The European Union (EU) project of combining a single market with a common currency was incomplete from its inception. This article shows that the incompleteness of the governance architecture of ...Europe’s Economic and Monetary Union (EMU) was both a cause of the euro crisis and a characteristic pattern of the policy responses to the crisis. We develop a “failing forward” argument to explain the dynamics of European integration using recent experience in the eurozone as an illustration: Intergovernmental bargaining leads to incompleteness because it forces states with diverse preferences to settle on lowest common denominator solutions. Incompleteness then unleashes forces that lead to crisis. Member states respond by again agreeing to lowest common denominator solutions, which address the crisis and lead to deeper integration. To date, this sequential cycle of piecemeal reform, followed by policy failure, followed by further reform, has managed to sustain both the European project and the common currency. However, this approach entails clear risks. Economically, the policy failures engendered by this incremental approach to the construction of EMU have been catastrophic for the citizens of many crisis-plagued member states. Politically, the perception that the EU is constantly in crisis and in need of reforms to salvage the union is undermining popular support for European integration.
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NUK, OILJ, PRFLJ, SAZU, UKNU, UL, UM, UPUK
32.
Hedging stocks with oil Batten, Jonathan A.; Kinateder, Harald; Szilagyi, Peter G. ...
Energy economics,
01/2021, Volume:
93
Journal Article
Peer reviewed
We study the feasibility of hedging stocks with oil. The Dynamic Conditional Correlation (DCC) approach allows for the calculation of optimal hedge ratios and corresponding hedge portfolio returns. ...Our results show that there are distinct economic benefits from hedging stocks with oil, although the effectiveness of hedging is both time-varying and market-state-dependent. The event of the Global Financial Crisis (GFC) is shown to affect the effectiveness of hedging. During the GFC, a positive jump in the hedge ratios occurs and hedge effectiveness increases. Among a set of common financial and macroeconomic drivers, we identify the implied volatility index VIX as being the most important. During times of global financial uncertainty, investors reduce stock positions more than commodity positions, thus VIX shocks negatively affect the portfolio returns of stock-oil hedges. The results also show that an appreciation of the U.S. dollar against the euro is associated with reduced hedge portfolio returns. From the GFC onwards, we document an increased significance of the gold price and the term spread in explaining hedge portfolio returns.
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GEOZS, IJS, IMTLJ, KILJ, KISLJ, NLZOH, NUK, OILJ, PNG, SAZU, SBCE, SBJE, UILJ, UL, UM, UPCLJ, UPUK, ZAGLJ, ZRSKP
Two daily, real-time, real-activity indexes are constructed for the United States, euro area, United Kingdom, Canada, and Japan: (i) a surprise index summarizing recent economic data surprises and ...measuring optimism/pessimism about the state of the economy, and (ii) an uncertainty index measuring uncertainty related to the state of the economy. The surprise index parsimoniously preserves the properties of the underlying series when affecting asset prices. For the United States, the real-activity uncertainty index is compared to other uncertainty proxies to show that, when uncertainty is strictly related to real activity only, it has a potentially milder effect on economic activity.
•I construct daily, real-time, real-activity surprise and uncertainty indexes.•The surprise index summarizes data surprises and measures optimism about the economy.•The surprise index parsimoniously preserves the properties of the underlying series.•The uncertainty index measures uncertainty related to the state of the economy.•The uncertainty index is compared to other uncertainty proxies.
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GEOZS, IJS, IMTLJ, KILJ, KISLJ, NUK, OILJ, PNG, SAZU, SBCE, SBJE, UL, UM, UPCLJ, UPUK, ZRSKP
•Study the effects of ECBs communication on the days of policy decisions.•Identify Delphic and Odyssean forward guidance with high frequency data.•Both move yield curve in same direction but have ...different effects on macro outcomes.•Yield curve not a sufficient statistic for measuring policy accommodation.•Language affects how markets interpret communication about interest rates.
What drives the reaction of financial markets to central bank communication on the days of policy decisions? We highlight the role of two factors that we identify from high-frequency monetary surprises: news on future macroeconomic conditions (Delphic shocks) and news on future monetary policy shocks (Odyssean shocks). These two shocks move the yield curve in the same direction but have opposite effects on financial conditions and macroeconomic expectations. They also have a different impact on macroeconomic outcomes so that central bankers cannot infer the degree of stimulus they provide by looking at the mere reaction of the yield curve.
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GEOZS, IJS, IMTLJ, KILJ, KISLJ, NUK, OILJ, PNG, SAZU, SBCE, SBJE, UL, UM, UPCLJ, UPUK, ZRSKP
Abstract
Using data on bank-firm relationships in Italy during the Eurozone financial crisis, we show that: (i) compared to healthy banks, under-capitalised banks cut credit to healthy but not to ...zombie firms and are more likely to prolong a credit relationship with a zombie; (ii) in area sectors with more low-capital banks, zombies are more likely to survive; (iii) bank under-capitalisation does not hurt the growth rate of healthy firms. We provide evidence that extending credit to the weakest firms during the recession mitigated the disruption of supply chains and adverse local demand externalities.
