short run strategies for attracting foreign direct investment this paper empirically investigates the effectiveness and feasibility of two fdi policies fiscal incentives and deregulation aimed at improving the attractiveness of a country in the short run using disaggregated data on sales by us mnes foreign affiliates in 43 developed and developing countries over the 1982 94 period results show that the provision of fiscal incentives or the deregulation of the labour market would exert a positive impact on total fdi given the drawbacks frequently associated with the use of incentive packages economy wide policies which ease firing procedures and reduce severance payments would certainly be the best policy option this paper also highlights the different aggregation and omitted variable biases that have affected results of previous studies and provides some support to recent theoretical models of fdi by showing that third country effects and spatial interdependence influence respectively the location of export platform fdi and vertical fdi

what determines bits abstract similar to bilateral or regional preferential trade agreements ptas bilateral investment treaties bits have proliferated over the past 50 years the purpose of this study is to provide the first systematic empirical analysis of the economic determinants of bits and of the likelihood of bits between pairs of countries using a qualitative choice model in a manner consistent with explaining ptas we develop the econometric specification for explaining the two based upon a general equilibrium model of world trade and foreign direct investment with three factors two products and trade and investment costs among multiple countries in the presence of national and multinational firms the empirical model for bits and ptas is bivariate in nature and supports a set of hypotheses drawn from the general equilibrium model using the preferred empirical model for a sample of 12 880 country pairs in the year 2000 we predict correctly 88 of all pairs with a bit and a pta 81 with a bit but no pta and 84 with a pta but no bit

factors determining the location decisions of spanish mnes an analysis based on the investment development path on the basis of theoretical assumptions approached via the investment development path idp this study examines the most important factors for and against the location decisions in foreign direct investment taken by multinational enterprises considering host countries at very different stages of economic development latin american and european union countries we carry out different kinds of analysis on a sample of 103 firms belonging to a medium sized country that has recently achieved the status of developed country the results reveal that the importance that home country firm managers give to diverse location factors depends to a certain extent on the stage that each group of host countries has reached in the idp in line with prior research we find that firm managers consider mainly the group of factors associated with strategic asset seeking when deciding to locate their investments in the group of more developed countries european union in contrast our results show that when these firm managers choose the group of less developed countries latin america social and cultural factors play a more determinant role thus suggesting the importance of historical and cultural ties between the home and host countries

the effect of environmental regulation on the locational choice of japanese foreign direct investment this article assesses the impact of environmental regulation er in host countries on japanese foreign direct investment fdi decision making it tests the pollution haven hypothesis using data on national er standards and japanese inward fdi in five dirty industries iron and steel industry nonferrous metals industry chemicals industry paper and pulp industry nonmetallic products industry the results do not support the pollution hypothesis on the contrary inward japanese fdi appears to be attracted to countries which have committed themselves to a transparent and stable environment regulatory environment suggesting that the quality of the regulatory framework in terms of its certainty and transparency has a greater influence on foreign investors choice of location than the level of environmental regulatory measures

beyond trade the impact of preferential trade agreements on fdi inflows summary this paper investigates the effects of preferential trade agreements ptas on net fdi inflows of member countries using a comprehensive database of ptas in a panel setting pta membership is associated with a positive change in net fdi inflows and fdi gains increase with the market size of pta partners and their proximity to the host country the estimated relationship is driven by the developing countries in the sample and agreements signed in the late 1990s early 2000s a period when the majority of deep integration ptas have been advanced

fdi as an outcome of the market for corporate control theory and evidence abstract much foreign direct investment fdi takes the form of mergers and acquisitions m a it is commonplace in finance to view acquisitions as manifestations of the market for corporate control following on that insight we propose a model of fdi in which headquarters bid to control overseas assets we derive an equation for bilateral fdi stocks that resembles the recently developed fixed effects approach to modelling bilateral trade flows we estimate the model and use its parameters to construct benchmarks for evaluating multilateral inward and outward fdi

global economic integration in developing countries the role of corruption and human capital investment globalization is multifaceted and involves the interaction among businesses services governments and societies beyond national borders as a result the flow of foreign direct investment fdi international trade in goods and services and the economic interdependence of the nations of the world have been increasing at the same time much attention has been paid to the effect of corruption prevalent within many cultures and societies and its impact on the economies especially developing economies this paper examines the relationship between human capital investment the level of national corruption and the global economic integration gei of a nation in developing countries based on the data collected from over 60 countries and building on the fdi and human capital theories it was found that human capital investment and corruption are related to gei it was also found that the level of corruption moderates the relationship between human capital investment and gei of developing economies the findings of the study can help to deepen our understanding of gei and have practical implications for developing countries in terms developing human capital which plays a critical role in today s knowledge based economy

estimating the effects of free trade agreements on international trade flows using matching econometrics abstract this paper provides the first cross section estimates of long run treatment effects of free trade agreements on members bilateral international trade flows using nonparametric matching econometrics our nonparametric cross section estimates of ex post long run treatment effects are much more stable across years and have more economically plausible values than corresponding ols cross section estimates from typical gravity equations we provide plausible estimates of the long run effects of membership in the original european economic community eec and the central american common market cacm between 1960 and 2000 and the estimates confirm anecdotal reports of these agreements effectiveness

a comparison of petroleum futures versus spot prices as predictors of prices in the future abstract even though studies have indicated that the futures market leads the spot market in price discovery this paper hypothesizes that the predictive significance of each should be the same a number of different statistical tests are presented to test this hypothesis when deseasonalized data is employed the predictive significance of each series is found to be the same but when actual prices are employed futures prices did correctly anticipate the observed seasonal pattern

