fixing exchange rates a virtual quest for fundamentals abstract fixed exchange rates are less volatile than floating rates but the volatility of macroeconomic variables such as money and output does not change very much across exchange rate regimes this suggests that exchange rate models based only on macroeconomic fundamentals are unlikely to be very successful it also suggests that there is no clear tradeoff between reduced exchange rate volatility and macroeconomic stability

shared inputs over capitalization and regulation abstract when inputs are joint in production a partially regulated firm has the incentive to allocate all joint inputs to the regulated jurisdiction the regulated firm if required to allocate costs will have less of an incentive to over capitalize

real exchange rate volatility and economic openness theory and evidence this paper relates the volatility of the trade weighted effective real exchange rate to the degree of trade openness of an economy the theoretical part presents an intertemporal monetary model of a small open economy with nominal rigidities both monetary and aggregate supply shocks are shown to produce ceteris paribus smaller real exchange rate movements if the country is more open to foreign trade empirical evidence on a cross section of forty eight countries confirms this relationship differences in trade openness explain a large part of the cross country variation in the volatility of the effective real exchange rate

u s bilateral trade flows and exchange risk during the floating period abstract this paper tests for real exchange rate risk effects on u s bilateral trade flows during the floating period using several new as well as previously used risk measures significant negative effects occur in five of six u s import flows and in two of six u s export flows with one export flow showing a significant positive effect these results are consistent with several previous findings for aggregate u s trade two risk measures using the forward exchange rate and assuming a time varying risk premium provide marginally more significant results than the others

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

fixed versus flexible exchange rates and the measurement of exchange rate instability a recent study by rana that examined exchange rate instability in eight asian countries concluded that owing to the non normality of the underlying exchange rate distributions the standard deviation was an erratic and misleading measure of variability the present paper argues that the choice of a suitable measure of instability cannot be made on mathematical grounds alone rana s preferred measure is shown to be inappropriate since it excludes from consideration precisely those observations of greatest significance conversely given the assumption of risk aversion the standard deviation is an entirely consistent measure results are also presented for an expanded study covering more than 150 countries

exchange rate volatility and intervention implications of the theory of optimum currency areas we show that variables pointed to by the theory of optimum currency areas ocas help to explain patterns of exchange rate variability and intervention across countries but oca considerations affect exchange market pressures and intervention in different ways exchange market pressures mainly reflect asymmetric shocks while intervention largely reflects the variables that oca theory suggests cause countries to value stable exchange rates small size and the extent of trade links intervention and exchange market pressure also vary with the structure of the international monetary system

forecasting wheat exports do exchange rates matter a vector autoregression is fit to recent u s data on wheat prices wheat export sales wheat export shipments and exchange rates forecast error decompositions and out of sample forecasts indicate that exchange rates have little influence on wheat sales and shipments

the law and economics movement in the last thirty years the scope of economics has expanded dramatically beyond its traditional domain of explicit market transactions today there is an economic theory of property rights of corporate and other organizations of government and politics of education of the family of crime and punishment of anthropology of history of information of racial and sexual discrimination of privacy even of the behavior of animals and overlapping all these but the last of law 2 some economists oppose this expansion in whole or more commonly in part 3 there are a number of bad reasons all i think closely related for such opposition and one slightly better one 1 one bad reason is the idea that economics means the study of markets so that nonmarket behavior is simply outside its scope this type of argument owes nothing really to economics but instead reflects a common misconception about language more specifically a failure to distinguish among three different types of word or concept the first type illustrated by the term marginal cost is purely conceptual the term is rigorously and unambiguously defined by reference to other concepts just as numbers are but again like numbers there is no observable object in the real world that it names try finding a firm s marginal costs on its books of account the second type of word illustrated by rabbit refers to a set of real world objects few such words are purely referential one can speak of a pink rabbit or a rabbit the size of a man without misusing the word even though one is no longer using it to describe anything that exists nevertheless the referential function dominates finally there are words like law religion literature and economics which are neither conceptual nor referential such words resist all efforts at definition they have in fact no fixed meaning and their dictionary definitions are circular they can be used but not defined 4 one cannot say that economics is what economists do because many noneconomists do economics one cannot call economics the science of rational choice either the word rational lacks a clear definition and passing that difficulty there can be noneconomic theories of rational choice in which few predictions of ordinary economics may hold for example because the theory assumes that people s preferences are unstable there can also be nonrational economic theories an example is the type of survival theory in industrial organization in which firms that randomly hit on methods of lowering their costs expand vis a vis their rivals another example is marxism one cannot call economics the study of markets either not only because that characterization resolves the question of the domain of eco judge u s court of appeals for the seventh circuit senior lecturer university of chicago law school 1111 e 60th st chicago il 60637 i thank gary becker frank easterbrook william landes geoffrey miller richard porter george stigler geoffrey stone and alan sykes for comments on a previous draft and nir yarden for research assistance see for example gary becker 1976 jack hirshleifer 1985 p 53 george stigler 1984 gerard radnitzky and peter bernholz 1986 2 for a recent conspectus of economic analysis of law see my book 1986 3see for example ronald coase 1978 coase is of course a leading figure in the economics of property rights so his opposition is far from total 4for an excellent discussion see john ellis 1974 ch 2

