the international transmission of interest rate shocks the federal reserve and emerging markets in latin america and asia abstract this paper analyzes the effects of changes in the u s federal reserve s federal funds rate on emerging countries interest rates using high frequency weekly data i also investigate how changes in the u s term structure affect short term rates differentials other shocks include changes in the u s dollar euro exchange rate changes in the international price of oil risk ratings and the degree of capital mobility the results indicate that there is a strong and fairly rapid transmission of changes in the federal funds rate into interest rates in the latin american countries in the sample this effect is equally large in the asian nations in the long run the adjustment path is different across the two regions however adjustment is very fast and cyclical in latin america it is gradual and slower in east asia

the effect of decision order on purchase quantity decisions abstract consumers often resolve trade offs in a particular order for example when making flavor and size decisions consumers might first decide which flavors to choose and then decide which sizes of those flavors to choose this research examines the effect of decision order on purchase quantity decisions the authors build on prior work on decision difficulty and conflict to show that consumers choose more overall and more variety when they consider a less replaceable attribute in an earlier rather than a later stage in the purchase decision for example consumers choose a greater quantity when flavor or brand decisions precede rather than follow size decisions the authors find that the degree of attribute replaceability also moderates the effect of decision order on quantity chosen furthermore marketers can influence the amount chosen by altering the organization of the shelf display finally the authors find that when consumers explicitly consider the possibility of deferring their dec

a pragmatic approach to capital account liberalization in the mid 1990s mainstream economists of nearly all stripes commonly recommended capital account liberalization that is allowing a free flow of funds in and out of a country s economy as an essential step in the process of economic development but then came the east asian financial crisis of 1997 98 in which even seemingly healthy and well managed economies like those of south korea were engulfed by massive capital outflows and tremendous currency volatility and capital account liberalization became quite controversial in the economics profession a decade later now that time has quelled passions and intervening research can shed more light on the debate it appears that both the costs and benefits of capital account liberalization may have been misunderstood in that earlier debate now it appears that the main benefits of capital account liberalization for emerging markets are indirect more related to their role in building other institutions than to the increased financing provided by capital inflows and these indirect benefits are important enough that countries should look for creative approaches to capital account liberalization that would help attain these benefits while reducing the risks countries don t have much choice but to plan for capital account liberalization because capital accounts are de facto becoming more open over time whatever governments may do to try to control them

real exchange rate volatility financial crises and exchange rate regimes this paper examines real exchange rate rer volatility in eighty countries around the world during the period 1970 to 2011 two main questions are raised are structural breaks in rer volatility related to changes in exchange rate regimes or financial crises and do these two events affect the permanent and transitory components of rer volatility to answer them we employ two complementary procedures that consist in detecting structural breaks in the rer series and decomposing volatility into its permanent and transitory components our results suggest that structural breaks in rer volatility coincidence with financial crises and certain changes in nominal exchange rate regimes moreover our findings confirm that rer volatility does increase with the global financial crises and detect that the more flexible the exchange rate regime the higher the volatility of the rer using a de facto exchange rate classification

when liberal policies reflect external shocks what do we learn abstract we present a model where policies of free capital mobility can signal governments future policies but the informativeness of the signal depends on the path of world interest rates capital flows to emerging markets reflect investors perception of these markets political risk with low world interest rates emerging markets experience a capital inflow and engage in a widespread policy of free capital mobility with higher rates only sufficiently committed countries allow free capital mobility whereas others impose controls to trap capital onshore thus signaling future policies affecting capital mobility these predictions are consistent with the recent experience of capital flows and policies affecting capital mobility in developing countries

