state dependent pricing invoicing currency and exchange rate pass through abstract we analyze exchange rate pass through and volatility of import prices in a dynamic framework where firms are subject to menu costs and decide on price adjustments in response to exchange rate innovations the exchange rate pass through and import price volatility then depend on the invoicing currency in combination with functional forms of cost and demand functions in particular there is lower pass through less frequent price adjustments and lower price volatility when prices are set in the importer s currency than when prices are set in the exporter s currency

currency internationalization and valuation effects based on the threshold model based on the three functions of currency internationalization including exchange medium pricing currency and foreign reserve this paper explores how the degree of currency internationalization a

exchange rate pass through in south africa panel evidence from individual goods and services abstract this study estimates pass through for south africa using samples of final goods and services and homogenous imports estimated pass through to consumer goods prices is low roughly 16 per cent in the two years following an exchange rate change surprisingly it is somewhat higher for services deviations from long run ppp appear to disappear relatively quickly with a half life of about 16 months for imports pass through estimates are much higher averaging around 60 per cent but with wide source country variation finally there is virtually no support for a simple linear trend change in either pass through or in reversion to ppp during the sample

symmetric pass through of tariffs and exchange rates under imperfect competition an empirical test abstract this paper examines the effect of tariffs and exchange rates on u s prices of japanese cars trucks and motorcycles in particular we test whether the long run pass through of tariffs and exchange rates are identical the symmetry hypothesis we find that this hypothesis is easily accepted in our sample we also find that the pass through relation varies across products ranging from about 0 6 for trucks to unity for motorcycles these coefficients have very different implications for trade policy we explain the results based on demand cost and institutional conditions in each industry

three questions about sunspot equilibria as an explanation of economic fluctuations it is by now well known that the sort of difference equations that characterize the equilibrium conditions of an infinite horizon competitive economy may have solutions in which the endogenous variables fluctuate in response to sunspot variables that is to random events that in fact have nothing to do with economic fundamentals and so do not directly affect the equilibrium conditions it is possible to view such sunspot equilibria as a representation of an actual phenomenon economic fluctuations not caused by exogenous shocks to fundamentals but rather by revisions of agents expectations in response to some event which revised expectations become self fulfilling early discussions of such solutions sometimes suggested that a more rigorous derivation of the requirements for equilibrium might yield additional restrictions that would eliminate the sunspot solutions from the set of true equilibria the demonstration by karl shell 1977 david cass 1981 and costas azariadis 1981 that sunspot equilibria can exist in a rigorously formulated intertemporal equilibrium model namely the overlapping generations model of samuelson has shown that this is not always the case nevertheless many economists remain skeptical about the reasonableness of the sunspot hypothesis as a possible explanation of actual economic fluctuations and for quite general reasons independent of judgments about the empirical plausibility of any particular models i discuss here three such general reasons for skepticism

an empirical analysis of the renminbi exchange rates and cross border trade settlement we introduce a gravity model to the currency choice for cross border trade settlement and the heckman selection model to estimate the impact of the exchange rate on the cross border trade settlement of the renminbi rmb we analyse bilateral exchange rates using panel data of china and 182 rmb settlement countries or areas from 2009 to 2014 we find that regardless the choice stage or scale stage of rmb cross border trade settlement the appreciation of the rmb does not necessarily promote rmb cross border trade settlement this result holds when we take geographic differences into account and split the settlement of cross border trade into merchandise and service trade we further investigate the channels through which exchange rate influences the cross border trade settlement of rmb and we find that the appreciation of rmb impedes enterprises from choosing rmb as their settlement currency by reducing the scale of export to rmb settlement areas whereas it speeds up rmb cross border trade settlement by increasing the scale of china s import from rmb settlement areas we find that china s economic strength supports the development of rmb cross border trade settlement however the geographical distance between china and the rmb settlement areas may inhibit cross border trade settlement in rmb

