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2 edition of Institutional quality, Knightian uncertainty, and insurability found in the catalog.

Institutional quality, Knightian uncertainty, and insurability

S. Nuri Erbas

Institutional quality, Knightian uncertainty, and insurability

a cross-country analysis

by S. Nuri Erbas

  • 45 Want to read
  • 4 Currently reading

Published by International Monetary Fund, Office of Executive Directors in [Washington, D.C.] .
Written in English

    Subjects:
  • Risk.,
  • Uncertainty.,
  • Fiscal policy.

  • About the Edition

    Knightian uncertainty (ambiguity) implies presence of uninsurable risks. Institutional quality may be a good indicator of Knightian uncertainty. This paper correlates non-life insurance penetration in 70 countries with income level, financial sector depth, country risk, a measure of cost of insurance, and the World Bank governance indexes. We find that institutional quality-transparency-uncertainty nexus is the dominant determinant of insurability across countries, surpassing the explanatory power of income level. Institutional quality, as it reflects on the level of uncertainty, is the deeper determinant of insurability. Insurability is lower when governance is weaker.

    Edition Notes

    Statementprepared by S. Nuri Erbaş and Chera L. Sayers.
    SeriesIMF working paper -- WP/06/179
    ContributionsSayers, Chera L., International Monetary Fund. Office of Executive Directors.
    The Physical Object
    Pagination13 p. ;
    Number of Pages13
    ID Numbers
    Open LibraryOL21611027M

    Knight and Knightian Uncertainty I recently re-read Knight's book. The book, submitted as his Ph.D. thesis at Cornell in , is difficult to read but is full of ideas. While the uncertainty of business activity, i.e., business success or failure, cannot be insured, pure risks [1], such as industrial accidents, natural disasters, or product defects, can be insured (Knight ). Insurance transforms uncertainty into risk, and thus it reduces the uncertainty of business activity.

    To explain such previously undocumented evidence, I suggest a Knightian uncertainty model from Easley and O’Hara (a), which models liquidity freeze in the fixed-income market. I form hypotheses to test potential causes of the instances where quotation prices clearly deviate from the expected true price of the security.   At this point, using Knightian Uncertainty to explain home bias faces two challenges. The first is to quantify the degree of Knightian Uncertainty that is necessary to account for the magnitude of home bias. Epstein and Miao’s results are as yet purely qualitative. Second, current models of Knightian Uncertainty abstract from learning.

    Institutional quality, knightian uncertainty, and insurability: a cross-country analysis / by Erbas, S. Nuri. Published This paper proposes a new measure for Knightian uncertainty under Markovian economy and solves the risk premium and the risk free rate puzzle under Knightian uncertainty in Japan and the U.S. with plausible values for time preference and risk aversion parameters.


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Institutional quality, Knightian uncertainty, and insurability by S. Nuri Erbas Download PDF EPUB FB2

We find that institutional quality-transparency-uncertainty nexus is the dominant determinant of insurability across countries, surpassing the explanatory power of Knightian uncertainty level.

Institutional quality, as it reflects on the level of uncertainty, is the deeper determinant of insurability. Insurability is lower when governance is weaker. Knightian uncertainty (ambiguity) implies presence of uninsurable risks.

Institutional quality may be a good indicator of Knightian uncertainty. This paper correlates non-life insurance penetration in 70 countries with income level, financial sector depth, country risk, a measure of cost of insurance, and the World Bank governance indexes.

institutional quality is lower, uncertainty is highe r and insurability is lower; at the same tim e, income levels tend to be lower. To the exte nt that non-life insurance penetration is a good.

Get this from a library. Institutional quality, knightian uncertainty, and insurability: a cross-country analysis. [S Nuri Erbas; Chera L Sayers; International Monetary Fund. Office of Executive Directors.] -- Knightian uncertainty (ambiguity) implies presence of uninsurable risks.

Institutional quality may be a good indicator of Knightian uncertainty. Knightian uncertainty (ambiguity) implies presence of uninsurable risks. Institutional quality may be a good indicator of Knightian uncertainty.

This paper correlates non-life insurance penetration in 70 countries with income level, financial sector depth, country risk, a measure of cost of insurance, and the World Bank governance indexes. We Knightian uncertainty that institutional quality-transparency Cited by: 7. Abstract. If Frank Knight is arguably the most famous economist few have heard of, it is because of Knightian uncertainty which established a major idea and reputation in the discipline of economics, but was not the beginning of other pioneering work, as he turned to teaching and essay-writing as a critic of other ideas and thinkers that were to remain more Knightian uncertainty than himself.

