The
economics and finance group wishes to supervise PhD dissertations in the
following the general areas. We present here some project titles and the
general lines of enquiries we believe could be pursued. If you are interested
in any of these projects or in projects that are related to one or more of
them, do not hesitate to contact us directly (in the first instance you may
want to contact Gauthier Lanot, g.lanot@econ.keele.ac.uk)
The projects
are collected in broad research areas:
Areas:
1.
Empirical
Finance
2.
Applied
Economics and Econometrics
3. Economics of ageing and retirement (includes Actuarial
research…)
The Dynamics Of
Sovereign Risk And The Price Of Risk In Bond And CDS Markets (Alena Audzeyeva +Gauthier Lanot)
It
was widely assumed until recently that both yield spreads on sovereign debt and
related CDS premiums reflect primarily default risk of a sovereign. Recent
studies have uncovered that bond yield spreads are determined by global and
regional market risks along with country-specific factors; see, e.g., Ferrucci,
2003, Sløk and Kennedy, 2004, Diaz Weigel and Gemmill, 2006, Hartelius et al.,
2008, Ciarlone et al., 2009, Audzeyeva and Schenk-Hoppé, 2010. The literature
on CDS pricing also provides evidence on the presence of a significant market
risk premium within CDS premiums linked to sovereign bonds (Pan and Singleton,
2008, Remolona et al., 2008, and Kücük, forthcoming). Given this evidence, it
is important to understand (a) the relative importance of sovereign (default)
component versus non-default component in the term-structure of both sovereign
bond yield spreads and CDS premiums; (b) the dynamics of the two components
over time and how the interaction between the two related markets (for bonds
and CDS) contributes to this dynamics.
Investigation Of Sovereign Credit
Rating Transitions (Alena Audzeyeva +Gauthier Lanot)
Credit
rating transition matrices are a key input to reduced-type valuation models of
defaultable debt (e.g. Jarrow and Turnbull, 1995, and Jarrow et al., 1997),
models of credit derivatives (e.g. Kijima and Komoribayashi, 1998, and Acharya
et al., 2002) and various credit risk management applications. An accurate
estimation of these matrices is therefore essential. When the properties of
corporate rating transitions received some attention in the literature (Lando
and Skødeberg, 2002, Jafry and Schuermann, 2004, and Christensen et al., 2004,
among others), little has been done to formally assess the finite-sample
properties of alternative estimators for sovereign rating transitions (the only
known study is Fuertes and Kalotychou, 2007) (Sovereign and corporate rating
transitions are estimated separately by Fitch, Moody’s and Standard &
Poor’s due to considerable divergences in the two rating migration processes.
Duffie et al. (2003), for example, discuss the differences in the motivation to
default, default procedures and also in the financial implications of default
for these two types of borrowers.)
Another
important question which remains unanswered is whether available estimators
adequately capture properties of the observed rating transition processes
(including transitions into default) at various time-horizons representing the
maturity spectrum of tradable debt and debt-related instruments.
Health, Economic
Wellbeing, and the MDGs: Evidence using Cross-Country Regional Analysis (Jami Husain)
The
developing countries around the world expressed their consensus in terms of the
targets for the improvement of income and population health by becoming the
signatories of the Millennium Development Goals (
The
Demographic and Health Surveys (DHS) programme, coordinated and conducted by
Macro International with funding from USAID under the project, named ‘MEASURE
DHS’, has been collecting representative data on population, health, wealth and
nutrition through more than 240 surveys in over 85 countries, spanning the last
two decades.1 In the purview of cross-country variations in the achievements of
MDGs, we will make use of the DHS to construct regional level pseudo-panels for
each country (and pool together) to analyse, firstly, the nature of the joint
evolution of health and wealth, and secondly, the extent of the impact that
regional level health improvements may have had on the regional level wealth
measures. The research methodology will consist of descriptive and econometric
analysis based on cross-section, pooled cross-section, and pseudo-panels at the
regional level.
Linked Trade and
Environmental Agreements (Shiva
Sidkar)
A
serious concern regarding the relationship between trade and environmental
policy is that these two issues have usually been dealt with separately in
bilateral and multilateral agreements. A key policy question is the extent of
cooperation that can be supported by a linked agreement - whether linkage of
trade and environmental agreements can support a more cooperative outcome than
non-linked agreements in the context of self-enforcing agreements. In a linked
agreement countries agree to cooperate on both trade policy and environmental
policy. Deviation from cooperation in either policy by one of the countries
results in a return to Nash equilibrium. Suppose pollution accumulates over
time, i.e., it is a stock variable and emissions in one period have potentially
long term effects. Is a higher degree of cooperation sustainable between
countries?
