Sellers' inflation, profits and conflict: why can large firms hike prices in an emergency?

The dominant view of inflation holds that it is macroeconomic in origin and must always be tackled with macroeconomic tightening. In contrast, we argue that the US COVID-19 inflation is predominantly a sellers' inflation that derives from microeconomic origins, namely the ability of firms with market power to hike prices. Such firms are price makers, but they only engage in price hikes if they expect their competitors to do the same. This requires an implicit agreement which can be coordinated by sector-wide cost shocks and supply bot-tlenecks. We review the long-standing literature on price-setting in concentrated markets and survey earnings calls and compile firm-level data to derive a three-stage heuristic of the inflationary process: (1) Rising prices in systemically significant upstream sectors due to commodity market dynamics or bottlenecks create windfall profits and provide an impulse for further price hikes. (2) To protect profit margins from rising costs, downstream sectors propagate, or in cases of temporary monopolies due to bottlenecks, amplify price pressures. (3) Labor responds by trying to fend off real wage declines in the conflict stage. We argue that such sellers' inflation generates a general price rise which may be transitory, but can also lead to self-sustaining inflationary spirals under certain conditions. Policy should aim to contain price hikes at the impulse stage to prevent inflation from the onset.

FAIR TAXATION UNDER THE GLOBAL ANTI-BASE EROSION RULES?

In 2021 the OECD launched the Global Minimum Company Tax to implement the Action 1 of the BEPS Project. This instrument has seen as a good mechanism to prevent company avoiding taxes at the global level and to stop existence of the harmful tax regimes worldwide, as well as a good mechanism to achieve fair taxation in the era of global digitalization. However, the broke-out of the COVID-19 pandemic and, consequently, the close of the national borders, then armed conflict between Russia and Ukraine, boost financial crisis and the crises in almost all social and industrial spheres at the global level. Such unwilling trend, between all, has influenced behavior of the companies and the initial optimism of the OECD and other international organizations that the global minimum company tax, at the very end, would end existence of the harmful tax regimes, tax avoidance and unfair taxation, dropped significantly. Therefore, at the very end of the 2022 and the beginning of the 2023, the OECD launched consultation document on tax certainty in the application of the Pillar Two of the global minimum tax known as a GloBE (Global Anti-Base Erosion) Model Rules. This paper deals with mentioned issue and actual problems that the application of the GLoBE rules is faced with.

Liquidity effects of COVID-19 in the European tourism industry

We examine the influence of COVID-19 on liquidity of the tourism industry in the UK, Europe and Spain. In the short run, the pandemic causes significant negative stock market reaction in the tourism industry. In the long run, the tourism industry recovers from the fall in returns due to the pandemic. Liquidity significantly decreases due to COVID-19, for the UK, European and Spanish tourism markets, even when we encapsulate the influence of stock prices, trading volume and volatility. Our findings suggest that European equity markets have declined in efficiency due to the pandemic in the tourism industry. Our empirical analysis has important implications for policy makers. Tourism recovery strategies from the pandemic are required with immediate effect in order to restore the valuation of the tourism companies, given that the negative stock price reaction and lack of liquidity significantly reduces market value of the tourism firms across Europe. In order for the tourism industry to fully recover from COVID-19, investors need to have the confidence to buy large volumes of tourism company stocks, which will increase the price and liquidity, leading to a substantial increase in market capitalization.

Close the deal: Mechanisms for the payment of the purchase price in share purchase and sale agreements

The past events that have shaped our world, such as the COVID-19 Pandemic and the different political outcomes, entailed a scenario of major economic uncertainty in the global market that remains, particularly, in our country. Admittedly, mergers and acquisitions of companies (M&A) in Peru have also been heavily affected. However, it is the market agents' duty to find new strategies to mitigate the economic uncertainty by generating incentives through legal and financial security to the foreign and national investors. Consequently, in this article, the authors have identified the pricing mechanism, employed in Shares Purchase Agreements, as a key element in the recovery and boosting of M&A deals in the Peruvian market driven by uncertainty. Thus, the authors present the pricing mechanisms that have been traditionally used in Shares Purchase Agreements but also introduce the new trends in global pricing mechanisms that have come to stay and fit. © 2022, Pontificia Universidad Catolica del Peru. All rights reserved.

