veto players and the choice of monetary institutions i argue that two types of veto players matter in the choice of monetary institutions party veto players and subnational governments which are strong in federal systems but weak in unitary systems a crucial issue is whether voters can readily identify the manipulation of the economy with party players a second issue concerns the national party veto player s ability to control either fiscal or monetary policy in one party unitary governments identification and control are clear parties where such governments are common prefer flexible exchange rates and dependent central banks in multiparty coalition governments in unitary systems identification is traditionally difficult and the ability to target benefits to specific constituencies under fiscal policy makes fiscal policy autonomy more attractive for coalition governments such governments prefer central banks that are politically independent but that finance government debt under federalism parties that constitute the central government have less control over fiscal policy and they prefer flexible exchange rates subnational governments do not support a dependent central bank that gives more power to the central government

what do saving investment relationships tell us about capital mobility abstract this paper re examines the tests of international capital mobility based on saving investment regressions originated by feldstein while analyses of various measures of capital controls provide some support for the feldstein hypothesis it is shown that the existence of nontraded goods can independently lead to a saving investment correlation this theoretical critique is supported empirically an analysis of the stability of the coefficients resolves the oft reported puzzle in the literature that economies appear to have become increasingly closed financially over time

interpersonal influence as an alternative channel communication behavior in emerging markets the case of china channel communications in emerging markets are embedded in the intricacy of economic and sociocultural environments managing channel relationships in emerging markets therefore requires more than formal interfirm communication to rely on interpersonal influence extending embeddedness theory we offer a conceptualization incorporating three embedding elements task environment social relations and institutional norms into a preliminary model that specifies the antecedents moderators and contingent consequences of interpersonal influence strategies in marketing channels specifically dependence firm boundary spanners social capital and their cultural values e g guanxi orientation may combine to shape firm boundary spanners use of interpersonal influence in channel communications which in turn affects channel member satisfaction in a chinese marketing channel context we test our research hypotheses with parallel analyses of 395 matched supplier retailer dyads the empirical results provide general support for the predictions and reveal differences between suppliers and retailers in terms of the focal effects journal of international business studies 2009 40 668 689 doi 10 1057 jibs 2008 84

building trust evidence from vietnamese entrepreneurs abstract in the context of underdeveloped market institutions entrepreneurs in a transition economy are forced to rely on trust based partnerships in the absence of effective market institutions and sufficient elapsed time these entrepreneurial firms find a great need to actively and intentionally develop trust with their partners the current literature however has virtually overlooked the possibility of trust being intentionally developed in interfirm relationships this study develops a model that links trust development strategies trust and interfirm collaboration and reports an empirical test of that model in vietnam the results support the general thesis that trust can be intentionally developed to facilitate interfirm relationships

free trade agreements for better or worse this paper cites reasons why regional free trade agreements fta s may be better than previously recognized when they are formed or expand as in nafta and why they may be worse when they multiply as is now common just about everywhere else if this argument stands it implies a fundamental reevaluation of fta s and their design

guanxi versus the market ethics and efficiency guanxi refers to a chinese system of doing business on the basis of personal relationships and it is representative of the way that business is done throughout much of the non western world in this paper we first evaluate guanxi from an ethical perspective and then attempt to shed light on the sources of its economic advantages and disadvantages through the use of a simple mathematical model finally we point out how eastern and western business practices may already be converging toward systems based on more complete models of trust to deal with the conditions of progress coupled with uncertainty that form our new economic reality

on the effects of barriers to international investment a simple model is presented in which it is costly for domestic investors to hold foreign assets the implications of the model for the composition of optimal portfolios at home and abroad are derived it is shown that all foreign assets with a beta larger than some beta plot on either one of two security market lines some foreign assets with a beta smaller than are not held by domestic investors even if their expected return is increased slightly while it is obviously not true that asset markets are completely segmented between countries there is evidence of barriers to international investment although reality seems to lie in that grey area between complete segmentation and no segmentation at all most international asset pricing models are concerned with the extreme case of no barriers to international investment no effort seems to have been made to study the effect on portfolio choice of such barriers which make it costly to hold foreign securities as opposed to domestic securities but which do not in general render international diversification so onerous that investors avoid foreign securities completely casual empiricism suggests that models without barriers to international investment should be suspect those models cannot explain why it appears that in every country investors on average hold more domestic securities than would be required if they held the world market portfolio 2 this paper constructs a model of international asset pricing in which there is a cost associated with holding either long or short risky foreign securities for the sake of simplicity in most of the paper we assume that while domestic investors face barriers to international investment foreign investors face no such barriers it turns out that nothing significant is lost with such an assumption the main conclusions of this paper for the case in which foreign investors face no barriers to international investment are 1 in the presence of barriers to international investment some risky foreign

