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Rising temperatures, falling ratings: the effect of climate change on sovereign creditworthiness
(2021)
How will a changing climate impact the creditworthiness of governments over the very long term? Financial markets need credible, digestible information on how climate change translates into material risks. To bridge the gap between climate science and real-world financial indicators, the authors simulate the effect of climate change on sovereign credit ratings for 108 countries, creating the world’s first climate-adjusted sovereign credit rating. The study offers a first methodological approach to extend the long-term rating to an ultra-long-term reality, aiming at long-term investors, but also regulators and rating agencies.
Central banks normally accept debt of their own governments as collateral in liquidity operations without reservations. This gives rise to a valuable liquidity premium that reduces the cost of government finance. The ECB is an interesting exception in this respect. It relies on external assessments of the creditworthiness of its member states, such as credit ratings, to determine eligibility and the haircut it imposes on such debt. The authors show how such features in a central bank’s collateral framework can give rise to cliff effects and multiple equilibria in bond yields and increase the vulnerability of governments to external shocks. This can potentially induce sovereign debt crises and defaults that would not otherwise arise.
Can boundedly rational agents survive competition with fully rational agents? The authors develop a highly nonlinear heterogeneous agents model with rational forward looking versus boundedly rational backward looking agents and evolving market shares depending on their relative performance. Their novel numerical solution method detects equilibrium paths characterized by complex bubble and crash dynamics. Boundedly rational trend-extrapolators amplify small deviations from fundamentals, while rational agents anticipate market crashes after large bubbles and drive prices back close to fundamental value. Overall rational and non-rational beliefs co-evolve over time, with time-varying impact, and their interaction produces complex endogenous bubble and crashes, without any exogenous shocks.
High-frequency changes in interest rates around FOMC announcements are a standard method of measuring monetary policy shocks. However, some recent studies have documented puzzling effects of these shocks on private-sector forecasts of GDP, unemployment, or inflation that are opposite in sign to what standard macroeconomic models would predict. This evidence has been viewed as supportive of a „Fed information effect“ channel of monetary policy, whereby an FOMC tightening (easing) communicates that the economy is stronger (weaker) than the public had expected.
The authors show that these empirical results are also consistent with a „Fed response to news“ channel, in which incoming, publicly available economic news causes both the Fed to change monetary policy and the private sector to revise its forecasts. They provide substantial new evidence that distinguishes between these two channels and strongly favors the latter; for example, regressions that include the previously omitted public macroeconomic news, high-frequency stock market responses to Fed announcements, and a new survey that they conduct of individual Blue Chip forecasters all indicate that the Fed and private sector are simply responding to the same public news, and that there is little if any role for a „Fed information effect“.
On the accuracy of linear DSGE solution methods and the consequences for log-normal asset pricing
(2021)
This paper demonstrates a failure of standard, generalized Schur (or QZ) decomposition based solutions methods for linear dynamic stochastic general equilibrium (DSGE) models when there is insufficient eigenvalue separation about the unit circle. The significance of this is demonstrated in a simple production-based asset pricing model with external habit formation. While the exact solution afforded by the simplicity of the model matches post-war US consumption growth and the equity premium, QZ-based numerical solutions miss the later by many annualized percentage points.
This in-depth analysis provides evidence on differences in the practice of supervising large banks in the UK and in the euro area. It identifies the diverging institutional architecture (partially supranationalised vs. national oversight) as a pivotal determinant for a higher effectiveness of supervisory decision making in the UK. The ECB is likely to take a more stringent stance in prudential supervision than UK authorities. The setting of risk weights and the design of macroprudential stress test scenarios document this hypothesis. This document was provided by the Economic Governance Support Unit at the request of the ECON Committee.
This document was requested by the European Parliament's Committee on Economic and Monetary Affairs. It was originally published on the European Parliament’s webpage: www.europarl.europa.eu/RegData/etudes/IDAN/2021/689443/IPOL_IDA(2021)689443_EN.pdf
The crisis management and deposit insurance (CMDI) framework in the euro area requires a reset. Although its policy objectives remain valid, the means of achieving them do not. As the euro area comes the end of the long transition period taken to implement the BRRD/SRMR, it should take the opportunity to reset expectations about resolution.
