Short-run Perspective Research Articles

Externality and policy intervention in interregional travel with infectious diseases.

This paper theoretically investigates externalities and policy interventions in travel during a pandemic. We develop a tractable static model of two regions from a short-run perspective. The model shows that the externalities can be both negative and positive, depending on regional asymmetry. Thus, even when infectious diseases are widespread, travel restrictions do not necessarily reduce infections and do not necessarily improve social welfare. A formula for the optimal policy intervention is derived and shown to be the weighted average of four types of externalities defined by the direction of travel and the epidemiological status of a traveler.

Holding the economy by the tail: analysis of short- and long-run macroeconomic risks

We put forward a macro-financial empirical modeling framework that can examine the tails of distributions of macroeconomic variables and the implied risks. It does so without quantile regression, also allowing for non-normal distributions. The framework offers a number of relevant insights into higher moments of the US output growth distribution, as well as the effects of monetary policy and financial (risk premia) shocks on downside macroeconomic risk. This is not only from the short-run perspective but also from the long-run perspective, which has remained largely unexamined in the existing Macro-at-Risk literature. In particular, we estimate the short-run (conditional) and long-run US output growth distributions and study their evolution. The short-run analysis finds that monetary policy and financial shocks render the conditional output growth distribution asymmetric. As such, they affect downside risk over and above their impact on the conditional mean that policymakers routinely focus on. The long-run analysis indicates that US output growth left-tail risk showed a general downward trend in the two decades preceding the Global Financial Crisis (GFC), but this trend got reversed post-2008. Our examination strongly points to the adopted unconventional monetary policy framework featuring quantitative easing as a potential source of elevated long-run downside tail risk in the post-GFC period.

Longitudinal Principal Component and Cluster Analysis of Azerbaijan’s Agricultural Productivity in Crop Commodities

Understanding long-term agricultural productivity is essential for designing agricultural policies, planning and targeting other economic policies (e.g., industrial policy), and managing agricultural business models. In a developing and oil-rich country such as Azerbaijan, agriculture is among the limited opportunities to diversify oil-based value added and address broad welfare issues, as farmers and agricultural workers account for a large share of total employment and the labor force. However, previous studies have not focused on an empirical assessment of the long-term and subsectoral productivity of crop commodities. Rather, they have used a highly aggregated and short-run perspective, focusing mainly on the impact of the oil sector on agricultural sectors. Here, we applied principal component analysis and hierarchical cluster analysis to identify similarities and differences in the productivity of specific crop commodities (e.g., cotton, tea, grains, tobacco, hay, fruits, and vegetables) between 1950 and 2021. We show that some crops are similar in terms of their variation, growth rates, and transition from the Soviet era to the post-Soviet period. Although the dynamics of change are different for food and non-food crops and for high- and low-productive commodities, it is still possible to narrow down specific subsectors that could reach the same productivity levels. This helps map out the productivity levels of crop commodities over time and across different subsectors, allowing for better policy decisions and resource allocation in the agricultural sector. In addition, we argue about some outlier commodities and their backward status despite extensive government support. Our results provide a common basis for policymakers and businesses to focus specifically on productivity and profitability from an economic standpoint.

Tax compliance, public spending and happiness in Europe

PurposeThis study aims to analyze whether tax compliance is the basis for the short-run dynamics of the development of welfare and happiness. The strengthening of tax compliance of corporates and citizens is not only important to achieve the goals assumed by fiscal policy but also is part of the values that can generate a higher level of welfare and happiness in Europe.Design/methodology/approachThis study uses a dynamic factor model to offer new indexes that allow to monitor tax compliance, public spending and happiness trajectories and to evaluate their short-run relationships. Next, an analysis of the cyclical characteristics in terms of duration, amplitude and intensity is provided using the Harding and Pagan method (2002).FindingsThe empirical findings show that the European countries were able to reinforce tax compliance during the expansionary periods of the economy, and this has made it possible to increase public spending, and indirectly, happiness. Otherwise, this paper shows that the contractions of public resources during the global crisis, such as the case in the COVID-19, reduced the possibilities of well-being in Europe and made it more difficult to increase public spending and happiness.Research limitations/implicationsThis study tries to analyze the transmission channels and relationships of three very complex variables: tax compliance, public spending and happiness. Incorporating these three variables into this research, with a short-run perspective, the authors have opened a new line of research that enriched the previous analysis. Therefore, the authors’ results should be considered the first step, that this study is going to continue to unravel the complexity of these relationships.Practical implicationsThe design of policies aimed at improving individual, corporate and the well-being of nations needs them to incorporate elements of tax compliance as an objective that has economic and social implications. Individuals and corporates contribute to a fairer and more equitable society through compliance with tax obligations.Originality/valueTo the best of the authors’ knowledge, this is the first paper that offers evidence on the short-run dynamics of tax revenue, public spending and happiness for a better understanding of their relationships and behavior during the different periods of the economy.

