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#1423.

collin_brown_workingpaper, Jonathan Chiu, Thorsten V. Koeppl

What Drives Bitcoin Fees? Using Segwit to Assess Bitcoin's Long-run Sustainability

We use block level data from the Bitcoin blockchain to estimate the impact of congestion and the USD price on average fee rates. The introduction and adoption of the Segwit protocol allows us to identify an aggregate demand curve for bitcoin transactions. We nd that Segwit has reduced fee revenue by about 80%. Fee revenue could be maximized at a blocksize of about 0.6 MB when Segwit adoption remains at 40%. At this blocksize, maximum fee revenue would be roughly 1/8 of the current block reward { or the equivalent of 1.6375 BTC as a reward in the long run given current prices and demand for…

#1422.

Jason Allen, Robert Clark, Brent R. Hickman, Eric Richert

Resolving Failed Banks: Uncertainty, Multiple Bidding & Auction Design

The FDIC resolves insolvent banks using an auction process in which bidding is multidimensional and the rule used to evaluate bids along the different dimensions is proprietary. Uncertainty about the scoring rule leads banks to simultaneously submit multiple differentiated bids. This resolution mechanism typically results in considerable losses for the FDIC—$90 billion during the crisis. Our objective is to see whether the mechanism could be improved. To do so, we propose a methodology for analyzing auction environments where bids are ranked according to multiple attributes chosen by…

#1421.

James G. MacKinnon, Matthew D. Webb

When and How to Deal With Clustered Errors in Regression Models

We discuss when and how to deal with possibly clustered errors in linear regression models. Specifically, we discuss situations in which a regression model may plausibly be treated as having error terms that are arbitrarily correlated within known clusters but uncorrelated across them. The methods we discuss include various covariance matrix estimators, possibly combined with various methods of obtaining critical values, several bootstrap procedures, and randomization inference. Special attention is given to models with few treated clusters and clusters that vary in size, where inference…

#1420.

Morten Ø. Nielsen, Won-Ki Seo, dkseong

Inference on the dimension of the nonstationary subspace in functional time series

We propose a statistical procedure to determine the dimension of the nonstationary subspace of cointegrated functional time series taking values in the Hilbert space of square-integrable functions defined on a compact interval. The procedure is based on sequential application of a proposed test for the dimension of the nonstationary subspace. To avoid estimation of the long-run covariance operator, our test is based on a variance ratio-type statistic. We derive the asymptotic null distribution and prove consistency of the test. Monte Carlo simulations show good performance of our test and…

#1419.

Charles Beach, working_paper_worswick

An Economic Model of the Distribution of Family Income in Canada

This paper develops an economic model of the distribution of income based on shares of family incomes in Canada over 1976 - 2016. Major determinants of quintile and decile shares of total and market income include male and female participation rates, unemployment rate, inflation rate, GDP growth rate and manufacturing-to-services employment ratio. The analysis tests the hypothesis of GDP growth neutrality ("a rising tide lifts all boats") and strongly rejects it. It also examines the distributional benefits and losses from automation and globalization, and…

#1418.

Beverly Lapham, amnasri

Exchange Rate Pass-Through: A Competitive Search Approach

We develop an open economy monetary model with heterogeneous households which is characterized by incomplete pass-through of exchange rate movements to import prices. Partial pass-through arises in our environment due to the presence of competitive search in international goods' markets. Under competitive search, agents choose a sub-market in which to exchange goods, where different sub-markets are characterized by different price and trading probability combinations. Preference and policy shocks which induce exchange rate movements cause households to choose a different…

#1417.

working_paper_Canavire-Bacarreza, Christopher Cotton, Michael Jetter, Alejandra Montoya-Agudelo

Polarized education levels and civil unrest

After introducing a measure for educational polarization (EduPol), this paper presents a theoretical framework to understand whether and how EduPol may affect the contest for power in society. The model suggests that societies with high degrees of EduPol (i.e., substantial shares with either no or university-level education) are systematically more prone to civil unrest. We test this prediction on four measures of civil unrest: Political instability, domestic terrorism, civil conflict, and civil war. Our empirical estimations produce evidence consistent with this…

#1416.

Steven Lehrer

How skills and parental valuation of education influence human capital acquisition and early labor market return to human capital in Canada

Using the Youth in Transition Survey we estimate a Roy model with a three dimensional latent factor structure to consider how parental valuation of education, cognitive skills and non-cognitive skills influence endogenous schooling decisions and subsequent labour market outcomes in Canada. We find the effect of cognitive skills on adult incomes arises by increasing the likelihood of obtaining further education. Further, we find that both non-cognitive skills and parental valuation for education play a larger role in determining income at age 25 than cognitive skills. Last, our analysis…

#1415.

James G. MacKinnon, Morten Ø. Nielsen, Matthew D. Webb

Wild Bootstrap and Asymptotic Inference with Multiway Clustering

We study two cluster-robust variance estimators (CRVEs) for regression models with clustering in two dimensions and give conditions under which t-statistics based on each of them yield asymptotically valid inferences. In particular, one of the CRVEs requires stronger assumptions about the nature of the intra-cluster correlations. We then propose several wild bootstrap procedures and state conditions under which they are asymptotically valid for each type of t-statistic. Extensive simulations suggest that using certain bootstrap procedures with one of the t-statistics generally performs…

Upcoming Events

James McNeil

2019 October 23

Research

Affiliation: Queen's University

David Jacks (Weatherall)

2019 October 29

Research

Title: "The Gravitational Constant."

Affiliation: Simon Fraser University

David Jacks will be visiting QED October 21 - November 1, 2019. Upon arrival he will be located in the Weatherall Office (Dun. 216D) and can be reached at extension 3-2287.