the turkish current account deficit during the 2011 2015 period turkey s current account deficit as a percentage of gross domestic product gdp was one of the largest among the organization for economic co operation and development countries in this paper we examine if this deficit can be considered optimal using the engel and rogers s approach in this framework the current account of a country is determined by the expected discounted present value of its future share of world gdp relative to its current share a country whose income is anticipated to rise relative to the rest of the world is expected to borrow now and run a current account deficit our findings suggest that turkey s current account deficit in 2015 may be considered optimal if the turkish economy s share in the world economy could continue to grow at rates similar to the past or to the predictions from professional forecasts the same approach however indicates that the current account deficit in 2011 at its peak was unlikely to be optimal jel f32 f41 f43

testing intertemporal budget constraints theory and applications to u s federal budget and current account deficits this paper extends previous tests of intertemporal budget balance and present value relationships by expanding the set of allowable deficit processes and by deriving a testable condition that is sufficient to ensure intertemporal budget balance as long as the expected discount rate is strictly positive using these tests the authors find that both the postwar federal budget deficit process and the process governing accumulation of u s assets by foreigners are consistent with intertemporal budget balance copyright 1991 by ohio state university press

what is a relationship worth repeated exchange and the development and deployment of relational capital organization scholars have highlighted the value of relationships in fostering effective exchange suggesting that repeated exchange creates a relational asset with latent value derived from elevated social connections norms and simple expectations of exchange continuity yet the empirical evidence supporting such claims remains largely indirect as a consequence few studies have been able to directly examine how contextual factors shape the accumulation of this relational asset or define its value in application we directly measure the value of relationships between suppliers and a large buyer using the buyer s choices in internet enabled procurement auctions to estimate the degree to which stronger relationship histories with suppliers increase willingness to pay for high volume commodity like parts our setting also allows us to examine how this willingness to pay for relationships is shaped by the social context in which they develop and by the exchange context in which they are subsequently depl

modern money theory and the facts of experience this paper discusses modern money theory mmt with a particular focus on the role of the state in its monetary system and the nature of money it addresses the main differences between the orthodox heterodox and mmt approaches to monetary theory while reconciling endogenous money theory with the state money approach by emphasising the symmetry between how banks create money as they finance private spending and how the government creates money when it finances its own spending we clarify some of the misconceptions surrounding mmt while showing that it is more consistent with the facts of experience furthermore we argue that mmt s insistence that government spending or lending must precede bond sales is consistent with the keynesian emphasis on effective demand as the driving force behind income and saving we delve into mmt s implications for monetary and fiscal policy with a particular focus on the eurozone we conclude our paper by discussing two proposals of monetary cranks narrow banking and government issue of debt free money this allows us to re emphasise mmt s views on the nature of money

international investment positions a cross sectional analysis abstract we explore some empirical properties of the level and composition of gross international investment positions in a cross section of countries we find that more open countries with larger domestic financial markets tend to hold greater quantities of foreign assets and liabilities there is some evidence that cross holdings are positively correlated with inflation volatility but negatively correlated with terms of trade volatility

tests for parameter instability in regressions with i 1 processes this article derives the large sample distributions of lagrange multiplier lm tests for parameter instability against several alternatives of interest in the context of cointegrated regression models the fully modified estimator of phillips and hansen is extended to cover general models with stochastic and deterministic trends the test statistics considered include the supf test of quandt as well as the lm tests of nyblom and of nabeya and tanaka it is found that the asymptotic distributions depend on the nature of the regressor processes that is if the regressors are stochastic or deterministic trends the distributions are noticeably different from the distributions when the data are weakly dependent it is also found that the lack of cointegration is a special case of the alternative hypothesis considered an unstable intercept so the tests proposed here may also be viewed as a test of the null of cointegration against the alternative of no cointegration the tests are applied to three data se

causes of capital flows in developing countries abstract this paper investigates the causes of capital flows in four developing countries mexico chile korea and malaysia using structural decomposition analysis it finds that the recent resurgence in capital movements is largely due to external reasons such as decreases in the world interest rate or recession in industrial countries domestic factors including country specific productivity shocks and demand shocks are relatively less important another interesting finding is that the fundamental causes of capital flows differ little across the countries under study these results suggest that developing countries need to pay attention to the financial arrangements associated with capital flows and to exchange rate policy as well as macroeconomic fundamentals to avoid financial crises in a world of increased capital mobility

consumption smoothing and the current account evidence for france 1970 1996 abstract this paper estimates a simple consumption smoothing model of the french current account and examines its capacity to predict recent developments in france s external performance the model views the current account as a buffer through which private agents can smooth consumption over time in response to temporary disturbances to output investment and government expenditure the empirical results indicate that the model performs well overall and predicts correctly the sharp turnaround in france s external accounts observed in the past 3 years a feature of the data that conventional models of trade flows based on income and relative price variables appear unable to explain

measures of fit for rational expectations models this survey provides a detailed description of some of the recent theoretical and empirical literature on rational expectations econometrics the survey pays special attention to non stationarity of the data and to the various methods for evaluating rational expectations models that have been developed as alternatives to the classical statistical approach of testing overidentifying restrictions these methods have become very popular and widely used in empirical research we provide an illustration using danish stock market data and we summarize the many results obtained recently using these measures in areas as diverse as stock prices the term structure of interest rates exchange rates consumption and saving the balance of payments tax smoothing hyperinflation and linear quadratic adjustment cost models for inventories labour demand and money demand