Above all, resolution should be for the many, not just the few. There should be a single presumptive path for dealing with failed banks: the use of bail-in to facilitate orderly liquidation under a solvent-wind down strategy. This will protect deposits and set the stage – together with the backstop that the European Stability Mechanism provides to the Single Resolution Fund (SRF) -- for the transformation of the SRF into the Single Deposit Guarantee Scheme (SDGS). To avoid forbearance, responsibility for emergency liquidity assistance (ELA) should rest, not with national central banks, but with the ECB as a single lender of last resort. Finally, national deposit guarantee schemes should function as institutional protection schemes and become investors of last resort in their member banks. Together, these measures would complete Banking Union, promote market discipline, avoid imposing additional burdens on taxpayers, help untie the doom loop between weak banks and weak governments, strengthen the euro and enhance financial stability.
This paper discusses policy implications of a potential surge in NPLs due to COVID-19. The study provides an empirical assessment of potential scenarios and draws lessons from previous crises for effective NPL treatment. The paper highlights the importance of early and realistic assessment of loan losses to avoid adverse incentives for banks. Secondary loan markets would help in this process and further facilitate bank resolution as laid down in the BRRD, which should be uphold even in extreme scenarios.
This in-depth analysis proposes ways to retract from supervisory COVID-19 support measures without perils for financial stability. It simulates the likely impact of the corona crisis on euro area banks’ capital and predicts a significant capital shortfall. We recommend to end accounting practices that conceal loan losses and sustain capital relief measures. Our in-depth analysis also proposes how to address the impending capital shortfall in resolution/liquidation and a supranational recapitalisation.
In this paper we put forward a legal argument in favour of granting more independence to BaFin, the German securities market supervisor. Following the Wirecard scandal, our reform proposal aims at strengthening the impartiality and credibility of the German supervisor and, as a consequence, at restoring capital market integrity. In order to achieve the necessary degree of democratic legitimacy for giving BaFin more independence and disassociating it from the Ministry of Finance, the paper sets out the necessary steps for a legal reform that creates accountability of BaFin vis-à-vis the Parliament, subjecting it to strict disclosure and reporting obligations.
Incentives, self-selection, and coordination of motivated agents for the production of social goods
(2021)
We study, theoretically and empirically, the effects of incentives on the self-selection and coordination of motivated agents to produce a social good. Agents join teams where they allocate effort to either generate individual monetary rewards (selfish effort) or contribute to the production of a social good with positive effort complementarities (social effort). Agents differ in their motivation to exert social effort. Our model predicts that lowering incentives for selfish effort in one team increases social good production by selectively attracting and coordinating motivated agents. We test this prediction in a lab experiment allowing us to cleanly separate the selection effect from other effects of low incentives. Results show that social good production more than doubles in the low- incentive team, but only if self-selection is possible. Our analysis highlights the important role of incentives in the matching of motivated agents engaged in social good production.
Managed portfolios that exploit positive first-order autocorrelation in monthly excess returns of equity factor portfolios produce large alphas and gains in Sharpe ratios. We document this finding for factor portfolios formed on the broad market, size, value, momentum, investment, prof- itability, and volatility. The value-added induced by factor management via short-term momentum is a robust empirical phenomenon that survives transaction costs and carries over to multi-factor portfolios. The novel strategy established in this work compares favorably to well-known timing strategies that employ e.g. factor volatility or factor valuation. For the majority of factors, our strategies appear successful especially in recessions and times of crisis.
We empirically examine the Capital Purchase Program (CPP) used by the US gov- ernment to bail out distressed banks with equity infusions during the Great Recession. We find strong evidence that a feature of the CPP – the government’s ability to ap- point independent directors on the board of an assisted bank that missed six dividend payments to the Treasury – helped attenuate bailout-related moral hazard. Banks were averse to these appointments – the empirical distribution of missed payments exhibits a sharp discontinuity at five. Director appointments by the Treasury led to improved bank performance, lower CEO pay, and higher stock market valuations.
This paper explores the interplay of feature-based explainable AI (XAI) tech- niques, information processing, and human beliefs. Using a novel experimental protocol, we study the impact of providing users with explanations about how an AI system weighs inputted information to produce individual predictions (LIME) on users’ weighting of information and beliefs about the task-relevance of information. On the one hand, we find that feature-based explanations cause users to alter their mental weighting of available information according to observed explanations. On the other hand, explanations lead to asymmetric belief adjustments that we inter- pret as a manifestation of the confirmation bias. Trust in the prediction accuracy plays an important moderating role for XAI-enabled belief adjustments. Our results show that feature-based XAI does not only superficially influence decisions but re- ally change internal cognitive processes, bearing the potential to manipulate human beliefs and reinforce stereotypes. Hence, the current regulatory efforts that aim at enhancing algorithmic transparency may benefit from going hand in hand with measures ensuring the exclusion of sensitive personal information in XAI systems. Overall, our findings put assertions that XAI is the silver bullet solving all of AI systems’ (black box) problems into perspective.
