Prof. Dr. Zongwu Cai

Date and Time: December 26th, 2017, 2:30 - 4:00 pm

Room: A 101 in the Economics Building (Museum)

Abstract

Testing predictability of asset returns is a cornerstone issue in modern asset pricing and the related fields. It has been one of the hottest research topics in asset pricing field in the recent two decades. In this talk, I will combine several of my papers on testing predictability of asset returns and review the recent developments in this area. In particular, I will outline some future research topics in this area.

 

About the speaker

Dr. Zongwu Cai is the Charles Oswald Professor of Econometrics and a Professor of Economics at Department of Economics, The University of Kansas. Furthermore, he is a member of the Scientific Board of our CFDS. His research interests include econometrics, quantitative finance, risk management, data-analytic modeling, nonlinear and nonstationary time series, and their applications, and among others. His primary research focuses on developing and justifying econometric methodology and applications in economics and finance. His work has been published extensively in professional journals, including both leading econometrics and statistics journals: Journal of Econometrics, Econometric Theory, The Journal of American Statistical Association, and more.

 

Date and Time: October 20th, 2017, 2:00 - 3:30 pm

Room: A 101 in the Economics Building (Museum)

Abstract

We trace the rise of the so called oligarchs in post-Soviet Russia and examine their relationship to income distribution in Russia. When Russia moved to a market economy in the 1990s a new business elite evolved. Russia’s distinctive path towards market economy, among other factors, gave rise to the oligarchs who now control large parts of the economy and have a strong standing within politics and society.

Using a unique regional data set on the locations of oligarchs’ businesses across the Russian regions, we test Acemoglu’s (2008) proposition that oligarchic societies experience extreme income inequality. Our results show significantly higher levels of income inequality in regions with a higher presence of oligarchs.

 

About the speaker

Jarko Fidrmuc is holding the Chair of International Economics at Zeppelin University, Friedrichshafen, Germany. His main research areas are international economics, in specific empirical analysis of European Integration and globalization, analyses of economic cycles and theory of optimal currency area, and development of emerging economies in Eastern Europe and Asia.

Date and Time: December 20th, 2018, 10:00 am - 12:00 pm

Room: Meeting Room, 1st floor, Dongliuzhai (Old Campus)

 

Abstract

Incumbency advantage is the difference in the probabilities of remaining in versus losing office for an incumbents party. I show that incumbency advantage increases accountability of political parties. To do so, I develop a repeated probabilistic voting model with two parties that alternate in office. Parts of the electorate are forward-looking and vote according to their (probabilistic) party preferences, and parts of the electorate consider the amount of rent-seeking by the incumbent party when they make their voting decision between two parties. The model allows for two different sources of incumbency advantage. Preference-driven incumbency advantage occurs if the random distribution of party preferences is biased in favor of the incumbent party. Accountability driven incumbency advantage is the result of the strategic interaction between retrospective voters who want to limit rent-seeking activities and the parties. It is always intertwined with electoral punishment, the loss in likelihood of an election victory when an incumbent party does engage in rent-seeking above a threshold. I show that it possible to distinguish the effects of incumbency advantage and electoral punishment on the minimum level of rent-seeking that is sustainable in equilibrium. While there is no accountability without the presence of backward-looking voters and electoral punishment, additional external incumbency advantage leads to lower rents and increasing accountability. The larger the incumbency advantage, the more important it is for a party to win the next election. Consequently, the incumbent party is willing to give up more rent-seeking in return for a higher likelihood of being reelected. The positive effect of incumbency advantage on accountability somewhat counterintuitive because it is widely believed that parties and politicians are less likely to be voted out of office are less accountable. However, this belief would only be justified if only cases with a combination of large incumbency advantage and low degrees of electoral punishment were conceivable. While this is a typical combination for countries with some degree of electoral fraud and manipulation, for example Russia under Putin, it is unlikely to occur in functioning mature democracies. In addition to its substantive contribution, this paper also provides a straightforward model of probabilistic voting that can be applied to different settings in which different groups of voters have random turnouts.

Date and Time: November 5th, 2018, 2:30 - 4:00 pm

Room: Meeting Room, 1st floor, Dongliuzhai (Old Campus)

 

Abstract

I show that, under common parameter values, a standard New-Keynesian model with standard search and matching frictions and Nash bargaining accounts significantly well for almost all key business cycle properties of the relevant U.S. macroeconomic variables, including relative standard deviations, autocorrelations, and correlations with output. In addition to its ability to explain the dynamics of inflation and persistent effects of monetary shocks, the model can produce exact cross correlations of the three central aggregate labor variables-unemployment, labor market tightness, and vacancies- as seen in the data. What accounts most for the success of the model is a low value for vacancy costs to GDP ratio, that is equivalent to having a high value for what Ljungqvist and Sargent (AER, 2017) call the inverse of the fundamental surplus fraction, and is inextricable from it. However, in contrast to what Ljungqvist and Sargent suggest that the fundamental surplus fraction is the single intermediate channel through which economic forces generating a high elasticity of market tightness with respect to productivity, I show that the fundamental surplus fraction (or the vacancy cost-GDP ratio) can be at their lowest possible values in the steady state, but the model doesn't generate enough volatility in unemployment if the steady state rate of unemployment is very high. Another contribution of the paper is to demonstrate that how wage inertia emerges as an internal feature of the standard matching model (due to the free-entry condition in vacancy creation) if one wants to have high volatility in unemployment. In other words, due to the nature of the model, there is a trade-off between wage volatility and unemployment volatility. However, this trade-off doesn't necessary emerge in the presence of a labor tax.

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