international capital mobility what do national saving investment dynamics tell us abstract we interpret the relationship between national saving and investment in the long run as reflecting a solvency constraint and interpret the ease with which a country can run current account imbalances in the short run before it has to ultimately reverse the transaction at some future date to satisfy the solvency constraint as being positively related to the degree of international capital mobility we apply panel error correction techniques to data for 20 oecd countries from 1960 to 1999 we find that saving and investment display a long run cointegration relationship that is consistent with the interpretation that a long run solvency constraint is binding for each country over time however deviations from this long run equilibrium relation have become more persistent which suggests that capital mobility has increased

the current account in the macroeconomic adjustment process macroeconomic adjustments to changes in the economic environment are to a large extent conditioned by the intertemporal choices of economic agents when agents face an intertemporal budget constraint a decision to alter current indebtedness implies changes in future consumption possibilities and will be based on expectations of the entire future path of key variables and not only current variables a formal model to show how today s current account is a function of both current and future economic variables is presented the determination of the current account under classical assumptions of market clearing and continuous full employment is emphasized

relational contracts and the theory of the firm relational contracts informal agreements sustained by the value of future relationships are prevalent within and between firms we develop repeated game models showing why and how relational contracts within firms vertical integration differ from those between nonintegration we show that integration affects the parties temptations to renege on a given relational contract and hence affects the best relational contract the parties can sustain in this sense the integration decision can be an instrument in the service of the parties relationship our approach also has implications for joint ventures alliances and networks and for the role of management within and between firms

surplus country adjustment revisiting the post world war ii scarce currency clause the scarce currency clause scc in the imf s articles of agreement article vii was originally designed to establish an effective automatic mechanism to stimulate the surplus countries to adopt adjustment policies and to correct chronic imbalances the clause formally authorises countries with a chronic deficit to apply trade discrimination against a surplus country by imposing tariffs and other restrictions on its exports but the scc has never been applied and its permanence in the imf s articles of agreement appears today as a relic of the past an example of post war international cooperation this paper presents an analytical survey of the debate on the scc in the first decade of the imf exploring the contemporary opinions on the possibility that this instrument could be effectively used to correct the chronic imbalances in the post war world and to resolve the problem of dollar shortage more recently the persistence of current global trade imbalances has stimulated a renewed reflection on the automatic instrument for encouraging or compelling countries to undertake necessary adjustments the paper is focusing on recent proposals for correcting imbalances against surplus countries

present value tests of the current account with durables consumption abstract the present value tests of the intertemporal model of the current account usually assume that all goods are traded and that aggregate consumption decisions can be closely approximated by a random walk process this paper extends these models by explicitly introducing durables and nontraded goods into an intertemporal model of the current account and tests the model using canadian data since aggregate consumption expenditures on durables do not exhibit random walk behavior even when the aggregate consumer has a quadratic utility function the model that includes durables makes predictions that differ from those of the basic approach when nontraded goods are also incorporated into the model the most appropriate income variable becomes output net of nontraded production these implications are examined using present value tests the results suggest that in the annual data introduction of both durables and nontraded goods improves upon the model with traded nondurables only this seems to be due to the combination of durables and nontraded goods as durables alone do not sufficiently refine the basic model

how do value creation and competition determine whether a firm appropriates value how does competition among economic actors determine the value that each is able to appropriate we provide a formal general framework within which this question can be posed and answered and then provide several results chief among them is a condition that is both required for and guarantees value appropriation we apply our methodology to i assess the familiar notion that uniqueness inimitability and competition imply value appropriation and ii determine the value appropriation possibilities for an innovator whose unique discovery is of use to several others who can compete for the right to use it

alternative origins to interorganizational trust an interdependence perspective on the shadow of the past and the shadow of the future despite the widespread acceptance of trust as an informal governance institution our understanding of its origins is nascent our review of the literature identified two distinct explanations trust emerges from either a shadow of the past i e prior history or a shadow of the future i e expectations of continuity in this paper we develop and empirically examine a third perspective the potential interdependence of these two explanations our results strongly endorse this third perspective we find that prior history does not directly affect trust instead the observed positive relationship between the two is mediated by expectations of continuity consistent with this result analyses further show that a longer prior history makes the effect of continuity on trust much stronger than a shorter prior history we interpret these findings as suggesting 1 the criticality and centrality of a shadow of the future i e a forward looking calculus in generating trust in interorganizational exchanges and 2 that a shadow of the past plays a facilitating albeit indirect role in trust building our conceptual model also extends the conventional use of the transaction cost logic to show how reciprocal investments in asset specificity and uncertainty drive expectations of continuity and consequently interorganizational trust our results also show unexpectedly that prior history has a direct negative effect on trust after specifying the mediating path of continuity our moderation analysis indicates when this effect occurs when weak expectations of continuity exist trust is lower for exchanges characterized by a longer prior history suggesting a potential darkside of overembedded ties

international capital mobility in oecd countries the feldstein horioka puzzle revisited abstract we utilise the most recent time series techniques of dynamic ols and examine international capital mobility across 23 oecd countries we adopt the saving investment approach where the endogeneity problem is confronted our findings show that capital has been remarkably mobile in most countries over the last three decades