Assessment of country institutional factor on sustainable energy target achievement in European Union

This study examines causality relation between the quality of national institutional frameworks designed to ensure higher energy efficiency and the distance to the achievement of the EU Commission targets in terms of energy consumption, using a panel of 21 EU member states. Through panel unit root tests and an estimated VAR model, our results reveal that the quality of a nation’s institutional and economic energy efficiency framework does not significantly influence the gap between annual energy consumption and related EU targets, as prescribed by the energy efficiency EU Directives. However, the results show a bi-directional causality relationship suggests that the nation’s institutional framework on energy efficiency should be improved. According to the impulse response function, this relationship is more related to a short-run perspective. Hence, a strong correlation exists between the level of achieving the reduction targets on energy consumption and the level of gas emissions. Our findings further reveal that the level of reported GHCs significantly influences national regulations and strategies for gas emission reductions. This research highlights the importance of each EU member state creating an appropriate legislative and institutional framework that promotes energy efficiency.

A Markov-Switching Model of Inflation in Bolivia

The Bolivian inflation process is analyzed utilizing a time-varying univariate and multivariate Markov-switching model (TMS). With monthly data and, beginning in the late 1930s, inflation is accurately described by a univariate TMS. The intercept for the high-inflation regime is significantly higher than for the low-inflation regime and the actual inflation rate mirrors the smoothing probabilities of the Markov process. Additionally, the predicted duration of each regime closely fits the periods when the country experienced low and inordinate high inflation rates. From a long-run perspective and utilizing a multivariate TMS, the results generally fall in line with what the quantity theory of money predicts. In the high-inflation regime, money growth increases inflation (almost) one-for-one, as classical economics contends. From a short-run perspective and in the high-inflation regime, inflation is almost exclusively explained by a negative output gap. In the low-inflation regime, lagged inflation is the most important determinant of inflation, in line with price stickiness expectations. Partitioning the sources of inflation demonstrate that, from a long-run perspective and in the high inflation regime, differences in inflation are mostly explained by GDP growth; in the low-inflation regime, money growth and velocity growth are the principal factors explaining the variance of inflation. From a short-run perspective, the output gap explains almost all regression variance in the high-inflation regime, and past inflation does the same during times of low inflation, though in both cases the R2 is low which precludes making definite statements about the sources of variability in inflation.

Competition between manufacturers and sharing economy platforms: An owner base and sharing utility perspective

We develop a two-period, five-stage game model with sharing utility to analyze how a manufacturer competes with a sharing economy platform that facilitates sharing of the manufacturer's product from both a long-run and a short-run perspective. We use the subgame perfect Nash equilibrium to reveal how the manufacturer chooses its long-run (period-1) price to foster an owner base (a collection of the period-1 product buyers) that in turn affects its short-run (period-2) competition with the sharing economy platform (hereafter, platform for short). Analytical results show that (1) in the short run, an increase in the owner base has a negative (non-monotonic) impact on the profitability of the manufacturer (platform) while an increase in sharing utility negatively (positively) affects the profitability of the manufacturer (platform); (2) in the long run, the existence of the platform could be irrelevant for, pose a threat to, or benefit the manufacturer contingent upon different levels of sharing utility; (3) in the long run, a win-win scenario is attainable for both the manufacturer and platform when sharing utility is high enough. The managerial implication of this research is that the manufacturer and platform should collaborate to improve sharing utility to a sufficiently high level by enhancing the sense of community belonging, fostering benefits from sharing activities, and addressing sustainability concerns, thereby achieving a win-win result.

