Professor Dr. Makram El-Shagi

Professor Dr. Makram El-Shagi
Aktuelle Position

seit 1/15

Forschungsprofessor

Leibniz-Institut für Wirtschaftsforschung Halle (IWH)

seit 8/14

Professor

Henan University, School of Economics, China

Forschungsschwerpunkte

  • Finanzmarktstabilität bzw. - instabilität: Regulierung und realwirtschaftliche Folgen
  • Währungs- und Geldpolitik

Makram El-Shagi ist seit Januar 2015 Forschungsprofessor am IWH. Seine Forschungsschwerpunkte liegen im Bereich monetäre Makroökonomik, internationale Makroökonomik und Ökonometrie.

Makram El-Shagi ist Professor an der Henan University in China und Leiter des "Center for Financial Development and Stability". Zuvor war er Gastprofessor an der California State University, Long Beach sowie wissenschaftlicher Mitarbeiter am IWH.

Ihr Kontakt

Professor Dr. Makram El-Shagi
Professor Dr. Makram El-Shagi
Mitglied - Abteilung Makroökonomik
Nachricht senden

Publikationen

cover_journal-of-banking-and-finance.jpg

The Joint Dynamics of Sovereign Ratings and Government Bond Yields

Makram El-Shagi Gregor von Schweinitz

in: Journal of Banking & Finance, im Erscheinen

Abstract

Can a negative shock to sovereign ratings invoke a vicious cycle of increasing government bond yields and further downgrades, ultimately pushing a country toward default? The narratives of public and political discussions, as well as of some widely cited papers, suggest this possibility. In this paper, we will investigate the possible existence of such a vicious cycle. We find no evidence of a bad long-run equilibrium and cannot confirm a feedback loop leading into default as a transitory state for all but the very worst ratings. We use a bivariate semiparametric dynamic panel model to reproduce the joint dynamics of sovereign ratings and government bond yields. The individual equations resemble Pesaran-type cointegration models, which allow for valid interference regardless of whether the employed variables display unit-root behavior. To incorporate most of the empirical features previously documented (separately) in the literature, we allow for different long-run relationships in both equations, nonlinearities in the level effects of ratings, and asymmetric effects in changes of ratings and yields. Our finding of a single good equilibrium implies the slow convergence of ratings and yields toward this equilibrium. However, the persistence of ratings is sufficiently high that a rating shock can have substantial costs if it occurs at a highly speculative rating or lower. Rating shocks that drive the rating below this threshold can increase the interest rate sharply, and for a long time. Yet, simulation studies based on our estimations show that it is highly improbable that rating agencies can be made responsible for the most dramatic spikes in interest rates.

Publikation lesen

cover_journal-of-applied-economics.gif

Qual VAR Revisited: Good Forecast, Bad Story

Makram El-Shagi Gregor von Schweinitz

in: Journal of Applied Economics, Nr. 2, 2016

Abstract

Due to the recent financial crisis, the interest in econometric models that allow to incorporate binary variables (such as the occurrence of a crisis) experienced a huge surge. This paper evaluates the performance of the Qual VAR, originally proposed by Dueker (2005). The Qual VAR is a VAR model including a latent variable that governs the behavior of an observable binary variable. While we find that the Qual VAR performs reasonable well in forecasting (outperforming a probit benchmark), there are substantial identification problems even in a simple VAR specification. Typically, identification in economic applications is far more difficult than in our simple benchmark. Therefore, when the economic interpretation of the dynamic behavior of the latent variable and the chain of causality matter, use of the Qual VAR is inadvisable.

Publikation lesen

cover_computational-economics.jpg

The Diablo 3 Economy: An Agent Based Approach

Makram El-Shagi Gregor von Schweinitz

in: Computational Economics, Nr. 2, 2016

Abstract

Designers of MMOs such as Diablo 3 face economic problems much like policy makers in the real world, e.g. inflation and distributional issues. Solving economic problems through regular updates (patches) became as important to those games as traditional gameplay issues. In this paper we provide an agent framework inspired by the economic features of Diablo 3 and analyze the effect of monetary policy in the game. Our model reproduces a number of features known from the Diablo 3 economy such as a heterogeneous price development, driven almost exclusively by goods of high quality, a highly unequal wealth distribution and strongly decreasing economic mobility. The basic framework presented in this paper is meant as a stepping stone to further research, where our evidence is used to deepen our understanding of the real-world counterparts of such problems. The advantage of our model is that it combines simplicity that is inherent to model economies with a similarly simple observable counterpart (namely the game environment where real agents interact). By matching the dynamics of the game economy we can thus easily verify that our behavioral assumptions are good approximations to reality.

Publikation lesen

Arbeitspapiere

cover_DP_2017-1.jpg

Why They Keep Missing: An Empirical Investigation of Rational Inattention of Rating Agencies

Gregor von Schweinitz Makram El-Shagi

in: IWH-Diskussionspapiere, Nr. 1, 2017

Abstract

Sovereign ratings have frequently failed to predict crises. However, the literature has focused on explaining rating levels rather than the timing of rating announcements. We fill this gap by explicitly differentiating between a decision to assess a country and the actual rating decision. Thereby, we account for rational inattention of rating agencies that exists due to costs of reassessment. Exploiting information of rating announcements, we show that (i) the proposed differentiation significantly improves estimation; (ii) rating agencies consider many nonfundamental factors in their reassessment decision; (iii) markets only react to ratings providing new information; (iv) developed countries get preferential treatment.

Publikation lesen

cover_DP_2016-23.jpg

Macroeconomic Trade Effects of Vehicle Currencies: Evidence from 19th Century China

Makram El-Shagi

in: IWH-Diskussionspapiere, Nr. 23, 2016

Abstract

We use the Chinese experience between 1867 and 1910 to illustrate how the volatility of vehicle currencies affects trade. Today’s widespread vehicle currency is the dollar. However, the macroeconomic effects of this use of the dollar have rarely been addressed. This is partly due to identification problems caused by its international importance. China had adopted a system, where silver was used almost exclusively for trade, similar to a vehicle currency. While being important for China, the global role of silver was marginal, alleviating said identification problems. We develop a bias corrected structural VAR showing that silver price fluctuations significantly affected trade.

Publikation lesen

cover_DP_2016-22.jpg

Much Ado About Nothing: Sovereign Ratings and Government Bond Yields in the OECD

Makram El-Shagi

in: IWH-Diskussionspapiere, Nr. 22, 2016

Abstract

In this paper, we propose a new method to assess the impact of sovereign ratings on sovereign bond yields. We estimate the impulse response of the interest rate, following a change in the rating. Since ratings are ordinal and moreover extremely persistent, it proves difficult to estimate those impulse response functions using a VAR modeling ratings, yields and other macroeconomic indicators. However, given the highly stochastic nature of the precise timing of ratings, we can treat most rating adjustments as shocks. We thus no longer rely on a VAR for shock identification, making the estimation of the corresponding IRFs well suited for so called local projections – that is estimating impulse response functions through a series of separate direct forecasts over different horizons. Yet, the rare occurrence of ratings makes impulse response functions estimated through that procedure highly sensitive to individual observations, resulting in implausibly volatile impulse responses. We propose an augmentation to restrict jointly estimated local projections in a way that produces economically plausible impulse response functions.

Publikation lesen
Mitglied der Leibniz-Gemeinschaft LogoTotal-Equality-LogoWeltoffen Logo