Asian Journal of Economics and Banking (AJEB)

A closer look at stochastic frontier analysis in economics

Hung T. Nguyen — Wed, 30 Mar 2022 00:00:00 +0700

Purpose – While there exist many surveys on the use stochastic frontier analysis (SFA), many important issues and techniques in SFA were not well elaborated in the previous surveys, namely, regular models, copula modeling, nonparametric estimation by Grenander’s method of sieves, empirical likelihood and causality issues in SFA using regression discontinuity design (RDD) (sharp and fuzzy RDD). The purpose of this paper is to encourage more research in these directions. Design/methodology/approach – A literature survey. Findings – While there are many useful applications of SFA to econometrics, there are also many important open problems. Originality/value – This is the first survey of SFA in econometrics that emphasizes important issues and techniques such as copulas.

How can econometrics help fight the COVID-19 pandemic?

Kevin Alvarez , Vladik Kreinovich — Thu, 31 Mar 2022 05:33:19 +0700

Purpose – The current pandemic is difficult to model – and thus difficult to control. In contrast to the previous epidemics, whose dynamics were smooth and well described by the existing models, the statistics of the current pandemic are highly oscillating. The purpose of this paper is to explain these oscillations and to see how this explanation can be used to fight the epidemic.

Design/methodology/approach – The authors use an analogy with economic systems.

Findings – The authors show that these oscillations can be explained if we take into account the disease’s long incubation period – as a result of which our control measures are determined by outdated data, showing number of infected people two weeks ago. To better control the pandemic, the authors propose to use the experience of economics, where also the effect of different measures can be observed only after some time. In the past, this led to wild oscillations of the economy, with rapid growth periods followed by devastating crises. In time, economists learned how to smooth the cycles and thus to drastically decrease the corresponding negative effects. The authors hope that this experience can help fight the pandemic.

Originality/value – To the best of our knowledge, this is the first explanation of the highly oscillatory nature of this epidemic’s dynamics.

How to choose a fuzzy similarity measure in decision-making?

Bernadette Bouchon-Meunier, Giulianella Coletti — Thu, 31 Mar 2022 05:41:51 +0700

Purpose – The paper is dedicated to the analysis of fuzzy similarity measures in uncertainty analysis in general, and in economic decision-making in particular. The purpose of this paper is to explain how a similarity measure can be chosen to quantify a qualitative description of similarities provided by experts of a given domain, in the case where the objects to compare are described through imprecise or linguistic attribute values represented by fuzzy sets. The case of qualitative dissimilarities is also addressed and the particular case of their representation by distances is presented. Design/methodology/approach – The approach is based on measurement theory, following Tversky’s well-known paradigm.
Findings – A list of axioms which may or may not be satisfied by a qualitative comparative similarity between fuzzy objects is proposed, as extensions of axioms satisfied by similarities between crisp objects. They enable to express necessary and sufficient conditions for a numerical similarity measure to represent a comparative similarity between fuzzy objects. The representation of comparative dissimilarities is also addressed by means of specific functions depending on the distance between attribute values.
Originality/value – Examples of functions satisfying certain axioms to represent comparative similarities are given. They are based on the choice of operators to compute intersection, union and difference of fuzzy sets. A simple application of this methodology to economy is given, to show how a measure of similarity can be chosen to represent intuitive similarities expressed by an economist by means of a quantitative measure easily calculable. More detailed and formal results are given in Coletti and Bouchon-Meunier (2020) for similarities and Coletti et al. (2020) for dissimilarities.

Are you a good borrower? Mining interpretable pattern structures in credit scoring

Sergei O. Kuznetsov, Alexey Masyutin, Aleksandr Ageev — Thu, 31 Mar 2022 05:56:18 +0700

Purpose – The purpose of this study is to show that closure-based classification and regression models provide both high accuracy and interpretability.
Design/methodology/approach – Pattern structures allow one to approach the knowledge extraction problem in case of partially ordered descriptions. They provide a way to apply techniques based on closed descriptions to non-binary data. To provide scalability of the approach, the author introduced a lazy (querybased) classification algorithm.
Findings – The experiments support the hypothesis that closure-based classification and regression allow one to both achieve higher accuracy in scoring models as compared to results obtained with classical banking models and retain interpretability of model results, whereas black-box methods grant better accuracy for the cost of losing interpretability.
Originality/value – This is an original research showing the advantage of closure-based classification and regression models in the banking sphere.

