users and non users of conservation areas are there differences in wtp motives and the validity of responses in cvm surveys abstract it is commonly assumed that respondents lack of familiarity with the valued resource causes invalid and unreliable responses in contingent valuation surveys with non users valuations mainly motivated by non use values the issue is also closely linked to the discussion of the measurement of non use values this paper re examines the impact of previous use on respondents willingness to support nature conservation their motives for valuing the resource and the validity of responses the users and non users characteristics differed but there was no difference between the groups in their willingness to support sustained conservation however those planning to visit the area in the near future were more likely to pay for conservation than other respondents even if they did not have previous use experience users considered their income constraint somewhat more carefully and were more aware of conservation related issues than non users however there was no difference in the validity of the wtp responses of the groups thus there seems to be no rationale from a point of view of validity to restrict cvm analysis only to those individuals who have previous experience of the resource which is in line with the basic premise of cvm furthermore non use values remained as significant motives for valuing the resource even if the use of the resource was intensive therefore if the existence of a large non use value component is considered as problematic in general the problem is likely to exist for all respondent groups and not only for non users

black markets for currency hoarding activity and policy reforms abstract in emerging market economies under development of financial markets leads to goods hoarding and foreign currency accumulation as forms of investment in this paper an asset market model supplemented by explicit treatment of smuggling and second economy activity is used to study the paths of black market exchange rates second economy prices hoarding stocks and privately held dollar balances following policy reforms we discuss conditions for overshooting and related dynamics of exchange rates and prices following official exchange rate adjustments price reforms and altered risks of monetary confiscation or currency reforms the saddlepath trajectory of financial adjustment is simulated using data from recent russian experience 1997 elsevier science b v

foreign exchange markets in transition economies china abstract the purpose of the paper is to examine the behaviour of exchange rates in china during the recent period of trade and exchange system reforms a simple theoretical model based on the monetary approach is developed to explain the exchange rate in the parallel or black market given the official and substantially controlled rate the model is tested on quarterly data using the cointegration technique error correction modeling and impulse response analysis the results confirm the main features of the model and have policy implications concerning the use of devaluation and monetary policy for stimulating the economy and the adoption of policies which encourage black market activities

a search theoretic model of legal and illegal currency abstract using a search theoretic model of money we explore the conditions under which two currencies domestic and foreign will co exist despite legal restrictions on the use of foreign currency for internal trade we study how changes in government policy i e its enforcement of currency laws through fines or the rate of enforcement affects the acceptability of illegal currency the equilibrium value of both currencies and the implicit exchange rate first we construct a model with indivisible goods to show conditions under which legal currency is fully acceptable but illegal currency circulates with varying acceptability we then introduce bargaining to determine prices in legal and illegal currency we show that some enforcement polices can create multiple equilibria while others will not also some methods of enforcement are capable of driving the illegal currency out of circulation while others are not

law enforcement and the black market exchange rate abstract this paper examines how a system of multiple exchange rates can give rise to unreported exports and imports and a black market for foreign exchange risk aversion rather than an assumed smuggling or detection technology generally guarantees the coexistence of legal and illegal trading evidence for brazil suggests that enforcement of the exchange rate and trade regime is an important fundamental of the black market exchange rate that has so far invariably been left out of empirical work

dual exchange rates in europe and latin america this article uncovers some important empirical regularities surrounding the operation of formal dual exchange rates in europe and latin america in the 1970s and 1980s although there are some parallels between the european and latin american experiences there are also interesting differences in terms of the size and nature of the distortion created by two official exchange rates the response of the distortion to foreign interest rates real commercial exchange rates and domestic budget deficits and the motives for adopting this exchange rate regime empirical work on dual exchange rate regimes is made difficult by the transitory nature of these regimes and by frequent changes in institutional practices

the effect of experience and quantity based pricing on the valuation of a curbside recycling program abstract quantity based pricing for garbage collection services and recycling programs are becoming increasingly popular methods of meeting municipal solid waste diversion objectives this article investigates household willingness to pay wtp for a pilot curbside recycling program crp in the presence of a quantity based pricing scheme for garbage collection services which allows a household to alter their garbage container size at a reduced price unlike previous studies that have modeled the simultaneity of these household decisions as a two step process we jointly estimate the household s intentions using a full information maximum likelihood fiml approach our results show a strong positive correlation between a household s wtp for a crp and its stated intention to reduce its garbage container size when a crp is offered the positive correlation suggests that wtp will be higher for households which are more likely to reduce their garbage container size thus in the presence of quantity based pricing a household s wtp for recycling more fully reflects the marginal social costs of garbage disposal

the role of question order and respondent experience in contingent valuation studies abstract grand canyon white water boating was used to address issues in contingent valuation of question ordering and respondent experience question ordering effects were not identified for experienced boaters but did occur in some estimates for less experienced boaters an experience effect is further suggested if respondents value their actual white water trips differently than written scenarios of trips no effect was identified for experienced boaters but a significant difference did occur for less experienced boaters significant differences for less experienced boaters suggest that respondent experience may play a role in value formation resulting in survey instrument effects in valuation estimates

the value of online banking to small and medium sized enterprises evidence from firms operating in the uae free trade zones abstractthis study estimates the willingness to pay of small and medium sized enterprises smes for a business online banking services the estimation utilizes a contingent valuation method employing data from 400 smes in the united arab emirates free zones an interval regression model is used to identify company characteristics affecting wtp the results indicate an average wtp for online banking of 518 50 per month firms engaging in international trade value these services at least 10 more than those with only domestic operations other variables that significantly affect wtp include number of employees and the transportation cost of using traditional branch banking

