was the emergence of the international gold standard expected evidence from indian government securities abstract the emergence of the gold standard has for a long time been viewed as inevitable we analyze agents expectations using the spread between gold and silver bonds issued by the indian government we find that bimetallism was credible until france surprised markets by suspending domestic operation of bimetallism triggering a run away from silver thereafter markets began demanding a premium to hold silver bonds indicating their belief that silver would depreciate in the future as more countries moved on gold

profit maximising goes global the race to the bottom we explore four decades of cyclical and long run dynamics in income distribution and economic activity for a panel of 13 oecd countries as measured by the wage share and output gap when modeled as predator prey dynamics economic activity in oecd countries is weakly profit led convergence to a long run equilibrium is relatively slow delaying the profit squeeze stage for many years our race to the bottom model suggests that the oecd countries have been engaged in undercutting each other s real unit labour costs an extension of the model shows that the long run equilibrium has been shifting south west towards a lower wage share it may even be that this race has the undesirable consequence of decreasing economic activity

finance inflation and employment a post keynesian kaleckian analysis the purpose of this paper is to contribute to the post keynesian kaleckian macroeconomic literature we develop a macroeconomic model that explicitly integrates the role of borrowing and cash payment commitments on outstanding debt interest plus principal repayment into the consumption and investment expenditures as well as into the inflation generating process we explore the way that finance influences the distribution effects of inflation in the demand side of a money credit using economy we suggest a new phillips curve that encapsulates the impact of financial commitments on wage and profit claims we argue that high debt and cash payment commitments are likely to be associated with a positive demand side effect of inflation on the rate of employment and that they might be conducive to a negative supply side effect of employment on the inflation rate the author 2011 published by oxford university press on behalf of the cambridge political economy society all rights reserved

on the utilisation controversy a theoretical and empirical discussion of the kaleckian model of growth and distribution this paper examines the utilisation controversy around the kaleckian model of growth and distribution we show that the federal reserve data on capacity utilisation which have been used by both sides of this debate are the wrong kind of data for the issue under examination instead a more appropriate measurement can be derived from the data on the average workweek of capital we argue that the long run dynamic adjustment proposed by kaleckian scholars lacks a coherent economic rationale we provide an alternative path towards the endogeneity of the desired utilisation at the micro and macro levels finally we examine the proposed adjustment mechanism econometrically our results verify the endogeneity of the normal utilisation rate

on the launching of a new currency this paper studies the appropriate way of launching a new fiat currency within a dual currency search theoretic framework we demonstrate that legal tender laws may not be sufficient to guarantee the acceptability of the new currency and that the old currency may continue to circulate if the enforcement power of legal tender laws is weak and the fraction of individuals endowed with the new currency is too low the possibility of converting the old currency into the new one can ease the transition to the new currency only if it is combined with strict legal tender laws finally a network externality may generate inefficiencies in the decision to switch to the new currency

the liability of foreignness in international equity investments evidence from the us stock market using foreign institutional ownership data in the us from 1990 to 2007 we examine whether foreign institutional investors face liabilities of foreignness lof in the us stock market we find that foreign institutional investors prefer low information asymmetry stocks more than domestic institutional investors do and this preference for low information asymmetry stocks is particularly strong among foreign institutional investors from countries with high lof more importantly we find that a change in foreign institutional ownership is negatively related to future returns whereas this relation does not exist for domestic institutional ownership the negative relation between the change in foreign institutional ownership and future returns is more pronounced when investors face a greater lof in the us stock market for instance when they are from countries with higher institutional distance information asymmetry unfamiliarity and cultural differences the negative effect of country specific lof factors on the return forecasting power of foreign institutional investors is more evident when they trade stocks with higher information asymmetry overall these findings suggest that foreign institutional investors face significant lof costs in the us stock market resulting in their poor ability to forecast returns

unions wages and labour markets in indian industry 1960 86 the purpose of this article is to explain the movement of wages in the manufacturing sector in india for the period 1960 86 a structuralist macroeconomic model is advanced where the changing strength structure and activities of unions are considered explicitly the objective is to disentangle the effects of factors specific to the bargaining process from the effects of overall economic development we consider two available wage series and we make a priori assumptions regarding the nature of both the labour and product markets associated with these series our econometric results support our characterisations and we show that the effects of both union related variables and overall macroeconomic variables differ across the two wage series

installed base and compatibility innovation product preannouncements and predation a good is often more valuable to any user the more others use compatible goods the authors show that this effect may inhibit innovation if an installed base exists and transition to a new standard must be gradual early adopters bear a disproportionate share of transient incompatibility costs this can produce excess inertia the installed base however is stranded if the new standard is adopted this may create excess momentum these dynamic effects have strategic implications temporary price cutting can permanently prevent entry and product preannouncements can be critical in innovation these strategic actions have ambiguous welfare effects