Rent Control, Market Segmentation, and Misallocation: Causal Evidence from a Large-Scale Policy Intervention

This paper studies market segmentation that arises from the introduction of a price ceiling in the market for rental housing. When part of the market faces rent control, theory predicts an increase of free-market rents, a consequence of misallocation of households to housing units. We study a large-scale policy intervention in the German housing market in 2015 to document this mechanism empirically. To identify the effect we rely on temporal variation in treatment dates, combined with a difference-in-differences setup and a discontinuity-intime design. By taking a short-run perspective, we are able to isolate the misallocation mechanism from other types of spillovers. We find a robust positive effect on free-market rents in response to the introduction of rent control. Further, we document that rent control reduced the propensity to move house within rent controlled areas, but only among highincome households. Interpreted through the lens of our theoretical model, this spillover is a clear sign of misallocation. Further, we document that the spillover brings forward demolitions of old, ramshackle buildings.

Hourly Demand for Electricity in Sweden: Implications for Load, Welfare and Emissions

In this study, using sub-hourly appliance-level data from a representative sample of Swedish households on standard tariffs, we investigate the welfare and emission implications of moving to a mandatory dynamic pricing scheme. We treat demand during different hours of a day to affect utility differently, and account for the derived nature of electricity demand by explicitly considering the services (end-use demands) that drive hourly electricity demand. We use the flexible EASI demand system, which accommodates both observed and unobserved heterogeneity in preferences, to understand changes in load consequent to moving to dynamic pricing schemes. We find changes in load patterns across hours to be relatively small (with at most a three percent reduction during the morning peak, and a two percent increase in the off-peak times), and welfare and emissions to decrease slightly (a maximum of 0.2 percent and 0.25 percent, respectively). Overall, in the context of a decentralized electricity retail setting such as in Sweden, our results call into question both the desirability (from a short-run welfare perspective) or the feasibility (from a consumer perspective) of the emphasis on ensuring that the retail price of electricity be aligned to the hourly marginal cost.

Land Inequality and Economic Growth: A Meta-Analysis

Increasing commercial pressure on land may lead to land concentration in developing countries, especially in the context of complex systems of property rights. In this article we review through meta-analysis (MA) the econometric findings of the literature estimating the nexus between land inequality and economic growth. In particular, our MA controls for various features of the studies and for the so-called “publication bias”, and shows that land-inequality negatively affects economic growth, especially at low development levels. Analysis based on panel data, which generally imply a relatively short run perspective, typically report a lower or positive correlation between land inequality and growth, suggesting that the negative impact of land inequality emerges in the long run, possibly through credit constraints and institutional mechanisms.

Renewable energy consumption and economic growth. Causality relationship in Central and Eastern European countries.

The new European model stipulates the achievement of an inclusive, sustainable and intelligent economic growth. Increasing the share of renewable energy is one of the factors that improve the quality of economic growth, similar to research, development and investment in human capital. In this paper we tested the correlation between economic growth and renewable energy consumption for ten European Union (EU) member states from Central and Eastern Europe (CEE) in the period 1990–2014, using Auto-regressive and Distributed Lag (ARDL) modeling procedure, a technique that captures causal relationships both on a short run and on a long run. The short run perspective reveals the transition towards a new energy paradigm, while the long run approach corresponds to the long-term equilibrium of the analyzed factors. Our results shows that, in the short run, the Gross Domestic Product (GDP) and Renewable Energy Consumption (REC) dynamics are independent in Romania and Bulgaria, while in Hungary, Lithuania and Slovenia an increasing renewable energy consumption improves the economic growth. The hypothesis of bi-directional causality between renewable energy consumption and economic growth is validated in the long run for both the whole group of analyzed countries as well as in the case of seven CEE states which were studied individually. These results allow us to look into the feasibility of the Europe 2020 goals regarding the increase of energy efficiency and to propose public policies to achieve these goals.