We focus on the role of social media as a high-frequency, unfiltered mass information transmission channel and how its use for government communication affects the aggregate stock markets. To measure this effect, we concentrate on one of the most prominent Twitter users, the 45th President of the United States, Donald J. Trump. We analyze around 1,400 of his tweets related to the US economy and classify them by topic and textual sentiment using machine learning algorithms. We investigate whether the tweets contain relevant information for financial markets, i.e. whether they affect market returns, volatility, and trading volumes. Using high-frequency data, we find that Trump’s tweets are most often a reaction to pre-existing market trends and therefore do not provide material new information that would influence prices or trading. We show that past market information can help predict Trump’s decision to tweet about the economy.
We define a sentiment indicator that exploits two contrasting views of return predictability, and study its properties. The indicator, which is based on option prices, valuation ratios and interest rates, was unusually high during the late 1990s, reflecting dividend growth expectations that in our view were unreasonably optimistic. We interpret it as helping to reveal irrational beliefs about fundamentals. We show that our measure is a leading indicator of detrended volume, and of various other measures associated with financial fragility. We also make two methodological contributions. First, we derive a new valuation-ratio decomposition that is related to the Campbell and Shiller (1988) loglinearization, but which resembles the traditional Gordon growth model more closely and has certain other advantages for our purposes. Second, we introduce a volatility index that provides a lower bound on the market's expected log return.
The pricing of an ambiguous asset, whose cash flow stream is uncertain, may be affected by three factors: the belief regarding the realization likelihood of cash flows, the subjective attitude towards risk, and the attitude towards ambiguity. While previous literature looks at the total price discount under ambiguity, this paper investigates with laboratory experiments how much effect each factor can induce. We apply both non-parametric and parametric methods to cleanly separate the belief effects, the risk premiums, and the ambiguity premiums from each other. Both methods lead to similar results: Overall, subjects have substantial ambiguity aversion, and ambiguity premiums account for the largest price deviation component when the degree of ambiguity is high. As information accumulates, ambiguity premiums decrease. We also find that beliefs do influence prices under ambiguity. This is not because beliefs are biased towards either good or bad scenarios per se, but because subjects display sticky belief updating as new information becomes available. The clear separation performed in this paper between belief and attitude also enables a more accurate estimation of the parameter of ambiguity aversion compared to previous studies, since the effect of beliefs is partialled out. Overall, we find empirically that both factors, belief and attitude towards ambiguity, are important factors in pricing under ambiguity.
The salience of ESG ratings for stock pricing: evidence from (potentially) confused investors
(2021)
We exploit the a modification to Sustainanlytics’ environmental, social, and governance (ESG) rating methodology, which is subsequently adopted by Morningstar, to study whether ESG ratings are salient for stock pricing. We show that the inversion of the rating scale but not new information leads some investors to make incorrect assessments about the meaning of the change in ESG ratings. They buy (sell) stocks they misconceive as ESG upgraded (downgraded) even when the opposite is true. This trading behavior exerts transitory price pressure on affected stocks. Our paper highlights the importance of ESG ratings for investors and consequently for asset prices.
Droughts threaten millions of people in Sub-Saharan Africa, leading to famines, water shortages, migration and casualties. Climate change will most probably exacerbate the devastating consequences as exceptional droughts are expected to occur more frequently. Conventional drought risk assessments however, do not provide adequate tools, as they often limit their focus to environmental parameters, ignoring social vulnerabilities. Integrated strategies are required to carry out holistic drought risk assessments that serve to find adapted technological and institutional solutions to ensure water and food security. This will contribute to the Sustainable Development Goals 1 “No Poverty”, 2 “Zero Hunger” and 6 “Clean Water and Sanitation”.
