Volume 17, Number 3, 2025

EN:

This study models a representative agent with generalized disappointment aversion preferences in an endowment economy. This model addresses the average upward slope in U.S. real bond yields, equity premium puzzle, and equity volatility puzzle. We integrate a two-state Markov switching process for economic cycles coupled with an independent rare disaster risk. During economic expansions, disaster risk increases the probability of disappointment, thereby reinforcing precautionary saving and reducing the risk-free rate. During recessions, diminished concern about disappointment encourages borrowing and increases the risk-free rate. This pattern engenders countercyclical fluctuations in risk-free rates and accounts for the upward-sloping average yield curve.

EN:

We analyze the effects of international trade on structural change. We show a positive correlation between openness and the share of the agricultural sector for developing economies and present a model to rationalize this stylized fact. We built a two-sector model to compare the autarky and open economy equilibrium. The results indicate that, for developing economies, international trade may delay structural change. If the comparative advantage is in agricultural goods, trade leads to greater specialization in this kind of goods and lower participation of other goods.

EN:

This paper analyzes the effects of the COVID-19 recession on the rate of return to schooling for twenty industries in Pennsylvania. Using data from the American Community Survey 2011-2021, we find the rate of return to schooling declined by 0.3 percentage points during COVID years from its pre-COVID level, and COVID effects on the rate of return differed among industries in Pennsylvania. COVID increased the returns to schooling for three industries, decreased the returns to schooling for six industries, and had no effect on the returns to schooling for the remaining eleven industries. The changes in the rate of return to schooling reflect shifts in the wage premium between high- and low-wage workers.

EN:

Controlling for macroeconomic indicators and trade openness, this study examined the impact of economic policy uncertainty on exchange market pressure for a panel of 25 countries from 2003Q2 to 2021Q3. The pooled mean group estimator, which allows for variation in short-run estimates and error variances but constrains long-run parameters to be the same, was employed to conduct the analysis. The overall panel was further split into developed, developing, and emerging economies panels to check if there was variation in the effect of economic policy uncertainty. Further, we split the entire sample into pre and post-GFC period to account for potential nonlinearity caused by the structural break (i.e., global financial crisis). Results indicate significant positive effect of economic policy uncertainty on EMP1. Economic policy uncertainty has larger impact on developing and emerging economies EMP1 than their developed counterparts entire sample period and all countries panel all sample periods. For EMP2 economic policy uncertainty has significant effect only for developing and emerging economies entire sample period. Furthermore, the effect of uncertainty in economic policy on EMP1 is larger in pre-GFC period than post-GFC period for all countries and developed economies panel. For developing and emerging economies, post-GFC is larger than pre-GFC period. All the remaining variables have mixed effect on either of the exchange market pressure indexes.

EN:

This study considers the nonlinear relationship between GDP growth and unemployment in France (1975–2024) using a logistic smooth transition regression (LSTR) model. Findings reveal a threshold unemployment rate of 7.93%, above which the traditional Okun’s law holds (GDP growth reduces unemployment). Below this threshold, an inverted Okun’s law emerges, where economic growth coincides with rising unemployment. This is explained by technological advancements, skill mismatches, and delayed employment adjustments. The results indicate that macroeconomic policies based on linear assumptions are limited in their capacity to address unemployment challenges effectively. Recognizing these nonlinear dynamics is crucial for designing effective labor market policies that account for asymmetries in economic fluctuations.