A Hybridized Stochastic SIR-Vasicek Model in Evaluating a Pandemic Emergency Financing Facility

In the context of the present global health crisis, we examine the design and valuation of a pandemic emergency financing facility (PEFF) akin to a catastrophe (CAT) bond. While a CAT bond typically enables fund generation to the insurers and re-insurers after a disaster happens, a PEFF or pandemic bond's payout is linked to random thresholds that keep evolving as the pandemic continues to unfold. The subtle difference in the timing and structure of the funding payout between the usual CAT bond and PEFF complicates the valuation of the latter. We address this complication, and our analysis identifies certain aspects in the PEFF's design that must be simplified and strengthened so that this financial instrument is able to serve the intent of its original creation. An extension of the compartmentalized deterministic epidemic model-which describes the random number of people in three classes: susceptible (S), infected (I), and removed (R) or SIR for short-to its stochastic analog is put forward. At time t, S(t), I(t), and R (t) satisfy a system of interacting stochastic differential equations in our extended framework. The payout is triggered when the number of infected people exceeds a predetermined threshold. A CAT-bond pricing setup is developed with the Vasicek-based financial risk factor correlated with the SIR dynamics for the PEFF valuation. The probability of a pandemic occurrence during the bond's term to maturity is calculated via a Poisson process. Our sensitivity analyses reveal that the SIR's disease transmission and recovery rates, as well as the interest rate's mean-reverting level, have a substantial effect on the bond price. Our proposed synthesized model was tested and validated using a Canadian COVID-19 dataset during the early development of the pandemic. We illustrate that the PEFF's payout could occur as early as seven weeks after the official declaration of the pandemic, and the deficiencies of the most recent PEFF sold by an international financial institution could be readily rectified.

Offshoring or reshoring: the impact of tax regulations on operations strategies.

After decades of outsourcing to low-cost countries, companies are restructuring their production footprint globally. Especially having experienced supply chain disruption caused by the unprecedented Covid-19 pandemic for the past several years, many multinational companies are considering bringing their operations back home (i.e., reshoring). At the same time, the U.S. government proposes using tax penalties to motivate companies to reshore. In this paper, we study how a global supply chain adjusts its offshoring and reshoring production decisions under two different circumstances: (1) under traditional corporate tax regulations; (2) under the proposed tax penalty regulations. We analyze cost variants, tax structures, market access and production risks to identify conditions where global companies decide to bring manufacturing back to their domestic countries. Our results show that multinational companies would be more likely to relocate the production from the main foreign country to an alternative country that enjoys even lower production costs under the proposed tax penalty. As identified by our analysis and as well as numerical simulations, reshoring can only occur in rare situations such as when the production costs in the foreign countries are close to that in the domestic country. Besides potential national tax reform, we also discuss the impact of the Global Minimum Tax Rate proposed by the G7 on global companies' offshoring/reshoring decisions.

Learning about unprecedented events: Agent-based modelling and the stock market impact of COVID-19.

We model the learning process of market traders during the unprecedented COVID-19 event. We introduce a behavioural heterogeneous agents' model with bounded rationality by including a correction mechanism through representativeness (Gennaioli et al., 2015). To inspect the market crash induced by the pandemic, we calibrate the STOXX Europe 600 Index, when stock markets suffered from the greatest single-day percentage drop ever. Once the extreme event materializes, agents tend to be more sensitive to all positive and negative news, subsequently moving on to close-to-rational. We find that the deflation mechanism of less representative news seems to disappear after the extreme event.

Cash holdings, ambiguity aversion, and investment puzzles

We consider a real options model with ambiguity to investigate how cash holdings and ambiguity aversion affect a firm's dynamic investments. First, we prove a unique positive ambiguity coefficient exists when ambiguity exceeds it such that entrepreneurs believe the project is "too valueless to invest in”. Second, the coupons demanded by creditors increase with ambiguity, and cash holdings reduce the ambiguity premium. Our research provides a new explanation as to why companies abandon investment and hold more cash under the influence of the COVID-19 pandemic.

Comparison of the Performances for CAPM and Fama-French models During COVID-19

Since the outbreak of COVID-19, it has caused a startling stun to both society and economy in numerous nations, where different industries suffered unequally. This paper reviews the various performance of the Capital Asset Pricing Model (CAPM), and the Fama-French three-factor model and the five-factor model in different regions and industries. To metric the performance, various statistics models and scaling are applied including Pearson correlation, linear regression, R2 scores, t-test, etc. Specifically, this paper demonstrates the different performances of the CAPM model on the US and Egyptian stock markets, whereas using generalized method of moments in a panel data analysis to evaluate the performance in the U.S. market and the paired sample t-test and Wilcoxon signed-rank to evaluate the performance in the Egyptian market. The Fama-French three-factor model and five-factor model are both based on the U.S. market and analyze the model's performance (measured by significant level) in the U.S. market in general and in individual sectors, respectively. Whereas, in terms of three-factors model, the OLS estimation and relapse expected excess return are used onto the variables and multiple linear regression method was used to study the significance of factors in three sub-industries. Regarding to five-factors model, a multivariate regression with covariates and OLS estimation are the method for evaluation. These results shed light for deeply understanding the model and recognizing the impact on the security market of the COVID-19. © 2023 SPIE.