overchoice and assortment type when and why variety backfires almost universally research and practice suggest that a brand that increases its product assortment or variety should benefit through increased market share in this paper we show this is not always the case we introduce the construct assortment type and demonstrate that the effect of assortment size on brand share is systematically moderated by assortment type we define an alignable assortment as a set of brand variants that differ along a single compensatory dimension such that choosing from that assortment only requires within attribute trade offs in contrast we define a nonalignable assortment as a set of brand variants that simultaneously vary along multiple noncompensatory dimensions demanding between attribute trade offs in turn we argue that an alignable assortment can efficiently meet the diverse tastes of consumers thereby increasing brand share but that a nonalignable assortment increases both the cognitive effort and the potential for regret faced by a consumer thereby decreasing brand share we term this effect overchoice across three studies we provide evidence of overchoice and tie the effect to the effort and regret brought about by nonalignability in the process we demonstrate that simplification of information presentation reversibility of choice and a reduction in underlying nonalignability serve to reduce or eliminate this effect

the federal reserve the emerging markets and capital controls a high frequency empirical investigation in this paper i use weekly data from seven emerging nations four in latin america and three in asia to investigate the extent to which changes in fed policy interest rates have been transmitted into domestic short term interest rates during the 2000s the results suggest that there is indeed an interest rates pass through from the fed to emerging markets however the extent of transmission of interest rate shocks is different in terms of impact steady state effect and dynamics in latin america and asia the results also indicate that capital controls are not an effective tool for isolating emerging countries from global interest rate disturbances changes in the slope of the u s yield curve including changes generated by a twist policy affect domestic interest rates in emerging countries i also provide a detailed case study for chile

seeking commonalities or avoiding differences re conceptualizing distance and its effects on internationalization decisions past research established distance s key influence on internationalization however theoretical issues methodological challenges and inconsistent results hinder scholarship on why distance plays such an influential role to address these problems we draw from cognitive research on similarity comparisons to re conceptualize distance and test a model of internationalization decisions analyzing the verbal protocols of executives considering a series of internationalization opportunities we demonstrate that over and above objective distance indicators considerations that reduce distance commonalities and considerations that augment distance differences have distinct effects on decisions of where when and how to internationalize as such our study contributes new insights for understanding the nature and effects of distance across different dimensions of distance and internationalization decisions moreover internationalization theories have come to emphasize different theoretical rationales for explaining the influential role of distance on different decisions by integrating these rationales together with the notion that distance reducing commonalities and distance augmenting differences have distinct implications for internationalization decisions we introduce the notion that it is not only the addition of distance considerations that matters but also the directionality of such changes doing so our study points to new theoretical and methodological insights to help address prior criticisms and advance future research

can short term capital controls promote capital inflows abstract in an economy a la diamond and dybvig j polit econ 91 3 1983 401 we present an example in which foreign lenders find it profitable to invest in an emerging market if and only if the emerging market government imposes taxes on short term capital inflows this implies that capital controls that are effective in reducing the vulnerability of emerging markets to financial crises may increase the volume of capital inflows

globalization and its challenges rudi was born and grew up in krefeld germany he was an undergraduate at the university of geneva and completed his ph d at the university of chicago in 1971 which is where we met he was a student of robert mundell and both the subject matter the development of the mundell fleming model and the elegance and insights of his early work reflected mundell s influence he taught at the university of rochester and at the university of chicago before accepting an offer from mit in 1975

how effective are capital controls a number of authors have recently argued that in order to avoid financial instability emerging countries should rely on capital controls two type of controls have been considered controls on capital outflows and controls on capital inflows in this paper i review the historical evidence on the effectiveness of these two type of controls i argue that controls on outflows have been ineffective they are circumvented and breed corruption i also analyze chile s recent experience with controls on inflows and i argue that their effectiveness has been exaggerated

capital controls on inflows exchange rate volatility and external vulnerability abstract we use high frequency data and a new econometric approach to evaluate the effectiveness of controls on capital inflows we focus on chile s experience during the 1990s and investigate whether controls on capital inflows reduced chile s vulnerability to external shocks we recognize that changes in the controls will affect the way in which different macro variables relate to each other in particular we consider the case where controls co exist with an exchange rate band aimed at managing the nominal exchange rate we develop a methodology to deal explicitly with the interaction between these two policies the main findings may be summarized as follows a a tightening of capital controls on inflows depreciates the exchange rate and b we find that a tightening of capital controls increases the unconditional volatility of the exchange rate but makes it less sensitive to external shocks