hot money inflows and monetary stability in china how the people s bank of china took up the challenge nonforeign direct investment capital inflows in china were particularly strong in 2003 and 2004 they have led to a rapid accumulation of international reserves and they may have provided excess liquidity to the chinese economy this article investigates how the central bank of china managed the rapid build up of international reserves in 2003 and 2004 the relationship between real international reserves and real domestic credit is examined with a vector error correction model estimated on monthly data from january 1997 to march 2006 empirical results show that this relationship was negative which suggests that the central bank succeeded in slowing down real domestic credit when real international reserves increased direct and indirect granger causality tests are implemented to show how the people s bank of china proceeded to control domestic credit

trying to explain home bias in equities and consumption investors hold a substantially larger proportion of their wealth portfolios in domestic assets than standard portfolio theory would suggest a phenomenon called equity home bias in the absence of this bias investors would optimally diversify domestic output risk using foreign equities therefore consumption growth rates would tend to co move across countries even when output growth rates do not empirically however consumption growth rates tend to have a lower correlation across countries than do output growth rates a phenomenon i call consumption home bias in this paper i discuss these two biases and their potential relationship as suggested by the literature

assessing the validity and reliability of contingent values a comparison of on site users off site users and non users abstract imperfect information in contingent markets can affect the validity and reliability of contingent values willingness to pay wtp for changes in natural resource allocations survey respondents can acquire information about the natural resource to be valued from behavior such as on site use of the resource off site use of the resource and or from the survey itself in this paper we compare the validity and reliability of wtp from respondents who obtained information in these different ways using theoretical validity tests based on relative prices as well as income we find that wtp is valid for respondents with information from on site and or off site use willingness to pay is less valid for respondents who had no information about the natural resource before they participated in the survey using an alternative form reliability test we find that wtp is in the technical sense reliable for all respondents and somewhat more reliable for on site users

real and monetary determinants of real exchange rate behavior theory and evidence from developing countries abstract this paper develops a dynamic model of real exchange rate rer behavior in developing countries a three goods economy exportables importables and non tradables is considered residents of this country hold domestic and foreign assets and there is a dual exchange rate regime there is a government that consumes importables and non tradables a distinction is made between equilibrium and disequilibrium movements of the rer the determinants of real exchange rate misalignment are studied with emphasis placed on the role of devaluations and balance of payments crises the implications of the model are tested using data for 12 developing countries the results obtained are generally favorable for the model the issue of rer stationarity is also analyzed

management ownership and market valuation an empirical analysis we investigate the relationship between management ownership and market valuation of the firm as measured by tobin s q in a 1980 cross section of 371 fortune 500 firms we find evidence of a significant nonmonotonic relationship tobin s q first increases then declines and finally rises slightly as ownership by the board of directors rises for older firms there is evidence that q is lower when the firm is run by a member of the founding family than when it is run by an officer unrelated to the founder

on the complementarity of commercial policy capital controls and inflation tax this paper studies the optimal use of distortive policies aimed at raising a given real revenue in a general equilibrium framework in which lump sum taxes are absent the policies analysed are an inflation tax commercial policy and an implicit tax on capital inflows it is shown that we would tend to avoid activating an inflation tax for small revenue needs if the policy target were allocative we would tend to use only one policy instrument thus each policy has its own comparative advantage and their combined use is justified when the target is raising government revenue

the market reaction to international cross listings evidence from depositary receipts abstract this paper examines the stock price impact of international dual listings the sample consists of 181 firms from 35 countries that instituted their first depositary receipt program over the period 1985 1995 the market reaction to a depositary receipt program is larger in magnitude and more pervasive than previously reported the stock price reaction is related to choice of exchange geographical location i e emerging or developed markets and avenues for raising equity capital i e public versus private offerings

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

real exchange rate behaviour evidence from black markets the behaviour of real exchange rates relative to the us dollar is examined using monthly data obtained from the black markets for foreign exchange of eight asian developing countries the data span is 31 years the black market real exchange rates do not show excess volatility during the recent float which is in sharp contrast to the results reported elsewhere unit root tests in heterogeneous panels and variance ratio tests confirm their stationarity thus we find support for ppp but not for the survivorship bias froot and rogoff 1995 there is little evidence of segmented trends issues raised by rogoff 1996 of whether ppp would hold across countries with differing growth experience and lothian and taylor 1996 of whether the degree of relative price volatility may bias results in favour of mean reverting real exchange rates are addressed copyright 2000 john wiley sons ltd

changes in income inequality and the black market premium is a high black market premium for us dollars associated with rising or falling income inequality within a nation this paper empirically examines this issue within a cross section of countries and finds that the black market premium is strongly associated with rising income inequality as measured by changes in the gini coefficient others have used the black market premium as a proxy to measure protectionist policies so a possible implication is that protectionist policies further skew the distribution of income within a country however other measures of protectionist policies are not associated with changes in income inequality instead other factors which might drive the black market premium such as interest rate differentials appear to be more relevant in explaining why the black market premium is positively related with increases in income inequality