VOLATILE FINANCIAL CONDITIONS, ASSETS PRICES AND INVESTMENT DECISIONS: ANALYSIS OF DAILY DATA OF DJIA AND S&P500, FROM JANUARY TO APRIL OF 2022

This paper is a logical outgrowth of empirical work in a Securities Analysis and Portfolio Management course at Houghton University between the start of January 2022 and end of April 2022. Remarkably, the exposure of global financial markets to two unmistakable events (shocks), the COVID-19 pandemic and the Russo-Ukrainian war (February 24, 2022)—sources of systematic risk—coincided with our empirical inquiry. The dual shocks, which exacerbated negative investment prospects for multiple product and financial sectors, heightened the uncertainty of profitable returns from investments in financial markets. The performance of eight publicly traded companies in the US and composite indices—the Dow Jones Industrial Average (DJIA) and the S& P 500—were tracked on a daily basis from January 10, 2022 to April 29, 2022, generating a total of 77 observations. Using the superior performance of a moving average model and the Holt-Winters algorithm, we found that profitable investment prospects existed during the period of systematic risk. We conclude that technical analysis provided time sensitive information for leveraged financial investments during turbulent periods of systematic risk. © 2023 Asociacion Euro-Americana de Estudios del Desarrollo. All rights reserved.

Determinants of Softwood Lumber Prices in the US Northwest

Lumber prices can be volatile and hard to predict from month to month yet are important for many sectors of the economy, ranging from forestry and construction. An economic model of lumber prices was developed and applied to data representing multiple supply and demand determinants of lumber. Using a suite of econometric models, monthly lumber prices were related back to variables including construction permits, US reserve bank credit, tariffs with Canada, exchange rates with Canada, and variables representing shocks associated with the COVID-19 pandemic. Preferred models use relatively small amounts of publicly available information, making them more accessible to industry participants who want to make their own price predictions. Such information can help guide decisions about whether to expand or scale back an operation in preparation for likely future price movements. Study Implications: This study shows that Douglas-fir lumber prices in the US Northwest can be predicted quite accurately with selected macro-economic variables that are commonly reported in the public domain. Using statistical techniques, monthly lumber prices in the United States were related back to variables including new home construction permits, US reserve bank credit, tariffs, and exchange rates. With suitable assumptions about future economic conditions, the models could be used by researchers as well as professionals at lumber mills, wholesales, and retailers to make near term predictions.

When should grocery stores adopt time-based pricing? Impact of competition and negative congestion externality

Consumers dread shopping during peak hours, and the Covid-19 pandemic has created additional safety concerns about overcrowding in addition to long waiting times. In view of consumer's congestion aversion, should competitive brick-and-mortar grocery stores charge higher prices during congested peak hours to smooth demand? To examine "whether and when” stores should adopt intraday time-based pricing under competition, we examine a 2-stage dynamic duopoly game. At the beginning of each stage, each store can make an irreversible decision to adopt time-based pricing by setting the peak-hour and normal-hour prices. We also endogenize consumer's shopping decisions (i.e., when and which store to shop) by incorporating the issue of negative congestion externality. Our equilibrium analysis reveals that time-based pricing is always beneficial for the stores, and both stores would adopt it eventually in equilibrium. As such, only two equilibria can sustain: either both firms adopt time-based pricing immediately in stage 1, or only one firm adopts in stage 1 while the other postpones its adoption until stage 2. Interestingly, due to the competitive dynamics, it is less likely for both firms to adopt immediately when consumers are more averse to congestion. Moreover, although the adoption of time-based pricing leads to differentiated price competition, it can "soften” price competition, causing both peak-hour and normal-hour prices to rise above the status quo equilibrium uniform prices. We find that time-based pricing can always induce demand smoothing and reduce congestion. Although time-based pricing creates value for the stores (through higher prices), it offers no benefit to consumers. © 2023 Production and Operations Management Society.