cronyism a cross cultural analysis the devastating economic effects of the asian financial crisis and us corporate scandals have underscored the need to strengthen corporate governance provisions although cronyism has been suggested as a leading cause of the two crises it has received little attention from scholars in this paper we analyze the concept of cronyism and argue that it comes in various guises arising from different motivational bases and power dependence relations we distinguish cronyism from related constructs and posit that it is a form of corruption with different dynamics from other forms we advance propositions on its likelihood of occurrence across cultures and develop a typology of cronyist exchanges

a cross cultural study of guanxi and auditor independence in two economies evidence from china and the united states abstractthis study examines the impact of guanxi on auditor independence in china and the u s using panel data from 2012 2015 surveys fixed effects regression models are used to analyse survey data with observations drawn from a total of 1076 big 4 and 1044 non big 4 auditor years for chinese auditors and 1168 big 4 and 1140 non big 4 auditor years for the u s auditors the results indicate that guanxi with clients has a negative influence on perceptions of auditor independence for chinese auditors but not for the u s auditors according to our findings both groups agree that imposing regulations code has a positive influence on perceptions of auditor independence gender has no influence on the perceived independence of either group after controlling for social desirability bias our results remain robust sensitivity analysis further increases the robustness of the findings our results provide empirical support for public interest theory and pose implications for western multinational compani

bargaining enforcement and international cooperation neoliberals and their neorealist critics have debated the relative importance of two main obstacles to international cooperation problems of cheating and enforcement and problems of relative gains by contrast i argue that problems of international cooperation have a common strategic structure in which a third distinct obstacle plays a crucial role almost regardless of the issue area states must first resolve the bargaining problem of agreeing on terms before they can implement and begin to enforce an agreement furthermore the bargaining and enforcement problems interact using a game model i show that if states must bargain to determine the deal to be enforced the shadow of the future cuts two ways a high expectation of continued interactions may make enforcing the agreement easier but it can also give states an incentive to bargain harder delaying agreement in hopes of getting a better deal empirical evidence from trade and arms control negotiations suggests that this mechanism may help to explain the costly standoffs that are often observed in international politics and are problematic for received neoliberal theories

financial liberalization and adjustment the cases of chile and new zealand abstract this paper analyzes macrodynamic adjustments during financial liberalization in chile and new zealand during the adjustment to more open capital accounts in the late 1970s or mid 1980s both countries experienced a real exchange rate appreciation and a collapse of net exports while domestic interest rates slowly converged to international levels this paper develops and estimates a two sector dynamic model with current and time varying parameter techniques the domestic interest rate is relatively more responsive to shocks under imperfect capital mobility while the real exchange rate becomes more responsive under perfect mobility therefore capital account liberalization does not eliminate but rather shifts volatility from the domestic interest rate to the real exchange rate jel e65 f33

the european central bank independence accountability and strategy a review this paper reviews research on central banking and monetary policy with special emphasis on the position of the future european central bank nowadays it is often thought that an independent central bank with an explicit mandate to aim for price stability constitutes an important institutional device to assure price stability indeed the ecb will be one of the most independent central banks as follows from the codings of various indicators measuring legal independence still it does not follow straightforwardly from the literature that the statute of the ecb is optimal it is also argued that the accountability of the ecb is poorly arranged for in comparison with that of several national central banks finally the discussion about the monetary strategy of the ecb is reviewed