income distribution and current account imbalances we develop a three country stock flow consistent macroeconomic model to study the effects of changes in both personal and functional income distribution on national current account balances each country has a household sector and a non household corporate sector the household sector is divided into income deciles and consumer demand is characterized by upward looking status comparisons following the relative income hypothesis of consumption the strength of consumption emulation depends on country specific institutions the model is calibrated for the united states germany and china simulations suggest that a substantial part of the increase in household debt and the decrease in the current account in the united states since the early 1980s can be explained by the interplay of rising top end household income inequality and institutions on the other hand the weak domestic demand and increasing current account balances of germany and china since the mid 1990s are strongly related to shifts in the functional income distribution at the expense of the household sector

international competition income distribution and economic growth this paper shows that the neo keynesian case for wage led growth does not generally hold in an open economy model wage increases cause a loss of competitiveness that reduces the trade balance if the economy is relatively open to trade and price elasticities satisfy certain restrictions the worsening of the trade balance more than outweighs the increase in workers consumption thus reducing the growth rate the main theoretical innovation is a flexible markup pricing rule that allows changes in unit labor costs and exchange rates to affect profit margins implications for international relations and class conflict are discussed copyright 1989 by oxford university press

on prices and economic power explaining recent changes in intersectoral relations in the indian economy two contrasting views about the relationship between agriculture and industry and in particular about the optimal level of the terms of trade between these two sectors are identified and first set in the context of the political economy of contemporary india methodological issues relating to the correct measurement of intersectoral price shifts are taken up and it is shown that these have considerable bearing on current controversies it is argued in particular that single factor explanations of the behaviour of the terms of trade lack credibility and that these have to be analysed in the context of wider issues of growth and imbalance in developing economies

currency competition a hayekian perspective on international monetary integration currency internationalization is examined from the vantage point of friedrich hayek s contributions in the 1970s compared with received commentaries in which only an idealized case for private money is attributed to hayek this paper underscores other dimensions of hayek s work on money and currency hayek s case for choice in currency draws on his theory of competition anticipates competition between government suppliers of fiat money accommodates many aspects of international monetary integration and embodies a distinctive approach to monetary independence choice of exchange rate regime and the transnationalization of currency hayekian predictions are outlined for future developments in currency competition

demographic growth harrodian in stability and the supermultiplier a basic kaleckian model is enriched by three simple intuitive assumptions first there is a redistributive system of the wage bill between employed and unemployed workers the latter receiving subsistence income second only individuals with an income above the subsistence level build savings the combination of these two assumptions gives rise to an autonomous consumption component whose rate of growth depends on population growth consequently the rate of capital accumulation spontaneously converges towards the rate of population growth the supermultiplier effect a dynamic that offers a solution to one of the two harrodian instability problems the third assumption corresponds to entrepreneurs attempts to adjust investments to restore the normal rate of capacity utilisation although this assumption usually generates knife edge instability we show here that the stabilising properties of the supermultiplier provided that the accelerator effect is not overly strong help overcome this instability and realise the normal rate of capacity utilisation therefore the model may offer a simple simultaneous solution to the two harrodian instability problems

the psychic distance paradox companies tend to begin their internationalization process in countries that are psychically close researchers describe the sequence of entry that firms follow and the mode of entry they choose they suggest that psychically close countries are more easily understood than distant ones and offer more familiar operating environments although not prescriptive an unstated conclusion can be drawn linking sequence of entry to performance evidence from thirty two canadian retail companies shows that only seven 22 were functioning successfully in the united states the psychic distance paradox is that operations in psychically close countries are not necessarily easy to manage because assumptions of similarity can prevent executives from learning about critical differences moreover empirical evidence from 271 ceos confirms greater cultural differences between canada and the u s than assumed previously modifications are suggested to improve the psychic distance concept

heterodox theories of economic growth and income distribution a partial survey heterodox theories of economic growth and income distribution are surveyed focusing on major theories and recent contributions first a general framework for examining growth and distribution is discussed in terms of which classical marxian and post keynesian kaleckian and other theories are presented since this framework examines how variables are determined in equilibrium second dynamics behind equilibria are examined focusing on goods market and labor market changes third the framework is extended in a variety of ways to examine additional models addressing productivity growth and technical change money and inflation finance and debt additional distributional considerations multisector issues open economy questions and the environment it is concluded that the literature on heterodox theories of growth and distribution is vibrant large and growing and addresses many issues that are ignored or neglected in orthodox theories including power unemployment and aggregate demand

the role of foreign institutional investors in restraining earnings management activities across countries this study investigates the role of foreign institutional investors fiis in restraining earnings management activities of firms under varying levels of investor protection firms manage their earnings less when independent fiis are among their shareholders especially for firms in which monitoring is more valuable firms in weak investor protection countries and when firms have greater growth opportunities these effects are robust to a quasi exogenous shock to fiis shareholdings unobserved firm heterogeneity and alternative earning management measures fiis are associated with an increase in foreign director presence on corporate boards and audit committees