Estimating the effects of legalizing drug e-commerce

With the technological development the e-commerce channel began to spread to all sectors of the economy. In 2020 with the introduction of sanitary and epidemiological restrictions because of COVID-19 pandemic, many countries lifted the ban of drug e-commerce. Such changes are interesting from the point of view of health economics, and the opening of this sales channel significantly reduces transaction costs and increases the physical availability of drugs, especially in regions with low population density. The article attempts to evaluate the effects of legalization of online sales of drugs on price level and the degree of market concentration (the concentration of the 5 largest companies is used as a proxy), and also uses new methods to estimate the effects of legalizing e-commerce on drug markets. High rates of industry and drug market concentration can lead to a noticeable decrease in the availability of goods. Legalizing e-commerce can be seen as a way to reduce market concentration by facilitating market entry for small firms. The effects of lifting the ban on remote drug sales are estimated using regression analysis on panel data, cross-country matching, and synthetic control. Empirical estimates provide an overall picture of the effects of legalizing online drug sales. After allowing remote drug sales market concentration decreases, indicating a reduction in information asymmetry and switching costs. This effect is particularly important for countries with a high proportion of pensioners, for whom the switching costs are noticeably higher ceteris paribus. Allowing distance trade, due to reducing information asymmetry, drug pricing also slows down, that is, in addition to increasing physical accessibility, opening this channel also increases economic accessibility.

Hierarchical Bayesian hedonic regression analysis of Japanese rice wine: is the price right?

PurposeThis paper aims to formulate a hedonic pricing model for Japanese rice wine, sake, via hierarchical Bayesian modeling estimated using an efficient Markov chain Monte Carlo (MCMC) method. Using the estimated model, the authors examine how producing regions, rice breeds and taste characteristics affect sake prices.Design/methodology/approachThe datasets in the estimation consist of cross-sectional observations of 403 sake brands, which include sake prices, taste indicators, premium categories, rice breeds and regional dummy variables. Data were retrieved from Rakuten, Japan's largest online shopping site. The authors used the Bayesian estimation of the hedonic pricing model and used an ancillarity–sufficiency interweaving strategy to improve the sampling efficiency of MCMC.FindingsThe estimation results indicate that Japanese consumers value sweeter sake more, and the price of sake reflects the cost of rice preprocessing only for the most-expensive category of sake. No distinctive differences were identified among rice breeds or producing regions in the hedonic pricing model.Originality/valueTo the best of the authors' knowledge, this study is the first to estimate a hedonic pricing model of sake, despite the rich literature on alcoholic beverages. The findings may contribute new insights into consumer preference and proper pricing for sake breweries and distributors venturing into the e-commerce market.

Does US Infectious Disease Equity Market Volatility Index Predict G7 Stock Returns? Evidence Beyond Symmetry

During the COVID-19 pandemic, Baker et al. (2020) [The unprecedented stock market reaction to COVID-19. The Review of Asset Pricing Studies, 10, 742–758.] proposed the infectious disease equity market volatility (ID-EMV) index, which tracks US equity market volatility caused by infectious diseases. We extended the literature by using this newly developed ID-EMV index to examine its asymmetric effect on the share market returns of the G7 countries, which include the United Kingdom, Italy, Japan, Germany, France, Canada, and the United States of America. Moreover, we used novel techniques like the quantile-on-quantile regression test, quantile cointegration test, and quantile unit root test. The quantile cointegration test indicates that the infectious disease EMV index is cointegrated with G7 stock returns. Moreover, the quantile-on-quantile regression technique reveals that the infectious disease index positively affects stock returns during bullish states of the stock markets. In contrast, it negatively affects stock returns during bearish states of the stock market returns. The negative effect of the bearish states implies that investors may discourage investments during the downturns of the economy, whereas they need to boost their investments during economic booms.

Stock Price Forecasting of IBEX35 Companies in the Petroleum, Electricity, and Gas Industries

In recent years, time series forecasting has become an essential tool for stock market analysts to make informed decisions regarding stock prices. The present research makes use of various exponential smoothing forecasting methods. These include exponential smoothing with multiplicative errors and additive trend (MAN), exponential smoothing with multiplicative errors (MNN), and simple exponential smoothing with additive errors (ANN) for the forecasting of the stock prices of six different companies in the petroleum, electricity, and gas industries that are listed in the IBEX35 index. The database employed for this research contained the IBEX35 index values and stock closing prices from 3 January 2000 to 30 December 2022. The models trained with this data were employed in order to forecast the index value and the closing prices of the stocks under study from 2 January 2023 to 24 March 2023. The results obtained confirmed that although none of the proposed models outperformed the rest for all the companies, it is possible to calculate forecasting models able to predict a 95% confidence interval about real stock closing values and where the index will be in the following three months.