co integration and error correction models the temporal causality between government taxes and spending several interesting papers have recently considered whether government taxes granger cause government spending or vice versa the findings based on standard granger 6 causality tests are not consistent manage and marlow 10 conclude that when evidence of one way causality exists federal taxes granger cause federal spending while anderson wallace and warner 1 conclude that the evidence supports one way causality in the opposite direction ram 11 reexamining the issue concludes that taxes granger cause spending at the federal level but that spending granger causes taxes at the state and local level von furstenberg green and jeong 13 in another related article examine the tax and spend spend and tax causality issue using a more general vector autoregressive var model they introduce in addition to federal taxes and spending two economic variables the gnp gap and the inflation rate decompose federal spending into several categories and remove the effects of automatic stabilizers when appropriate they find little evidence that taxes granger cause spending and limited evidence that spending causes taxes a finding which corresponds most closely to that of anderson wallace and warner 1 our purpose is to reconsider the causality issue with the aid of co integration and errorcorrection modeling our analysis illustrates with a specific example how sources of causality can be neglected in standard granger causality tests moreover addressing the question of temporal causality between government taxes and spending provides insight as to how different policies might or might not help control the growth of government the results of our estimating various co integration and error correction models with quarterly data suggest bi directional causality between government taxes and spending both for the federal and state and local sectors this finding counters the conclusions of previous studies when annual data are used however our

a note on dual foreign exchange markets with official rationing predetermined versus floating official exchange rate abstract this paper examines the relationship between the long run rate of inflation and the allocation of transactions between markets in economies that operate dual exchange market regimes and ration foreign exchange in the official market it shows that wider access of importers to the official market and wider access of exporters to the free market are associated with higher rates of inflation and vice versa the direction of causality among the various variables and thus the effects of economic policies depend on whether the official exchange rate is predetermined or floating

exchange rate behavior with currency inconvertibility abstract the paper analyzes exchange rate dynamics in a world where the domestic currency is inconvertible into foreign currency and there is a black market for foreign exchange the official exchnage rate is thus set by policy but the black market rate is determined by portfolio balance the stock of domestic money changes with the reported current account and the stock of foreign assets of the private sector changes with smuggling and other unreported current account transactions the effects of capital and current account disturbances as well as the effects of changes in the level and the rate of crawl of the official rate on the black market premium and on the currency substitution ratio are analyzed in variants of the basic model

international portfolio nondiversification and exchange rate variability abstract incomplete international portfolio diversification is implied by an equilibrium models of exchange rates with nontraded goods the model can also explain the greater correlation between consumption and income within a country than between consumption across countries nontraded goods make more stringent the elasticity conditions required to explain exchange rate variability resulting from current productivity disturbances though not from disturbances to fiscal policies or the prospective return to investment the model is also consistent with international real interest rate differentials changes over time in the current account and relative wealth across nations and observed time series properties of exchange rates

home bias in equity portfolios inflation hedging and international capital market equilibrium we test whether the home bias in equity portfolios is caused by investors trying to hedge inflation risk the empirical evidence is consistent with this motive only if investors have very high levels of risk tolerance and equity returns are negatively correlated with domestic inflation we then develop a model of international portfolio choice and equity market equilibrium that integrates inflation risk and deadweight costs using this model we estimate the levels of costs required to generate the observed home bias in portfolios consistent with different levels of risk aversion for a level of risk aversion consistent with standard estimates of the domestic equity market risk premium these costs are about a few percent per annum greater than observable costs such as withholding taxes thus the home bias cannot be explained by either inflation hedging or direct observable costs of international investment unless investors have very low levels of risk aversion article published by oxford university press on behalf of the society for financial studies in its journal the review of financial studies

parallel fragmented or black defining market structure in developing economies abstract in describing market structure development economists employ such terms as fragmented informal parallel and segmented to account for the observed distributions of prices of both goods and factors although these terms are used interchangeably do they mean the same thing focusing on the parallel markets approach the paper identifies government policies which create excess demand or supply in particular markets as the core determinant of the emergence of an official unofficial market structure the legality of unofficial transactions proves critical in assessing the consequences of the parallel market situation contrasting alternative characterizations of market structure the paper concludes that the parallel market is a distinct analytical concept

empirical regularities in black markets for currency abstract this paper develops a model of the black or parallel market foreign exchange rate this rate is seen to depend upon the level of the official rate the unobserved equilibrium rate the premium offered for exchange sold through the black market and government reserve level policies the model is then empirically estimated for 10 countries over a period from 1957 through 1983 the results generally support the model specified by theory additionally the paper provides weak form tests concerning the efficiency of the black market the results cannot reject the hypothesis that the current black market rate incorporates all relevant historical price information

competition for aid and trade policy this paper considers the optimal allocation of a given amount of foreign aid between two recipient countries it is shown that given consumer preferences a country following a more restrictive trade policy would receive a smaller share of the aid if the donor country maximises its own welfare in allocating aid if on the other hand the donor country allocates aid in order to maximize the sum of the welfare of the two recipient countries the result is just the opposite finally we analyze the situation where the recipient countries compete with each other for the given amount of aid it is shown that this competition tends to lower the level of optimal tariffs in the recipient countries

the effect of protest votes on the estimates of wtp for use values of recreational sites contingent valuation studies are often characterized by a considerable number of protest responses which may cause selectivity bias on the final estimates for wtp sample selection models can detect and if necessary correct selectivity bias in economic applications where the relevant dependent variable is continuous sample selection models are generally estimated using heckman s 2 step method rather than the fiml estimator either method has its own drawback computational complexity for the fiml method susceptibility to collinearity problems for the 2 step method using data on valuation of forest resources for recreational use we analyse the performance of the two estimators in this application given the presence of some collinearity the fiml is preferred to the 2 step method a procedure is outlined to deal with selectivity problems in similar settings

black and official exchange rates in the pacific basin countries an analysis of their long run dynamics this paper examines the long run dynamic relationship between black and official markets for seven pacific basin countries over the period 1974 to 1989 the evidence shows a long run unit proportionality between the two rates i e a constant long run black market premium when the premium deviates from its long run value the black market rate adjusts to eliminates the division the speed of adjustment varies and seems to depend on the financial development of the country finally there is evidence of weak form informational inefficiency in the black markets