full reserve banking more cranks than brave heretics this paper analyses the main features and policy implications of full reserve banking frb proposals it argues that whilst frb advocates recognize the essential endogeneity of the money creation process they have failed to understand the post keynesian and monetary circuitist analyses of endogenous money which leads them to analytical errors including lending activity creates seigniorage privilege for commercial banks inflation is always and everywhere a monetary phenomenon the inability of distinguishing the actual from the planned supply of bank loans and money to be spent from money hoarded and the debt free money proposition the paper also argues that an frb system is likely to exacerbate financial instability for several reasons including the obsessive focus on commercial banks while ignoring non bank financial intermediaries and shadow banking a blind fascination for the safety and security of the payment system with little consideration for the financing needs of capitalist economies and an inherent deflationary bias furthermore frb arrangements would soon be undermined by the development of alternative near moneys finally frb will nullify the automatic stabilisers of fiscal policy and lead to a de facto dominance of monetary policy and unelected central bankers over fiscal policy and democratic decision making

international capital mobility amongst the major industrialised countries too little or too much this paper examines capital flows among the major industrialized countries with a view to assessing m feldstein and c horioka s 1980 claim that international capital mobility is limited it argues that saving investment correlation tests are inherently flawed and proposes an alternative methodology for testing the degree of international capital mobility it finds that capital flows have been excessive in the sense that they are driven by speculative forces rather than by economic fundamentals copyright 1995 by royal economic society

how much do your co opetitors capabilities matter in the face of technological change firms often lose their competitive advantage when a technological change renders their existing capabilities obsolete an important question that has received little or no attention is what happens to these firms competitive advantage when the technological change instead renders obsolete the capabilities of their co opetitors the suppliers customers and complementors whose very success may underpin that of the firm and with whom it must collaborate and compete this paper explores the effects on a firm of the impact of a technological change on its co opetitors it argues that a firm s post technological change performance decreases with the extent to which the technological change renders co opetitors capabilities obsolete it uses detailed data on the adoption of risc reduced instruction set computer technology by computer workstation makers to demonstrate the need to view resources as residing in a network and not in the firm alone copyright 2000 john wiley sons ltd

the continuing muddles of monetary theory a steadfast refusal to face facts lionel robbins was concerned about the methodology of economic science when he discussed the relationship between theory and reality two of the examples of inappropriate relationships were taken from monetary economics such shortcomings continue among the worst are 1 is lm whereby the monetary authorities set the monetary base and the interest rate is market determined 2 the monetary base multiplier of bank deposits and the role of reserve ratios 3 the current three equation neoclassical consensus assuming perfect creditworthiness and hence no need for banks 4 the analysis of the evolution of money

macroeconomic uncertainty precautionary saving and the current account abstract the relationship between current account developments and changes in the macroeconomic environment is a key issue in open economy macroeconomics this paper extends the standard intertemporal model of the current account to incorporate the effects of macroeconomic uncertainty on external saving behavior it is shown that the greater the uncertainty in national cash flow defined as output less investment less government consumption the greater will be the incentive for precautionary saving and ceteris paribus the larger the current account surplus empirical support for the model is found using post war quarterly data for the united states japan and the united kingdom as well as a long time series 1919 1990 for the united states

capital flows to developing countries this article focuses on the determinants of the large portfolio flows from the united states to latin american and asian countries during 1988 92 cointegration techniques reveal that both domestic and global factors explain bond and equity flows to developing countries and represent significant long run determinants of portfolio flows the article also investigates the dynamics of portfolio flows by estimating seemingly unrelated error correction models global and country specific factors are equally important in determining the long run movements in equity flows for both asian and latin american countries while global factors are much more important than domestic factors in explaining the dynamics of bond flows u s interest rates are a particularly important determinant of the short run dynamics of portfolio especially bond flows to developing countries

back to which bretton woods liquidity and clearing as alternative principles for reforming international money in the face of the current crisis there is growing demand for regulation often invoked in terms of a return to bretton woods the bretton woods conference of 1944 was indeed the last explicit attempt to define a rule for international set tlements in fact post world war ii currency negotiations gave place to a confrontation between two alternative visions of the international monetary system the two plans set forth by the u s and by the u k embody two alternative principles the first aims at producing international liquidity on the basis of a reserve currency white s plan for an international stabilization fund the second aims at providing a pure means and measure for the multilateral clearing of current accounts in the form of a currency unit keynes s plan for an international clearing union the former has undoubtedly prevailed however it is questionable whether it is the most appropriate way to manage global imbalances indeed the principle eventually embodied in the bretton woods system and persisting even after its demise tends to identify money with a reserve asset making possible and even necessary the accumulation of global imbalances despite original intentions to reabsorb them on the contrary the principle that inspired the alternative plan was intended to deprive money of the character of a reserve asset thus making it the rule for international exchanges rather than an object of regulation among others this paper outlines the two principles both in historical perspective and in the perspective of future reforms particularly in relation to the recent proposal by the governor of the people s bank of china to go back to the principles of the keynes plan

complementary credit networks and macroeconomic stability switzerland s wirtschaftsring abstract the swiss wirtschaftsring economic circle credit network founded in 1934 provides residual spending power that is highly counter cyclical individuals are cash short in a recession and economize by greater use of wir credits a money in the production function mipf specification implies that transactions in wir form a stabilizing balance that makes up for the lack of ordinary currency thus unlike the ordinary money wir money is negatively correlated with gdp in the short run this implication is confirmed by empirical estimates such credit networks play a stabilizing role that should be considered in monetary policy