stagnation income distribution and monopoly power the deceleration in the rate of industrial growth in the indian economy since the middlesixties initially interpreted by some as a temporary downward deviation from trend hasnow come to be generally accepted as reflecting long run tendencies towards stagnation several explanations for these tendencies have been offered bhagwati and desai 1970 and bhagwati and srinivasan 1975 have focused on inefficiencies and the misallocationof resources arising from industrial policies pursued by the government others chakravarty 1974 raj 1976 and vaidyanathan 1974 among them have emphasisedthe sluggishness of agricultural growth which is alleged to have retarded industrial growthby limiting markets and the supply of wage goods and raw materials a third view reflectedin srinivasan and narayana 1977 for example has put the blame on a slackening of invest ment demand due to lower public investment but does not explain why public investmentfell or why its fall restrained industrial growth finally there is the explanation put forthin bagchi 1970 1975 1982 in nayyar 1978 and in parts of mitra 1977 that inequali ties in income distribution have resulted in a limited demand for industrial goods reducedincentives for investment and therefore reduced growth this view seems to suggest apositive relation between growth and income equality which is opposed to the generallyaccepted idea derived from cambridge growth models that higher growth requires greaterinequality the purpose of this paper is to examine the last explanation by considering the inter action between growth and income distribution in an underdeveloped economy with thehelp of a simple macroeconomic model the model is a stylisation of the indian economy so that we will be able to use the model to assess the argument that a deceleration in therate of growth of the indian industrial economy could have been caused by an unequaldistribution of income the argument will not be made that this income distributional con straint is the binding constraint on industrial growth the model will merely examine theinternal consistency of the argument that a bad income distribution could explain stagnation in the sense of reduced growth and show that in the indian context as in other similarcontexts this argument can be put forward in explaining stagnation our argument is first presented with a highly simplified schematisation of the indianeconomy which we shall call the basic model the economy modelled produces only one

voting on standardisation this paper analyses equilibria of voting on commodity standards within the framework of a farrell saloner model which takes into consideration the trade off between network effects and losses from a reduction of variety social welfare implications are derived and discussed with respect to manipulations of majority rules the findings indicate that welfare implications of standards are highly sensitive to the decision procedure and that the choice of the decision rule is non trivial as it can at least prevent worst outcomes if not guarantee optimal results

growth and income distribution with the dynamics of power in labour and goods markets the interaction between economic growth and income distribution is examined using kaleckian post keynesian models in which there are lags in investment and in which the dynamics of income distribution between wages and profits depends on changes in power relations in both the labour market and goods market by examining these two influences on distributional dynamics simultaneously the relative strength of which can change over the growth process it is shown that the growth distributional dynamics can involve non linearities multiple equilibria and instability the implications of policy induced changes including those in macroeconomic policy and labour market and antitrust policies on aggregate demand and distribution are examined for both wage led and profit led growth regimes copyright oxford university press

income distribution and growth in east asia it is widely believed that the east asian economies performed exceptionally well not only in generating growth but also in keeping inequality low this study tries to answer the questions raised by the claims of exceptionality of income distribution in east asia central findings are that only japan korea and taiwan have legitimate claims to low inequality that the east asian economies distinguished themselves by their ability to translate high profit shares into high savings and investment rates and that low inequality and high profit shares coexisted primarily due to the unusually even distribution of wealth

gender inequality and economic growth a cross country analysis abstract this paper investigates empirically the determinants of economic growth for a set of semi industrialized export oriented economies in which women provide the bulk of labor in the export sector the primary hypothesis tested is that gender inequality which contributes to women s relatively lower wages was a stimulus to growth via the effect on exports during 1975 95 empirical analysis shows that gdp growth is positively related to gender wage inequality in contrast to recent work which suggests that income inequality slows growth evidence also indicates that part of the impact of gender wage inequality on growth is transmitted through its positive effect on investment as a share of gdp

on the welfare benefits of an international currency abstract is it beneficial for a country s currency to be used internationally and if so can we quantify the benefit since the emergence of the euro there has been great interest in the consequences of a transfer of the dollar s premier international role to the euro this paper presents a novel model based approach towards assessing the welfare benefits associated with the international use of a country s currency apart from the familiar benefits associated with seigniorage residents of the issuing country experience an increase in the purchasing power of their currency both at home and abroad in the calibration exercise carried out in this paper we find the benefits of an international currency to be quantitatively significant the welfare gain for the euro area in having the euro internationally used ranges from 1 9 to 2 3 of consumption depending on relative inflation rates the rest of the world is not indifferent as to which currency circulates as the dominant international currency conditional on their currency not being used internationally their preference is for the dominant international currency to be the one with the lowest inflation rate

determining global currency bloc equilibria an empirical strategy based on estimates of anchor currency choice the study presents an empirical strategy for determining global currency bloc equilibria the procedure includes first a nested logit estimation of the combined determinants of currency regime and anchor currency choice second a test for a welfare maximizing regime decision in which estimates of the relative welfare of alternative regimes are inferred from the results of the first step estimation and third taking the path dependency of regime choice into account a currency bloc equilibrium is derived in equilibrium the dollar bloc is somewhat smaller and the euro bloc larger than at present counterfactual exercises assess among others the potential for a renminbi bloc

