College Choice, Selection, and Allocation Mechanisms: A Structural Empirical Analysis
J.-R. Carvalho, T. Magnac, Qizhou Xiong
Quantitative Economics,
No. 3,
2019
Abstract
We use rich microeconomic data on performance and choices of students at college entry to analyze interactions between the selection mechanism, eliciting college preferences through exams, and the allocation mechanism. We set up a framework in which success probabilities and student preferences are shown to be identified from data on their choices and their exam grades under exclusion restrictions and support conditions. The counterfactuals we consider balance the severity of congestion and the quality of the match between schools and students. Moving to deferred acceptance or inverting the timing of choices and exams are shown to increase welfare. Redistribution among students and among schools is also sizeable in all counterfactual experiments.
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An Evaluation of Early Warning Models for Systemic Banking Crises: Does Machine Learning Improve Predictions?
Johannes Beutel, Sophia List, Gregor von Schweinitz
Abstract
This paper compares the out-of-sample predictive performance of different early warning models for systemic banking crises using a sample of advanced economies covering the past 45 years. We compare a benchmark logit approach to several machine learning approaches recently proposed in the literature. We find that while machine learning methods often attain a very high in-sample fit, they are outperformed by the logit approach in recursive out-of-sample evaluations. This result is robust to the choice of performance measure, crisis definition, preference parameter, and sample length, as well as to using different sets of variables and data transformations. Thus, our paper suggests that further enhancements to machine learning early warning models are needed before they are able to offer a substantial value-added for predicting systemic banking crises. Conventional logit models appear to use the available information already fairly effciently, and would for instance have been able to predict the 2007/2008 financial crisis out-of-sample for many countries. In line with economic intuition, these models identify credit expansions, asset price booms and external imbalances as key predictors of systemic banking crises.
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Housing Consumption and Macroprudential Policies in Europe: An Ex Ante Evaluation
Antonios Mavropoulos, Qizhou Xiong
IWH Discussion Papers,
No. 17,
2018
Abstract
In this paper, we use the panel of the first two waves of the Household Finance and Consumption Survey by the European Central Bank to study housing demand of European households and evaluate potential housing market regulations in the post-crisis era. We provide a comprehensive account of the housing decisions of European households between 2010 and 2014, and structurally estimate the housing preference of a simple life-cycle housing choice model. We then evaluate the effect of a tighter LTV/LTI regulation via counter-factual simulations. We find that those regulations limit homeownership and wealth accumulation, reduces housing consumption but may be welfare improving for the young households.
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Pricing Sin Stocks: Ethical Preference vs. Risk Aversion
Stefano Colonnello, Giuliano Curatola, Alessandro Gioffré
Abstract
We develop a model that reproduces the return and volatility spread between sin and non-sin stocks, where investors trade off dividends with the ethical assessment of companies. We relax the assumption of boycott behaviour and investigate the role played by the dividend share of sin stocks on their return and volatility spread relative to non-sin stocks. We empirically show that the dividend share predicts a positive return and volatility spread. This pattern is reproduced by our model when dividends and ethicalness are complementary goods and investors are sufficiently risk averse.
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Career Experience, Political Effects, and Voting Behavior in the Riksbank’s Monetary Policy Committee
Stefan Eichler, Tom Lähner
Economics Letters,
June
2017
Abstract
We find that career experience shapes the voting behavior of the Riksbank’s Monetary Policy Committee (MPC) members. Members with a career in the Riksbank and the government prefer higher rates. During a legislation with a center-right (center-left) party administration, MPC members with a career background in the government favor higher (lower) interest rates. Highlights: • The determinants of voting behavior in the Swedish Riksbank are considered. • Voting is analyzed with random effects ordered logit models for 1999–2013. • Interplay of career experience and political factors shapes voting behavior. • Government or Riksbank background leads to higher interest rate votes. • Partisan voting behavior is detected for members with government background.
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The Effects of Local Elections on National Military Spending: A Cross-country Study
Liuchun Deng, Yufeng Sun
Defence and Peace Economics,
No. 3,
2017
Abstract
In this paper, we study the domestic political determinants of military spending. Our conceptual framework suggests that power distribution over local and central governments influences the government provision of national public goods, in our context, military expenditure. Drawing on a large cross-country panel, we demonstrate that having local elections will decrease a country’s military expenditure markedly, controlling for other political and economic variables. According to our preferred estimates, a country’s military expenditure is on average 20% lower if its state government officials are locally elected, which is consistent with our theoretical prediction.
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Inflation Dynamics During the Financial Crisis in Europe: Cross-sectional Identification of Long-run Inflation Expectations
Geraldine Dany-Knedlik, Oliver Holtemöller
IWH Discussion Papers,
No. 10,
2017
Abstract
We investigate drivers of Euro area inflation dynamics using a panel of regional Phillips curves and identify long-run inflation expectations by exploiting the crosssectional dimension of the data. Our approach simultaneously allows for the inclusion of country-specific inflation and unemployment-gaps, as well as time-varying parameters. Our preferred panel specification outperforms various aggregate, uni- and multivariate unobserved component models in terms of forecast accuracy. We find that declining long-run trend inflation expectations and rising inflation persistence indicate an altered risk of inflation expectations de-anchoring. Lower trend inflation, and persistently negative unemployment-gaps, a slightly increasing Phillips curve slope and the downward pressure of low oil prices mainly explain the low inflation rate during the recent years.
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Private Equity and Industry Performance
Shai B. Bernstein, Josh Lerner, Morten Sorensen, Per Strömberg
Management Science,
No. 4,
2017
Abstract
The growth of the private equity industry has spurred concerns about its impact on the economy. This analysis looks across nations and industries to assess the impact of private equity on industry performance. We find that industries where private equity funds invest grow more quickly in terms of total production and employment and appear less exposed to aggregate shocks. Our robustness tests provide some evidence that is consistent with our effects being driven by our preferred channel.
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Optimizing Policymakers' Loss Functions in Crisis Prediction: Before, Within or After?
Peter Sarlin, Gregor von Schweinitz
Abstract
Early-warning models most commonly optimize signaling thresholds on crisis probabilities. The expost threshold optimization is based upon a loss function accounting for preferences between forecast errors, but comes with two crucial drawbacks: unstable thresholds in recursive estimations and an in-sample overfit at the expense of out-of-sample performance. We propose two alternatives for threshold setting: (i) including preferences in the estimation itself and (ii) setting thresholds ex-ante according to preferences only. Given probabilistic model output, it is intuitive that a decision rule is independent of the data or model specification, as thresholds on probabilities represent a willingness to issue a false alarm vis-à-vis missing a crisis. We provide simulated and real-world evidence that this simplification results in stable thresholds and improves out-of-sample performance. Our solution is not restricted to binary-choice models, but directly transferable to the signaling approach and all probabilistic early-warning models.
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