the monetary approach to exchange rate determination under rational expectations the dollar deutschmark rate abstract this paper reformulates the monetary approach after ascertaining that a money demand function with a partial adjustment mechanism had more empirical support than a money demand function which assumed instantaneous stock adjustment the resulting exchange rate equation is estimated by two rational expectations techniques the parameter estimates are reasonable and are robust to the estimation technique used to different specifications of the driving processes and to changes in the estimation period the structural model outperforms the random walk model and its own unconstrained equivalent a pure time series equation in outof sample forecasts

deviations from purchasing power parity in the long run this paper demonstrates that deviations from purchasing power parity reveal a remarkable and possibly startling consistency with martingale behavior during both fixed and flexible rate periods for a wide variety of countries and in both monthly and annual data since this pattern appears to be much more general than one would expect on the basis of models founded on international commodity arbitrage the paper proposes an alternative explanation which instead relies on financial arbitrage in bonds as the underlying mechanism this paper will demonstrate that deviations from purchasing power parity ppp reveal a remarkable and possibly startling consistency with martingale behavior during both fixed and flexible exchange rate periods for a wide variety of countries and in both monthly and annual data this pattern appears to be much more general than one would expect on the basis of models founded on international commodity arbitrage the paper therefore proposes an alternative explanation which does not presuppose free trade in goods but which instead relies on financial arbitrage in bonds as the underlying mechanism the major implication of the theory and the results is that ppp is as likely to be violated in the long as in the short run as an empirical matter deviations from ppp can be observed for most currencies at any instant see kravis et al 21 stockman 37 and genberg 15 among others these deviations are typically both cumulative and persistent the real exchange rate can remain on either side of parity for lengthy but variable time intervals of a year or more as a consequence the current consensus shared

foreign currency positioning by u s firms some new evidence s ince the breakdown of the par value system there has been a dramatic increase in the variability of exchange rates often the question is raised whether this variation is rational or whether it is the outcome of disorderly markets which are bereft of stabilizing speculation or even worse are dominated by destabilizing speculation the considerable research stimulated by this issue has yet to yield conclusive results and whether the foreign exchange market is rational or efficient is still an open question of course the market is not an abstraction but is comprised of flesh and blood participants whose behavior may show varying degrees of rationality this paper utilizes a new body of data to undertake a preliminary investigation into the market behavior of one major group of participants u s firms whose foreign currency positions are regularly reported to the u s government

exchange rates financial innovation and divisia money the sterling dollar rate 1972 1990 in this paper we examine the usefulness of divisia money relative to simple sum money for exchange rate modelling in a period of rapid financial deregulation this comparison is conducted using as a convenient framework the monetary model of the exchange rate we demonstrate inter alia that for the sterling us dollar exchange rate over the period 1972 q1 to 1990 q2 that the use of divisia money makes a significant difference to both the long and short run modelling of the exchange rate

some evidence of speculative bubbles in the foreign exchange markets the authors propose that the poor performance of portfolio models is due to their exclusion of speculative bubbles they suggest a new unce rtainty bubble solution as opposed to a risk bubble solution discr etion is minimized because the trend of the bubble is an exact functi on of the structural parameters for three exchange rates the bubble augmented portfolio model passes the usual statistical tests and per forms better than its var equivalent in out of sample dynamic simulat ion when the model was reestimated with the bubbles removed and wit h ordinary dummies in place of the constrained trend the parameter e stimates were invariably insignificant copyright 1987 by ohio state university press

monetary fundamentals and exchange rate dynamics under different nominal regimes we investigate the dynamic relationship between the us dollar exchange rate and its fundamentals across different exchange rate regimes using data going back to the late 1800s or early 1900s for six industrialized countries for these countries there is evidence of a long run relation between the nominal exchange rate and monetary fundamentals consistent with conventional theories of exchange rate determination we employ a markov switching vector equilibrium correction model that allows for regime shifts in the entire set of parameters and the variance covariance matrix our results suggest that the relative importance of exchange rates and fundamentals in restoring the long run equilibrium level implied by the exchange rate monetary fundamentals model varies significantly over time and is affected by the nominal exchange rate regime in operation

exchange rate bubbles fundamental value estimation and rational expectations test abstract we propose a model of periodically collapsing bubbles which extends the van norden 1996 model and nests it by considering a non linear specification for the bubble size in the survival regime and the endogenous determination of the level of the fundamental value of the stochastic process they allow us to test for rationality in the formation of expectations and remove the arbitrariness of exogenously setting the level of the fundamental value this general model is applied to the exchange rate of the brazilian real to the us dollar from march 1999 to february 2011 the futures market exchange rate is used as a proxy of its expected future value and three different structural models are considered for the determination of the fundamental value the first two imply that the exchange rate satisfies either purchasing power parity ppp or a modified version of it the third structural model is a version of the monetary model of exchange rate determination fitted to the period under consideration we obtain the maximum likelihood estimate of the parameters of the models explore the properties of the errors test its restricted versions and compare the three specifications for the fundamental we find that the models we propose fit well the data and are useful in the heuristic interpretation of the exchange rate movements of the period finally we select the structural models that display the best performance according to several criteria

testing for rational bubbles with exogenous or endogenous fundamentals the german hyperinflation once more abstract the presence of rational price bubbles during the german hyperinflation is tested under two different structural assumptions on the money process if the money supply is constrained to be exogenous to the current inflation rate the hypothesis of no bubble can be rejected however this is no longer found to be true when a feedback rule from inflation to money creation is allowed the analysis contradicts previous results presented in the literature

financial crashes as endogenous jumps estimation testing and forecasting abstract this paper provides an econometric approach for forecasting financial crashes based on diffusion processes with time varying parameters that are driven by market fundamentals under a polynomial drift function one obtains a cusp stochastic process that entails a generalized exponential stationary distribution this class of densities is quite convenient as it allows for skewness different tail shapes and even multimodality which corresponds to multiple equilibria movements from one equilibrium to another due to changes in the market fundamentals then relates to crashes methods for fitting and evaluating this sort of diffusion processes are proposed to enable the estimation and forecast of crash events finally an empirical assessment is carried out by tracking the likelihood of a crash during the swedish twin crises in the early 1990s

