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Mathematics
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Mathematical Modeling in Transportation Economics, Financial Economics, and International Economics
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Mathematical Modeling in Transportation Economics, Financial Economics, and International Economics

A special issue of Mathematics (ISSN 2227-7390). This special issue belongs to the section "Financial Mathematics".

Deadline for manuscript submissions: closed (15 July 2023) | Viewed by 13976

Special Issue Editor

Prof. Dr. Bahram Adrangi

E-Mail Website
Guest Editor
W.E. Nelson Professor of Financial Economics, University of Portland, 5000 N. Willamette Blvd., Portland, OR 97203, USA
Interests: applied econometrics; international economics and finance; financial economics; transportation economics; applied microeconomics and industrial organization

Special Issue Information

Dear Colleagues,

As the guest editor of the Special Issue of Mathematics titled Mathematical Modeling in International Economics, I would like to invite you to submit your scholarly papers for review and possible publication in the areas of international trade, balance of payments, and international finance, among other relevant areas. Topics may include trade and factor prices, tariffs and their impact on wages and commodity prices, trade and transportation, trade and supply chain, trade and its environmental impact, trade and equity markets of the world, current account, foreign investments, exchange rate determination or forecasting, covered and uncovered interest parity, currency options, futures, and other currency derivatives, as well as DSGE models that include any of the above topics. 

Prof. Dr. Bahram Adrangi
Guest Editor

Manuscript Submission Information

Manuscripts should be submitted online at www.mdpi.com by registering and logging in to this website. Once you are registered, click here to go to the submission form. Manuscripts can be submitted until the deadline. All submissions that pass pre-check are peer-reviewed. Accepted papers will be published continuously in the journal (as soon as accepted) and will be listed together on the special issue website. Research articles, review articles as well as short communications are invited. For planned papers, a title and short abstract (about 100 words) can be sent to the Editorial Office for announcement on this website.

Submitted manuscripts should not have been published previously, nor be under consideration for publication elsewhere (except conference proceedings papers). All manuscripts are thoroughly refereed through a single-blind peer-review process. A guide for authors and other relevant information for submission of manuscripts is available on the Instructions for Authors page. Mathematics is an international peer-reviewed open access semimonthly journal published by MDPI.

Please visit the Instructions for Authors page before submitting a manuscript. The Article Processing Charge (APC) for publication in this open access journal is 2600 CHF (Swiss Francs). Submitted papers should be well formatted and use good English. Authors may use MDPI's English editing service prior to publication or during author revisions.

Keywords

  • trade
  • tariffs
  • balance of payment
  • currency derivatives
  • exchange rate forecasting
  • exchange rate determination
  • currency derivatives
  • DSGE models

Published Papers (7 papers)

