financial dollarization short run determinants in transition economies this paper examines the determinants of financial dollarization in transition economies from a short run perspective using aggregate monthly data of deposit and loan dollarization we study the drivers of short term fluctuations in dollarization and test their importance at different levels of dollarization the results provide evidence that a the positive negative short run effects of depreciation monetary expansion on deposit dollarization are exacerbated in high dollarization countries b short run loan dollarization is mainly driven by banks matching of domestic loans and deposits currency matching of assets and liabilities international financial integration and institutional quality and c both types of short run dollarization are affected by interest rate differentials and deviations from desired dollarization

credibility versus control agency independence and partisan influence in the regulatory state there is a natural tension between theories of party government and theories of regulatory politics whereas effective party government requires that politicians have firm control over public polic

too many cooks committees in monetary policy how many people should decide about monetary policy in this paper we take an empirical perspective on this issue analyzing the relationship between the number of monetary policy decisionmakers and monetary policy outcomes using a new data set that characterizes monetary policy committees mpcs in more than 30 countries from 1960 through 2000 we find a u shaped relation between the membership size of mpcs and inflation our results suggest that the lowest level of inflation is reached at mpcs with about seven to ten members similar results are obtained for other measures such as inflation variability and output growth we also find that mpc size influences the success of monetary targeting regimes in contrast there is no evidence that either turnover rates of mpc members or the membership composition of mpcs affect economic outcomes

central bank transparency and cross border banking abstract we analyze the effect of central bank transparency on cross border bank activities based on a panel gravity model for cross border bank claims for 21 home and 47 destination countries from 1998 to 2010 we find strong empirical evidence that a rise in central bank transparency in the destination country on average increases cross border claims using interaction models we find that the positive effect of central bank transparency on cross border claims is only significant if the central bank is politically independent and operates in a stable economic environment central bank transparency and credibility are thus considered complements by banks investing abroad

the market reaction to international cross listings evidence from depositary receipts abstract this paper examines the stock price impact of international dual listings the sample consists of 181 firms from 35 countries that instituted their first depositary receipt program over the period 1985 1995 the market reaction to a depositary receipt program is larger in magnitude and more pervasive than previously reported the stock price reaction is related to choice of exchange geographical location i e emerging or developed markets and avenues for raising equity capital i e public versus private offerings

bankruptcy costs liability dollarization and vulnerability to sudden stops abstract countries with intermediate levels of institutional quality suffer larger output contractions following sudden stops of capital inflows than less developed nations however countries with strong institutions seldom experience significant falls in output after capital flow reversals we reconcile these two observations using a calibrated dsge model that extends the financial accelerator framework developed in bernanke gertler and gilchrist 1999 the model captures financial market institutional quality with creditors ability to recover assets from bankrupt firms bankruptcy costs affect vulnerability to sudden stops directly but also indirectly by affecting the degree of liability dollarization simulations reveal an inverted u shaped relationship between bankruptcy costs and the output loss following sudden stops

fiscal deficits and inflation abstract macroeconomic theory postulates that persistent fiscal deficits are inflationary yet empirical research has had limited success in uncovering this relationship this paper reexamines the issue in light of broader data and a new modeling approach that incorporates two key features of the theory unlike previous studies we model inflation as non linearly related to fiscal deficits through the inflation tax base and estimate this relationship as intrinsically dynamic using panel techniques that explicitly distinguish between short and long run effects of fiscal deficits results spanning 107 countries over 1960 2001 show a strong positive association between deficits and inflation among high inflation and developing country groups but not among low inflation advanced economies

can foreign firms bond themselves effectively by renting u s securities laws abstract the study tests the functional convergence hypothesis which states that foreign firms can leapfrog their countries weak legal institutions by listing equities in new york and agreeing to follow u s securities law evidence shows that the sec and minority shareholders have not effectively enforced the law against cross listed foreign firms detailed evidence from mexico further shows that while some insiders exploited this weak legal enforcement with impunity others that issued a cross listing and passed through an economic downturn with a clean reputation went on to receive privileged long term access to outside finance as compared with legal bonding reputational bonding better explains the success of cross listings

does hometown advantage matter the case of institutional blockholder monitoring on earnings management in korea this study uses a large sample of korean firms to examine institutional blockholders influence on corporate earnings management the korean market is an interesting setting to study institutional monitoring because it is dominated by chaebols which are characterized by ineffective internal governance mechanisms we find evidence that institutional blockholders deter opportunistic financial reporting and such activities are the most evident among domestic institutional blockholders foreign institutional blockholders especially those with short term investment objectives lead to more discretionary reporting our findings are robust to various empirical models and endogeneity checks moreover this study offers new insight into the proximity advantage of domestic institutional investors with regard to monitoring information it also highlights institutional investors roles in shaping corporate governance in emerging markets in which sound corporate governance has become increasingly important for firms long term sustainability one important policy implication is that regulatory authorities should aim to promote institutional investors participation in these markets

