scholarly journals Endowments, fiscal federalism and the cost of capital for states: evidence from Brazil, 1891–1930

2010 ◽  
Vol 17 (1) ◽  
pp. 13-50 ◽  
Author(s):  
André C. Martinez Fritscher ◽  
Aldo Musacchio
Keyword(s):  
Risk Premium ◽  
Fiscal Federalism ◽  
Cost Of Capital ◽  
State Level ◽  
Export Prices ◽  
Brazilian Government ◽  
Per Capita ◽  
The Difference ◽  
Risk Free Rate ◽  
The Impact

There is a large literature that aims to explain what determines country risk (defined as the difference between the yield of a sovereign's bonds and the risk free rate). In this article, we contribute to the discussion by arguing that an important explanatory factor is the impact that commodities have on the capacity to pay. We use a newly created database with state-level fiscal and risk premium data (between 1891 and 1930) to show that Brazilian states with natural endowments that allowed them to export commodities that were in high demand (e.g. rubber and coffee) ended up having higher revenues per capita and lower cost of capital. We also explain that the variation in revenues per capita was both a product of the variation in natural endowments (i.e. the fact that states cannot produce any commodity they want) and a commodity boom that had asymmetric effects among states. These two effects generated variation in revenues per capita at the state level thanks to the extreme form of fiscal decentralisation that the Brazilian government adopted in the constitution of 1891, which gave states the sole right to tax exports. We also run instrumental variable estimates using indices of export prices for each state. These estimates confirm our findings that states with commodities that had higher price increases had lower risk premia.

scholarly journals How to Determine the Cost of Capital for a Commercial Forestry

2022 ◽  
Vol 72 (1) ◽  
pp. 21-28
Author(s):  
Karlo Beljan ◽  
Denis Dolinar ◽  
Donald Hodges
Keyword(s):  
Risk Premium ◽  
Cost Of Capital ◽  
Stock Exchange ◽  
For Profit ◽  
Average Return ◽  
Risk Characteristics ◽  
Us Government ◽  
The Difference ◽  
Risk Free Rate ◽  
The Cost

Abstract This paper focuses on designing a methodological workflow to fill a knowledge gap for determining the cost of capital for commercial forestry projects. Upon reviewing the literature, a method to determine the cost of capital for profit-oriented forestry seems to be lacking. Accordingly, we selected and analyzed 42 companies that do businesses worldwide, are present on the stock exchange, and possess or lease forest land. Based on their business activities (growing forest, sawmilling, final production, paper production), these companies are classified into four subgroups. An algorithm has been devised using the concept of risk diversification and the capital asset pricing model for three groups of investors and four forestry subgroups. In doing so, the real risk-free rate (0.43%) is set as the difference between an average return on 10-year US government bonds (2.59% nominal) and the 10-year average US inflation rate (2.16%). The measure of forestry systematic risk (beta coefficient) varies between 0.83 and 1.41, while the equity (stock exchange market) risk premium is set to 6%. Unsystematic risk is determined using a process of mapping which takes into account all risk elements marked as relevant for the forestry sector. This approach provides results that reveal the cost of capital varying between 5.41% and 16.55% based on the current level of an investor's portfolio diversification and the risk characteristics of the forestry subgroup. Finally, the forestry companies meeting the investor's expectations are noted as preferable investment opportunities.

scholarly journals How leverage can improve performance

2020 ◽  
Vol 83 ◽  
pp. 01031
Author(s):  
Miroslav Kmeťko ◽  
Eduard Hyránek
Keyword(s):  
Risk Premium ◽  
Expected Returns ◽  
Tax Rates ◽  
Expected Return ◽  
Tax Rate ◽  
Equity Ratio ◽  
Risk Free Rate ◽  
The Cost ◽  
Managed Portfolios ◽  
The Impact