The Eastern Steppe of Mongolia is one of the world's largest mostly intact grassland ecosystems and is characterised by a close coupling of societal and natural processes. In this ecosystem, mobility is one of the key characteristics of wildlife and human societies alike. The current economic development of Mongolia is accompanied by extensive societal transformation and changes in nomadic lifestyles, which potentially affects the unique steppe ecosystem and its biodiversity. The changing lifestyles are mainly characterised by rural-urban migration, resulting in reduced mobility of herders and their livestock, and presumably affecting wildlife. The question is how mobility can be fostered under these transformation processes. Time is pressing as a new generation is born which is growing up in urban environments and with new skill sets but a potential loss of the tight connection to nature and the nomadic lifestyle.
This article provides a novel explanation for the global intellectual property (IP) paradox, i.e. the consistent growth of the multilateral IP system in spite of mounting evidence that its effects are at best neutral if not disadvantageous for low-income and most middleincome countries and thus the majority of contracting states. It demonstrates that the multilateral IP system is deliberately structured as a virtual network that exhibits network effects similar to a social media platform, for example. The more members an IP treaty has, the more IP protection acceding states can secure for their nationals. Conversely, every accession enlarges the territory in which nationals of previous members can enjoy protection. Due to these increasing returns to adoption, signing up to and remaining part of the global IP network is attractive, irrespective of the immediate effects of a treaty.
The paper examines the importance of international labour standards for ESG reporting. International labour standards exist today for almost all working conditions. There are many reasons why ESG criteria should be based on these standards. This is already happening to some extent. However, the references to international labor standards should be expanded and the existing references deepened.
According to the standard account, IPRs allocate objects to owners, just like ownership allocates real property. In this paper, I explain that this simplistic paradigm operates on the basis of three fictions: The first – truly Polanyian – fiction concerns IP subject matter that was originally not produced for sale but created for other purposes, e.g. private pleasure. The second fiction is that IP is treated as a marketable good whereas much IP, in particular works and signs, are embedded in communication. Finally, IP is a fictitious concept in that we speak of works, inventions, and other IP objects as of tangible commodities, where in fact IP objects only exist insofar and because we speak and regulate as if they exist as abstract “goods” of value.
The "Suma de tratos y contratos" (1569-1571) by Tomás de Mercado is the first legal treatise on trade that explicitly takes into account the specificities of Spanish trade with the Indias. Tomás de Mercado was faced with very profound changes in trade: long distances, large convoy sizes, the need for large amounts of funding, high risk, variations in prices and the value of money...
From a theological-legal point of view, these upheavals posed new and complex questions.
Mercado, advisor to the merchants of Seville and an excellent knowledge of New Spain, analyses the sudden transformation of economic and juridical practice with finesse and realism. The 'Suma' is thus an extraordinary real-time testimony to the profound transformations taking place in 16th century commerce.
Moreover, faced with fundamental questions of moral order and juridical legitimacy, Mercado proposes legal solutions of high equilibrium in which theological imperatives are masterfully reconciled with the needs of transatlantic commercial practice.
The purpose of this chapter is to analyze the concept of solidarity and distinguish various conceptions of solidarity that differ depending on social and normative contexts. The analysis helps to clarify both the different meanings of the term “solidarity” (and the different normative conceptions) and to avoid some of its pitfalls. The latter stem from making false connections between these conceptions, such as the assumption that solidarity must always be of an ethical or nationalist nature, that it is categorially different from justice or is always supererogatory. Solidarity as a virtue comes in many forms and with many justifications and grounds, and one must not reduce this plurality, but instead describe it properly. As already indicated, this opens up the possibility of conflicts between these contexts and dimensions of solidarity. The (as argued) “normatively dependent” concept of solidarity does not tell us to which form we ought to accord priority.
The Sustainable Urban Mobility Plan (SUMP) is a concept of the European Union. The non-binding guidelines formulated within this framework aim to help municipalities and cities to strategically define a local and long term transport and mobility plan. From the European Union's point of view, citizen participation plays a pivotal role during all phases – from the development of the plan until its implementation. This intends to achieve greater support and acceptance from the community for the plan, and to facilitate its implementation.
This paper investigates whether the planning and political SUMP approach guarantees successful participatory processes, and what conclusions can be drawn to amend the SUMP process and general transport planning practice. It discusses how citizen participation is defined in the SUMP guidelines and how these elements are reflected in the SUMP guidelines of 2013 and 2019. In a second step, this paper shows how successful citizen participation is defined in an academic context and to what extent the SUMP reflects these findings. The findings derived from the academic context are then applied to the case studies of Ghent and Limburg in order to evaluate how successfully participation procedures were implemented in these SUMP processes. Finally, the question - what conclusions can be drawn from this to improve the SUMP process and general transport planning practice - is assessed.