analysis on the determinants of currency invoicing in korean trade we investigate the determinants of currency invoicing in trade using import and export transactions data between korea and its 30 major trading partners from 2000 to 2013 we find a noticeably different pattern of currency invoicing from advanced countries for example a large market share of korean exporters in partner countries does not guarantee more use of the korean won in currency invoicing this might be attributed to a low degree of korean won s internationalisation and the strong coalescing effect we also observe that the higher the level of industry product differentiation the weaker the coalescing motive in addition we verify that the share of invoicing in the currency of korea s trading partner tends to be higher when the partner country has i a larger trade volume ii higher level of financial development iii lower inflation and lower price volatility and iv its own currency with lower transaction costs

wage expectations of european college students expected earnings and expected returns to education are seen by labor economists as a major determinant of educational attainment in spite of this the empirical knowledge about expectations and their formation is scarce in this paper we report the results of the first systematic study of the wage expectations of european college students our data are based on the replies to the same questionnaire by more than 6000 college students all over europe we study the determinants of wage expectations and expected employment probabilities the variability of these expectations within a field of study and their variation across universities and fields we also examine the trade off between expected starting wages and wage growth in the final section of the paper we contrast expected returns to education with actual returns estimated from country specific micro data in line with u s studies we find that students overestimate returns to education jel j30

a model of relative national price levels under pricing to market abstract this paper proposes an alternative to the balassa samuelson theory of how relative price levels between countries are determined the theory is a general equilibrium formulation of a model where pricing to market arises endogenously from firm decisions it differs from balassa samuelson in that it centers on the distinction between segmented national goods markets rather than the distinction between traded and nontraded goods the paper also explores how balassa samuelson might be updated by combining it together with pricing to market elements applied to the case of a monetary union the theory offers an alternative explanation for the inflation differentials observed in emu it implies that such differentials may be a natural and enduring feature of a monetary union in which markets for goods and labor are less than fully integrated

exchange rate pass through and inflation a nonlinear time series analysis abstract this paper investigates the relationship between the exchange rate pass through erpt and inflation by estimating a nonlinear time series model based on a simple theoretical model of erpt determination we show that the dynamics of erpt can be well approximated by a class of smooth transition autoregressive star models using the past inflation rate as a transition variable we employ several u shaped transition functions in the estimation of the time varying erpt to us domestic prices the estimation result suggests that declines in the erpt during the 1980s and 1990s are associated with lowered inflation

exchange rate pass through at the product level we use a detailed database to investigate exchange rate pass through at the product level for a large number of countries the empirical analysis suggests that pricing behaviours are dichotomous with complete pass through in around 25 of sectors and significant pricing to market in the remaining ones average long run pass through coef ficient is close to 80 this result hides a strong heterogeneity of pass through behaviours across sectors even when composition effects are controlled for average pass through varies across importing countries the econometric analysis shows that pass through tends to be higher in volatile environments in less developed countries in weakly integrated markets jel classification f12 f31 f41

measuring the intensity of competition in export markets abstract this paper develops an approach to measuring the intensity of competition in international markets using readily available data on destination specific values and quantities of exports at the seven digit industry level the intensity of competition a group of exporters faces in a particular export market is measured by the residual demand elasticity the group faces this elasticity is identified by exchange rate shocks which rotate the supply relation of the source country export group relative to competitors located in other countries we apply this method to german exports of beer and us exports of linerboard paper the resulting estimates of market power appear to be plausible and consistent with other indicators of competition e g market shares the number of competitors providing support for the applicability of our framework in measuring competition in international markets

hyteresis in import prices the beachhead effect this paper shows that temporary real exchange rate fluctuations can have persistent hysteretic effects on trade specifically when market entry costs are sunk sufficiently large exchange rate shocks alter domestic market structure and thereby induce hysteresis this simple result has strong implications for exchange rate theory t rade policy and estimation of trade equations empirical evidence su ggests that the recent dollar overvaluation induced hysteresis in u s import prices namely the aggregate pass through equation of exchange rates to import prices shifted in the 1980s the shift s nature and timing is broadly consistent with the hysteresis hypothesis copyright 1988 by american economic association

