making the same mistake again or is this time different the world faces an economic crisis of unprecedented proportions but much of the policy response has certainly not lacked for precedent national governments and international organisations including the international monetary fund imf have looked to crises of the past for solutions to the present and austerity has become a familiar theme the inability to effectively resolve the current crisis however gives rise to the question is this time different this article provides a broad overview to the origins and development of the recent economic crisis and the resort to policies of austerity although there is historical precedent for the resort to austerity such as the uk treasury view during the 1920s and 1930s this time things are different many of the current problems are deeply rooted and reflect the impact of the shift towards free market economics that started in the 1970s 2 the origins of the crisis since the beginning of the 1970s the private sector finance in particular has reorganised on an increasingly global scale it has innovated in terms of both structure and products and it has experienced significant growth as tridico 2012 this issue shows this financialisation was characterised by a ballooning of stock exchanges as many firms decided not only to list their shares but also to become involved in speculative finance in response to pressures on firms to maximise shareholder value together with the progressive erosion of worker and trade union rights and influence labour markets became more flexible and real wages stagnated concurrently profits rebounded leading to burgeoning inequality in this context aggregate demand and consumption were bolstered by easy credit and the wealth effects of speculative bubbles first in stocks and shares and then in housing

forecasting the exchange rate a monetary or random walk phenomenon abstract this paper evaluates the forecasting accuracy of monetary and random walk models of the exchange rate instrumental variable estimates of the simple monetary model are not supported by the data while the full information maximum liklihood estimates of its rational expectations counterpart are the rational expectations monetary model is operationalized using the results of hansen and sargent 1980 and flavin 1981 and box jenkins time series techniques monthly data on the us and uk economics over the recent flexible exchange rate period serve as the case study

control and performance of international joint ventures control is a critical concept for successful management and performance of international joint ventures ijvs this paper reviews and synthesizes prior studies addressing the conceptualization and operationalization of control within ijvs as well as the ijv control performance relationship the paper also presents a new conceptualization of ijv control as well as a conceptual frame work for studying control of ijvs

forecasting foreign exchange rates with an intrinsically nonlinear dynamic speed of adjustment model forecasting foreign exchange rates is an important but difficult process therefore it is important to use a superior forecasting model the paper takes up this criterion and proposes to describe and forecast foreign exchange rates by developing an intrinsically nonlinear model with variable and dynamic speeds of adjustment it is found that the speed of adjusting the random or expected to the equilibrium rate is very slow implying that fiscal policy statistically insignificat and monetary policy statistically significant may be ineffective to induce changes in the adjustment speed we also find that the nonlinear dynamic model improves forecasting performance implying that nonlinearities in the sense of functional forms are exploitable for improved point forecasting of foreign exchange rates

the political economics of austerity the 2007 8 financial crisis has reignited the debate about economic austerity with the aim of understanding why a government would pursue such a policy in the current context of persistent economic recession this article traces the social political and economic developments that have together shaped the evolution of ideas about austerity from the earliest theorizing by the classical political economists some three hundred years ago throughout the historical narrative important analytical themes revolve around the arguments used to justify austerity notably appeals to ethics and morality reinforced by misleading analogies drawn between government budgets and the accounts of firms and households these include concerns about inflation and the observed relationship between inflation and unemployment ricardian equivalence and non keynesian effects of austerity and the correlation between public debt levels and economic growth the class analytics of austerity who bears the burden of austerity and who benefits and the process by which alternative ideas penetrate the mainstream and reconstitute the conventional wisdom are also important analytical themes

patterns of control in u s uk and european multinational corporations this paper examines the type and level of control exercised by the parent headquarters of 50 u s uk and european multinational corporations over their foreign subsidiaries patterns of control in the 3 national groups differ in significant ways and these differences seem to have important implications for other characteristics of a company s organization design and managerial style

exchange rate models and innovations abstract an explicit relationship between innovations in the spot exchange rate and innovations in its driving variables is derived in the context of the asset market theory of the exchange rate the relationship forms a theoretical basis for regression results in news form that have been reported in the literature

control and coordination in multinational corporations the integration of french and british subsidiaries into u s based multinationals is examined a theory linking the use of control and coordination mechanisms to the need for predictability flexibility and the cost of achieving them is investigated by relating organizational structure technology foreign commitment financial performance and nationality to the use of coordination and control