sudden stops are global and local investors alike the main goal of this paper is to characterize the determinants of sudden stops caused by domestic vis a vis foreign residents are the decisions of domestic investors to invest abroad or of foreign investors to cut off funds from the domestic economy governed by the same set of determinants given the distribution of different types of sudden stop episodes over time and its different macroeconomic consequences the authors argue that the determinants may not be alike using an effective sample of 82 countries with annual information over the period 1970 2007 the analysis finds that global investors are less likely to stop bringing their capital when their economy is growing and the world interest rate is lower domestic agents are more willing to invest abroad if the macroeconomic performance of the domestic economy is poor high inflation the financial system is weak and there are high external savings current account surpluses increasing financial openness makes the domestic country more vulnerable to sudden stops caused by either local or global investors finally countries with higher shares of foreign direct investment are less prone to inflow driven sudden stops whereas the opposite holds for outflow driven sudden stops

the impact of forecasting methods on the bullwhip effect abstract this paper considers the impact of forecasting methods on the bullwhip effect for a simple replenishment system in which a first order autoregressive process describes the customer demand and an order up to inventory policy characterizes the replenishment decision a bullwhip effect measure is derived for the optimal forecasting procedure that minimizes the mean squared forecasting error for the specified demand process similar measures are obtained for the moving average and exponential smoothing methods the findings indicate that different forecasting methods lead to bullwhip effect measures with distinct properties in relation to lead time and underlying parameters of the demand process moreover a simple rule is established to help managers select a forecasting method that yields the lowest inventory cost

hedging and financial fragility in fixed exchange rate regimes currency crises that coincide with banking crises tend to share at least three elements first banks have a currency mismatch between their assets and liabilities second banks do not completely hedge the associated exchange rate risk third there are implicit government guarantees to banks and their foreign creditors this paper argues that the first two features arise from banks optimal response to government guarantees we show that guarantees completely eliminate banks incentives to hedge the risk of a devaluation our model also articulates one reason why governments might be tempted to provide guarantees to bank creditors guarantees lower the domestic interest rate and lead to a boom in economic activity but this boom comes at the cost of a more fragile banking system in the event of a devaluation banks renege on foreign debts and declare bankruptcy

institutions and financial dollarization indirect effects based on a policy experiment we provide evidence that institutional improvements lead to lower levels of financial dollarization through previously unidentified channels these indirect channels operate in addition to the direct impact identified in the literature and further illustrate the importance of institutions for the extent of banking dollarization

a time series framework for supply chain inventory management we consider a supply chain in which the underlying demand process can be described in a linear state space form inventory is managed at various points of the chain members based on local information that each member observes and continuously updates the key feature of our model is that it takes into account the ability of the members to observe subsets of the underlying state vector and adopt their forecasting and replenishment policies accordingly this enables us to model situations in which the members are privy to certain explanatory variables of the demand with the latter possibly evolving according to a vector autoregressive time series for each member we identify an associated demand evolution model for which we propose an adaptive inventory replenishment policy that utilizes the kalman filter technique we then provide a simple methodology for assessing the benefits of various types of information sharing agreements between members of the supply chain we also discuss inventory positioning and cost performance assessment in the supply chain our performance metrics and inventory target levels are usually presented in matrix forms allowing them to accommodate a relatively large spectrum of linear demand models and making them simple to implement several illustrations for possible applications of our models are provided

a unified theory of the dynamics of closed loop supply chains we investigate the dynamics of a closed loop supply chain with first order auto regressive ar 1 demand and return processes we assume these two processes are cross correlated the remanufacturing process is subject to a random triage yield remanufactured products are considered as goodas new and used to partially satisfy market demand newly manufactured products make up the remainder we derive the optimal linear policy in our closed loop supply chain setting to minimise the manufacturer s inventory costs we show that the lead time paradox can emerge in many cases in particular the auto and cross correlation parameters and variances of the error terms in the demand and the returns as well as the remanufacturing lead time all influence the existence of the lead time paradox finally we propose managerial recommendations for manufacturers