local clearing unions as stabilizers of local economic systems a stock flow consistent perspective various examples of complementary currencies have recently emerged in europe in response to the impact of the 2007 financial crisis they have been variously labelled as social local and alternative money but their economic meaning has still to be discussed on the one hand they have been hailed as innovative tools for socio territorial policies with a focus on localist anti globalist and anti capitalist values on the other the emphasis on the value of currencies as instruments of alternative territorial development runs the risk of overshadowing issues concerning the specific features of such projects the first part of this paper puts forward an interpretation of the current situation as a crisis of the liquidity principle and suggests that the principle of clearing instead represents the primary point of reference for any institutional arrangement aimed at restoring a balanced relationship between lenders and borrowers a critical review of known european complementary monetary circuits is followed by examination of the sardex clearing system the paper then goes on to argue by means of a stock flow consistent model that complementary monetary circuits can serve to stabilise local economic systems in particular a local clearing union for local exchanges has the effect of stabilising the profits of firms while attenuating the impact of the credit crunch at same time

a response to critiques of full reserve banking in this response to critiques of full reserve banking or sovereign money proposals we challenge four of the main criticisms made by fontana and sawyer this issue i the impact of the proposal on government finances and fiscal policy ii the impact of the proposal on the supply of credit to the real economy iii the danger of private money creation re emerging in the shadow banking sector and iv the argument that shadow banking not commercial banking is the real source of financial instability

international capital mobility in the long run and the short run can we still learn from saving investment data the idea to learn about international capital mobility from saving and investment data remains appealing our approach is based on var methods and overcomes some of the problems associated with saving investment regressions when the data are non stationary we propose a new measure of long run capital mobility that can be easily calculated as a by product of the estimation procedure of a cointegrated var in an application to historical us and british data we find long run capital mobility to have been remarkably stable over the century whereas variations in the mobility of capital primarily seem to have affected short run capital flows

on the effectiveness of capital controls the experience of colombia during the 1990s abstract this paper analyzes the effectiveness of capital controls in colombia the evidence presented points towards a relative inability of the measures adopted to reduce the level of capital inflows nonetheless the evidence suggests that non remunerated deposits have been successful in inducing a recomposition of foreign liabilities in favor of long term maturities it is likely that this is a positive result as it has made the country less vulnerable to a reversal in capital flows in this sense controls may be viewed as an effective way of internalizing the negative externality imposed by short term maturities

relational contracts and the value of loyalty this paper examines how relational contracting afiects the pattern of trade across the economy we suppose a flrm principal repeatedly chooses among of a set of potential trading partners agents under the threat of holdup the possibility of ex post opportunism allows agents to collect rents which act like a flxed cost that the principal must pay when initiating a new relationship the principal responds by dividing agents into insiders with whom she has previously traded and outsiders with whom she has never traded if the principal is su ciently patient the proflt maximising contract then uses insiders e ciently while being biased against outsiders this optimal strategy can be implemented by a maintenance contract that is robust to asymmetric information

intertemporal optimizing models of trade and current account balance a survey abstract this study surveys the intertemporal optimizing models of trade and current account balance that were developed calibrated and empirically tested since they came into vogue in the 1980s the implications of these models often differ from those of static and dynamic conventional non optimizing models the literature on optimizing models has not only grown reasonably fast but has also witnessed significant advances in methodology and these models have culminated into a distinct strand of new open economy macroeconomics the studies conducted until the late 1980s have used deterministic perfect foresight models while several studies conducted since the 1990s relax the perfect foresight and certainty equivalence assumptions and develop stochastic dynamic general equilibrium models to account for uncertainty confronting the optimizing agents the future research needs to explore the possibility of tracing any preferred specification of household preferences model the effect of time varying discount factor on household utility function and intertemporal budget constraint examine the role of costs in international trade place a parallel emphasis on the empirical verifications of theoretical propositions examine the relative performance of optimizing vis a vis non optimizing models and rationalize the extreme propositions of perfect and imperfect capital mobility in the wake of moderately open capital accounts

understanding interdependence the macroeconomics of the open economy list of figureslist of tablesintroduction1the endogeneity of exchange rate regimes32exchange rate behavior under alternative exchange rate arrangements343panel one money for how many 844exchange rates prices and external adjustment in the united states and japan1075the dynamic optimizing approach to the current account theory and evidence1696international capital mobility in the 1990s2017a retrospective on the debt crisis2628trade liberalization in disinflation2919inflation and growth in an integrated approach31310panel the outlook for stabilization and reform in central and eastern europe36811international cooperation in the making of national macroeconomic policies where do we stand 39112the political economy of monetary union44813what do we need to know about the international monetary system 509conference participants531author index535subject index543

effective interim collaboration how firms minimize transaction costs and maximise transaction value this study of automotive transaction relationships in the u s a and japan offers abta which indicate that transaction costs do not necessarily increase with an increase in reiation specijk investments we empirically examine the conditions under which transactors can simultaneously achieve the twin benejits of high asset specificity and low transaction costs this is possible because the dtfferent safeguards which can be employed to control opportunism have different set up costs and result in different transaction costs over dl erent time horizons we examine in detail the ractices of javanese firms which result in effective inteq n collaboration 1997 by john wiley sons ltd

domestic saving and international capital movements in the long run and the short run the evidence and analysis in this paper support the earlier findings of feldstein and horioka 1980 that sustained increases in domestic savings rates induce approximately equal increases in domestic rates of investment new estimates for the post opec period 1974 79 imply that each extra dollar of domestic saving increases domestic investment by approximately 85 cents in a sample of 17 oecd countries an explicit analysis of the problems of identification and simultaneous equations bias suggests that the regression estimates are more relevant as a guide to the long run response of international capital flows than to their short run behavior coefficient estimates based on annual variations in savings and investment are subject to potentially severe simultaneous equations bias that is not present when annual observations are averaged over a decade or more and the regression is estimated with a cross country sample of these averages a portfolio model of international capital allocation that is presented in the paper indicates that the short run change in the rate of net foreign investment in response to a sustained increase in domestic saving is likely to be substantially greater than the ultimate steady state response this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item