endogenous timing of actions under conflict between two types of second mover advantage in a model two players heterogeneous in their information quality compete with each other with perfect information about the other player s information quality if they can decide their timings of actions endogenously the less informed player has an incentive to delay her action for learning on the other hand the more informed player wants to delay her action to prevent her information from being revealed not to enable her to learn the consict of these two types of second mover advantages yields a war of attrition although both players can bene t from acting as the follower the gain from a delay for learning is greater than that for preventing the other s learning therefore a cost for the delay in action plays an important role in characterizing the equilibrium in contrast to the literature in which only informational externalities are considered this article shows that the introduction of payoff externalities contributes to different procedures and reasoning processes through which the heterogeneous players timings of actions are decided endogenously

capital flows to emerging economies minsky in the tropics capital inflows to emerging economies have a significant exogenous component they are very large when scaled to the size of the domestic financial sectors of recipients and they have large real macroeconomic effects they also sow the seeds for the ensuing sudden stops or capital flow reversals observed in financial crises in emerging markets this paper tests the implications of applying the kindleberger minsky model of financial crises to capital account reversals in emerging economies or sudden stops as they have been called in the recent literature it uses a panel probit framework with heterogeneous unobserved country effects the most important variables that account for sudden stops are preceding capital surges the share of flows other than foreign direct investment the size of the current account deficit contagion from sudden stops in other emerging markets and the ratio of external debt to exports the main policy conclusion is that emerging economies need specific policies to deal with capital surges in addition macroeconomic policies geared toward preserving sustainable macroeconomic balance may be necessary to avoid sudden stops but they are clearly insufficient copyright the author 2010 published by oxford university press on behalf of the cambridge political economy society all rights reserved oxford university press

compositional effects of capital controls theory and evidence this paper examines the effects of capital controls on the composition of inter national capital flows paying particular attention to debt inflows versus equity inflows a two period small open economy model with stochastic second period output and asymmetric information between domestic agents and international financiers is utilised to generate predictions regarding the effects of capital controls on the relative use of debt versus equity for financing first period investment these capital control implications are then investigated with quarterly frequency panel data for latin america capital controls are found to significantly affect the composition of the capital account

on the effectiveness of capital controls the experience of colombia during the 1990s abstract this paper analyzes the effectiveness of capital controls in colombia the evidence presented points towards a relative inability of the measures adopted to reduce the level of capital inflows nonetheless the evidence suggests that non remunerated deposits have been successful in inducing a recomposition of foreign liabilities in favor of long term maturities it is likely that this is a positive result as it has made the country less vulnerable to a reversal in capital flows in this sense controls may be viewed as an effective way of internalizing the negative externality imposed by short term maturities

on the positive correlation between income inequality and unemployment abstract two papers published in this journal jantti 1994 and mocan 1999 among others find empirical evidence that increases in structural unemployment have a substantial aggravating impact on income inequality the main point of this work is to show that standard job search models can help us understand this empirical regularity as a byproduct of the analysis the paper also provides a closed form general expression that enables direct calculation of the gini coefficient of wage income inequality as a function of any arbitrary initial distribution of wage offers three numerical examples illustrate the results

overcoming the early entrant advantage the role of alignable and nonalignable differences prior research has focused on early entrant advantage rather than on theories that explain and predict how late entrants can surpass the early entrant s performance in this research the authors p

the effect of capital controls on interest rate differentials abstract in this paper we present a model of international interest rate arbitrage under conditions of entry and exit costs to and from the domestic capital market we seek to measure the maximum potential effect of capital controls such as non interest paying reserve requirements on interest rate differentials we quantify the effect of such taxes using a dynamic optimization model with uncertainty and transaction costs an optimal s s rule gives the limits for interest rate differentials that trigger capital inflows and outflows we also calculate maximum interest rate differentials for various maturities and study the effect of parameter changes using parameters estimated for the chilean economy the model shows that the effect of capital controls on interest rate differentials is considerably smaller than what static calculations suggest