new evidence on the relationship between democracy and economic growth it is often maintained that democracy is a luxury which comes at a price in terms of subsequent slower increases in national living standards however various recent cross section studies on economic growth have found evidence that lack of civil and political liberties is negatively correlated with economic growth using a new measure of democracy which is based upon the number of years that a country can be regarded as a democracy the robustness of this relationship is examined both direct and indirect effects of lack of democratic liberties are analysed our main conclusion is that the relationship between democracy and economic growth is not rubust

political influence on the central bank international evidence political influence on the central bank is measured bere by looking at the probability that a central bank governor will be replaced shortly after a political change of government the governor changes about half the time witbin six months of a nonconstitutional or other radical change of government a military coup or a restoration of democracy the governor is much less likely to change within six months following a routine change in the head of government about one fourth of the time in developing countries and one tenth in industrial countries these indicators vary across countries and correlate statistically with inflation and its variability and with real growth and real interest rates differences in the vulnerability of the central bank to political instability in political instability itself and in central bank turnover in nonpolitical periods seem to be a major part of the explanation for why developing countries have on average higher and more variable inflation than industrial countries do

analysis of the bullwhip effect in a multiproduct setting with interdependent demands the bullwhip effect has been extensively studied primarily based on the analysis of various single product models with a few exceptions we extend the single product analysis to the multiproduct setting of interdependent demand streams with auto correlation and cross product correlation as well as contemporaneous correlation across forecasting errors we find that interdependency between demand streams plays a critical role in determining the existence and magnitude of the bullwhip effect specifically we consider two operating environments a the firm orders product specific materials so that the ordering decision is based on the product level and b the firm orders generic materials so that the order decision is based on the category level we show that even with demand pooling a firm operating at the category level can experience a larger bullwhip effect and a larger order variance under certain conditions that depend on the number of products in the category and the demand dependencies

the effectiveness of monetary policy anchors firm level evidence analyses of monetary policy posit that exchange rate pegs inflation targets and central bank independence can help anchor private sector inflation expec tations yet there are few direct tests of this argument we offer cross national micro level evidence on the effectiveness of monetary anchors in controlling private sector inflation concerns using firm level data from eighty one countries approximately 10 000 firms we find evidence that international anchors exchange rate commit ments correlate significantly with a substantial reduction in private sector concerns about inflation while domestic anchors inflation targeting and central bank inde pendence do not our conjecture is that private sector inflation expectations are more responsive to exchange rate anchors because they are more transparent more con straining and more costly than domestic anchoring arrangements the literature on monetary policy highlights the role of monetary institutions in stabilizing private sector inflation expectations central bank independence cbi inflation targeting it and fixed exchange rates pegs are widely viewed as insti tutions that have the capacity to mitigate private sector concerns that policymak ers will exploit them after they have locked in their price wage and investment decisions while other empirical research explores the institutional correlates of inflation and its variability yielding mixed results we use firm level data in our study to directly assess the impact of monetary anchors on private sector inflation concerns we find evidence that pegs mitigate firm owners concerns with infla tion but that domestic anchors such as it and cbi are uncorrelated with our micro indicators of inflation expectations considerable research has investigated the use of it cbi and pegs as institu tions that establish monetary policy credibility whereas these anchors are expected

performance analysis of demand planning approaches for aggregating forecasting and disaggregating interrelated demands a synchronized and responsive flow of materials information funds processes and services is the goal of supply chain planning demand planning which is the very first step of supply chain planning determines the effectiveness of manufacturing and logistic operations in the chain propagation and magnification of the uncertainty of demand signals through the supply chain referred to as the bullwhip effect is the major cause of ineffective operation plans therefore a flexible and robust supply chain forecasting system is necessary for industrial planners to quickly respond to the volatile demand appropriate demand aggregation and statistical forecasting approaches are known to be effective in managing the demand variability this paper uses the bivariate var 1 time series model as a study vehicle to investigate the effects of aggregating forecasting and disaggregating two interrelated demands through theoretical development and systematic analysis guidelines are provided to select proper demand planning approaches a very important finding of this research is that disaggregation of a forecasted aggregated demand should be employed when the aggregated demand is very predictable through its positive autocorrelation moreover the large positive correlation between demands can enhance the predictability and thus result in more accurate forecasts when statistical forecasting methods are used

does deposit insurance increase banking system stability an empirical investigation based on evidence of 61 countries in 1980 97 the authors find that explicit deposit insurance tends to be detrimental to bank stability the more so where bank interest rates are deregulated and the institutional environment is weak the adverse impact of deposit insurance on bank stability tends to be stronger the more extensive is the coverage offered to depositors and where the scheme is funded and run by the government rather than the private sector