building routines learning cooperation and the dynamics of incomplete relational contracts this paper studies how agents with conflicting interests learn to cooperate when the details of cooperation are not common knowledge it considers a repeated game in which one player has incomplete information about when and how her partner can provide benefits initially monitoring is imperfect and cooperation requires inefficient punishment as the players common his tory grows the uninformed player can learn to monitor her partner s actions which allows players to establish more efficient cooperative routines because revealing information is costly it may be optimal not to reveal all the existing information and efficient equilibria can be path dependent jel c73 d82 d83 d86 this paper studies how agents with conflicting interests go about developing a successful cooperative relationship when the details of cooperation are not common knowledge in cir cumstances where formal contracts are unavailable or inconvenient agents frequently rely on informal cooperative agreements or relational contracts to resolve incentive conflicts in fact whenever the interested parties have better information than do outside courts relational con tracts can outperform formal contracts by allowing agents to adapt their joint behavior to contin gencies that cannot be assessed by third parties 1 the starting point of this paper is to recognize that even when agents have better information than outside courts this does not mean that the details of how and when cooperation should occur are common knowledge between the parties for instance a new plant manager may not have a complete understanding of what her produc tion teams can and cannot do a firm s ceo may have only partial understanding of how research teams should operate and so on the question is then how do players go about building a com mon agreement or formulated in a slightly different way how do they go about specifying the contingencies of their relational contract the model developed in the paper considers two players engaged in an infinitely repeated game with asymmetric information in each period player 1 decides to stay and interact with player 2 or exit and skip interaction for one period staying is costly for player 1 and yields a benefit for player 2 if player 1 stays player 2 can reciprocate by taking some action from a set of available actions which is randomly drawn in each period from a countable superset player 2 can take actions of two types unproductive actions that are costless to player 2 but yield zero benefit to

sustainable consumption the new economics and community currencies developing new institutions for environmental governance seyfang g 2006 sustainable consumption the new economics and community currencies developing new institutions for environmental governance regional studies 40 781 791 sustainable consumption is gaining currency as a new environmental policy objective but there is a limit to the changes in consumption behaviour that individuals can make within current socio economic frameworks the new economics literature argues that sustainable consumption is characterized by five factors localization reducing ecological footprints community building collective action and building new social institutions these form a set of indicators for the evaluation of initiatives and policies community currencies have been put forward as a new tool to promote sustainable consumption but until now there has been no appraisal of their ability to deliver this goal three different community currency types are described and their effectiveness and potential in enabling more sustainable consumption patterns are assess

local exchange trading systems as a response to the globalisation of capitalism the globalisation of capitalism has disadvantaged those people and places marginal to the capitalist development process the local exchange trading system represents a possible approach to the challenge of relocalising social and economic identity despite the growing importance of local exchange trading systems lets in the uk geographical research into the concept is limited this paper examines the potential of lets as a response to the hegemonic influence of global capitalism the empirical evidence focuses on the development and operation of lets in glasgow the research analyses both successful and unsuccessful lets in the city examines the prospects for further development of lets in the uk and considers the potential value of the concept particularly for people and places disadvantaged by the capitalist market economy

learning and protection of proprietary assets in strategic alliances building relational capital one of the main reasons that firms participate in alliances is to learn know how and capabilities from their alliance partners at the same time firms want to protect themselves from the opportunistic behavior of their partner to retain their own core proprietary assets most research has generally viewed the achievement of these objectives as mutually exclusive in contrast we provide empirical evidence using large sample survey data to show that when firms build relational capital in conjunction with an integrative approach to managing conflict they are able to achieve both objectives simultaneously relational capital based on mutual trust and interaction at the individual level between alliance partners creates a basis for learning and know how transfer across the exchange interface at the same time it curbs opportunistic behavior of alliance partners thus preventing the leakage of critical know how between them copyright 2000 john wiley sons ltd

the political economy of monetary reform proposals to reform money and banking in the wake of the recent crisis appeal to populist politics on the left and the right if banks caused the crisis then their power must be curtailed to prevent a recurrence many of these proposals echo ideas which gained attention in the wake of the great depression the purpose of this paper is to consider proposals for reform of money and banking current in canada in the 1930s in particular plans for social credit and for social reconstruction some of which were translated into policy while both sets of ideas involved a markedly increased role for the state in money and banking the underlying ontology political philosophy and theoretical rationale were rather different the result was different views as to the nature of the problem and the feasibility of different policy solutions

failures on the market and market failures a complementary currency for bankruptcy procedures one of the most widespread implications of the great financial crisis has been the increase in bankruptcies across advanced economies the traditional approach to the problem of insolvencies is constrained by deeply ingrained concepts of money and credit and by the institutions in which those concepts are embodied according to which the only way to discharge a debt is a payment in money this paper deals with a peculiar project elaborated within the italian ministry of justice to address the problem of the growing amount of uncollectibles involved in bankruptcy procedures the project entails a new form of articulation between money and credit which overturns the traditional logic of liquidation by transforming creditors of bankruptcy procedures passively waiting to be paid into active operators capable of sustaining demand this goal is pursued by converting part of their credits into purchasing power that can be immediately spent in the auctions for the assets of bankrupt companies thereby increasing the efficiency of bankruptcy procedures accelerating the reallocation of assets and maximising the satisfaction of creditors the projects may be seen as a complementary currency characterised by a functional and not by a territorial delimitation it incorporates some of the features that have been recently experimented with with varying degree of success within both the official and alternative monetary systems endogenous money creation targeted loans and demurrage the present paper aims at illustrating the theoretical underpinnings of the project and its implication for the question of devising an alternative to current financial institutions