One of the best-known Capital Asset Pricing Model (CAP/M) provides us with a methodology for measuring the relationship between the risk premium and the impact of leverage on expected returns. However, this model is not used only to value the cost of capital but also to evaluate the performance of managed portfolios. We will test how the expected return changes in percent by changing the debt-equity ratio and the tax rate based on following assumptions: market return 7%, risk-free rate of return 1% and beta 1.2. These assumptions will be constant and we will change the debt-equity ratio and tax rate. Based on these results, it is clear that the change in profitability varies, in relation to the change of the DE ratio by one tenth. As for changes I n tax rates, changes in expected profitability are not entirely in direct proportion to these changes.

scholarly journals COVID-19 scenarios for the United States

2020 ◽  
Author(s):  
◽  
Simon I Hay
Keyword(s):  
United States ◽  
Model Performance ◽  
State Level ◽  
The United States ◽  
Economic Damage ◽  
Reference Scenario ◽  
Level Model ◽  
Per Capita ◽  
Novel Coronavirus ◽  
The Impact

The United States (US) has not been spared in the ongoing pandemic of novel coronavirus disease. COVID-19, caused by the severe acute respiratory syndrome coronavirus 2 (SARS-CoV-2), continues to cause death and disease in all 50 states, as well as significant economic damage wrought by the non-pharmaceutical interventions (NPI) adopted in attempts to control transmission. We use a deterministic, Susceptible, Exposed, Infectious, Recovered (SEIR) compartmental framework to model possible trajectories of SARS-CoV-2 infections and the impact of NPI at the state level. Model performance was tested against reported deaths from 01 February to 04 July 2020. Using this SEIR model and projections of critical driving covariates (pneumonia seasonality, mobility, testing rates, and mask use per capita), we assessed some possible futures of the COVID-19 pandemic from 05 July through 31 December 2020. We explored future scenarios that included feasible assumptions about NPIs including social distancing mandates (SDMs) and levels of mask use. The range of infection, death, and hospital demand outcomes revealed by these scenarios show that action taken during the summer of 2020 will have profound public health impacts through to the year end. Encouragingly, we find that an emphasis on universal mask use may be sufficient to ameliorate the worst effects of epidemic resurgences in many states. Masks may save as many as 102,795 (55,898-183,374) lives, when compared to a plausible reference scenario in December. In addition, widespread mask use may markedly reduce the need for more socially and economically deleterious SDMs.

scholarly journals Dampak Kebijakan Tarif dan Non-tarif Negara-Negara Importir atas Ekspor Tuna Olahan Indonesia

2021 ◽  
Vol 26 (3) ◽  
pp. 468-478
Author(s):  
Maharani Tristi ◽  
Harianto Harianto ◽  
Amzul Rifin
Keyword(s):  
Exchange Rates ◽  
Export Performance ◽  
Gdp Per Capita ◽  
Cross Sectional ◽  
Export Prices ◽  
Economic Distance ◽  
Negative Effect ◽  
Per Capita ◽  
Actual Exchange ◽  
The Impact

This study aims to analyze the impact of the tariff and non-tariff policies implementation of the importing countries on the export performance of Indonesian processed tuna. A cross-sectional gravity model analysis was conducted to find out the impact of these policies on exports. The variables used include GDP per capita of the importing countries, population, economic distance, export prices, actual exchange rates, tariff policies, and non-tariff policies in the form of sanitary and phytosanitary (SPS) and technical barriers to trade (TBT). The estimation shows that the variables of GDP per capita of the importing countries, population, exchange rates, export prices, and SPS give a positive and significant effect on the trade of Indonesian processed tuna commodities. On the other hand, economic distance and TBT policy give a negative and significant impact on the volume of this particular commodity. Meanwhile, the tariff policy implementation also give a negative effect on the export volume, but it is not significant.   Keywords: cross sectional gravity, export performance, non-tariffs, tariffs

scholarly journals Impact of federal transfers upon US infant mortality rates: a secondary analysis using a fixed effects regression approach

BMJ Open ◽  
2018 ◽  
Vol 8 (9) ◽  
pp. e021533
Author(s):  
Michael McLaughlin ◽  
Mark R Rank
Keyword(s):  
Mortality Rate ◽  
Infant Mortality ◽  
Fixed Effects ◽  
State Level ◽  
Well Being ◽  
Mortality Rates ◽  
Postneonatal Mortality ◽  
Per Capita ◽  
Fixed Effects Regression ◽  
The Impact

