a principal components analysis of international financial integration under fixed and floating exchange rate regimes this paper presents an application of factor analytic techniques employing principal components analysis to determine to what extent international financial integration has been enhanced as a result of the move to a floating exchange rate regime by the major industrialized countries in the early 1970s while several alternative though related definitions exist financial integration is viewed here as the extent to which the levels or changes in interest rates in different financial centers move in harmony the results suggest that there has not been a marked increase in scope for countries to pursue independent interest rate policies since 1973 though germany would seem to be an exception to this general observation

which market integration measure abstract this paper compares the dynamics of the financial integration process as described by different empirical approaches to this end a wide range of measures accounting for several dimensions of integration is employed in addition we evaluate the performance of each measure by relying on an established international finance result i e increasing financial integration leads to declining international portfolio diversification benefits using monthly equity market data for three different country groups i e developed markets emerging markets developed plus emerging markets and a dynamic indicator of international portfolio diversification benefits we find that i all measures give rise to a very similar long run integration pattern ii the standard correlation explains variations in diversification benefits as well or better than more sophisticated measures these findings are robust to a battery of robustness checks

evidence on nonlinear error correction in money demand the case of taiwan this paper proposes a nonlinear error correction model based upon smooth transition regression methodology the model is specified such that the short run adjustment toward long run equilibrium is nonlinear and that the error correction is a smooth function of long run deviation empirical results obtained from estimating m2 money demand in taiwan support the hypothesis of a nonlinear error correction process and provide better interpretation of change in the demand for money

measuring international capital mobility a review many barriers to the international movement of capital across national boundaries have been dismantled over the course of the last 20 years financial integration was greatly enhanced by the removal of capital controls on the part of the united states germany canada switzerland and the netherlands after 1973 the recycling of surpluses to developing countries through the euromarkets in the 1970 s the removal of capital controls in the united kingdom and japan beginning in 1979 financial integration among european community countries including france and italy in preparation for 1992 recent moves toward financial liberalization in smaller countries in the pacific and the steady process of technical and institutional innovation that has proceeded around the world some popular tests of international capital mobility however appear to show anomalous results martin feldstein and charles horioka upset conventional wisdom in 1980 when they concluded that changes in countries rates of national saving had very large effects on their rates of investment and interpreted this finding as evidence of low capital mobility the argument

beyond hofstede and globe improving the quality of cross cultural research journal of international business studies 2010 41 1259 1274 doi 10 1057 jibs 2010 41 overview of 41 8 hofstede and globe in cross cultural research while hofstede s work was not the first systematic study on crossnational cultures his seminal book culture s consequences international differences in work related values 1980 succeeded in putting cross cultural analysis at the forefront of international business ib research in a later paper he boldly asserted that the business of international business is culture 1994 1 despite the criticisms that have been voiced against his work see mcsweeney 2002 oyserman coon kemmelmeier 2002 hofstede s influence on the fields of ib and management is undeniable according to harzing s publish or perish citation index as of june 2010 there were over 54 000 citations to his work this is a remarkable record that attests to first the growing popularity of cross cultural research in light of continued internationalization of the world economy and second hofstede s personal impact on scholarly research this jibs issue brings together 10 articles on culture and ib all of which were submitted to the editorial team led by jibs editorin chief lorraine eden while the articles were independently submitted through the regular double blind reviewing process the decision to join them in one collection creates in effect a special issue on culture in international business research which the jibs editors hope will be widely read and cited by ib scholars in general terms the papers in this collection fall into one of two categories 1 articles and commentaries about conceptual and methodological issues associated with hofstede s oeuvre vs the global leadership and organizational behavior effectiveness globe project s cultural dimensions and 2 articles and perspectives that use culture and or cultural dimensions as well as the operational measurement thereof to explain differences in behavior and practices across countries the common feature of all these scholarly pieces is that they challenge particular assumptions often made too easily in conventional cross cultural research the first paper in this collection is a perspective written by franke and richey that cautions against questionable generalizations from small numbers of countries in international business research using statistical analysis to support their assertion franke and richey argue that in order to draw credible generalizations in ib a minimum of 7 10 countries must be used this is an important message researchers should never formulate strong conclusions about the impact of cultural dimensions on journal of international business studies 2010 41 1259 1274 2010 academy of international business all rights reserved 0047 2506