The
first stage of the project would involve becoming familiar with the relevant
literature and techniques. Then, start by looking at a static game and then the
dynamic game. This is a project that would require a candidate to be well
trained in Microeconomics, International Trade and Game Theory.
Debt sustainability and
the political economy of debt and deficits. (Gabriella
Legrenzi)
This
project aims at empirically assessing the sustainability of a given
government’s intertemporal budget constraint, i.e. whether a government is
solvent.
Drawing
on Legrenzi and Milas (2009), particular emphasis will be attached to
non-linear models, pointing to threshold behaviour of fiscal policy
authorities, as opposed to state-invariant fiscal adjustments, and in line with
the political economy of fiscal policy.
A
related project relies in evaluating the impact of political and institutional
variables on fiscal policy, aimed at assessing the existence of deficit bias,
and designing appropriate corrections.
International Business
Cycles and Spill-over effects (Robin Bladen Hovell)
The
recent financial crisis and subsequent downturn in economic activity has
demonstrated the importance of economic spill-overs between financial markets
and aggregate economic activity as a whole.
There is conflicting evidence, however, as to whether the importance of
these spill-over effects has strengthened over time. The research would focus on quantifying the
magnitude of spill-over effects in relation to business cycles and examining
the significance of the various channels through which business cycle
propagation occurs internationally.
Costs of Recession (Robin Bladen Hovell,
Elizabeth Symons)
Traditional
measures of the costs of recession impute the loss associated with the
shortfall of economic activity below full capacity. Under this approach,
economic activity may be variously expressed in terms of output or consumption
while full capacity is measured in terms of trend. Empirically, the costs of recession obtained
are numerically small. Clarke et al
(1994) adopt an alternative approach to the problem and calculate the costs of
recession in terms of the consumption households would be willing to forego in
order to avoid the risks associated with recession. Calculated this way, the costs of recession
appear significantly higher.
The
intention of the current research is to build upon this analysis by
investigating the costs of recession using the British Household Panel. Interviews for the first wave of the BHPS
were conducted between September and December 1991 and annually thereafter. The dataset provides a rich source of
information regarding socio-economic characteristics of households and the
panel characteristics allows the significance of state dependence in employment
and savings outcomes to be taken into account.
Reformulating the theoretical framework in order to recognize the
significance of the dynamic behaviour of households for the measure of
recession cost will represent an early contribution of the PhD.
Macroeconomic management
and the Sustainability of the Euro (Robin Bladen Hovell)
The
objective of this project is to investigate the efficacy of alternative forms
of macroeconomic governance and management across
The
project will need to analyse a number of key issues. Inter alia, these include the prospective
structure of fiscal coordination rules, the definition of a harmful imbalance,
the range and size of shocks, and alternative measures of robustness
Human Capital Investment
In A Recession. (Gauthier Lanot)
Human
Capital Investment decisions in the simplest framework depend on the comparison
between rates of return (possibly corrected for risk) of various kinds of
investments: financial, educational, health, etc... A more advanced analytical
framework includes the effect of liquidity/borrowing constraints on the action
and the investment strategies of several kind of agents: individual/households
(demand for education/training), firms (demander of trained/untrained labour force)
and governments (provides funding for school, universities, support investment
in specific forms of human capital). However we may suspect that the investment
decisions in recession periods and in boom times may be substantially different
(i.e. households may decide to invest in different form of human capital in a
recession than in a boom while firms human and physical capital decision would
exacerbate/mitigate the effects of individual choices). A first contribution of
this work would be to synthesize the effect of past recessions and booms on the
observed behaviours of households, firms and government. This would be based on
the analysis of the many surveys (of households, firms) which are available
over the last 30 years (i.e. covering several recessions and booms). In a
second stage the PhD would develop a modelling approach which would resolve the
methodological issues associated with the measurement of behavioural responses
to a change in the economic climate. This is a demanding PhD project which
requires a well trained candidate in all aspects of modern economics.
