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Publication Open Access A comparison of game-theoretic models for parallel trade(World Scientific Publishing, 2018) Gnecco, Giorgio; Pammolli, Fabio; Department of Economics; Alpanda, Berna Tuncay; Faculty Member; Department of Economics; College of Administrative Sciences and EconomicsWithin the EU Single Market for medicines, differences in drug prices, regulations, and transaction costs may create, under suitable conditions, arbitrage opportunities well before patent expiration, giving an incentive to the occurrence of parallel trade. When this is permitted, parallel traders may obtain a profit from buying drugs in a country where prices are lower, then re-selling them in a country where prices are higher. This phenomenon may came inefficiencies from a global welfare perspective, and reduce the manufacturers' incentive to invest in Research and Development (R & D). Given this framework, in this paper, we investigate the efficiency (expressed in terms of the price of anarchy) of the subgame-perfect Nash equilibria associated with five dynamic noncooperative game-theoretic models for the parallel trade of pharmaceuticals. We also compare such models with regard to the manufacturer's incentive to invest in R & D. More specifically, first we find in closed form the optimal value of the global welfare of two countries, which is obtained by solving a suitable quadratic optimization problem modeling the decision-making process of a global planner. Then, we use such a result. to evaluate and compare the prices of anarchy of five games modeling the interaction between a manufacturer in the first country and a potential parallel trader in the second country. The first three games refer, respectively, to the cases of no parallel trade threat, parallel trade threat, and parallel trade occurrence at equilibrium. Then, we investigate two modifications of the third game, in which its transfer payment from the potential parallel trader to the manufacturer is, respectively, removed/determined by Nash bargaining. For completeness, we also consider a decision-theoretic model of no parallel trade threat. For what concerns the incentive for the manufacturer to invest in R & D, the results of our numerical comparison show that the decision-theoretic model of no parallel trade threat is always the one with the highest incentive, whereas the two game-theoretic models of parallel trade threat/occurrence that do not include the transfer payment provide typically the lowest incentives. Moreover, the latter two models have the highest prices of anarchy (i.e., their equilibria have the lowest efficiencies). From a policy-making perspective, improvements are obtained if suitable countermeasures are taken to help the manufacturer recover from the costs of R & D, such as the inclusion of a transfer payment in the model.
Publication Metadata only Agricultural transformation and the rural labor market in Turkey(Nova Science Publishers, Inc., 2011) İlkkaracan, Ipek; Department of Economics; Tunalı, Fehmi İnsan; Faculty Member; Department of Economics; College of Administrative Sciences and Economics; 105635After five decades of transformation, the share taken by agriculture in total employment in Turkey had decreased from 85 percent in 1950 to 36 percent in 2000. Despite significant technological progress, total agricultural employment remained in the 8-9 million range during much of this period. The pace of transformation hastened upon implementation of the Agricultural Reform Implementation Project (ARIP) in 2001. This process placed some two million additional inhabitants in the "surplus labor" category as the share of agricultural employment fell to under 25 percent by the end of 2008. We rely on various data sources to trace the contours of this transformation and examine its manifestations in the rural labor market. Since the transformation burdens the urban labor market with the task of absorbing the surplus labor, we also review the changes that have taken place in urban areas to gauge the prospects. We tease out the demographic manifestations of the transformation by breaking the aggregates down by gender, age, and education. We find that the agricultural labor force is ageing at unprecedented rates as the young and women opt for nonparticipation. Women, who typically contribute to the small family farm as unpaid family labor, face the biggest challenges as the distinctions between the rural economy and the urban economy become blurred. Although there are signs that the rural economy took a more diverse form in the post-ARIP period, rural labor markets do not appear to hold much promise for the working-age population.Publication Open Access Algeria’s manufacturing sector: few avenues to diversification(The Lebanese Center for Policy Studies, 2017) Bustos, Sebastian; Department of Economics; Yıldırım, Muhammed Ali; Faculty Member; Department of Economics; College of Administrative Sciences and Economics; 219280This policy