This article examines the impact of intra-industry trade on Business cycle synchronization in the Economic Community of West African States (ECOWAS). The paper has two primary contributions. First, it utilizes the two-digit level HS classification to measure intra-industry trade, which is easy to interpret and calculate and is suitable for countries with low trade intensity. Second, it employs the system generalized method of moments (system-GMM) to analyze the dynamic relationship between variables and address the issue of endogeneity. Using data from 13 countries between 2000 and 2020 enables the investigation of endogeneity in ECOWAS. Results from the system-GMM estimation indicate a significant and positive relationship between intra-industry trade intensity and business cycle synchronization, advocating for policies focused on reducing tariff barriers, enhancing financial integration, and diversifying production.
This study re-examines the purchasing power parity (PPP) hypothesis for six developed countries, addressing the inconsistent evidence in the existing empirical literature. By applying a newly developed multiple autoregressive distributed lag (MARDL) unit root test, this study updates that both real and real effective exchange rates of the UK, Canada, Australia, Japan, Switzerland, and New Zealand (with the US as a covariate) are non-stationary, I(1) for 2000m1-2023m12, suggesting that the PPP does not hold.
This study examines the impact of global trade disruptions using a Generalized Autoregressive Conditional Heteroskedasticity (GARCH) model, focusing on the Red Sea Crisis, which has disrupted key maritime ports including the Bab el-Mandeb Strait, the Suez Canal and the Cape of Good Hope, and the severe drought constraining traffic through the Panama Canal. By analyzing cargo ship transit data before, during, and after these events, the study quantifies the effects of both geopolitical and environmental disruptions on global trade dynamics. The findings reveal displacement and increased volatility in trade patterns, highlighting the far-reaching impacts of such crises on international commerce. These results emphasize the need for geopolitical stability and environmental resilience in key trade routes, a conclusion that is also relevant for policymakers.
In this paper, we study the effects of heterogeneous sensitivities to social norms when an environmental regulator designs a mechanism for land retirement. We show that when the social norm exceeds the personal norm, as expected, landowners who are relatively sensitive to social norms ("conformists") retire more land. However, when the social norm is below the personal norm, landowners who are more sensitive to personal norms ("individualists") conserve more. Endogenizing the social norm shows that the efficient provider might not supply the efficient quantity of land retirement.
We examine the potential of upcoming Central Bank Digital Currencies (CBDCs) to be used as a means of transferring remittances. In a simple theoretical model, CBDCs compete with traditional channels provided by specialized intermediaries and with digital transfer options already offered by fintech companies. Their success depends on factors such as anonymity, potential conversion into cash, and the network effects generated by CBDC transactions among recipients' families.
This paper investigates the optimal strategy for mergers and acquisitions (M&A) within corporate finance. We assume that two role model companies significantly influence the effort levels of other companies. As the effort level affects a company's future rate of return, we model this rate using Brownian motion to determine the optimal timing for M&A. Through this approach, we derive the optimal M&A strategy, specifying when and how much to acquire. Two illustrative examples are provided to demonstrate constructive acquisition strategies. This research contributes to the literature by offering a theoretical framework that optimizes M&A strategy, particularly regarding acquisition timing and scale, in a stochastic environment.
In vertical models of product differentiation, consumers agree on their ranking of product quality but differ in their willingness to pay for it. When product quality is bounded and the range of willingness to pay is narrow, there are "natural oligopoly" equilibria in which a finite number of firms enter the market regardless of market size. I relax both of these assumptions and consider a simple vertical model in which the number of entering firms increases with market size. I derive analytical expressions for equilibrium prices, markups, and shares for any number of entering firms and limiting expressions for market shares and concentration as the number of firms grows large. The limiting market structure is highly concentrated. The market share of the largest firm converges from above to .58, the combined share of the four largest firms to .99, and the HHI to .44 (4,400). I conclude that vertical models can give rise to natural oligopoly when the range of quality is unbounded and the number of entering firms is unlimited.
We study the impact of commodity terms of trade (CToT) volatility on long-term economic growth and its drivers as well as on inflation, in a sample of 118 countries over 1970-2019, including 69 commodity exporters. Our econometric approaches account for bi-directional feedback effects, cross-country heterogeneity, and cross-sectional dependences. We find that CToT volatility exerts a negative impact on long-term economic growth, mainly through lower capital accumulation. This offsets the positive impact on growth from commodity price booms (especially in resource-rich economies). Furthermore, we observe that higher CToT volatility leads to greater volatility in inflation rather than structurally higher inflation.
This paper obtains estimates of trend inflation and its stochastic volatility for Brazil, through models that incorporate information from breakeven inflation rates and their monthly volatility. Periods with high and low inflation expectations uncertainty are identified and compared to measures of forecast disagreement from survey expectations.
The main objective of this study is to analyse the role of democracy in the relationship between civil conflict and food security in sub-Saharan Africa. The empirical analyses cover a sample of 30 sub-Saharan African countries over the years 2002-2017. To address endogeneity issues in the relationship between civil conflict and food security problem, the study uses a dynamic model based on a sequential linear panel data estimator and system Generalized Method of Moments. The main results obtained from econometrics analyses show that civil conflict has a significant negative influence on food security in sub-Saharan Africa. As regards the role of democracy, the results show that democracy breaks the negative influence of civil conflict on food security. Otherwise, the results also show that GDP per capita, readiness and arable land positively affect food security, while total population has a negative effect on it in sub-Saharan Africa.