is there a world real interest rate abstract this study uses panel data techniques to estimate a common component to the ex post real interest rates of nine countries with liberal capital markets over the past 16 years we show that the residuals from such a regression have almost no serial correlation and that each country s real interest rate is highly correlated with the estimated world real interest rate the primary exception to these findings is the behavior of the us real interest rate which exhibits large and persistent deviations from the estimated world real interest rate although it is still highly correlated with the world real interest rate

the rebirth of the liberal creed paths to neoliberalism in four countries1 since the 1970s market based economic policies have been institutionalized as a nearly global policy paradigm using four national case studies this article shows that economic and financial globalization played a critical role in fostering the transition to neoliberal policies but that local institutional conditions were decisive in shaping the nature and meaning of the shift while the analysis finds that developing countries appear more dependent upon direct external pressures than developed ones it also shows that institutionalized patterns of state society relations determined the way in which neoliberal transitions were carried out somewhat irrespectively of the level of economic development in chile and britain poorly mediated distributional conflict created the ideological conditions for a monetarist revolution in mexico and france on the other hand neoliberalism was understood mainly as a necessary step to adapt the country to the international economy

emerging market spreads then versus now we analyze yield spreads on sovereign bonds issued by emerging markets using modern data from the 1990s and newly collected historical data on bonds traded in london during 1870 1913 a previous era of global capital market integration we show that spreads today comove across emerging markets to a significantly higher degree than they did in the historical sample moreover sharp changes in spreads in the 1990s tend to be mostly related to global events whereas they were primarily related to country specific events in 1870 1913 although we find that fundamentals comove somewhat more strongly today than they did in the past we conjecture that today s investors pay less attention to country specific events than their predecessors did

measuring financial market integration over the long run is there a u shape abstract using long time series for sovereign bond markets of fifteen industrialized economies from 1875 to 2009 i find that financial market integration by the end of the 20th century was higher than in earlier periods and exhibited a j shaped trend with a trough in the 1920s the main reason for the higher financial integration seen today is the recent extensive globalization around the turn of the 20th century countries frequently drifted apart conversely in recent years the bond markets of most countries have moved together both policy variables and the global market environment play a role in explaining the time variation in integration while unexplained changes in the overall level of country risk are also empirically important my methodology based on principal components analysis is immune to outliers and accounts for global and country specific shocks and hence can capture trends in financial integration more accurately than standard techniques such as simple correlations

a century of global equity market correlations in this paper we use a unique long run dataset of regulatory constraints on capital account openness to explain stock market correlations since stock returns themselves are highly volatile any examination of what drives correlations needs to focus on long runs of data this is particularly true since some of the short term changes in co movements appear to reverse themselves delroy hunter 2005 we argue that changes in the co movement of indices have not been random rather they are mainly driven by greater freedom to move funds from one country to another in related work geert bekaert and campbell harvey 2000 show that equity correlations increase after liberalization of capital markets using a number of case studies from emerging countries we examine this pattern systematically for the last century and find it to be most pronounced in the recent past we compare the importance of capital account openness with one main alternative explanation the growing synchronization of economic fundamentals we conclude that greater openness has been the single most important cause of growing correlations during the last quarter of a century though increasingly correlated economic fundamentals also matter in the conclusion we offer some thoughts on why the effects of greater openness appear to be so much stronger today than they were during the last era of globalization before 1914 this abstract was borrowed from another version of this item

stability without a pact lessons from the european gold standard 1880 1914 stability pacts european lessons from the gold standard the gold standard was a system of fixed exchange rates that offered little opportunity for carrying out monetary policies short of suspending gold convertibility trade integration and capital mobility were very high it is worthwhile asking whether there are useful lessons to draw for emu from european experience during that period one clear lesson is that debts matter another basic finding is that the stability of the european gold standard depended on the underlying price trend deflation prior to 1895 resulted in rising public debt burdens which forced some countries to leave the system once gold was discovered and deflation gave way to inflation real interest service fell debts grew more slowly and a high degree of convergence allowed most countries to return to gold for emu this result implies that stability will hinge on the ecb s policy not being too restrictive other lessons concern the fragility of institutions in the face of deep public finance difficulties the risks for the single market of leaving out countries that have not fully converged and the existence of a virtuous cycle including low real interest rates fast growth and debt reduction marc flandreau jacques le cacheux and frederic zumer