intra industry foreign direct investment we use a new firm level data set that establishes the location ownership and activity of 650 000 multinational subsidiaries close to a comprehensive picture of global multinational activity a number of patterns emerge from the data most foreign direct investment fdi occurs between rich countries the share of vertical fdi subsidiaries which provide inputs to their parent firms is larger than commonly thought even within developed countries more than half of all vertical subsidiaries are only observable at the four digit level because the inputs they are supplying are so proximate to their parent firms final good that they appear identical at the two digit level we call these proximate subsidiaries intra industry vertical fdi and find that their location and activity are significantly different to the inter industry vertical fdi visible at the two digit level these subsidiaries are not readily explained by the comparative advantage considerations in traditional models where firms locate their low skill production stages abroad in low skill countries to take advantage of factor cost differences we find that overwhelmingly multinationals tend to own the stages of production proximate to their final production giving rise to a class of high skill intra industry vertical fdi

exchange rate exchange rate volatility and foreign direct investment in the light of the importance of foreign direct investment fdi for the promotion of economic development this paper examines the impact of the changes in the real exchange rate and its volatility on fdi examining japan s fdi by industries we found that the depreciation of the currency of the host country attracted fdi while the high volatility of the exchange rate discouraged fdi our results suggest the need to avoid over valuation of the exchange rate and to maintain stable but flexible exchange rate in order to attract fdi

oil prices the role of refinery utilization futures markets and non linearities we test the hypothesis that real oil prices are determined in part by refinery capacity non linearities in supply conditions and or expectations and that observed changes in these variables can account for the rise in prices between 2004 and 2006 results indicate that the refining sector plays an important role in the recent price increase but not in the way described by many analysts the relationship is negative such that higher refinery utilization rates reduce crude oil prices this effect is associated with shifts in the production of heavy and light grades of crude oil and price spreads between them non linear relationships between opec capacity and oil prices as well as conditions on the futures markets also account for changes in real oil prices together these factors allow the model to generate a one step ahead out of sample forecast that performs as well as forecasts implied by far month contracts on the new york mercantile exchange and is able to account for much of the 27 rise in crude oil prices between 2004 and 2006

global value chains and inward foreign direct investment in the 2000s in this paper we make use of recent data published by the world input output database to i provide evidence on trade in value added of the major organization for economic co operation and development oecd member countries and major emerging economies designated by oe country group namely by measuring the degree of participation in global value chains gvcs at the country and sectoral levels and ii estimate whether the gvc participation of oe countries has positively influenced foreign direct investment fdi inward stocks in the 2000s the pooled regression model estimated shows that the country s degree of gvc participation has contributed positively for bilateral fdi inward stocks after controlling for other possible fdi determinants

on the stock control performance of intermittent demand estimators the purpose of this paper is to assess the empirical stock control performance of intermittent demand estimation procedures the forecasting methods considered are the simple moving average single exponential smoothing croston s method and a new method recently developed by the authors of this paper we first discuss the nature of the empirical demand data set 3000 stock keeping units and we specify the stock control model to be used for experimentation purposes performance measures are then selected to report customer service level and stock volume differences the out of sample empirical comparison results demonstrate the superior stock control performance of the new intermittent demand forecasting method and enable insights to be gained into the empirical utility of the other estimators

confronting the environmental kuznets curve t he environmental kuznets curve posits an inverted u relationship between pollution and economic development kuznets s name was apparently attached to the curve by grossman and krueger 1993 who noted its resemblance to kuznets s inverted u relationship between income inequality and development in the first stage of industrialization pollution in the environmental kuznets curve world grows rapidly because people are more interested in jobs and income than clean air and water communities are too poor to pay for abatement and environmental regulation is correspondingly weak the balance shifts as income rises leading industrial sectors become cleaner people value the environment more highly and regulatory institutions become more effective along the curve pollution levels off in the middle income range and then falls toward pre industrial levels in wealthy societies the environmental kuznets curve model has elicited conflicting reactions from researchers and policymakers applied econometricians have generally accepted the basic tenets of the model and focused on measuring its parameters their regressions typically fitted to cross sectional observations across countries or regions suggest that air and water pollution increase with development until per capita income reaches a range of 5000 to 8000 when income rises beyond that level pollution starts to decline as shown in the conventional ekc line in figure 1 in developing countries some policymakers have interpreted such results as conveying a message about priorities grow first then clean up numerous critics have challenged the conventional environmental kuznets curve both as a representation of what actually happens in the development process and as a policy prescription some pessimistic critics argue that crosssectional evidence for the environmental kuznets curve is nothing more than a

distinction between intermediate and finished products in intra firm trade abstract although intra firm trade has been viewed as associated with vertical integration which exploits opportunities for exchange between inherently dissimilar economies it is more common between developed countries where horizontal integration is expected to dominate using unique data from 1974 to 1990 on swedish firms application of a tobit model explains variations in majority owned manufacturing affiliates internal imports of intermediate and finished goods on the basis of firms international organization of production effects which are unobservable in aggregate figures show up only when finished and intermediate goods are separated

human capital and fdi inflow an assessment of the african case summary this study assesses the role of human capital hk on fdi inflows to sub saharan africa it uses panel data for the period 1980 2012 to asses if changing skill needs influence fdi inflows several measures of hk are used to assess whether the quality of labor explains fdi flows over the study period various versions of an fdi model were estimated and the results show that all measures of hk have a significant influence on fdi as are the traditional variables there is no evidence of the increasing importance of hk on fdi over time probably reflecting the type of fdi flowing into ssa

in search of substitution between foreign production and exports abstract are foreign production and exports substitutes or complements standard theory of the multinational corporation mnc assumes substitution while previous empirical work examining the relationship has generally found strong evidence of complementarity this study examines product level data which more closely fits the assumption of a single product firm often used in mnc theory and finds substantial evidence for both a substitution and a complementarity effect between affiliate production and exports with japanese automobile parts for the us market i also test for and find evidence of substitution using product level data on a set of japanese produced final consumer goods

the determinants of fdi location choice in china a discrete choice analysis this study addresses two questions what are the determinants of foreign direct investment fdi location choice in china what are the factors that determine investors choice between economic zo

determinants of international activity evidence from the chemical processing industry abstract this paper empirically investigates two important determinants of international activity through wholly owned operations joint ventures and technology licensing namely country risk and intellectual property rights iprs protection using a comprehensive database on investments in chemical plants during the period 1981 1996 we show that higher levels of country risk are associated with less activity into recipient economies the analysis also suggests that international activity with smaller resource commitment tends to be preferred in countries with higher levels of risk and that multinational investment is more responsive to changes in risk conditions than indigenous investment after controlling for several country characteristics we do not find iprs protection playing a significant role in fostering international activity or conditioning its mode

