Demographic Transitions: analyzing the effects of mortality on fertility

The effect of mortality reductions on fertility is one of the main mechanisms stressed by the recent growth literature in order to explain demographic transitions. We analyze the empirical relevance of this mechanism based on the experience of all countries since 1960. We distinguish between the effects on gross and net fertility, take into account the dynamic nature of the relationship and control for alternative explanatory factors and for endogeneity. Our results show that mortality plays a large role in fertility reductions, that the change in fertility behavior comes with a lag of about 10 years and that both net and gross fertility are affected. We find comparatively little support for explanations of the demographic transition based on economic development or technological change.

Inequalities in Child Mortality in India: A District-Level Analysis

This paper measures the degree of inequality in child mortality rates across districts in India, using data from the 1981, 1991 and 2001 Indian population censuses. The results show that child mortality is more concentrated in less developed districts in all three census years. Further, between 1981 and 2001, the inequality in child mortality seems to have increased to the advantage of the more developed districts (i.e., there was an increasing concentration of child mortality in less developed districts). However, the inequality in female child mortality rates seems to have declined between 1991 and 2001, even as it increased – albeit at a slower rate than before – for male child mortality rates. In the decomposition analysis, it is found that while a more equitable distribution of medical facilities and safe drinking water across districts did contribute towards reducing inequality in child mortality between 1981 and 1991, different levels of structural change among districts were responsible for a very large part of the inequality in child mortality to the advantage of the more developed districts in all three census years. Other variables which played important roles in increasing inequality included a measure of infrastructure development, female literacy, and a social group status variable. The paper concludes with some brief comments on the policy implications of the findings.

Revisiting Shiller’s excess volatility hypothesis

One of the cornerstone of financial anomalies is that there exists money making opportunities. Shiller’s excess volatility theory is re-investigated from the perspective of a trading strategy where the present value is computed using a series of simple econometric models to forecast the present value. The results show that the excess volatility may not be exploited given the data available until time t. However, when learning is introduced empirically, the simple trading strategy may offer profits, but which are likely to disappear once transaction costs are considered.

Co-Movement, Spillovers and Excess Returns in Global Bond Markets

This paper investigates global term structure dynamics using a Bayesian hierarchical factor model augmented with macroeconomic fundamentals. More than half of the variation in bond yields of seven advanced economies is due to global co-movement, which is mainly attributed to shocks to non-fundamentals. Global fundamentals, especially global inflation, affect yields through a ‘policy channel’ and a ‘risk compensation channel’, but the effects through two channels are offset. This evidence explains the unsatisfactory performance of fundamentals-driven term structure models. Our approach delineates asymmetric spillovers in global bond markets connected to diverging monetary policies. The proposed model is robust as identified factors has significant explanatory power of excess returns. The finding that global inflation uncertainty is useful in explaining realized excess returns does not rule out regime changing as a source of non-fundamental fluctuations.

Revisiting Shiller’s excess volatility hypothesis

One of the cornerstone of financial anomalies is that there exists money making opportunities. Shiller’s excess volatility theory is re-investigated from the perspective of a trading strategy where the present value is computed using a series of simple econometric models to forecast the present value. The results show that the excess volatility may not be exploited given the data available until time t. However, when learning is introduced empirically, the simple trading strategy may offer profits, but which are likely to disappear once transaction costs are considered.