testing present value models of the current account a cautionary note following campbell and shiller j pol eco 95 1987 1062 many papers have evaluated the intertemporal approach to the current account by testing restrictions on a vector autoregression var the attractiveness of the campbell shiller methodology is that it is thought to be immune to omitted information this paper shows that this is not always true in particular it is shown that if fundamentals are driven by unobserved to the econometrician permanent and transitory components then the restrictions of a standard present value model of the current account might not be testable with a var this is because the theoretical moving average representation can turn out to be non invertible this implies that observed data including the current account do not reveal the underlying shocks to agents information sets the paper shows how researchers employing the campbell shiller methodology can be tricked into thinking the current account responds excessively to shocks when in fact the data are consistent with the theory

are current account deficits sustainable evidence from panel cointegration abstract conventional cointegration tests fail to consider information across countries which leads to efficiency loss in estimation in this article we apply panel cointegration tests to examine the cointegration between exports and imports among the g7 our findings support the sustainability of current accounts among major industrial countries which lends support to the intertemporal approach to the current account

the saving investment correlation puzzle is still a puzzle abstract a number of simulation studies claim to have solved the feldstein horioka puzzle by demonstrating that a high time series correlation between saving and investment naturally arises from business cycle shocks this paper uses panel data of saving and investment controlled for business cycle shocks to empirically test the significance of cyclical shocks productivity fiscal and the terms of trade shocks in explaining a high saving investment correlation the estimation results reveal that conventional aggregate shocks only partially explain the high saving investment correlation moreover country differences in the size of the gnp and the non traded sector do not significantly affect the saving investment correlation the saving investment correlation puzzle remains a puzzle after all

capital mobility and the relationship between saving and investment rates in oecd countries abstract this paper considers tests that use data on saving and investment rates to determine the degree of international capital mobility two types of evidence are presented to show that a high correlation between saving and investment rates across oecd countries can be consistent with a high degree of capital mobility this evidence qualifies the conclusions of previous studies and casts doubt on the usefulness of testing hypotheses about capital mobility with data on saving and investment rates

international macroeconomic fluctuations and the current account intertemporal models of the current account generally assume that global shocks do not affect the current account we use this assumption to identify global and country specific shocks in a bivariate var we test the quality of the identification using evidence from g7 data in accordance with the theory we observe a link between the global shock and a measure of the world real interest rate we also find that long term output growth is driven by global factors in most countries that country specific shocks are less persistent in smaller economies and generally less volatile than global shocks

uninsurable shocks and international income convergence the dynamics of production and income growth across countries or across regions within the same country are often thought to give evidence on whether returns to accumulation are increasing constant or decreasing at the local level when poor countries or regions are found to grow no faster than richer ones such lack of convergence is viewed as unfavorable evidence for models in which technology offers high returns to accumulation in relatively capital poor locations see e g paul romer 1987 when population growth saving or investment rates and other determinants of long run income levels in the neoclassical model are controlled for residual income differences across countries and across regions within the same country appear to vanish slowly but significantly over time this suggests that local returns to accumulation are decreasing if the reference theoretical model takes technology to be uniform across locations features unexplained and permanent differences in saving behavior and eliminates or limits capital mobility across locations these assumptions clearly oversimplify reality in various respects and a particular one is considered here 2 the theory that motivates empirical work on income convergence either takes saving propensities as exogenously given or else models them in terms of individual optimization under certainty random variability is essential to every empirical regression equation of course and real data are better represented by a stochastic steady state with ongoing uncertainty than by steady convergence toward steady state uniformity see e g danny quah 1993 to explore the possible role of exogenous and uninsurable income sources in the joint determination of savings behavior and income dynamics here i allow consumption and savings to draw on possibly stochastic location specific income sources which are independent of past accumulation at the local level and which remain relevant as the aggregate economy grows returns to accumulation are assumed to be constant both over time and cross sectionally thus ruling out decreasing returns to accumulation as the driving force of income convergence and ensuring that potential capital mobility need not induce actual capital flows under the common assumption of constant saving propensities this framework predicts that incomes should converge over time if the relative importance of nonaccumulated income is crosssectionally heterogeneous when individuals optimize their savings in light of the size and composition of their accumulated and nonaccumulated income sources consumption smoothing behavior leads to persistent but stationary dynamics for relative incomes and consumption levels the concluding section briefly discusses the extent to which these saving based insights may be applicable to international or interregional income dynamics

brokers and competitive advantage the broker profits by intermediating between two or more parties using a biform game we examine whether such a position can confer a competitive advantage as well as whether any such advantage could persist if actors formed relations strategically our analysis reveals that if one considers exogenous the relations between actors brokers can enjoy an advantage but only if 1 they do not face substitutes either for the connections they offer or the value they can create 2 they intermediate more than two parties and 3 interdependence does not lock them into a particular pattern of exchange if on the other hand one allows actors to form relations on the basis of their expectations of the future value of those relations then profitable positions of intermediation only arise under strict assumptions of unilateral action we discuss the implications of our analysis for firm strategy and empirical research