report on Algeria’s industrial sector is the eighth in a series of reports aimed at identifying strategic options Arab countries have in undertaking structural transformation. Using the product space methodology, this report analyzes existing capabilities of selected economies by identifying products they currently export and determining which path they should follow to produce more sophisticated and strategic products. Algeria’s position in the product space suggests that the country’s future path for development should focus on new opportunities in the chemical and food clusters. Redeploying productive knowledge that already exists within the country into other more complex products would prove difficult but the current position implies that, unaided, the economy is unlikely to diversify. This suggests the need to adopt proactive industrial policies entailing a number of new industries or products at which to target public inputs.Publication Open Access Arab country product space report introduction and methodology(The Lebanese Center for Policy Studies, 2017) Bustos, Sebastian; Department of Economics; Yıldırım, Muhammed Ali; Faculty Member; Department of Economics; College of Administrative Sciences and Economics; 219280During the decades prior to the Arab spring, Arab countries on average had one of the lowest per capita growth rates compared to other parts of the world. Although countries in the region registered higher growth rates at the beginning of the century, this economic growth did not bring about a structural transformation required to diversify Arab economies. The challenge remains not only in how to ensure these economies grow but also to ensure that growth is inclusive and sustainable. The general objective of the report is to lay out the strategic options Arab countries have in undertaking structural transformation. Using the product space methodology, the existing capabilities of selected economies are analyzed by locating products they currently export, which assists in determining which path they should follow to produce more sophisticated and strategic products.Publication Metadata only Asset pricing for dynamic economies(Cambridge University Press, 2008) Labadie, Pamela; Department of Economics; Altuğ, Sumru; Faculty Member; Department of Economics; College of Administrative Sciences and Economics; N/AThis introduction to general equilibrium modelling takes an integrated approach to the analysis of macroeconomics and finance. It provides students, practitioners, and policymakers with an easily accessible set of tools that can be used to analyze a wide range of economic phenomena. Key features: • Provides a consistent framework for understanding dynamic economic models • Introduces key concepts in finance in a discrete time setting • Develops simple recursive approach for analyzing a variety of problems in a dynamic, stochastic environment • Sequentially builds up the analysis of consumption, production, and investment models to study their implications for allocations and asset prices • Reviews business cycle analysis and the business cycle implications of monetary and international models • Covers latest research on asset pricing in overlapping generations models and on models with borrowing constraints and transaction costs • Includes end-of-chapter exercises allowing readers to monitor their understanding of each topic Online resources are available at www.cambridge.org/altug_labadie. © Sumru Altug and Pamela Labadie 2008.Publication Metadata only Bank lending with imperfect competition and spillover effects(Walter de Gruyter, 2006) Department of Economics; Department of Economics; Altuğ, Sumru; Usman, Ali Murat; Faculty Member; Teaching Faculty; Department of Economics; College of Administrative Sciences and Economics; College of Administrative Sciences and Economics; N/A; 100999We examine bank lending decisions in an economy with spillover effects in the creation of new investment opportunities and asymmetric information in credit markets. We examine price-setting equilibria with horizontally differentiated banks. If bank lending takes place under a weak corporate governance mechanism and is fraught with agency problems and ineffective bank monitoring, then an equilibrium emerges in which loan supply is strategically restricted. In this equilibrium, the loan restriction, the "under- lending" strategy, provides an advantage to one bank by increasing its market share and sustaining monopoly interest rates. The bank's incentives for doing so increase under conditions of increased volatility of lending capacities of banks, more severe borrower-side moral hazard, and lower returns on the investment projects. Although this equilibrium is not always unique, with poor bank monitoring and corporate governance, a more intense banking competition renders the bad equilibrium the unique outcome.Publication Open Access Bank volatility connectedness in South East Asia(2018) Department of Economics; Yılmaz, Kamil; Faculty Member; Department