Scholarly Publications - Economics
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Item Open Access Co-movements of crude oil prices(Routledge, 2024-01-23) Karcı, Rüya; Doğan, Nükhet; Berument, M. HakanThis paper investigates whether the world crude oil market is globalised in a ‘one great pool’ or is regionalised by examining the prices of 21 different types of crude oil from various regions worldwide. We employ monthly data from October 2011 to November 2020 to construct spatial panel data models. Using three weight matrices, we account for the physical properties affecting crude oil quality and geographical factors. The resulting empirical evidence reveals that although we cannot refute the globalisation hypothesis, there are distinct price mechanisms specific to each type of crude oil. The pricing of crude oil appears to be influenced by a combination of similar and dissimilar qualities, including American Petroleum Institute gravity (API) gravity, sulfur content and geographical location.Item Open Access Benchmark prices and Iraqi oil prices: the asymmetric effects of benchmark prices on three Iraqi oil blends(Econjournals, 2024-03-15) Kahraman, Volkan; Doğan, Nukhet; Berument, HakanThis paper examines the asymmetric effects of benchmark oil prices on the prices of the three major Iraqi oil blends (Basrah Light, Basrah Heavy and Kirkuk) using Kilian and Vigfusson’s (2011) non-linear VAR specification. The empirical evidence reveals that a decrease in benchmark prices decreases Basrah Light and Kirkuk oil blends more than an increase in the benchmark increases the prices of these two Iraqi blends for the October 2002–October 2019 period. However, the asymmetric behavior of Basrah Heavy is the reverse for the April 2015-October 2019 period. Moreover, as the magnitude of the benchmark oil price shocks increases, the degree of asymmetry increases. This shows that Iraq cannot benefit from oil price increases and market developments for its two most important export blends: Basrah Light and Kirkuk. © 2024, Econjournals. All rights reserved.Item Open Access Submodularity and supermodularity in contest games(Wiley-Blackwell Publishing Ltd., 2024-01-04) Karagözoğlu, Emin; Keskin, Kerim; Sağlam, ÇağrıThis paper presents various examples of two-player submodular or supermodular contest games. Emphasizing the three main elements of a contest model, our examples revolve around situations where (i) contest success function allows for a draw, (ii) winning prize is not exogenously given but rather jointly produced, or (iii) individual effort cost also depends on the rival's effort. We then illustrate how submodularity and supermodularity can be used to study the existence of equilibrium, the order structure of the equilibrium set, and monotone comparative statics in such contest game examples.Item Open Access Effects of education on elderly care preferences(Routledge, 2024-12-10) Akyol, PelinThis paper explores the effects of education on elderly care preferences by using the 1997 compulsory schooling reform in Turkey, which extended compulsory schooling from five to eight years, as an instrument. Our results provide evidence that increased schooling due to this reform decreases the likelihood of females agreeing with the statement that ‘children should look after their parents when they are old’. Additionally, it increases their own intention to use formal care options, such as nursing homes, hospices, or home care services, in their old age. The impact of education on the elderly care preferences of males is found to be insignificant. By establishing the causal relationship between education and preferences for elderly care, this paper contributes to our understanding of how higher education can influence intergenerational dynamics and the demand for formal care services.Item Open Access Selection closedness and scoring correspondences(Springer, 2024-08) Koray, Semih; Şenocak, TalatUniversal self-selectivity of a social choice function (SCF) F defined in Koray (Econometrica 68:981–995, 2000) implies that F is either dictatorial or anti-dictatorial. In an attempt to escape this impossibility, here we weaken self-selectivity of an SCF by introducing the notion of selection-closedness pertaining to families of SCFs. As in the self-selectivity setting, a society, which is to make a choice from a set A of alternatives, is also to choose the choice rule that will be employed in making that choice. Self-selectivity of an SCF F requires that F outrivals all available SCFs by selecting itself from among them if it is also used in choosing the choice rule, where the societal preferences on the available SCFs are induced from those on the set A of alternatives in a consequentialist way. Given a collection of SCFs and a nonempty finite set of available SCFs containing also members of an SCF in is now not required any more to select itself from but it suffices that it selects some member of for to be selection-closed. It is shown that a proper subset of the collection of all neutral SCFs is selection-closed if and only if all its members are either dictatorships or anti-dictatorships. We further weaken the notion of selection-closedness to an extent that not only enables us to escape the impossibility result, but also equips us