Six species of lichens are described as new from Santa Catarina and Rio Grande do Sul (Brazil): Astrothelium aureoirregulare Aptroot & Gumboski, Bogoriella xantholateralis Aptroot, Lecanora umbilicatimmersa Aptroot & Spielmann, Lepra lichexanthonorstictica Aptroot, Megalaria flavosorediata Aptroot and Vainionora sorediata Aptroot. Moreover, 28 further species are reported which are first records for Brazil; and a further 166 are first records for Santa Catarina and 104 for Rio Grande do Sul.
Ten species of the lichen family Graphidaceae are treated in the ninth contribution to this series. Four species are new to science: Allographa cameroonensis Kalb & Schumm from Cameroon differs from A. grandis in having larger ascospores and in the lack of secondary lichen products. Allographa kuetchangiana Kalb & Schumm from Thailand differs from A. mexicana in having a permanent thalline cover of the ascomata and in having a whitish pruina on their top. Cruentotrema siamense Lücking & Kalb from Thailand differs from C. amazonum in having smaller ascomata and smaller ascospores. Ocellularia striata Kalb & Schumm from Thailand differs from O. jutaratiae in having smaller ascospores and in lacking the purplish, K+ greenish pigment which covers the remnants of the split proper exciple. Rhabdodiscus exutus (Hale) Kalb & Schumm is a new combination (Bas.: Ocellularia exuta Hale). Photographs of Allographa mexicana (Hale) Lücking & Kalb (including an isotype) show the variation of the ascomata and the differences to A. kuetchangiana. Allographa isidiata (Hale) Lücking & Kalb is reported from Ecuador, which is a new addition to the lichenobiota of this country and the second finding of this species after its description. Allographa plagiocarpa (Fée) Lücking & Kalb, before misidentified as A. mexicana, from Cartago Province is the second report of this species from Costa Rica. The chemistry of Ocellularia kohphanganensis Papong, Mangold & Lücking and the exact spelling of the specific epithet are corrected. Ocellularia macrocrocea Kalb is a new addition to the lichenobiota of Thailand where it is sometimes growing together with O. striata. The intraspecific variation of Ocellularia thelotremoides (Leight.) Hale ist discussed and the name is put on the correct place of the amended key to Thai Ocellularia species. Cochromatography of some Ocellularia species with a deep orange-yellow pigment together with a pure sample of skyrin in solvents A, B' and C showed identical Rf-values in all three solvent systems.
Four new Astrothelium species and a Mazaediothecium from Várzea areas in Mato Grosso do Sul, Brazil
(2020)
Five species of lichens are described as new from Várzea areas in Mato Grosso do Sul (Brazil): Astrothelium fernandae, A. pseudodermatodes, A. septoconicum, A. xanthopseudocyphellatum, and Mazaediothecium serendipiticum, the latter being deviating from all other species in its order by the at least morphologically chlorococcoid photobiont. Further, we found 226 identifiable species in the Várzea reserve near Jateí and 47 on a farm near Naviraí. Of these, 15 are new records for Brazil and a further 88 are first reports from the state.
The Pantanal is a wetland biome in the interior of Brazil. It is known for its rich macrofauna. Botanically, it is relatively species poor, although the marshes have trees and shrubs throughout and there are occasional forested, even somewhat rocky hills. Lichens have received only scant attention so far, but the area is not very species rich (Canêz et al. 2020). We visited the Pantanal several times and collected in different areas. Here we describe four new species, one of which is locally the most common macrolichen, which was found on places elsewhere in the state and in the bordering state of Mato Grosso as well.
Since 2015, 90 taxa of lichens and 18 lichenicolous fungi have been recorded from Turkey for the first time. Further 707 taxa are new to one or more provinces. In this paper 2 species are new to Turkey. A list of 82 published papers is also provided as a supplement to the bibliography of the 2017 Checklist (John & Türk (2017) of Turkish Lichens.