of Economics; College of Administrative Sciences and Economics; 6111This paper presents an analysis of the volatility connectedness of major bank stocks in the South East Asia (SEACEN) region between 2004 and 2016. Applying the Diebold-Yilmaz Connectedness Index (DYCI) framework to daily stock return volatilities of major banks in the region, we obtain results that help us uncover valuable information on the region's static and dynamic bank volatility network. The volatility connectedness increased substantially during the US financial crisis (from 2007 to 2009) and during the European sovereign debt and banking crisis in 2011. The recent increase in the total connectedness has resulted from temporary financial shocks on a global scale. Once included in the analysis, the global systemically important banks (GSIBs) from the U.S. and Europe generate substantial volatility connectedness to SEACEN banks. We also identify country clusters in the banking volatility network. Major Indian, Taiwanese and Chinese banks generate volatility connectedness to their counterparts in other countries of the region. Finally, we show that the region's bank volatility network becomes tighter during systemic events; banks from different countries in the region generate volatility connectedness to the others.Publication Metadata only Borrowing constraints and saving in Turkey(Central Bank Republic Turkey, 2018) Fırat, Melih Can; Department of Economics; Altuğ, Sumru; Faculty Member; Department of Economics; College of Administrative Sciences and Economics; N/AThe Turkish macroeconomic experience since 2002 has been characterized by three striking trends: (1) an accelerated growth rate of income, (2) a sharp decline in the real interest rate, and (3) a sustained fall in the saving rate of different age-groups. During the same period, there has also been a significant increase in access to credit by Turkish households. In this paper, we argue that a model which incorporates a borrowing constraint mechanism together with the observed increases in the expected growth rate of income and the substantial declines in the real interest rate is able to explain the change in saving across cohorts in Turkey over the last decade. We provide both micro-level evidence on the age-saving profile for Turkey as well as quantitative results from a simple three-period OLG framework with borrowing constraints to account for the change in the saving rate for different age-groups between 2004 and 2014. (C) 2018 Central Bank of The Republic of Turkey. Production and hosting by Elsevier B.V.Publication Metadata only Business cycles: fact, fallacy and fantasy(World Scientific Publishing Co., 2009) Zenginobuz, Ünal; Department of Economics; Altuğ, Sumru; Faculty Member; Department of Economics; College of Administrative Sciences and Economics; N/AThis book provides an overview of the modern theory and empirics of business cycles. Written by one of the pioneering authors in this field, it examines the notion of a business cycle and discusses alternative approaches to modeling. Arguably, one of the most important debates in this literature has been the issue of “matching” a business cycle to the data. In their original contribution, Kydland and Prescott (1982) proposed the method of calibration as a way of examining the implications of a business cycle model; yet, even at its inception, this approach came under criticism from a variety of sources. This monograph will examine some of these criticisms and discuss alternative approaches that have been put forward. More generally, it will discuss what lies ahead for modern business cycle theory. © 2010 by World Scientific Publishing Co. Pte. Ltd. All rights reserved.Publication Metadata only Capital flows and spillovers(MCGILL-QUEENS UNIV PR, 2016) N/A; Department of Economics; Kalemli Özcan, Şebnem; Other; Department of Economics; College of Administrative Sciences and Economics; N/AThis paper shows that debt flows have contractionary effects while equity flows have expansion- ary effects on emerging markets output. Such correlations can be driven by countercyclical debt flows and procyclical equity flows or debt flows leading to an appreciation and hurting exports and equity flows improving productivity of real economy broadly defined. To separate out the stories, we focus on business cycle frequencies and the effect of global risk appetite (VIX) in driving capital flows into emerging markets. A positive initial impact of debt flows on output is followed by a negative impact afterwards. Equity flows has a positive impact on output initially and thereafter. FDI inflows have a positive affect on output only with a two year lag and if this period coincides with increased global uncertainty, the effect on output reverses but total effect stays positive. This result holds also for equity flows, suggesting that during increased periods of uncertainty private investors leave emerging markets. Quantitative impacts are not big except the case of FDI flows.