exchange rate volatility international trade and resource allocation a perspective on recent research abstract recent research on the effects of exchange rate volatility is discussed and directions for future research are explored the need to pay more attention to the effects of diversification and firms characteristic is emphasized it is suggested that while international risk has risen substantially since floating the differential between international and domestic risk may not this could help explain the failure of international trade to fall drastically and suggests that exchange rate volatility has been more a reflection than an independent cause of underlying instability

international financial volatility and agricultural commodity trade a primer recent international financial crises east asia in 1997 russia in 1998 brazil in 1999 and the speed with which they have spread across countries and regions have called into question the very desirability of financial globalization that is the opening of balance of payments capital accounts in both developed and emerging economies since the mid 1980s 1 calls for a new global financial architecture have multiplied and new and old theoretical arguments for and against controlling capital flows as well as domestic financial markets especially banks have been put forward imf rodrik stiglitz there is little empirical evidence to support the debate over the potential effects of enhanced financial volatility at the sectoral level and especially on the agricultural economy has international financial volatility actually affected real sectoral performance and if so how after briefly reviewing literature in this area this paper introduces the methodology and preliminary results of an on going research project that addresses that question with reference to agricultural commodity trade the purpose of the paper is both to generate productive discussion and to motivate similar research in this

intra national versus international trade in the european union why do national borders matter the first objective of this paper is to estimate border effects among european union countries in this context the specification of the gravity equation together with the choice of the distance measure are shown to be crucial for assessing the size of the border effect the second objective is to evaluate the determinants of the cross commodity variation in national border effects contrary to previous findings reported in the literature we show that trade barriers do provide an explanation in particular technical barriers to trade together with product specific information costs increase border effects whereas non tariff barriers are not significant our results further suggest that these barriers are not the only cause since the spatial clustering of firms is also found to matter

same currency different strategies the role of the exchange rate in shaping european agri food exports abstractthis article uses a nonlinear autoregressive distributed lag nadrl model introduced by shin yu and greenwood nimmo 2014 to assess the role that the exchange rate plays in shaping european agri food exports after the introduction of the euro although the 10 countries of this study share the same currency and thus a single nominal exchange rate with the us cross country discrepancies of exports reactions to exchange rate changes are evident moreover i find that exchange rate changes influence exports asymmetrically in the long run euro appreciations are harmful to a lesser extent than euro depreciations are beneficial for european agri food exports the magnitude of this effect is country specific and varies considerably between individual exporting countries exported quantities are less affected by exchange rate fluctuations than export values which is in line with local currency price stabilization strategies of the exporters this finding is interpreted as a sign of an incomplete

exchange rate uncertainty and agricultural trade using a sample of bilateral trade flows across ten developed countries between 1974 and 1995 this article explores the effect of exchange rate uncertainty on the growth of agricultural trade as compared to other sectors based on a gravity model that controls for other factors likely to determine bilateral trade the results show that real exchange rate uncertainty has had a significant negative effect on agricultural trade over this period moreover the negative impact of uncertainty on agricultural trade has been more significant compared to other sectors