information sharing and order variability control under a generalized demand model the value of information sharing and how it could address the bullwhip effect have been the subject of studies in the literature most of these studies used different forms of demand models assuming that no order smoothing was used by the retailer and that the supplier has full knowledge of the retailer s demand model and order policy in this paper we contribute to the literature by starting with a most general demand model coupled with a smoothing policy for order variability control in addition we do not require that the supplier has full knowledge of the retailer s demand model and order policy but instead let the retailer share its projected future orders and freely revise them as the retailer sees fit under such a setting we first obtain a unifying formula for the magnitude of the bullwhip effect the formula indicates that it is the forecast correlation over the exposure period as a whole that determines the magnitude of the bullwhip effect we then quantify the value of information sharing and generalize the existing results in the literature finally we explore the optimal smoothing parameters that could benefit the total supply chain the resulting optimal policy resembles the postponement strategy we find that information sharing together with order postponement improves the supply chain performance even though the order variability may amplify in some cases

price stability and central bank independence discipline credibility and democratic institutions despite mixed empirical evidence in the past two decades central bank independence cbi has been on the rise under the assumption that it ensures price stability using an encompassing theoretical approach and new yearly data for de jure cbi seventy eight countries 1973 2008 we reexamine this relationship distinguishing the role of printing less money discipline from the public s beliefs about the central bank s likely actions credibility democracies differ from dictatorships in the likelihood of political interference and changes to the law because of the presence of political opposition and the freedom to expose government actions cbi in democracies should be directly reflected in lower money supply growth besides being more disciplinarian it also ensures a more robust money demand by reducing inflation expectations and therefore inflation empirical results are robust and support a discipline effect conditioned by political institutions as well as a credibility effect

variation in central bank independence across countries some provisional empirical evidence in this paper seven hypotheses to explain variation in central bank independence across countries are tested the predictions based upon the theory that delegation of authority by politicians to the central bank is used as a commitment device are not supported central bank independence is not higher the larger the employment motivated inflationary bias the higher political instability or the larger the government debt central bank independence is positively related to historical inflation experience and negatively with political instability we do only find limited support for the view that countries with a universal banking system and countries whose central banks do not regulate financial institutions have more independent central banks

foreign banks and foreign currency lending in emerging europe based on survey data from 193 banks in 20 countries we provide the first bank level analysis of the relationship between bank ownership bank funding and foreign currency fx lending across emerging europe our results contradict the widespread view that foreign banks have been driving fx lending to retail clients as a result of easier access to foreign wholesale funding our cross sectional analysis shows that foreign banks do lend more in fx to corporate clients but not to households moreover we find no evidence that wholesale funding had a strong causal effect on fx lending for either foreign or domestic banks panel estimations show that the foreign acquisition of a domestic bank does lead to faster growth in fx lending to households however this is driven by faster growth in household lending in general not by a shift towards fx lending

the impact of central bank independence on the performance of inflation targeting regimes abstract this paper examines the effects of inflation targeting on inflation in both advanced and emerging economies we do not detect significant effects in advanced economies and only find small benefits in emerging economies in line with previous studies however when we differentiate the impact of inflation targeting based on the degree of central bank independence we find large effects in emerging economies with low central bank independence our results therefore suggest that central bank independence is not a prerequisite for countries to experience significant declines in inflation following the adoption of inflation targeting furthermore we provide evidence that one channel through which inflation targeting lowers inflation more in countries with low central bank independence is the reduction of budget deficits following the adoption of an inflation target

information distortion in a supply chain the bullwhip effect this article originally appeared in management science april 1997 volume 43 number 4 pp 546 558 published by the institute of management sciences consider a series of companies in a supply chain each of whom orders from its immediate upstream member in this setting inbound orders from a downstream member serve as a valuable informational input to upstream production and inventory decisions this paper claims that the information transferred in the form of orders tends to be distorted and can misguide upstream members in their inventory and production decisions in particular the variance of orders may be larger than that of sales and distortion tends to increase as one moves upstream a phenomenon termed bullwhip effect this paper analyzes four sources of the bullwhip effect demand signal processing rationing game order batching and price variations actions that can be taken to mitigate the detrimental impact of this distortion are also discussed

bank funding securitization and loan terms evidence from foreign currency lending we examine how bank funding structure and securitization activities affect the currency denomination of business loans we analyze a unique data set that includes information on the requested and granted loan currency for 99 490 loans granted to 57 464 firms by a bulgarian bank our findings document that foreign currency lending is at least partially driven by bank eagerness to match the currency structure of assets with that of liabilities our results also show that loan currency as well as loan amount and maturity are adjusted to make loans eligible for securitization