determinants of export orientation of foreign production by u s multinationals an inter country analysis this paper examines the role of structural and policy factors in explaining a country s attractiveness as a base for export oriented production by u s mnes empirical analysis finds wage rates and industrial capability to be important determinants of export oriented production attracted by a country exports generated by relocation are found to be dependent upon intra firm imports u s mnes are found to be using their hosts as export bases more selectively

the impact of bilateral free trade agreements on bilateral foreign direct investment among developed countries previous studies find that a trade treaty positively impacts foreign direct investment fdi but does a trade treaty always have positive effects on fdi what is the effect of bilateral free trade agreement fta on bilateral fdi among developed countries based on the knowledge capital model i hypothesize that bilateral fta has negative effects on bilateral fdi in developed developed country pairs but positive effects in developed developing country pairs to test this hypothesis empirically i conduct the within estimator the difference in difference estimator and the arellano bond estimator with panel data of bilateral fta and outward fdi in 30 oecd countries and 32 non oecd countries between 1982 and 2005 the result supports the hypothesis the existence of bilateral fta decreases bilateral fdi in the oecd oecd country pairs but increases bilateral outward fdi in the oecd non oecd country pairs the finding of negative effects of bilateral fta on fdi is robust to different country classifications by gross national income gni per capita and secondary school enrolment hence the results are consistent with what carr et al 2001 predicts about the effects of trade cost on fdi in developed developed country pairs and in developed developing country pairs

nonlinear expectations in speculative markets evidence from the ecb survey of professional forecasters chartist and fundamentalist models have proven to be capable of replicating stylized facts on speculative markets in general this is achieved by specifying nonlinear interactions of otherwise linear asset price expectations of the respective trader groups this paper investigates whether or not regressive and extrapolative expectations themselves exhibit significant nonlinear dynamics the empirical results are based on a new data set from the european central bank survey of professional forecasters on oil price expectations in particular we find that forecasters form destabilizing expectations in the neighborhood of the fundamental value whereas expectations tend to be stabilizing in the presence of substantial oil price misalignment

do natural resources attract nonresource fdi abstract a new and extensive panel of outward nonresource and resource fdi is used to investigate the effect of natural resources on the different components of fdi our main findings are as follows first for countries which were not a resource producer before a resource discovery causes nonresource fdi to fall 16 in the short run and by 68 in the long run second for countries that were already a resource producer a doubling of resource rents induces a 12 4 fall in nonresource fdi third on average the contraction in nonresource fdi outweighs the boom in resource fdi aggregate fdi falls by 4 if the resource bonanza is doubled finally these negative effects on nonresource fdi are amplified through the positive spatial lags in nonresource fdi we also find that resource fdi is vertical whereas nonresource fdi is of the export fragmentation variety our main findings are robust to different measures of resource reserves and the oil price and to allowing sample selection bias

the effect of foreign direct investment on the urban wage in china an empirical examination how does foreign direct investment fdi affect the wage levels of cities in a host country this paper uses a panel dataset of chinese cities to examine the impact of inward fdi on the urban real wage the results suggest that the existence of fdi has a significant and positive effect on urban real wages and that this impact remains significant after controlling for other city characteristics cross city variation of fdi intensity is one important factor contributing to intercity wage inequality

an empirical investigation of the pollution haven effect with strategic environment and trade policy abstract using a new dataset on the stringency and enforcement of environmental policy this study is the first to find robust confirmation of a pollution haven effect in a cross country context by accounting for strategically determined environment trade and intellectual property right ipr policies a simple game theoretic approach to policy determination is described which suggests an identification strategy based on other country characteristics it is found that for the top 20th percentile of countries in terms of growth in u s multinational affiliate value added as much as 8 6 of that growth between 1999 and 2003 can be attributed to declining relative stringency and enforcement of environmental policy the results are robust to a number of identification tests weak iv tests and third country spatial effects further evidence is found that relatively footloose industries are more likely to be affected by environmental policy than more traditionally dirty industries and enforcement of environmental policies tends to be a more important deterrent than the stringency of the policy set

the boundaries of multinational enterprises and the theory of international trade this paper begins with a review of empirical evidence on multinational firms conceptual underpinnings of a theory are developed relying in particular on the notion of knowledge capital as a mobile joint input into geographically separated production facilities this idea is embedded in a simple two country general equilibrium model that supports multinational production in equilibrium under conditions consistent with the empirical evidence the final section examines internalization and shows why certain properties of knowledge capital also imply a preference for transferring technologies internally within the firm rather than through arm s length markets

toward a new conception of the environment competitiveness relationship accepting a fixed trade off between environmental regulation and competitiveness unnecessarily raises costs and slows down environmental progress studies finding high environmental compliance costs have traditionally focused on static cost impacts ignoring any offsetting productivity benefits from innovation they typically overestimated compliance costs neglected innovation offsets and disregarded the affected industry s initial competitiveness rather than simply adding to cost properly crafted environmental standards can trigger innovation offsets allowing companies to improve their resource productivity shifting the debate from pollution control to pollution prevention was a step forward it is now necessary to make the next step and focus on resource productivity

intermittent demand forecasts with neural networks intermittent demand appears when demand events occur only sporadically typically such time series have few observations making intermittent demand forecasting challenging forecast errors can be costly in terms of unmet demand or obsolescent stock intermittent demand forecasting has been addressed using established forecasting methods including simple moving averages exponential smoothing and croston s method with its variants this study proposes a neural network nn methodology to forecast intermittent time series these nns are used to provide dynamic demand rate forecasts which do not assume constant demand rate in the future and can capture interactions between the non zero demand and the inter arrival rate of demand events overcoming the limitations of croston s method in order to mitigate the issue of limited fitting sample which is common in intermittent demand the proposed models use regularised training and median ensembles over multiple training initialisations to produce robust forecasts the nns are evaluated against established benchmarks using both forecasting accuracy and inventory metrics the findings of forecasting and inventory metrics are conflicting while nns achieved poor forecasting accuracy and bias all nn variants achieved higher service levels than the best performing croston s method variant without requiring analogous increases in stock holding volume therefore nns are found to be effective for intermittent demand applications this study provides further arguments and evidence against the use of conventional forecasting accuracy metrics to evaluate forecasting methods for intermittent demand concluding that attention to inventory metrics is desirable