the impacts of exchange rate volatility on vegetable trade flows trade flows of commodities are generally affected by the principles of comparative advantage in a free trade however trade flows might be enhanced or distorted not only by various government interventions but also by exchange rate fluctuations among others this study applies a commodity specific gravity model to selected vegetable trade flows among organization for economic co operation and development oecd countries to determine the effects of exchange rate uncertainty on the trade flows using the data from 1996 to 2002 the results show that while the exchange rate uncertainty significantly reduces trade in the majority of commodity flows there is evidence that both short and long term volatility have positive effect on trade flows of specific commodities this study also tests the regional preferential trade agreements such as the north american free trade agreement nafta the asia pacific economic cooperation apec and the eu and their different effects on commodities

exchange rate risk and u s agricultural trade flows this paper analyzes the effect of exchange rate risk on u s agricultural trade flows a model which incorporates exchange rate risk is applied to ten countries while exchange rate risk was not significant in the seven developed markets results indicate that the exchange rate variable adversely affected u s agricultural exports to the three developing countries used in the analysis these findings underscore the importance of exchange rate risk in developing countries trading behavior issues such as establishment of well developed financial and commodity markets in developing countries must be addressed in future research

real and nominal exchange rates in the long run an empirical investigation abstract this paper reports on econometric tests of the hypothesis that purchasing power parity holds as a long run relationship using data on eight industrialized countries during the flexible exchange rate period the empirical work proceeds by i testing whether nominal exchange rates and relative price levels are co integrated and ii conducting impulse response analysis of long run exchange rate and relative price level changes to explain the data keynesian models suggest that shocks during the estimation period were due principally to exogenous shifts in aggregate demand while equilibrium models suggest that monetary factors have been relatively more important

the economics of invention incentives patents prizes and research contracts though public intervention in the market for research is virtually universal economists have paid surprisingly little attention to the choice of the form of research incentive in a given market structure many studies concentrate on patents but any assumption of their superiority over other incentives has been founded on intuition rather than on formal analysis in this paper i analyze the choice between three of the most common alternative means of public intervention in the research market namely patents prizes and direct contracting for research services i show why and under what conditions any one of the three may be preferred by a social welfare maximizing administrator in a competitive economy using a model that for the first time pays explicit attention to differences in the informational roles of each of these alternatives in the extensive literature on the economics of patents see arnold plant 1934 fritz machlup 1958 charles taylor and z a silberston 1973 morton kamien and nancy schwartz 1975 and f m scherer 1977 for valuable surveys formal analysis weighs the benefits of patents as a solution to the market failure associated with the inappropriability of knowledge against the welfare cost due to the restriction on the use of the knowledge generated and this tradeoff is optimized by patent life adjustment in william nordhaus 1969 scant analytical attention is paid to alternative incentive mechanisms an exception is ben yu 1981 who considers the role of prior contracting for inventions but as many writers for example dan usher 1964 yoram barzel 1968 joseph stiglitz 1969 carole kitti 1973 glenn loury 1979 partha dasgupta and stiglitz 1980a have pointed out in various contexts the incentive offered by an unlimited patent to competitive researchers may be excessive due to the common pool problem discussed further in section i below if the patent administrator and researchers share the same information as implicitly assumed in previous models then the patent life limitation can be adjusted to provide the optimal patent incentive given the common pool problem but in all such models patents would not be chosen in a fully optimized fiscal system researchers and the administrator are assumed to have identical information about the shadow price of potential inventions a patent is just a means of turning this shadow price into a monetary reward but monetary compensation can instead be offered directly to researchers by the state assuming that patent revenues incur a higher deadweight loss than an equivalent amount of public funds financed by less distortionary means for example a minimally efficient tax system appropriate prizes or government contracts are socially preferable to patents with optimal lives if the patent is ever to be the optimal incentive mechanism for research it must possess advantages not captured in existing models informal discussions of patents emphasize their informational role to include the latter as a justification for decentralized invention incentives i incorporate an ex ante imbalance of information about costs and benefits of research in the model presented in section ii but this alone is not quite enough it is further necessary to specify that the terms of the award must be fixed before department of economics economic growth center box 1987 yale station yale university new haven ct 06520 i thank with the usual caveat marguerite alejandro wright cindy arfken martin baily nuong brennan steven englander robert evenson richard levin richard nelson susan rose ackerman denis wright and two referees for assistance of various kinds