global growth opportunities and market integration we propose an exogenous measure of a country s growth opportunities by interacting the country s local industry mix with global price to earnings pe ratios we find that these exogenous growth opportunities predict future changes in real gdp and investment in a large panel of countries this relation is strongest in countries that have liberalized their capital accounts equity markets and banking systems we also find that financial development external finance dependence and investor protection measures are much less important in aligning growth opportunities with growth than is capital market openness finally we formulate new tests of market integration and segmentation by linking local and global pe ratios to relative economic growth in a perfectly integrated world economy capital should be invested where it

black markets for foreign exchange real exchange rates and inflation abstract the black market foreign exchange premium is a tax on exports creating a conflict between the financing of government spending and the allocative goal of stimulating exports the premium is solved for in a model that includes private portfolio choice dual exchange markets and money financing of the fiscal deficit the inflationary implications of switching to floats as a means of unifying official and black market rates are then analyzed inflation could rise substantially if the lost revenues from exports are replaced with a higher tax on money the paper is motivated with examples from sub saharan africa

capital market integration in the pacific basin region an impulse response analysis abstract we examine the extent of capital market integration in a group of pacific basin countries following the deregulation of their markets and explore whether the financial influence of japan in the region has overtaken that of the us looking at long run comovements of real interest rates through the use of cointegration and using impulse response analysis to examine the speed of adjustment of real interest rates to long run equilibrium following a shock in one of the markets which is another indicator of the degree of capital market integration we find that these countries are closely linked with world financial markets and more so with japan than with us

exchange rate regimes in transition italy 1974 in order to explain the behavior of the lira during the operation of the italian two tier exchange market in 1973 74 we develop a model of exchange rate regimes in transition on the assumption that the market will set exchange rates so as to eliminate speculative profits at the time of transition the model indicates that expectations of a transition combined with uncertainty about the nature of the post transition regime can cause a jump in exchange rates at the moment of transition as well as volatile exchange rate movements prior to the transition the model suggests that the perceived temporariness of an exchange rate regime should be treated as a market fundamental

exchange rate differential and balance of payments under dual exchange markets abstract this paper develops a model of an economy that uses two exchange markets an official market in which the exchange rate is determined by central bank intervention and a free market in which the exchange rate is determined by market forces the official market handles selected imports and exports while the free market handles the remaining imports and exports and capital transactions the model is used to discuss the effects of various policies on the differential between the free and the official exchange rates and on the balance of payments

optimal foreign aid and tariffs this paper investigates the optimal choice of foreign aid when trade policies are decided in a non cooperative fashion three alternative scenarios depending on the timing of the actions and on whether aid is tied are analyzed it is shown that in the case where aid is decided before tariffs untied aid can lead to the reduction of the recipient s optimal trade tax when the donor can tie the aid to a reduction in the recipient s tariff the optimal aid level is always positive and the world can always achieve a pareto efficient equilibrium

a fractional cointegration analysis of the long run relationship between black and official foreign exchange rates the case of the brazilian cruzeiro this paper applies a relatively new but generalized concept of fractional cointegration to shed some light on the validity of a long run relationship between monthly black and official us dollar rates of the brazilian cruzeiro an investigation of the stochastic properties of these rates reveals that while the relationship is not cointegrated in their logs they appear to be fractionally cointegrated if we allow for mean reverting processes that are ci 1 d with 0 d 1 the paper demonstrates that relaxing the condition that the residual from the cointegration equation must be a i 0 process captures a much wider class of mean reversion behaviour furthermore an analysis of the short run dynamics propelling the long run relationship tends to imply that although the official rate influences the changes in the black rate this is purely over the short run in the longer term the black rate is found to be the initial receptor of any exogenous shock to the equilibrium and it is the official exchange

black and official exchange rates in morocco an analysis of their long run behaviour and short run dynamics 1974 1992 using vector error correction vec model estimation on monthly data from morocco for the period january 1974 to december 1992 this article tests the hypothesis that there is a long run stable relationship between the official and the black market exchange rates for us dollars we also examine the short run dynamics in the relationship between the two markets the econometric results indicate that the two exchange rates are cointegrated furthermore we reject weak exogeneity in the case of the official exchange rate but fail to reject it in the case of the black market rate granger causality tests show that the black market rate causes the official exchange rate the results seem to support the efficiency hypothesis suggesting that participants in the black market are able to anticipate changes in the official exchange rate the findings also suggest that morocco s decision in january 1993 to introduce only current account convertibility and keep controls on capital accounts was wise

dual exchange markets for countries facing financial crises abstract in dual exchange markets there is an exchange market for capital transactions separate from the foreign exchange market for current transactions developing countries experiencing financial crises should avoid both a substantial decline in the exchange value of their currency and a reduction of their imports to the point at which their production and consumption of essentials are grossly impaired it is suggested that a temporary system of dual exchange markets will prevent capital outflow from reducing foreign exchange for imports of goods and services both markets should be free of exchange controls except those needed to maintain separation of the markets

the indexation of wages and bonds in brazil this paper analyses the dynamic relationship between the degrees of indexation of wages and public bonds in brazil a simple model is constructed to show that both degrees of indexation are determined simultaneously we apply cointegration techniques and estimate error correction representations to assess the temporal causality between them our results provide empirical support for the existence of simultaneity in the degrees of indexation in brazil in the period 1980 93

on the tying of aid to tariff reform this paper considers the welfare effects of foreign aid that is tied to changes in the recipient s tariff by constructing a three country model with tariffs and by allowing for changes both in the amount of aid and in the tariff rates we are able to consider the welfare implications of two different rules of aid conditionality i a rule which leaves the donor s welfare unchanged and ii a rule which leaves the recipient government s total revenue unchanged it is shown that the tying of aid to a tariff reform can inter alia be used to ensure pareto improvement