corporate financial hedging with proprietary information abstract if a firm has information pertinent to its own dividend stream that is not made available to its shareholders it may be in the interests of the firm and its shareholders to adopt a financial hedging policy this is in contrast with the modigliani miller theorem which implies that with informational symmetry such financial hedging is irrelevant in certain cases hedging policies are identified that are unanimously supported by shareholders

distribution aggregate demand and unemployment in oecd countries the primary aim of this paper is to investigate the role of income distribution in the determination of unemployment to this end the author develops a post keynesian model that shows that unemployment is effectively determined by income distribution aggregate demand and the inadequacy of capital equipment the deriv ed unemployment equation is applied to ten large industrial countries o ver the period 1976 89 the empirical findings provide strong support fo r the hypothesis that shifts in income distribution and inadequacy of capital equipment are major sources of unemployment copyright 1993 by royal economic society

international corporate diversification market valuation and size adjusted evidence errunza and senbet es 7 analyze the effects of international operations on the market value of the firm both at theoretical and empirical levels the theoretical model which is largely heuristic exploits the costly supply adjustment of multinational firms mncs in providing international portfolio diversification services to investors who face differential cost barriers to direct holdings of assets across national boundaries mncs compete as financial intermediaries to undo the barriers so that in equilibrium profits are driven out mncs and pure domestic firms sell at an equivalent risk adjusted return however costly financial intermediation and the associated relative efficiency leads to a positive valuation effect for mncs relative to purely domestic firms further the equilibrium analysis implies that demand side investor barriers to international capital flows alone are inconsequential to the valuation of mncs in their pure financial role but that the interaction with the supply side costs are necessary to produce a valuation effect at the corporate level es subject the theory to an empirical analysis in a value based approach by employing a variant of tobin s 17 qratio the analysis controlling for industrial market power suggests that the relationship between the excess valuation and the degree of international involvement doi has magnified over periods characterized by severe u s government controls vis a vis the more recent periods in this paper we formalize the theoretical argument by viewing indirect portfolio diversification by mncs as a means of completing the international capital market we employ a paradigm in the unanimity literature and formally characterize the equilibrium in which there is a rationale for mnc financial intermediation we then perform an expanded empirical study by employing generalized least squares and maximum likelihood procedures since the positive relationship between excess valuation and doi as suggested in es 7 might be attributed to the so called small firm or size and the p e effects the test methodology controls for such effects also the traditional literature has relied upon foreign sales percentage as a proxy for doi in view of the well recognized limitations of this proxy we employ four different measures of international

a supermultiplier stock flow consistent model the return of the paradoxes of thrift and costs in the long run supermultiplier models have been recently brought to the post keynesian debate yet these models still rely on quite simple economic assumptions being mostly ow models which omit the nancial determinants of autonomous expenditures since the output growth rate converges in the long run to the exogenously given growth rate of non capacity creating autonomous expenditure and the utilization rate moves towards the normal utilization rate the paradoxes of thrift and costs remain valid only as level e ects average growth rates this paper investigates whether the core conclusions of supermultiplier models hold in a more complex economic framework described by means of a supermultiplier sfc model in which private business investment is assumed to be completely induced by income while the autonomous expenditure component in this case consumption out of wealth becomes endogenous the results of the numerical simulation experiments suggest that the paradox of thrift can remain valid in terms of growth e ects and that a lower pro t share can also be associated to a higher accumulation rate though with a lower pro t rate

does corporate hedging attract foreign institutional investors evidence from international firms we study how corporate hedging affects the demand of foreign institutional investors we collect measures of foreign exchange hedging and interest rate hedging for a comprehensive sample of international companies we document a strongly positive relationship between foreign institutional demand and corporate hedging the effect of hedging is concentrated in the demand of non bank affiliated investors whereas bank affiliated investors are less sensitive to it the impact of hedging on foreign institutional ownership is higher for less transparent countries and a low quality of corporate governance amplifies the effect of lower transparency we address the potential endogeneity of hedging with an instrumental variable specification that exploits the changes in hedging induced by changes in the asset quality of relationship banks we also show that the pre ipo hedging policy is positively related to international investor demand after the ipo

the effects of international operations on the market value of the firm theory and evidence this paper investigates the existence of monopoly rents associated with international operations in a market value theoretic framework the benefits of international operations evolve from such factors as 1 imperfections in the product and factor markets 2 differential international taxation and 3 imperfections in the financial markets in this paper these factors are subject to an equilibrium analysis in the context of recent advances in financial theory in particular imperfections in the financial sector arising from corporate international diversification are examined in a framework which allows a supply adjustments by multinational firms and b the interaction of barriers to international capital flows faced by both firms and investors taking the u s capital market and investors as a base we then specify the conditions under which the foregoing imperfections get priced out in an equilibrium these pricing effects cannot be detected empirically through the methodologies employed by the existing studies which examine the effects of corporate international diversification indeed it was an attempt to rescue the limitations of these studies which initially motivated our paper the existing empirical inquiries into this area rely on traditional risk adjusted performance measures e g 7 or international analogs of return generating processes e g 1 8 instead at the empirical level we employ a value based method which is in the same vein of the thomadakis 17 approach developed to identify the monopoly benefits of industrial market structure we conduct the tests over subperiods characterized by differential government controls in an attempt a to separate the pure financial motives for multinationality from other motives and b to detect if the benefits of international operations carry through recent periods