invoicing currency in international trade an empirical investigation and some implications for the renminbi to play the role of a unit of account an international currency must be a currency widely used to invoice international trade this paper investigates the determinants of the use of currencies in trade invoicing and evaluates the potential of the renminbi for the denomination of cross border transactions in the asia pacific region in particular we develop a simple model and establish the evidence showing that there is a convex relationship between the invoicing share of a currency and the economic size of its issuing country because of a coalescing effect and thick market externalities we use the ratio of the foreign exchange fx turnover share of a currency to the global gdp share of its issuing country as a proxy for the size of thick market externalities which we argue reflects capital account openness financial development and exchange rate stability of the country this ratio is very small for the renminbi compared with the ratios for established international currencies our quantitative analysis suggests that the renminbi can be a major invoicing currency in the region only if china sufficiently opens up its capital account and liberalises its financial sector we also draw a parallel between the renminbi and the euro and forecast the invoicing share of the renminbi in the asia pacific region if the renminbi market attained the same degree of thickness as the euro

imported inputs and invoicing currency choice theory and evidence from uk transaction data a significant proportion of international trade is in intermediate goods this paper considers theoretically and empirically how exporters dependence on imported inputs affects their choice of invoicing currency the model predicts that exporters that depend more on foreign currency denominated inputs are less likely to price in their home currency i test this and other theoretical results using a novel dataset that covers uk trade transactions with non eu countries i find considerable support for the model s predictions a 10 percentage point higher share of foreign currency denominated inputs is associated with a 20 percentage point higher probability of pricing in the same foreign currency relative to the producer s currency

a theory of entrepreneurship and institutional uncertainty abstract uncertainty and institutions are each vital concepts in entrepreneurship research however little work has been done to combine them into a consistent conceptual framework for analyzing the dynamic aspects of entrepreneurial action uncertainty and institutional change using insights from new institutional economics we develop a model that explains the institutional uncertainty resulting from conflicts between institutions on different levels of social activity we further explain how entrepreneurs can both cause and mitigate this uncertainty through market and institutional action finally we focus on a special case of institutional uncertainty regime uncertainty wherein entrepreneurs are left without reliable means to overcome uncertainty in political institutions

the economic consequences of brain drain of the best and brightest microeconomic evidence from five countries this article presents results of innovative surveys that tracked academic high achievers from five countries to wherever they moved in the world to directly measure at the micro level the channels through which high skilled emigration affects sending countries there are high levels of emigration and of return and the income gains to the best and brightest from migrating are an order of magnitude greater than any other effect most high skilled migrants from poorer countries remit but involvement in trade and foreign direct investment is rare fiscal costs vary widely but are much less than the benefits to the migrants themselves two narratives drive discussions of the development impact of high skilled migration the first is the idea of a brain drain whereby the departure of doctors teachers engineers scientists and other highly skilled workers decimates the human capital and fiscal revenues of sending countries bhagwati and hamada 1974 such fears lead to calls for policies to restrict the flow of highly skilled workers such as demands that developed countries stop recruiting doctors from developing nations and efforts by developing nations to restrict the ease of their highly skilled individuals migrating 1 contrasting with this is the view of a highly educated diaspora as a potent force for developing the local economy through remittances trade foreign direct investment fdi and knowledge transfers with the experience of india and china in setting up technology firms as a result of diaspora working in silicon valley a prominent example saxenian 2002 economists have also emphasised that the possibility of migrating may spur human capital accumulation potentially leading to a net increase in the education levels of those in the home country 2

institutions as knowledge capital ludwig m lachmann s interpretative institutionalism the paper revisits the socioeconomic theory of the austrian school economist ludwig m lachmann by showing that the common claim that lachmann s idiosyncratic read eclectic and multidisciplinary approach to economics entails nihilism is unfounded it reaches the following conclusions 1 lachmann held a sophisticated institutional position to economics that anticipated developments in contemporary new institutional economics 2 lachmann s sociological and economic reading of institutions offers insights for the problem of coordination 3 lachmann extends contemporary new institutional theory without simultaneously denying the policy approach of comparative institutional analysis