book reviewjohn law economic theorist and policy maker by antoin e murphy oxford clarendon press 1997 pp 3921xiv 75 00

on the choice of funtional form for hedonic price functions this study examines how errors in measuring marginal attribute pric es vary with the form of the hedonic price function in simulations consumers with known utility functions bid for houses with given attributes various forms of the hedonic function are estimated using equilibrium housing prices errors in estimating marginal attribute prices are calculated by comparing each consumer s equilibrium marginal bid vector with the gradient of the hedonic function when all attributes are observed linear and quadratic box cox forms produce lowest mean percentage errors however when some attributes are unobserved or are replaced by proxies linear and linear box cox functions perform best copyright 1988 by mit press

testing for bubbles in exchange markets a case of sparkling rates this paper investigates the possibility that the observed deviations of major bilateral exchange rates from values implied by market fundamentals are a consequence of rational asset market bubbles when a new econometric methodology for detecting asset market bubbles is used the joint hypothesis of no bubbles and stable autoregressive processes for relative money supplies and real incomes is rejected for the dollar deutsche mark and dollar pound ratesusing monthly data over the period 1973 82 additional tests for coefficient stability and for lack of cointegration between exchange rates and market fundamentals suggest that the bubble findings must be interpreted with care

the role of dutch auctions and lotteries in shaping the art market s of 17th century holland abstract this article examines institution formation in the nascent art markets of 17th century amsterdam and haarlem in response to external and internal pressures on artists guilds in amsterdam poor quality imports often copies were touted as originals and sold in clandestine dutch auctions the deliberate confusion about quality imparted to the market features similar to those of akerlof s lemons model and a need for quality guarantees gave occasion to dealers in haarlem and other towns demand was viewed as fixed and guilds toughened restrictions on the supply side dissenters successfully used lotteries to show that demand can be engendered promotion was to become a key feature of later art markets

sparkling wine choice from supermarket shelves the impact of certification of origin and production practices we report the results of a study based on revealed and stated preference data on choice of prosecco wines in retail stores close to the origin of production in northern italy emphasis is placed on ability to reconcile the utility structure of stated preference data with that underlying revealed preference data we extend the analysis to cover nonattendance of key attributes such as price and certification of origin while controlling for the large range of brand effects

cointegration between exchange rates and relative prices another view abstract in this paper the cointegration property of exchange rates and relative prices as implied by the purchasing power parity theory ppp is reexamined using a time varying parameter tvp approach such an approach recognizes the possibility that the lack of cointegration between exchange rates and relative prices found in recent literature may be the result of the nonstationarity of the cointegrating regression parameters themselves the tests of cointegration in a tvp framework indicate that ppp is better supported and point to the presence of structural instability in the long run equilibrium relationship between exchange rates and relative prices

the role of the board of directors in disseminating relevant information on greenhouse gases in today s world the corporate image of the largest companies is closely linked to their performance in the field of corporate social responsibility and the disclosure of information on that topic specifically on climate change since the board of directors is the body responsible for this process the aim of this article is to show the role that companies boards of directors play in the accountability process vis a vis stakeholders in relation to one specific aspect which has enormous significance in environmental information practices used to monitor greenhouse gas emissions in order to achieve this we shall verify certain business characteristics in addition to the size and activity of the board of directors and we shall take different dependence models into consideration these models will include variables related to the level of independence and diversity of the board of directors which interact with dummy variables representing the company s litigation risks regarding environmental behavior and the institutional macro context of the organization s country of origin the results make it clear that boards of directors are basically focused on the traditional responsibility of creating economic value instead of dealing with today s broader business world concepts which include social responsibility this focus therefore does not favor the accountability process before other stakeholders if this makes it more difficult to protect the interests of shareholders

complex bubble persistence in closed end country funds abstract we seek to resolve the misspecified fundamental problem in speculative bubbles through examining the behavior of closed end country funds which possess well defined fundamentals based on their net asset values we study six funds during an episode when large premia emerged and subsequently disappeared we apply rescaled range and regime switching tests which reject the no bubble null hypothesis for these premia these results are placed in a complex bubble model framework interpretable according to the big player model

margin short selling and lotteries in experimental asset markets the robustness of bubbles and crashes in markets for assets with finite lives is perplexing this paper reports the results of experimental asset markets in which participants trade two assets in some markets price bubbles form in these markets traders pay higher prices for the asset with lottery characteristics i e a claim on a large unlikely payoff however institutional design has a significant impact on deviations in prices from fundamental values particularly for an asset with lottery characteristics price run ups and crashes are moderated when traders finance purchases of the assets themselves and are allowed to short sell

shakeouts and market crashes this article provides a microfoundation for the rise in optimism that seems to precede market crashes small young markets are more likely to experience stock price run ups and crashes we use a zeira rob type of model in which demand size is uncertain optimism then grows rationally if traders prior distribution over market size has a decreasing hazard such prior beliefs are appropriate if most new markets are duds and only a few reach a large size the crash occurs when capacity outstrips demand as an illustration for the period 1971 2001 we fit the model to the telecom sector

should central banks burst bubbles some microeconomic issues anti bubble policy is examined in a finite horizon greater fool bubble model with rational agents asymmetric information and short sales constraints this permits the use of standard tools of welfare economics to analyse bubble policies policy is modelled as deflating overpriced assets by revealing information about this overpricing if the central bank is following such a policy then the market interprets inaction as an implicit endorsement of asset prices which raises these prices also the central bank can deflate overpriced assets even if it has no informational advantage over any investors about this overpricing however unless it has such an informational advantage a bubble bursting rule may only make things worse

the monetary model of the exchange rate long run relationships short run dynamics and how to beat a random walk abstract the monetary model is re examined for the sterling dollar exchange rate first it is demonstrated using a multivariate cointegration technique that an unrestricted monetary model is a valid framework for analyzing the long run exchange rate second we find once proper account has been taken of the short run data dynamics that an unrestricted monetary model outperforms the random walk and other models in an out of sample forecasting contest jel f31