phasing the operation mode of foreign subsidiaries reaping the benefits of multinationality through internal capital markets the lifetime of foreign equity partnerships is often limited research suggests that mncs abandon their local partners when the need for sharing ownership in foreign subsidiaries has diminished this study shows that mncs may abandon their local equity partners to reap the benefits of multinationality as mncs gain a competitive advantage from leveraging resources across borders they will initially benefit from sharing ownership with a local firm to embed their foreign subsidiaries in the local environment and access local resources more effectively later they will benefit from taking over the local partner s equity share to better embed their subsidiaries in the parent organization and transfer locally accessed resources to the mnc s other locations moderated mediation regressions provide evidence of such practice in the context of cross border transfers of capital resources this strategy seems to work as a corollary of our model panel regressions suggest that sharing ownership with local firms in a host country with a capital resource advantage is associated with appropriating more capital resources from the local debt market while abandoning these partner firms later is associated with transferring more capital resources from this host country via internal capital markets to other parts of the mnc

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

inflation and employment is there a third way high post war inflation precipitated a counter reformation in theory from keynesianism and established the conventional wisdom that a level of unemployment existed at which prices stabilised the policy application of this notion failed to improve economic performance and although inflation fell mass unemployment and poverty returned the explanation for this from within the new orthodoxy was that demand and supply conditions in the labour market had changed and unemployability explained joblessness a study of the trend in import prices suggests however that the fall in inflation can be more readily explained by falls in import prices and other changes which redistributed resources from the periphery to the core this suggests that monetary control works indirectly on inflation by lowering economic activity and by reducing the bargaining power of the relatively weak the enormous economic and social costs of this suggest that institutional ways of controlling prices offer major benefits copyright 2000 by oxford university press

evolution of the trans atlantic exchange rate before and after the birth of the euro and policy implications the establishment of the euro could present a challenge to the hegemony of the us dollar as the predominant international currency the fact that the unipolar us dollar dominated international monetary system can be unstable in the presence of large shocks presents an opportunity for the euro to promote systemic stability the present study pursues this conjecture by exploring with cointegration and error correction method techniques the interdependence between the dynamics of the dollar euro exchange rate and economic fundamentals in the context of a monetary exchange rate model our results suggest that both short run price stickiness and long run secular growth fundamentals affect the exchange rate path these findings support a relatively broad based policy approach to promote the collective economic interest of the eu zone to the extent that such policies succeed in strengthening and stabilizing the euro zone economy they are likely to buttress and possibly accelerate the internationalization

the political economy of socially irrational products in the past long waves have dissipated themselves in an exhaustion of innovations under spending and or a shortage of labour and ensuing upswings depended upon adjustments in the wage profit relation and a restructuring of the patterns of production and consumption whereas monetarist keynesian and marxist perspectives all focus attention on changes in the distributional or former dimension of the present crisis in this paper i argue that the critical distinguishing feature is grounded more in the latter the intractable character of post world war ii production and consumption the intractability refers to the resilience of the contemporary structure of production and consumption whereas in the past competitive market forces facilitated the restructuring of production and consumption required at the end of a long boom today the economy remains encumbered with a range of investments and product forms entrenched within the social and political order but which are increasingly costly in real terms proposals to resolve these dislocations by government cutbacks and the imposition of selective austerity fail to capture the organisational sources of rising costs and government paralysis even if such programmes were to stimulate a renewed spurt of economic growth they would quickly be accompanied by rising cost pressures and a political backlash for the austerity would be imposed on a populace imprisoned within an expensive infrastructure of consumption and therefore required to maintain a high level of expenditure the task of this paper is to explain the intractable character of the current crisis in terms of the contemporary organisation of consumption and production the argument proceeds in the following order first the politicised market generating irrational patterns of production and consumption in key industries has driven up the cost of living second these patterns of production and consumption once they were embedded in political and social institutions have become highly resistant to the competitive forces which in theory reduce inflationary pressures third the burdens and constraints imposed on the state by the prevailing patterns of production and consumption combine with the relative ineffectiveness of keynesian and monetarist measures to set up the state as a scapegoat for economic irrationalities lodged more deeply in the contemporary structure of production and consumption