ObjectivesIn order to improve health outcomes, the federal government allocates hundreds of billions of annual dollars to individual states in order to further the well-being of its citizens. This study examines the impact of such federal intergovernmental transfers on reducing state-level infant mortality rates.SettingAnnual data are collected from all 50 US states between 2004 and 2013.ParticipantsEntire US population under the age of 1 year between 2004 and 2013.Primary and secondary outcome measuresState-level infant mortality rate, neonatal mortality rate and postneonatal mortality rate.ResultsUsing a fixed effects regression model to control for unmeasurable differences between states, the impact of federal transfers on state-level infant mortality rates is estimated. After controlling for differences across states, increases in per capita federal transfers are significantly associated with lower infant, neonatal and postneonatal mortality rates. Holding all other variables constant, a $200 increase in the amount of federal transfers per capita would save one child’s life for every 10 000 live births.ConclusionsConsiderable debate exists regarding the role of federal transfers in improving the well-being of children and families. These findings indicate that increases in federal transfers are strongly associated with reductions in infant mortality rates. Such benefits should be carefully considered when state officials are deciding whether to accept or reject federal funds.

scholarly journals Information and Heterogeneous Beliefs: Cost of Capital, Trading Volume, and Investor Welfare

2013 ◽  
Vol 89 (1) ◽  
pp. 209-242 ◽  
Author(s):  
Peter O. Christensen ◽  
Zhenjiang Qin
Keyword(s):  
Information System ◽  
Risk Premium ◽  
Trading Volume ◽  
Cost Of Capital ◽  
Public Information ◽  
Exchange Economy ◽  
Substantial Impact ◽  
Certainty Equivalents ◽  
Ex Ante ◽  
The Impact

ABSTRACTIn an incomplete market with heterogeneous prior beliefs, we show that public information can have a substantial impact on the ex ante cost of capital, trading volume, and investor welfare. The Pareto efficient public information system is the system enjoying the maximum ex ante cost of capital and the maximum expected abnormal trading volume. Imperfect public information increases the gains-to-trade based on heterogeneously updated posterior beliefs. In an exchange economy, this leads to higher growth in the investors' certainty equivalents and, thus, a higher equilibrium interest rate, whereas the ex ante risk premium is unaffected by the informativeness of the public information system. Similar results are obtained in a production economy, but the impact on the ex ante cost of capital is dampened compared to the exchange economy due to welfare-improving reductions in real investments to smooth the investors' certainty equivalents over time.

Medicaid Expansion and Not-For-Profit Hospitals’ Financial Status: National and State-Level Estimates Using IRS and CMS Data, 2011-2016

2021 ◽  
pp. 107755872110097
Author(s):  
Tatiane Santos ◽  
Simone Singh ◽  
Gary J. Young
Keyword(s):  
Hospital Costs ◽  
State Level ◽  
Medicaid Expansion ◽  
Financial Status ◽  
For Profit ◽  
Not For Profit ◽  
Percentage Points ◽  
The Difference ◽  
Using Data ◽  
The Impact

Several studies have shown that Medicaid expansion has improved hospital financial performance. All of these studies have either used data from the Internal Revenue Service (IRS) or the Centers for Medicare and Medicaid Services (CMS), and none of them has examined the state-level impact of expansion on hospital finances. Using data for not-for-profit hospitals from both IRS and CMS for 2011-2016, we described the difference in costs related to uncompensated care and Medicaid shortfalls. We then estimated the impact of Medicaid expansion on hospitals’ financial status nationally and by state. Nationally, the estimated net effect of expansion reduced not-for-profit hospital costs by 2 percentage points based on IRS data and 0.83 percentage points based on CMS data. Across expansion states, the estimated net effects varied widely with approximately a 10-fold difference for hospitals based on IRS data and a 2-fold difference based on CMS data. Future studies should further explore the differences across IRS and CMS data.