corporate social responsibility in europe and the u s insights from businesses self presentations the paper compares the extent and content of businesses communications about corporate social responsibility csr in france the netherlands the u k and the u s in particular the study investigates the nature of csr principles processes and stakeholder issues discussed in web pages the results show that businesses in the four countries do not display the same eagerness to appear as socially responsible and employ diverse means to convey social responsibility images

economic shocks and crime evidence from the crash of ponzi schemes abstract in november 2008 colombian authorities dismantled a network of ponzi schemes making hundreds of thousands of investors lose tens of millions of dollars throughout the country using original data on the geographical incidence of the ponzi schemes this paper estimates the impact of their breakdown on crime we find that the crash of ponzi schemes differentially exacerbated crime in affected districts confirming the intuition of the standard economic model of crime this effect is only present in places with relatively weak judicial and law enforcement institutions and with little access to consumption smoothing mechanisms such as microcredit in addition we show that with the exception of economically motivated felonies such as robbery violent crime is not affected by the negative shock

can learning affect exchange rate behavior the case of the dollar in the early 1980 s this paper demonstrates that a change in parameters of the money market that is not immediately understood will affect the behavior of exchange rate forecast errors while the market is learning the analysis is applied to the behavior of u s dollar german mark forecast errors during the early 1980 s when the market appeared to systematically underpredict the strength of the dollar consistent with this observation empirical estimates of implied forecast errors based upon bayesian learning suggest that forecast errors would have been on average negative during the period as the market came to realize the increase in u s money demand

nonlinear nonparametric nonessential exchange rate estimation a wide variety of empirical exchange rate mo dels have been estimated over the years but despite the considerable energies that have been devoted to this work the economics profession has remarkably little to show for itself there is little evidence that conclusively links the bilateral exchange rates of typical oecd countries to fundamental macroeconomic determinants of exchange rates such as money output relative prices or interest differentials coefficient estimates are notoriously unstable and frequently mis signed compared with theoretical predictions exchange rate equations do not fit particularly well and forecast no better than the simplest naive alternatives recently a new class of exchange rate models was introduced by paul krugman 1988 these models provide a potential reason for the poor performance of traditional exchange rate models because they are nonlinear if the exchange rate actually depends in a nonlinear way on exogenous macroeconomic fundamentals linear exchange rate models may work poorly even though the exchange rate is closely linked to fundamentals in this paper we provide a brief sketch of some of this work as well as some preliminary evidence on the actual performance of these nonlinear models in our empirical analysis we use a nonparametric estimator that can handle a wide variety of nonlinear phenomena we examine fixed exchange rate regimes where nonlinearities should be quite easy to detect however we do not find strong empirical support for the hypothesis that the incorporation of nonlinear effects significantly improves models of exchange rate determination in section i we briefly review the theoretical literature on nonlinear target zone exchange rate models linking this work to the tests for intrinsic bubbles we draw heavily on recent papers by kenneth froot and maurice obstfeld 1989a b our methodology and data are discussed in section ii section iii contains new empirical tests for nonlinearities in exchange rate models

retrospectives an early supply side demand side controversy petty law cantillon early modern europe in the late seventeenth and early eighteenth centuries witnessed an unprecedented increase in the rate of economic growth and governments entertained a wide range of proposals aimed at developing and harnessing foreign trade and emerging financial markets in his magisterial survey of foreign trade doctrine titled studies in the theory of international trade 1936 jacob viner pointed out that enlightened authors of that time were often nonbullionist mercantilists they favored export promotion and import reduction not on the grounds that it would lead to an accumulation of gold but on the grounds that it would increase trade and employment my focus here is on how some key economists of this time period william petty john law and richard cantillon adumbrated disputes between supply side and demand side macroeconomics that have continued to the present day

are there bubbles in the sterling dollar exchange rate new evidence from sequential adf tests there has been mixed evidence regarding the existence of rational bubbles in the foreign exchange markets this paper introduces recently developed sequential unit root tests into the analysis of exchange rates bubbles we find strong evidence of explosive behavior in the nominal sterling dollar exchange rate however this explosive behavior should not be simply interpreted as evidence of rational bubbles as we show that it might be driven by the relative prices of traded goods

modelling prices and the reputation of individual named wines this article develops empirical models to assess the relation between the reputation of an individual named wine and its price unrestricted and polynomial distributed lag models are used to assess

rational herding in financial economics abstract this paper briefly describes recent papers on the economics of rational herding in financial markets some models can predict perfect herding in which rational agents all act alike without any countervailing force such herding typically arises either from direct payoff externalities negative externalities in bank runs positive externalities in the generation of trading liquidity or in information acquisition principal agent problems based on managerial desire to protect or signal reputation or informational learning cascades the paper also provides a few pointers to related literature and suggests issues to be addressed in future research

the role of the private sector in global climate and energy governance the private sector plays an active role in implementation of mechanisms concerning the mitigation of climate change in spite of that the corporate actors play a limited direct role in international arenas when it comes to negotiating the design of climate and energy regime the climate and energy governance in the united nations system remains mostly state centric but the active participation of corporate actors in negotiation of climate and energy regimes is essential to increase the effectiveness of their governance business is not just a subject of a regulatory climate and energy imposed by the state rather business is an intrinsic part of the fabric of climate and energy governance as rule maker particularly in the many voluntary regimes however the architecture in place should guarantee that the private sector does not highjack the decisions and its positions are balanced by other non governmental actors in the process this article analyzes the role that the private sector can play in the global climate and energy governance the private sector does not only play a rule taker role in the climate change and energy regime indeed they are not passive observers as they influence through indirect means the results suggest that the private sector is able to play a key role in global climate and energy governance based on the principle of multi stakeholder participation in global decision making but the architecture should be able to balance the goods and bads of private direct influence in international regimes

learning and the volatility of exchange rates abstract this paper investigates the implications for the volatility of exchange rates of specifying market uncertainty as parameter uncertainty private agents learn by means of bayes rule about a parameter of the stochastic process generating the exogenous variables learning is shown to magnify the reaction of exchange rates to random shocks to the market fundamentals this magnification effect of learning can explain the rejections of the econometric tests on the variance bounds and on the absence of bubbles that have been reported in the literature