stock market cycles financial liberalization and volatility in this paper we analyze the cycles of the stock markets in four latin american and two asian countries and we compare their characteristics we divide our sample in two subperiods in order to account for differences induced by the financial liberalization processes of the early 1990s we find that cycles in emerging countries tend to have shorter duration and larger amplitude and volatility than in developed countries however after financial liberalization latin american stock markets have behaved more similarly to stock markets in developed countries whereas asian countries have become more dissimilar concordance of cycles across markets has increased significantly over time especially for latin american countries after liberalization

structural unemployment cyclical unemployment and income inequality this is the first study that decomposes unemployment into its structural and cyclical components and investigates their impact on income distribution controlling for the influence of inflation increases in structural unemployment have a substantial aggravating impact on income inequality inflation has a progressive impact which is due to the unexpected component the study demonstrates that previous work failed to take into account the stochastic trend behavior of the variables consequently specifications used by previous research cannot predict the behavior of income shares after 1983 whereas the specification used by this paper generates accurate forecasts the results also indicate that a sustained gnp growth is not necessarily associated with an improvement in income inequality because sustained gnp growth can coexist with increased structural unemployment

the new wave of private capital inflows push or pull abstract this paper studies the determinants and sustainability of the widespread private capital inflows to middle income countries after 1989 the key question is whether these flows are mostly pulled by attractive domestic conditions or pushed by unfavorable conditions in developed countries an analytical model focusing on country risk is developed and used empirically it is argued that the observed improvement in country creditworthiness is mostly due to the decline in international interest rates and that therefore its importance as a proximate cause does not support the pull interpretation all things considered in most countries the key answer that emerges is push

decision ambiguity and incumbent brand advantage this article examines the role of decision ambiguity in judgments that consumers make about an incumbent the brand a consumer currently uses versus an attack brand a new superior competitor it is hypothesized that decision ambiguity creates an advantage for the incumbent a conceptualization of decision ambiguity is offered in three experiments factors that can cause decision ambiguity are manipulated and their effects on preference for the incumbent are investigated the results underscore the role of decision ambiguity in incumbent brand advantage in two other experiments boundary conditions are examined t his research focuses on the advantages of incumbency the term incumbent refers to the brand that a consumer first chooses in a product category a brand may achieve incumbent status by being the first brand chosen by consumers entering a mature product class or by being a pioneer in a new product class an incumbency advantage occurs when consumers prefer the incumbent to an objectively superior but later encountered competitor referred to as the attack brand the objectives of this research are to examine conditions under which an incumbent advantage obtains and to conduct an exploratory investigation of the psychological processes that underlie it research in marketing has not been specific about either the processes or the conditions that result in an incumbency advantage although research on the related topic of brand loyalty has emphasized the role of emotional commitment or ego involvement in repeat purchase behavior e g jacoby 197 1 jacoby and chestnut 1978 other psychological processes are surely operative on the basis of behavioral decision theory research i propose a framework that offers a different explanation for consumer repeat purchase behavior in addition this framework offers an explanation of the pioneering advantage that is consistent with but independent of prior research e g carpenter and nakamoto 1989 kardes and kalyanaram 1992 schmalensee 1982 with a few notable exceptions in the domain of the pioneering advantage carpenter and nakamoto 1989 kardes and kalyanaram 1992 kardes et al 1993 research in marketing has not provided a psychological account of the incumbency advantage however behavioral decision theory research offers some suggestions for example samuelson and zeckhauser 1988 showed that people prefer a previously chosen option over others this pervasive tendency labeled the status quo bias has been demonstrated across a range of decisions samuelson and zeckhauser 1988 invoked a variety of psychological mechanisms to explain the phenomenon including commitment induced by sunk costs regret avoidance cognitive misperception and feeling of control however samuelson and zeckhauser 1988 were silent with respect to conditions that would make such biases present absent or even reversed cf biehal and chakravarti 1983 the present research identifies the decision characteristics that can increase or decrease the likelihood of the status quo bias the central premise of this research is that the incumbency advantage will vary as a function of the level of ambiguity in the decision environment