market sentiment and macroeconomic fluctuations under pegged exchange rates this paper models changes in market sentiment as a temporary increase in the premium faced by domestic private borrowers on world capital markets the effects of this shock are studied in an intertemporal optimizing framework of a fixed exchange rate economy where firms demand for working capital is financed by bank credit depending on the perceived length of this shock the model is capable of predicting a rise in domestic interest rates capital outflows and a drop in official reserves a reduction in bank deposits and the supply of credit a fall in private consumption a contraction in output and an increase in unemployment these predictions are consistent with observed facts associated with several recent episodes of turbulence on international financial markets

the bullwhip effect progress trends and directions the bullwhip effect refers to the phenomenon where order variability increases as the orders move upstream in the supply chain this paper provides a review of the bullwhip literature which adopts empirical experimental and analytical methodologies early econometric evidence of bullwhip is highlighted findings from empirical and experimental research are compared with analytical and simulation results assumptions and approximations for modelling the bullwhip effect in terms of demand forecast delay replenishment policy and coordination strategy are considered we identify recent research trends and future research directions concerned with supply chain structure product type price competition and sustainability

the political economy of monetary institutions in recent decades countries have experimented with a variety of monetary institutions including alternative exchange rate arrangements and different levels of central bank independence political economists have analyzed the choice of these institutions emphasizing their role in resolving both the time inconsistency problem and dilemmas created by an open economy this first generation work however suffers from a central limitation it studies exchange rate regimes and central bank institutions in isolation from one another without investigating how one monetary institution affects the costs and benefits of the other by contrast the contributors to this volume analyze the choice of exchange rate regime and central bank independence together and in so doing present a second generation of research on the determinants of monetary institutions the articles incorporate both economic and political factors in explaining the choice of monetary institutions investigating how political institutions democratic processes political party competition and interest group pressures affect the balance between economic and distributional policy objectives

an arima supply chain model this paper presents a multistage supply chain model that is based on autoregressive integrated moving average arima time series models given an arima model of consumer demand and the lead times at each stage it is shown that the orders and inventories at each stage are also arima and closed form expressions for these models are given the paper also discusses the causes of the bullwhip effect a phenomenon in which variation in demand produces larger variations in upstream orders and inventory this discussion reveals how different modeling can lead to different insights because they make different assumptions about the cause of the bullwhip effect these observations are used to develop managerial insights about reducing the bullwhip effect

the impact of cross listing in the united states on the precision of public and private information our study explores the source of improvement in the information environment from cross listing shares on us stock exchanges are the improvements from cross listing in the united states achieved more through public or private information channels while we find evidence that us cross listing is significantly associated with improvements in both public and private information precision the association is stronger between cross listing and improvements in private information precision this suggests that the improvement in the information environment for cross listed firms is largely due to analysts expending more effort on firm specific information discovery as opposed to broader improvements in overall public disclosure this research should influence international business scholars that improvements in the information environment do not occur solely through public information channels they also occur through investors private information search activities

information transmission and the bullwhip effect an empirical investigation the bullwhip effect is the amplification of demand variability along a supply chain a company bullwhips if it purchases from suppliers more variably than it sells to customers such bullwhips amplifications of demand variability can lead to mismatches between demand and production and hence to lower supply chain efficiency we investigate the bullwhip effect in a sample of 4 689 public u s companies over 1974 2008 overall about two thirds of firms bullwhip the sample s mean and median bullwhips both significantly positive respectively measure 15 8 and 6 7 of total demand variability put another way the mean quarterly standard deviation of upstream orders exceeds that of demand by 20 million we decompose the bullwhip by information transmission lead time estimating the bullwhip s information lead time components with a two stage estimator we find that demand signals firms observe with more than three quarters notice drive 30 of the bullwhip and those firms observe with less than one quarter s notice drive 51 from 1974 1994 to 1995 2008 our sample s mean bullwhip dropped by a third this paper was accepted by christian terwiesch operations management

two fallacies concerning central bank independence this paper takes issue with two basic conclusions prevalent in the literature on central bank behavior first the paper argues that it is inappropriate to presume that central banks will in the absence of any precommitment technology necessarily behave in a discretionary fashion that implies an inflationary bias since there is no functional connection between average rates of money creation or inflation and policy responsiveness to cyclical disturbances it is entirely feasible for the bias to be avoided in other words there is no necessary tradeoff between flexibility and commitment second to the extent that the absence of any absolute precommitment technology is nevertheless a problem it will apply to a consolidated central bank plus government entity as well as to the central bank alone thus contracts between governments and central banks do not overcome the motivation for dynamic inconsistency they merely relocate it this abstract was borrowed from another version of this item