The impact of foreign capital shifts on economic activities and asset prices: a threshold VAR approach

Boubekeur Baba, Güven Sevil — Thu, 31 Mar 2022 00:00:00 +0700

Purpose – The purpose of this paper is to investigate the impact of foreign capital shifts on economic activities and asset prices in South Korea.
Design/methodology/approach – The authors in this paper apply the Bayesian threshold vector autoregressive (TVAR) model to estimate the regimes of large and low inflows of foreign capital. Then, structural impulse-response analysis is used to check whether the responses of the variables differ across the estimated regimes. The model is estimated using quarterly data of foreign capital inflows, gross domestic product (GDP), consumer price index, credit to the private non-financial sector, real effective exchange rate (REER), stock returns and house prices.
Findings – The main findings suggest that large inflows of gross foreign capital, foreign direct investments (FDI) and foreign portfolio investments (FPI) are ineffective to boost economic growth, but large inflows of other foreign investments (OFIs) significantly contribute to GDP. The decreases in the foreign capital inflows are associated with larger depreciation of REER. The large inflows of gross foreign capital, FDI and OFIs are associated with further expansion of credit supply to private nonfinancial sectors.
Research limitations/implications – The policy implications of foreign capital inflows are of particular importance to all the emerging markets alike. However, the empirical analysis is limited to the case of South Korea due to various reasons. The experience with international capital inflows among emerging markets is heterogeneous. Therefore, it would be better to take each case of emerging market individually. In addition, TVAR analysis requires a long data sample, which unfortunately is not available for most of the emerging markets.
Originality/value – The foreign capital inflows are shown to be procyclical and notoriously volatile in many studies. Nevertheless, this topic has commonly been studied using linear VAR models, which do not properly deal with the cyclical characteristics of foreign capital inflows. This study attempts to resolve these methodological limitations by examining a non-linear VAR model that is capable of capturing the structural breaks associated with the cyclical behaviors of foreign capital inflows.

Quantum-like modelling in game theory: Quo Vadis? A brief review

Sudip Patra, Partha Ghose — Thu, 31 Mar 2022 06:11:19 +0700

Purpose – The current paper is a brief review of the emerging field of quantum-like modelling in game theory. This paper aims to explore several quantum games, which are superior compared to their classical counterparts, which means either they give rise to superior Nash equilibria or they make the game fairer. For example, quantum Prisoners Dilemma generates Pareto superior outcomes as compared to defection outcome in the famous classical case. Again, a quantum-like version of cards game can make the game fairer, increasing the chance of winning of players who are disadvantaged in the classical case. This paper explores all the virtues of simple quantumgames, also highlighting some findings of the authors as regards Prisoners Dilemma game.
Design/methodology/approach – As this is a general review paper, the authors have not demonstrated any specific mathematical method, rather explored the well-known quantum probability framework, used for designing quantum games. They have a short appendix which explores basic structure of Hilbert space representation of human decision-making.
Findings – Along with the review of the extant literature, the authors have also highlighted some new findings for quantum Prisoners Dilemma game. Specifically, they have shown in the earlier studies (which are referred to here) that a pure quantum entanglement set up is not needed for designing better games, even a weaker condition, which is classical entanglement is sufficient for producing Pareto improved outcomes.
Research limitations/implications – Theoretical research, with findings and implications for future game designs, it has been argued that it is not always needed to have true quantum entanglement for superior Nash Equilibria.
Originality/value – The main purpose here is to raise awareness mainly in the social science community about the possible applications of quantum-like game theory paradigm. The findings related to Prisoners Dilemma game are, however, original.

Determinants of consumers’intention to use credit card: a perspective of multifaceted perceived risk

Hoang Nam Trinh, Hong Ha Tran, Duc Hoang Quan Vuong — Thu, 31 Mar 2022 06:24:28 +0700

Purpose – The purpose of this study is to develop a theoretical model for consumer behavioral intention by integrating the technology acceptance model (TAM) and the theory of perceived risk, which is tested on the intended use of credit cards in Vietnam.
Design/methodology/approach – The data were collected from 485 bank customers through a nationwide online survey. An exploratory and confirmatory factor analyzes were performed to validate the factor structure of the measurement items while structural equation modeling was used to validate the proposed model and testing the hypotheses.
Findings – The results of structural equation modeling reveal that perceived risk, perceived usefulness, social influence and perceived ease of use were significant determinants of consumer intention to use a credit card. Of them, only perceived risk discouraged the intended use of a credit card, which was synthesized from psychological, financial, performance, privacy, time, social and security risk.
Research limitations/implications – This study measured the first-order risk dimensions based on the payment function of the credit card only; these measurements missed potential losses relevant to credit function of credit cards.
Practical implications – This study can be beneficial to banks enacting policies to attract more consumers and to help decide how to allocate resources to retain and expand their customer base.
Originality/value – The study adds value to the literature on consumer behavior by confirming the impact of second-order perceived risk on the intended use of credit cards, which most previous studies have not demonstrated. The research also provides an empirical evidence to the academic research platform on
e-banking services in Vietnam, especially related to the credit card industry.

Stability analysis of solutions to equilibrium problems and applications in economics

Tran Ngoc Tam, Nguyen Minh Hai, Bantaojai Thanatporn — Thu, 31 Mar 2022 06:30:16 +0700

Purpose – The purpose of this paper is to study the Hölder calmness of solutions to equilibrium problems and apply it to economics.
Design/methodology/approach – The authors obtain the Hölder calmness by using an effective approach. More precisely, under the key assumption of strong convexity, sufficient conditions for the Hölder continuity of solution maps to equilibrium problems are established.
Findings – Anewresult in stability analysis for equilibriumproblems and applications in economics is archived.
Originality/value – The authors confirm that the paper has not been published previously, is not under consideration for publication elsewhere and is not being simultaneously submitted elsewhere.