exchange rates innovations and forecasting in this paper an ex post forecasting experiment is performed on the basis of a version of the news model of exchange rate determination for several exchange rates the news formulation of monetary exchange rate models leads to relatively accurate ex port exchange rate forecasts at a number of forecasting horizons for a majority of the exchange rates studied however the results do not compare favorably with those obtained from the naive random walk forecasting rule thus the findings in this article provide mixed evidence with regard to a suggestion in the literature that the finding by meese and rogoff that structural models do not even outperform the random walk in an ex post forecasting experiment may be due to the fact that these models were not properly tested in a news framework the forecasting performance of structural exchange rate models has recently received considerable attention meese and rogoff 1983a b have studied the forecasting performance of several important structural exchange rate models while in sample studies of these models usually show quite satisfactory fits meese and rogoff s out of sample results based on instrumental variables estimates were not very encouraging the structural models failed to improve upon the simple random walk forecasting rule even though the models forecasts were based

efficient exchange rate forecasts lagged models better than the random walk abstract the evidence of meese amd rogoff 1983 on the out of sample forecasting performance of structural exchange rate models in comparison to the random walk model portrays a disappointing picture of structural models this paper re considers the issue for the german mark for an updated period to include a larger set of structural models and lagged adjustment besides out of sample evidence in sample evidence is also examined we conclude that while some stuctural models dominate the random walk a lagged adjustment consideration can contribute towards better performance

a note on the determinants of unexpected exchange rate movements abstract in this paper we study the relative importance of surprises in fundamentals in explaining unexpected exchange rate movements employing a unique survey dataset that contains matched exchange rate and interest rate expectations we are able to derive a number of interesting conclusions a variance decomposition of unexpected exchange rate movements into various components reveals that interest rate news is relatively unimportant but that changes in perceptions about risk premia and more importantly revisions of expectations with regard to future exchange rate levels are crucial in explaining unexpected exchange rate movements

dual career expatriates expectations adjustment and satisfaction with international relocation dual career expatriate couples present a challenging set of problems for international human resource managers the results of a survey of husbands and wives in expatriate dual career couples are analyzed relative to 1 differences between the expatriates and their trailing spouses 2 differences between male and female led dual career couples 3 differences between dual career couples opinions prior to expatriation and upon repatriation the results of the study indicate dual career couples have relatively consistent concerns and expectations prior to expatriation and upon repatriation to their home country the significant differences observed were between male led dual career couples prior to expatriation when compared to male led dual career couples upon repatriation in addition the dual career expatriate respondents did not feel the mnc that transferred them overseas provided adequate training or social support during the international assignment

strategic determinants of partner selection criteria in international joint ventures prior studies are vague regarding determinants of criteria for selecting complementary partners for international joint ventures ijvs this paper first distinguishes task and partner related dimensions of selection criteria the paper then argues that relative importance of task related selection criteria is determined by the strategic context of the proposed ijv and the parent firm specifically the critical success factors of the venture s competitive environment and the parent s static and dynamic position vis a vis these factors

time varying parameters and the out of sample forecasting performance of structural exchange rate models varying parameter estimation techniques based on recursive application of the kalman filter are used to improve the predictive performance of a class of monetary exchange rate models i find that allowing estimated parameters to vary over time enhances the models forecasting performance for the dollar pound dollar mark and dollar yen exchange rates contrary to earlier results in the literature ex post forecasts for the dollar mark rate compare favorably with those obtained from the naive random walk forecasting rule

neo liberalism and new labour policy economic performance historical comparisons and future prospects the paper analyses19760 70s inflation the replacement of keynesian with neo liberal economic policy and the post 1979 decline in inflation it is shown that the fall in inflation is explained by trends in import prices rather than by switches in economic policy however new labour s conversion to neo liberalism means that no alternative to it is on political offer despite returns to pre keynesian policy making the success of which will depend on price policies based on an understanding of the institutional roots of inflation