forecasting and stock control a study in a wholesaling context wholesalers add value to the products they deal with by essentially bringing them closer to the end consumers in that respect the effective control of stock levels becomes an important measure of operational performance especially in the context of achieving high customer service levels in this paper we address issues pertinent to forecasting and inventory management in a wholesaling environment and discuss the recommendations proposed in such a context in a case study organization our findings demonstrate the considerable scope that exists for improving current practices and offers insights into possible managerial issues

reappraising the eclectic paradigm in an age of alliance capitalism this article discusses the implications of the advent of alliance capitalism for our theorizing about the determinants of mne activity in particular it argues that due to the increasing porosity of the boundaries of firms countries and markets the eclectic or oli paradigm of international production needs to consider more explicitly the competitive advantages arising from the way firms organize their inter firm transactions the growing interdependencies of many intermediate product markets and the widening of the portfolio of the assets of districts regions and countries to embrace the external economies of interdependent activities

global value chains a survey of drivers and measures global value chains gvcs emerged as the paradigm for the international organisation of production for most goods and services production is nowadays vertically fragmented across different countries and this reality gave rise to a significant new strand of research in in ternational trade this article starts by discussing the major driving forces of gvcs in recent decades next it surveys the main measures of gvcs accounting for their different scopes and required datasets the artic le highlights the timing of the contributions to the literature signalling their sequential nature and the trend towards more accurate and data demanding indicators

on the growth of foreign affiliates multinational plant networks joint ventures and flexibility we take a flexibility perspective to analyse employment growth in a large sample of japanese manufacturing affiliates in nine asian countries during the years leading up to and into the asian financial crisis 1995 1999 we find that joint ventures are less flexible than wholly owned affiliates in responding to changing environmental conditions in the focal country and underperform in high growth environments multinational enterprises mnes use the flexibility created by their multinational plant network to adjust affiliate employment in response to labour cost changes in other countries in which they operate plants however no evidence was found that the presence of joint ventures in multinational plant networks reduces this network flexibility our findings suggest that more research is needed on the heterogeneous responses of mnes and their affiliates to changing economic environments

information costs agglomeration economies and the location of foreign direct investment in china1 he c 2002 information costs agglomeration economies and the location of foreign direct investment in china reg studies 36 1029 1036 foreign investors suffer from adverse information asymmetry and face internal and external uncertainties in host economies better access to information and a variety of agglomeration economies could attenuate the disadvantages that foreign investors encounter statistical results strongly buttress the argument that foreign investors are inclined to favour such locations that could minimize information costs and offer a variety of agglomeration economies theoretical and policy implications and further research directions are discussed at the end 1 this paper was presented at the 63rd annual meeting of the association of pacific coast geographers sept 13 16 2000 arcata ca

the location of overseas production and production for export by u s multinational firms abstract the location of overseas manufacturing production is influenced by common factors that operate in all industries notably proximity to the united states and to other markets within industries opposites attract low wage and low capital intensity parents choose high wage countries production for export is attracted by large internal markets in host countries economies of scale in production presumably make large markets economical as export bases another factor is high trade propensities of host countries u s firms tend to export from high wage countries but labor cost is not in general a major influence on the location of export production

multinational firms technology and location this thesis consists of four essays its main theme is the location of production in multinational firms subsidizing away exports a note on strategic trade policy investigates how strategic

what is the role of openness for china s aggregate industrial so2 emission a structural analysis based on the divisia decomposition method abstract having observed the weaknesses in previous structural analyses on the role of environmental kuznets curve ekc the author proposes a detailed analysis using a rich data set of provincial level production and so2 emission intensity of 13 industrial sectors the latter represent more than 98 of the total industrial production in each chinese province for the period 1991 2001 through the use of the log mean divisia index decomposition method the variations in province level industrial so2 emissions with regard to the 1990 baseline level are decomposed into the contribution from three components scale composition and technical effects the following analysis seeks to explain how trade openness affects aggregate industrial so2 emission through its impact on the structural determinants for these three components of region specific environmental variations

spiders and snakes offshoring and agglomeration in the global economy abstract global production sharing is determined by international cost differences and frictions related to the costs of unbundling stages spatially the interaction between these forces depends on engineering details of the production process with two extremes being snakes and spiders snakes are processes whose sequencing is dictated by engineering spiders involve the assembly of parts in no particular order this paper studies spatial unbundling as frictions fall showing that outcomes are very different for snakes and spiders even if they share some features both snakes and spiders have in common a property that lower frictions produce discontinuous location changes and overshooting parts may move against their comparative costs because of proximity benefits and further reductions in frictions lead these parts to be reshored predictions for trade volumes and the number of fragmented stages are quite different in the two cases for spiders a part crosses borders at most twice the value of trade increases monotonically as frictions fall except when the assembler relocates and the direction of parts trade is reversed for snakes the volume of trade and number of endogenously determined stages is bounded only by the fragmentation of the underlying engineering process and lower frictions monotonically increase trade volumes

estimating and forecasting the real prices of crude oil a data rich model using a dynamic model averaging dma approach given that oil price fluctuations have been of great interest for macroeconomics in the recent years due to its important implications for future inflation economic growth and policy making the aim of this paper is to estimate and forecast west texas intermediate wti crude oil prices using a large monthly dataset that covers the period from march 1983 to december 2011 to achieve this aim forecasting with factor models offers a usual approach that utilizes large datasets however a forecasting model which simply includes all factors in state space equation and does not allow for time varying may be not suitable with a highly volatile market such as oil market to overcome these limitations an approach that accounts both for parameter and model uncertainty is employed in particular this study uses the dynamic model averaging dma approach suggested by koop and korobilis 2012 the key element of the dma approach is that it allows both for model and parameter to vary at each point of time by doing so the dma is robust to structural breaks empirical findings show that dma approach outperforms any other alternative model used in the forecasting exercise results also show that there is model but not parameter variation in this oil price forecasting exercise finally the findings suggest that the dma approach provides a better proxy of expected spot prices than future prices

