Calendrier du 01 octobre 2020
Macroeconomics Seminar
Du 01/10/2020 de 16:00 à 17:30
Using Zoom
MUELLER Gernot (Tuebingen)
The exchange-rate insulation puzzle
écrit avec Giancarlo Corsetti, Keith Kuester and Sebastian Schmidt
According to the received wisdom, flexible exchange rates insulate a country from foreign shocks. This notion is well grounded in theory, from the classics (Meade 1951, Friedman 1953) to the more recent dominant currency paradigm (Gopinath et al 2020). We confront it with new evidence from Europe. Specifically, we study how monetary and financial shocks that originate the euro area spill over to its neighbor countries. We exploit the variation of the exchange rate regime across time and countries to assess whether it alters the spillovers: it does not – flexible exchange rates fail to provide insulation against euro area shocks. This result is robust across a number of specifications and holds up once we control for global financial conditions. Based on standard theory, we offer a simple explanation for the lack of insulation: if central banks pursue a inflation targeting strategy based on consumer prices, the response of the exchange rate to foreign shock is muted and there is hardly any more insulation than under an exchange rate peg.
TOM (Théorie, Organisation et Marchés) Lunch Seminar
Du 01/10/2020 de 12:30 à 13:30
salle R1-14, campus Jourdan - 75014 Paris
MUN Sofiia (CES, Université Paris 1 Panthéon-Sorbonne)
An Econometric Estimation of Prospect Theory for Natural Uncertainty
écrit avec Emmanuel Kemel (HEC-Paris)
Prospect Theory (PT) has been one of the most experimentally studied models for describing behavior under risk. This model also applies to decisions involving natural sources of uncertainty, the context in which probabilities are unknown, and that concerns the large majority of real-life decisions. Surprisingly however, the literature does not propose any elicitation of PT in such context.
The paper reports a lab experiment allowing to estimate all the PT parameters in decisions involving a natural source of uncertainty: the participation rate in the 2019 European Parliament elections in the UK. This source is a genuine example of uncertainty inasmuch as is has no objective probability distribution, nor even past frequencies related to similar (Brexit) context. We analyzed the data using structural econometric modeling, that allows to estimate subjective probabilities, jointly with PT components. We also elicited PT parameters for risk, considered as a benchmark, in a within-subject design.
The main features of CPT apply under natural uncertainty: attitudes follow the fourfold pattern, and evidence for loss aversion is captured. Additionally, the estimated subjective probabilities give plausible results.
Behavior seminar
Du 01/10/2020 de 11:00 à 12:00
online
GRIMALDA Gianluca (Kiel University)
Sanctions and International Interactions Improve Cooperation to Prevent Collective Losses
écrit avec Alexis Belianin, Heike Hennig-Schmidt, Till Requate, Marina V. Ryzhkova
The use of sanctions is often invoked to bolster international agreements. For instance, it has been proposed to link climate change agreements – where costs of compliance normally exceed the benefits for a country - with trade sanctions – where a country normally benefits from having sanctions removed. We investigate whether sanctions may improve international cooperation experimentally.
Participants are involved in a “collective risk social dilemma” (CRSD), where groups of individuals are threatened by the possibility of a large loss in their savings. The loss probability is proportional to the amount of “insurance” bought by individuals. Crucially, insurance bought by an individual reduces the risk of loss for all individuals. Self-interested individuals will free ride on others’ without buying any insurance. This would lead to a “tragedy of the commons” because the collective loss would occur with certainty. The cooperative solution is instead for the group to reduce the probability of loss to 30%.
We involve German and Russian participants because, according to previous research, the two populations belong to different cultural areas with respect to the effectiveness of sanctions in sustaining cooperation. German participants can typically rely on sanctions to significantly increase group cooperation, whereas sanctions are typically detrimental in Russia, because of the high levels of anti-social punishment – i.e. punishment of cooperators – and of vengeance against punishers. This is the first experiment where the effectiveness of punishment is tested internationally. The use of populations from different cultural areas makes the prospect of cooperation particularly demanding.
We implemented eight different experimental conditions, in which the CRSD is played within countries or between countries, with or without sanctions, either revealing or not revealing the nationality of the counterparts. We find that: (1) German groups achieve higher cooperation - that is, probability of loss avoidance - than Russian groups in within-country interactions. (2) Introducing sanctions significantly increases the probability of loss avoidance in Germany, but not in Russia. (3) Cooperative behavior by Russian participants significantly increases and converges to cooperative behavior by German participants in international interactions when sanctions are available. The convergence is slower when sanctions are not available. (4) Results are the same regardless of whether national identities are revealed or not revealed. (5) Expected payoffs are always higher in the non-sanction conditions than in sanction conditions. Arguably, this is the case because people are risk averse and attach high value to a certainty premium.