the inflow effect trader inflow and price efficiency abstract we investigate the impact of cash and trader inflow on price efficiency in multi period experimental asset markets implementing eight treatments with 672 subjects we find that i the joint inflow of cash and traders triggers strong overvaluation and massive price run ups inflow effect remarkably the effect occurs in almost all of the 30 markets with joint cash and trader inflow and is very robust the effect even prevails in markets with complete and symmetric fundamental information we further show that ii in treatments with the joint inflow of cash and traders prices crash to fundamentals towards maturity of the asset the analysis of traders beliefs reveals that iii despite fundamental values staying constant beliefs about fundamentals co move with upwardly trending prices finally we report a speculative motive only among the optimists in treatments where we observe the inflow effect

testing the monetary model of exchange rate determination a closer look at panels abstract in this paper we undertake an extensive evaluation of panel tests of the long run monetary model of exchange rate determination we first show how poorly the monetary model performs on a country by country basis for us dollar exchange rates over the post bretton woods period for a large number of industrialized countries in sharp contrast we find considerable support for the monetary model using panel procedures as in groen 2000 and mark and sul 2001 given the disparity in the country by country and panel approaches we carefully analyze the homogeneity restrictions inherent in the panel procedures the evidence on the appropriateness of the homogeneity restrictions is mixed in the end whether the monetary model conforms to post bretton woods data largely depends on one s prior beliefs

determinants of corporate social disclosure in spanish local governments this paper contributes to previous country level analyses of non financial reporting in the public sector by studying public transparency in relation to sustainability as well as by assessing the determinants of sustainability disclosure practices in spanish municipalities we have carried out a content analysis of the websites of 102 spanish local governments subsequently we have employed different statistical techniques biplots and dependence models to analyse the extent of disclosure and to determine the impact of certain contextual and political factors on transparency in matters of sustainability when compared to the amount of information that is revealed concerning financial issues disclosure practices regarding social and environmental information are rather scarce we have also observed that several political factors more specifically the presence of conservative governments and political rivalry may become genuine barriers to municipal transparency based on these findings we can make two policy recommendations first it seems necessary to establish national policies laws or recommendations that generate similar levels of transparency among local governments in order to avoid social dilemmas in this sense similar accountability processes limit non sustainable behaviours playing a similar role to that of markets for the private sector second accountability processes should focus on the addition of information concerning social and environmental actions and on informing of the effects of municipalities on them going beyond the strictly economic dimension

famous first bubbles t he jargon of economics and finance contains numerous colorful expressions to denote a market determined asset price at odds with any reasonable economic explanation such words as tulip mania bubble chain letter ponzi scheme panic crash and financial crisis immediately evoke images of frenzied and probably irrational speculative activity many of these terms have emerged from specific speculative episodes which have been sufficiently frequent and important that they underpin a strong current belief among economists that key capital markets sometimes generate irrational and inefficient pricing and allocational outcomes before economists relegate a speculative event to the inexplicable or bubble category however we must exhaust all reasonable economic explanations while such explanations are often not easily generated due to the inherent complexity of economic phenomena the business of economists is to find clever fundamental market explanations for events and our methodology should always require that we search intensively for market fundamental explanations before clutching the bubble last resort thus among the reasonable or market fundamental explanations i would include the perception of an increased probability of large returns the perception might be triggered by genuine economic good news by a convincing new economic theory about payoffs or by a fraud launched by insiders acting strategically to trick investors it might also be triggered by uninformed market participants correctly inferring changes in the distribution of dividends by observing price movements generated by the trading of informed insiders while some of these perceptions might

developing difference social organization and the rise of the auto industries of south korea taiwan spain and argentina theories of economic development as diverse as modernization dependency world system and market reform take a critical factor view proponents of each theory argue that countries fail to develop because of an obstacle to economic growth we argue instead that neither a critical factor nor a single path leads to economic development viable paths vary economic growth depends on linking a country s historically developed patterns of social organization to the opportunities of global markets we formulate a sociological theory of cross national comparative advantage including not only economic factor endowments but also institutionalized patterns of authority and organization such patterns legitimize certain actors and certain relationships among those actors which facilitate development success in some activities but not in others we illustrate this approach to understanding development outcomes with a comparative analysis of the difficult rise of the automobile assembly and components industries in south korea taiwan spain and argentina

expectations and bubbles in asset pricing experiments abstract we present results on expectation formation in a controlled experimental environment in each period subjects are asked to predict the next price of a risky asset the realized market price is derived from an unknown market equilibrium equation with feedback from individual forecasts in most experiments prices deviate from the benchmark fundamental and bubbles emerge endogenously these bubbles are inconsistent with rational expectations and seem to be driven by trend chasing behavior or positive feedback expectations of the participants we also analyze individual predictions of participants and find that participants within a group tend to coordinate on a common prediction strategy

a perspective on multinational enterprises and climate change learning from an inconvenient truth this paper explores whether and how an important environmental issue such as climate change can not only give multinational enterprises the opportunity to develop green firm specific advantages fsas but also help reconfigure key fsas that are viewed as the main sources of firms profitability growth and survival we examine the nature and geography of such fsa development and develop two organizing frameworks which are subsequently applied to climate change using information from global 500 firms implications and future directions for international business research are indicated

are there rational bubbles in foreign exchange markets evidence from an alternative test abstract this paper employs the kalman filter technique to estimate and test for stochastic bubbles for exchange rates between the us dollar and the british pound the japanese yen and the deutsche mark i find no significant evidence of bubbles my results are in sharp contrast with previous findings on exchange rate bubble testing and cast some doubt on those claims that the dollar exchange rates were driven by speculative bubbles in the post bretton woods period

taste or reputation what drives market prices in the wine industry estimation of a hedonic model for italian premium wines the aim of this article is to provide new evidence on the factors affecting wine prices on both methodological and factual grounds on the methodological ground this study is the first to apply a general box cox transformation within the context of hedonic models which exploit all the variables objective and sensorial characteristics reputation pointed out by previous literature as relevant in driving market prices on the factual ground the article fills the lack of empirical evidence on the issue for italy one of the leading wine producers by using a large data set on two premium quality wines barolo and barbaresco covering the 1995 1998 vintages our results support the evidence obtained using data from other countries showing that sensorial traits the reputation of wines and producers as well as objective variables are all important factors influencing the consumers willingness to pay more importantly by resorting to a nonnested statistical test vuong 1989 we compare two alternative