complementary resources and capabilities for an ethical and environmental management a qual quan study managers commitment to contribute to sustainable development holds the key to their long term business success and may be a source of competitive advantage the managerial perception of business ethics is influenced by the level of moral development and personal characteristics of managers these perceptions are also shaped by forces existing in the environment of the firm including available resources societal expectations sector and regulations the resource based perspective can thus contribute to the analysis of ethical issues offering important insights on how they can influence the environmental strategy of the firm the findings of this study show that firm resources have a strong influence on business managers ethical attitudes in addition the application of resource based rationales to ethical issues can be justified in the following several ways it influences a managerial perception of natural environment as a competitive opportunity it requires investments of financial and human resources flexibility and speed in the adaptation to environmental changes and it creates new resource based opportunities through changes in prevention pollution technology policy process and market forces

capital controls in brazil effective abstract a large theoretical literature emerged in recent years analyzing the positive and normative effects of capital controls begging for empirical studies to validate it no emerging market experimented as actively with controls on capital inflows as brazil did since late 2009 this paper analyzes the impact of those measures these policies had some success in segmenting the brazilian from global financial markets as measured by the spread between onshore and offshore dollar interest rates as well as adr premia relative to the underlying local stocks the measures adopted from late 2009 to mid 2011 did not translate into significant changes in the exchange rate suggesting limited success in mitigating exchange rate appreciation however the exchange rate strongly depreciates after a tax on the notional amount of derivatives is adopted in mid 2011 the last of the three restrictions studied may have depreciated the brazilian real in the range from 4 to 10 percent that strong response may have been driven by complementarities with the previous measures as well as an unexpected easing in monetary policy

the effects of capital controls on international capital flows in the presence of asymmetric information abstract this paper examines the effects of capital controls on the volume and composition of international capital flows in the presence of asymmetric information in the two period small open economy model stochastic second period output depends on the level of first period investment which cannot be verified by international investors domestic agents obtain external funding by borrowing on international capital markets and by selling equity to international investors the paper investigates the effects of various capital controls on the debt equity choice domestic investment and welfare controls on capital inflows are shown to shift the composition of flows from fixed income instruments towards equity and to reduce the overall volume of inflows

is the accumulation of international reserves good for development international reserves accumulation has been the preferred policy recently adopted by developing economies to achieve financial stability the aim of this policy is to increase liquidity and thus reduce the risk of suffering a speculative attack the main concern expressed in the literature has been related to its cost most of the studies conclude that the opportunity cost of international reserves accumulation is around 1 of gdp however these studies have not analysed whether this strategy is or could be more broadly supportive of development an issue that must be of central interest for developing economies the aim of this paper is to show that the stockpiling of international reserves is not optimal for developmental purposes and that there exist alternative policies that can be applied to achieve financial stability policy autonomy and a better performance in terms of development

banks and liquidity crises in emerging market economies abstract this paper presents and analyzes a simple banking model in which banks have access to international capital markets and domestic asset markets the model generates two types of equilibria a no default equilibrium and a mixed equilibrium in the no default equilibrium all banks are symmetric and always solvent while in the mixed equilibrium some banks can be internationally illiquid and default simultaneously the latter equilibrium captures the basic features of banking crises after financial liberalization in emerging market economies in this case a large capital inflow leads to high asset price volatility and magnifies a banking crisis

inflation targeting and exchange rate management in less developed countries abstract we analyze coordination of monetary and exchange rate policy in a two sector model of a small open economy featuring imperfect substitution between domestic and foreign financial assets our central finding is that tight management of the exchange rate greatly enhances the efficacy of inflation targeting in a flexible exchange rate system inflation targeting incurs a high risk of indeterminacy moreover small inflation shocks may escalate into much larger increases in inflation ex post both problems disappear when the central bank fixes the path of the nominal exchange rate or leans heavily against the wind in a managed float