pricing of exports and exchange rate uncertainty this paper examines the implications of different pricing cum invoicing strategies available to an exporting firm that sells its product in domestic and foreign markets when the exchange rate is uncertain the firms decisions are made sequentially throughout the decision making process the firm receives new information about the distribution of the random exchange rate the information arrives after output decisions have been made but before setting prices and allocating sales the authors state conditions that lead to the dominance of invoicing exports in the importer s currency over the alternative invoicing strategies copyright 1991 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

pass through of exchange rates and purchasing power parity abstract in this paper we develop and test two hypotheses about purchasing power parity ppp the first is that changes in the price of traded goods relative to domestic substitutes will affect the ppp relation due to the partial pass through of exchange rates the second is that ppp should hold on forward rather than spot exchange rates due to hedging by firms which implies that the interest rate differential should enter the ppp relation for spot rates using quarterly data for several countries we find support for both these hypotheses though the magnitude of the interest rate effect is very small

the evolution of price dispersion in the european car market car prices in europe are characterized by large and persistent differences across countries the purpose of this paper is to document and explain this price dispersion using a panel data set extending from 1980 to 1993 we first demonstrate two main facts concerning car prices in europe i the existence of significant differences in quality adjusted prices across countries with italy and the u k systematically representing the most expensive markets 2 substantial year to year volatility that is to a large extent accounted for by exchange rate fluctuations and the incomplete response of local currency prices to these fluctuations these facts are analysed within the framework of a multiproduct oligopoly model with product differentiation the model identifies three potential sources for the international price differences price elasticities generating differences in markups costs and import quota constraints local currency price stability can be attributed either to the presence of a local component in marginal costs or to markup adjustment that is correlated with exchange rate volatility the latter requires that the perceived elasticity of demand is increasing in price we find that the primary reason for the higher prices in italy is the existence of a strong bias for domestic brancs that generates high markups for the domestic firm fiat in the u k higher prices are mainly attributed to better equipped cars and or differences in the dealer discount practices the import quota constraints are found to have a significant impact on japanese car prices in italy france and the u k with respect to local currency price stability a large percentage of the documented price inertia can be attributed to local costs and a smaller fraction to markup adjustment that is indicative of price discrimination based on these results we conjecture that the emu will substantially reduce the year to year volatility observed in the car price data but without further measures to increase european integration it will not completely eliminate existing cross country price differences

perspective absorbing the concept of absorptive capacity how to realize its potential in the organization field the purpose of this perspective paper is to advance understanding of absorptive capacity its underlying dimensions its multilevel antecedents its impact on firm performance and the contextual factors that affect absorptive capacity twenty years after the cohen and levinthal 1990 paper the field is characterized by a wide array of theoretical perspectives and a wealth of empirical evidence in this paper we first review these underlying theories and empirical studies of absorptive capacity given the size and diversity of the absorptive capacity literature we subsequently map the existing terrain of research through a bibliometric analysis the resulting bibliometric cartography shows the major discrepancies in the organization field namely that 1 most attention so far has been focused on the tangible outcomes of absorptive capacity 2 organizational design and individual level antecedents have been relatively neglected in the absorptive capacity literature and 3 the emergence of absorptive capacity from the actions and interactions of individual organizational and interorganizational antecedents remains unclear building on the bibliometric analysis we develop an integrative model that identifies the multilevel antecedents process dimensions and outcomes of absorptive capacity as well as the contextual factors that affect absorptive capacity we argue that realizing the potential of the absorptive capacity concept requires more research that shows how micro antecedents and macro antecedents influence future outcomes such as competitive advantage innovation and firm performance in particular we identify conceptual gaps that may guide future research to fully exploit the absorptive capacity concept in the organization field and to explore future fruitful extensions of the concept