a test for speculative bubbles in the sterling dollar exchange rate 1981 84 the u s dollar price of the u k pound sterling is tested for a speculative bubble defined as a period with a nonzero median in excessreturns a nonparametric procedure is developed which controls for data mining over the period of flexible exchange rates and finds a negative bubble in the excess return to holding sterling rather than dollar assets during the period 1981 84 possible interpretations arebootstrap equilibria rational bubbles nonsym metric fundamentals and nonrational expectations copyright 1986 by american economic association

quality adjusted price indexes for portable computers constructing an accurate price index requires controlling for changes in quality the potential for bias is especially problemaic for rapidly changing goods such as computers this study extends previous research on quality adjusted or hedonic price indexes for computers by investigating price and quality changes in portable models in particular recent research by nelson et al 1994 and berndt et al 1995 on desktop and portable computers is extended after adjusting for quality changes price indexes in this tudy exhibit average declines of 26 to 33 per year the magnitude of quality adjusted price changes is consistent with these auhors and with the extensive line of research on quality adjusted price indexes for computers of various types the results emphasize the extent of potential bias in estimating price level changes if technological advancement is ignored significant potential for bias implies the need to account properly for changes in quality in consructing indexes for both individual

key market values for bottled wine in an emerging market product attributes or business strategy this article focuses on the emerging bottled chilean red wine market and studies the main determinants of the consumer price of wine sold on the domestic market a hedonic price function was estima

nominal exchange rates and unit roots a reconsideration abstract this paper provides empirical evidence that nominal exchange rates are stationary and are not random walks other studies using classical tests suggest that exchange rates contain unit roots thereby supporting the random walk hypothesis the apparently permanent nature of shocks to exchange rates has been interpreted to mean that disequilibrium models such as the dornbusch overshooting model are not useful in explaining exchange rate behavior this paper applies a new statistical test for unit roots proposed by sims and based on bayesian posterior odds ratios the results favor exchange rate stationarity for several countries jel f31

estimation of a hedonic price equation for burgundy wine a hedonic price equation and two jury grade equations are estimated for burgundy wine the approach is the same as in an earlier bordeaux wine paper combris et al 1997 the data come from an experimental study that is very similar to the study on bordeaux wines the results for the two wine growing regions are compared and discussed

corporate governance and codes of ethics as a result of recent corporate scandals several rules have focused on the role played by boards of directors on the planning and monitoring of corporate codes of ethics in theory outside directors are in a better position than insiders to protect and further the interests of all stakeholders because of their experience and their sense of moral and legal obligations female directors also tend to be more sensitive to ethics according to several past studies which explain this affirmation by early gender socialization the fact that women are thought to place a greater emphasis on harmonious relations and the fact that men and women use different ethical frameworks in their judgments the goal of this paper is to determine the influence of these characteristics of the board in terms of promoting and hindering the creation of a code of ethics our findings show that a greater number of female directors does not necessarily lead to more ethical companies moreover within europe as a continent board ownership leads to an entrenchment of upper level management generating a divergence between the ethical interests of owners and managers in light of this situation the presence of independent directors is necessary to reduce such conflicts

to steal or not to steal firm attributes legal environment and valuation data on corporate governance and disclosure practices reveal wide within country variation that decreases with the strength of investors legal protection a simple model identifies three firm attributes related to that variation investment opportunities external financing and ownership structure using firm level governance and transparency data from 27 countries we find that all three firm attributes are related to the quality of governance and disclosure practices and firms with higher governance and transparency rankings are valued higher in stock markets all relations are stronger in less investor friendly countries demonstrating that firms adapt to poor legal environments to establish efficient governance practices

estimation of a hedonic price equation for bordeaux wine does quality matter in this paper the hedonic price technique is applied to bordeaux wine in the hedonic price function we include not only the objective characteristics appearing on the label of the bottle but also the sensory characteristics of the wine our data come from an experimental study in which juries have evaluated and graded a sample of bordeaux wines the estimation of the hedonic price equation shows that the market price is essentially determined by the objective characteristics the estimation of a jury grade equation shows that quality unlike the market price is essentially determined by the sensory characteristics

crypto currency bubbles an application of the phillips shi yu 2013 methodology on mt gox bitcoin prices the creation of bitcoin heralded the arrival of digital or crypto currency and has been regarded as a phenomenon since its introduction it has experienced a meteoric rise in price and rapid growth accompanied by huge volatility swings and also attracted plenty of controversies which even involved law enforcement agencies hence claims abound that bitcoin has been characterized by bubbles ready to burst any time e g the recent collapse of bitcoin s biggest exchange mt gox this has earned plenty of coverage in the media but surprisingly not in the academic literature we therefore fill this knowledge gap we conduct an econometric investigation of the existence of bubbles in the bitcoin market based on a recently developed technique that is robust in detecting bubbles that of phillips et al 2013a over the period 2010 2014 we detected a number of short lived bubbles most importantly we found three huge bubbles in the latter part of the period 2011 2013 lasting from 66 to 106 days with the

what to show on the wine labels a hedonic analysis of price drivers of sicilian wines unlike previous literature we construct a hedonic model of wine price that incorporates all the main categories of variables simultaneously to enable a better evaluation of their importance on wine price formation a comprehensive model has the advantage of providing more reliable estimates of the attributes implicit prices thereby facilitating firms pricing and improving effectiveness of wine production and marketing decisions we utilize two different datasets of sicilian wines collecting data from influential wine guides our results suggest that wine price strongly depends on objective features such as vintage alcoholic content geographical origin grape variety producer size and cellaring potential in addition use of containers like tonneaux and barrique positively affects prices whereas use of concrete containers has a negative influence no univocal indications emerge with regard to the effect of the type of company type of viticulture and firm age as for sensorial characteristics our a