financial dollarization and systemic risks new empirical evidence abstract this paper explores the persistence of financial dollarization in a group of 79 economies with different levels of development our main hypothesis is that a high level of domestic debt combined with default risk explains this persistence even after a decline in inflation rates using the generalized method of moments gmm in a panel data analysis our results show that inflation risks caused by increasing probability of default account for financial dollarization more than inflation rate itself after the decrease in inflation rates the foreign currency denominated deposits remain large because of the high debt to gdp ratios particularly in speculative grade economies high public indebtedness leads to expectations of default dollarization is a rational response to the future inflation associated with investors expectations of default observed in highly indebted economies

dollarization of bank deposits causes and consequences abstract this paper assesses the benefits and risks associated with dollarization of bank deposits we provide novel empirical evidence on the determinants of deposit dollarization its role in promoting financial development and on whether dollarization is associated with financial instability we find that a the credibility of macroeconomic policy and the quality of institutions are both key determinants of cross country variations in dollarization b dollarization is likely to promote financial deepening only in a high inflation environment and c financial instability is likely higher in dollarized economies the implications of these findings for financial sector and monetary policies are briefly discussed

inflation and central bank independence a meta regression analysis using 59 studies we perform a meta regression analysis of studies examining the relationship between inflation and central bank independence cbi the studies considered are very different with respect to the cbi indicator used the sample of countries and time periods covered model specification estimators used and publication outlet we conclude that there is a significant publication bias however we also find a significant genuine effect of cbi on inflation differences between studies are not caused by differences in cbi indicators used

lessons from the asian crisis abstract this paper provides an asymmetric information analysis of the recent east asian crisis it then outlines several lessons from this crisis first there is a strong rationale for an international lender of last resort second without appropriate conditionality for this lending the moral hazard created by operation of an international lender of last resort can promote financial instability third although capital flows did contribute to the crisis they are a symptom rather than an underlying cause of the crisis suggesting exchange controls are unlikely to be a useful strategy to avoid future crises fourth pegged exchange rate regimes are a dangerous strategy for emerging market countries and make financial crises more likely

the multivariate bullwhip effect abstract a multivariate bullwhip expression for m products with an order up to inventory policy is developed the demand models under consideration are differenced stationary vector time series with a wold representation for which general forecasting formulas are available resulting in a large class of possible models including nonstationary ones examples are provided for common demand models and implemented on sales data it is found that the multivariate approach gives rise to mechanisms for understanding and reducing the bullwhip effect through horizontal information sharing particularly for the nonstationary demand case in the stationary setting a more nuanced approach to bullwhip reduction can be achieved by managing the relationship between cross correlations and lead times a method of determining whether a multivariate or univariate approach generates a lower bullwhip effect is proposed

reason for reserve reserve requirements and credit this paper considers the impact of a regulatory policy action on bank credit and traces its incidence across banks i make use of a reserve requirement increase in lebanon that was considerably greater on foreign currency deposits than on domestic currency deposits all banks cut lending as they scrambled to adjust portfolios but the policy shock disproportionately affected banks with a greater reliance on dollar funding and with low buffers of dollar liquid assets exposed domestic owned banks also adjusted more slowly than similar foreign owned banks that obtained outside funding descriptive firm bank matching evidence reveals a disproportionate impact on small firms

institutional causes macroeconomic symptoms volatility crises and growth countries that have pursued distortionary macroeconomic policies including high inflation large budget deficits and misaligned exchange rates appear to have suffered more macroeconomic volatility and also grown more slowly during the postwar period does this reflect the causal effect of these macroeconomic policies on economic outcomes one reason to suspect that the answer may be no is that countries pursuing poor macroeconomic policies also have weak institutions including political institutions that do not constrain politicians and political elites ineffective enforcement of property rights for investors widespread corruption and a high degree of political instability this paper documents that countries that inherited more extractive institutions from their colonial past were more likely to experience high volatility and economic crises during the postwar period more specifically societies where european colonists faced high mortality rates more than 100 years ago are much more volatile and prone to crises based on our previous work we interpret this relationship as due to the causal effect of institutions on economic outcomes europeans did not settle and were more likely to set up extractive institutions in areas where they faced high mortality once we control for the effect of institutions macroeconomic policies appear to have only a minor impact on volatility and crises this suggests that distortionary macroeconomic policies are more likely to be symptoms of underlying institutional problems rather than the main causes of economic