the determinants of foreign direct investment in services this paper has two main objectives first to consider country specific determinants that attract services fdi and second to compare the importance of these determinants vis a vis traditional determinants that attract manufacturing fdi using oecd countries as our sample and 1980 to 2003 as our time period we consider the determinants of inward fdi in a panel setting our results provide empirical evidence to support the view that no new theories may be necessary to explain the determinants of services fdi

competing destinations gravity model an application to the geographic distribution of fdi the competing destinations formulation of the gravity model ensues from the fact that unlike the classical version this approach explicitly acknowledges the interdependence of the flows between a set of alternative locations i e country recipients are competing for foreign direct investment fdi this article examines empirically a range of theoretical hypotheses about the determinants of fdi location in a panel data regression framework the results of the estimation of a gravity model lend support to the proximity concentration and internalization hypotheses also the fact that fdi has been found to be decreasing in the competition posed by alternative locations is suggestive of the superiority of the competing destinations version of the gravity equation over its classical formulation

economic integration and the profitability of cross border mergers and acquisitions abstract the 1990s was a decade of increased economic integration the decade also witnessed a sharp increase in cross border mergers and acquisitions from a theoretical perspective the increase in international mergers in more integrated economies is rather puzzling it is a well established result that due to the business stealing effect mergers in integrated markets are not likely to be profitable a reasonable conjecture would therefore be that closer integration of markets would reduce the attractiveness of cross border mergers and acquisitions the present paper demonstrates that this is not necessarily the case economic integration may trigger cross border acquisitions by reducing the business stealing effect and by reducing the reservation price of the target firm the paper thus provides explanations to the observed increase in cross border mergers in a world of more integrated economies

investment climate and fdi in developing countries firm level evidence this paper uses firm level data across 77 developing countries to show that constraints related to investment climate hamper foreign direct investment fdi the main results show that physical infrastructure problems financing constraints and institutional problems discourage fdi these results are robust to an alternative definition of fdi introduction of additional explanatory variables and some breakdown analyses different sectors of activity and comparison between sub saharan africa and other developing countries the results also highlight that exporter foreign firms are more constrained in their activity by physical infrastructure hurdles and the lack of skilled workers compared to firms supplying the domestic market

intermittent demand linking forecasting to inventory obsolescence the standard method to forecast intermittent demand is that by croston this method is available in erp type solutions such as sap and specialised forecasting software packages e g forecast pro and often applied in practice it uses exponential smoothing to separately update the estimated demand size and demand interval whenever a positive demand occurs and their ratio provides the forecast of demand per period the croston method has two important disadvantages first and foremost not updating after many periods with zero demand renders the method unsuitable for dealing with obsolescence issues second the method is positively biased and this is true for all points in time i e considering the forecasts made at an arbitrary time period and issue points only i e considering the forecasts following a positive demand occurrence only the second issue has been addressed in the literature by the proposal of an estimator syntetos boylan approximation sba that is approximately unbiased in this paper we propose a new method that overcomes both these shortcomings while not adding complexity different from the croston method the new method is unbiased for all points in time and it updates the demand probability instead of the demand interval doing so in every period the comparative merits of the new estimator are assessed by means of an extensive simulation experiment the results indicate its superior performance and enable insights to be gained into the linkage between demand forecasting and obsolescence

capital controls and foreign direct investment abstract this paper examines the effect of three types of capital control policies on fdi a the existence of multiple exchange rates b restrictions on capital account and c restrictions on the repatriation of export proceeds we find that the impact of capital controls on fdi varies by region and has changed over time in the 1970s and 1980s none of the policies had a significant impact on fdi in the 1990s all three were significant furthermore capital controls have no effect on fdi to sub saharan africa and the middle east but affects fdi to east asia and latin america adversely

investing to cooperate theory and experiment we study theoretically and in a lab experiment investment decisions in environments where property rights are absent in our setting a player chooses an investment level before interacting repeatedly with a given set of agents the investment stochastically affects the payoffs of the game in every subsequent period we show that more volatile returns make investment more difficult in the absence of legal protection and might force the investor to invest more to guarantee cooperation experimental results are broadly consistent with the theoretical findings

on the predictive accuracy of crude oil futures prices abstract this paper evaluates the predictive accuracy of 1 3 6 9 and 12 month ahead crude oil futures prices for 1991 01 2001 12 in addition to testing for unbiasedness a naive forecasting model is constructed to generate comparable forecasts as benchmarks our empirical findings reveal that futures prices and naive forecasts are unbiased at all forecast horizons however the 1 and 12 month ahead futures prices are the only forecasts outperforming the naive suggesting their potential usefulness in policy making continuing political instability of the middle east and the inability of opec to offset market sentiment among other factors may in the future adversely affect the predictive accuracy of the 1 and 12 month ahead futures prices accordingly caution must be exercised when utilizing such prices as a forecasting tool

intermittent demand forecasting an empirical study on accuracy and the risk of obsolescence intermittent demand items account collectively for considerable proportions of the total stock value of any organization forecasting the relevant inventory requirements constitutes a very difficult task and most work in this area is based on croston s estimator that relies upon exponentially smoothed demand sizes and inter demand intervals this method has been shown to be biased and a number of variants have been introduced in the literature including the recently proposed tsb method that updates the demand probability instead of the demand interval and in doing so reacts faster to decreasing demand the tsb has been shown theoretically to be unbiased for all points in time but its empirical performance has not been investigated yet and this constitutes one of the objectives of our work more generally we explore the empirical performance of forecasting methods used in an intermittent demand context paying particular attention to the effects and implications of the smoothing constant values employed for updating purposes we do so by means of experimentation on large empirical datasets from the military sector and automotive industry the results enable insights to be gained into the sensitivity of the various methods forecasting and stock control performance to the smoothing constant values used the paper concludes with an agenda for further research