is integrated reporting determined by a country s legal system an exploratory study in recent years companies responsibilities towards society have expanded significantly and former business models have been revised in line with a more pluralist approach which takes stakeholders sustainability business ethics and transparency into account these considerations are increasingly reflected in corporate sustainability reporting i e statements reflecting the impact of business practices related to economic environmental and social perspectives however the data contained in such documents are reported independently of the financial aspects implying a disconnection between the three pillars of business strategy in order to avoid this shortcoming some leading companies have developed integrated reporting which expresses the interconnections between a firm s strategy governance performance and prospects as well as the contexts within which it operates the aim of this paper is to examine the influence of one of the most important institutional factors the legal system on the development of integrated reports the analysis of a non balanced sample of 750 international companies for the years 2008 2010 in which a logit methodology is applied to panel data reveals the impact of this institutional factor the results show that companies located in civil law countries and where indices of law and order are high are more likely to create and publish a broad range of integrated reports thus favouring decision taking by the different stakeholders on the basis of these findings two policy recommendations are proposed first it may be necessary to establish national laws and protection mechanisms to promote and ensure holistic transparency second managers must be able to decide on the appropriate disclosure practices in the context of their own legal environment in order to obtain maximum benefits from their decisions the results should be considered as having only preliminary value due to the limited number of firms that disclose this typology of reporting and because of the limitations of the data sample

explosive oil prices spectacular oil price increases occur on a regular basis the most recent one is dated july 2008 this paper puts forward the notion that extreme oil price movements of this type can be described as temporary explosive the paper applies a forward recursive unit root tests and finds evidence of explosive behavior in the following periods 1990 1991 2005 2006 and 2007 2008 currently existing oil price models are not capable of appropriately describing this type of behavior a thorough discussion of the underlying reasons of these price hikes indicates these oil price episodes even though extreme are mainly fundamentally explained this finding is insufficiently acknowledged in the literature on speculative oil price bubbles thus policy interventions as response to extreme movements of this kind need to be very carefully thought through

in search of the exchange risk premium a six currency test assuming mean variance optimization abstract a number of authors examining deviations of actual rates of currency depreciation from forward discounts have claimed to find evidence of risk premiums if these deviations are indeed partly due to risk premiums rather than being entirely due to expectational errors then they should be systematically related to those variables on which risk premiums are thought to depend finance theory tells us that if investors optimize with respect to mean and variance the risk premium depends in a specific way on 1 the supplies of assets denominated in the various currencies 2 the variance covariance matrix of the rates of return and 3 the coefficient of risk aversion the null hypothesis of this paper is that the coefficient of risk aversion is zero countries assets are perfect substitutes and risk premiums are nonexistent the alternative hypothesis is that rates of return are systematically related to asset supplies by a macroeconomic portfolio balance function the maximum likelihood technique used dominates previous attempts to find such a relationship in that the parameters of the portfolio balance function are constrained to depend on the variance covariance matrix as the finance theory says they should on the other hand the technique also dominates previous applications of the finance theory in that the expected returns are allowed to vary over time as the macroeconomic portfolio balance theory says they should the paper s finding is a statistical inability to reject the null hypothesis for a portfolio of six currencies although this could be due to low power in the test

the persistence of the peso problem when policy is noisy abstract the peso problem the market s belief that a discrete event may occur has frequently been blamed for the persistence of on average mistaken forecasts of macroeconomic variables this paper demonstrates how beliefs that a policy process may have switched can induce apparent ex post biased forecasts of exchange rates even after the switch has occurred furthermore during this peso problem period exchange rates may appear to contain a speculative bubble component since they will systematically deviate from the levels implied by observing fundamentals ex post and the conditional variance of exchange rates will exceed the variance implied by observing fundamentals

was it real the exchange rate interest differential relation over the modern floating rate period in this paper we explore the relationship between real exchange rates and real interest rate differentials in the united states germany japan and the united kingdom contrary to theories based on the joint hypothesis that domestic prices are sticky and monetary disturbances are predominant we find little evidence of a stable relationship between real interest rates and real exchange rates we consider both in sample and out of sample tests one hypothesis that is consistent with our findings is that real disturbances such as productivity shocks may be a major source of exchange rate volatility this paper investigates the empirical relationship between major currency real exchange rates and real interest rates over the modern post march 1973 flexible rate experience the exchange rates examined here include the dollar mark dollar yen and dollar pound rates our two major findings are as follows first the data do not indicate a strong correspondence between real interest rate differentials short term or long term and real exchange rates this finding appears to conflict with the predictions of most monetary and portfolio balance models of exchange rate determination though the conflict can be substantially reconciled if aggregate disturbances are primarily real in nature i e changes in productivity tastes etc it is true that in many cases the sign of the estimated exchange rate interest rate differential relationship is consistent with the possible predominance of financial market disturbances but the relationship is not stable enough to be statistically significant second although one does find some evidence of a unit root in both real exchange rates and long term but not shortterm real interest differentials these two series do not appear to be linearly cointegrated hence the nonstationarity or near nonstationarity in the two series cannot be attributed to the same factor in section i we briefly describe a class of small scale monetary models of exchange rate determination the importance of this class of models for empirical work derives from its strong predictions about how the exchange rate will move

changing beliefs and systematic rational forecast errors with evidence from foreign exchange this paper addresses a new interpretation to the appearance in the early 1980s of systematic errors in forecasting the dollar exchange rate following a change in the process of a fundamental variable market participants revise their beliefs about the process using bayes rule since the market does not immediately recognize the change forecast errors are on average wrong during a period when the market is rationally learning for conservative parameter values the learning behavior of the dollar exchange rate in the early 1980s appears consistent with about half of the dollar s underprediction implied by the forward market copyright 1989 by american economic association

organic price premium or penalty a comparative market analysis of organic wines from tuscany abstract previous literature suggests that the price of wine is a function of its intrinsic and extrinsic attributes studies have examined the price of wines from various wine producing regions using the hedonic price model to determine the correlation between wine attributes and price however few studies have examined the relationship between organic production or certification and price this study uses a hedonic pricing model to examine the price premiums associated with organic production and organic certification for tuscan red wines produced between 2000 and 2008 in both the italian and american wine markets controlling for a variety of wine attributes the analysis finds that wines produced with organic practices but not certified as organic and wines certified but not labeled as organic receive a higher price compared to conventional wine for wines with low quality ratings however as the wine s quality rating increases the positive effects of organic practices and certification on price decrease and for wine with higher quality ratings organic practices and certification is associated with lower prices relative to otherwise comparable conventional wines