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Research

26 pages, 1950 KiB  
Article
Macroeconomic Effects of Maritime Transport Costs Shocks: Evidence from the South Korean Economy
by Xingong Ding and Yong-Jae Choi
Mathematics 2023, 11(17), 3668; https://doi.org/10.3390/math11173668 - 25 Aug 2023
Viewed by 1707
Abstract
In the aftermath of the COVID-19 pandemic, the dramatic increase in maritime transport costs might potentially exert detrimental impacts on the macroeconomy, especially for countries that heavily rely on international trade for their consumption and production activities. Our study employs a small open [...] Read more.
In the aftermath of the COVID-19 pandemic, the dramatic increase in maritime transport costs might potentially exert detrimental impacts on the macroeconomy, especially for countries that heavily rely on international trade for their consumption and production activities. Our study employs a small open economy DSGE (Dynamic Stochastic General Equilibrium) model to analyze the impact of maritime transport costs on the South Korean macroeconomy, where maritime transport costs are considered as key factors impacting the law of one price. Positive shocks in maritime transport costs, according to the impulse response function, have positive repercussions on the Consumer Price Index (CPI), terms of trade, nominal exchange rates, and nominal interest rates, but can negatively affect real output and real exchange rate. To verify the validity of the our DSGE model, we utilize a Vector autoregression with exogenous variables (VARX) model to examine the dynamic relationship between maritime transport costs and South Korean macroeconomic variables, based on quarterly data from the first quarter of 2002 to the fourth quarter of 2022. The results of the VARX model coincide with those of the DSGE model. Our findings underline the importance of maritime transport costs in the macroeconomy and hold substantial implications for the considered design and selection of policies to mitigate such shocks. Full article
(This article belongs to the Special Issue Mathematical Modeling in Transportation Economics, Financial Economics, and International Economics)
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21 pages, 15267 KiB  
Article
Climate Risks and Forecasting Stock Market Returns in Advanced Economies over a Century
by Mehmet Balcilar, David Gabauer, Rangan Gupta and Christian Pierdzioch
Mathematics 2023, 11(9), 2077; https://doi.org/10.3390/math11092077 - 27 Apr 2023
Cited by 1 | Viewed by 1618
Abstract
In this study, we contribute to the rapidly growing climate-finance literature by shedding light on the question of whether climate risks have predictive value for stock market returns. We measure climate risks in terms of both the change in the northern hemisphere temperature [...] Read more.
In this study, we contribute to the rapidly growing climate-finance literature by shedding light on the question of whether climate risks have predictive value for stock market returns. We measure climate risks in terms of both the change in the northern hemisphere temperature anomaly and its volatility and the change in the global temperature anomaly and its volatility. We study monthly data for eight advanced countries (Canada, France, Germany, Italy, Japan, Switzerland, the United Kingdom (UK), and the United States (US)). Our sample period runs from 1916 to 2021. We control for cross-market spillovers of stock market returns and volatility as well as other risks including oil-price returns and volatility, geopolitical risks, and the gold-to-silver price ratio as a measure of investor risk aversion. Given this large array of control variables, we apply the Lasso estimator to trace out the incremental predictive value of climate risks for subsequent stock market returns. We find that climate risks do not have systematic predictive value for subsequent stock market returns. We then extend our analysis in two ways. First, we show that climate risks have short-term out-of-sample predictive value for the connectedness of stock market returns. Second, we show that climate risks have predictive power for stock market returns when we study monthly historical UK data for the sample period from 1772 to 2021. Full article
(This article belongs to the Special Issue Mathematical Modeling in Transportation Economics, Financial Economics, and International Economics)
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27 pages, 405 KiB  
Article
Forecasting BDI Sea Freight Shipment Cost, VIX Investor Sentiment and MSCI Global Stock Market Indicator Indices: LSTAR-GARCH and LSTAR-APGARCH Models
by Melike Bildirici, Işıl Şahin Onat and Özgür Ömer Ersin
Mathematics 2023, 11(5), 1242; https://doi.org/10.3390/math11051242 - 4 Mar 2023
Cited by 3 | Viewed by 1915
Abstract
Prediction of the economy in global markets is of crucial importance for individuals, decisionmakers, and policies. To this end, effectiveness in modeling and forecasting the directions of such leading indicators is of crucial importance. For this purpose, we analyzed the Baltic Dry Index [...] Read more.