unbiasedness and time varying risk premia in the crude oil futures market abstract this paper presents some empirical evidence on market efficiency and unbiasedness in the crude oil futures market and some related issues on the basis of monthly observations on spot and futures prices of the west texas intermediate wti crude oil several tests are carried out on the relevant hypotheses the evidence suggests that futures prices are neither unbiased nor efficient forecasters of spot prices furthermore a garch m 1 1 model reveals the existence of a time varying risk premium

on the bias of intermittent demand estimates forecasting and inventory control for intermittent demand items has been a major problem in the manufacturing and supply environment croston operational research quarterly 23 1972 289 proposed a method according to which intermittent demand estimates can be built from constituent events croston s method has been reported to be a robust method but has shown more modest benefits in forecasting accuracy than expected in this research one of the causes of this unexpected performance has been identified as a first step towards improving croston s method certain limitations are identified in croston s approach and a correction in his derivation of the expected estimate of demand per time period is presented in addition a modification to his method that gives approximately unbiased demand per period estimates is introduced all the conclusions are confirmed by means of an extended simulation experiment where croston s and revised croston s methods are compared the forecasting accuracy comparison corresponds to a situation of an inventory control system employing a re order interval or product group review

mergers and acquisitions trade a global value chain analysis the present paper deals with how the insertion in international trade and global value chains gvcs of countries affects their capacity of attracting foreign mergers and acquisitions m as to this end we combine data for bilateral m as and trade in value added for the period 2001 15 and estimate an augmented gravity equation results indicate that trade openness per se does not favour m as nevertheless bilateral free trade agreements heterogeneity of destinations sources for exports imports of intermediate and final goods and position and participation in global value chains are relevant for explaining bilateral m as moreover their role is significantly different depending on the level of development of the home and host countries

exploring the regional distribution of inbound foreign direct investment in the uk in theory and practice evidence from a five region study fallon g and cook m exploring the regional distribution of inbound foreign direct investment in the uk in theory and practice evidence from a five region study regional studies this paper examines the main factors that attract inbound foreign direct investment fdi at the uk regional level using econometric data from five sample uk regions the south east the west midlands the north west wales and scotland broadly representing the country s regional economic divide the findings indicate that regional and national but not european union level factors linked to several underlying strategic determinants help determine the regional distribution of inbound foreign direct investment and its inter regional variation the paper concludes that governmental policy makers at the national and regional levels can have an important role to play in drawing targeted foreign direct investment inflows to the uk regions fallon g et cook m examiner la distribution regionale de l ide au royaume uni en the

foreign direct investment the role of institutional and cultural determinants abstractusing panel data for 29 source and 65 host countries in the period 1995 2009 we examine the determinants of bilateral fdi stocks focusing on institutional and cultural factors the results reveal that institutional and cultural distance is important and that fdi has a predominantly regional aspect fdi to developing countries is positively affected by better institutions in the host country while foreign investors prefer to invest in developed countries that are more corrupt and politically unstable compared to home the results indicate that foreign investors prefer to invest in countries with less diverse societies than their own

a new measure of trade openness trade openness popularly measured as x m gdp in the hundreds of studies published to date consistently considers the world s biggest trading countries such as the usa the uk japan and germany to be closed economies irrespective of the data set used this study suggests a composite trade share measure that more completely reflects reality by combining two important dimensions of trade openness trade share and the relative importance of a country s trade level to total world trade robustness tests support the new proposed measure in lieu of the conventional measure of openness and suggest that the latter may not only be incomplete but may also overstate the impact of trade on such things as income and the environment

bilateral investment treaties and fdi does the sector matter summary developing and transition countries have increasingly engaged in the signing of bilateral investment treaties bits in order to attract fdi based on the widely shared view that fdi can contribute significantly to economic development and poverty reduction however the degree to which foreign investments can be expected to generate employment offer access to international technology and know how and ultimately create growth varies considerably depending on the type of investment it is therefore important to determine what type of fdi is attracted by bits by providing a legal commitment to the fair and equitable treatment of foreign investors bits aim to decrease investment risk and to attract foreign investors we argue that bits can be expected to be most effective in those sectors of the economy with a larger risk of expropriation i e sectors characterized by large sunk costs relatively low levels of firm specific know how and in sectors that are politically sensitive to foreign ownership this paper represents the first attempt to empirically study the heterogeneous effect that bits may have across different sectors of investments we analyze investments made in 13 countries in the former soviet union and central and eastern europe disaggregated over seven sectors we indeed find the effect of bits to differ considerably across sectors of investment using capital intensity as a proxy we confirm that fdi in those sectors with higher sunk costs responds more strongly to the signing of bits given the considerable differences in the development impact that can be expected from fdi in different sectors it remains to be shown whether bits are an effective tool to attract those types of investments that are most beneficial for the development of the host economy

dodging bullets the heterogeneous effect of political violence on greenfield fdi the relationship between political violence and greenfield foreign direct investment is contingent on the type of violence characteristics of the investment receiving sector and extent to which the investing firm is geographically diversified this paper presents an analysis with a dynamic fixed effects model for a panel of 90 developing countries from 2003 to 2012 the analysis shows that nationwide political conflict is negatively associated with total and non resource related greenfield foreign direct investment but not with resource related greenfield foreign direct investment the insensitivity to political conflict of multinational firms in the resource sector is associated with the high profitability of natural resource extraction and the companies geographic constraints on location choice during the period of estimation in the non resource sector the less geographically diversified firms are most sensitive to the risk of conflict

how corruption influences foreign direct investment a panel data study abstract this article analyzes the sign and development of the effect of corruption on foreign direct investment fdi economic theory distinguishes grabbing hand corruption from helping hand corruption the former suggests a negative impact of corruption on fdi the latter one a positive effect empirically we apply a data set of 21 home and 59 developed and less developed host countries covering between 1983 and 1999 to investigate the corruption impact we employ a panel data model that particularly refers to the knowledge capital model of multinational activity we find a negative relationship between corruption and fdi this in turn suggests that the helping hand effects of corruption are outweighed by the grabbing hand effects further we observe that corruption is an important impediment of fdi in developed economies but not in less developed ones finally we demonstrate that the importance of corruption has decreased over the years