is corporate responsibility converging a comparison of corporate responsibility reporting in the usa uk australia and germany corporate social reporting while not mandatory in most countries has been adopted by many large companies around the world and there are now a variety of competing global standards for non financial reporting such as the global reporting initiative and the un global compact however while some companies e g henkel bhp johnson and johnson have a long standing tradition in reporting non financial information other companies provide only limited information or in some cases no information at all previous studies have suggested that there are country and industry specific differences in the extent of csr reports e g kolk et al 2001 business strategy and the environment10 15 28 kolk 2005 management international review45 145 166 maignan and ralston 2002 journal of international business studies33 3 497 514 however findings are inconclusive or contradictory and it is often difficult to compare previous studies owing to the idiosyncratic methods used in each study graafland et al 2004 journal of business ethics53 137 152 furthermore previous studies have relied mainly on simple measures such as word counts and page counts of reports to compare the extent of reporting that may not capture significant differences in the content of the reports in this article we seek to overcome some of these deficiencies by using textual analysis software and a more robust statistical method to more objectively and reliably compare the csr reports of firms in different industries and countries we examine a sample of leading companies in four countries us uk australia and germany and test whether or not membership of the global compact makes a difference to csr reporting and is overcoming industry and country specific factors that limit standardization we conclude that globalcompact membership is having an effect only in certain areas of csr reporting related to the environment and workers and that businesses from different countries vary significantly in the extent to which they promote csr and the csr issues that they choose to emphasize in their reports these country differences are argued to be related to the different institutional arrangements in each country

testing for rational inflationary bubbles the case of argentina brazil and israel in this paper it is examined whether the existence of rational bubbles can explain the dynamics of the price level during the argentine brazilian and israeli high inflations in the first half of the 1980s based on the cagan 1956 money demand model the west 1987 specification test finds evidence of rational inflationary bubbles in the three countries when the money supply is assumed to be exogenous however if endogeneity of money is taken into account there is no evidence of rational bubbles

is food and drug administration policy governing artisan cheese consistent with consumers preferences abstract united states government policy prohibits the sale of cheese made from unpasteurized milk aged less than 60 days despite contested science behind the policy we use experimental auctions for artisan cheese to estimate the value of pasteurization and age as food safety attributes which is the rationale for the policy we also look at consumers perception of the tradeoff between safety and quality a survey was conducted with participants at farmers markets including experimental auctions and sensory analysis of pasteurized and unpasteurized cheese and questions concerning attitudes about food safety there is no evidence of positive demand for pasteurization and there is no evidence of a tradeoff between safety and quality on average artisan cheese consumers make purchasing decisions based on taste not their attitude toward food safety the results of this study raise questions about the possible extension of a minimum aging period for cheese made from unpasteurized milk

larger board size and decreasing firm value in small firms1 abstract several studies hypothesize a relation between board size and financial performance empirical tests of the relation exist in only a few studies of large u s firms we find a significant negative correlation between board size and profitability in a sample of small and midsize finnish firms finding a board size effect for a new and different class of firms affects the range of explanations for the board size effect

board gender diversity and corporate response to sustainability initiatives evidence from the carbon disclosure project this paper investigates the effect of female representation on the board of directors on corporate response to stakeholders demands for increased public reporting about climate change related risks we rely on the carbon disclosure project as a sustainability initiative supported by institutional investors greenhouse gas emissions measurement and its disclosure to investors can be thought of as a first step toward addressing climate change issues and reducing the firm s carbon footprint based on a sample of publicly listed canadian firms over the period 2008 2014 we find that the likelihood of voluntary climate change disclosure increases with women percentage on boards we also find evidence that supports critical mass theory with regard to board gender diversity these findings reinforce initiatives being undertaken around the world to promote gender diversity in corporate governance while demonstrating board effectiveness in stakeholder management

hedonic prices property values and measuring environmental benefits a survey of the issues this paper provides a review of the theoretical basis and the assumptions required in order to use hedonic price equations derived from property value data to obtain measures of the prices and the inverse demand functions for environmental amenities such as air quality it also includes a review and assessment of existing empirical applications of the technique to problems of air and water quality and urban noise

is it signalling exchange intervention and the dollar deutschemark rate abstract the portfolio balance channel for sterilised intervention is tested by examining the effects of changes in relative asset supplies on the dollar deutschemark rate during the 1980s in contrast to previous studies we control for any signalling effects of central bank intervention and find a weak but statistically significant portfolio balance influence on the exchange rate

speculative bubbles in the ff dm parity during the 1980s it is often argued that exchanged rates volatility during the 1980s was too excessive to be attributed only to market fundamentals this paper investigates for speculative bubles in the franc mark exchange rate applying direct tests for determinate bubbles and indirect ones according to the issues of integration and cointegration for stochastic bubbles in the context of a sticky price monetary model no clear cut conclusions can be drawn from these tests although all of them indicate that the no bubble hypothesis cannot be easily accepted however any evidence for bubbles should be interpreted with caution since a possible misspecification of the model may produce misleading inferences

famous myths of fiat money the paper re evaluates the conventional wisdom regarding the existence of moneys that supposedly circulated without any legal status or intrinsic value economists call these objects fiat money i re examine the most famous examples of such objects from primitive societies such as the stone money of yap and seashells which have been cited by some of the most prominent monetary economists i find that actually none of these cases is an evidence of fiat money a general conclusion is that one needs to seriously study the society in question before making a claim that it has used fiat money

the implicit price for fair trade coffee does social capital matter abstract this study aims to ascertain whether the implicit price paid for fair trade coffee in regular supermarkets is influenced by the stock of social capital in the territory where consumers live a hedonic regression set up is adopted based on italian scanner data taken at nuts3 level regressors include attributes described on the label which include separate certifications for fair trade and organic eco label status plus various indicators of social capital and their interactions with the fair trade and organic eco label attributes the implicit consumer price paid for the fair trade attribute is significantly and positively affected by a social capital proxy the ratio of co op members to total employment