The Equity Premium Puzzle, Ambiguity Aversion, and Institutional Quality: Implications for Islamic Finance S. Nuri Erbaş Abbas Mirakhor1 Abstract With cross-section data from 53 emerging and mature markets, we provide evidence that equity premium puzzle is a global phenomenon.

In addition to risk aversion, equity premium. reduction in Knightian uncertainty faced by rms in the U.S. steel industry. Using a di erence-in-di erence methodology, I nd that when uncertainty is resolved, a median rm in the U.S.

steel industry increases its market and book leverage by approximately 12% relative to a matched control rm from another industry. The results are not.

In economics, "Knightian uncertainty" is risk that is immeasurable, impossible to calculate. Knightian uncertainty is named after University of Chicago economist Frank Knight (), who distinguished risk and uncertainty in his work "Risk, Uncertainty, and Profit": "Uncertainty must be taken in a sense radically distinct from the familiar Reviews: Ramesh Dangol Anthony Kos, (),"Knightian uncertainty and risk", Journal of Strategy and Management, Vol.

7 Iss 4 pp. - Permanent link to this document. For this reason, the crisis has cast new attention on an idea about risk from decades past: “Knightian uncertainty.” Frank Knight was an idiosyncratic economist who formalized a distinction between risk and uncertainty in his book, Risk, Uncertainty, and Profit.

As Knight saw it, an ever-changing world brings new opportunities for. Knightian risk is associated with (1) and (2) and Knightian uncertainty with (3). 2 On this view, market insurance mostly amounts to an application of the law of large numbers. On this point see Section 4.

Institutional Quality, Knightian Uncertainty, and Insurability: A Cross-Country Analysis IMF Working Paper No. 06/ Number of pages: 15 Posted: 23 Aug Highlights Examine the foundations of the welfare state as provider of social insurance.

Analyze neglected parts of de Finetti on probability and insurance. Propose a de Finettian interpretation of Knightian uncertainty. Provide philosophical background to empirical work on insurance industry practice.

Explain the coexistence of private and public insurance. In economics, Knightian uncertainty is a lack of any quantifiable knowledge about some possible occurrence, as opposed to the presence of quantifiable risk (e.g., that in statistical noise or a parameter's confidence interval).

The concept acknowledges some fundamental degree of ignorance, a limit to knowledge, and an essential unpredictability of future events. Knightian Uncertainty Critique of the Probabilistic Model Frank Knight: Risk, Uncertainty, and Pro t Risk = \Roulette" = objective probabilities Uncertainty = \Horse Races" = no probabilities many entrepreneurial decisions are \horse{races" (start{up) nancial markets: well-known assets, options, mortality risk, car insurance etc.

= \roulette". Downloadable. Institutional transparency makes future contingencies more easily predictable for investors. Greater transparency can be achieved through vertical and horizontal integration of policy rules, which may result in lower Knightian uncertainty (ambiguity).

In a model based on cumulative prospect theory, for a given probability and payoff structure, expected return on investment is. summary of the three types of uncertainty and techniques to deal with them).

Insert Table 1 about here The key difference between Knightian uncertainty and the other two types is that Knightian uncertainty involves dealing with a future that has no discernible. linear. The agent perceives Knightian uncertainty, and has beliefs described by sets of probability distributions, one set for each action, while the principal’s beliefs are a unique element of the relative interior of those sets.

This formalizes the idea that the agent’s. Knightian Uncertainty and Moral Hazard Giuseppe Lopomoa, Luca Rigottib,1, Chris Shannonc aFuqua School of Business, Duke University bDepartment of Economics, University of Pittsburgh cDepartment of Economics, University of California Berkeley Abstract This paper presents a principal-agent model in which the agent has imprecise beliefs.

Possible explanations are provided for two basic results in Kräussl's paper. First, rating effect may be stronger in emerging markets because they are.Knightian Uncertainty and its Resolution as Institutionalized Practice.RISK, UNCERTAINTY, AND THE DYNAMICS OF INEQUALITY KENNETH KASA AND XIAOWEN LEI Abstract.

This paper studies the dynamics of wealth inequality in a continuous-time Blanchard/Yaari model. Its key innovation is to assume that idiosyncratic investment returns are subject to (Knightian) uncertainty. In response, agents formulate robust.