Prediction of the economy in global markets is of crucial importance for individuals, decisionmakers, and policies. To this end, effectiveness in modeling and forecasting the directions of such leading indicators is of crucial importance. For this purpose, we analyzed the Baltic Dry Index (BDI), Investor Sentiment Index (VIX), and Global Stock Market Indicator (MSCI) for their distributional characteristics leading to proposed econometric methods. Among these, the BDI is an economic indicator based on shipment of dry cargo costs, the VIX is a measure of investor fear, and the MSCI represents an emerging and developed county stock market indicator. By utilizing daily data for a sample covering 1 November 2007–30 May 2022, the BDI, VIX, and MSCI indices are investigated with various methods for nonlinearity, chaos, and regime-switching volatility. The BDS independence test confirmed dependence and nonlinearity in all three series; Lyapunov exponent, Shannon, and Kolmogorov entropy tests suggest that series follow chaotic processes. Smooth transition autoregressive (STAR) type nonlinearity tests favored two-regime GARCH and Asymmetric Power GARCH (APGARCH) nonlinear conditional volatility models where regime changes are governed by smooth logistic transitions. Nonlinear LSTAR-GARCH and LSTAR-APGARCH models, in addition to their single-regime variants, are estimated and evaluated for in-sample and out-of-sample forecasts. The findings determined significant prediction and forecast improvement of LSTAR-APGARCH, closely followed by LSTAR-GARCH models. Overall results confirm the necessity of models integrating nonlinearity and volatility dynamics to utilize the BDI, VIX, and MSCI indices as effective leading economic indicators for investors and policymakers to predict the direction of the global economy. Full article
(This article belongs to the Special Issue Mathematical Modeling in Transportation Economics, Financial Economics, and International Economics)
20 pages, 1444 KiB  
Article
Welfare–Balanced International Trade Agreements
by Filipe Martins, Alberto A. Pinto and Jorge P. Zubelli
Mathematics 2023, 11(1), 40; https://doi.org/10.3390/math11010040 - 22 Dec 2022
Cited by 1 | Viewed by 1802
Abstract
In this work, we consider a classic international trade model with two countries and one firm in each country. The game has two stages: in the first stage, the governments of each country use their welfare functions to choose their tariffs either: (a) [...] Read more.
In this work, we consider a classic international trade model with two countries and one firm in each country. The game has two stages: in the first stage, the governments of each country use their welfare functions to choose their tariffs either: (a) competitively (Nash equilibrium) or (b) cooperatively (social optimum); in the second stage, firms competitively choose (Nash) their home and export quantities under Cournot-type competition conditions. In a previous publication we compared the competitive tariffs with the cooperative tariffs and we showed that the game is one of the two following types: (i) prisoner’s dilemma (when the competitive welfare outcome is dominated by the cooperative welfare outcome); or (ii) a lose–win dilemma (an asymmetric situation where only one of the countries is damaged in the cooperative welfare outcome, whereas the other is benefited). In both scenarios, their aggregate cooperative welfare is larger than the aggregate competitive welfare. The lack of coincidence of competitive and cooperative tariffs is one of the main difficulties in international trade calling for the establishment of trade agreements. In this work, we propose a welfare-balanced trade agreement where: (i) the countries implement their cooperative tariffs and so increase their aggregate welfare from the competitive to the cooperative outcome; (ii) they redistribute the aggregate cooperative welfare according to their relative competitive welfare shares. We analyse the impact of such trade agreement in the relative shares of relevant economic quantities such as the firm’s profits, consumer surplus, and custom revenue. This analysis allows the countries to add other conditions to the agreement to mitigate the effects of high changes in these relative shares. Finally, we introduce the trade agreement index measuring the gains in the aggregate welfare of the two countries. In general, we observe that when the gains are higher, the relative shares also exhibit higher changes. Hence, higher gains demand additional caution in the construction of the trade agreement to safeguard the interests of the countries. Full article
(This article belongs to the Special Issue Mathematical Modeling in Transportation Economics, Financial Economics, and International Economics)
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33 pages, 1822 KiB  
Article
How Resilient Is the U.S. Economy to Foreign Disturbances?
by Olayinka Oyekola
Mathematics 2022, 10(9), 1404; https://doi.org/10.3390/math10091404 - 22 Apr 2022
Cited by 1 | Viewed by 1779
Abstract
We assess the relative importance of domestic and foreign disturbances in explaining fluctuations in key macroeconomic variables and find that both types of shocks are equally important. We reach this conclusion within a constructed two-sector open economy DSGE model context, where we isolate [...] Read more.