economic policies and demand for money evidence from canada this study identifies canadian fiscal and monetary policy regime changes that could influence the services of money it is argued that if these policy regime changes were not incorporated in the estimation of demand for real balances the resulting estimate would be biased and unstable using canadian monthly data for the january 1975 to june 2001 period the paper estimates a standard demand for money m1 function with and without these policy regime changes it was found the demand for money in canada is stable over the short and long run periods when these policy regime changes are incorporated and the estimated coefficients have correct signs

long term global market correlations the correlation structure of the world equity markets varied considerably over the past 150 years and was high during periods of economic integration we decompose diversification benefits into two parts one component due to variation in the average correlation across markets and a another component due to the variation in the investment opportunity set from this we infer that periods of globalization have both benefits and drawbacks for international investors globalization expands the opportunity set but as a result the benefits from diversification rely increasingly on investment in emerging markets

the thick description and comparison of societal systems of capitalism critiques of international business theory have recently pointed to weaknesses in the handling of context of culture and of policy implications it is contended that the origins of such failings lie in the discipline s commonly accepted methodologies and in turn that they have epistemological roots as a route out of the dilemmas faced a proposal is made to adopt more complete ways of handling determinacy including the influences of history culture and the societal emergence of institutions business systems theory is drawn upon and a model proposed developed from the work of whitley in this culture is seen as underpinning formal institutions which in turn underpin societal business systems the use of the model relies on the ideas of geertz on thick description and of ragin on holistic analysis it is illustrated with a comparison of the american and french socio economic systems seen historically findings in strategy research about the geographically defined nature of firm supremacy in many industries are brought into the account using the business systems literature consistent patterns of determinacy as well as distinct and contrasting trajectories of business system evolution are noted a more complete and multidisciplinary form of explanation grounded in socio economics is advocated as a means of meeting the challenges both of understanding and of policymaking at several levels

comments on n r ericsson d f hendry and k m prestwich the demand for broad money in the united kingdom 1878 1993 the paper by ericsson hendry and prestwich ehp is a report on an empirical analysis of the demand for money in the uk over the period 1878 to 1993 in spite of the very long period with a vast number of institutional changes and tremendous changes in the degree of openness of the economy the authors are able to find an econometric model with underlying constant parameters this somewhat surprising result is obtained through a redefinition of variables based on the opportunity cost of holding money use of nonlinear formulations and use of dummy variables the period is divided into two subperiods one running from 1878 to 1973 and the other from 1878 to 1993 it is shown that the differences between the parameter values in the two estimated models are negligible the actual model has a nonlinear equilibrium correction term which seems quite interesting the cointegrating relation for the period 1878 to 1973 is ehp equation 17

euro area money demand and international portfolio allocation a contribution to assessing risks to price stability this chapter argues that a stable broad money demand for the euro area over the period 1980 2011 can be obtained by modelling cross border international portfolio allocation we first observe that in this first decade of the new millennium the breakdown of standard money demand specifications for the euro area and the strong developments in annual m3 growth coincide with large net flows in portfolio invest ment in the euro area we then estimate a new money demand which turns out to be stable by including variables explaining portfolio flows omitted in the traditional specifications

the demand for broad money in the united kingdom 1878 1993 using annual data from friedman and schwartz 1982 hendry and ericsson 1991a developed an empirical model of the demand for broad money in the united kingdom over 1878 1975 we update that model over 1976 1993 accounting for changed data definitions and clarifying the concept of constancy with appropriate measures of opportunity cost and credit deregulation the model s parameters are empirically constant over the extended sample which was economically turbulent policy implications follow for parameter nonconstancy and predictive failure causation between money and prices monetary targeting deregulation and financial innovation and the effect of policy on economic agents behavior

long run money demand in taiwan revisited evidence from a cointegrating str approach previous studies on the nonlinearity of the money demand function focus only on short run dynamics and assume that the long run cointegrated relationship is linear which according to economic theory need not be the case thus this article focuses on the variables that make up the long run money demand function in taiwan and their determinants by using the cointegrating smoothing transition regression cstr test developed by choi and saikkonen 2004 this model is more general than the previous str model in that it may contain several transition functions and has more than a single transition variable we demonstrate our empirical results for robustness and adopt two models to ascertain whether or not the stock price should be added as a determinant of the demand for money our empirical results show the existence of a stationary long run relationship among real money demand functions for the period from 1976q1 to 2005q1 and the robustness test covers the 1980q1 2005q1 period in taiwan by comparing

