Model Adequacy Checks for Discrete Choice Dynamic Models

This paper proposes new parametric model adequacy tests for possibly nonlinear and nonstationary time series models with noncontinuous data distribution, which is often the case in applied work. In particular, we consider the correct specification of parametric conditional distributions in dynamic discrete choice models, not only of some particular conditional characteristics such as moments or symmetry. Knowing the true distribution is important in many circumstances, in particular to apply efficient maximum likelihood methods, obtain consistent estimates of partial effects and appropriate predictions of the probability of future events. We propose a transformation of data which under the true conditional distribution leads to continuous uniform iid series. The uniformity and serial independence of the new series is then examined simultaneously. The transformation can be considered as an extension of the integral transform tool for noncontinuous data. We derive asymptotic properties of such tests taking into account the parameter estimation effect. Since transformed series are iid we do not require any mixing conditions and asymptotic results illustrate the double simultaneous checking nature of our test. The test statistics converges under the null with a parametric rate to the asymptotic distribution, which is case dependent, hence we justify a parametric bootstrap approximation. The test has power against local alternatives and is consistent. The performance of the new tests is compared with classical specification checks for discrete choice models

Credit rating and bank behavior in India: Possible implications of the new Basel accord

The paper examines the impact of credit rating on capital adequacy ratios of Indian state-owned banks using quarterly data for the period 1997:1 to 2002:4. To this end, a multinomial logit model with multi credit rating indicators as dependent variable is estimated. The variables that can impinge upon capital adequacy ratio have been used as explanatory variables. Two separate models — one for long-term credit rating and another for short-term credit rating—have been estimated. The paper concludes that, both for short-term as well as for long-term ratings, capital adequacy ratios are an important factor impinging on credit rating of Indian state-owned banks.banknig; capital adequacy; credit rating; multinomial logit model; India

Working Paper 10-10 - The long-term adequacy of the Belgian public pension system: An analysis based on the MIDAS model

This working paper describes the second version of MIDAS (an acronym for ‘Microsimulation for the Development of Adequacy and Sustainability'), a dynamic population model with dynamic cross-sectional ageing. This model simulates the life spans of individuals in the base dataset, including with their interactions, for the years between 2003 and 2060. It enables to produce, on that period, adequacy assessment of pensions in Belgium that is coherent with the baseline budgetary projections of the 2009 report of the Study Committee for Ageing realized by the Federal Planning Bureau's semi-aggregated MALTESE model. Indeed, MIDAS aligns its socio-economic and demographic projections and its macro-economic assumptions on the 2009 report of the Study Committee for Ageing. The adequacy of pensions is analysed through the replacement ratio, inequality measures among pensioners and poverty risk indicators of the elderly.Adequacy, Pensions, Microsimulation

On the adequacy of current empirical evaluations of formal models of categorization

Categorization is one of the fundamental building blocks of cognition, and the study of categorization is notable for the extent to which formal modeling has been a central and influential component of research. However, the field has seen a proliferation of noncomplementary models with little consensus on the relative adequacy of these accounts. Progress in assessing the relative adequacy of formal categorization models has, to date, been limited because (a) formal model comparisons are narrow in the number of models and phenomena considered and (b) models do not often clearly define their explanatory scope. Progress is further hampered by the practice of fitting models with arbitrarily variable parameters to each data set independently. Reviewing examples of good practice in the literature, we conclude that model comparisons are most fruitful when relative adequacy is assessed by comparing well-defined models on the basis of the number and proportion of irreversible, ordinal, penetrable successes (principles of minimal flexibility, breadth, good-enough precision, maximal simplicity, and psychological focus)

Distinguishing Types of ‘Economic Abuses’: A Three-Dimensional Model

Is international criminal law adequate in respect of ‘economic abuses’ such as corporate complicity in human rights abuses or harm arising through the exploitation of resources from conflict-affected areas? Attempts to assess the adequacy of international criminal law to deal with ‘economic abuses’ have given rise to a complex and multi-layered debate. Authors have analysed a range of different phenomena, making it challenging to generalise conclusions on the suitability of existing international criminal law. Against this background, it is crucial to distinguish different types of ‘economic abuses’ if we are to assess the adequacy of international criminal law to address them. To do so, I propose a three-dimensional model to disentangle the various categories of ‘economic abuses’. Depending on whether the actor, the harmful activity, and the affected legal interests are economic or non-economic, legally distinct types of ‘economic abuses’ can be discerned. Through exploring three specific constellations, the article demonstrates that the adequacy of international criminal law varies significantly for the various types of ‘economic abuses’. The model aims to serve as an analytical entry point to distinguish the nature and extent of the legal challenges in a factual scenario and contributes to the elaboration of nuanced and meaningful conclusions on the relative adequacy of international criminal law in relation to ‘economic abuses’

A Dynamic Factor Analysis of Financial Contagion in Asia

In this paper we compared the performance of country specific and regional indicators of reserve adequacy in predicting, out of sample, the balance of payment crisis affecting the South East Asian region during the 1997-98 period. A Dynamic Factor method was used to retrieve reserve adequacy indicators. The empirical findings suggest clear evidence of financial contagion.Financial contagion, Dynamic factor model

Determinants of Capital Structure in Financial Institutions: The Case of Turkey

This study analyzes the determinants of capital structure in the Turkish banking sector. We propose an empirical model in order to identify the factors that explain why banks hold capital beyond the amount required by the regulation. We used a panel data set that employs bank-level data from the Turkish banking sector covering the period 2002–2006 and estimated the model with generalized method of moments (GMM). The findings of this study suggest that lagged capital, portfolio risk, economic growth, average capital level of the sector and return on equity are positively correlated with capital adequacy ratio and share of deposits are negatively correlated with capital adequacy ratio.Capital Adequacy, Turkish Banking Sector, GMM