piero sraffa and the true object of economics the role of the unpublished manuscripts this special issue is concerned with the work of piero sraffa and with recent developments in its interpretation occasioned by the opening of the sraffa archives in late 1993 1 it brings together some of the contributions to a workshop on this theme that was sponsored by the cambridge journal of economics and held in july 2010 on the occasion of the 50th anniversary of the publication of piero sraffa s major work production of commodities by means of commodities pcmc the original workshop on new perspectives on the work of piero sraffa was aimed at sraffa scholars who had taken the opportunity to engage with materials in the sraffa archives and who were interested in exploring their potential for revisiting and placing pcmc in the wider context of ongoing debates on economic philosophy economic theory and economic policy as is usually the case not all presentations made at the workshop were advanced for consideration in this special issue nor could all invitees attend heinz kurz as chief editor of the sraffa archives agreed to present his view on the relevance of the sraffa archives to research on sraffa and to comment on contributions at the workshop as well as on their final versions submitted for publication in this special issue kurz s contribution to this special issue was thus written in the short time available between the receipt of final versions and publication deadlines we are indebted to him for his cooperation in the preparation of this special issue we are especially grateful for his patience in the time taken to bring this project to publication this abstract was borrowed from another version of this item

the economics of organization the transaction cost approach the transaction cost approach to the study of economic organization regards the transaction as the basic unit of analysis and holds that an understanding of transaction cost economizing is central to the study of organizations applications of this approach require that transactions be dimensionalized and that alternative governance structures be described economizing is accomplished by assigning transactions to governance structures in a discriminating way the approach applies both to the determination of efficient boundaries as between firms and markets and to the organization of internal transactions including the design of employment relations the approach is compared and contrasted with selected parts of the organization theory literature

tests of rational expectations and no risk premium in forward exchange markets abstract this paper tests the simple efficiency hypothesis i e that traders have rational expectations and charge no risk premium in the forward exchange market it uses a statistical procedure which is consistent under a large class of heteroscedasticity and a set of data which takes into account the institutional features of the forward exchange market the results show that this procedure leads to stronger rejections of the simple efficiency hypothesis than do procedures using the standard assumption of homoscedasticity

exchange rate theory and practice this volume grew out of a national bureau of economic research conference on exchange rates held in bellagio italy in 1982 in it the world s most respected international monetary economists discuss three significant new views on the economics of exchange rates rudiger dornbusch s overshooting model jacob frenkel s and michael mussa s asset market variants and pentti kouri s current account portfolio approach their papers test these views with evidence from empirical studies and analyze a number of exchange rate policies in use today including those of the european monetary system

flexible exchange rates prices and the role of news lessons from the 1970s recent experience with flexible exchange rate systems has led to renewed interest in the operation of foreign exchange markets as reflected in many recent studies of the principal determinants of exchange rates the 1970s witnessed the dramatic alteration of the international monetary system from a regime of pegged exchange rates which prevailed for about a quarter of a century since the bretton woods conference into a regime of flexible though managed rates as a consequence of the emergence of the new legal and economic system traders national governments and international organisations were confronted with new economic problems choices and instruments during the 1970s ex change rates fluctuated widely and inflation rates accelerated the international monetary system had to accommodate extraordinarily large oil related shocks which affected trade flows in goods and assets huge oil payments had to be recycled uncertainties concerning future developments in international politics reached new heights and the prospects for the world economy got gloomier these developments placed unprecedented pressures on the markets for foreign exchange as well as on other asset markets they were associated with a large slide in the value of the us dollar and resulted in speeding up the creation of new institutions like the european monetary system which provided the formal framework for the management of exchange rates among members

equity joint ventures and the theory of the multinational enterprise this paper extends the internalization approach to the theory of the multinational enterprise mne to include an expanded role for equity joint ventures using the transaction cost paradigm of williamson this paper explains why joint ventures may sometimes be preferred over wholly owned subsidiaries also presented is empirical work on joint venture performance in developing countries which demonstrates that under certain conditions joint ventures can be the optimal mode of foreign direct investment

credit risk exposure with interest and currency swaps abstract the increased use of financial derivatives like interest rate and currency swap contracts has drawn much attention as it exposes banks to non performance by their counterparts this credit risk exposure is of great concern to monetary authorities e g the bank for international settlements in this paper a method for the determination of credit risk exposure is developed in which the exposure is a function of interest rates exchange rates and lives of the contracts to quantify the credit risk exposure simulations of the variables have been used

multinational corporations control systems and delegation issues the paper has 2 major objectives first to identify control and delegation issues confronting multinational corporation managers second to develop a conceptual model to assist multinational corporation managers in selecting appropriate control systems and determining the extent of delegation to be provided to subsidiary managers finally the paper suggests directions for future research