central bank independence and growth a sensitivity analysis in this paper the levine renelt robustness test is employed to examine the robustness of the empirical relationship between growth and various proxies for central bank independence experiments are made with a wide variety of the most comprehensive systematic measures of central bank independence currently available the levine renelt test implies that growth is not robustly correlated with central bank independence

how robust is the relationship between economic freedom and economic growth using various indicators for economic freedom it is shown that increases in economic freedom are robustly related to economic growth this conclusion holds even if the impact of outlying observations is taken into account the level of economic freedom is not related to growth

exchange rate regimes for emerging markets moral hazard and international overborrowing this paper investigates the role of the exchange rate regime in a simple fisherian model of the overborrowing syndrome where domestic banks are subject to moral hazard the choice of exchange rate regime may have important implications for the macroeconomic stability of the economy banks that enjoy government guarantees have an incentive to increase foreign borrowing and incur foreign exchange risks that are underwritten by the deposit insurance system in the absence of capital controls this increases the magnitude of overborrowing and leaves the economy both more vulnerable to speculative attack and more exposed to the real economic consequences of such an attack while bad exchange rate pegs will tend to exacerbate the problem of overborrowing in emerging markets it is unclear that flexible exchange rate always dominate fixed exchange rates a good fix one that is credible and close to purchasing power parity may reduce the super risk premium in domestic interest rates and thereby narrow the margin of temptation for banks to overborrow internationally contrary to the current consensus regarding the lessons that should be drawn from the asian crisis a good fix may better stabilise the domestic economy while limiting moral hazard in the banking system

does central bank independence really matter new evidence for developing countries using a new indicator abstract this paper provides a new indicator for central bank independence cbi based on the turnover rate of central bank governors for 82 developing countries over the period 1980 1989 using this new indicator it is concluded that this proxy for cbi is related to inflation only if the high inflation countries are included in the sample the view that both cbi and inflation are caused by effective opposition towards inflation is not supported using both the extreme bound analysis and sala i martin s method we do not find evidence that cbi is robustly related to economic growth

the association between stock returns and foreign gaap earnings versus earnings adjusted to u s gaap abstract this study examines the association between stock returns and foreign gaap earnings versus earnings adjusted to u s gaap using a sample of foreign firms with common stock or american depositary receipt adr traded in u s exchanges we compare the returns earnings relations between u s and foreign gaap based earnings results based on the ja test indicate that earnings based on foreign gaap are more closely associated with contemporaneous stock returns than earnings reconciled to u s gaap we find evidence that our results may be driven by institutional factors which are specific to foreign markets

a model of crises in emerging markets this paper presents a perfect foresight model of speculative attacks on emerging markets credit constrained governments are assumed to have two objectives to accumulate liquid assets in order to self insure against shocks to national consumption and to insure poorly regulated domestic financial markets this policy regime generates endogenous fiscal deficits defined to include the growth of contingent liabilities the model sets out a sequence of yield differentials consistent with capital inflows followed by anticipated speculative attacks the model suggests that a common shock generated capital inflows to emerging markets in asia and latin america after 1989

the effects of market segmentation and investor recognition on asset prices evidence from foreign stocks listing in the united states non u s firms cross listing shares on u s exchanges as american depositary receipts earn cumulative abnormal returns of 19 percent during the year before listing and an additional 1 20 percent during the listing week but incur a loss of 14 percent during the year following listing we show how these unusual share price changes are robust to changing market risk exposures and are related to an expansion of the shareholder base and to the amount of capital raised at the time of listing our tests provide support for the market segmentation hypothesis and merton s 1987 investor recognition hypothesis the globalization of u s capital markets has accelerated dramatically in the past decade increasing numbers of companies from overseas have chosen to either raise capital through global equity issues or prepare for future capital raising by way of cross listings on u s exchanges as of 1997 about 1 300 non u s companies have listed their shares for trading on the new york stock exchange nyse the american exchange amex the national association of securities dealers automation quotation nasdaq system or

replacing a disobedient central bank governor with a docile one a novel measure of central bank independence and its effect on inflation this paper identifies two mechanisms that empirical papers on central bank independence assume to be embedded in the yardstick measure of turnover rate of central bank governor i the removal of a governor who is perceived as a challenger by the government and ii whether his her replacement is an ally of the government we identify the first mechanism with premature exits of central bankers and the second by examining whether or not the incoming governor is drawn from the ranks of the executive branch of the government we find that only premature exits and replacements with government allies increase inflation