one money one market the effect of common currencies on trade currency unions their dramatic effect on international trade a gravity model is used to assess the separate effects of exchange rate volatility and currency unions on international trade the panel data bilateral observations for five years during 1970 90 covering 186 countries includes 300 observations in which both countries use the same currency i find a large positive effect of a currency union on international trade and a small negative effect of exchange rate volatility even after controlling for a host of features including the endogenous nature of the exchange rate regime these effects statistically significant imply that two countries sharing the same currency trade three times as much as they would with different currencies currency unions like the european emu may thus lead to a large increase in international trade with all that that entails andrew rose

exchange rate behaviour are fundamentals important one of the most controversial issues in the international economics literature concerns the role of economic fundamentals in explaining exchange rate behaviour we interpret this controversy as having three different aspects the first concerns the relationship between exchange rates and fundamentals in the long run the second the usefulness of fundamentals in producing out of sample forecasts which dominate a random walk and the third controversy concerns the relative importance of shocks to real and nominal fundamentals in explaining real exchange rate variability this as we shall see is related to the first controversies one and two therefore may be thought of as relating to the first moment of exchange rate behaviour while the third is associated with the second moment the first controversy may be motivated by referring to fig 1 which portrays the logarithm of the real and nominal exchange rates of the mark dollar

international trade and exchange rate volatility for currencies with well developed forward markets several papers have investigated the conjectured negative relationship between trade and short term exchange rate volatility without being very successful a theoretical explanation for the empirical anomalies is provided by solving explicitly for the forward rate because importers and exporters are on opposite sides of the forward market so is their exposure towards exchange rate volatility moreover which trade flow benefits and which one loses from increased volatility is determined by the signs of the aggregate net foreign currency exposure and the aggregate measure of risk aversion

understanding bilateral exchange rate volatility abstract this paper develops an empirical model of bilateral exchange rate volatility we conjecture that for developing economies external financial liabilities have an important effect on desired bilateral exchange rate volatility above and beyond the standard optimal currency area oca factors by contrast industrial countries do not face the same set of constraints in international financial markets in our theoretical model external debt tightens financial constraints and reduces the efficiency of the exchange rate in responding to external shocks we go on to explore the determinants of bilateral exchange rate volatility in a broad cross section of countries for developing economies bilateral exchange rate volatility relative to creditor countries is strongly negatively affected by the stock of external debt for industrial countries however oca variables appear more important and external debt is generally not significant in explaining bilateral exchange rate volatility

exchange rate uncertainty and foreign trade abstract this paper starts with reviewing the existing literature on exchange rate uncertainty and trade flows it then argues that potential costs of medium term uncertainty in exchange rates and competitiveness are likely to be much larger than that of exchange risk which has been the focus of the existing literature two measures of medium term exchange rate uncertainty are constructed one is a weighted function of the magnitude of past movements in nominal exchange rates and the current deviation of the exchange rate from equilibrium while the second depends on both the duration and the amplitude of misalignment from equilibrium exchange rates the empirical evidence reported in the paper suggests that when exchange rate uncertainty is defined over a medium term period it does affect adversely trade flows of the industrial countries under review with the notable exception of the united states

trade blocs currency blocs and the reorientation of world trade in the 1930s we analyze the impact of commercial and financial policies on the reorientation of trade in the 1930s we report evidence that commercial policies attenuated prior connections between income growth and trade and that exchange rate instability marginally discouraged international trade in contrast the tendency toward regionalization commonly ascribed to the formation of trade and currency blocs was already evident to a considerable extent prior to the regional policy initiatives of the 1930s this reorientation is more properly attributed to ongoing historical forces such as commercial and financial links between countries forged over many years

