Discussion Papers

Papers from 1998 onwards are available on-line as .PDF files.

If you would like to submit your paper to Repec, please email econplone@le.ac.uk

10 Most Recent Papers

17/06 Dimitrios Varvarigos

Adobe Acrobat (PDF) 17/06 Economic Growth and the Cultural Transmission of Attitudes towards Education

This analysis investigates path-dependencies in a growing economy where altruistic parents try to inculcate their children with a behavioural trait that is conducive to human capital formation. The initial stock of physical capital is critical because it shapes the population dynamics of behavioural traits which, in turn, impinge on the formation of physical and human capital. Despite the absence of a complementarity in the process of cultural instruction, the long-run equilibrium can also depend on the initial distribution of behavioural traits among the population, as long as the efficiency of the external elements of cultural transmission is sufficiently low for households with parents who did not adopt the human capital-promoting trait when they, themselves, were young.

17/05 Dimitrios Varvarigos & Nikolaos Kontogiannis

Adobe Acrobat (PDF) 17/05 Entrepreneurial Status, Social Norms, and Economic Growth

We offer a behavioural approach on the relation between growth and volatility, based on a monetary growth model where entrepreneurs borrow funds to invest in projects that produce capital goods. In addition to their varying pecuniary returns, different projects also vary with respect to the status they confer to the entrepreneurs who operate them. We show that social status promotes capital accumulation. We also show that, even when the status-induced increase of marginal utility is constant over time, the interaction between status and inflation is an additional source of transitional dynamics. When a social norm links this increase of marginal utility to past outcomes, however, the dynamics can generate endogenous cycles in the transition to the balanced growth path.

17/04 Arkadiusz Szydłowski

Adobe Acrobat (PDF) 17/04 Endogenously Censored Median Regression with an Application to Benefit Elasticity of US Unemployment Duration

We provide first set estimates for benefit elasticity of median unemployment duration that are robust to assumptions on the censoring mechanism.

17/03 D.S.G. Pollock

Adobe Acrobat (PDF) 17/03 Stochastic processes of limited frequency and the effects of oversampling

Discrete-time ARMA processes can be placed in a one-to-one correspondence with a set of continuous-time processes that are bounded in frequency by the Nyquist value of π radians per sample period. It is well known that, if data are sampled from a continuous process of which the maximum frequency exceeds the Nyquist value, then there will be a problem of aliasing. However, if the sampling is too rapid, then other problems will arise that may cause the ARMA estimates to be severely biased. The paper reveals the nature of these problems and it shows how they may be overcome.

17/02 D.S.G. Pollock

Adobe Acrobat (PDF) 17/02 Trends Cycles And Seasons: Econometric Methods Of Signal Extraction

Alternative methods of trend extraction and of seasonal adjustment are described that operate in the time domain and in the frequency domain. The time-domain methods that are implemented in the TRAMO–SEATS and the STAMP programs are compared. An abbreviated time-domain method of seasonal adjustment that is implemented in the IDEOLOG program is also presented. Finite-sample versions of the Wiener–Kolmogorov filter are described that can be used to implement the methods in a common way. The frequency-domain method, which is also implemented in the IDEOLOG program, employs an ideal frequency selective filter that depends on identifying the ordinates of the Fourier transform of a detrended data sequence that should lie in the pass band of the filter and those that should lie in its stop band. Filters of this nature can be used both for extracting a low-frequency cyclical component of the data and for extracting the seasonal component.

17/01 D.S.G. Pollock

Adobe Acrobat (PDF) 17/01 Econometric Filters

A variety of filters that are commonly employed by econometricians are analysed with a view to determining their effectiveness in extracting well-defined components of economic data sequences. These components can be defined in terms of their spectral structures—i.e. their frequency content—and it is argued that the process of econometric signal extraction should be guided by a careful appraisal of the periodogram of the detrended data sequence. Whereas it is true that many annual and quarterly economic data sequences are amenable to relatively unsophisticated filtering techniques, it is often the case that monthly data that exhibit strong seasonal fluctuations require a far more delicate approach. In such cases, it may be appropriate to use filters that work directly in the frequency domain by selecting or modifying the spectral ordinates of a Fourier decomposition of data that have been subject to a preliminary detrending.