some puzzles about money finance and the monetary circuit this paper discusses three puzzles about money and finance having to do with the velocity of circulation the marxian concept of the monetary circuit and the deceptively simple question of whether there is enough money in existence at any point in time to purchase the full value of output these issues take on particular significance at times of economic and financial crisis but have often been neglected by the mainstream of the economics profession leaving the field to keynes s brave heretics

embeddedness in the making of financial capital how social relations and networks benefit firms seeking financing i investigate how social embeddedness affects an organization s acquisition and cost of financial capital in middle market banking a lucrative but understudied financial sector using existing theory and original fieldwork i develop a framework to explain how embeddedness can influence which firms get capital and at what cost i then statistically examine my claims using national data on small business lending at the level of dyadic ties i find that firms that embed their commercial transactions with their lender in social attachments receive lower interest rates on loans at the network level firms are more likely to get loans and to receive lower interest rates on loans if their network of bank ties has a mix of embedded ties and arm s length ties these network effects arise because embedded ties motivate network partners to share private resources while arm s length ties facilitate access to public information on market prices and loan opportunities so that the benefits of different types of ties are optimized within one network i conclude with a discussion of how the value produced by a network is at a premium when it creates a bridge that links the public information of markets with the private resources of relationships

current account dynamics under information rigidity and imperfect capital mobility abstract the current account in developed countries is highly persistent and volatile in comparison to their output growth the standard intertemporal current account model with rational expectations re fails to explain the observed current account and consumption dynamics the re model extended with imperfect capital mobility by shibata and shintani 1998 can account for the consumption dynamics but only at the cost of the explanatory power for the volatility of the current account this paper replaces re in the intertemporal current account model with sticky information si in which consumers are inattentive to shocks to their income the si model can better explain a persistent and volatile current account than the re model but it overpredicts the persistence of changes in consumption the si model extended with imperfect capital mobility explains both the current account and consumption provided that sufficiently high degrees of information rigidity and imperfect capital mobility are considered

the liquidity of money in his general theory keynes implicitly defines liquidity as stability of value with respect to changes in the state of long term expectation this contrasts with the usual conception of liquidity as convertibility and with leading post keynesian interpretations the proposed definition explains why keynes places so much emphasis on liquidity while assuming perfect markets for capital goods and writes of the liquidity of land it also sheds new light on the distinction keynes makes between the liquidity of money and the liquidity of organised investment markets

internationalization and changes in tax policy in oecd countries the importance of domestic veto players this article examines the role that economic and political factors played in tax reform in organization for economic cooperation and development oecd countries from 1986 to 1990 some writers argue that economic integration forced states to reform their tax systems the authors findings indicate that economic openness had an indirect effect on the level of change in marginal tax rates the institutional structure of a country was most important countries that had only one veto player or only one institution or party whose approval was necessary for a bill to become law enacted more sweeping reform than states that had more than one veto player these results suggest that even when international or domestic economic factors might dictate a change in policy reform will not be as sweeping in countries in which agreement among several institutions and or parties is necessary

towards an accounting view on money banking and the macroeconomy history empirics theory in this paper three views are considered which are traditionally associated with money cranks and brave heretics the first is that the credit nature of money has macroeconomic significance the second is that financial development can be bad for economic growth the third is that macroeconomic models need to be explicitly monetary macroeconomic models it is argued that in each of these three areas there has been a recent shift in mainstream economic opinion this suggests new opportunities for meaningful debate between heterodox and orthodox schools on money and finance it is further argued following skaggs 2003 that a common meeting ground could be an accounting view of economics this is a mode of macroeconomic analysis which explicitly uses accounting definitions identities that credit is also debt or that flows of a variable affect the stock of that variable or accounting methods e g decomposing different kinds of liabilities or linking flows of liquidity to flows of transactions to structure and direct the analysis the accounting view is highly pluralist yet clearly defined i discuss its applications to each of the three views

being efficiently fickle a dynamic theory of organizational choice a central proposition in organization theory is that discrete organizational forms are matched to environmental conditions market strategies or exchange conditions this paper develops a contrary theoretical proposition we argue that efficiency may dictate modulating between discrete governance modes i e structural modulation in response to a stable set of exchange conditions if governance choices are discrete as much of organization theory argues then the consequent steady state functionality delivered by these organizational forms is itself discrete however if the desired functionality lies in between the steady state functionality delivered by two discrete choices then efficiency gains may be available by modulating between modes we develop an analytical model of structural modulation and examine factors that influence when modulation is ef ficiency enhancing as well as the optimal rate of modulation we conclude that under certain conditions structural modulation is efficiency enhancing further contrary to theories that highlight the potentially destructive consequences of inertia on organizational survival we identify important efficiencyyielding benefits of inertia

a signal jamming theory of predation we propose a new theory ofpredation based on signal jamming in our model the predator s characteristics are common knowledge while the entrant is uncertain of his own future profitability the entrant uses his current profit to decide whether to remain in the market and the predator preys to jam or interfere with this inference problem thus our model differs from those based on reputation effects in which the predator preys to signal information about himself