inducement prizes and innovation we examine the effect of prizes on innovation using data on awards for technological development offered by the royal agricultural society of england at annual competitions between 1839 and 1939 we find large effects of the prizes on competitive entry and we also detect an impact on patents especially when prize categories were set by a strict rotation scheme thereby mitigating the potentially confounding effect that they targeted only hot technology sectors prizes encouraged competition and medals were more important than monetary awards the boost to innovation we observe cannot be explained by the re direction of existing inventive activity

real exchange rate behavior the recent float from the perspective of the past two centuries using annual data spanning two centuries for dollar sterling and franc sterling real exchange rates we find strong evidence of mean reverting real exchange rate behavior using simple stationary autoregressive models estimated on prefloat data we easily outperform nonstationary real exchange rate models in dynamic forecasting exercises over the recent float such stationary univariate equations explain 60 80 percent of the in sample variation in real exchange rates although the degree of short run persistence may be high the econometric estimates imply a half life of shocks to the real exchange rate of about 6 years for dollar sterling and a little under 3 years for franc sterling

the effects of real exchange rate risk on international trade abstract by assuming real profit maximization and uncertain prices as well as exchange rates we conclude that it is uncertain percentage changes in the real exchange rate that are risky in international trade empirical estimation of fourteen bilateral trade flows among industrialized countries finds a significant negative effect on trade quantity from such risk in a number of these cases the expectation variable has a positive effect in a larger number of cases significant price effects from the expectation variable are fewer and from risk are negligible

sectoral effects of exchange rate volatility on united states exports abstract we analyze the effects of real exchange rate volatility on the proportions of bilateral exports of nine categories of goods from the united states to seven major industrial countries using a fixed effect framework in six of the nine categories the volatility of the real exchange rate significantly affects the value of exports and in five of these categories the effect is positive these results are consistent with a model in which risk neutral firms increase supply of elastically demanded exports in response to an increase in the volatility of the real exchange rate

monetary and exchange rate policies for international financial stability a proposal w v ithout a common monetary standard the remarkable integration of western european north american and the industrialized asian economies in both commodity trade and financial flows is less efficient and becoming untenable dissatisfaction with wildly fluctuating relative currency values euphemistically called floating or flexible exchange rates is a prime cause of the resurgence in protectionism in 1986 87 the overvalued yen forced japanese industrialists to close factories retire workers and write off once valuable investments in plant and equipment this parallels what their american counterparts were forced to do between 1981 and 1985 when the dollar suddenly became overvalued similarly the paring down of the british manufacturing base was precipitated when the pound unexpectedly became a strong petrocurrency in 1979 81 in agriculture japan and european countries are determined to insulate their domestic prices of farm products from unsettling international influences including volatile fluctuations in the yen dollar or mark dollar exchange rates thus unless exchange stability is first achieved the american government s attempt to broaden the general agreement on tariffs and trade to encompass agriculture and services is likely to fail but what keeps the three major industrial blocs from developing a common monetary standard to prevent exchange rate fluctuations although many people

the dynamics of the transfer and renewal of patents this article explores new data on the transfer and renewal of u s patents and interprets this new evidence using a model of patent transfers and renewal we find that the proportion of transferred patents is large and differs across technology fields and especially type of patentees we also find that the probability of a patent being traded depends on a number of factors the age of the patent the number of citations received by a given age the patent generality and whether the patent has been previously traded or not these findings are consistent with the predictions of a model of patent transfers and renewals

behavior of the firm under regulatory constraint a recent article by akira takayama discusses an earlier paper by harvey averch and leland l johnson on fair rate of return regulation of public utilities although takayama p 255 agrees with averch and johnson s general conclusions that a firm will tend to increase its investment with the introduction of an active constraint on its rate of return he criticizes the a j argument as being confusing ambiguous and in error takayama then attempts a clarification and presents a new formulation which leads to the a j result quoted above this comment will discuss several of takayama s criticisms in addition to showing that the so called a j effect cannot be derived from the basic assumptions made by both averch and johnson and takayama 1 we will show that the very assumptions used to prove the a j effect by defining the region of x require an assumption that the a j effect exists in the first place