16/20 Sanjit Shami & Ali al-Nowaihi 

Adobe Acrobat (PDF) 16/20 Social responsibility, human morality and public policy

The evidence shows that in many important economic domains, many people are either predisposed to engage in ‘socially responsible actions ’and/or required by regulations to do so. Examples include pollution abatement activity, behavior in a commons, and contributions to charity. We propose a general framework of analysis for modelling such actions and the role of public policy in encouraging these actions in an equilibrium setting. Multiple equilibria are endemic in these situations. We show that it is possible to conduct interesting and meaningful analysis in the presence of multiple equilibria. We examine the role of optimal public policy such as subsidies, taxes and direct government grants in engineering moves from less tomore desirable equilibria. We highlight a new role for leadership contributions in facilitating moves between multiple equilibria. We also conduct a welfare analysis of the optimal mix between private and public actions.

16/19 Heather D. Gibson & Stephen G. Hall & George S. Tavlas

Adobe Acrobat (PDF) 16/19 Measuring Systemic Stress in European Banking Systems*

We construct a measure of systemic risk in selected EU banking systems using an indirect measure of the system covariance which is also time-varying. We proceed to examine to what extent the resulting measures of systemic stress provide a convincing narrative of events during the period January 2000 to March 2016. The results provide evidence of: (i) rising stress prior to the outbreak of the international financial crisis in 2007/08 in countries with banks exposed to toxic assets; (ii) stress associated with the euro area sovereign debt crisis from 2009/10; and (iii) continued concerns from 2013 out the need for euro area banks to clean up their balance sheets and raise new capital at a time of sluggish profitability.

Adobe Acrobat (PDF) 16/18 Self-fulfilling dynamics: The interactions of sovereign spreads, sovereign ratings and bank ratings during the euro financial crisis*

During the euro-area financial crisis, interactions among sovereign spreads, sovereign credit ratings, and bank credit ratings appeared to have been characterized by self-generating feedback loops. To investigate the existence of feedback loops, we consider a panel of five euro-area stressed countries within a three-equation simultaneous system in which sovereign spreads, sovereign ratings and bank ratings are endogenous. We estimate the system using two approaches. First we apply GMM estimation, which allows us to calculate persistence and multiplier effects. Second, we apply a new, system time-varying-parameter technique that provides bias-free estimates. Our results show that sovereign ratings, sovereign spreads, and bank ratings strongly interacted with each other during the euro crisis, confirming strong doom-loop effects.

16/17 Sanjit Dhami & Mengxing Wei & Ali al-Nowaihi

Adobe Acrobat (PDF) 16/17 Public goods games and psychological utility: Theory and evidence.

We consider a public goods game which incorporates guilt-aversion/surprise- seeking and the attribution of intentions behind these emotions (Battigalli and Dufwenberg, 2007; Khalmetski et al., 2015). We implement the induced beliefs method (Ellingsen et al., 2010) and a within-subjects design using the strategy method. Previous studies mainly use dictator games - whose results may not be robust to adding strategic components. We fi…nd that guilt-aversion is far more important than surprise-seeking; and that the attribution of intentions behind guilt- aversion/surprise-seeking is important. Our between-subjects analysis confi…rms the results of the within-subjects design.

16/16 Aristotelis Boukouras 

Adobe Acrobat (PDF) 16/16 Capitalist Spirit and the Markets: Why Income Inequality Matters

I develop a simple static general equilibrium model with capitalist-spirit preferences and prices set by firm owners (entrepreneurs). The model’s pure symmetric Nash equilibria differ markedly from the canonical model: (i) A positive output gap and unemployment may emerge in equilibrium, despite the absence of price rigidities or information asymmetries. (ii) Income and wealth inequality affect equilibrium prices and employment. (iii) The model generates ambiguous comparative statics. Specifically, an increase in inequality of either type may reduce employment and increase the output gap of the economy, while productivity reductions may have the opposite effect. As a result, minimum wage policies may increase employment. These results provide some justification for a number of arguments used in public debates.

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