with a yardstick to compare correspondences as to whether or not their singleton valued refinements form a weakly selection-closed family. A rich family of scoring correspondences with strict scoring vectors are shown to pass the test of weak selection-closedness, while the Pareto and Condorcet correspondences fail.Item Open Access Office spaces and urban costs(Routledge, 2023-05-10) Abdurahimov, RamizThis paper aims to provide insights about the role of professional businesses, which are inputs that are sourced more locally than material inputs, in shaping urban land prices. Exploiting an exogenous variation in the form of market access, I estimate how much land prices change as a response to an increase in the use of housing by professional business services. I find that a percentage increase in local office propensity increases urban land prices by 0.59%, controlling for numerous geographical and socio-economic factors. The estimated effect is twice larger when corrected for the endogeneity bias.Item Open Access O-Ring production networks(University of Chicago Press, 2024-01-01) Demir, Banu; Fieler, Ana Cecilia; Xu, Daniel Yi; Yang, Kelly KailiWe document strong skill matching in Turkish firms' production networks. Additionally, in the data, export demand shocks from rich countries increase firms' skill intensity and their trade with skill-intensive domestic partners. We explain these patterns using a quantitative model with heterogeneous firms, quality choices, and endogenous networks. A counterfactual economy-wide export demand shock of 5% leads both exporters and nonexporters to upgrade quality, raising the average wage by 1.2%. This effect is nine times the effect in a scenario without interconnected quality choices. We use the model to study the conditions for the success of export promotion policies.Item Embargo Consideration sets and reference points in a dynamic bargaining game(Elsevier Ltd, 2024-02-08) Karagözoğlu, Emin; Keskin, KerimWe introduce the notion of limited consideration into a bilateral, infinite-horizon, alternating-offers bargaining game. Both agents have reference-dependent preferences, and their reference points are dynamically updated. An agent's current consideration set (or focus) is influenced by the last offer he rejected such that the most salient point in that consideration set becomes his current reference point. We provide an implicit characterization of stationary subgame perfect Nash equilibria in our model. Without resorting to asymmetric or incomplete information, we show that our bargaining game can produce delay and disagreement in equilibrium. In addition to analytical results on the disagreement conditions and the nature of agreements, we provide computational comparative statics on model parameters and study their impacts on delay.Item Embargo Abstract reasoning, theory of mind and character development in the school(Elsevier Ltd, 2024-03-29) Alan, Şule; Türküm, BetülWe show that the development of abstract reasoning and cognitive empathy (theory of mind) is severely hindered when children are deprived of the stimulation of a school environment. We document significantly lower abstract reasoning and cognitive empathy scores in elementary school children who returned from an extended school closure caused by the Covid-19 pandemic relative to proximate pre-pandemic cohorts. This developmental delay has a significant socioeconomic gradient, with underprivileged children experiencing more substantial delays. We also document a significant disruption in the development of socioemotional skills: 0.24 sd lower grit, 0.43 sd lower emotional empathy, 0.06 sd lower epistemic curiosity, and 0.24 sd higher impulsivity. About eight months of school exposure results in a remarkable recovery in abstract reasoning and theory of mind for all socioeconomic groups. However, the measured levels still indicate significant delays relative to the expected developmental trajectories. No notable improvements are observed in socioemotional skills except for curiosity. These findings reveal that the damage school closures inflicted on children goes beyond well-documented academic losses and highlight the crucial role of the school environment in fostering fundamental cognition and socioemotional development in children.Item Embargo Macro and micro of external finance premium and monetary policy transmission(Elsevier BV, 2024-07-20) Altavilla, Carlo; Gürkaynak, Refet Soykan; Quaedvlieg, RogierWe establish basic facts about the external finance premium. Tens of millions of individual loan contracts extended to euro area firms allow studying the determinants of the external finance premium at the country, bank, firm, and contract levels of disaggregation. At the country level, the variance in the premium is closely linked to sovereign spreads, which are important in understanding financial amplification mechanisms. However, country level differences only explain half of the total variance. The rest is predominantly attributed to variances at the bank and firm levels, which are influenced by the respective balance sheet characteristics. Studying the response of the external finance premium to monetary policy, we find that balance sheet vulnerabilities of banks and firms strengthen the transmission