valuation effects of global diversification this paper examines the effect of global diversification on firm value using a data set of us firms from 1994 to 2002 we document that global diversification enhances firm value specifically we find that tobin s q our proxy for firm value increases with foreign sales measured as a fraction of the firm s total sales even after we control for well known determinants of firm value in contrast we find no such evidence for industrial diversification we find evidence of both financial and real effects driving such a value enhancement from global diversification furthermore we find that the valuation benefits from global diversification are higher if the firm diversifies into countries with creditor rights that are stronger than those of the united states our results are also robust to controlling for the firm s endogenous choice to diversify across countries or across industries our study is anchored by the theories of both the financial and real dimensions of global diversification and our results support both theories overall our results provide a unifying view that global diversification benefits are driven by both the real and financial dimensions

growth distribution trade offs the role of capacity utilisation previous empirical studies of the impact of economic growth on income distribution have consistently found statistically insignificant impact this paper empirically reexamines this impact for a cross section of thirty nine advanced and developing countries focusing on a new critical factor i e the presence or absence of economic slack with this factor included growth becomes significantly unequalizing in a capital taut economy while the presence of slack capacity plays a significantly equalizing role this suggests that the insignificant finding of previous studies stems from an averaging out of these two opposite impacts when this factor is omitted copyright 1988 by oxford university press

currency competition network externalities and switching costs towards an alternative view of optimum currency areas existing models of currency competition and monetary union ignore network effects and switching costs this paper develops a simple model that incorporates these features and shows how it can be used to shed light on observed monetary experience and current issues in international monetary relations it explains why agents will often be reluctant to switch currencies highlights the role of expectations and sheds light on the nature of currency competition and the effect of legal restrictions copyright 1993 by royal economic society

adaptive learning and the transition to fiat money this article explores some implications of adaptive learning for monetary evolution using a search theoretic framework that allows for media of exchange network effects adaptive learning precludes any voluntary transition to a fiat standard from a non monetary state of nature and can account for the historically observed tendency for fiat monetary standards to emerge only following the prior appearance of commodity money and the widespread employment of redeemable banknotes adaptive learning can also account for governments frequent resort to coercive measures to force a switch to fiat money and for their ability to affect such a switch even when doing so is not pareto optimal exchange media fall into the general category of products for which the utility that a user of the good derives from use of the good increases with the number of other agents using the good katz and shapiro 1985 p 424 there are two reasons for these positive network effects 1 indirect the more agents who employ a particular medium of exchange the more likely it is that prices will be quoted in terms of that medium of exchange i e that the medium of exchange will also serve as the economy s principle medium of account the costs of exchange are less for a medium of exchange that trades at par this indirect external effect is analogous to one encountered in computer hardware the more purchasers of a particular kind of hardware the more likely manufacturers of software are to supply compatible products 2 direct the more persons who use a particular exchange medium the better its quality or performance this direct network effect is analogous to one encountered in communications technologies such as telephones the analogy is especially close for fiat money which is useless to an isolated individual this article examines some ways in which media of exchange network effects influence the evolution of monetary standards and especially their role in determining both when and how a transition may occur from barter or commodity money to fiat money the approach taken here emphasises the role of adaptive learning where agents select exchange strategies that reflect static expectations concerning other agents preferred strategies although the exchange game agents play generally has multiple nash equilibria including one in which all agents accept fiat money adaptive learning precludes a spontaneous transition from barter to a fiat monetary standard even where a fiat standard would be welfare enhancing yet such learning does not rule out the spontaneous evolution of a commodity money standard or the eventual substitution of redeemable banknotes for commodity money readers familiar with the literature on network effects will recognise this

the parallel currency approach to asian monetary integration since the crisis of 1997 1998 there has been a proliferation of proposals for fostering asian monetary integration asian countries it is suggested should collectively peg their currencies to the dollar the yen or a dollar yen euro basket or establish a multilateral currency grid like the european monetary system ems the resulting exchange rate stability would promote intraregional trade simplify investment planning and encourage cross border participation in local bond markets experience with establishing and maintaining a system of stable exchange rates would help ready the region for the introduction of a single currency asia in this view should emulate europe s approach to regional monetary integration along with the attractions of the european example however there are also dangers defending a system of currency pegs in the presence of high capital mobility requires the close convergence of policies and the maintenance of confidence if either precondition is disturbed a country will require extensive financial support in order to defend its peg or to undertake an orderly realignment in practice asian countries possess neither the willingness to subordinate other policies to these imperatives nor the solidarity needed to offer extensive financial supports absent an appetite for political integration there is little readiness to create a regional central bank like the european central bank since there is no counterpart to the european parliament to hold it accountable for its actions hence there is little prospect of early monetary union to tie down expectations a system of asian currency pegs would consequently be fragile and crisis prone as a road to monetary unification it would be a dead end it would be better for governments to create an asian currency unit acu constituted as a weighted average of asian currencies and allow it to circulate alongside their national currencies this would have three advantages first it would not be necessary to stabilize exchange rates between the currencies comprising the basket hence fragility would be less second the parallel currency would be more stable than any one national currency in terms of aggregate asian production and exports it would thus be a vehicle for encouraging intraregional trade and investment third the decision to move to a single currency could be driven by economics rather than politics only when a critical mass of producers exporters and investors had adopted the parallel currency would it be clear that asian economies were ready for monetary unification