reserve and exchange rate cycles abstract many latin american countries appear locked into cycles of reserve loss devaluation and temporary reserve gains this paper shows how a dual exchange rate system with leakages may generate cycles in reserves and the premium between official and parallel exchange rates we study the dynamics of these cycles and their asymptotic behavior both analytically and numerically

disentangling the incentive and entrenchment effects of large shareholdings this article disentangles the incentive and entrenchment effects of large ownership using data for 1 301 publicly traded corporations in eight east asian economies we find that firm value increases with the cash flow ownership of the largest shareholder consistent with a positive incentive effect but firm value falls when the control rights of the largest shareholder exceed its cash flow ownership consistent with an entrenchment effect given that concentrated corporate ownership is predominant in most countries these findings have relevance for corporate governance across the world

exchange rate policy and price level changes casualty tests for turkey in the post liberalisation period the purpose of the present study is to examine the relationship between exchange rate changes and price level changes in turkey during the 1980s using some modified granger causality tests during this period turkish exchange rate policy was characterised by considerable flexibility in contrast to the long standing policy of fixing the exchange rate until a foreign exchange crisis necessitated devaluation the weight of the evidence presented suggests that granger causality runs from price level changes to exchange rate changes but that there is not feedback causality from exchange rate changes to price level changes this conclusion is not altered by the inclusion of a money supply variable thus for turkey exchange rate adjustment does not seem to have created a vicious cycle of currency depreciation leading to inflation as is often feared whether this result will hold for other developing countries which adopt flexible exchange rate regimes will require further testing

home bias foreign mutual fund holdings and the voluntary adoption of international accounting standards we test the assertion that a consequence of voluntarily adopting international accounting standards ias is the enhanced ability to attract foreign capital using a unique database that reports firm level holdings of over 25 000 mutual funds from around the world our multivariate tests find that average foreign mutual fund ownership is significantly higher among ias adopters we also find that ias adopters in poorer information environments and with lower visibility have higher levels of foreign investment consistent with firms using ias adoption to provide more information and or information in a more familiar form to foreign investors taken together our findings are consistent with voluntary las adoption reducing home bias among foreign investors and thereby improving capital allocation efficiency

aid the real exchange rate and why policy matters the cases of morocco and tunisia abstractevery form of foreign exchange inflow including aid can potentially cause real exchange rate appreciation with adverse consequences for the production of tradables dutch disease whether it does so depends on the policy response to the inflow this paper investigates the issue for morocco and tunisia over 1980 2009 we find that aid led to a real appreciation in morocco but had no effect on tunisia s real exchange rate this confirms the importance of the macroeconomic framework in which aid is provided and the key role for infrastructure and other supply side improvements in determining the final real economy impact of aid and other inflows

adjustment to monetary policy and devaluation under two tier and fixed exchange rate regimes abstract the purpose of this paper is to determine whether a two tier exchange rate regime is more effective than a fixed rate regime in increasing a country s ability to pursue an independent monetary policy the analysis compares adjustment to a monetary policy and to a devaluation in the two exchange rate regimes in a portfolio model under imperfect assets substitutability it is shown that a two tier exchange rate regime is capable of reducing the current account effects of monetary injection or devaluation only in the long run in the short run however we can get a larger current account response under a two tier regime these results reflect the trade off between quantity and price adjustment

exchange rate rules black market premia and fiscal deficits the bolivian hyperinflation with dual exchange rates where a managed official exchange rate co exists with a floating black market rate a given budget deficit may be consistent with many different inflation rates rather than two which is the normal result in closed economy systems further all these inflation equilibria are saddle point stable a policy of adjusting the official exchange rate towards the black market rate may cause the economy to converge to a high inflation saddle point stable equilibrium where money inflation elasticity exceeds unity the analytics are motivated and illustrated by the bolivian hyperinflation of 1984 1985

contingent valuation controversies and evidence contingent valuation cv has become one of the most widely used non market valuation techniques cv s prominence is due to its flexibility and ability to estimate total value including passive use value its use and the inclusion of passive use value in benefit cost analyses and environ mental litigation are the subject of a contentious debate this paper discusses key areas of the debate over cv and the validity of passive use value we conclude that many of the alleged problems with cv can be resolved by careful study design and implementation we further conclude that claims that empirical cv findings are theoretically inconsistent are not generally supported by the literature the debate over cv however has clarified several key issues related to nonmarket valuation and can provide useful guidance both to cv practitioners and the users of cv results

special exchange rates for capital account transactions the governments of developing countries are constrained in the effective implementation of domestic policy by the interlinkages of national and international financial markets domestic macroeconomic conditions are influenced by the interaction of national and world interest rates and prices and through the impact of real exchange rates on employment the domestic responses to changes in these factors are often strong and rapid this article suggests that dual rates can indeed be used successfully as a strictly transitory policy to offset sudden shocks in capital markets the article develops models which indicate why these dual systems are able to prevent inflationary or recessionary pressures caused by a misaligned exchange rate in the short term while free capital account rates can cut the flow of capital flight however a dual rate system cannot prevent a possibly equivalent loss of foreign reserves that will ultimately result because of the impact of the overvaluation of the commercial rate on the trade balance in the longer term a dual rate system with a misaligned commercial rate exacerbates the government s deficit ultimately real wages must be cut and real interest rates raised to generate sufficient foreign exchange to finance the external debt thus a dual rate works well if the commercial rate is maintained close to the equilibrium level