The relationship between international trade and capital flow: A network perspective

The relationship between international trade and capital flow has been extensively discussed. Using bilateral data from 2001 to 2016, we construct international trade and capital flow networks, defined as a weighted graph in which nodes are countries and edges represent trade and capital flow linkages. Centrality is employed as the main variable in this study to represent the importance of a country in the networks. To gain further insight into the network characteristics, we adopt a turning-parameter centrality to combine both the original degree and strength measurements within the weighted network. Moreover, we develop a new indicator called “partner quality centrality” to identify the quality of neighbors. Within the panel cointegration framework, we argue that a positive long-run equilibrium exists between the trade and capital flow networks as constructed. In addition, we employ a panel causality test to investigate the short-run dynamics, indicating that the international capital flow network has predictive power on the trade network from the short-run perspective but not vice versa.

Sustainability and Ethics in the Process of Price Determination in Financial Markets: A Conceptual Analysis

This paper explores how financial markets can support the practical applicability of Sustainability Development Goals (SDGs) principles and why ethics has a central role in this process. The efficient market hypothesis holds that a financial market is efficient when prices equate value. Extending this assertion to sustainability, it can be said that prices should become equal to sustainable value. Prices can be regarded as the addition of the present value of future expectations and the impact of short-term volatility. This property parallels the existence of two different types of shareholders: long-run shareholders, who are often involved in the management of the corporation, and short-run shareholders, who usually apply speculative strategies to the choice of their investments. The SGDs’ principles are logically thought for a long-run horizon. Their impact on corporate value stems mainly from the changes they introduce in environmental and social risk, apart from becoming a potential source of innovation. Nevertheless, their effects on the short-run perspective can be very small unless either market traders assume sustainability as a goal of their own or the sustainability effects are incorporated into prices. We hold that the second issue is safer and preferable. Both involve ethics: the former would require that investors perform any trade from an ethical perspective. The latter needs that the ethical emphasis is placed on the process of price determination. The achievement of this goal demands a wide display of information on sustainability, placed together with financial information, and appropriate regulation. Its analysis considers the principles of behavioral finance.

Data-Driven Economy and Artificial Intelligence: Emerging Competition Law Issues

Artificial Intelligence (AI), although it is not an entirely new phenomenon, has been developing more intensively relatively recently. AI is based on artificial neural networks (ANNs), which are modelled upon the architecture of human brains. Beside several ethical issues, such as whether “artificial brains” can and should be created in the first place, a number of legal questions emerge. One of the most urgent issues to be analyzed as regards AI is whether there is a need for a regulatory intervention. It is probably fair to say that AI is currently in a shape of a cocoon. In an academic legal research AI is still pretty much “terra incognita”. However, although there is no clear and visible AI market failure (yet), it may be worthwhile analyzing what the status quo of the markets in the digital economy is with a perspective view of the AI markets of the future. After all, AI is featured by the systems that can autonomously learn and improve (machine learning). Such self-learning capability of the machines is based on the technique called “deep learning”. The latter is fed by data. In this regard, it may well be that the purpose of current data collection and processing is related to conquering future markets for AI, so that a “snapshot” analysis of the issues related to current data-driven markets would show only one side of the coin of the market dynamics. The latter insight has to be borne in mind by both regulators and competition authorities. It is in this context that it has to be analyzed whether or what type of protection is needed for (non-personal) data and what is the optimal scope of protection of “deep learning” algorithms. After all, a current “open source” strategy of the biggest market players may be attractive from a short-run perspective, but may possibly raise competition law concerns in a long run. If current processes in the markets feature competition for developing future systems of AI, the question of (setting) standards and interoperability may turn out to be mostly important for future competition.

Two suggestions to improve the outcomes of public-private partnerships

This paper reviews the benefits and costs of public-private partnerships (PPPs), and argues that there exists a basic problem with PPPs that government officials have a short run perspective, while the private companies have a long run perspective. This problem contributes to PPPs being more costly than traditional government projects but PPPs have a much better record of completing projects on schedule as compared to traditionally procured projects, and have led to increases in innovation. Accordingly, government should continue to use PPPs to improve the infrastructure in their countries, but ways must be found to reduce the costs of PPPs. In this paper, we suggest two ways to improve the outcomes of PPPs. One, PPPs should not include up-front payments from the private company to the government and, two, more importantly, the PPP contracts should be shortened to a maximum of 20 years.