financial instability in latin america in this paper i deal with a number of issues related to financial instability in latin america i first discuss from a macroeconomic research perspective what i believe are some of the most important policy issues faced by the latin american nations these include the effectiveness of controls on capital inflows the effect of exchange rate depreciation on output and the international transmission of the business cycle second i argue that the economic research agenda on latin america should not ignore history in latin america more so than in any other region in the world there has been a self destructing tendency for repeating history 2003 elsevier ltd all rights reserved

consideration sets and competitive marketing we present a model of competitive marketing based on the notion that consumers are boundedly rational and that firms use marketing tactics in an attempt to influence consumers decision process the standard model of consumer behaviour assumes that the consumer applies well defined preferences to a perfectly perceived set of available alternatives we retain the assumption that consumers have stable preferences but relax the assumption that they have a perfect perception of what is relevant for their consumption problem thus allowing firms to manipulate that perception our aim is to explore the market implications of this departure from the standard model especially for the way firms deploy marketing strategies in competitive environments the cornerstone of our model is the observation that in the modern marketplace consumers face an overwhelmingly large variety of products and therefore often use screening criteria deliberate as well as unconscious in order to reduce the number of relevant alternatives as a result consumers apply their preferences not to the set of objectively feasible alternatives but to a potentially smaller set which they construct at an earlier stage of the decision process borrowing a term from the marketing literature we refer to this set as the consideration set the basic idea underlying this term is that consumers may be unaware of some of the feasible products and even when they become aware of a new product they still need to be persuaded to consider it as a potential substitute to their currently consumed product

consumer choice strategies for comparing noncomparable alternatives research on consumer choice has focused on easily comparable alternatives a subset of the choices consumers regularly face this paper outlines the problem and two general strategies for comparing noncomparable alternatives a subset of choices that has been overlooked in the literature experiments are reported that support use of the strategies

new empirical evidence on the effects of capital controls on composition of capital flows in malaysia this study aims to examine the effect of capital controls on composition capital flows in malaysia under predetermined exchange rate rules the contribution of selective controls is to increase monetary autonomy without taxing private long term capital flow or foreign direct investment although the selective capital controls in malaysia tax only some components of capital flows the study shows after controlling other factors the controls not only reduce the total flows hence increase monetary autonomy but to some extent affected the private long term flows

age order of entry strategic orientation and organizational performance abstract this paper proposes an empirical test of several hypotheses linking age order of entry and strategic orientations to a firm s performance three strategies are defined cost leadership strategy innovative differentiation and marketing differentiation the aim is to show that the impact on performance of both age and each of the three strategic orientations may differ according to a firm s order of entry into an industry following lieberman and montgomery s 1998 evaluation of their major contribution on first mover advantage we emphasize three points first we develop and test hypotheses related to early and late followers strategic orientations broadening the scope of traditional studies on pioneers second the model combines the dimensions of a firm s age order of entry and strategic orientations as well as industry conditions stage of the industry environmental unpredictability and technology diffusion to establish a contingent model of performance analysis finally the empirical study deals chiefly with organizational performance and not market share which is considered a typical advantage accruing to pioneers in addition the scope of the study 582 french manufacturing firms provides the means to fill a void in empirical studies because it is a broad cross sectional test on non u s data the firms are mainly private small to medium sized and single or dominant business firms therefore our assumptions must be understood as particularly applicable to this type of firm the results reveal important lessons for practitioners first we did not find a first mover advantage in terms of organizational performance in addition pioneers organizational performance is enhanced by the cost leader strategy contrary to our assumption emphasizing innovative differentiation for these firms second early followers performance benefits from innovative differentiation and marketing differentiation finally late entrants developing a cost leader strategy have a significantly higher performance all groups considered late followers are the firms most sensitive to environmental uncertainty and age effects our study clarifies the impact of a firm s age and strategic orientations on its performance depending on the firm s order of entry the implications of these results are particularly relevant for practitioners and entrepreneurs first a cost leadership strategy seems to be a guarantee for a pioneer to increase its organizational performance new ventures should therefore take into consideration the fact that newness and innovative differentiation might not be the best strategic orientations for high performance in the long run second as a second mover however developing a superior product and being able to market it efficiently appear to be the enhancing factors of firm performance third for both pioneers and early followers age does not significantly reduce their performance however the longer a firm waits before entering the greater is the negative effect of age on its performance this is due to the difficulty of resisting competitive erosion because pioneers and early followers drive the changes in the industry the identification of these effects should help managers and stakeholders to make more effective entry decisions to sustain a firm s advantage leading to better performance and higher probability of survival

