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We present a theory in which the interaction between limited sharing of idiosyncratic labor income risk and labor adjustment costs (that endogenously arise through search frictions) determines interest rate dynamics. In the general equilibrium, the interaction of these two ingredients relates bond risk premiums, cross-sectional skewness of income growth, and labor market tightness. Our model rationalizes an upward-sloping average yield curve and predicts a negative relation between labor market tightness and bond risk premiums. We provide evidence for our theory's mechanism and predictions. [ABSTRACT FROM AUTHOR]

A repurchase agreement (repo) is a source of cash and collateral. We document that the money market is more segmented when the collateral motive prevails. Two crucial aspects of the central bank framework lead to this disconnect: banks' access to the central bank's deposit facility and assets' eligibility for quantitative easing (QE). We show that repo rates lent by banks with access to the deposit facility and secured by QE eligible assets are more collateral-driven and disconnected from funding-based money market rates. Our results are relevant for different monetary policies and have suggestive implications for the monetary policy pass-through. Authors have furnished an Internet Appendix , which is available on the Oxford University Press Web site next to the link to the final published paper online. [ABSTRACT FROM AUTHOR]

This paper quantifies mechanisms through which heterogeneity in household finances affects the transmission of monetary policy, considering housing tenure choices over the life cycle. Our analysis also identifies challenges for monetary policy related to housing busts. It focuses on the four largest economies in the euro area: France, Germany, Italy, and Spain. Through the lens of our model, we find that home ownership and endogenous transitions from renting to owning are key elements for the extent of cross‐country asymmetries in aggregate consumption responses to changes in the real interest rate. Across groups with different housing tenure, we find that the consumption response of homeowners to interest rate changes tends to be larger than the response of renters, particularly if these homeowners are indebted and do not adjust their illiquid housing wealth. [ABSTRACT FROM AUTHOR]

We study the problems of consistency and the existence of finite-dimensional realizations for multi-curve interest rate models of Heath–Jarrow–Morton type, generalizing the geometric approach developed by T. Björk and co-authors for the classical single-curve setting. We characterize when a multi-curve interest rate model is consistent with a given parameterized family of forward curves and spreads and when a model can be realized by a finite-dimensional state process. We illustrate the general theory in a number of model classes and examples, providing explicit constructions of finite-dimensional realizations. Based on these theoretical results, we perform the calibration of a three-curve Hull–White model to market data and analyse the stability of the estimated parameters. [ABSTRACT FROM AUTHOR]

When missing reliable comparables, estimating inappropriately is a high risk in the use of both market-oriented and income approach methods. Therefore, it is useful to identify effective alternatives in accordance with the estimation method to arrive at the estimated value in the absence of comparables. This paper examines the use of the asking price for estimating the market value of a fruit tree orchard, missing comparable data of similar assets. The analysis was conducted by considering two different scenarios. In the first, asking prices from the same segment of the land to be estimated were used in two market-oriented appraisal methods: the General Appraisal System (GAS) and the Nearest Neighbors Appraisal Technique (NNAT). In both these approaches, market prices were replaced with detected asking prices. The second scenario was based on the use of the Remote Segments Approach (RSA). The comparison was conducted between the market segment of the fruit orchard to be valued and other comparison market segments, consisting of three other species of fruit trees, grown in the same area where the fruit orchard to be estimated is located. The results showed that in the first scenario, the estimated value appeared to be unreliable and excessively high compared to actual market conditions. Using the segment comparison method, which applies asking prices for the purpose of determining the capitalization rate, produced more reliable results. The appraisal also appeared more objective, transparent, and consistent with valuation standards. In the presence of similar limiting conditions, RSA can be an effective support to the activity of the appraiser in the valuation process of agricultural land. [ABSTRACT FROM AUTHOR]

We show that search frictions in credit markets affect accepted interest rates and loan sizes and distort consumption. Using data on car loan applications and originations not intermediated by car dealers, we isolate quasi-exogenous variation in both the costs and benefits to searching for credit. After identifying lender-specific policies that price risk discontinuously, we study the differential response to offered interest rates by borrowers who face high and low search costs. High-search-cost borrowers are 10 |$\%$| more likely to accept loan offers with higher markups, consequently originating smaller loans and purchasing older and less expensive cars than lower-search-cost borrowers. Authors have furnished an Internet Appendix , which is available on the Oxford University Press Web site next to the link to the final published paper online. [ABSTRACT FROM AUTHOR]