Asymmetric Information
in the Mortgage Market (Gauthier Lanot)
Asymmetric
information is claimed to contribute significantly to the performance of the
mortgage asset markets at the time of the recent financial crisis. The purpose
of this PhD project is to disentangle the contribution of selection and moral hazard to the performance
and pricing of a pool of mortgages. The literature to date focuses mainly on
insurance product of various types (see
Chiappori, P. A. and B.Salanie´ 1997, 2000 and Finkelstein, A., and Poterba, J., 2004), and focused mostly on the
effect of adverse selection. Further work considered the issue of identifying
moral hazard (see Abbring, J. H., Chiappori, P.-A. and Pinquet, J. ,2003 ) in
particular insurance case where individual performance over time matters. More
recently the question of the empirical importance advantageous selection has been studied empirically (Fang, H.,
Keane, M. P., and Silverman, D., 2008). All these aspects are likely candidates to
explain in part the performance of portfolio
of sub-prime mortgages. This project will involve both some economic
modelling of the mortgage market participants and some applied econometric
work. It requires a good knowledge of basic contract theory and applied
econometrics.
Solvency And Risk In
Public Pension Systems (Carmen Boado-Penas)
The
aim of this project is twofold: to demonstrate the actuarial imbalance in the
British pension system in its current form; and to measure the degree of
aggregate economic risk pensioners are exposed to when applying formulas for
the calculation of retirement pensions based on notional accounts for different
earning profiles.
The
model used generates scenarios for various periods encompassing some 10,000
different permutations of the macroeconomic indicators needed to calculate quantities
such as the initial individual pension, the earnings replacement rate, or the internal
rate of return and the value at risk. The project further aims at constructing
a British Actuarial Balance, taking into account automatic balance mechanisms.
Pricing Social Security
commitments (Alena Audzeyeva, Carmen Boado-Penas, Gauthier Lanot, Roman Raab)
An
actuarial valuation of a social security system or a retirement system is an
estimate of the plan’s financial position at a specific point in time, and
actuarial assumptions are primarily based on past experience or standard
tables. However the liabilities of the system are rarely measured taking into
account the risk. This project will show how different techniques of modern asset
pricing (Geanakoplos and Zeldes 2009, Blocker et al 2008) can be used to value
the liabilities associated to the pension schemes and social security systems.
In the case of pension schemes the results can be compared with those obtained
under actuarial valuation. The methodology developed would valid for the
Retirement And Informal
Care-Giving (Roman Raab)
The
literature on informal care giving as a reason for retirement is thin and
outdated, probably due to the absence of data in the past. Gorey, Rice, and
Brice (1992, Research on Aging) show that up to a third of informal care giving
leads to labour market exit. Extending this literature, we target to
micro-estimate the influence of informal care-giving on the retirement
decision.
The
first step in this project is therefore to explore new and up-to-date survey
data such as SHARE and ELSA to develop a data set of older workers/retirees
giving care in the family.
The
second step involves the estimation of a model of retirement as a function of
care giving attributes. A possible set of explanatory variables includes care
intensity (hrs. of care-giving), nursing care proximity and costs, care-giving
benefits and incentives, income, wealth, household/family characteristics, age,
eligibility for retirement, and demographic descriptors.
Retirement Decisions And
Asset Accumulation. (Gauthier Lanot, Roman Raab)
The
objective of this project is to extend Bingley & Lanot’s empirical work in
the direction of more general empirical model of retirement decision which accounts
for the heterogeneous accumulation/decumulation of assets in a “non-diversified”
portfolio (i.e. housing, health, pension wealth, social security wealth etc).
The
work could develop in several directions: model the observed dynamic of accumulation
of imperfectly diversified portfolio and attempt to embed this is an inter-temporal
model of labour supply at the household level and describe the behavioural
consequences on retirement decisions for the current pension design and suggest
welfare improving policies.
Alternatively,
the PhD work could plan to explain why household are in the main unlikely to
hold perfectly diversified (to be defined) portfolios. This is turn would
suggest that households at risk of retirement are likely to face
(financial/health) shocks against which they are poorly insured/protected. A
theoretical analysis would then suggest which are the “worst” shocks and what
are their likely labour supply effects (pre and post retirement).
The
modeling and the measurement of the behavioural responses to such shocks would
be the core of the PhD research work.
This
project would require a quantitatively well trained candidate in modern
micro-econometrics and modern micro economics in its application to risk.
Retirement And The
“Global” Recession. (Gauthier Lanot)
This
would be a more descriptive thesis which would attempt to describe, analyse and
synthesise the effect of the recent global recession on the observed retirement
behaviour in the
Solvency And
Sustainability Of Pension Systems. (Carmen Boado-Penas , Gauthier Lanot)
The
project addresses the sustainability of pension systems in an economy where demographic
booms and busts over time affect the level of contributions and liabilities.
Different designs of pension systems will be analysed theoretically, in the
context of a dynamic model, and empirically, using British and other European data.
The aim of the project is to suggest pension system designs which are both
feasible and robust to large demographic changes and economic downturns.