We show that financial advisors recommend more costly products to female clients, based on minutes from about 27,000 real-world advisory meetings and client portfolio data. Funds recommended to women have higher expense ratios controlling for risk, and women less often receive rebates on upfront fees for any given fund. We develop a model relating these findings to client stereotyping, and empirically verify an additional prediction: Women (but not men) with higher financial aptitude reject recommendations more frequently. Women state a preference for delegating financial decisions, but appear unaware of associated higher costs. Evidence of stereotyping is stronger for male advisors.
Eight new lichen species are described from South America, Malaysia and Thailand, viz. Chapsa canaimae from Venezuela, which differs from C. alborosella in having distictly smaller ascospores with less septa, Dirinaria hypoleuca from Thailand, which differs from the isidiate D. papillulifera in having a whitish lower surface, Myriotrema robertianum from Brazil, which differs from M. viride in having an inspersed hymenium, Myriotrema subzollingeri from Brazil, which differs from M. glauculum in having brown ascospores, Ocellularia jutaratiae from Brazil, which differs from O. crocea in having ascomata with a fissured margin, Ocellularia subnatashae from Brazil, which differs from O. natashae in lacking hirtifructic and conhirtifructic acids and in having smaller and less sepatate ascospores, Redingeria uniseptata from Brazil, which differs from R. vulcani in having smaller and 1-septate ascospores, Thalloloma intermedium from Brazil, which differs from T. anguiniforme in having smaller ascospores. Chapsa pulchella from Malaysia is a new record for Borneo and the first finding after its description, and Redonographa parvispora from Brasil is a new addition to the lichen biota of this country. All species mentioned are described and illustrated with close-up photographs.
Eleven species of lichens are described as new from the Serra do Bodoquena in Mato Grosso do Sul (Brazil): Alyxoria cyanea, Astrothelium ochraceum, Chiodecton xanthonosorediatum, Gyalecta perithecioidea, Gyalecta uniseptata, Pyrenula rubroacutispora, Ramonia xylophila, Synarthonia xanthosarcographoides, Trypethelium aureornatum, Trypethelium endoflavum, and Trypethelium xanthostiolornatum. Around 400 further species are reported, of which 27 are first records for Brazil and 265 are first records for the state.
Nine species of Graphidaceae are described as new to science from South and Central Brazil, in 7 different genera: Acanthothecis normuralis, A. psoromica, Acanthotrema minus, Aggregatorygma submuriforme, Allographa medioinspersa, Diorygma isidiolichexanthonicum, Fissurina excavatisorediosa, Graphis norsorediata, and Graphis tricolor.
New or otherwise interesting lichens. VII, including a world key to the lichen genus Heiomasia
(2020)
Eight species new to science are described, Allographa grandis from Cameroon which is distinguished by its very large ascomata, richly muriform, large ascospores and an inspersed hymenium (type B); Bapalmuia microspora from Malaysia which differs from B. consanguinea in having shorter and broader ascospores and a granular thallus; Diorygma cameroonense from Cameroon which differs from D. sticticum in having larger ascospores with more septa; Glyphis frischiana which is similar to G. atrofusca but differs in producing secondary lichen compounds, the first species in Glyphis in doing so. Two new species are added to the genus Heiomasia, viz. H. annamariae from Malaysia, which differs from H. sipmanii in producing the stictic acid aggr. and H. siamensis from Thailand, distinguished from H. sipmanii in containing hypoprotocetraric acid as a major metabolite. The published chemistry of several species of Heiomasia is revised and a new substance, heiomaseic acid, with relative Rf-values 5/19/8, is demonstrated for H. seaveyorum, H. siamensis and H. sipmanii. A world-wide key to the known species of Heiomasia is presented. Myriotrema squamiferum, a fertile species from Malaysia, is distinguished from M. frondosolucens by lacking lichexanthone. As there are conflicting literature data concerning Ocellularia crocea, the type specimen was investigated and the results are reported. Ocellularia macrocrocea, a related species from Malaysia, differs from O. rubropolydiscus in lacking the red pigment covering the disc of the ascomata and in having a broad stump-shaped columella. A revised chemistry for Ocellularia tanii, a new record for Sarawak, is also given. A table of Rfvalues and scans of relevant TLC runs facilitate the interpretation of the spots occurring on TLC plates of Graphidaceae.