wages economic development and the customary standard of life this paper examines empirically the evolution of the customary standard of life and how this relates to real wages and economic development its starting point is sraffa s reintroduction of the classical notion of wages as the cost of reproducing labour so that they are necessarily a charge on production however when considering a production system generating a surplus sraffa offered no explanation of how the surplus might be realised and distributed rather he concentrated on the choice of technique as the profit share varied from 0 to 1 his approach was one of taking a snapshot of a productive system at a point in time in contrast this paper explores the trend in wages in the uk over the past 150 years and the evolving level and composition of what became the social necessities of worker consumption i e the customary standard of life in this process four dynamically interacting processes can be identified i a progressive increase in the productive potential of the system ii the diffusion of a greater quantity and varieties of consumer goods the growth of property ownership by consumers and their use of credit in a cumulative improvement in their customary standard of life iii the consolidation of the customary standard of life into real wages by collective bargaining and iv diffusion of improved living standards by an extension of collective bargaining coverage to include groups previously excluded and the growth of the welfare state in which the failure to achieve the customary standard of life defines poverty and triggers policy designed to alleviate it the central role played by the customary standard of life in driving real wages means that the inputs of labour power into commodity production can be represented by the commodity composition of the customary standard of life in sraffa style analyses in this the successive cross sections in the historical flow of economic development showing the commodity flows into and out of production will be ever changing like the still frames in a moving picture show moreover such a historical approach rules out the possibility that at any time changes in the rate of profit will precipitate the switching of methods of production past choices of techniques are historically embedded in the capital stock the composition of which is modified by new investment and the scrapping of old as it wears out becomes technically outmoded and or demand for its products declines nevertheless changes in the distribution of income have consequences for the future path of economic and social development and what this might be is arguably the most useful area for economic and social research copyright oxford university press

patterns of strategic control within multinational corporations the management of multinational operations is often required to balance conflicting priorities between responsiveness at the national subsidiary level and central coordination for global competitiveness such balancing requires that relevant data be brought to bear on decisions that consensus be created among key managers and that relative power among them be carefully balanced in large complex mncs the balancing process can be institutionalized through the structuring of relationships between headquarters and subsidiaries

piero sraffa and the future of economics how did piero sraffa look at the future of economic theory first when he arrived in england in the mid 1920s and then after the publication of his extraordinarily compact little book production of commodities by means of commodities 1960 the author sifts through sraffa s published works and abundant unpublished papers his acquaintances and personal contacts and vicissitudes the conclusions he arrives at remain problematical but do not refrain him from clearly expressing his specific quite definite views copyright oxford university press

real dollar exchange rate under the bretton woods and floating exchange rate regimes abstract the focus of the paper is on real exchange rates for the dollar over the period 1957 to 1985 most such exchange rates followed an almost steplike pattern showing relatively little movement in the late 1950s and 1960s falling abruptly and then remaining low in the 1970s and finally in the 1980s rising back to levels close to those that prevailed initially contrary to much recent commentary therefore the period that appears different is not the last five years but the decade that preceded them an important factor underlying this pattern of exchange rate movement according to results presented in the paper was the behavior of monetary policy and hence inflation in the united states what remains to be established is the precise mechanism linking money and real exchange rates and the relative strength of those links

modes of foreign entry a transaction cost analysis and propositions a frontier issue in international marketing is the appropriate choice of entry mode in foreign markets the objective of this paper is to offer a transaction cost framework for investigating the entry mode decision this framework provides 1 a theoretical basis for systematically interrelating the literature into propositions 2 propositions about interactions which resolve the apparently contradictory arguments advanced to date specifically the paper illustrates the feasibility of clustering 17 entry modes into the degree of control the mode provides the entrant proposes that the most appropriate i e most efficient entry mode is a function of the tradeoff between control and the cost of resource commitment advances testable propositions delimiting the circumstances under which each mode maximizes long term efficiency

testing the canonical model of exchange rates with unobservable fundamentals in this paper the authors test the asset market approach or canonical model of exchange rates they treat exchange rate fundamentals as unobservable the empirical results do not reject the canonical model and therefore the embedded rational expectations assumption in sharp contrast with previous empirical evidence the authors also find evidence of feedback from the exchange rate to fundamentals which is normally omitted in the theoretical literature copyright 1997 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association