the depressing effect of agricultural institutions on the prewar japanese economy why didn t the japanese miracle take place before world war ii the culprit we identify is a barrier that kept prewar agricultural employment constant using a standard neoclassical two sector growth model we show that the barrier induced sectoral distortion and an ensuring lack of capital accumulation account well for the depressed output level without the barrier japan s prewar gnp per worker would have been at least about a half of that of the united states not about a third as in the data the labor barrier existed because we argue the prewar patriarchy forced the son designated as heir to stay in agriculture

how do patent laws influence innovation evidence from nineteenth century world fairs studies of innovation have focused on the effects of patent laws on the number of innovations but have ignored effects on the direction of technological change this paper introduces a new dataset of close to fifteen thousand innovations at the crystal palace world s fair in 1851 and at the centennial exhibition in 1876 to examine the effects of patent laws on the direction of innovation the paper tests the following argument if innovative activity is motivated by expected profits and if the effectiveness of patent protection varies across industries then innovation in countries without patent laws should focus on industries where alternative mechanisms to protect intellectual property are effective analyses of exhibition data for 12 countries in 1851 and 10 countries in 1876 indicate that inventors in countries without patent laws focused on a small set of industries where patents were less important while innovation in countries with patent laws appears to be much more diversified these findings suggest that patents help to determine the direction of technical change and that the adoption of patent laws in countries without such laws may alter existing patterns of comparative advantage across countries jel d2 k11 l51 no 014

the effects of exchange rate volatility on agricultural trade i extend cho sheldon and mccorriston s 2002 analysis of the effect of exchange rate volatility on agricultural trade among the g 10 countries to a broad sample of developed and developing nations i replicate their original finding that exchange rate volatility has a large negative impact on agricultural trade between g 10 members after controlling for agricultural export subsidies which are correlated with exchange rate volatility i show that the original impact declines by half using the extended sample i find that the effect of exchange rate volatility is much larger for developing country exporters than for developed exporters copyright 2008 oxford university press

monetary policy real exchange rates and u s agricultural exports interest rates will attract capital to dollar money market instruments which in turn will cause the value of the dollar to rise in foreign exchange markets a stronger dollar makes our exports more expensive to other countries thereby reducing the quantity demanded and it also causes the price of imports into the united states to decline in dollar terms creating competitive pressures for domestic imports sic that compete with imports such as the automobile steel and textile industries the monetary authorities accomplish what they want to accomplish but the burden of adjustment is borne by the export sectors and the sectors that have strong import competition in this way one can see that the problems of agriculture and the automobile industry in the early 1980 s have been cut in part from the same cloth a period of very tight monetary policy

monopolistic competition and international trade reconsidering the evidence we test some propositions about international trade flows that are derived from models of monopolistic competition developed by elhanan helpman and paul krugman we investigate whether the volume of trade between oecd countries is consistent with the predictions of a model in which all trade is intraindustry trade in differentiated products we then repeat the test with non oecd countries we also investigate whether the share of intraindustry trade is consistent with a more general theoretical model in which some but not all trade is intraindustry trade our results lead us to question the apparent empirical success of these models

measuring and analysing the effects of short term volatility in real exchange rates this paper examines short term volatility in the real effective exchange rates of industrial countries and its impact on their imports it yields three conclusions first volatility has not diminished as markets have gained experience with floating exchange rates the trend appears to be in the opposite direction for some countries second exposure to short term volatility has differed among countries japan and sweden have experienced much more than most other industrial countries third volatility appears to depress the volume of international trade this third finding is consistent with results reported by cushman and by akhtar and hilton and challenges earlier findings by hooper and kohlhagen

exchange rate uncertainty and us bilateral fresh fruit and fresh vegetable trade an application of the gravity model in order to analyse the effect of exchange rate uncertainty we apply an empirical gravity equation to two sets of us bilateral trade data fresh fruit over the period 1976 1999 for a panel of 26 countries and fresh vegetables over the period 1976 2006 for a panel of nine countries based on panel estimation methods and using both a moving sd measure and the peree and steinherr 1989 measure of exchange rate uncertainty the results show that us bilateral fresh fruit trade has been negatively affected by exchange rate uncertainty we also find some evidence that the exchange rate between the us dollar and the currencies of latin american trading partners accounts for most of the negative impact of exchange rate uncertainty on bilateral trade flows in fresh fruit in contrast when using panel estimation methods and both measures of exchange rate uncertainty we find no statistically significant evidence for any negative effect of exchange rate uncertainty on us bilateral fresh vegetable trade however

the over capitalization effect with diversification and cross subsidization abstract this paper examines diversification and cross subsidization in the context of an averch johnson model even if the allowed rate of return is less than the cost of capital the over capitalization effect exists provided the firm is sufficiently diversified

