of the Global Financial Crisis?

Objective: The objective of this article is to examine whether the trade-finance nexus was distorted in the aftermath of the global financial crisis. Research Design & Methods: We estimated OLS regressions between trade and finance for 36 countries. The Quandt-Andrews breakpoint test and Bai-Perron multiple breaking point test were used to test for structural breaks in the trade-finance nexus. Findings: The results show that a structural break in the trade-finance relationship occurred in 2008 in the majority of the examined countries. The structural changes were relatively more often identified in middle-income countries than in high-income ones. This finding confirms our suppositions inferred from the stylized facts that reactions of international trade and financial development in the crisis era differed across the countries depending on their level of development. Implications & Recommendations: Our study partly fills the gap between theory-based approaches to the trade-finance nexus and empirical evidence. It also emphasizes the need of a revision of traditional theoretical arguments, including those referring to the linkages between the financial and the real sides of economy. Contribution & Value Added: Our article contributes to the theoretical discussion in three ways. Firstly, we examine a still bothering question on the relationship between the financial and the real sides of economy. Secondly, while the main strand in the literature deals with finance-growth and trade-growth interactions, we focus directly on the trade-finance linkages. Thirdly, our finding that a break in the trade-finance nexus was more pronounced for the middle-income countries may provide some insight into better understanding of the global financial crisis of 2008 and its consequences.

Sovereign risk in the Euro area: a multivariate stochastic process approach

In this paper we jointly model financial and real components of sovereign risk, by means of correlated stochastic processes, and apply the model to Euro Area countries. For each country we consider, as a target measure, the Debt/GDP ratio. We model the time dynamics of both the Debt and the GDP by means of a linear combination of two stochastic equations: an Euro Area systematic process and a country-specific idiosyncratic process. Doing so, we provide an early warning predictive model of sovereign debt sustainability, considering both the financial and the real economy sides, and in terms of both common and country-specific factors. We provide an estimation procedure for the parameters of the processes, which allows to calculate the implied probabilities of default for each country. The empirical findings show a clear clustering effect between northern and southern countries, especially on the financial side. The inclusion of the GDP growth rate in the derivation of default probabilities partially changes the clustering structure, showing that the sovereign risk of some countries (especially that of France and Italy) is strongly affected not only by the debt evolution, but also by the growth of the GDP.

A Macroeconomic Lesson from the Story of Disinflation in New Zealand

Despite the transparency and independent operations of the central bank, the costly disinflation in the early nineties and the apparent lack of contemporaneous correlation between inflation and unemployment in the subsequent periods brings into question the validity of the Phillips curve hypothesis for the New Zealand economy. Nevertheless, drawing on an empirical exercise built on a narrative history, I argue that the hypothesis remains a valid view of the interaction between the real and nominal sides of the economy if we interpret that history with theories of credibility to account for the dynamics of inflation expectations. Between 1987 and 2015, the survey data of inflation expectations identifies, through either a new classical or a new Keynesian representation, the changing location of the Phillips curve, illustrating how inflation expectations directly affect both inflation and unemployment, without undermining their theoretical relationship. Findings suggest that a credible regime between 1993 and 1999 precipitated a stable manifold of relatively flat Phillips curves. However, probably the loss of credibility in the post-1999 era left the policymakers with a steeper Phillips curve with unstable locations. Use of the nontradable component of the consumer price index (CPI) rather than the CPI as a whole strengthens the policy conclusions based on the Phillips curve hypothesis.

Mixed-Frequency Macro-Financial Spillovers

We develop a new methodology to analyse spillovers between the real and financial sides of the economy that employs a mixed-frequency modelling approach. This enables high-frequency financial and low-frequency macroeconomic data series to be employed directly, avoiding the data aggregation and information loss incurred when using common-frequency methods. In a detailed analysis of macro-financial spillovers for the US economy, we find that the additional high-frequency information preserved by our mixed-frequency approach results in estimated spillovers that are typically substantially higher than those from an analogous common-frequency approach and are more consistent with known in-sample events. We also show that financial markets are typically net transmitters of shocks to the real side of the economy, particularly during turbulent market conditions, but that the bond and equity markets act heterogeneously in both transmitting and receiving shocks to the non-financial sector. We observe substantial short and medium-run variation in macro-financial spillovers that is statistically associated with key variables related to financial and macroeconomic fundamentals; the values of the term spread, VIX and unemployment rate in particular appear to be important determinants of macro- financial spillovers.

Agent based-stock flow consistent macroeconomics: Towards a benchmark model

The paper moves from a discussion of the challenges posed by the crisis to standard macroeconomics and the solutions adopted within the DSGE community. Although several recent improvements have enhanced the realism of standard models, we argue that major drawbacks still undermine their reliability. In particular, DSGE models still fail to recognize the complex adaptive nature of economic systems, and the implications of money endogeneity. The paper argues that a coherent and exhaustive representation of the inter-linkages between the real and financial sides of the economy should be a pivotal feature of every macroeconomic model and proposes a macroeconomic framework based on the combination of the Agent Based and Stock Flow Consistent approaches. The papers aims at contributing to the nascent AB-SFC literature under two fundamental respects: first, we develop a fully decentralized AB-SFC model with several innovative features, and we thoroughly validate it in order to check whether the model is a good candidate for policy analysis applications. Results suggest that the properties of the model match many empirical regularities, ranking among the best performers in the related literature, and that these properties are robust across different parameterizations. Second, the paper has also a methodological purpose in that we try to provide a set or rules and tools to build, calibrate, validate, and display AB-SFC models.