This article explores the long-term and cyclical effects of the Pasinetti Index (PI) and their implications for income distribution and macroeconomic policy in a post-pandemic environment marked by inflationary pressures and increasingly restrictive central bank policies. It discusses the relevance of adopting a zero PI as monetary policy framework as either a short-term target or a long-term norm. The research underscores the importance of coordinating monetary and fiscal policies to achieve a balanced mix of short-term and long-term macroeconomic goals, as per the Pasinetti rule, aimed at stabilizing income distribution between rentier and non-rentier groups without compromising on a Keynesian full employment commitment. By analyzing historical data and employing a SVAR model for Canada and the United States, the study highlights the significant cyclical impact of PI fluctuations on unemployment and income distribution. The findings challenge the efficacy of rigid monetary policy rules and support a macroeconomic policy that reconciles short-term employment objectives and long-term distributional goals. [ABSTRACT FROM AUTHOR]

Purpose: To investigate the role of domestic and foreign economic policy uncertainty (EPU) in driving the corporate bond yields in emerging markets. Design/methodology/approach: The study utilizes monthly data from January 2008 to June 2023 from the selected emerging economies. The data analysis is conducted using univariate, bivariate and multivariate statistical techniques. The study includes bond market liquidity and global volatility (VIX) as control variables. Findings: Domestic EPU has a significant role in driving corporate bond yields in these markets. The study finds weak evidence to support the role of the USA EPU in influencing corporate bond yields in emerging economies. Domestic EPU holds more weight and influence than the EPU originating from the United States of America. Research limitations/implications: The findings provide useful insights to policymakers about the potential impact of policy uncertainty on corporate bond yields and enable them to make informed decisions regarding economic policies that maintains financial stability. Understanding the relationship between EPU and corporate bond yields enables investors to optimize their investment decisions in emerging market economies, opens the scope for further research on the interaction between EPU and volatility and other attributes of fixed income markets. Originality/value: Focuses specifically on the emerging market economies in Asia, providing an in-depth analysis of the dynamics and challenges faced by these countries, Explores the influence of both domestic and the USA EPU on corporate bond yields in emerging markets, offering valuable insights into the transmission channels and impact of EPU from various sources. [ABSTRACT FROM AUTHOR]

The present article analyses the balance sheet composition and the evolution of the operational framework of the Macedonian central bank. It shows that the compensating movements on its balance sheet could not be attributed exclusively to domestic liquidity management operations, as in the absence of substantial foreign currency inflows, the central bank has increased foreign reserves through the proceeds arising from the issuance of government bonds denominated in foreign currency on international financial markets. Despite retaining some of the characteristics of a currency board, the absence of a strict commitment to such a regime has allowed the central bank to employ a range of instruments of domestic liquidity management and to maintain relatively tight control over its policy rate. The level of the policy rate under a rigidly fixed exchange rate parity meant to be sustained over time, would however continue to depend on the ability of the authorities to ensure a sufficient level of foreign exchange reserves. [ABSTRACT FROM AUTHOR]

A closed-form solution for zero-coupon bonds is obtained for a version of the discrete-time arbitrage-free Nelson-Siegel model. An estimation procedure relying on a Kalman filter is provided. The model is shown to produce adequate fit when applied to historical Canadian spot rate data and to improve distributional predictive performance over benchmarks. An adaptation of the mixed fund return model from Augustyniak et al. ((2021). ASTIN Bulletin: The Journal of the IAA , 51 (1), 131–159.) is also provided to include the discrete-time arbitrage-free Nelson-Siegel model as one of its building blocks. [ABSTRACT FROM AUTHOR]

In agricultural land appraisal, the absence of comparable transactions poses significant trials, especially when the appraiser oversees the challenge of assessing the market value of an orchard cultivated with pioneering crops in regions where such cultivation is novel. Traditional approaches, like the income capitalization method, struggle due to the lack of valid data, particularly regarding the determination of the capitalization rate. Appraisers often resort to indirect and ambiguous methods for estimating and adjusting rates, leading to unreliable and unrealistic results. This paper proposes, in such cases, the use of the Remote Segments Approach (RSA) as a viable alternative to income capitalization method. By systematically comparing variables between the asset's segment and one or more remote segments, RSA produces more realistic and conservative estimates of the market value when comparable data is unavailable. The case of study relates on the valuation of avocado orchards in Sicily (Italy), a region experiencing the rapid expansion of tropical and sub-tropical fruit cultivations due to climate change. As such innovative crops continue to gain traction in Mediterranean regions, the use of new valuation approaches like RSA in the next future will be crucial for accurately assessing land values and facilitating informed decision-making in agricultural real estate.