the dampening effect of bank foreign liabilities on monetary policy revisiting monetary cooperation in east asia abstract this paper addresses the cost of formal monetary cooperation from the perspective of monetary policy effectiveness as banks tend to borrow from abroad in foreign currencies to fund domestic lending monetary policy may have a reduced effect on the credit market and the economy results derived from bank level data in east asia indicate that bank foreign liabilities significantly reduce the effectiveness of the credit channel of monetary policy implying a relatively low cost of giving up monetary autonomy

bullwhip effect measurement and its implications the bullwhip effect or demand information distortion has been a subject of both theoretical and empirical studies in the operations management literature in this paper we develop a simple set of formulas that describe the traditional bullwhip measure as a combined outcome of several important drivers such as finite capacity batch ordering and seasonality our modeling framework is descriptive in nature as it features certain plausible approximations that are commonly employed in practical inventory systems the results are nonetheless compelling and can be used to explain various conflicting observations in previous empirical studies building on the theoretical framework we discuss the managerial implications of the bullwhip measurement we show that the measurement can be completely noninformative about the underlying supply chain cost performance if it is not linked to the operational details such as decision intervals and leadtimes specifically we show that an aggregated measurement over relatively long time periods can mask the operational level bullwhip in addition we show that masking also exists under product or location aggregation in some illustrative cases

firm characteristics and analyst following abstract this paper examines the major determinants of the number of analysts following a firm a simple model of analyst following is proposed and several firm characteristics are suggested that are likely to influence the extent of a firm s analyst following by either affecting the aggregate demand for or supply of analyst services or both for the firm almost all of these characteristics are found to be strongly significant in affecting the extent of analyst following of firms and the empirical results generally accord well with economic intuition

the mirage of exchange rate regimes for emerging market countries this paper argues that much of the debate on choosing an exchange rate regime misses the boat it begins by discussing the standard theory of choice between exchange rate regimes and then explores the weaknesses in this theory especially when it is applied to emerging market economies it then discusses a range of institutional traits that might predispose a country to favor either fixed or floating rates and then turns to the converse question of whether the choice of exchange rate regime may favor the development of certain desirable institutional traits the conclusion from the analysis is that the choice of exchange rate regime is likely to be of second order importance to the development of good fiscal financial and monetary institutions in producing macroeconomic success in emerging market countries this suggests that less attention should be focused on the general question whether a floating or a fixed exchange rate is preferable and more on these deeper institutional arrangements a focus on institutional reforms rather than on the exchange rate regime may encourage emerging market countries to be healthier and less prone to the crises that we have seen in recent years

dollarization exchange rate regimes and government quality abstract the dollarization of the domestic banking system represents a source of vulnerability for emerging market countries and a debate has emerged over whether the exchange rate regime has an impact on dollarization this paper argues that the regime is far less important than the literature has previously claimed unofficial dollarization results from a lack of faith in the domestic currency which ultimately stems from the belief that the government will not follow policies that promote long run currency stability empirical results indicate that improved government quality reduces unofficial dollarization while the exchange rate regime plays no direct role in promoting dollarization

the effects of information voids on capital flows in emerging markets information voids reflect a lack of publicly available information about a country s investment climate and represent the information problems associated with institutional voids we argue that foreign investors differ in their sensitivity to information voids based on their own private information and their flexibility in responding rapidly to change we predict that foreign banks will be least hampered by information voids due to their privileged access to private information about local conditions and ability to adapt quickly to new information portfolio investors while impeded by information voids due to their severely limited access to local private information are able to quickly respond to new information foreign direct investors have moderate access to local private information yet their inability to adapt quickly creates problems dealing with information voids using time series cross sectional data on local public information and capital flows to the thirty largest emerging markets from 1994 to 2012 we find preliminary support for our hypotheses regarding the sensitivity of different investors to information voids we find that direct investors are most sensitive to information voids and banks are least sensitive while portfolio investors are moderately sensitive

the modern history of exchange rate arrangements a reinterpretation we develop a novel system of reclassifying historical exchange rate regimes one key difference between our study and previous classifications is that we employ monthly data on market determined parallel exchange rates going back to 1946 for 153 countries our approach differs from the imf official classification which we show to be only a little better than random it also differs radically from all previous attempts at historical reclassification our classification points to a rethinking of economic performance under alternative exchange rate regimes indeed the breakup of bretton woods had less impact on exchange rate regimes than is popularly believed