scholarly journals Cultural values predict national COVID-19 death rates

2021 ◽  
Vol 1 (3) ◽  
Author(s):  
Damian J. Ruck ◽  
Joshua Borycz ◽  
R. Alexander Bentley
Keyword(s):  
Cultural Values ◽  
Cultural Context ◽  
State Level ◽  
Population Level ◽  
World Values Survey ◽  
Death Rates ◽  
Trust In Institutions ◽  
National Response ◽  
The Difference ◽  
The Impact

AbstractNational responses to a pandemic require populations to comply through personal behaviors that occur in a cultural context. Here we show that aggregated cultural values of nations, derived from World Values Survey data, have been at least as important as top-down government actions in predicting the impact of COVID-19. At the population level, the cultural factor of cosmopolitanism, together with obesity, predict higher numbers of deaths in the first two months of COVID-19 on the scale of nations. At the state level, the complementary variables of government efficiency and public trust in institutions predict lower death numbers. The difference in effect between individual beliefs and behaviors, versus state-level actions, suggests that open cosmopolitan societies may face greater challenges in limiting a future pandemic or other event requiring a coordinated national response among the population. More generally, mass cultural values should be considered in crisis preparations.

scholarly journals The Macaulay Duration: A Key Indicator for the Risk-Adjustment in Fair Value

2018 ◽  
Vol 13 (12) ◽  
pp. 251
Author(s):  
Francesca Beccace ◽  
Roberto Tasca ◽  
Luisa Tibiletti
Keyword(s):  
Financial Reporting ◽  
Risk Premium ◽  
Fair Value ◽  
Financial Reporting Standards ◽  
Adjusted Rate ◽  
Set Up ◽  
Risk Free Rate ◽  
Cash Inflow ◽  
The Impact ◽  
Free Rate

International Financial Reporting Standards (IFRS) 13 Fair Value Measurement lays down two methods to adjust Expected Present Value (EPV) for risk. According to Method 1, expected cash inflows should be risk-adjusted by subtracting a risk-premium and discounted at the market risk-free rate, see (IFRS 13, B25). In contrast according to Method 2, expected cash inflows should be discounted at the risk-free rate augmented by a risk-premium addendum, see (IFRS 13, B26). Standard IFRS 13, B29 leaves the freedom to choose between the two methods. The aim of this note is to identify the relationship between the Risk-Adjusted EPVs rolled out from Method 1 and Method 2. First we introduce a theoretical solution to risk-adjustments compliant with the Standard IFRS 13, B29. Then, we set up a user-oriented proxy to connect the risk-premium present in Method 1 with the risk-adjusted rate present in Method 2. This proxy spots light on the key role played by the Macaulay Duration of expected inflows, rather than that of the lifetime of the project. As a consequence, projects expiring at the same redemption date and endowed with the same EPV and/or the same total inflow may differ considerably in risk-adjustments, due to different Macaulay Durations. A user-oriented method to properly to fast evaluate risk-adjustments for multi-cash inflow projects is provided. Sensitivity analysis of the impact of the Macaulay Duration on Risk-Adjusted EPV is also rolled out through numerical examples.

A Puzzle of Excessive Equity Risk Premium and the Case of Poland

e-Finanse ◽  
2016 ◽  
Vol 12 (1) ◽  
pp. 1-11
Author(s):  
Paweł Kliber
Keyword(s):  
Financial Markets ◽  
Risk Premium ◽  
Historical Review ◽  
Theoretical Models ◽  
Equity Risk ◽  
The Difference ◽  
Using Data ◽  
Risk Free Rate ◽  
Excessive Risk ◽  
Free Rate

AbstractThe article presents a historical review of the literature related to the empirical problem of excessive risk premium. The risk premium (the difference between the return on equities and risk-free rate) observed in financial markets cannot be reconciled with theoretical models of financial markets - it is too high (“excessive”). We present the original model from the seminal work of Mehra and Prescott (1985), where this problem has been signaled. The article gives an overview of the main trends in the literature concerning this problem, of the proposed solutions and of the extension to the model. Finally, we consider the problem in the Polish context, estimating the original Mehra-Prescott model using data from the Polish financial market.

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