Analysis of gambier monopoly index in West Sumatra Province

Gambier production in Indonesia comes from smallholder plantations. West Sumatra Province is the leading producer of gambier, with a supply of around 80-90 per cent of the total national gambier production. Based on empirical data, when the selling price of gambier exports increases or fluctuates, the selling price of gambier farmers does not increase as much as the price increase at the level of exporter traders. This condition creates marketing inefficiency. The monopoly index (MPI) is one way to measure marketing efficiency based on the performance of each marketing agency. In this regard, the current business environment is also affected by the Covid-19 pandemic. This study analyzed the monopoly level on the Gambier marketing channel in West Sumatra during the covid 19 pandemic. A survey was conducted in this study. The type of data used in this research is cross-section data. Respondents in this study were gambier farmers, gambier traders, and gambier exporters in Padang City, Lima Puluh Kota, and Pesisir Selatan Regency. The analytical method used in this study is using the Lerner index. Based on the analysis of the monopoly index, it is known that exporters have an enormous monopoly index value compared to other marketing institutions, where the collecting trader has a monopoly index of 4.84, inter-regional traders have 2.09, and exporters have 12.81 MDI. These values showed that exporters dominate gambier marketing in West Sumatra Province. The strong position of exporters in determining prices and marketing gambier is also influenced by cooperation with inter-regional traders (IRT).

OIL PRICE AND VIETNAM STOCK MARKET IN THE ERA OF THE COVID-19 OUTBREAK

The interactive association between oil prices and stock market has increasingly captured the attention of researchers. Especially, how does the relationship between oil prices and stock market varies during COVID-19 pandemic? The study's aim is to investigate the time-varying causal effect of the COVID-19 pandemic on the link between the oil prices and Vietnam stock market using the wavelet approach. Daily data about oil prices Vietnam stock prices and returns covers the period of ten years from January 2011 to December 2021 will be gathered, processed and analyzed to examine the influence of pre, first and second waves of COVID-19 pandemic on the relationship between oil prices and stock market.

Disentangling Short-Run COVID-19 Price Impact Pathways in the US Corn Market

Despite this focus on pandemic-related supply chain disruptions, fewer empirical studies have sought to isolate short-term price impacts in food and nonfood agricultural commodity markets.1 Understanding the drivers of short-term commodity price impacts is critical to understanding future susceptibility to major market shocks and to informing policies related to shock mitigation. Declines in ethanol production reached an estimated 2 billion gallons lost from March to November 2020, leading to a corresponding decline of 700 million bushels of corn usage and a loss of billions of dollars of ethanol producer surplus (Renewable Fuels Association, 2020b;Schmitz, Moss, and Schmitz, 2020). Increases in corn-based ethanol production that started in 2005 have linked agricultural commodity prices and energy markets as US ethanol production increased rapidly from 3.9 billion gallons in 2005 to 13.3 billion by 2010 and 15.8 billion by 2019 (Chakravorty, Hubert, and Nøstbakken, 2009;Wright, 2011;Roberts and Schlenker, 2013;Asgari, Saghaian, and Reed, 2020;US Department of Agriculture, 2021). Given that over 90% of US ethanol is used in mixtures of E10 gasoline and the US market reached a 10% "blend wall" in 2016, any reduction in gasoline use will cause proportional decreases in ethanol use (US Energy Information Administrationa, 2020;US Department of Agriculture, 2021).

Clean Energy Action Index Efficiency: An Analysis in Global Uncertainty Contexts

Climate change, the scarcity of fossil fuels, advances in clean energy, and volatility of crude oil prices have led to the recognition of clean energy as a viable alternative to dirty energy. This paper investigates the multifractal scaling behavior and efficiency of green finance markets, as well as traditional markets such as gold, crude oil, and natural gas between 1 January 2018, and 9 March 2023. To test the serial dependency (autocorrelation) and the efficient market hypothesis, in its weak form, we employed the Lo and Mackinlay test and the DFA method. The empirical findings showed that returns data series exhibit signs of (in)efficiency. Additionally, there is a negative autocorrelation among the crude oil market, the Clean Energy Fuels Index, the Global Clean Energy Index, the gold market, and the natural gas market. Arbitration strategies can be used to obtain abnormal returns, but caution should be exercised as prices may increase above their actual market value and reduce the profitability of trading. This work contributes to the body of knowledge on sustainable finance by teaching investors how to use predictive strategies on the future values of their investments.