capital flows to developing countries long and short term determinants this article focuses on the determinants of the large portfolio flows from the united states to latin american and asian countries during 1988 92 cointegration techniques reveal that both domestic and global factors explain bond and equity flows to developing countries and represent significant long run determinants of portfolio flows the article also investigates the dynamics of portfolio flows by estimating seemingly unrelated error correction models global and country specific factors are equally important in determining the long run movements in equity flows for both asian and latin american countries while global factors are much more important than domestic factors in explaining the dynamics of bond flows u s interest rates are a particularly important determinant of the short run dynamics of portfolio especially bond flows to developing countries copyright 1997 by oxford university press

capital controls and the real exchange rate do controls promote disequilibria abstract the consensus view is that capital controls can effectively lengthen the maturity composition of capital inflows and increase the independence of monetary policy but are not generally effective at reducing net inflows and influencing the real exchange rate this paper studies the adjustment dynamics of the real exchange rate towards its long run equilibrium and presents empirical evidence that capital controls increase the persistence of misalignments allowing the speed of adjustment to vary according to the intensity of restrictions on capital flows it is shown that the real exchange rate converges to its long run level at significantly slower rates in countries with capital controls this result is stronger when the exchange rate is undervalued and is independent of confounding factors such as the exchange rate regime and other forms of heterogeneity affecting the speed of adjustment i also find evidence that controls on capital inflows have greater effects than controls on outflows in addition while the combination of capital controls with a fixed or managed exchange rate regime significantly increases the persistence of misalignments controls appear to loose traction under more flexible exchange rate arrangements

unemployment and the size distribution of income the impact of changes in the level of unemployment on the u k size distribution of annual income is examined using cross section data increased unemployment is shown to have a discernible regressive effect however reductions in shares were not highly concentrated at the very bottom of the distribution many individuals affected by unemployment during the year are in households families not at the bottom of the distribution particularly because of the presence of other working members copyright 1986 by the review of economic studies limited

sustainable pioneering advantage profit implications of market entry order there is strong theoretical and empirical evidence supporting the idea that first to market leads to an enduring market share advantage in sharp contrast to these findings we find that at the business unit level being first to market leads on average to a long termprofit disadvantage this result holds for a sample of consumer goods as well as a sample of industrial goods and leads to questions about the validity of first mover advantage in and of itself as a strategy to achieve superior performance we replicate the typical demand side pioneering advantage but find an evengreater average cost disadvantage which is the source of the pioneering profit disadvantage in an extended analysis we show that first to market leads to aninitial profit advantage which depending on the sample or profit measure lasts for about 12 to 14 years before turning into a disadvantage moreover we show that pioneers differentially benefit from a lack of consumer learning a strong market position and patent protection these three moderating factors together can actually help pioneers achieve a sustainable profit advantage over later entrants finally we find strong support for the theoretical argument that the entry order decision should be treated as endogenous in empirical estimation

what can we learn from the implementation of monetary and macroprudential policies a systematic literature review the emergence of macroprudential policies implemented by central banks as a means of promoting financial stability has raised many questions regarding the interaction between monetary and macroprudential policies given the limited number of studies available this paper sheds light on this issue by providing a critical and systematic review of the literature to this end we divide the theoretical and empirical studies into two broad channels of borrowers consisting of the cost of funds and the collateral constraint and financial intermediaries consisting of risk taking and payment systems in spite of the existing ambiguity surrounding coordination issues between monetary and macroprudential policies it is argued that monetary policy alone is not sufficient to maintain macroeconomic and financial stability hence macroprudential policies are needed to supplement monetary in addition we find that the role of the exchange rate is critical in the implementation of monetary and macroprudential policies in emerging markets while volatile capital flows pose another challenge in so far as how the arrangement of monetary and macroprudential policies varies across countries key theoretical and policy implications have been identified