of policy measures to financing conditions. Moreover, our findings reveal an asymmetrical effect contingent on the sign and type of the policies. Specifically, policy rate hikes and quantitative easing measures exert a more pronounced impact on lending spreads, further magnified through their repercussions on the external finance premium.Item Embargo A research program on monetary policy for Europe(Elsevier BV, 2024-08-28) Altavilla, Carlo; Bussiere, Matthieu; Gali, Jordi; Gorodnichenko, Yuriy; Gürkaynak, Refet Soykan; Rey, HeleneEuropean macroeconomies remain under-researched. There are compelling reasons for this to change. European issues pose significant economic challenges, are theoretically intriguing, and provide ample data for empirical studies. In this call to action, we outline a research program focused on monetary policy questions relevant for Europe.Item Embargo FDI and import competition and domestic firm's capital structure: Evidence from Chinese firm-level data(Elsevier, 2024-07) Hong, Tongtong; Pyun, Ju HyunThis study explores how foreign competition impacts the capital structure of domestic firms. While existing literature reveals that import competition is associated with a decrease in domestic firms' leverage, we propose a novel perspective concerning the positive effect of inward foreign direct investment (FDI) on leverage. FDI competition can boost demand for debt via productivity spillover to domestic firms, and also increase supply of debt by inducing lenders to herd toward foreign investors. Using Chinese firm-level data, we find that the positive effects of industry inward FDI on domestic firms' leverage are more pronounced in high-tech industries, industries with higher productivity growth, and industries where foreign investors exhibit a higher degree of herding behavior. Our instrument variable approach, employing industry exchange rates and import tariffs, supports these findings. Additionally, we reveal that the positive effect of FDI on local firms' leverage is amplified when the firms have stronger absorptive capacities, receive foreign capital, and experience more human capital transfers from foreign rivals.Item Embargo Effects of grandmothers' proximity on mothers' labour force participation(Wiley-Blackwell Publishing Ltd., 2025-02-05) Akyol, Pelin; Yilmaz, ZeynepThis paper investigates the causal effects of grandmothers’ geographical proximity onlabour supply decisions of married women with young children by leveraging a noveldata set from Turkey. We deal with the reverse causality and endogeneity problemsarising from mothers’ and grandmothers’ joint location and labour supply decisions byimplementing a two-stage least squares estimation method using the number of alivegrandmothers as an instrument. We argue that grandmothers’ proximity can increasemothers’ labour supply through their free and flexible childcare services. On the otherhand, geographically close grandmothers can reduce mothers’ labour supply by imposingthe traditional gender norms prevalent in Turkey or requiring them to take on elderlycaregiving duties. The overall effect depends on the relative size of these opposing factors.Our findings suggest that living in the same neighbourhood as grandmothers increasesthe probability of labour force participation and the employment rates of women withyoung children by 18.2 ppt and 16.4 ppt, respectively. These results are mostly driven bythe non-village sample. The ‘traditional gender norm’ channel explains the insignificantimpact of grandmothers’ proximity on the labour market outcomes of mothers who havebeen raised in villages.Item Embargo Sperner's lemma and competitive equilibrium with incomplete financial markets(Elsevier Science SA, 2024-05) Le, Thanh; Van, Cuong Le; Pham, Ngoc-Sang; Sağlam, Hüseyin ÇağrıWe establish the existence of a competitive equilibrium in a two-period stochastic economy with incomplete financial markets by using Sperner’s lemma. Our existence result covers (but is not limited to) several results in the literature, including the cases of nominal and numéraire assets. Moreover, there may exist a continuum of equilibrium prices.Item Open Access Moral preferences in bargaining(Springer, 2024-01-06) Juan-Bartroli, Pau; Karagözoğlu, EminWe analyze the equilibrium of a bilateral bargaining game (Nash, 1953, Econometrica, 21: 128–140). where at least one of the individuals has a preference for morality (homo moralis). We show that the equilibrium set crucially depends on these moral preferences. Furthermore, our comparative static analyses provide insights into the distributional implications of individuals’ moral concerns and the composition of society. A comparison of the set of equilibria in our model with those under selfish preferences, Kantian equilibrium, fairness preferences, altruistic preferences, and inequality averse preferences reveals important differences.Item Open Access A new look at cross‑country aggregation in the global VAR approach: theory and Monte Carlo simulation(Springer New York LLC, 2024-03-24) Gündüz, H.