Vienna University of Economics and Business
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Pandemics and protectionism: evidence from the "Spanish" flu
Full text linkThe impact of COVID-19 on recent tendencies towards international isolationism has been much speculated on but remains to be seen. We suggest that valuable evidence can be gleaned from the “Spanish” flu of 1918–20. It is well-known that the world fell into a protectionist spiral following the First World War, but scholars have almost exclusively ignored the impact of the pandemic. We employ a difference-in-differences strategy and find that the flu had a significant impact on trade policy, independent of the war. In our preferred specification, a one standard deviation increase in excess deaths during the outbreak implied 0.022 percentage points higher tariffs subsequently, corresponding to an increase of one third of a standard deviation in tariffs. Health policy should aim to avoid the experience of the interwar period and consider the international macroeconomic impact of measures (not) taken
Essays in Financial Economics
Full text linkChapter 1: What Flows Around Comes Around:
Mean Reversion and Portfolio Flows
This paper investigates mean reversion properties of real effective exchange rates (REERs)
using a semi-parametric quantile autoregression approach. This method accounts for nonnormality
and captures asymmetric and dynamic adjustments towards the REER’s long run
equilibrium, conditional on the size of the shock to the REER. Due to the nonstandard limiting
distribution of our tests, we apply a resampling procedure for robust inference. Using
a sample of 29 countries over the period 1980–2017, we indeed show that the REER features
non-linear mean-reverting tendencies following large shocks. The REER adjusts dynamically
and asymmetrically towards its long run equilibrium, conditional on the size of the shock. We
find half-lives of less than one year in some cases for the most extreme quantiles. Additionally,
panel regressions indicate that this behavior can be explained by portfolio flows. Large
deviations in the REER from its long run mean are followed by debt portfolio flows from international
investors. These flows are associated with an appreciation in the REER, conditional
on the level of deviation and the shocks incurred, leading to faster mean reversion in REERs.
In the most extreme quantile, the flows move the REER back towards its mean by 1.78% per
month.
Chapter 2: Understanding Volatility-Managed
Portfolios
Contrary to the intuition that the standard risk-return tradeoff should lead to underperformance
of a portfolio that scales down exposure during volatile periods a recent paper by Moreira
and Muir (2017) actually shows that volatility-managed portfolios produce robust and
significant alphas. The present paper investigates the mechanisms that lead to the outperformance
of volatility management. By implementing timing regressions and relating returns
of a volatility-managed portfolio to discount-rate, cash-flow and expected volatility news we
provide evidence that volatility management outperforms by levering up good times without
increasing downside exposure to fundamental risk drivers. On the contrary, during the most
severe cumulative news shocks (either to cash flows, discount rates or expected volatility) the
scaling strategy suffers less than the buy-and-hold portfolio and, thus, increases investor utility.
Furthermore, we relate volatility-managed strategies to popular timing strategies based
on a measure of risk-neutral variance as a lower bound for the expected equity risk premium.
We find that strategies that combine elements from both, volatility management and timing
based on risk-neutral variance, outperform over a recent sample period and produce significant
alphas in spanning regressions, posing further puzzles for the asset pricing literature.
Chapter 3: Analyst Forecasts and Currency Markets
I examine the forecasting performance, directional accuracy, rationality and economic value
of analyst forecasts and characteristics of investment portfolios built from these forecasts for
30 currency pairs from 2006 to 2020. My results show that analyst forecasts perform worse
than forecasts based on a random walk and forward rates and that they are biased and do
not provide significant economic value to investors. Forecasts from global systemically important
banks do not differ from non-systemically important banks in terms of forecasting ability.
Median forecasts may strongly deviate from market expectations, while analyst forecast dispersion
is positively associated with future currency returns. Portfolios built from analyst
forecasts tend to strongly underperform the dollar factor, value, carry and momentum portfolios
and are spanned by them. My findings indicate that expected returns extracted from
analyst forecasts are negatively related to realized excess returns in FX markets and thus contribute
to the literature on survey-based returns in asset pricing
Immigration policy and fertility: Evidence from undocumented migrants in the U.S.