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

150 years of patent protection this paper examines three sets of explanations for variations in the strength of patent protection across sixty countries and a 150 year period wealthier nations are more likely to have patent systems to allow patentees a longer time to put their patents into practice and to ratify treaties assuring equal treatment of other nations but they are also likely to charge higher fees and limit patent protection in some important ways countries with democratic political institutions are consistently more likely to have patent protection appear to be determined by historical factors the origin of a country s commercial law appears particularly important in explaining the presence of restrictions on patentees privileges and discriminatory provisions against foreign patentees this abstract was borrowed from another version of this item

japanese research consortia a microeconometric analysis of industrial policy despite the existence of much theoretical research analyzing the potential benefits and costs of r d consortia there has been little corresponding empirical work on their efficacy in this paper we undertake a large sample econometric study of japanese government sponsored research consortia we find evidence that frequent participation in these consortia has a positive impact on research expenditure and research productivity these results hold after controlling for the potential endogeneity of intensity of participation in consortia to participating firms research productivity furthermore we find evidence that part of this impact arises from the increased knowledge spillovers that take place within these consortia

hybrid innovation in meiji japan japan s hybrid innovation system during the meiji era provides a useful laboratory for examining the effectiveness of complementary incentives to patents patents were introduced in 1885 and by 1911 1 2 million mostly nonpecuniary prizes were awarded at 8 503 competitions prizes provided a strong boost to patents especially in less developed prefectures and they also induced large spillovers of technical knowledge in prefectures adjacent to those with prizes relative to distant control prefectures without prizes linking competition expenditures with the expected market value of patents induced by the prizes permits a cost benefit assessment of the prize competitions to be made

a panel project on purchasing power parity mean reversion within and between countries abstract previous time series studies have shown evidence of mean reversion in real exchange rates deviations from purchasing power parity ppp appear to have half lives of approximately four years however the long samples required for statistical significance are unavailable for most currencies and are potentially inappropriate because of regime changes in this study we re examine deviations from ppp using a panel of 150 countries and 45 annual post wwii observations our panel shows strong evidence of mean reversion that is similar to that from long time series ppp deviations are eroded at a rate of approximately 15 annually i e their half life is around four years such findings can be masked in time series data but are relatively easy to find in cross sections

estimates of the value of patent rights in european countries during the post 1950 period this paper examines the distribution of the values of patent rights in the united kingdom france and germany during the post 1950 period these values are inferred from the behavior of patentees with respect to payment of renewal fees on their patents a simple economic model of renewal decisions is combined with data on the proportion of patents renewed at alternative ages and the renewal fee schedules to produce estimates of the distribution and the total value of patent rights in these countries moreover the data indicate that there have been changes in the value distribution and we follow these changes over the period the empirical results of particular interest concern the total value of patent rights and the relationship between changes in it and changes in the quantity of patents the skew in the distribution of patent values and the rate of obsolescence on the returns to patents

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

does innovation cause stock market runups evidence from the great crash this article examines the stock market s changing valuation of corporate patentable assets between 1910 and 1939 it shows that the value of knowl edge capital increased significantly during the 1920s compared to the 1910s as investors responded to the quality of technological inventions innovation was an important driver of the late 1920s stock market runup and the great crash did not reflect a significant revaluation of knowledge capital relative to physical capital although substantial quantities of influential patents were accumulated during the post crash recovery high technology firms did not earn significant excess returns over low technology firms for most of the 1930s