A surge of interest in the Women's National Basketball Association (WNBA) during the 2024 season has prompted media debate about the origins of the increased attention. This study employs a least squares approach on panel data to evaluate potential influences on game attendance while controlling for mitigating factors. The goal is to determine whether recent attendance growth is organic and the result of long-term efforts by players and league management or due to external factors such as the introduction of a popular rookie class, particularly Caitlin Clark and Angel Reese. Empirical results indicate that the surge is the result of a combination of these factors, with each contributing positively to varying degrees.
The paper aims to verify the ambivalent causal relationship between economic growth and carbon dioxide emissions. The data used were obtained from the World Development Indicators database for the period of 2000-2023. The simultaneous equation model was used with three-stage least squares (3SLS). The results revealed that gross domestic product increased CO2 emissions by 0.787 and that CO2 emissions decreased gross domestic product by 0.375 at the threshold of 1%. However, to achieve growth in terms of environmental protection in Benin, it is necessary to invest more in ecotourism, renewable energy consumption, and activities capable of increasing the capacity for CO2 and internal carbon
This document presents an analytical tool that allows monitoring the liquidity conditions of firms in Ecuador. In this way, we analyze the situation of the firms using liquidity ratios and constructing the operating cash flow of the firms. Our results show that at least half of the firms in Ecuador have liquidity problems because of the COVID-19 pandemic and that their working capital has a slow adjustment level when facing adverse situations.
National Basketball Association (NBA) data are examined to evaluate player performance. The paper uses a least squares approach to assess player contributions to team success while controlling for the opposing teams' quality of play. The results are consistent with prior research and commonly used analytical methods while introducing novelty to the field of player performance evaluation. The initial focus is a single team, the Indiana Pacers, to study the effectiveness of this approach but can be expanded league-wide with enhanced access to data and resources.
Over the past two decades, increasing attention has been given to the mobilization of tax revenues in developing countries. Numerous empirical studies have investigated the impact of economic, structural, institutional, and social factors on public revenues, with a strong focus on corruption. This article contributes to the literature by distinguishing between various types of corruption and examining their nonlinear relationships with tax revenue. By utilizing disaggregated V-Dem indicators for corruption, and applying a dynamic GMM approach to address the endogeneity of corruption, the article also examines macroeconomic determinants of tax revenue mobilization in 122 middle- and lowincome countries from 1990 to 2017. The findings demonstrate that corruption has a nonlinear relationship, shaped by both its scale and nature.
This study explores how individual mental models and beliefs-when misaligned with the objective structure of wealth distribution-can influence macroeconomic inequality. Using an integrated framework that combines agent-based modeling (ABM) and system dynamics (SD), we investigate the effects of micro-level behavioral assumptions on wealth outcomes. Drawing inspiration from Michael Sandel's critique of meritocracy, we test whether cognitive biases, such as those grounded in prospect theory and meritocratic perceptions, can reshape wealth dynamics even in a purely stochastic economic environment. Our simulations are based on a modified version of Wilensky's Simple Economy model, termed the Flexible Simple Economy, which introduces agents with differing risk profiles based on behavioral economics. The findings reveal that mental models significantly affect the long-term distribution of wealth: prospect theory-based agents produce more egalitarian outcomes, whereas meritocratic beliefs tend to exacerbate inequality. These results suggest that policies targeting belief systems and behavioral expectations-rather than solely redistributive interventions-may be crucial for addressing economic inequality. By demonstrating a feedback loop between individual perceptions and systemic outcomes, this study highlights the central role of cognitive and psychological factors in shaping economic distributions.
On April 2, 2025, President Donald Trump announced a wide-ranging set of "reciprocal tariffs" against many of its trading partners. The calculation of these tariffs have elicited a largely negative reaction in part due to the simple formula used to calculate them. In this note, I provide a model which, under the proper assumptions, does indeed result in the administration's formula. I, however, leave it to the reader to judge whether these assumptions are reasonable.
An increase in the aggregate markup induces substitution of primary inputs for intermediate inputs, and substitution of labor for capital. Both effects lower the labor share if the inputs are complements. A reasonable calibration shows that a 4% increase in the markup lowers U.S. labor share by 7.5 percentage points, with input substitution accounting for about one third of the total impact.
This study examines the effect of the PAYG tax rate from short-and long-run perspectives using an overlapping-generations model with pay-as-you-go (PAYG) social security and retirement decision-making by the government. The findings are as follows: First, when the government is myopic, a tax rate exists that maximizes the utility of the present generation or some other generation in transition. In this case, the reason for introducing a PAYG pension is acknowledged. Second, when the government is concerned only with the economic growth rate in the long run, the tax rate has a negative effect on the economic growth rate, which means that PAYG social security should not be introduced. Third, the long-term economic growth rate can increase if retirement is prolonged.
The study empirically investigates the impact of stock exchange listing on the financial stability of Indian Small and Medium Enterprises (SMEs). The study uses an unbalanced panel of sixty-four listed Indian SMEs from 2012 to 2023 and seeks to explore the performance of the selected SMEs before and after listing. It explores the impact of listing in two ways: first, using a fixed-effects panel regression it explores if listing helps SMEs improve their financial stability and second, using a fixed-effects ordered logit regression it explores if listing helps SMEs enter a higher zone of financial stability. Financial stability is measured by Altman's Z''-Score (2005). The Z''-Scores are used as the dependent variable in the first model while Z''-Score zones are used as ordered dependent variable in the second model. The listing dummy is the main independent variable for both models, the study uses control variables including company-related factors and macroeconomic variables including a pandemic dummy. The study finds significant impact of stock exchange listing in improving SMEs' financial stability and helping them enter a higher financial stability zone. Hence, the study suggests that access to capital market can benefit SMEs to raise funds through newer channels, and thus can enhance their financial stability by lowering the probability of failure faced through obstacles in accessing external finance. The insignificant pandemic dummy shows risk-resilient nature of SMEs.