Full text linkUsing the 2005–2014 waves of the American Community Survey – a period characterized by the rapid expansion of interior immigration enforcement initiatives across the United States, we evaluate the impact of a tougher policy environment on undocumented immigrants’ fertility. We find that a one standard deviation increases in enforcement lowers childbearing among likely undocumented women by 5%. The effect stems from police-based measures linked to increased deportations, which may raise uncertainty about the future of the family unit and its resources
Macro-level efficiency of health expenditure: Estimates for 15 major economies
Full text linkThe coronavirus disease 2019 (COVID-19) pandemic highlights the importance of strong and resilient health systems. Yet how much a society should spend on healthcare is difficult to determine because additional health expenditures imply lower expenditures on other types of consumption. Furthermore, the welfare-maximizing (“efficient”) aggregate amount and composition of health expenditures depend on efficiency concepts at three levels that often get blurred in the debate. While the understanding of efficiency is good at the micro- and meso-levels—that is, relating to minimal spending for a given bundle of treatments and to the optimal mix of different treatments, respectively—this understanding rarely links to the efficiency of aggregate health expenditure at the macroeconomic level. While micro- and meso-efficiency are necessary for macro-efficiency, they are not sufficient. We propose a novel framework of a macro-efficiency score to assess welfare-maximizing aggregate health expenditure. This allows us to assess the extent to which selected major economies underspend or overspend on health relative to their gross domestic products per capita. We find that all economies under consideration underspend on healthcare with the exception of the United States. Underspending is particularly severe in China, India, and the Russian Federation. Our study emphasizes that the major and urgent issue in many countries is underspending on health at the macroeconomic level, rather than containing costs at the microeconomic level
Eyes Wide Shut? Understanding and Managing Consumers’ Visual Processing of Country-of-Origin Cues
Full text linkIn the context of the on-going debate regarding the relevance of the country of origin (COO) phenomenon and drawing from cue utilization theory as well as research on visual attention, we conduct three eye-tracking experiments that investigate (a) whether consumers naturally detect COO labels, (b) whether such detection influences subsequent behavioural intentions and (c) whether visual attention to COO labels can be externally motivated. Results consistently show that the majority of COO labels on product pack-ages are indeed noticed by consumers. While the effects of COO on behavioural intentionsare conditional on the duration of visual attention, dwell times on COO labels, on average, exceed the tipping point necessary to allow such effects. Importantly, whether and for how long COO labels are attended to can be motivated by differentially priming con-sumers’ competence (vs. warmth)-based judgment goals. Implications of these findings for levering COO cues in marketing strategies are considered
The divergent narratives and strategies of unions in times of social-ecological crises: fracking and the UK energy sector
Full text linkThe issue of fracking highlights the variability of trade union approaches to the environment in the UK energy sector, as reflected in their narratives and strategic organising orientations. Stories alone cannot change the material interests underlying complex societal conflicts, yet transformative policies on the climate crisis cannot emerge without a coherent story about the environmental crises and possible solutions. This article uses unions’ positions on fracking as a proxy for opposing/supporting/hedging against climate action to see how divergent positions amongst the UK’s three biggest unions in the energy sector (UNISON, Unite and GMB) and the TUC are reinforced or challenged by internal union narratives and strategic foci. Drawing on four indepth expert interviews and 148 union documents, the main union narratives and strategies are analysed and clustered. The article’skey insight is that unions’ specific narratives differ depending on a union’s orientation. Pro-frackingunions address the short-term immediate financial and material concerns of members and hence promote business partnerships, while anti-fracking unions develop broad-based grass-roots alliances to address the climate crisis. The key entry point for transformative coalitions lies in promoting a coherent and positive narrative about transformative change, in line with scientific evidence
A study into the practice of reporting software engineering experiments
Full text linkIt has been argued that reporting software engineering experiments in a standardized way helps researchers find relevant information, understand how experiments were conducted and assess the validity of their results. Various guidelines have been proposed specifically for software engineering experiments. The benefits of such guidelines have often been emphasized, but the actual uptake and practice of reporting have not yet been investigated since the introduction of many of the more recent guidelines. In this research, we utilize amixed-method study design including sequence analysis techniques for evaluating to which extent papers follow such guidelines. Our study focuses on the four most prominent software engineering journals and the time period from 2000 to 2020. Our results show that many experimental papers miss information suggested by guidelines, that no de facto standard sequence for reporting exists, and that many papers do not cite any guidelines. We discuss these findings and implications for the discipline of experimental software engineering focusing on the review process and the potential to refine and extend guidelines, among others, to account for theory explicitly
Population growth and automation density: theory and cross-country evidence
Full text linkWe analyze the effects of declining population growth on automation. Theoretical considerations imply that countries with lower population growth introduce automation technologies faster. We test the theoretical implication on panel data for 60 countries over the time span 1993-2013. Regression estimates support the theoretical implication, suggesting that a 1% increase in population growth is associated with an approximately 2% reduction in the growth rate of robot density. Our results are robust to the inclusion of standard control variables, different estimation methods, dynamic specifications, and changes with respect to the measurement of the stock of robots.Series: Department of Economics Working Paper Serie
Building trust: The costs and benefits of gradualism
Full text linkWe examine the prevalence of gradualist strategies and their effect on trust-building and economic gains in a setting with an infinite horizon, asymmetric information regarding the trustworthiness of receivers, and various levels of trust. The theoretical literature suggests that gradualist strategies mitigate asymmetric information problems and foster trust-building. However, we theoretically and experimentally show that gradualism sometimes reduces joint payoffs relative to a simple “binary” setting in which trust is an all-or-nothing decision. In a series of experiments, we vary the degree of asymmetric information as well as the economic returns to trusting behavior, and delineate circumstances under which gradualism may promote or curb efficiency
The Foundational Economy as a Cornerstone for a Social–Ecological Transformation
Full text linkThis theoretical paper synthesises research on the foundational economy and its contribution to a social–ecological transformation. While foundational thinking offers rich concepts and policies to transition towards such transformation, it fails to grasp the systematic non-sustainability of capitalism. This weakness can be overcome by enriching contemporary foundational thinking with feminist and ecological economics. Whereas the feminist critique problematises foundational thinking’s focus on paid labour, the ecological critique targets Sen’s capability approach as a key inspiration of foundational thinking, arguing that a theory of human needs is better suited to conceptualise wellbeing within planetary boundaries. Based on this, we outline a novel schema of economic zones and discuss their differentiated contributions to the satisfaction of human needs. By privileging need satisfaction, such broadened foundational thinking demotes the tradable sector and rentier economy, thereby revaluating unpaid work as well as respecting ecological imperatives. This empowers new articulations of social and ecological struggles to improve living conditions in the short run, while having the potential in the long run to undermine capitalism from within