Over the past decade, Lawrence Summers has argued that stagnation cannot be rectified by monetary policy because it is the result of a negative natural rate of interest. This analysis brings together two separate streams of thought: traditions in which stagnation has been connected to excessive saving linked to income distribution, or to diminishing investment demand; and a tradition centred on the natural rate of interest and its relationship to the market rate. However, they remained largely separated until Summers brought them together. Modern discussions of the natural rate stem from Knut Wicksell’s Interest and Prices (1898). However, although he came close to arguing that the natural rate might be negative during cyclical depressions, it was mainly under-consumptionists who argued for the possibility of stagnation. These two strands of thinking came closer in the interwar period but they remained separate. The main advocate of secular stagnation, Alvin Hansen, drew on the American Institutionalist tradition, not Wicksell. Postwar Keynesians did not pursue the idea of a negative natural rate even though Samuelson had provided a theoretical explanation. It was not until Summers that a negative natural rate, income distribution and the possibility of secular stagnation were brought together. [ABSTRACT FROM AUTHOR]

The article describes the origins of the Pasinetti index and Pasinetti rule and links both notions to debates over concerns regarding which socio-economic income group in a modern capitalist economy was being hurt and which broad income class was benefiting from the high interest rate policy, especially during the Volcker era of the 1980s. These were statistical constructs as well as distinct normative concepts that resulted from a close reading of Pasinetti’s original writings published in 1980–81. The purpose of the Pasinetti index was to measure and monitor the actual transfer between the rentier and non-rentier sectors of an economy both cyclically and over the long term. As discussed in some detail, both authors of this article had directly participated in those debates and had basically initiated the early discussions around these concepts among post-Keynesians and other heterodox economists. The first part of our article, after the introduction, is primarily focused on what came to be called the Pasinetti rule, while the following section of the article recounts how the different variants of the Pasinetti index came to be constructed and used. We conclude with a discussion of the possible continued relevance of the Pasinetti norm in today’s world. [ABSTRACT FROM AUTHOR]

The credit sensitivity of LIBOR helped lenders during the financial crisis. SOFR is not credit-sensitive and would not have provided that support. The cumulative additional interest from LIBOR during the crisis is estimated to be between 1 to 2% of the notional amount of outstanding loans, depending on the tenor and type of SOFR rate used. The amount of LIBOR business loans owned by banks could have been as high as about 2trn, and the overall additional interest income banks received thanks to LIBOR could have been as high as 30bn dollars. The analysis also shows that a compounded SOFR reduces insurance relative to a term SOFR. [ABSTRACT FROM AUTHOR]

Purpose: The purpose of this article is to make a contribution to the existing knowledge by using the unique cross-jurisdiction data drawn from the FCA's REP-CRIM submissions to explore dynamics behind firms' perceptions on financial crime. Capturing firm's sentiment is notoriously challenging, and any relevant regulatory data is usually not available in the public domain. A recent exception is the UK Financial Conduct Authority's (FCA's) financial crime data return (REP-CRIM) submissions which include the cross-country regulatory data on the UK financial institutions' perceptions of jurisdiction risk. Despite a broad literature with respect to financial crime, there exists an important gap in the existing knowledge with respect to factors that are associated with the perceptions of firms with respect to jurisdiction risk, which this article aims to close. Design/methodology/approach: Using cross-country regulatory data on the UK financial institutions' perceptions of jurisdiction risk, this study empirically determines that perceptions of jurisdiction risk is significantly and positively associated with anti-money laundering and countering the financing of terrorism (AML/CFT) framework, as well as with tax burden on business and institutional and legal risk in the case of 165 jurisdictions. Findings: The findings lend support to the proposition that unsystematic efforts and too much publicity may ascertain the high-risk image of a jurisdiction, deterring cross-border business. Policy implications that emerge from the study also add to the case for strengthening institutional and legal frameworks, as well as relieving the tax burden on doing business. Research limitations/implications: Findings of the present study should be interpreted with caution, as the dependent variable used in the present study reflects UK firms' perceptions of jurisdiction risk, which may depend on various factors such as different risk appetites and the countries in which firms carry out business, and not necessarily the actual level of risks based on financial crime statistics. For example, a jurisdiction which may indeed be considered high risk, would not necessarily be ranking high on the FCA's list of UK firms' jurisdiction risk perceptions due to few firms operating in that particular country. As a result, the list could differ from the Financial Action Task Force's black and grey lists. Findings based on the regulatory data on the UK financial institutions' perceptions of jurisdiction risk should be considered preliminary in nature, given that they are based on a single year cross sectional data. As global and country-level AML/CFT efforts continue to intensify and as more regulatory data becomes publicly available, it would be imperative to bring further empirical evidence to bear on the question of whether financial crime perceptions are likely to be more pronounced for jurisdictions where AML/CFT efforts are more intensified. Likewise, from a policy standpoint, it would be equally important to explore further the role that institutional and legal risk, as well as tax burden on businesses, play in shaping firms' perceptions of jurisdiction risk. Practical implications: Findings lend support to the proposition that unsystematic efforts and too much publicity may ascertain the high-risk image of a jurisdiction, deterring cross-border business. Therefore, rather than waiting for more data to be made available by other financial regulators, which could lead to a more conclusive evidence in the future, on balance, the findings of this study add to the case for carefully designing and systematically implementing AML/CFT measures in a less publicized manner. Findings lend support to the theoretical postulation that disorderly efforts and undue publicity regarding AML/CFT efforts serve to ascertain the high-risk image of a jurisdiction, which could deter cross-border business and could be detrimental to how firms undertake due diligence. They also suggest that disorderly implementation of AML/CFT measures may hinder access to formal financial service and jeopardize authorities' ability to trace the movement of funds, which may also add to negative perceptions of jurisdiction risk. Social implications: Findings are in line with the theoretical expectations that perceptions of jurisdiction risk would be expected to be higher in countries with inadequate disclosure rules, lax regulation and opacity jurisdiction. Likewise, results are aligned with the expectations that tax burden on business would be expected to be in a positive relationship with jurisdiction risk, as it would increase the likelihood of tax evasion, which incentivizes financial crime. Therefore, policy implications that emerge from the study also add to the case for strengthening institutional and legal frameworks and relieving the tax burden on doing business as part of efforts to improve the international image of jurisdictions with respect to financial crime risks. Originality/value: Using the cross-country regulatory data on the UK financial institutions' perceptions of jurisdiction risk, this study has empirically determined that perceptions of jurisdiction risk is significantly and positively associated with AML/CFT framework, as well as with tax burden on business and institutional and legal risk. These findings have implications from a policy standpoint. [ABSTRACT FROM AUTHOR]

