master projects – Page 8

The pass-through of United States monetary policy to emerging markets: evidence at the firm level from India

Master’s project by Ana Arencibia Pareja, Marina Conesa Martínez, Iuliia Litvinenko, and Ruth Llovet Montañés

Editor’s note: This post is part of a series showcasing Barcelona GSE master projects by students in the Class of 2015. The project is a required component of every master program.

Authors:
Ana Arencibia Pareja, Marina Conesa Martínez, Iuliia Litvinenko, and Ruth Llovet Montañés

Master’s Program:
International Trade, Finance and Development

Paper Abstract:

This paper evaluates the reaction of Indian firms’ equity prices to U.S. monetary policy changes during the period from 2005 to 2015, limiting the analysis to the days where monetary policy announcements took place. We find that a one percentage point permanent increase in Fed funds rate is associated with a 0.09% drop in equity prices, being this association large in economic terms. Results also show that the response of Indian companies is not homogeneous. For instance, we find that equity prices of companies with higher capital over total assets react less compared to firms with low capital levels, given the same U.S interest rate increase. Moreover, we also see that larger firms, proxied by the number of employees, will be less affected by the U.S monetary tightening. The same conclusions can be obtained when using EBIT over interest expenses, cashflows over sales and dividends per share. Besides, we show that stocks respond much stronger to monetary shocks in periods of contractionary interventions and higher global risk aversion. We propose firms to be better capitalized by holding more equity relative to loans and relying less on banks’ short-term external debt denominated. Finally, we also recommend them to have more liquidity, which goes in line with having a larger EBIT and bigger cashflows. However, we can definitely conclude that advanced economies should promote greater international policy cooperation and communicate their monetary policy intention. This would reduce the risk of large market volatility of Emerging Countries´ economies.

Presentation Slides:

[slideshare id=50496909&doc=us-monetary-policy-emerging-markets-150714064158-lva1-app6892]

The end of the master’s in two acts

Competition and Market Regulation student Fernando Cota ’15 just finished his master project. Here’s how he celebrated:

https://twitter.com/fer_cota/status/609025041460793345

One of the perks of studying in Barcelona…

Graduation is right around the corner! Stay tuned in July and August for examples of this year’s master projects.

The Credit Channel in Monetary Policy Transmission at the Zero Lower Bound. A FAVAR Approach

Editor’s note: This post is part of a series showcasing Barcelona GSE master projects by students in the Class of 2014. The project is a required component of every master program.

The Credit Channel in Monetary Policy Transmission at the Zero Lower Bound. A FAVAR Approach

Authors:

Alexandru Barbu, Zymantas Budrys, Thomas Walsh

Master Program:

Economics

Paper Abstract:

This paper aims to provide a methodology for identifying the credit channel in US monetary policy transmission, consistent with periods at the zero lower bound. We follow Ciccarelli, Maddaloni and Peydro (2011) in identifying credit shocks through quarterly responses in the Federal Reserve’s Senior Loan Officer Survey, but augment their identification strategy in two key ways. First, we use the credit variables inside a Factor Augmented Vector Autoregression, to summarize the information contained in a set of 110 US macroeconomic and financial series. Second, we adopt the shadow rate developed by Wu & Xia (2013) as an alternative to the effective federal funds rate at the zero lower bound. We present our results through impulse response functions and carefully designed counterfactuals. We find that monetary policy shocks have considerably larger effects through the credit supply side than the credit demand side. Building counterfactual analyses, we find the macroeconomic effects arising from the supply side of the credit channel to be sizable. When focusing on the recent unconventional policies, our counterfactuals show only very modest movements in credit variables, suggesting that the positive effects of unconventional monetary policy during the crisis may not have acted strongly through the credit channels.

Read the full paper

Too-many-to-fail: a theoretical approach

Editor’s note: This post is part of a series showcasing Barcelona GSE master projects by students in the Class of 2014. The project is a required component of every master program.

Too-many-to-fail: a theoretical approach

Author:

Jaume Martí

Master Program:

Finance

Paper Abstract:

The recent financial crisis has generated enormous economic and human costs. New regulatory framework has been proposed in order to provide banks with better incentives.

My goal in this project is to theoretically explain several market failures that happened prior to the financial crisis and propose a model that captures these phenomena in the banking sector. To end up, I suggest different macroprudential measures that could be undertaken with the ultimate objective of providing a more stable financial system.

[slideshare id=39413387&doc=too-many-to-fail-140923034120-phpapp02]

Europe out of balance: an analysis of current accounts in Europe

Editor’s note: This post is part of a series showcasing Barcelona GSE master projects by students in the Class of 2014. The project is a required component of every master program.