proliferating regional trade arrangements why and whither this paper investigates why regional trade arrangements rtas are proliferating extensively and how the effects of multiple rtas by interacting with each other evolve over time our empirical analysis based on an extended gravity model utilising a large panel dataset of 175 countries from 1948 to 1999 shows that rtas on average increase global trade by raising intra bloc trade without damaging extra bloc trade the net trade effects however heavily depend on the types of rta strategic evolution over time which we categorise as expansionary rtas duplicate rtas or overlapping rtas we find that countries excluded from an rta can benefit more from duplicating a separate rta than from joining an existing rta this result explains why the number of bilateral trade blocs rather than the membership size of existing rtas is currently exploding we also find that the net trade creating effects of rtas are substantially lower for countries participating in overlapping rtas this result suggests that it is less likely that the currently proliferating rtas will completely merge and lead the world economy to global free trade our empirical results are robust to controlling for the characteristics of countries that may influence the impact of rtas

singapore and the new regionalism bilateral trade linkages with japan and the us free trade areas ftas have recently become an integral part of singapore trade policy this paper discusses the reasons behind singapore s recent embracement of new regionalism with particular reference to the proposals to form ftas with japan and the us the paper goes on to examine various aspects of singapore s trade linkages with the two economic superpowers in some detail popular discussion of ftas gives one the appearance that such a trade policy is entirely benign the paper sounds a cautionary note highlighting some reasons to be concerned with singapore s recent embracement of the new regionalism

arbitrage equilibrium with transaction costs the general topic of this paper is the transmission of disturbances in asset markets the specific topic is the role of transaction costs in this transmission do high transaction costs shelter a market against foreign disturbances while bottling up domestic disturbances at home the question is considered in the context of a small scale general equilibrium model of asset arbitrage with quadratic transaction cost functions the main conclusion is that the transmission of disturbances depends more on the relationships between different transaction cost rates than on their absolute level a progressive decline of transaction costs therefore does not necessarily strengthen the transmission of disturbances nor can artificial increases of transaction costs be relied upon to reduce it copyright 1994 by ohio state university press

the media and their advertisers exploring ethical dilemmas in product coverage decisions marketers are increasingly relying on promotional practices variously labeled as stealth marketing hybrid messages covert advertising based on the diffusion of product information by third parties that appear to be independent of advertisers in this paper we examine to what extent the media treat their advertisers favorably providing these advertisers products extra visibility in supposedly neutral editorial content empirically we model the determinant of media coverage of italian fashion products in an extended dataset of consumer magazines in italy france germany uk and the usa research findings show that advertising is an important determinant of product placements in editorial content and this result is consistent across countries and publishers our results imply that resource rich advertisers engaging in compensatory advertising that is advertising investments that compensate poor product quality might bias media coverage in their favor consumers will consequently be exposed twice to favorable messages about those products in both advertisements and media content resulting in higher purchases and reduced consumer welfare

the socio cultural environment for entrepreneurship a comparison between east asian and anglo saxon countries this study uses a theory of face to identify predictors of interest in entrepreneurship in six east asian and four anglo saxon countries at the cultural level social status of entrepreneurship and shame from business failure predict interest in entrepreneurship better in east asian than anglo countries at the individual level social status predicts interest in entrepreneurship in the entire sample

non cooperative bargaining theory an introduction the paper provides an informal introduction to some of the main themes of the recent literature on non cooperative or sequential bargaining models it focuses in particular on the relationship between the new approach and the traditional axiomatic approach exemplified by nash bargaining theory it illustrates the new insights offered by the non cooperative approach by reference to a detailed analysis of the manner in which the presence of an outside option available to one of the parties will affect the negotiated outcome finally the difficulties which arise in extending this analysis to two person bargaining with incomplete information and to n person bargaining are discussed this is a revised version of the fourth review of economic studies lecture presented in april 1985 at the joint meeting of the association of university teachers of economics and the royal economic society held in oxford the choice of lecturer is made by a panel whose members are currently professors hahn mirrlees and nobay and the paper is refereed in the usual way this paper aims to provide an informal and elementary introduction to an approach to bargaining which has received a great deal of attention over the past few years the approach involves writing down some particular sequence of moves offers and replies to be made over time in the course of negotiations and then looking for a non cooperative equilibrium in the game thus specified in practice a perfect equilibrium or in games of incomplete information a sequential equilibrium while the approach appears at first sight to be very different in spirit from the traditional axiomatic approach in which a bargaining solution is specified by appealing to a number of general requirements which are deemed appropriate on the basis of some a priori considerations the two approaches are in fact complementary while the