We assess the relative importance of domestic and foreign disturbances in explaining fluctuations in key macroeconomic variables and find that both types of shocks are equally important. We reach this conclusion within a constructed two-sector open economy DSGE model context, where we isolate the relative contributions of each group of disturbances to post-WWII U.S. business cycles. Our approach is to apply the indirect inference method to test the model’s fit against a four-equation VAR(1) of output, real exchange rate, energy use, and consumption. Our main result is that foreign disturbances are pivotal to driving movements in these home variables; accounting for 38% of the variability in aggregate output, 73% of the variation in the real exchange rate, 45% of the variance of energy use, and 84% of the volatility of consumption. Further, foreign disturbances are also identified to be crucial for some other home macroeconomic variables, explaining larger fractions in changes to investment, labour hours, and real interest rate. However, the U.S. economy appears to be resilient to foreign disturbances with respect to certain macroeconomic variables; in particular, exports, imports, real wages, and domestic absorption. Full article
(This article belongs to the Special Issue Mathematical Modeling in Transportation Economics, Financial Economics, and International Economics)
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21 pages, 10648 KiB  
Article
High Persistence and Nonlinear Behavior in Financial Variables: A More Powerful Unit Root Testing in the ESTAR Framework
by Tolga Omay, Aysegul Corakci and Esra Hasdemir
Mathematics 2021, 9(20), 2534; https://doi.org/10.3390/math9202534 - 9 Oct 2021
Cited by 2 | Viewed by 1835
Abstract
In this study, we consider the hybrid nonlinear features of the Exponential Smooth Transition Autoregressive-Fractional Fourier Function (ESTAR-FFF) form unit root test. As is well known, when developing a unit root test for the ESTAR model, linearization is performed by the Taylor approximation, [...] Read more.
In this study, we consider the hybrid nonlinear features of the Exponential Smooth Transition Autoregressive-Fractional Fourier Function (ESTAR-FFF) form unit root test. As is well known, when developing a unit root test for the ESTAR model, linearization is performed by the Taylor approximation, and thereby the nuisance parameter problem is eliminated. Although this linearization process leads to a certain amount of information loss in the unit root testing equation, it also causes the resulting test to be more accessible and consistent. The method that we propose here contributes to the literature in three important ways. First, it reduces the information loss that arises due to the Taylor expansion. Second, the research to date has tended to misinterpret the Fourier function used with the Kapetanios, Shin and Snell (2003) (KSS) unit root test and considers it to capture multiple smooth transition structural breaks. The simulation studies that we carry out in this study clearly show that the Fourier function only restores the Taylor residuals of the ESTAR type function rather than accounting forthe smooth structural break. Third, the new nonlinear unit root test developed in this paper has very strong power in the highly persistent near unit root environment that the financial data exhibit. The application of the Kapetanios Shin Snell- Fractional Fourier (KSS-FF) test to ex-post real interest rates data of 11 OECD countries for country-specific sample periods shows that the new test catches nonlinear stationarity in many more countries than the KSS test itself. Full article
(This article belongs to the Special Issue Mathematical Modeling in Transportation Economics, Financial Economics, and International Economics)
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21 pages, 1885 KiB  
Article
International Trade and Human Capital Investment with Heterogeneous Firms and Workers: Modeling and Analysis
by Jaewon Jung
Mathematics 2021, 9(10), 1106; https://doi.org/10.3390/math9101106 - 13 May 2021
Cited by 4 | Viewed by 1841
Abstract
Though the importance of organizational behavior and human decision processes within firms for the firm performance has largely been recognized in the business and management literature, much less attention has been devoted to studying such implications in the international trade context. This paper [...] Read more.
Though the importance of organizational behavior and human decision processes within firms for the firm performance has largely been recognized in the business and management literature, much less attention has been devoted to studying such implications in the international trade context. This paper develops a general-equilibrium trade model in which heterogeneous workers make an investment decision in acquiring advanced managerial skills and choose their optimal effort level based on their comparative advantage. In doing so, we show how globalization-induced human capital accumulation within firms leads to sustainable economic growth. We also show that workers’ organizational belief and CEO’s managerial vision may be an important element for the human capital formation within firms and for the performance of firms in a global economy. Full article
(This article belongs to the Special Issue Mathematical Modeling in Transportation Economics, Financial Economics, and International Economics)
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