biofuel developments in mozambique update and analysis of policy potential and reality abstract climate change rising oil prices and concerns about future energy supplies have contributed to a growing interest in using biomass for energy purposes several studies have highlighted the biophysical potential of biofuel production on the african continent and analysts see mozambique as one of the most promising african countries favorable growing conditions and the availability of land water and labor are mentioned as major drivers behind this potential moreover the potential of biofuel production to generate socio economic benefits is reflected in the government s policy objectives for the development of the sector such as reducing fuel import dependency and creating rural employment this article provides an overview of biofuel developments in mozambique and explores to what extent reality matches the suggested potential in the country we conclude that biofuel developments mainly take place in areas near good infrastructure processing and storage facilities where there is skilled labor available and access to services and goods moreover our analysis shows the need to timely harmonize current trends in biofuel developments with the government s policy objectives as the majority of existing and planned projects are not focusing on remote rural areas and in absence of domestic markets principally target external markets

cross border mergers and acquisitions and the role of trade costs abstract cross border mergers and acquisitions m as have increased dramatically over the last two decades this paper analyses the role of trade costs in explaining the increase in the number of cross border m as in particular we distinguish horizontal and non horizontal m as and investigate whether trade costs affect these two types of mergers differently we analyse this question using industry data for 23 oecd countries for the period 1990 2001 our findings suggest that while in the aggregate trade costs affect cross border merger activity negatively its impact differs importantly across horizontal and non horizontal mergers the impact of trade costs is less negative for horizontal mergers which is consistent with the tariff jumping argument

more stringent bits less ambiguous effects on fdi not a bit we focus on investor state dispute settlement provisions contained in various though far from all bilateral investment treaties as a possible determinant of bit related effects on bilateral fdi flows our estimation results prove to be sensitive to the specification of these provisions as well as the inclusion of transition countries in the sample stricter dispute settlement provisions do not necessarily result in higher fdi inflows so that the effectiveness of bits as a credible commitment device remains elusive

a simulation framework for forecasting uncertain lumpy demand abstract managing uncertainty when the demand is irregular and sporadic i e lumpy is a complex issue as well as an unexplored one this study analyses the behaviour of forecasting techniques when dealing with lumpy demand at the master production scheduling level in particular three forecasting techniques exponentially weighted moving average early sales and order overplanning are considered it is argued that demand lumpiness is a multidimensional phenomenon generated by different market characteristics namely numerousness of customers heterogeneity of customers frequency of order placing variety of each customer s request and correlation between customers behaviour hence the performances of the three forecasting methods are compared through simulation experiments with different values of the sources of lumpiness a framework is then proposed that indicates the domain of applicability of each forecasting technique according to the prevailing source of lumpiness in the market

lumpy demand forecasting using neural networks abstract the current study applies neural network nn modeling in forecasting lumpy demand it is to the best of our knowledge the first such study our study compares the performance of nn forecasts to those using three traditional time series methods single exponential smoothing croston s method and the syntetos boylan approximation we find nn models to generally perform better than the traditional methods using three different performance measures we also independently validate earlier findings that the syntetos boylan approximation performs better than the croston s and single exponential smoothing methods in lumpy demand forecasting

agglomeration effects in foreign direct investment and the pollution haven hypothesis does environmental regulation impair international competitiveness of pollution intensive industries to the extent that they relocate to countries with less stringent regulation turning those countries into pollution havens we test this hypothesis using panel data on outward foreign direct investment fdi flows of various industries in the german manufacturing sector and account for several econometric issues that have been ignored in previous studies most importantly we demonstrate that externalities associated with fdi agglomeration can bias estimates away from finding a pollution haven effect if omitted from the analysis we include the stock of inward fdi as a proxy for agglomeration and employ a gmm estimator to control for endogenous time varying determinants of fdi flows furthermore we propose a difference estimator based on the least polluting industry to break the possible correlation between environmental regulatory stringency and unobservable attributes of fdi recipients in the cross section when accounting for these issues we find robust evidence of a pollution haven effect for the chemical industry

the volatility of offshore investment abstract offshore investment often bears the image of footloose industry with little to hinder movement to the most favorable environment an effort to describe this particular segment of u s direct investment supports some elements of the colorful anecdotal portrait painted by critics in the third world semiconductor assemblers are moderately sensitive to wage rates and adjust quite rapidly in maintaining what they perceive as a diversified portfolio of risky ldc production locations on the other hand this reaction is small enough to guarantee that modest increases in wages will not send all investment fleeing from an export platform new methods of modelling direct foreign investment when risk diversification is important in explaining industrial location decisions are introduced in this paper

are asean countries havens for japanese pollution intensive industry in an era of closer worldwide economic integration the role that environmental regulations play in shaping a country s comparative advantage is greater than ever this has led to fears that dirty firms will relocate from developed to developing countries where environmental regulations may be less stringent the so called pollution haven hypothesis to date however there is little support for the existence of pollution havens despite anecdotal evidence and the theoretical predictions in this paper we employ a unique industry level dataset for japan and examine whether japanese industries have relocated production to their asean neighbours in response to the relative stringency of japanese environmental regulations not only do we find no evidence for pollution haven consistent behaviour but also some indication that the complex relationship between the characteristics of japanese dirty industries and environmental regulations may actually have reduced japanese outward fdi to the philippines

strategic investments and the development of multinationals a model of multinational behavior is presented in which either the existence or absence of multinationals can be a nash equilibrium outcome the key determinant is the relationship between plant scale economies a force for geographic centralization and multiplant economies plus transport costs leading to multinationality the model predicts that multinational enterprise production arises when firm specific and transportation costs are large relative to plant scale economies the latter are both a technological and a strategic variable in the entry decision copyright 1987 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