I analyze time series momentum along the Treasury term structure. Yield curve momentum is primarily due to changes in the level factor of yields. Because yield changes are partly induced by changes in the federal funds rate, yield curve momentum is related to post-FOMC (Federal Open Market Committee) announcement drift. The momentum factor is unspanned by the information in the term structure today and is hence inconsistent with standard term structure, macrofinance, and behavioral models. I argue that the results are consistent with a model with unpriced longer term dependencies. [ABSTRACT FROM AUTHOR]

This paper examines the impact of fiscal and monetary policies on carbon dioxide emissions in Trinidad and Tobago, using data from 1970 to 2020. We use a fiscal policy index based on government revenue and expenditure, a monetary policy index based on interest rates and reserve requirement data, and a Non-linear Autoregressive Distributed Lag technique. Our results show that expansionary fiscal policy raises emissions, while contractionary fiscal policy reduces emissions. Intriguingly, expansionary monetary policy increases emissions, while contractionary monetary policy lowers them. These findings hold significance for fiscal and monetary policymakers working on climate change mitigation strategies.

The study aims to assess whether there are significant differences among EU member states regarding the Russo-Ukrainian-conflict-driven changes in macroeconomic indicators and whether these differences are linked to the country’s energy vulnerability. Applying k-means clustering, three country groups are distinguished, similar with regard to their energy intensity, energy dependence (including dependence on Russian gas), and household budgets’ exposure to energy prices. Based on the Kruskal-Wallis and Wilcoxon pairwise comparison tests, the study reveals statistically significant differences among the distinguished country clusters in the level of inflation and interest rates at the time of this conflict as well as differences in the 2022 forecasts’ changes for GDP, inflation, budget balance and unemployment. The results indicate that EU economies characterised by the most significant energy vulnerability economically suffer the most in the aftermath of the Russian invasion of Ukraine.

Tony Lawson, the leading figure of the Cambridge Social Ontology Group, recently published a series of papers devoted to the question of the nature of money. These contributions have to be understood in the context of his broader approach to social ontology, the so called social positioning theory. While at first glance Lawson’s monetary ideas might appear disconnected and sometimes even contradictory or mistaken, there is a consistent vision behind them which is Lawson general social ontology. Lawson’s elaboration of the nature of money is not the only one compatible with the social positioning theory and an alternative one is briefly proposed in the paper. While systematising various Lawson’s monetary contributions, attention has been paid to several particular discrepancies and mistakes and their rectification. At the end of the paper, some lessons from analysing Lawson’s monetary contributions are drawn for his general approach to social ontology.

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This paper develops an estimated New Keynesian model of a commodity-exporting economy for an integrated policy framework, integrating the full range of policies used in practice and featuring a range of nominal and real rigidities, macro-financial linkages, and transmission channels of external shocks. We jointly examine the optimal conduct of conventional and unconventional monetary policies, macroprudential policy, foreign exchange intervention, capital flow management, and fiscal policy based on the model. The policy analysis framework is applied empirically to Mongolia, a small open and developing economy highly dependent on imports and commodity exports. We find that an eclectic policy mix improves policy trade-offs and a lack of cooperation among policy authorities may result in conflicting policies, hence suboptimal results for overall economic stability. Our optimal policy analysis shows that policy mix adjustments should differ depending on the type of shocks and the policy objectives. The results suggest that the policy analysis framework can help policymakers choose their policy mix adjustments to deal with external shocks in an integrated and optimal way. [ABSTRACT FROM AUTHOR]