peer effects in higher education does the field of study matter does the peer effect vary with the field of study using data from a middle sized public university located in southern italy and exploiting the random assignment of first year students to college accommodation we find that roommate peer effects for freshmen enrolled in the hard sciences are positive and significantly larger than for freshmen enrolled in the humanities and social sciences we present a simple theoretical model which suggests that the uncovered differences between fields in the size of the peer effect could plausibly be generated by between field variation in labor market returns which affect optimal student effort jel i21 z13 j24 i introduction understanding the nature and importance of peer group effects in education is crucial for education policy peer effects are relevant for school choice tracking affirmative action selective admissions and the sources of school quality empirical research which seeks to estimate the existence size and non linearity of peer effects has run into several problems including the self selection reflection and correlated effects described by manski 1993 following sacerdote 2001 and zimmerman 2003 a popular approach in this literature has been to investigate roommate peer effects because in a number of universities and colleges the allocation of students to rooms can be argued

the history of the theory of the firm from marshall to robinson and chamberlin the source of positivism in economics a widely believed story in the folklore of the economics profession is that the theories of perfect competition and monopoly were well established from the time of marshall or perhaps pigou s economics of welfare and that the role of imperfect or monopolistic competition theory was to fill in the middle ground between these extremes it will be shown in this paper that the folklore conflicts with the historical evidence robinson and chamberlin created the theory of perfect competition in the course of inventing imperfect and monopolistic competition theory robinson and chamberlin between them were concerned with the same issues that concerned marshall the difference is that robinson and chamberlin derived their analyses from a few clear axioms while marshall sought to develop his analysis from a well informed but necessarily impressionistic description of actual business behaviour and dynamic processes along with the introduction of indifference analysis to english speaking economists by hicks and allen robinson and chamberlin gave the theory of value and distribution a complete and logically consistent axiomatic basis because their axioms relating to business motivation and behaviour were amenable to empirical verification the work of robinson and chamberlin rendered the theory of value and distribution open to a new empirical criticism it will be argued that the widespread acceptance of friedman s 195 3 positive methodological position was a necessary response to these empirical criticisms if the new axiomatic foundations of the theory of value and distribution were to be as secure as those previously provided by marshall

estimating and interpreting peer and role model effects from randomly assigned social groups at west point abstract the random assignment of cadets to social groups at west point provides a rare opportunity to highlight potentially misleading estimates of social group effects found in many studies estimates of contemporaneous group effects in human capital production are typically positive and significant however evidence in this study suggests that occurrences common to a group may account for much of this correlation models that address these biases provide little evidence of group effects in academic performance although there is evidence of group influences in choice outcomes such as the selection of academic major and the decision to remain in the army

price discrimination and markups in export markets abstract imperfect competition in international markets is one of the key explanations for why prices of similar goods might differ among destination countries this paper develops an empirical model to examine the presence of price discrimination stemming from imperfect competition in the international market for a country s exports the model is used to examine the export behavior of taiwanese exporters of footwear the generalized supply relation allows identification of deviations from competitive pricing in each export market in addition the model provides insights into the extent of exchange rate pass through finally the model is modified in order to estimate the effect of the voluntary export restraint imposed in the u s on footwear imports from taiwan

explaining the exchange rate pass through in different prices abstract this paper examines the performance of a variety of new open economy macroeconomic models in explaining the exchange rate pass through in a wide range of prices quantitative versions of different models are used to derive the dynamic response of various prices to an exchange rate shock predicted responses are compared with the evidence based on var models to examine how well different models fit the data the results show that the best fitting model incorporates a number of features highlighted by different strands of the literature sticky prices sticky wages distribution costs and a combination of local lcp and producer currency pricing pcp

exchange rates and traded goods prices abstract this paper presents a partial equilibrium model of the determination of domestic and export prices by a monopolistic competitive firm the model stresses the role of exchange rate uncertainty and expectations the most important result of the analysis is that the stochastic properties of deviations from the law of one price are crucially affected by the currency of denomination of export prices using data on domestic and dollar export prices of japanese goods i find that deviations from the law of one price are due to exchange rate surprises but also to price staggering and ex ante price discrimination