exchange rate uncertainty and the demand for u s soybeans this study examines the effects of exchange rate uncertainty on bilateral soybean trade flows and finds that imports for japan france and spain are sensitive to short term variations in nominal bilateral exchange rates this research extends previous work by focusing on bilateral trade for a single commodity using a longer sample period and testing over a variety of model specifications the results suggest that the effects vary across countries depending on access to forward markets the availability of alternative soybean suppliers the degree of market concentration in the domestic soybean processing sector and the degree of currency risk importers are willing to assume the decline in u s agricultural exports during the 1980s has been explained by numerous factors including stagnant world income increased foreign competition the existence of trade barriers and the level of the exchange rate an additional factor exchange rate volatility has received less attention in agricultural trade models since the adoption of the flexible exchange rate system in the early 1970s variability in exchange rates has had a potentially destabilizing impact on trade disruptions in trade can occur because exchange rate variations change the actual price paid or received for traded goods causing adjustments in quantities traded domestic prices or in the timing of sales in order to avoid the effects of variability on profits other longer term effects may occur if exchange rate uncertainty persists to the extent that goods are substitutable such adjustments can be manifested as a sustained preference for domestic suppliers over foreign suppliers or alternative sources of foreign supply may be explored the magnitude of the effect of exchange rate uncertainty on quantity imported is dependent upon inter alia the respective exchange rate elasticities and the importer s response to variability for some goods this magnitude can be substantial the objective of this study is to determine

testing purchasing power parity under the null hypothesis of co integration this paper analyzes monthly data on the exchange rates and price indices of the eleven major industrial countries over the modern period of floating exchange rates it presents tests that are based upon the null hypothesis of cointegration the paper finds evidence that most country pairs not involving north american currencies have exchange rates and price indices that are cointegrated it estimates the error correction representation for the series that are cointegrated and it shows that the dynamic adjustment of the relationship between exchange rates and prices is accomplished almost entirely in the market for foreign exchange copyright 1991 by royal economic society

has exchange risk depressed international trade the impact of third country exchange risk abstract this paper argues that the effect of exchange risk on bilateral and aggregate trade flows should be analyzed by including the impact of third country exchange risk factors in addition to direct bilateral or multilateral risk after a theoretical examination of these effects us bilateral export flow to its six largest trading partners are analyzed empirically i find individuality and jointly significant third country risk effects in most cases in contrast to some recent bilateral efforts i find a steadily growing negative impact on trade flows from exchange risk during floating and in contrast to recent aggregate trade flow studies i conclude that there was no temporary decline in exchange risk during the late 1970s

recent exchange rate experience and proposals for reform university of california at berkeley department of economics berkeley california 94720 3880 center for international and development economics research working paper no c96 060 recent exchange rate experience and proposals for reform jeffrey a frankel department of economics university of california berkeley january 1996 key words exchange rate foreign exchange market volatility speculation bubble mckinnon tobin tax iel classification f31 f33

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

real exchange rate misalignment and agricultural export performance in developing countries the influence of fluctuating currency values on agricultural trade has been acknowledged especially since the demise of the bretton woods system of fixed exchange rates following g e schuh s pioneering articles linking exchange rates to country performance in the global agricultural market several attempts were made to quantify the effects of nominal and real exchange rate movements on agricultural trade recently another body of literature emerged aimed at quantifying the effects of exchange rate risk on trade 2 despite these studies inadequate attention has been directed toward analyses of underlying policies that directly influence real exchange rates and that indirectly affect trade performance specifically the issue of incorrect real exchange rate alignment has been ignored real exchange rate misalignment occurs in markets in which actual exchange rates are not allowed to adjust to changes in economic fundamentals unsustainable monetary fiscal and various trade and exchange control policies are its principal cause calculation of misaligned exchange rates is dependent on the ability to disentangle equilibrium from disequilibrium disturbances affecting movements in actual real exchange rates quantification represents a major challenge purchasing power parity ppp provides the simplest way to estimate misalignment however real exchange rate deviations from ppp often do not indicate incorrect alignment of the real exchange rate because the actual rate ought to vary in response to external or internal shocks that modify the equilibrium rate ideally misalignments are measured using real exchange rates that are permitted to vary in response to changed economic conditions the changing path of real equilibrium exchange rates is somewhat elusive and can be identified using a structural model