the transmission of disturbances under alternative exchange rate regimes with optimal indexing the paper develops a general stochastic macroeconomic model that can be used to study the international transmission of disturbances under four alternative exchange rate systems uniform flexible exchange rates uniform fixed exchange rates and two versions of two tier exchange rates the analysis makes two general points first one cannot assume stability of structure when assessing the consequences of alternative exchange rate regimes for example the slope of the aggregate supply curve and the rationally formed expectations in the asset markets can respond dramatically to the government s choice of exchange rate regime second exchange rate regimes that provide full insulation from foreign disturbances may nevertheless be inferior to other regimes in terms of their ability to maximize social welfare

welfare effects of aid under quantitative trade restrictions the paper examines the effects of tied aid on the welfare of both the donor and the recipient countries we depart from the previous literature by assuming preexistence of quantitative trade distortions to mitigate these distortions the donor country provides aid that is tied to the rationed good conditions for the presence of the transfer paradox and of the enrichment of both countries are derived and interpreted under the stability of the system furthermore we show that whereas untied aid cannot increase global welfare tied aid unambiguously does so

the effect of knowledge on the disparity between hypothetical and real willingness to pay the use of a contingent valuation cv method is controversial among economists because it is based on hypothetical rather than real economic choices this paper reports the results of an experiment designed to elicit the real and the hypothetical willingness to pay wtp for a private good the effect of different settings of knowledge direct and indirect of the good on subjects valuation behaviour are investigated the findings show that i a direct knowledge of the good reduces the observed disparity between hypothetical and real wtp and that ii different settings of knowledge generate different perceptions of the characteristics of the good

the black market for dollars in chile abstract this study investigates the effects of foreign exchange restrictions on the black market premium for dollars in chile over the period 1975 1984 the model emphasises the interaction of stock and flow conditions in the black market for dollars our results support the view that the real exchange rate the official depreciation adjusted interest rate differential the dollar value of peso assets valued at the official exchange rate and foreign exchange restrictions are important determinants of the black market premium

insulation properties under dual exchange rates this paper reviews the insulation properties of a dual exchange rate regime it is shown that in general a dual regime is not successful in insulating the economy from monetary and real shocks of domestic and foreign origin the existence of incomplete segmentation of markets as well as the role played by real exchange rate changes as channels of transmission of disturbances to real equilibrium output are discussed

a note on the efficiency of black markets in foreign currencies there exists considerable literature on the efficiency of foreign exchange markets with most of the empirical work supporting the hypothesis that the foreign exchange markets are weak form efficient 1 in some countries however trading in foreign currencies takes place in black markets which are the result of restrictions placed on the foreign sector 2 the importance of these markets in sustaining the illegal import and export of goods and assets as well as illegal capital flows has been growing in the past few years 3 in this paper market efficiency tests are performed on the black market exchange rates in india taiwan and south korea it is quite conceivable that black markets may not be efficient because the information about prices and market participants is generally imperfect the markets tend to be thin and often segmented and the transaction costs as measured by the buy sell differential tend to be high all these factors could hinder efficient adjustment of exchange rates to new information 4 a test of market efficiency is a test simultaneously of efficiency and of the assumptions of market equilibrium the theory underlying financial efficiency tests has been omitted here since it is well known and accepted weak form tests of market efficiency are based on the autocorrelation functions of rates of return on currency positions on nonparametric tests like the runs analysis and on mechanical trading rules applied to historical currency prices in the black market finally the cross correlations between the changes in the black market rate and changes in the official exchange rate are examined to see if the black market exchange rate predicts the movements in the official rate

contingent valuation of ecotourism in annapurna conservation area nepal implications for sustainable park finance and local development abstract to determine willingness to pay wtp for candidate entry fees contingent valuation surveys were administered to 315 foreign visitors to the annapurna conservation area nepal during april and may of 2006 the results of logit regression showed that the bid amount family size visitors satisfaction the use of a guide and group size were the most significant predictors of wtp results suggest that most visitors would be willing to pay an entry fee considerably higher than the current fee of 27 u s dollars usd the mean and median wtp were 69 2 and 74 3 usd respectively the most common explanation for wtp by respondents was a desire to better protect the environment the most common explanation for unwillingness to pay was that the bid was simply too expensive two models were developed based upon different predictions of visitor numbers an optimistic case and pessimistic case to calculate the expected revenue production and likely gross local economic impact of candidate entry fees based on this analysis we recommend an increase in the entry fee to usd 50 in the optimistic scenario this higher entry fee leaves a budget surplus in the pessimistic scenario it would reduce current budget deficits

the black market for dollars in brazil the model of the black market for dollars focuses on the interaction of portfolio decisions relevant to the holding of asset stocks and the determinants of net flows of dollars associated with tourism and smuggling a partial equilibrium model of the black market shows that the level of the premium is determined by the official real exchange rate and the official depreciation adjusted interest differential as well as seasonal factors associated with tourism expectations of future exchange rate changes under rational expectations are shown to affect the current level of the black market premium the empirical evidence provides ample support for the role of the key determinants of the premium as well as for an important seasonal pattern the magnitude of the seasonal variation is evidence of the imperfect substitutability between black dollars and cruzeiro assets in portfolios

on the provision of official and private foreign aid abstract the provision of official relative to private foreign aid varies considerably between donor countries we explain the variations in terms of country size household composition income distribution and the government s ability to commit to aid and derive inter alia the results 1 official aid crowds out private aid 2 total aid and official aid collected from each household are lower in more populous countries 3 total aid is lower if i the distribution of income favors the more altruistic households and ii the government can credibly commit to a certain level of aid evidences suggest that the theoretical results can explain stylized facts