does multinational activity displace trade kimberly a clausing using two panel data sets on the operations of u s multinational firms abroad and the operations of foreign multinational firms in the united states this article examines the empirical relationship between international trade and multinational activity the evidence supports the conclusion that multinational activity and trade are complementary activities particularly multinational activity and intrafirm trade this empirical result is consistent with the theoretical reasons one might expect a complementary relationship between the two activities and is also robust to different approaches and specifications jel f23 i introduction in recent years foreign direct investment fdi has become an increasingly important part of world integration flows of fdi have been increasing faster than trade flows which in turn have been growing faster than income 1 in addition multinational firms play a very large role in world trade for the united states 83 of exports in 1994 were either intrafirm shipments between multinational parents and their affiliates 36 or arms length trade between multinationals and unaffiliated buyers 47 2 although it is clear that multinational firms have an important role in world trade it is certainly less clear what the relationship is between production abroad and trade for multinational firms the popular press often assumes that multinational investment by u s firms replaces u s exports and in fact some economists have assumed that the rapid growth of foreign direct investment in recent years implies that multinational activity will eventually displace trade 3 this article examines the empirical relationship between multinational activity and trade and finds that there is evidence that multinational activity complements rather than displaces trade the article utilizes two panel data sets constructed from aggregate survey data published by the bureau of economic analysis bea the data vary by country and over time the first data set is used to study the relationship between u s exports and the activities of u s affiliates abroad this data set is constructed from data describing the operations of u s multinational firms in 29 host countries between 1977 and 1994 together with data on u s exports both intrafirm and arms length the second data set is used to study the relationship between u s imports and the activities of foreign affiliates operating in the united states it uses data describing operations in the united states by foreign affiliates of firms based in 29 home countries between 1977 and 1994 together with data on u s imports both intrafi rm and arms length most previous studies of this question have examined the relationship between multinational activity and trade for a cross section of countries by using data that also vary over time it is possible to explore more thoroughly the relationship between multinational activity and trade and how this relationship evolves it is also possible to control for fixed country effects that may be influencing the observed relationships previous studies have tended to focus on the relationship between outward multinational activity and exports this article looks as well at the relationship between inward multinational activity and imports finally this article considers the question of complementarity between multinational activity and trade in two ways in addition to looking at the relationship between the quantities of multinational activity and trade the article also studies complementarity much as one might think of complementarity in a demand study by considering cross price effects in particular the article includes an analysis of the relationship between price variables that measure the cost of multinational activity abroad and exports since the price of operating abroad is negatively related to exports this is further evidence of a complementary relationship between trade and multinational activity

institutional differences and the direction of bilateral foreign direct investment flows are south south flows any different than the rest we explore the asymmetric effects of institutional differences on bilateral foreign direct investment fdi flows conditional on countries development levels previous experiences of foreign investors and bilateral trade relations the empirical results using bilateral fdi data from 134 countries during 1990 2009 suggest that institutional differences create entry barriers for foreign investors only in north south and south north directions and more so for the former furthermore southern investors appear to have a comparative advantage in institutionally different developing countries finally we find no evidence that investor experiences in other institutionally different countries or existing trade linkages negate the negative effect of institutional distance

international investment location decisions abstract in international location tournaments governments compete for foreign investment with tax and other short run incentives such tournaments can be won if agglomeration economies are sufficiently powerful to overcome investors desire to spread investments as a hedge against risk we focus on manufacturing investments by u s multinationals in the 1980s our econometric results suggest that agglomeration economies are indeed the dominant influence on investor calculations paradoxically short run incentives have limited apparent impact on location choice we conclude that high cost tournament play is unnecessary for countries with good infrastructure development specialized input suppliers and an expanding domestic market

foreign direct investment and local linkages this paper analyses the pattern of local linkages in foreign direct investment fdi treating such local linkages as an investment in local relationships using taiwanese manufacturing firms investing abroad as the sample for our case study we find that the local linkage intensity of a foreign subsidiary differs by fdi location entry mode firm size and the nature of the production network in which an investor is embedded more local linkages will be pursued by an investor if it is in search of distinctive and inimitable resources as opposed to homogeneous and reproducible resources investment in local linkages always begins with the linkage that carries the lowest risk to the original business network for manufacturing firms the sequence of such linkages is workers components and parts subcontracting and finally sources of r d

do civil and political repression really boost foreign direct investments multinational enterprises are often accused of having a preference for investing in countries in which the working populations civil and political rights are largely disregarded this article presents an empirical investigation of the popular political repression boosts fdi hypothesis and arrives at the conclusion that the hypothesis is not supported on the contrary multinational enterprises rather appear to be attracted by countries in which civil and political freedom is respected

the informational content of ex ante forecasts the informational content of different forecasts can be compared by regressing the actual change in a variable to be forecasted on forecasts of the change we use the procedure in fair and shiller 1987 to examine the informational content of three sets of ex ant forecasts the american statistical association and national bureau of economic research survey asa data resources incorporated dri and wharton economic forecasting associates uefa we compare these forecasts to each other and to quasi ex ante forecasts generated from a vector autoregressive model an autoregressive components model and a large scale structural model the fair model

multinational enterprises and wage costs vertical fdi revisited abstract this study explores how wage costs for high skilled and less skilled labor in host countries affect the level of affiliate activities conducted by foreign mnes we find support for vertical fdi in the sense that more fdi is conducted in countries where less skilled labor is relatively cheap in addition we find that skilled wage cost premia also affect fdi activities previously associated with horizontal fdi i e local affiliate sales consequently the potential effects of relative wage costs on mne activities are large rough calculations suggest that more than 20 percent of us affiliate sales in 1998 can be attributed to skilled wage cost premia

privatization and foreign competition abstract this paper determines the equilibrium market structure in an international oligopoly where a state enterprise is sold at an auction the paper suggests that high greenfield costs and high trade costs do not necessarily induce foreign acquisitions in privatizations despite the fact that foreign firms would gain considerably from acquiring in such situations the reason is that domestic firms can then prevent foreign firms from becoming strong local competitors and thus their willingness to pay for the state assets is high