Fascicle XVI of the exsiccate "K. KALB & A. APTROOT: LICHENES NEOTROPICI" (new name for "K. KALB: LICHENES NEOTROPIC" from fascicle XVI onwards) with 23 lichen specimens (No. 628–650) from Brazil, Chile, Dominican Republic, Ecuador, Kenya, Peru and Venezuela is distributed. Three species are described as new, namely Lopadium subcoralloideum Aptroot & Kalb, Lecanactis caceresiana Kalb & Aptroot and Rhizocarpon sipmanianum Kalb & Aptroot. The holotypes of the new species are deposited at Universidade Federal de Mato Grosso do Sul (UFMS). Range extensions are reported for Hypocenomyce tinderreyensis (new to the Neo-tropics; so far only known from Australia, but apparently austral), Ocellularia baorucensis (new to Brazil), Physcidia striata (recently described from Rondônia and the Venezuelean Amazon, and subsequently reported from Amapá and Brazilian Amazonas. The collection from Brazil/Mato Grosso do Sul represents a major range extension to the South), Tephromela campestricola (new to the Neotropics; not different in any way from European material) and Xanthoparmelia arvidssonii (new to Venezuela).
The recently observed disconnect between inflation and economic activity can be explained by the interplay between the zero lower bound (ZLB) and the costs of external financing. In normal times, credit spreads and the nominal interest rate balance out; factor costs dominate firms' marginal costs. When nominal rates are constrained, larger spreads can more than offset the effect of lower factor costs and induce only moderate inflation responses. The Phillips curve is hence flat at the ZLB, but features a positive slope in normal times and thus a hockey stick shape. Via this mechanism, forward guidance may induce deflationary effects.
We conducted a large-scale household survey in November 2020 to study how altering the time frame of a message (temporal framing) regarding an imminent positive income shock affects consumption plans. The income shock derives from the abolishment of the German solidarity surcharge on personal income taxes, effective in January 2021. We randomize across survey participants whether their extra disposable income is presented in Euros per month, Euros per year, or Euros per ten year-period. Our main findings are as follows: In General, we find our respondents’ intended Marginal Propensity to Consume (MPC) is 28.2%. Across all three treatments, the MPC is a positive function of age and being female while it is a negative function of the income increase’s size, self- control, and being unemployed. Temporal framing effects are statistically and economically highly significant as we find the monthly treatment groups’ average MPC 5.6 and 8.7 percentage points higher compared to the yearly and 10-yearly treatment groups. We will be able to analyze the real consumption behavior of households throughout 2021 based on re-surveying the participants as well as by using transaction-based bank data.
The authors examine the effectiveness of labor cost reductions as a means to stimulate economic activity and assesses the differences which may occur with the prevailing exchange rate regime. They develop a medium-scale three-region DSGE model and show that the impact of a cut in the employers’ social security contributions rate does not vary significantly under different exchange rate regimes. They find that both the interest rate and the exchange rate channel matters. Furthermore, the measure appears to be effective even if it comes along with a consumption tax increase to preserve long-term fiscal sustainability.
Finally, they assess whether obtained theoretical results hold up empirically by applying the local projection method. Regression results suggest that changes in employers’ social security contributions rates have statistically significant real effects – a one percentage point reduction leads to an average cumulative rise in output of around 1.3 percent in the medium term. Moreover, the outcome does not differ significantly across the different exchange rate regimes.
How people form beliefs is crucial for understanding decision-making un- der uncertainty. This is particularly true in a situation such as a pandemic, where beliefs will affect behaviors that impact public health as well as the aggregate economy. We conduct two survey experiments to shed light on potential biases in belief formation, focusing in particular on the tone of information people choose to consume and how they incorporate this information into their beliefs. In the first experiment, people express their preferences over pandemic-related articles with optimistic and pessimistic headlines, and are then randomly shown one of the articles. We find that respondents with more pessimistic prior beliefs about the pandemic are substantially more likely to prefer pessimistic articles, which we interpret as evidence of confirmation bias. In line with this, respondents assigned to the less preferred article rate it as less reliable and informative (relative to those who prefer it); they also discount information from the article when it is less preferred. We further find that these motivated beliefs end up impacting incentivized behavior. In a second experiment, we study how partisan views interact with information selection and processing. We find strong evidence of source dependence: revealing the news source further distorts information acquisition and processing, eliminating the role of prior beliefs in article choice.