is there convergence across countries a spatial approach we analyze convergence across countries over the last half century as a result of globalizing forces drawing on theories of modernization dependency the world system political trade blocs and the world society we consider economic demographic knowledge financial and political dimensions of convergence using a new methodology we calculate the minimum volume ellipsoid encompassing different groupings of countries finding that during the 1960 2009 period countries have not evolved significantly closer or similar to one another although groups of countries based on their core periphery status or membership in trade blocs exhibit increasing internal convergence and divergence between one another

nonlinear equilibrium correction in u s real money balances 1869 1997 several theoretical models of money demand imply nonlinear functional forms for the aggregate demand for money characterized by smooth adjustment toward long run equilibrium in this paper we propose a nonlinear equilibrium correction model of u s money demand that is shown to be stable over the sample period from 1869 to 1997

values schemas and norms in the culture behavior nexus a situated dynamics framework international business ib research has predominantly relied on value constructs to account for the influence of societal culture notably hofstede s cultural dimensions while parsimonious the value approach s assumptions about the consensus of values within nations and the generality and stability of cultural patterns of behavior are increasingly challenged we review two promising alternatives the constructivist approach centering on schemas and the intersubjectivist approach centering on norms and the evidence that demonstrates their usefulness in accounting for international differences in the behavior of managers employees and consumers we propose a situated dynamics framework specifying the role of values schemas and norms in accounting for cultural differences and delineating conditions under which each causal mechanism is operative values play a more important role in accounting for cultural differences in weak situations where fewer constraints are perceived schemas play a more important role when situational cues increase their accessibility and relevance and norms play a more important role when social evaluation is salient directions for future research based on this integrative framework and its implications for the measurement of culture and application in ib are discussed

non linear error correction and the uk demand for broad money 1878 1993 in this paper we reconsider an error correction model of uk broad money demand by ericsson hendry and prestwich their model is non linear in both variables and parameters and it can be viewed as an approximation to a smooth transition regression str type specification the corresponding str model when specified and estimated fits the data better than the original model adopting a somewhat more general modelling approach leads to another str model this model variance dominates the other two and the encompassing tests performed in this paper indicate that it is an improvement over the other two specifications copyright 2001 john wiley sons ltd

the internationalization of money and finance and the globalization of financial markets abstract in this paper i combine long multi country time series data for interest rates and stock returns with the institutional evidence for much earlier centuries amassed by economic historians to study the question of financial globalization and how it has altered since the late classical era at their longest for dutch and english short term interest rates the quantitative data that i use extend back slightly more than three centuries the institutional history provides information on an additional millennium s worth of experience the conclusion that i reach is that the internationalization of money and finance and the globalization of financial markets are not new phenomena they are part of an evolutionary process that began much earlier and that has continued albeit with periodic interruptions and reversals for many centuries what we see today is simply the latest and most advanced manifestation of this process

on the role of domestic and international financial cyclical factors in driving economic growth abstractwe investigate the effects of domestic and international financial cyclical factors on the us business cycle over the period 1890 2013 using an augmented stochastic version of the neoclas

the geography of trade in goods and asset holdings gravity models have been widely used to describe bilateral trade in goods portes and rey portes r rey h 2005 the determinants of cross border equity flows journal of international economics 65 2 269 296 applied this framework to cross border equity flows and found that distance which proxies information asymmetries is a surprisingly very large barrier to cross border asset trade we adopt a different point of view and explore the complementarity between bilateral trade in goods and bilateral asset holdings in a simultaneous gravity equations framework providing different instruments for both endogenous variables we show that a 10 increase in bilateral trade raises bilateral asset holdings by 6 to 7 the reverse causality is also significant albeit smaller controlling for trade the impact of distance on asset holdings is drastically reduced keywords gravity models international finance international trade simultaneous equations

perceived organizational support pos across 54 nations a cross cultural meta analysis of pos effects the authors meta analyze relationships of perceived organizational support pos with attitudinal and behavioral outcomes in western i e horizontal individualistic and eastern i e vertical collectivistic cultures the social exchange perspective suggests that pos effects are stronger in western cultures because employees are more likely to see the self as independent and understand their relationship with the organization in terms of reciprocity however the social identity perspective suggests that pos effects are stronger in eastern cultures because employees are more likely to see the self as interdependent and are more attuned to organizational support as an identity related cue addressing these competing hypotheses meta analytic results from 827 independent samples n 332 277 across 54 countries show support for both perspectives in the west pos was more strongly associated with social exchange processes than organizational identification processes in contrast in the east pos was more strongly associated with organizational identification processes than social exchange processes overall pos was more strongly related to job attitudes and performance in the east than in the west cultural differences in pos effects on attitudinal outcomes were found to be increasing over time we discuss the implications of these findings for organizational support theory and research