the wage goods constraint on a developing economy theory and evidence abstract in a dual economy the traditional or agricultural sector generally has a relatively low supply response to prices if in addition the real wages of the modern or industrial sector are denominated at least partly in terms of the product of agriculture then agricultural output sets an upper bound on employment in industry such a constraint may be binding in the short run whenever the level of food production is low this is called the wage goods constraint this paper examines the analytics of a wage goods constraint in the framework of a two commodity model of a dual economy with surplus labor where unconstrained industrial output is demand determined the effects of either expansionary or redistributive policy may be quite different and sometimes perverse in a situation where the wage goods constraint is binding next data for the indian economy is used to test the hypothesis that the wage goods constraint was binding in the indian industrial sector between the years 1955 to 1980 the results indicate that this was the case for most of the period

monetary policy and macroeconomic stability under alternative demand regimes in this paper we analyse the interaction of macroeconomic activity and the dynamics of real wages from a theoretical perspective by means of a system dynamic approach we investigate the economic viability of wage and profit led demand regimes by analysing not only the effect of real wages on output but also the feedback mechanisms of macroeconomic activity on the real wages furthermore in this context we focus on the role of monetary policy as a macroeconomic stabilisation mechanism in the two mentioned demand regimes

growth distribution and sectoral heterogeneity reading the kaleckians in latin america abstract the aim of this paper is to explore a parallelism between two episodes in the history of economic thought in order to suggest that the interaction between them can contribute to the research on kaleckian growth and distribution models first a brief summary of the theoretical development from steindl s stagnationist claims to the debate about demand regimes is offered then a more detailed account is provided of the latin american debate that began with furtado s stagnationist claims and resulted in the formulation of models of social articulation and disarticulation finally an analytical classification of kaleckian and latin american growth and distribution models is provided indicating the way in which sectoral heterogeneity and demand composition can act as a plausible link between growth and distribution

bargaining power effective demand and technical progress a kaleckian model of growth following the kaleckian tradition this paper presents a demand led growth model in which the distribution of income is fully endogenised this is done by introducing claims on income by workers and firms the bargaining power of these two groups affects through distribution the patterns of accumulation and inflation in turn the bargaining power of workers is affected by the rate of change of employment the paper discusses the model s static and dynamic implications including the effects of exogenous and induced technical progress the model confirms all the typical kaleckian results including the fact that increases in real wages may lead to accelerating accumulation as well as inflation it also produces a new result it is possible that an increase in the rate of change of labour productivity may not lead to an increase in the rate of change of employment

personal income inequality and aggregate demand this paper presents a theoretical and empirical investigation of how changes in the size distribution of income can aect aggregate demand and the demand regime of an economy after presenting empirical evidence for the us economy that the propensity to save increases signicantly from the bottom to the top quintile of wage earners we demonstrate that more equal distributions always lead to higher output in the traditional neo kaleckian macroeconomic model we also present conditions under which a reduction of income inequality among workers turns demand more wage led this view is supported by the results of an econometric study for the united states 1967 2010 which show that the rise after 1980 in income inequality has made the us economy more prot led

monopoly power and uneven development baran revisited baran examined the implications of the rise in monopoly power in advanced economies for the underdevelopment in poor countries and the process of uneven development on a world scale this article examines his work critically and then presents a north south model which defines uneven development in a precise manner and analyses the mechanism by which the rise in monopoly power leads to such uneven development it is shown that the process can work even without reference to imperialism which is a central but controversial element in baran s analysis

distribution aggregate demand and productivity growth theory and empirical results for six oecd countries based on a post kaleckian model empirical research based on the bhaduri marglin variant of the kaleckian model has recently shown that aggregate demand in many medium sized and large open economies tends to be wage led in the medium to long run even in a period of increasing globalisation in this paper we extend this type of analysis and integrate the effects on productivity growth theoretically and empirically productivity growth is introduced into the theoretical model making use of the verdoorn effect or of kaldor s technical progress function and hence of a positive relationship between gdp or capital stock growth and productivity growth further on a cost push or marx hicks effect and hence a positive impact of real wage growth or the wage share on productivity growth is taken into account in the empirical part we estimate productivity growth equations for six countries introducing these two effects finally economic policy conclusions are drawn