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IZUM, KILJ, NUK, PILJ, SAZU, UL, UM, UPUK
Conservation managers regularly burn vegetation to regenerate habitat for fire-dependent species. When determining the time since fire at which to burn, managers model change in a species’ occurrence ...over time, post-fire (fire-response curve) and identify the time since fire associated with decline in occurrence. However, where species exhibit variability in their fire response across space, using a single fire-response curve to determine the timing of burns may lead to burning habitat at an inappropriate time since fire. We tested if elevation, local topography, soil properties, vegetation type or evapotranspiration affect the fire response of the endangered Mallee Emu-wren Stipiturus mallee and its hummock-grass habitat Triodia scariosa in southeastern Australia (n = 217). Previous work on the Mallee Emu-wren found a unimodal fire response with decline in occurrence at ~30–50 yr since fire and a time window of occurrence of ~30 yr. We found that time since fire and elevation interact to affect the Mallee Emu-wren fire response. At high elevations (55–98 m), Mallee Emu-wrens declined in occurrence at ~50 yr since fire, with a time window of occurrence of 20–40 yr. However, at low elevations (28–55 m), Mallee Emu-wrens showed no decline in occurrence with increasing time since fire with a time window of occurrence of up to 107 yr. Extent cover of Tall T. scariosa showed similar patterns to the Mallee Emu-wren, indicating that vegetation structure is a likely driver of variability in the Mallee Emu-wren fire response. We speculate that the effect of low elevation is mediated by increased soil nutrient and water availability for key plants. We used our findings to map the appropriate time since fire at which to burn to regenerate habitat for the Mallee Emu-wren across the study region. We recommend no burning for regeneration across one-third of potential habitat, because the Mallee Emu-wren showed no decline in occurrence in these areas. We recommend managers model variability in species’ fire responses across space to improve the timing of burns for regeneration.
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BFBNIB, FZAB, GIS, IJS, INZLJ, KILJ, NLZOH, NMLJ, NUK, OILJ, PNG, SAZU, SBCE, SBMB, UL, UM, UPUK, ZRSKP
Abstract
The pre-crisis rise and post-crisis resilience of European repo and securitization markets represent political victories for the interests of large banks. To explain when and how finance ...wins, the literature emphasizes lobbying capacity (instrumental power) and the financial sector’s central position in the economy (structural power). Increasingly, however, finance also enjoys infrastructural power, which stems from entanglements between specific financial markets and public-sector actors, such as treasuries and central banks, which govern by transacting in those markets. To demonstrate the analytical value of this perspective, the article traces how the European Central Bank (ECB), motivated by monetary policy considerations, has shaped post-crisis financial policymaking in the EU. It shows that the ECB has played a key part in fending off a financial transaction tax on repos and in shoring up and rebuilding the securitization market. With market-based forms of state agency on the rise, infrastructural entanglement and power shed new light on the politics of finance.
We assess the effects of recent ECB’s unconventional monetary policy (UMP) measures by estimating a global VAR that exploits panel variation amongst all euro area economies and explicitly takes into ...account cross-country interdependencies. Most euro area members benefit from these measures but with substantial heterogeneity, whose extent has been evolving over time and peaked with the sovereign debt crisis. Cross-country spillovers account for a sizable fraction of such dispersion, and substantially amplify effects. Countries with more fragile banking systems benefit the least from unconventional monetary policy measures, and especially so in terms of output gains. Importantly, this heterogeneity implies that the effects on real activity of the whole currency union get substantially dampened. In this respect, we also document that UMP shocks imply significantly smaller and less persistent effects than those arising from conventional interest rate surprises.
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GEOZS, IJS, IMTLJ, KILJ, KISLJ, NLZOH, NUK, OILJ, PNG, SAZU, SBCE, SBJE, UL, UM, UPCLJ, UPUK, ZRSKP
We review the extensive literature on systemic risk and connect it to the current regulatory debate. While we take stock of the achievements of this rapidly growing field, we identify a gap between ...two main approaches. The first one studies different sources of systemic risk in isolation, uses confidential data, and inspires targeted but complex regulatory tools. The second approach uses market data to produce global measures which are not directly connected to any particular theory, but could support a more efficient regulation. Bridging this gap will require encompassing theoretical models and improved data disclosure.
In this paper, we develop a new non-ordinary state-based peridynamic method to solve transient dynamic solid mechanics problems. This new peridynamic method has advantages over the previously ...developed bond-based and ordinary state-based peridynamic methods in that its bonds are not restricted to central forces, nor is it restricted to a Poisson’s ratio of 1/4 as with the bond-based method. First, we obtain non-local nodal deformation gradients that are used to define nodal strain tensors. The deformation gradient tensors are used with the nodal strain tensors to obtain rate of deformation tensors in the deformed configuration. The polar decomposition of the deformation gradient tensors are then used to obtain the nodal rotation tensors which are used to rotate the rate of deformation tensors and previous Cauchy stress tensors into an unrotated configuration. These are then used with conventional Cauchy stress constitutive models in the unrotated state where the unrotated Cauchy stress rate is objective. We then obtain the unrotated Cauchy nodal stress tensors and rotate them back into the deformed configuration where they are used to define the forces in the nodal connecting bonds. As a first example we quasi-statically stretch a bar, hold it, and then rotate it ninety degrees to illustrate the methods finite rotation capabilities. Next, we verify our new method by comparing small strain results from a bar fixed at one end and subjected to an initial velocity gradient with results obtained from the corresponding one-dimensional small strain analytical solution. As a last example, we show the fracture capabilities of the method using both a notched and un-notched bar.
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GEOZS, IJS, IMTLJ, KILJ, KISLJ, NLZOH, NUK, OILJ, PNG, SAZU, SBCE, SBJE, UILJ, UL, UM, UPCLJ, UPUK, ZAGLJ, ZRSKP
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