Exchange rate parities and Taylor rule deviations

This paper investigates the PPP and UIP conditions by taking into account possible nonlinearities as well as the role of Taylor rule deviations under alternative monetary policy frameworks. The analysis is conducted using monthly data from January 1993 to December 2020 for five inflation-targeting countries (the UK, Canada, Australia, New Zealand and Sweden) and three non-targeting ones (the USA, the Euro Area and Switzerland). Both a benchmark linear VECM and a nonlinear Threshold VECM are estimated; the latter includes Taylor rule deviations as the threshold variable. The results can be summarized as follows. First, the nonlinear specification provides much stronger evidence for the PPP and UIP conditions, the estimated adjustment speed towards equilibrium being twice as fast. Second, Taylor rule deviations play an important role: the adjustment speed is twice as fast when deviations are small and the credibility of the central bank is higher. Third, inflation targeting tends to generate a higher degree of credibility for the monetary authorities, thereby reducing deviations of the exchange rate from the PPP- and UIP-implied equilibrium.

The Complex Dynamics of Sharing Platform Competition Game

With the rapid development of Internet technologies and online sharing platforms, sharing economy has become a major trend in economy. The entry of sharing economy leads to profound impacts on incumbent industry. We build a dynamic sharing platform competition model with which agents are bounded rational, and consumer side is heterogeneous. Then, we present the fixed points and the stability conditions of the bifurcation of the dynamic model. We simulate the adjustment speed of sharing platform, sharing platform price, and costs of traditional firm effects on system stability, and we present stable area, bifurcation diagram, the largest Lyapunov exponent, and strange attractor of different parameters, and we give a feedback control method at last. Our main results are as follows: (1) when adjustment speed of sharing platform increases, the system becomes bifurcation, and finally, the system goes into a chaotic state; when the system is stable, price of traditional firm and fee decision of sharing platform are constant. (2) When price of sharing platform increases, sharing platform is more stable while traditional firm is more vulnerable. Suppose the system is in the stable state; when sharing platform price increases, traditional firm price increases, while sharing platform fees decreases. (3) When traditional firm cost is small, the system would be more stable. When the system is stable, with traditional firm cost increasing, traditional firm price increases quicker than sharing platform consumer fee, while sharing platform seller fee decreases. (4) Feedback control can alleviate the chaotic state of system. With feedback control parameter increases, the system becomes more stable.

Symmetric and asymmetric adjustment of bank deposit interest rates: empirical evidence from Kenya

PurposeThis paper examines the sluggish adjustment of deposit interest rate categories with response to policy rate changes in a developing economy.Design/methodology/approachSymmetric and asymmetric error correction models (ECMs) are employed to test the pass-through effect and adjustment speed of deposit rates when above or below their equilibrium levels.FindingsThe findings reveal an incomplete pass-through effect in both the short run and long run while mixed results of symmetric and asymmetric adjustment speed across the different deposit rate categories are observed. Collusive pricing arrangement behavior is supported by deposit rate categories that adjust more rigidly upwards than downwards, while negative customer reaction behavior is supported by deposit rate categories that adjust more rigidly downwards than upwards.Practical implicationsEven though the findings indicate an aspect of increased responsiveness over the period, the sluggish adjustment of deposit rates imply that monetary policy is still ineffective and not uniform across the different deposit rate categories.Originality/valueTo the best of the authors' knowledge, this is the first study to empirically examine both symmetric and asymmetric adjustment behavior of deposit interest rate categories in Kenya. The findings are key to policy makers as they provide insights on how long it takes to adjust different deposit rate categories to monetary policy decisions. In addition, the behavior of deposit rates partly explains why interest rates capping was imposed in Kenya in 2016.

Leader Selection and Dynamics Analysis under Leader-Based Collective Bargaining for Buyers’ Alliance

This paper focuses on the leader selection from the leader-based collective bargaining system, where buyers form an alliance and designate one of them as the leader to bargain with the supplier for a lower wholesale price of their common component. We construct the dynamic bargaining system consisting of two heterogeneous buyers and one supplier to analyze the influence of the enterprise nature and bargaining power on the leader selection. It was proved that the buyer with stronger bargaining power should be the leader. However, we find that, when the buyers are heterogeneous, the result may be different. In order to explore which factor plays a more important role in the leader selection, we design two rounds of bargaining for comparison. The interesting results imply that whether the bargaining power will reverse the leader selection in the first round depends on its growth rate. The nonlinear dynamics theory is also introduced to analyze the complex behaviors in the dynamic bargaining system. We analyze the influence of adjustment speed on the dynamic bargaining system and obtain the conditions required to maintain system stability. Considering the significance of system stability, the delayed feedback control mechanism is adopted to drive chaos back to stability.