foreignness and exit over the life cycle of firms received wisdom indicates that owing to a liability of foreignness foreign firms exit with greater likelihood than do comparable domestic firms and that the difference attenuates as firms age and overcome the liability we posit that foreign firms are also intrinsically more volatile and footloose than domestic ones and that this leads to an increasing divergence between the exit rates of foreign and domestic firms empirically we find that the difference between exit rates of foreign firms and domestic firms increases with age as exit of foreign firms increases with age while that of purely domestic firms decreases exit rates of domestic based multinationals do not change significantly with age they are between those of foreign and purely domestic firms but are closer to the latter this suggests that the footlooseness observed for foreign firms is due to foreignness more than to multinationality

the effects of income distribution and fiscal policy on aggregate demand investment and the budget balance the case of europe this paper develops a multi country post kaleckian model that incorporates the role of the government one key novelty of the model is that it integrates cross country effects of both changes in income distribution and fiscal policy the model is used to estimate econometrically the effects of income distribution and fiscal policy on the components of aggregate demand and the budget balance in eu15 countries the results show that a simultaneous increase in the wage share in all eu15 countries would increase demand and the primary budget balance in all countries a simultaneous increase in government spending turns out to boost economic activity in all the eu15 countries indicating the positive economic effects of expansionary fiscal policy moreover a progressive tax policy that would be implemented simultaneously at the eu level would lead to an increase in output in all countries

the impact of changes in job security regulations in india and zimbabwe employment laws in india and zimbabwe require employers to obtain permission from the government to retrench or lay off workers the effect of these laws on the demand for employees in 64 manufacturing industries is examined using time series data little evidence is found indicating slower adjustments in employment levels and hence retardation in any structural adjustment following the new laws however in both countries a substantial decline in the demand for employees other things equal followed the new legislation in zimbabwe it is difficult to be precise about a causal connection between the drop in the demand for labor allowing for concurrent increased wages and the new legislation because enactment occurred simultaneously with independence however the current economic climate induced high levels of investment in capital but not investments in long term commitments to employees but in india further evidence supports a causal connection larger establishments covered by the job security regulations tended to experience a decline in the demand for labor while smaller uncovered enterprises in the same industries did not moreover the decline in demand for employees across industries in india was larger where the private sector predominates where larger establishments covered by the new laws are important and where a smaller proportion of employees are union members thus in both countries the policy implemented to protect jobs may bave resulted infarfewerjobs upon achieving independence in 1980 the government of zimbabwe passed a new employment act requiring employers to obtain permission from the ministry of labor to fire or lay off workers comparable regulations were imposed in india by the industrial disputes amendment act of 1976 requiring that written permission be obtained normally from the relevant state government either to close a plant or to retrench workers the immediate goal of these items of legislation was to protect the livelihood of workers and to maintain jobs any addition to economic security in the lives of workers is clearly a laudable goal in its own right but the question addressed in this article is whether these particular job security regulations have had undesirable side effects which may even have thwarted the original goals of the legislation india and zimbabwe are

bitcoin and the legitimacy crisis of money the virtual currency and payment project bitcoin intends to challenge the current monetary and payment system that finds itself in a legitimacy crisis in the aftermath of the financial market turmoil of 2008 in examining the governance of the bitcoin system i try to assess its potential to create input and output legitimacy as a payment system and as a monetary system in comparison with current practice

do firms hedge in response to tax incentives there are two tax incentives for corporations to hedge to increase debt capacity and interest tax deductions and to reduce expected tax liability if the tax function is convex we test whether these incentives affect the extent of corporate hedging with derivatives using an explicit measure of tax function convexity we find no evidence that firms hedge in response to tax convexity our analysis does however indicate that firms hedge to increase debt capacity with increased tax benefits averaging 1 1 percent of firm value our results also indicate that firms hedge because of expected financial distress costs and firm size an increasing number of corporations use financial derivatives each year the international swaps and derivatives association reports that the notional value of outstanding otc swap contracts increased from 11 3 trillion in 1994 to more than 60 trillion by mid 2000 http 00www isda org this is interesting because financial theory tells us that corporate risk management enhances value only in the presence of costly market imperfections a number of empirical studies examine derivative holdings to identify which of the proposed theoretical incentives and imperfections lead to corporate hedging our paper adds to the hedging literature by testing whether corporations respond to two tax related incentives to hedge the incentive to reduce volatility thereby increasing debt capacity and the tax benefits of debt and the incentive to reduce expected tax liabilities by reducing the volatility of taxable income we also use a refined dependent variable to measure net

sectoral balance in development a survey abstract this paper surveys the literature on sectoral balance to see how sectoral imbalances can retard economic development it examines definitions of sectors and balance provides background facts theories and planning tools reviews the debate on balanced growth and surveys two sector models of agriculture industry consumption investment and luxury basics interaction the open economy and the role of service nonmarket and unproductive sectors it argues that the examination of important development issues requires multisectoral analysis incorporating the insights of several of these models and that alternative models with different structural characteristics deserve attention