the welfare costs of price controls for cars and color televisions in poland contrasting estimates of rent seeking from recent experience the welfare costs of price controls can vary enormously depending on the method of allocating the goods in shortage and the possible rent seeking costs that may result with full rent dissipation the welfare loss from price controls on polish color televisions in 1989 was about ten times the standard estimates of distortion costs which ignore rent seeking and was more than 100 percent of the value of domestic producers sales the methods of allocating cars however did not result in rent seeking costs the domestic price controls were an unintended implicit subsidy to imports subsidies for cars were estimated at 43 percent and for color televisions at 22 percent

the effects of market segmentation and investor recognition on asset prices evidence from foreign stocks listing in the united states non u s firms cross listing shares on u s exchanges as american depositary receipts earn cumulative abnormal returns of 19 percent during the year before listing and an additional 1 20 percent during the listing week but incur a loss of 14 percent during the year following listing we show how these unusual share price changes are robust to changing market risk exposures and are related to an expansion of the shareholder base and to the amount of capital raised at the time of listing our tests provide support for the market segmentation hypothesis and merton s 1987 investor recognition hypothesis the globalization of u s capital markets has accelerated dramatically in the past decade increasing numbers of companies from overseas have chosen to either raise capital through global equity issues or prepare for future capital raising by way of cross listings on u s exchanges as of 1997 about 1 300 non u s companies have listed their shares for trading on the new york stock exchange nyse the american exchange amex the national association of securities dealers automation quotation nasdaq system or

does home bias affect firm value evidence from holdings of mutual funds worldwide this study finds strong evidence that home bias affects firm valuation at both country and firm levels at the country level increasing the bias of domestic investors toward home equity lowers the market valuation of home equity at the firm level firm value increases as the compositions of local equities held by domestic and foreign investors tend toward the firms global market capitalization weights but decreases as their weights deviate from global weights overall the evidence is consistent with the optimal global risk sharing hypothesis that the greater risk sharing between domestic and foreign investors in international capital markets reduces the cost of capital and hence enhances market valuation

dual exchange rates under pegged interest rate and balance of payments crisis this paper develops a model of dual exchange rates and pegged interest rate it shows that under perfect asset substitutability the financial exchange rate dynamics is unrelated to current account imbalances it also demonstrates that if the emergence of a current account deficit is expected to give rise to a devaluation of the commercial exchange rate there will be an instantaneous depreciation of the financial exchange rate and further depreciation along the adjustment path this is in sharp contrast to the established result that under dual rates a current account deficit is associated with an appreciating financial rate jel e52 f31

devaluation exchange controls and black markets for foreign exchange in developing countries abstract this paper analyzes the response of external balance indicators to anticipated devaluation in a model incorporating the movement of black market exchange rates under rational expectations the analysis is then extended to the case of devaluation cycles to examine the behavior of black market rates and official trade statistics in the face of persistent inflation that appreciates the real exchange rate and motivates periodic devaluation the data confirm the predicted response of the black market rate to devaluation as well as the sensitivity of official exports data to movements in the black market rate

inflation dynamics and the parallel market for foreign exchange abstract pinto 1990 in world bank economic review 3 321 338 showed that unification of official and parallel market exchange rates may lead to an increase in steady state inflation because of the fiscal impact of real official exchange rate changes this paper shows how this and other comparative static and stability results in pinto 1990 are reversed under the assumption that official exchange rate devaluation reduces money creation in the economy it is argued that this was the case for uganda in the 1980s and we give a simple rule of thumb for estimating when unification will increase or decrease steady state inflation

long run dynamics of black and official exchange rates abstract this paper examines the relationships among black and official foreign exchange rates its primary purpose is to investigate the way in which black and official markets process information application of cointegration tests to the turkish markets for us dollars and west german marks in the mid 1980s indicates that the two black markets are efficient information processors for the black and official markets of each currency evidence is found suggesting the possibility of overshooting by the black exchange rate this inefficiency may not be able to be arbitraged away because of restrictions on capital flows through official channels

structural breaks in parallel markets the case of nigeria 1980 1993 abstract this paper demonstrates the importance of allowing for structural breaks in the time series when investigating the relationship between the official and the parallel markets in foreign exchange only when structural breaks are accounted for does a relationship emerge in nigeria we find that over the period 1980 1993 the official rate has granger caused the parallel rate

a stochastic model of incomplete separation between commercial and financial exchange markets abstract this paper constructs a framework that is suitable for the analysis of a dual exchange market regime characterized by intermarket leakage the model incorporates the fact that in reality certain proportions of both trade account and service account items are settled in the financial market on account of both legally sanctioned leakage and fraudulent transactions the model is utilized to investigate the dynamic and static properties of the economy with respect to the degrees of export import and service account leakage as well as with respect to other parameters of interest

determinants of visitors willingness to pay for the national marine park of zakynthos greece abstract we examined the influence of visitors profile information sources environmental dispositions and visit evaluation on visitors willingness to pay wtp for the national marine park of zakynthos regarding wtp amounts pledged parameters of visit evaluation were the most significant predictors the estimated annual revenue that could be gained could cover the operating costs of the protected area management body visitor and visit characteristics were not significant determinants of visitor responses to the payment principle question while they explained a relatively small amount of variation in the wtp amount multiple regression model nationality was not a significant predictor of wtp all the same greek visitors showed more signs of pro environmental attitudes than foreign ones non use values dominated over use values and higher wtp amounts were associated with bequest value an alternative classification of the valuation system alleged to justify wtp is proposed where option value could be arranged together with use value components under the assumption that future use could still be regarded as another form of use value moreover existence and bequest values could be approached separately under the hypothesis that the former is expected to be associated with relatively lower wtp amounts pledged while the latter is expected to lead to relatively higher wtp amounts our study adds to the complexity and context dependency of wtp determinants park managers are suggested to organize environmental education programs that could decrease visitors consensus estimation error and act as a feedback through word of mouth information gained by friends and relatives