forced gifts the burden of being a friend abstract in many developing countries gift expenses escalate with income growth and account for a substantial share of household expenditure we develop a theoretical model to demonstrate how unequal income growth may trigger gift competition and drive up the financial burden associated with gift exchange we use unique census type panel data from rural china to test our model predictions and demonstrate that 1 the value of gifts responds to the average gift in the community 2 the escalation of gift giving may have adverse welfare implications especially for the poor and 3 escalating gift expenses crowd out expenditures on other consumption items

conceptions of self and performance related feedback in the u s japan and china effective international management requires knowledge of culturally patterned self concepts and concomitant feedback desires this paper argues that the cultural forces of individualism versus collectivism shape the self concept and by extension individual performance evaluation and feedback seeking we present a comparative study to test the hypotheses that u s respondents desire success feedback whereas japanese and chinese desire feedback show more initiative and perceive more direct workplace feedback than do either japanese or chinese respondents strong support was found for comparisons between the u s and japan but the chinese consistently departed from predictions we interpret these results in terms of recent reforms in the people s republic of china and discuss implications of the study for international management

the international allocation of savings with quadratic transaction or risk costs abstract quadratic transaction costs are used to explain to what extent the savings of a country are invested in the same country and to what extent they give rise to international capital flows more specifically it is shown that the high across countries correlation between saving and investment observed by feldstein and horioka could at least in part result from differences in transaction costs between internal and external investments this remains true even in the presence of an international asset without such differences in the particular model used transaction costs cannot be distinguished from risk jel f21

firm networking and bribery in china assessing some potential negative consequences of firm openness economic openness both in terms of increased international trade exposure and enhanced inter firm networking has been a key element of china s economic emergence since the implementation of market reforms and the opening up policy over 30 years ago unfortunately these changes have also coincided with the increased incidence of bribery and corruption both in general and in the specific context of china research on the relationship between a firm s tendency toward openness and its propensity to engage in bribery is scarce this study seeks to fill this gap based on empirical evidence provided by a large sample of chinese firms the findings of the study reveal that firms increased networking and openness tend to occur contemporaneously with greater bribery and corruption we suggest that this may be due to the misuse of guanxi based networks that coincide with the presence of firms open network strategies heightened by the potential loss of resource and capability heterogeneity and hence reduced competitive advantages in the context of openness we further find that firms paying bribes do so as an attempt to overcome unnecessary bureaucratic processes and ineffective institutional support that might tend to hinder their development

regime dynamics the rise and fall of international regimes the dynamics of international regimes are treated as social institutions how and why do regimes arise from the interactions of individual actors over time three developmental sequences are identified and the resultant regimes are described as spontaneous orders negotiated orders and imposed orders how do regimes change once they have become established in specific social settings three major types of pressure for regime change arise from internal contradictions shifts in underlying power structures and exogenous forces the next task in studying the dynamics of international regimes is to seek a more sophisticated understanding of the factors determining the incidence of these developmental sequences and pressures for change

moral choice and the declining influence of traditional value orientations within the financial sector of a rapidly developing region of the people s republic of china this paper describes the results of a field experiment involving 400 employees from ten financial institutions operating within the shenzhen special economic zone of the people s republic of china it was found that when faced with an agency based problem employees indicated they would be less inclined to advise management of the existence of unethical work practices younger employees without supervisory experience displayed significant risk aversion traditional chinese values associated with confucian work dynamism were shown to be poor predictors of moral choice response a parsimonious regression model was developed that provides evidence that the universal trait masculinity femininity human heartedness acted to offset the negative influence of the agency problem on the other hand an operative s level of education attainment exerted a negative influence on moral response scores