tracking euro preparations amongst uk smes this paper tracks levels of euro preparations by uk smes with trade links with the euro currency area using two surveys of the same cross sectional dataset the first study was conducted soon after the initial launch of the euro in 1999 the second study using the same smes sought to see how euro preparations had changed by 2002 following the introduction of euro notes and coins at the univariate level the results showed that the proportion of smes that were totally prepared increased from 31 to 44 3 whilst the proportion not prepared has also increased from 8 9 to 12 2 the multivariate results show that directly trading manufacturers with a parent in the euro area or who are seeking to acquire another company are more likely to have partially prepared for the euro which suggests a compliant just another foreign currency rather than a strategic approach to the euro trade links do not explain all the differences incorporated manufacturing firms are significantly more likely to be partially

war peace and private portfolios abstract during civil wars trading is profitable as markets fragment profits may be saved in liquid form because investment is too risky in a successful economic transition to peace these liquid assets are switched into investment continuing fears of insecurity however may keep portfolios liquid we consider three policy consequences the unpredictable return of confidence causes erratic changes in the demand for money complicating monetary targeting government liabilities become unmarketable except at prohibitive interest rates though the state may be able to sell real assets the government can subsidize the act of investment commitment by temporarily undervaluing the exchange rate

some instability puzzles in kaleckian models of growth and distribution a critical survey we tackle the issue of the possible instability of the kaleckian distribution and growth model distinguishing between keynesian and harrodian instability we review various mechanisms that have been proposed by critics of the kaleckian model to tame harrodian instability while bringing back the rate of utilisation to its normal rate we find that the mechanisms that have been suggested are far from convincing therefore we conclude that it may be premature for the critics of the kaleckian model to dismiss the endogeneity of the rate of capacity utilisation in long run growth equilibrium copyright the author 2010 published by oxford university press on behalf of the cambridge political economy society all rights reserved oxford university press

critical mass effect and restructuring in the transition towards a market economy abstract restructuring firms in a transition economy produces a sort of network externality in that the profitability of restructuring depends on the number of firms that already adopted this strategy we investigate under what conditions a critical mass exists i e a situation in which such externality is positive and restructuring spurs imitation possibly leading to the eventual transformation of the whole economy we find a critical mass effect when the main effect of restructuring is an increase in value added i e aggregate demand rather than an increase in the firm s ability to compete against rival home firms the critical mass case becomes the typical one when competition spurs firms efficiency

excess market value the multinational corporation and tobin s q ratio the results of this study show that there is a positive and significant relationship between excess market value of multinational corporations and the degree of international involvement as measured by foreign sales percentage however the excess market value is not determined by the number of foreign subsidiaries nor the interaction between foreign sales and the number of foreign subsidiaries the relationship between excess market value and the two frequently used measures of monopoly power concentration ratio and the lerner index was also examined this study found that the lerner index contributes significantly in explaining excess market value but concentration ratio does not furthermore the positive and significant coefficients of advertising and r d intensity serve as evidence that product market imperfections appear to play a bigger role in explaining the excess market value experienced by mncs during our sample period

stock flow consistent macroeconomic models a survey the stock flow consistent sfc modelling approach grounded in the pioneering work of wynne godley and james tobin in the 1970s has been adopted by a growing number of researchers in macroeconomics especially after the publication of monetary economics by godley and lavoie which provided a general framework for the analysis of whole economic systems and the recognition that macroeconomic models integrating real markets with flow of funds analysis had been particularly successful in predicting the great recession of 2007 2009 we introduce the general features of the sfc approach for a closed economy showing how the core model has been extended to address issues such as financialization and income distribution we next discuss the implications of the approach for models of open economies and compare the methodologies adopted in developing sfc empirical models for whole countries we review the contributions where the sfc approach is being adopted as the macroeconomic closure of microeconomic agent based models and how the sfc approach is at the core of new research in ecological macroeconomics finally we discuss the appropriateness of the name sfc for the class of models we survey

open economy macroeconomics developments in theory and policy this paper views developments in open economy macroeconomics through the lens of the debate over european monetary unification the empirical tendency for nominal exchange rate regimes to affect the variability of nominal and real exchange rates alike can be rationalized by sticky price theories or models of asset market liquidity effects but plausible liquidity models have difficulty generating enough persistence to match the data thus the macroeconomic stabilization costs of forgoing the exchange rate realignment option seem pertinent it is argued that our theories of efficiencies due to a common currency remain unsatisfactory despite recent advances the paper concludes by reviewing theories of currency crisis

macroeconomic issues for latin america abstract recent macroeconomic issues in latin america are reviewed with an emphasis on theory topics covered include multiple equilibria from hysteresis or increasing returns exchange rate management and the output and asset market effects of devaluation speculation interest rate management and financial reform government behavior income distribution and growth inertial inflation and heterodox policy shocks and disequilibrium theories

on the determinants of corporate hedging finance theory indicates that hedging increases firm value by reducing expected taxes expected costs of financial distress or other agency costs this paper provides evidence on these hypotheses using survey data on firm s use of forwards futures swaps and options combined with computstat data on firm characteristics of 169 firms in the sample 104 firms use hedging instruments in 1986 the data suggest that firms which hedge face more convex tax functions have less coverage of fixed claims are larger have more growth options in their investment opportunity set and employ fewer hedging substitutes