Trade Liberalization and Economic Growth in Guyana: An Empirical Assessment using DOLS and Error Correcting Methodologies

This paper uses econometric techniques in the area of time series analysis to examine the relationship between economic performance and trade liberalization in Guyana. For this study, the base model underlying the analysis is a traditional per worker production function that has been augmented to include trade liberalization and other factors like human capital and exports. The results from this study suggest that when viewed from the long-run and short-run perspective trade liberalization has enhanced the economic performance of Guyana. Indeed, in this study both measures of trade liberalization - the average import tariff rate and the dummy variable representing the change in quota and import licensing measures, among other things - were statistically significant and correctly signed.

Analisis Perilaku Sektor Pertanian Indonesia: Aplikasi Vector Error Correction Model

The specific goals of this research are: Firstly, in the long run perspective, the goal is to analyze impact of policy that inflating agriculture price to growth, employment, and investment in agriculture sector. Secondly, in the short run perspective, the goals are: (1) to analyze which economic blocks that have most producing instability to agriculture sector, (2) to analyze behaviour of inflation in agriculture sector and causality relationship both among output price and input prices and among input prices. Quantitative methods that are used in this study are Vector Error Correction Model, Johansen Cointegration Test, and Granger Causality Test. Data used in this research from several sources such as Bank Indonesia, BPS Statistic, International Financial Statistic and CEIC data Company Limited, series data from first mountly of 1993 (1993:01) up to the last mountly of 2002 (2002:12). In the agriculture sector, production (output) and capital are responsive to change in the output price. This mean that inflating the output price effectively help generate output and new investment in this sector. Nevertheless because shock in price can be source of instability to agriculture sector, so government should becarefully apply policies that can inflating the price in agriculture. To solve unemployment problem in agriculture sector, government should apply cost strategy such as subsidy policy of input price. Keywords: Instabilitas, Pergerakan Harga, Employment, Investasi, Sektor Pertanian, Vector Error Correction Model, Johansen Cointegration Test and Granger Causality Test

Growth and Knowledge Management Strategy of Indian Commercial Banks

In this paper the author derived short run and long run optimum growth paths from short run and long run growth frontiers using Data Envelopment Analysis (DEA) and investigated the contributing growth factors for all banks also banks segregated into different groups both in short run and long run perspective. The author's short run as well as long run findings strongly support the role knowledge capital as an important contributor to augment growth for all categories of banks. Knowledge capital forces the firms to adopt heterogeneous strategies results in heterogeneity in performance caused by barriers to imitation and inability of the firms to change the dynamic resource endowments quickly. On the contrary the finding supports the view that firm specific dynamic capabilities acquired through efficient knowledge management acts as a strategic variable for influencing performance of Indian commercial banks.

On the reliability of Japanese inflation expectations using purchasing power parity

This paper shows how purchasing power parity (PPP) can be used to construct a measure for inflation expectations and discusses the properties of this measure from both a theoretical and an empirical perspective. Under the PPP hypothesis, inflation expectations in one country are equal to inflation expectations in another country plus the expected depreciation rate of the nominal exchange rate. Exploiting this formula, we calculate Japanese inflation expectations from the break-even inflation rates (BEI) and FX forward spreads for five countries (United States, United Kingdom, Australia, Canada, and Sweden). The resulting PPP-based measure of inflation expectations follows a trend that largely coincides with long-run developments in the Japanese BEI. However, we find that both levels of and variations in the new measure differ across the reference countries, and that a recent gap between the new measure and the Japanese BEI is not negligible from a short-run perspective. Consequently, there remain several issues that need to be addressed to assess the usefulness of this new formula.

Output-Employment Relationship Across Sectors: A Long Versus Short-Run Perspective

This paper investigates the nature of the output-employment relationship by using the Turkish quarterly data for the period from 1988 to 2008. Even if we fail to find a long-run relationship between aggregate output and total employment, there are long-run relationships for the aggregate output with non-agricultural employment and sectoral employment levels for seven of nine sectors that we consider. However, a further investigation for the output and employment relationship within a short-run perspective do not reveal statistically significant relationships for either total employment, or non-agriculture employment or the eight out of the nine sectors that we consider. Thus, it seems that sustainable growth is an essential economic agenda for employment generation concerning the sectors and that there is a long-run link but weak short run link with demand.