exchange rate pass through when market share matters the authors investigate the pass through from exchange rates to import prices when firms future demands depend on their current market shares they show that profit maximizing foreign firms may either raise or lower their dollar export prices when the dollar appreciates temporarily i e the pass through may be perverse and that current import prices may be more sensitive to expected future exchange rates than to current exchange rates they present evidence that suggests the behavior of expected future exchange rates may provide a clue to the puzzling recent behavior of u s import prices copyright 1989 by american economic association

goods prices and exchange rates what have we learned import prices typically change by a smaller proportion than the exchange rate between the exporting and importing country recent research indicates that common currency relative prices for similar goods exported to different markets are highly correlated with exchange rates between those markets this evidence suggests that incomplete pass through is a consequence of third degree price discrimination while distance matters for market segmentation borders have independent effects the source of the border effect has not been clearly identified furthermore there is little evidence yet to suggest substantial market power is implied by the observed price discrimination

micro macro and strategic forces in international trade invoicing synthesis and novel patterns abstract the currency used in invoicing international trade matters for the impact of exchange rate movements in the presence of price rigidities we present stylized facts on specific macro micro and other drivers of invoicing based on 45 million canadian import transactions four main results emerge first a large share of invoicing takes place in vehicle currencies that are neither the exporters nor the importers second we document a novel link between the size of individual transactions and invoicing both the absolute value of a transaction and its relative size at the industry level matter third the exchange rate plays an important role along three dimensions exchange rate volatility exchange rate regime and currency transaction volumes in foreign exchange markets finally we confirm the role of the market share of an exporting country at the industry level our results identify the most salient patterns in order to guide further developments in theoretical models of invoicing currency choice

identification of endogenous social effects the reflection problem this paper examines the reflection problem that arises when a researcher observing the distribution of behaviour in a population tries to infer whether the average behaviour in some group influences the behaviour of the individuals that comprise the group it is found that inference is not possible unless the researcher has prior information specifying the compisition of reference groups if this information is available the prospects for inference depend critically on the population relationship between the variables defining reference groups and those directly affecting outcomes inference is difficult to implossible if these variables are functionally dependent or are statistically independent the prospects are better if the variables defining reference groups and those directly affecting outcomes are moderately related in the population

pricing to market currency invoicing and exchange rate pass through to producer prices abstract in this paper we examine producer prices to shed light on a number of outstanding issues in the understanding of price adjustment in the face of fluctuating exchange rates first we provide results that link two closely related literatures on firm characteristics and exchange rate pass through and currency of invoicing and pass through we show that there is significant within and across industry heterogeneity in the currency of invoice of exports of canadian goods to the u s and further in the degree of pass through to producer prices next we exploit the fact that we observe firms that sell the same good to both the domestic and export markets often in different currencies to difference out the common marginal cost component of the prices this allows us to relate markups to exchange rate movements and we find evidence that pricing to market is most prominent when firms are setting export prices in u s dollars

international dimensions of optimal monetary policy abstract this paper provides a baseline general equilibrium model of optimal monetary policy among interdependent economies with monopolistic firms and nominal rigidities an inward looking policy of domestic price stabilization is not optimal when firms markups are exposed to currency fluctuations such a policy raises exchange rate volatility leading foreign exporters to charge higher prices vis a vis increased uncertainty in the export market as higher import prices reduce the purchasing power of domestic consumers optimal monetary rules trade off a larger domestic output gap against lower consumer prices optimal rules in a world nash equilibrium lead to less exchange rate volatility relative to both inward looking rules and discretionary policies even when the latter do not suffer from any inflationary or deflationary bias gains from international monetary cooperation are related in a non monotonic way to the degree of exchange rate pass through

does exchange rate stability increase trade and welfare we develop a simple general equilibrium framework to study the effect of the exchange rate system on trade and welfare an important feature of the model is deviations from purchasing power parity caused by rigid price setting in buyers currency we find the following first exchange rate stability is not necessarily associated with more trade in a simple benchmark model with separable preferences and only monetary shocks trade is unaffected by the exchange rate system consistent with most evidence second both trade and welfare can be higher under either exchange rate system depending on preferences and on the monetary policy rules followed under each system finally in general there is no one to one relationship between the levels of trade and welfare across exchange rate systems