Europe out of balance: an analysis of current accounts in Europe

Author:

Michel Carlo Nies

Master Program:

Economics

Paper Abstract:

The European sovereign debt crisis should not only be seen as the simple failure to manage public finances, but also as the consequence of divergent balance of payment positions. This paper attempts to shed light on this line of argument by analysing empirically the determinants of current accounts. The principal conclusion is that divergent developments in labour costs and misallocation of capital are behind the developments that led to the sovereign debt crisis. Given these results, this paper also evaluates different policy measures designed to address the issue of diverging current accounts.

Read the full paper or view slides below:

[slideshare id=39413120&doc=europe-current-accounts-140923033450-phpapp02]

Collusion in auctions and the role of communication to sustain it: a microeconomic approach

Editor’s note: This post is part of a series showcasing Barcelona GSE master projects by students in the Class of 2014. The project is a required component of every master program.

Collusion in auctions and the role of communication to sustain it: a microeconomic approach

Author:

Giuseppe Leonello

Master Program:

Competition and Market Regulation

Paper Abstract:

Collusion among bidders in auctions is an important topic in competition economics since it decreases the seller’s revenues and the social welfare. In this project the focus will be on the role of communication among bidders for the incentives to collude.

In the literature, communication among bidders has always been treated as an exogenous variable. This assumption will be relaxed and the choice of communicate will be endogenous and function of the expected collusive profits and the expected costs of collusion represented by the risk to be catch and punished.

The auctioneer can monitor the market and the auction process to discover the collusive agreement, exerting a costly effort.

The model will find the minimum level of effort needed to make bidders not having incentives to communicate and collude. However, the auctioneer will exert this level of effort only when the expected gains are higher than expected costs. For this reason, in some case the optimal choice for the auctioneer will be to lead bidders to collude even if this will not maximize the social welfare.

Government interventions to reach the not collusive equilibrium will be discussed. In particular, they will take the form of an increase in the punishment when bidders are discovered to collude and the subsidization of the cost needed to exert the optimal level of effort.

[slideshare id=39412510&doc=collusion-auctions-slides-140923031725-phpapp02]

Effectiveness of primary care ValCRÒNIC teleHealth program

Editor’s note: This post is part of a series showcasing Barcelona GSE master projects by students in the Class of 2014. The project is a required component of every master program.

Effectiveness of primary care ValCRÒNIC teleHealth program: outcome findings on mortality and healthcare service consumption in patients with high-risk chronic conditions. A cohort study with matched controls in Valencia community, Spain.

Author:

Sherman Kong

Master Program:

Health Economics and Policy

Paper Abstract:

We analyze the mortality and hospitalization level of 512 patients enrolled in the ValCRÒNIC teleHealth program in Valencia public health region with a matched control of 1023 patients with same risk profiles. We obtain medical records of patient sample for 12 months before start of trial and follow-up on consumption level from hospital and primary care facilities for 12 months during program. We observed utilization level before and after trial and found an increase in primary care nurse and home care visitations. We used logistic and zero-inflated Poisson models to estimate effect of program enrollment to intense acute hospital use, deaths and avoidable hospitalization rate. We found insignificant benefits to reducing mortality and intense acute hospital use.

Author’s note: This paper is a work in progress, pending revision of results.

Read the full paper or view slides below:

[slideshare id=39412038&doc=valcronic-telehealth-slides-140923030346-phpapp01]

Government spending news and the term structure of interest rates

Editor’s note: This post is part of a series showcasing Barcelona GSE master projects by students in the Class of 2014. The project is a required component of every master program.

Government spending news and the term structure of interest rates

Authors:

Nicola Cofelice and Sarah Zoi

Master Program:

Macroeconomic Policy and Financial Markets

Paper Abstract:

Studying the effect of a fiscal policy shock on the term structure of interest rates has long been a controversial issue. On the one hand, economic theory predicts that government spending should drive up interest rates; on the other hand, many empirical analyses found negative or not significant responses of the yield curve to different types of fiscal shocks. A recent stream of literature on fiscal foresight showed how news about future fiscal policy may anticipate the effects of public expenditure and pose a challenge for the recovery of structural shocks due to a problem of non-fundamentalness. We study the effect of a “foresight shock” on the term structure of interest rates using an identification strategy based on the information contained in the projections by the Survey of Professional Forecasters. Our results support the evidence of fiscal foresight and show how changes in expectations stimulate positive responses of the term structure anticipating the effects of a government spending shock.

Read the full paper or view slides below:

[slideshare id=38818725&doc=spending-term-structure-slides-140908060451-phpapp02]

Does Extended Time Improve Students’ Performance?

Editor’s note: This post is part of a series showcasing Barcelona GSE master projects by students in the Class of 2014. The project is a required component of every master program.