beyond the policy frontier canada mexico and the ideological origins of nafta why are certain foreign policy options considered taboo or simply kept off the agenda as necessarily unthinkable or self destructive and under what conditions can governments transcend such policy frontiers this article seeks to answer these questions by examining the circumstances that brought about canada s and mexico s entry into the north american free trade agreement nafta a move that constituted a surprising reversal of historic prohibitions on formalizing bilateral economic integration that had long been entrenched in these two nations foreign policies policy frontiers develop as certain elements of the national interest sovereignty security and identity become equated with the legitimation of state elites when these leaders defend the policy frontier ostensibly to defend the nation they are also defending their own political power these barriers are constructed in a path dependent fashion through a critical juncture that first establishes the frontier and then are maintained over time by institutional and ideological mechanisms of reproduction for the frontier to be transcended a critical juncture combining an exogenous shock with an internal legitimacy crisis must undermine and then reconfigure both mechanisms of reproduction the origins of nafta in the canadian and mexican embrace of the once forbidden bilateral free trade option in 1985 and 1990 respectively illustrate this dynamic while the individual cases offer variations on the policy frontier model that can provide insights into the analysis of other cases of historically resisted foreign policy change

federalism and central bank independence the politics of german monetary policy 1957 92 two channels of political control allow elected politicians to influence monetary policy first political threats to the status structure or very existence of the central bank may force central bankers to comply with politically motivated demands on monetary policy second politicians may use their powers of appointment to ensure that central bank appointees share their electoral and party political goals this paper derives the monetary policy outcomes obtained as a function of the degree of central bank independence zero partial or full and central bankers types partisans or technocrats based on a case study of the 1957 and 1992 institutional changes to the german central banking system and a regression analysis covering the period in between i argue that the formal independence of the system is protected by its embeddedness in the institutions of german federalism and by the federalist components of its decentralized organizational structure the behavioral independence of the german central bank fluctuates over time with the party control of federalist veto points the bundesbank is staffed with nonpartisan technocrats who are partially insulated from political pressures

social ties and partner identification in sino hong kong international joint ventures partner identification is an important and under studied precursor to selection and eventual performance of international joint ventures ijvs the mechanics of the identification process were investigated in depth across a sample of eighteen sino hong kong ijvs using the case study research method the cross case findings of this exploratory investigation support the idea that social networks provide a valuable resource for reducing ijv partner search costs specifically the findings reveal that while weakly linked bridge ties are valuable in identifying potential partners searches based on strong ties tend to be shorter and provide a more robust basis for inter partner cooperation

power politics and the free trade bandwagon what explains the world s newfound enthusiasm for free trade are government leaders integrating their economies to achieve pareto improving gains or is it because a critical mass of pro free trade governments has acquired the capacity to go it alone leaving would be protectionists with a choice between a bad option opening their markets at very high political cost and an even worse alternative incurring the still higher political costs of exclusion this article suggests that in practice mutual gains seeking motivations are frequently dominated by defensive ones the north american free trade agreement is a case in point without in any way being bullied or coerced the mexican and canadian governments agreed to take part in a multilateral arrangement that the evidence suggests neither much liked although hard to reconcile with the political economy literature s positive sum model of international cooperation this finding is consistent with the broader power politics model introduced here

an expectancy model of chinese american differences in conflict avoiding this paper develops an expectancy model for chinese american differences in conflict avoiding and tests this model using a scenario study with respondents from taiwan and the us our results show that a higher chinese tendency to avoid conflict is explained by higher chinese expectations that direct conflict will hurt the relationship with the other party and by greater concern for the other party among chinese it is not however explained by differences in the expected career costs benefits of good bad relations with others also chinese are more sensitive to hierarchy than americans so that avoiding is heightened more for chinese than for americans when the other party is of higher status qualitative results suggest that chinese american differences in time frames may also explain differences in avoiding implications for businesses and management are suggested journal of international business studies 2006 37 76 91 doi 10 1057 palgrave jibs 8400172

does local social capital deter labour migration evidence from rural china abstractthis article empirically investigates the effect of local social capital on job related migration in rural china a household s social ties in the region of origin which we refer to as local social capital may deter migration because local social capital is location specific and an individual cannot benefit from it if s he migrates in view of chinese gift giving culture we use household expenses on wedding gifts for family members outside household relatives and friends as a proxy for local social networks based on the data from the china health and nutrition survey we find that in rural china local social networks have a significantly negative effect on migration the iv results suggest that a 10 increase in wedding gifts expenses results in roughly a 1 1 percentage points decrease in migration probability