respondent direct experience and contingent willingness to pay for new commodities a switching endogenous interval regression analysis most environmental economists argue that direct experience with the good being valuated or with similar goods is a precondition for providing valid willingness to pay wtp responses to contingent valuation questions two questions are posed in this article the first is whether previous use experience of a resource sene nature reserve similar to that being valuated future nature reserves and located in the same geographical area gulf of morbihan impacts on wtp the second is whether accounting for the endogeneity of direct experience matters in the estimation of wtp we find that respondents who have not experienced the sene nature reserve provide value estimates that are statistically comparable to that of respondents who have experienced it our assumption is that respondents have acquired sufficient and adequate experience of future nature reserves from the questionnaire that experience obtained by experiencing the sene nature reserve was not necessary for making a valid value formulation hen

collapsing exchange rate regimes some linear examples abstract we construct a pair of linear examples to study the collapse time of a fixed exchange rate regime the first example is a perfect foresight continuous time model which allows calculation of the exact collapse time and the tracking of reserves the second example is a discrete time stochastic model which yields an endogenous probability distribution over the collapse time and produces a forward discount of the exchange rate

insulation properties of a two tier exchange market in a portfolio balance model when countries peg their currencies to those of their major trading partners they expose themselves to interest sensitive and speculative capital flows that can undermine their ability both to maintain their exchange rate and to pursue an independent monetary policy some countries notably france italy and the belgo luxembourg economic union bleu experimented with two tier exchange rates in the early 1970s in the hopes of insulating their economies from the effects of international capital flows while at the same time protecting foreign trade from exchange rate fluctuations france and italy soon abandoned the experiment but the bleu continues to maintain separate exchange markets with separate exchange rates for current and capital account transactions the commercial exchange rate which relates to the market for current account transactions is generally pegged by the authorities the financial exchange rate determined in the market for capital account transactions is usually free to fluctuate 1 this paper investigates how well a two tier exchange market insulates a small open economy from foreign disturbances taking into account recent developments in the theory of exchange rate determination work by branson 1977 dornbusch 1976 and kouri 1976 suggests that the short run equilibrium value of the exchange rate is determined along with interest rates by demand and supply in the markets for financial assets this asset market or portfolio balance approach to exchange rate determination is particularly well suited to a study of the two tier exchange market one can view the financial exchange rate as a relative asset price it is among the variables that equilibrate asset markets and it is determined in the short run in those asset markets previous theoretical work on the two tier exchange market has generally been within the mundellian framework the financial exchange rate has been treated as equating a flow demand and supply of foreign exchange the asset market approach has the advantage of carefully distinguishing between stocks and flows in particular it treats demands for assets as stock demands that are realized instantaneously so that actual holdings of assets always reflect the desired composition of the portfolio disturbances to portfolio equilibrium create immediate stock adjustments as portfolios are rebalanced causing instantaneous changes in endogenous market clearing variables in addition disturbances alter the rate of accumulation the flow of financial assets over time portfolio balance models of two tier exchange rates can be found in dornbusch 1976 and decaluwe and steinherr 1976 but they differ from the one presented here dornbusch partitioned the exchange market so that interest income a current account transaction was channelled through the financial market that segmentation yields a different expected rate of return on foreign

unification of dual exchange markets abstract this paper develops the model of an economy under a dual exchange system comprising an official market with a crawling exchange rate and a free market with a floating exchange rate after analyzing the behavior of the economy under the dual system the paper discusses the effects that switching to a unified floating system or a unified crawling peg system has on the exchange rate and on the balance of payments particularly in the short run the paper shows that these effects depend on the composition of the private sector s portfolio at the time of unification which in turn depends on the various policies that were followed while the economy was under the dual system

respondent experience and contingent valuation of environmental goods abstract respondent experience i e a respondent s information set has long been suspected to influence contingent valuation estimates of environmental values we assess the influence of experience by explicitly modeling the relationship between respondent experience and both fitted individual resource values and the conditional variance of these estimated values using three different joint specifications for experience and wtp normal censored normal poisson censored normal and zero inflated poisson censored normal we find discrete jumps in resource values as experience increases from zero and that more experienced respondents have smaller conditional variances simulation of arbitrary levels of experience allows standardization of the amount of information when developing welfare estimates

export adjustment to currency depreciation in the presence of parallel markets for foreign exchange the experience of selected sub saharan african countries in the 1980s the primary focus of this study is an empirical investigation of the implications of parallel exchange markets for export adjustment to official currency depreciation an econometric model incorporating the features of exchange control and credit constraint was estimated using pooled data from 13 sub saharan african countries a rise in the parallel currency premium was found to adversely affect official exports and the estimates suggest that official depreciations which are launched in the presence of large exchange rate misalignment and which succeed in reducing the latter are likely to exert greater favourable effects on export performance than otherwise equivalent depreciations

exchange rate regime reforms with black market leakages abstract many countries have multiple exchange rate regimes with black or secondary currency markets operating alongside an exchange rate pegged or determined in interbank or auction markets leakages occur across these markets necessitating careful analysis of the dynamic effects of numerous policy instruments using a model with multiple exchange rates and leakages we trace the dynamic effects on official and parallel foreign exchange markets of exchange rate unification changes in foreign exchange surrender requirements taxes on trade and capital account transactions and official exchange rate devaluation simulations based on russia s recent experience demonstrate the qualitative importance of the results