Does Extended Time Improve Students’ Performance? Evidence from Catalonia

Authors:

Ana María Costa Ramón, Laia Navarro-Sola, Patricia de Cea Sarabia

Master Program:

Economics

Project Summary:

Education is one of the main priorities of developed societies, and countries are investing huge amounts of resources in this area. However, little is known about the effectiveness of the inputs used in the education production function, leaving the final decision of investment to ideological or political reasons. In this context, there is an increasing support of extending class time among politicians and policy-makers as a way of improving education. Our paper is an investigation of the effect of an increase in the number of hours per day of class on the performance of the students.

As identification strategy, we exploit the exogenous variation generated by a policy change in Catalonia (a region of Spain), known as the “sixth hour policy”. This reform introduced one extra hour per day, representing an increase of 20% of the total number of hours per year. It involved an important investment for Catalonia and thus, knowing the effects of the policy is needed in order to assess whether it was effective or if there exists other alternatives. The specific characteristics of the policy implementation provide three different sources of variation: variation between cohorts, generated by the sudden implementation, variation between types of schools, since the policy was only addressed to public schools (leaving private schools timetable unchanged) and in last term, variation across regions, as the reform only affected public schools in Catalonia. These features allow us to take the policy implementation as a natural experiment and thus, to investigate more deeply the effects of extending school time.

Using the PISA database and the econometric specification of differences-in-differences, we find that there is no conclusive evidence of the causal relationship between extending school time and performance improvement. This difficulty comes from the implementation of the policy itself which was done simultaneously with other major educational changes, and thus it is hard to identify the channel through which this effect could be operating.

However, we face this lack of evidence on this causality introducing an innovative methodology in the study of extending time at school. To solve specific concerns about the suitability of the control group we construct a “synthetic control” group (an artificial control group), which is a weighted combination of other Spanish regions chosen to resemble education characteristics of Catalonia before the introduction of the “sixth hour policy” as much as possible. However, the particularities of the region of the study make it very hard to predict its behavior.

All in all, we believe that the use of the synthetic control approach can help to shed light on these issues in different case studies or with more detailed data. The analysis of time as an input in the education production function still requires a lot of research but as we have seen with our case study, natural experiments by themselves could be an imperfect tool. Maybe it is time to use more innovative approaches to this old topic.

Read the full paper or view slides below:

[slideshare id=38818305&doc=extendent-time-students-performance-140908055119-phpapp02]

A bullet a day keeps the doctor away: the effect of war over health expenditure

Editor’s note: This post is part of a series showcasing Barcelona GSE master projects by students in the Class of 2014. The project is a required component of every master program.

A bullet a day keeps the doctor away: the effect of war over health expenditure

Authors:

Rita Abdel Sater and María José Ospina Fadul

Master Program:

Health Economics and Policy

Project Summary:

Although there is an ongoing debate on how much an increase in health expenditure would actually improve the health condition of its population (as this relation also depends in factor such as efficiency), the truth is that the level of expenditure in many developing countries is still under the basic needed level suggested by the World Health Organization. Furthermore, it has become clear that the public budget plays a fundamental role in the financing of a health system: in fact, the public expenditure on health should increase by 5% on average in these countries to provide the basic conditions in order to accomplish the millennium goals. However, the struggle to achieve acceptable levels of health expenditure has faced several obstacles. This article intends to determine if war is in fact one of them.

Within this context, this article tries to determine the effect of war over health expenditure level and composition, particularly in terms of the public budget participation. So far several articles have examined the effects of war over public health but none have determined the effect that it has over the levels and the composition of the health expenditure. Additionally, this article contributes to the existent literature in the sense that it classifies conflicts as high or low intensity and discerners between these two when determining their effect over health expenditure.

We used panel data on the 27 countries that had both episodes of war and episodes of peace in the period that goes from 1995 to 2008. We applied clustering techniques to classify these conflicts as high or low intensity and after this we used Arellano-Bond estimators to determine the effect of war over the level and composition of health expenditure.

Surprisingly, we found that low intensity wars have a negative and statistically significant effect over health expenditure while there seems to be no effect when there is a high intensity war. Moreover, we found that public expenditure in health increases when there is a high intensity war while there is no change in the composition when there is a low intensity war. These results suggest that when there is a high intensity conflict the decrease in private investment in health is compensated by an increase in public expenditure, while in countries exposed to low intensity wars the decrease in private expenditure is not equalized by an increase in public expenditure.

Finally, in terms of the compositions of this expenditure we found that the public expenditure in health as a percentage of total public expenditure stays the same in countries exposed to high intensity conflicts while it decreases in countries with low intensity conflicts. These results, in combinations with the former, provide empirical evidence to support Peacock and Wiseman’s expenditure displacement theory according to which public expenditure increases during times of crisis.

[slideshare id=38816026&doc=effect-war-health-expenditure-140908043800-phpapp01]