trade and capital flows a financial frictions perspective the classical heckscher ohlin mundell paradigm states that trade and capital mobility are substitutes in the sense that trade integration reduces the incentives for capital to ow to capital scarce countries in this paper we show that in a world with heterogeneous nancial development the classic conclusion does not hold in particular in less nancially developed economies south trade and capital mobility are complements within a dynamic framework the complementarity carries over to nancial capital ows this interaction implies that deepening trade integration in south raises net capital in ows or reduces net capital out ows it also implies that at the global level protectionism may back re if the goal is to rebalance capital ows when these are already heading from south to north our perspective also has

currency substitution and nonlinear error correction in taiwan s demand for broad money we modify the conventional money demand function by including a real exchange rate variable to reflect the effect of currency substitution empirical evidence indicates that the variable is crucial to the long run stability of taiwan s money demand after finding the failure of a linear error correction model ecm in describing the dynamics of taiwan s money demand we apply a nonlinear ecm to examine its dynamics and support the appropriateness of the nonlinear model empirically

money demand function estimation by nonlinear cointegration conventionally the money demand function is estimated using a regression of the logarithm of money demand on either the interest rate or the logarithm of the interest rate this equation is presumed to be a cointegrating regression in this paper we aim to combine the logarithmic specification which models the liquidity trap better than a linear model with the assumption that the interest rate itself is an integrated process the proposed technique is robust to serial correlation in the errors for the usa our new technique results in larger coefficient estimates than previous research suggested and produces superior out of sample prediction copyright 2007 john wiley sons ltd

why doesn t capital flow from rich to poor countries an empirical investigation we examine the empirical role of difierent explanations for the lack of ows of capital from rich to poor countries the lucas paradox the theoretical explanations include difierences in fundamentals across countries and capital market imperfections we show that during 1970i2000 low institutional quality is the leading explanation for example improving peru s institutional quality to australia s level implies a quadrupling of foreign investment recent studies emphasize the role of institutions for achieving higher levels of income but remain silent on the speciflc mechanisms our results indicate that foreign investment might be a channel through which institutions afiect long run development

why does capital flow to rich states abstract the magnitude and the direction of net international capital flows do not fit neoclassical models the fifty u s states comprise an integrated capital market with very low barriers to cap

globalization and changing patterns in the international transmission of shocks in financial markets abstract this paper compares the strength of and patterns in the transmission of shocks and currency crises during two periods of globalization the pre wwi classical gold standard era 1880 1914 and the post bretton woods era 1975 2001 our results suggest that financial market shocks were more globalized before 1914 compared to the present we postulate that this difference in systemic stability between the two eras reflects factors such as strong cross country interdependence fostered through links to gold the growing financial maturity of advanced countries and the widening of the center to include a more diverse group of countries spanning several regions

international real business cycles we ask whether a two country real business cycle model can account simultaneously for domestic and international aspects of business cycles with this question in mind we document a number of discrepancies between theory and data the most striking discrepancy concerns the correlations of consumption and output across countries in the data outputs are generally more highly correlated across countries than consumptions in the model we see the opposite

the term structure of forward exchange premiums and the forecastability of spot exchange rates correcting the errors we develop a framework to extract information regarding subsequent spot rate movements from the term structure of forward exchange premiums while admitting possible deviations from rationality and

institutional polycentrism entrepreneurs social networks and new venture growth what is the interrelationship among formal institutions social networks and new venture growth drawing on the theory of institutional polycentrism and social network theory we examine this question using data on 637 entrepreneurs from four different countries we find the confluence of weak and inefficient formal institutions to be associated with a larger number of structural holes in entrepreneurial social networks while the effect of this institutional order on the revenue growth of new ventures is negative a network s structural holes have a positive effect on revenue growth furthermore the positive effect of structural holes on revenue growth is stronger in an environment with a more adverse institutional order i e weaker and more inefficient institutions the contributions and implications of these findings are discussed abstract from author