İ.; Emirmahmutoğlu, F.; Yücel, Mustafa ErayRequirements to understand and forecast the behavior of complex macroeconomic interactions mandate the use of high-dimensional macroeconometric models. The Global Vector Autoregressive (GVAR) modeling technique is very popular among them and it allows researchers and policymakers to take into account both the complex interdependencies that exist between various economic entities and the global economy through the world’s trade and fnancial channels. However, determining the cross-section unit size while using this approach is not a trivial task. In order to address this issue, we suggest an objective procedure for the detection of the size of the cross-country aggregation in GVAR models. While doing so, we depart from the Akaike Information Criterion (AIC) and propose an analytical modifcation to it, mainly employing an ad hoc approach without violating Akaike’s main principles. To supplement the theoretical results, small sample performances of those procedures are studied in Monte Carlo experiments as well as implementing our approach on real data. The numerical results suggest that our ad hoc modifcation of AIC can be used to determine the structure of the cross-section unit dimension in GVAR models, allowing the researchers and policymakers to build parsimonious models.Item Embargo Financial constraints and propagation of shocks in production networks(MIT Press, 2024-03-19) Demir, Banu; Javorcik, Beata; Michalski, Tomasz K.; Ors, EvrenWe examine the propagation of a small unexpected supply shock through a production network and the role financial constraints play in its transmission. Using data on almost all Turkish supplier-customer links, we exploit the heterogeneous impact of an unexpected import-tax increase for identification. We find that this relatively minor shock had a nontrivial economic impact on exposed firms and propagated downstream through affected suppliers. Importantly, we show that low-liquidity firms amplified its transmission.Item Open Access Productive and unproductive effort choices in groups and sharing: an experimental study(John Wiley and Sons Inc, 2025-01-25) Karagözoğlu, Emin; Büyükboyacı, Mürüvvet; Küçükşenel, SerkanAgents in collaborative relationships (e.g., business partnership and co-authorship) frequently need to decide on the allocation of limited resources (e.g., time and money) to productive activities that increase the size of the joint surplus and unproductive, promotional activities that do not affect the size of the surplus but increase their (individual) likelihood of capturing a greater control/share of the surplus. Using a laboratory experiment, we first analyze the effect of the opportunity cost of unproductive investment on subjects' resource allocation decisions in the first stage. Second, we study whether (i) the opportunity cost of unproductive investment and (ii) the identity of the decision-maker (human or computer) affect subjects' distributive decisions in the second stage. Three main insights emerge from our experiment: First, we find that subjects choose productive and unproductive investments equally likely both in low and high opportunity cost treatments. Second, subjects give less to their matched pairs if they choose unproductive investment in human treatment but not in computer treatment that suggests that subjects punish (by giving less) their matched pairs for allocating more resources to unproductive, promotional activities, a behavior that is not present when the allocation decision is made by a computer.Item Embargo Attainment and gender equality in higher education: evidence from a large-scale expansion(University of Chicago Press, 2024-09-01) Caner, A.; Derebasoglu, M.; Ökten, ÇağlaWe examine the causal effects of the drastic expansion in Turkish higher education on the attainment disadvantage of women by using the variation in exposure intensity across cohorts and regions. The expansion increased the attainment rates of both genders but did not significantly reduce the gender gap after controlling for time trend. Studying the mechanisms, we observe that the expansion in social sciences, more than half of additional slots, benefited men and women evenly, but the expansion in engineering, about 25% of additional slots, benefited men more. The results are robust to a wide range of checks for alternative specifications, samples, and policies.Item Embargo Endogenous bank regulation and supervision: long term implications(Elsevier Inc., 2024-01-09) Karakoyun, O. K.; Karakaplan, M. U.; Neyaptı, BilinThe role of bank regulation and supervision (RS) on financial stability and welfare has been subject to ongoing research, especially since the Great Recession. RS is expected to help eliminate the adverse selection and moral hazard problems that are abundant in financial transactions. In this paper, we present a general equilibrium model that is augmented by either a bank regulatory and supervisory agent who chooses the level of RS by maximizing bank profits, or by a macroprudential agent who minimizes non-performing loans (NPL). We compare the long-term outcomes of these scenarios and show that minimizing NPL is feasible for a larger and economically more viable range of parameter values than the alternatives. Moreover, for a comparable set of parameter combinations, the optimal choice of RS that minimizes NPL leads to both higher levels of steady state income and lower interest spreads as compared to RS that maximizes bank profits.