We assess the effect and the timing of the corporate arm of the ECB quantitative easing (CSPP) on corporate bond issuance. Because of several contemporaneous measures, to isolate the programme effects we rely on one key eligibility feature: the euro denomination of newly issued bonds. We find that the significant increase in bonds issuance by eligible firms is due to the CSPP and that this effect took at least six months to unfold. This result holds even when comparing firms with similar ratings, thus providing evidence that unconventional monetary policy can foster a financing diversification regardless of firms’ risk profile. We also highlight the impact of the programme on the real economic activity. The evidence suggests that while all firms increased investment in capital expenditures and intangible assets, the CSPP induced eligible firms to invest in marketable and equity securities, to repurchase their own stocks, to hold cash and to carry out short-term investment.
By focusing on the cost conditions at issuance, I find that not only the Covid-19 pandemic effects were different across bonds and firms at different stages, but also that the market composition was significantly affected, collapsing on investment- grade bonds, a segment in which the share of bonds eligible to the ECB corporate programmes strikingly increased from 15% to 40%. At the same time the high-yield segment shrunk to almost disappear at 4%. In addition to a market segmentation along the bond grade and the eligibility to the ECB programmes, another source of risk detected in the pricing mechanism is the weak resilience to pandemic: the premium requested is around 30 basis points and started to be priced only after the early containment actions taken by the national authorities. On the contrary, I do not find evidence supporting an increased risk for corporations headquartered in countries with a reduced fiscal space, nor the existence of a premium in favour of green bonds, which should be the backbone of a possible “green recovery”.
Relying on a perspective borrowed from monetary policy announcements and introducing an econometric twist in the traditional event study analysis, we document the existence of an .event risk transfer., namely a significant credit risk transmission from the sovereign to the corporate sector after a sovereign rating downgrade. We find that after the delivery of the downgrade, corporate CDS spreads rise by 36% per annum and there is a widespread contagion across countries, in particular among those which were most exposed to the sovereign debt crisis. This effect exists on top of the standard relation between sovereign and corporate credit risk.
This paper studies the behavior of competing firms in a duopoly with rational inattentive consumers. Firms play a sequential game in which they decide to obfuscate their individual prices before competing on price. Probabilistic demand functions are endogenously determined by the consumers’ optimal information strategy, which depends on the firms’ obfuscation choice and the consumers’ unrestricted prior beliefs. We show that the game may result in an obfuscation equilibrium with high prices where both firms obfuscate and a transparency equilibrium with low prices and no obfuscation, providing an argument for market regulation. Lower information costs and asymmetric prior beliefs about prices reduce the probability of an obfuscation equilibrium. Using data on Sweden, we document a decrease in price complexity and corresponding prices in the market for mobile phone subscriptions in the last two decades. Our model rationalizes these changes and explains why complexity and high prices persist in some but not all digitalized markets.
The disposition effect is implicitly assumed to be constant over time. However, drivers of the disposition effect (preferences and beliefs) are rather countercyclical. We use individual investor trading data covering several boom and bust periods (2001-2015). We show that the disposition effect is countercyclical, i.e. is higher in bust than in boom periods. Our findings are driven by individuals being 25% more likely to realize gains in bust than in boom periods. These changes in investors’ selling behavior can be linked to changes in investors’ risk aversion and in their beliefs across financial market cycles.
The centrality of the United States in the global financial system is taken for granted, but its response to recent political and epidemiological events has suggested that China now holds a comparable position. Using minute-by-minute data from 2012 to 2020 on the financial performance of twelve country-specific exchange-traded funds, we construct daily snapshots of the global financial network and analyze them for the centrality and connectedness of each country in our sample. We find evidence that the U.S. was central to the global financial system into 2018, but that the U.S.-China trade war of 2018–2019 diminished its centrality, and the Covid-19 outbreak of 2019–2020 increased the centrality of China. These indicators may be the first signals that the global financial system is moving from a unipolar to a bipolar world.
Smart(phone) investing? A within investor-time analysis of new technologies and trading behavior
(2021)
Using transaction-level data from two German banks, we study the effects of smartphones on investor behavior. Comparing trades by the same investor in the same month across different platforms, we find that smartphones increase purchasing of riskier and lottery-type assets and chasing past returns. After the adoption of smartphones, investors do not substitute trades across platforms and buy also riskier, lottery-type, and hot investments on other platforms. Using smartphones to trade specific assets or during specific hours contributes to explain our results. Digital nudges and the device screen size do not mechanically drive our results. Smartphone effects are not transitory.