checks and balances and the supply of central bank independence abstract the paper analyzes the institutional conditions under which policymakers can credibly commit to an independent central bank and thereby mitigate the well known time consistency problem in monetary policy it is shown theoretically that granting independence via a statute is only credible for legislative systems with at least two heterogeneous decision making bodies which both have veto rights for example bicameral systems this thesis is supported by empirical evidence the legal independence of central banks is significantly higher in those oecd countries whose legislative processes are characterized by extensive checks and balances furthermore the negative relation between legal independence and inflation is larger in countries with checks and balances than in countries without checks and balances

face and favor the chinese power game western research on interpersonal behavior patterns and rules of exchange needs to move beyond the assumption of isolated individuals socialized to make rational decisions on the basis of self inte

negotiation arithmetic adding and subtracting issues and parties students of international negotiations often examine strategic interactions among a given set of parties dealing with a specified group of issues the issues and parties themselves are often choice variables whose ultimate configuration can have decisive effects on a bargain s outcome using a variety of international cases i investigate the properties of several classes of moves that are intended to alter the issues and parties of an original negotiation a unified approach to the analysis of such situations suggests numerous distinct means by which the addition or subtraction of issues can yield one sided gains to the use of power can yield joint gains that create or enhance a zone of possible agreement and can reduce or destroy a zone of possible agreement the effects of adding or subtracting parties are similarly analyzed however unintended complexity unforeseen interrelationships organizational considerations transactions costs and informational requirements may alter the analysis of such moves

eu enlargement and the world trade system abstract the paper considers the possible enlargement of the eu towards the cee and the mediterranean and the implications for the rest of the world it suggests that with some variable geometry the eu could expand to more than 20 by the end of the century and to beyond 25 by 2010 it concludes that while trade diversion costs are likely to be low the main costs to the rest of the world will be associated with a more inward looking eu and the difficulties of decision making in particular

modeling the forms of international cooperation distribution versus information the problems of distribution and information impede international cooperation they arise when actors select how they will cooperate an exploration of the interaction between these problems using a limited information model of cooperation leads to six conclusions first leadership solutions to coordination problems always exist but leadership here is very different from hegemonic provision of public goods second actors can cooperate in the face of anarchy even without a shadow of the future third diffuse reciprocal strategies arise naturally in coordination problems fourth norms and institutions are intertwined within successful cooperation fifth the form of cooperation on an issue varies with the relative importance of distribution and information finally and most important distributional and informational problems interfere with each other arrangements to cooperate can successfully address one but not both of these problems

global communications and national power life on the pareto frontier regime analysis has focused on issues of market failure the resolution of which depends upon knowledge and institution building global communications regimes however have been concerned either with issues of pure coordination or with coordination problems with distributional consequences outcomes have been decided by the underlying distribution of national power in those areas where power was asymmetrically distributed and there was no agreement on basic principles and norms radio broadcasting and remote sensing no regime was formed in those areas where distributional issues could not be unilaterally resolved allocation of the radio spectrum and telecommunications regimes were created although both principles and rules changed with alterations in national power capabilities

does conservatism matter a time series approach to central bank behaviour empirical studies crediting independent and conservative central banks with lowering inflation and inflation volatility have been criticised for their focus on policy outcomes instead of policies and for their unsystematic conflation of independence and conservatism we present results from time series models for the german bundesbank that avoid these shortfalls conservatism matters in the following sense i more conservative bundesbank councils tend to react stronger to changes in inflation and output and ii an increase in conservatism leads to a more activist stabilisation policy this is in line with simple policy models incorporating economic persistence with implementation lags for monetary policy

the origins and sustainability of mexico s free trade policy standard explanations for trade liberalization do not fully account for mexico s turn toward free trade during the 1980s to a large extent the initiative came from within the country even many mexican entrepreneurs whose sectors seem likely to lose from increased competition now support trade liberalization four conditions lowered the political cost benefit ratio for policymakers and entrepreneurs first mexico s leaders dispersed implementation into several financial ministries thereby better insulating this policy from lobbying by the likely losers second potential losers were less well informed than were likely winners third under these conditions the liberal ideological biases of mexican elite policymakers and investors flourished prompting them to accept a higher political cost than would have been tolerated otherwise finally many mexicans came to perceive trade liberalization as a necessary tool in the fight against inflation each of these hypotheses however also flags a possible threat to the policy s future political survival