tools for managing financial stability risks from capital inflows abstract we examine whether macroprudential policies and capital controls can enhance financial stability in the face of the risks typically associated with large capital inflows we construct new indices of foreign currency fx related prudential measures domestic prudential measures and financial sector specific capital controls for 51 emerging market economies over the period 1995 2008 our results indicate that both capital controls and fx related prudential measures are associated with a lower proportion of fx lending in total domestic bank credit and with a lower proportion of portfolio debt in total external liabilities other prudential policies appear to help restrain the intensity of aggregate credit booms experience from the global financial crisis suggests that prudential and capital control policies in place during the boom enhanced economic resilience during the bust

labour market structure and inequality a comparison of italy and the u s markets with rigid labour regulations and centralized wage setting are often thought to be inefficient but egalitarian using a model of off and on the job search and event history individual level data for italy and the u s we show that while the cross sectional wage distributions of young italian males are much more compressed than are the comparable distributions for young white u s males the estimated search model implies that the distribution of lifetime welfare is no more disperse in the u s than it is in italy our model implies that the high frequency of movements between labour market states leads to both a relatively equitable distribution of long run welfare in the u s and a high level of cross sectional inequality

controls on capital inflows do they work abstract this paper analyzes the effectiveness of controls on capital inflows in particular we analyze in great detail the chilean experience with the use of the unremunerated reserve requirement we examine the effects of the controls applied in chile in 1991 1998 on interest rates real exchange rate and the volume and composition of capital inflows the effects are elusive and it is difficult to pin down long run effects although after the unremunerated reserve requirement was introduced there was an increase in the interest rate differential the econometric evidence does not show it has a significant long run effect also we detect very small effects on the real exchange rate however the more persistent and significant effect is on the composition of capital inflows tilting composition toward longer maturity

a more efficient estimate of the effects of macroeconomic activity on the distribution of income the effects of unemployment and inflation on quintile shares of family income in the united states are estimated by means of generalized least squares inflation is found to have a significant progressive impact on the distribution of income the results also lend support to earlier findings regarding the regressive effects of unemployment copyright 1994 by mit press

capital controls and exchange rate instability in developing economies abstract a large literature on the appropriate sequencing of financial liberalization suggests that removing capital controls prematurely may contribute to currency instability this paper investigates whether legal restrictions on international capital flows are associated with greater currency stability we employ a comprehensive panel data set of 69 developing economies over the 1975 1997 period identifying 160 currency crises we control for macroeconomic political and institutional characteristics that influence the probability of a currency crisis employ alternative measures of restrictions on international payments and account for possible joint causality between the likelihood of a currency attack and the imposition of capital controls we find evidence that restrictions on capital flows do not effectively insulate economies from currency problems rather countries with less restrictive capital controls and more liberalized regimes appear to be less prone to speculative attacks

oil dependency and exchange rate regimes in arab oil economies time to rethink the paradigm this study examines implications of the current exchange rate regimes on the macroeconomic and growth performance of five arab oil producing countries saudi arabia the uae sudan algeria and yemen the study evaluates alternative exchange rate regime policy options towards exploring an optimal exit strategy to ensure successful transition to more sustainable exchange rate regime especially in the fixed regime economies of saudi arabia and the uae this study proposes the adoption of a transparent broad basket band and crawl bbc regime by the arab oil economies in order to provide a better alternative to the existing fixed pegs or dirty floats however it is imperative to note that the timing of the exit from the current regime and the extent of institutional development and market sophistications are very critical to successful transition to more sustainable regime that would provide a larger scope for counter cyclical policies and diversification in these economies