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Tag Archives: Financial Crisis
By Weiran Zeng
Prediction in economics is the focal point of debate for the future of economics, ever since economists were burdened with the failure to “predict” the 2008 Financial Crisis. This paper discusses positions held by philosophers and economic methodologists regarding what kinds of predictions there are and creates a taxonomy of prediction. Through evaluation of those positions, this paper presents different senses of prediction that can be expected of economics, and assess economists’ reflections according to those senses.
Advisor: Kevin Hoover | JEL Codes: B41, N1, G17
Protecting Long Term Human Capital in a Financial Crisis: Evidence from the Indonesian Family Life Survey
By Sachet Bangia
The East Asian Financial crisis of the late nineties made its way to Indonesia in January 1998. Using longitudinal data from the Indonesian Family Life Survey (1993-2015), this paper studies the impact of the crisis on education attainment. In the midst of economic upheaval, households with liquid assets at hand, particularly gold, were better able to maintain per capita expenditures. Tracing out the impact of gold ownership on completed education, I find that the effect is most apparent on 7 to 12 year olds in Indonesia. Using within-household variation in completed education, I find that a divergence in the use of gold to protect child education: urban households direct it towards older children, while rural households do the opposite. This result is best understood by considering the effect of the crisis on opportunity costs of schooling. In urban areas, wages declined sharply, while in rural areas, the return to food production increased dramatically. Thus older children in rural areas would be more likely to exit schooling during the crisis, and consequently not benefit from gold ownership in the household. The evidence examined indicates that families sought to protect their children’s long-term human capital, but in households with fewer resources, the children suffered permanent consequences.
Advisor: Duncan Thomas | JEL Codes: D1, I2, O0
By Mingwei Lei
Drawing motivation from the 2007-2009 global financial crises, this paper looks to further examine the potential time-variant nature of asset correlations. Specifically, high frequency price data and its accompanying tools are utilized to examine the relationship between asset correlations and market volatility. Through further analyses of this relationship using linear regressions, this paper presents some significant results that provide striking evidence for the time-variability of asset correlations. These findings have crucial implications for portfolio managers as well as risk management professionals alike, especially in the contest of diversification.
Advisor: George Tauchen | JEL Codes: G, G1, G10, G11, G14 | Tagged: A