endogenous risk in a portfolio balance rational expectations model of the deutschemark dollar rate abstract a portfolio balance model of the dm s rate under rational expectations is specified in which systematic risk induced deviations from uncovered interest parity are allowed this leads to a reduced from containing a potentially time varying risk premium which we approximate and estimate using an arch in mean approach the maximum likelihood estimator and a lagrande multiplier test for arch in mean are developed the estimation results indicate a small but non negligible time varying risk premium

testing the monetary model of exchange rate determination new evidence from a century of data abstract we test the long run monetary model of exchange rate determination for a collection of 14 industrialized countries using data spanning the late nineteenth or early twentieth century to the late twentieth century interestingly we find support for a simple form of the long run monetary model in over half of the countries we consider for these countries we estimate vector error correction models to investigate the adjustment process to the long run monetary equilibrium in the spirit of meese and rogoff journal of international economics 14 1983 3 24 we also compare nominal exchange rate forecasts based on monetary fundamentals to those based on a naive random walk model

the volatility of asset returns during trading and nontrading hours some evidence from the foreign exchange markets abstract this paper presents the ratio of the hourly return variance during trading time to the hourly return variance during nontrading time for live currency futures contracts we find that 1 hourly return variances are greater during trading time than during nontrading time 2 hourly return variances are greater during weeknight nontrading time than during weekend nontrading time and 3 the variance ratios are generally highest for the canadian dollar contracts lower for the european currency contracts and lowest for the japanese yen contracts the results suggests that the timing of business hours is an important determinant of the timing of currency futures return volatility

new evidence on the first financial bubble the mississippi bubble south sea bubble and the dutch windhandel of 1720 together represent the world s first global financial bubble we hand collect cross sectional price data and investor account data from 1720 to test theories about market bubbles our tests suggest that innovation was a key driver of bubble expectations we present evidence against the currently prevailing debt for equity conversion hypothesis and relate stock returns to innovations in atlantic trade and insurance we find evidence consistent with the innovation driven bubble dynamics documented by pastor and veronesi 2009 for new economy stocks our evidence seems inconsistent with clientele based theories that emphasize bubble riding and short sales restrictions

ruling out divergent speculative bubbles abstract the growth in the empirical literature on testing for divergent in mean speculative bubbles indicates that existing theoretical arguments for ruling out such price paths are not sufficiently compelling here we strengthen the case for ruling out explosive or implosive bubbles a priori by filling in two gaps first we demonstrate why divergent stochastic bubbles arising from purely extrinsic uncertainty as in blanchard 1979 cannot be equilibria in a monetary optimizing model second we show why existing arguments for ruling out implosive price bubbles are insufficient in some cases and we provide stronger arguments

on the choice of functional form for hedonic price functions the empirical results presented in this paper demonstrate the usefulness of quadriatic models in the estimation of hedonic price functions we propose a quadriatic semi log model a restricted case of the quadriatic box cox model whose standardized marginal attribute prices are linear functions of the attribute vector this specification outperforms the linear box cox specification in terms of explanatory power and captures much of the increase in explanatory power provided by the quadriatic box cox model without the corresponding loss in the ability to interpret the coefficient estimates for policy applications the quadriatic semi log model provides a useful alternative to linear specification

econometric approaches to empirical models of exchange rate determination abstract this paper identifies four principal econometric approaches to the estimation and testing of asset market models of exchange rate determination the traditional static reduced form approach the error correction and co integration dynamic reduced form approaches the simultaneous equations approach and large scale multi equation macroeconometric simulation models each of these econometric approaches is evaluated with respect to its theoretical validity and the comparative properties of the empirical results obtained this leads to the conclusion that although there may be little to choose between the different theoretical exchange rate models there may be grounds for favouring a multi equation simultaneous estimation procedure for this class of models

short run fluctuations in foreign exchange rates evidence from the data 1973 1979 abstract the paper examines the statistical properties of daily changes in foreign exchange fx rates for nine currencies it finds that these changes are leptokurtotic i e have long tailed and sharp peaked histograms the evidence suggests that this leptokurtosis does not arise from an underlying paretian stable distribution nor from a stationary mixture of normal distributions but rather from normal processes with time varying parameters this finding casts doubt on the validity of many standard techniques t stats arima methods some moving statistics for estimating the time varying parameters are also presented

wine prices and quality ratings a meta regression analysis this article examines the empirical support for the hypothesized hedonic theoretical relation between the price of wine and its quality the examination considers over 180 hedonic wine price models developed over 20 years covering many countries the research identifies that the relation between the price of wine and its sensory quality rating is a moderate partial correlation of 0 30 this correlation exists despite the lack of information held by consumers about a wine s quality and the inconsistency of expert tasters when evaluating wines the results identify a moderate price quality correlation which suggests the existence of strategic buying opportunities for better informed consumers strategic price setting possibilities may also exist for wine producers given the incomplete quality information held by consumers the results from the meta regression analysis point to the absence of any publication bias and attribute the observed asymmetry in estimates to study heterogeneity the analysis suggests the observed heterogeneity is explained by the importance of a wine s reputation the use of the 100 point quality rating scale the analysis of a single wine variety style and the employed functional form the most important implication from the analysis is the relative importance of a wine s reputation over its sensory quality inferring that producers need to sustain the sensory quality of a wine over time to extract appropriate returns the reputation of the wine producer is found not to influence the strength of the price quality relationship this finding does not contradict the importance of wine producer reputation in directly influencing prices

fundamentals uncertainty bubbles and exchange rate dynamics abstract using a monetary model of exchange rate determination we study exchange rate dynamics with bubbles which depend on stochastic market fundamentals these dynamics can be either stochastically stable or unstable and either monotonic or non monotonic including cyclic in an extreme case they converge with probability one and exhibit cyclic movements implications for the analysis of time dependent regime shifts are also explored exchange rates with bubbles are likely to appear less volatile than the fundamentals in finite samples both the variance bounds and cointegration tests might thus be ineffective in testing the absence of bubbles under fundamentals uncertainty