The Complexity of Investment Spillover from New-Type Agricultural Business Entities to Small-Scale Farmers

Aiming to clarify the leading roles of new-type agricultural business entities (abbreviated as NABEs) to small-scale farmers, integrated game models between NABEs and small-scale farmers are designed to verify the impact of scale economy and investment spillover on the equilibrium points of the game system. The influence of the investment spillover rate and the decision-making adjustment speed on the stability of the system are emphatically discussed. Numerical simulation shows that, with the increase of small-scale farmers’ decision-making adjustment speed, the system would successively show the phenomena of stability, period doubling bifurcation, chaos and discreteness. In the Cournot game, the two sides’ decision-making results such as investment intensity, selling price and eventual profits vary in the opposite direction. In the Stackelberg game of the basic mode, the two sides’ decision-making results are not evidently changed, and NABEs’ investment intensity, selling price and eventual profits are higher than those of small-scale farmers. In the order mode, system improvement can be realized by controlling the investment spillover rate. The research results indicate that with the increase of the adjustment speed of small-scale farmers’ decision-making, the repeated game decision-making aggravates the instability of the Cournot game system. This paper finds that the order pattern can make up for the scale weakness of small-scale farmers, and finally achieve a win-win situation for decision makers in the case of uncertain demands.

Complex Dynamics in a Closed-Loop Supply Chain with Risk Aversion and Fairness Concerns Under Supply Disruption

In this paper, we consider a closed-loop supply chain (CLSC) consisting of two suppliers, one manufacturer, one risk-averse retailer and one fair-caring third-party in the presence of supply disruption. We focus on establishing a dynamic Stackelberg game model with bounded rational expectation and analyzing the game evolution process. The effects of key parameters on the Nash equilibrium solutions and their stability are investigated, as well as the complex dynamical behaviors of the CLSC system are explored by using the stability region, bifurcation graph, the largest Lyapunov exponent (LLE), strange attractors, etc. Moreover, the performance of channel members under different values of parameters is researched by utilizing the (average) expected profits or utilities index. The analysis results reveal that the excessive fast adjustment speed of the manufacturer will lead to the system losing stability and falling into chaos. Also, the retailer’s risk aversion and the third party’s fairness concerns have a destabilization effect on the Nash equilibrium point, while the possibility of supply disruption has different effects on the scope of the adjustment speed of decision variables of the manufacturer. Furthermore, in most cases, an over the top adjustment speed of the manufacturer is disadvantageous to all the channel members for more expected profits, but the third-party can achieve a better performance when the system is in periodic state. Finally, the time-delay feedback control method is proposed to eliminate the system chaos.

Establishing a Dynamic Capital Structure Model for Company Sustainability Performance Using Data Mining Techniques

In order to reconsider the changes of adjustment speed caused by the recapitalization cost, this research adopted dynamic capital structure theory with adjustment speed as one of the independent variables to analyze the relationship between capital structure and company performance. Instead of applying the commonly used regression models, this research used the decision tree C4.5 algorithm and association rules of priori algorithm. Taking the predictive models created by the decision tree as the main result and supporting it with association rules which help to explain the relationships between capital structure and company performance, this research shows how capital structure influences company performance. As the result presents, a company tends to have better performance when its debt ratio is low, and Tobin’s Q and ROA will turn worse as the ratio gets higher. However, maybe because of the financial leverage, ROE will not decrease when the ratio is high but will increase instead. In addition, this research found out that adjustment speed is negatively related to company performance, meaning that even though a company is more flexible in adjusting itself, it might still perform badly since it is deviating from its optimum leverage. This research found that not only capital structure, but other variables such as price-earnings ratio, research and development expense ratio, and dividend payout ratio also determine a company’s performance.