it s not your peers and it s not your friends some progress toward understanding the educational peer effect mechanism abstract using a new administrative panel data set from the university of maryland this paper explores conventional peer effects and the effects of socially proximate peers at a large public university where some students are randomly assigned to housing results show that there is little evidence of robust residential peer effects on undergraduate performance the impact of socially proximate peers characteristics on student achievement is then examined using an instrumental variables technique results indicate that social friends do not impact performance more than randomized peers the paper casts doubt on the notion that social tie formation is the route to peer effects and urges caution in the continued pursuit of peer effects in education without substantial empirical or theoretical innovation

changes in college skills and the rise in the college wage premium the college wage premium for new labor market entrants rose sharply during the 1980s we ask how much of this change arose from changes in the skill level of the typical college graduate we find that skills attained prior to college as measured by standardized test scores and high school grades had no effect on the change in the college wage premium for men in contrast the returns to math ability rose considerably for women failing to account for math skills thus substantially overstates the growth in the female college wage premium skills acquired in college as reflected in the distribution of students across majors had important effects on the relative wages of men the trend away from low skill subjects such as education and toward high skill subjects such as engineering accounts for one fourth of the rise in the male college wage premium

in which currency should exporters set their prices this paper studies the choice of price setting currency for an exporter faced with the choice of setting price in his own in the importers or a third currency under exchange rate uncertainty we establish that sufficient conditions on demand and cost functions for exchange rate pass through to be less than unity under certainty are also sufficient conditions for price setting in the importer s currency to yield the highest expected profit under exchange rate uncertainty under the same conditions on demand and cost functions setting price in the importer s currency maximizes expected utility when risk aversion and forward currency markets are introduced

choice of specialization do peers matter social influence is an important factor in learning and decision making we estimate peer influence on student choice of specialization using data on undergraduate students of a russian university information about individual social ties has been gathered from a questionnaire survey we show that specialization choice is significantly influenced by friends as well as by study partners the strongest effect is produced by friends who are study partners and those who have similar academic achievements reciprocal friendship ties have a stronger influence on the choice than nonreciprocal ones also the decision is affected by classmates with similar academic achievement the results allow us to better understand the mechanisms of peer effects in the specialization choice

a simple model of educational standards the author models standards for educational credentials such as high school diplomas standard setters maximize their conception of social welfare knowing that utility maximizing students choose whether to meet the standard the author shows that more egalitarian policymakers set lower standards the median voter would prefer higher standards under symmetric distributions and decentralization lowers standards among identical communities optimal standards do not necessarily fall with increased student preference for leisure deterioration of nonstudent inputs to education or increased student heterogeneity superseding binary credentials by perfect information increases average achievement and social welfare for plausible degrees of heterogeneity egalitarianism and pooling under decentralization

exchange rates and prices the adjustment of relative prices to exchange rate movements is explained in an industrial organization approach given labor costs in the respective currencies exchange rate movements change costs for firms selling in the home market and thus disturb the industry equilibrium the extent of absolute and relative price adjustment is shown to depend on market integration product substitutability the relative number of domestic and foreign firms and the market structure the impact of exchange rates on prices is illustrated in a variety of approaches including the cournot a dixit and j stiglitz 1977 and s salop 1979 models some empirical evidence is offered in support of the theory copyright 1987 by american economic association

equivalence results for optimal pass through optimal indexing to exchange rates and optimal choice of currency for export pricing firms sometimes write price lists or catalogs for their exports so they set prices for a period of time and do not adjust prices during that interval in response to changes in their environment the firm sets the price either in its own currency or the importer s currency this paper draws a simple link between the choice of currency and the pricing decision of a firm that changes prices in response to all shocks specifically if the latter firm s price has a lower variance in terms of its own currency than the importer s currency then the firm with a price list will set the price in its own currency and otherwise it will set price in the foreign currency this relationship is established by consideration of the firm with a price list as a special case of a firm that indexes its export price to the exchange rate jel f4 f1