making sense of a crank case monetary diversity in argentina 1999 2003 based on empirical data this study discusses the introduction acceptance and circulation of two complementary currencies in argentina that do not fit well in the main approaches to the nature of money these two monetary circuits provincial and community currencies were introduced as units of account to denominate the value of debt and circulated as means of payment to overcome monetary stringency during the crisis of 1999 2003 after discussing several theories on the nature of money we reflect on the institutional significance of currency circuits as concurrent and rather stable pairs of trade and money we suggest that several theories of money need to be combined to account for the variety and heterogeneity of daily monetary practices in a broad spectrum of countries

the new open economy macroeconomics a survey since the 1995 publication of obsteld and rogoff s redux model there has been an outpouring of research on open economy dynamic general equilibrium models that incorporate imperfect competition and nominal rigidities this paper offers an interim survey of this recent literature 2001 elsevier science b v all rights reserved

network prominence bargaining power and the allocation of value capturing rights in high tech alliance contracts we suggest and provide empirical evidence that the bargaining power of alliance partners stemming from their prominence in alliance networks influences the ex ante allocation of value capturing rights in high tech alliance contracts network prominence can enhance the availability of alternative partners for a firm and thereby elevates the firm s bargaining power and enables the firm to receive i more value capturing rights vis a vis its partner i e more net value capturing rights and ii more rights to the unexpected outcomes vis a vis its partner we empirically investigate the content of research and development r d collaboration contracts between biotech and pharmaceutical firms and show that as the prominence of the client i e pharmaceutical firm increases it is able to attain i more net value capturing rights to outcomes within the area of collaboration and ii more rights to unexpected outcomes by contrast increased prominence of the r d firm i e biotech firm decreases both t

capital flows to developing countries long and short term determinants this article focuses on the determinants of the large portfolio flows from the united states to latin american and asian countries during 1988 92 cointegration techniques reveal that both domestic and global factors explain bond and equity flows to developing countries and represent significant long run determinants of portfolio flows the article also investigates the dynamics of portfolio flows by estimating seemingly unrelated error correction models global and country specific factors are equally important in determining the long run movements in equity flows for both asian and latin american countries while global factors are much more important than domestic factors in explaining the dynamics of bond flows u s interest rates are a particularly important determinant of the short run dynamics of portfolio especially bond flows to developing countries copyright 1997 by oxford university press

the current impasse in research on optimum currency areas abstract the only visible advance in the theory of the optimum currency area oca since mundell wrote in 1961 is the proposal of new criteria for determining the optimal size of a currency area the paper first tries to substantiate this general assessment and then argues that the fault lies in the profession s unwillingness to adopt a formal analysis of the subject divorced from the policy aspects we could make considerable progress in analysing the oca by merely following our usual procedure of defining a general welfare function to be compared if not maximised under different well specified conditions furthermore any move in this direction would take us far beyond the current enumeration of criteria for an oca

current accounts in debtor and creditor countries the authors reexamine a classic question in international economics what is the current account response to a transitory income shock such as a temporary improvement in the terms of trade a transfer from abroad or unusually high production to answer this question they construct a world equilibrium model in which productivity varies across countries and international borrowing and lending take place to exploit good investment opportunities despite its conventional ingredients the model generates the novel prediction that favorable income shocks lead to current account deficits in debtor countries and current account surpluses in creditor countries evidence from thirteen oecd countries broadly supports this theoretical prediction

bargaining ability and competitive advantage empirical evidence from medical devices in markets where buyers and suppliers negotiate supplier costs buyer willingness to pay and competition determine only a range of potential prices leaving the final price dependent on other fac

savings investment and international capital flows abstract the high correlation between national savings and domestic investment rateshas been interpreted as evidence that capital is not internationally mobile this paper surveys the theory and evidence on the relationship between savings and investment in a sample of 23 oecd countries a positive correlation between savings and investment rates is found in both the short and long runs however a wide variety of models generate such co movements in savings and investment in response to exogenous disturbances even under conditions of complete financial markets thus the savings investment correlation provides little evidence on the question of international capital mobility

creating and capturing value in repeated exchange relationships the second paradox of embeddedness prior empirical studies suggest repeated exchange develops increasing value in buyer supplier relationships a first order implication of this finding is that buyers will concentrate exchange among a relatively small number of suppliers to generate maximum value in relationships however buyers are equally concerned with value capture by distributing rather than concentrating exchange buyers may position themselves to capture more of the value created leaving buyers potentially conflicted concerning the choice we label this dynamic the second paradox of embeddedness distinguishing it from uzzi s uzzi b 1997 social structure and competition in inter firmnetworks the paradox of embeddedness admin sci quart 42 1 35 67 paradox driven by technological uncertainty by examining the procurement activities of a large diversified manufacturing company we then test for supplier and buyer behavior consistent with the conditions that give rise to the second paradox and behaviors that result from it

testing a present value model of the current account evidence from us and canadian time series abstract this paper presents a simple model of current account determination based upon the permanent income hypothesis of private consumption behavior under rational expectations the model employs a representative national agent who is forward looking and can borrow and lend at a constant world interest rate a present value relationship for the current account is derived and its implications are tested on post war data for the united states and canada testing is done using the framework developed by campbell and shiller 1987 which allows the forcing variables in the model to be difference rather than trend stationary our empirical results indicate the most stringent restrictions of the present value model are strongly rejected by the us and canadian data however less formal procedures suggest the consumption smoothing model has some ability to track the dynamic behavior of the us current account jel f32

money reform and the eurozone crisis panacea utopia or grassroots alternative the economic crisis that broke out in 2007 2008 and the ongoing crisis in the eurozone has given a new urgency to discussions about alternatives to capitalism and a new salience to proposals for monetary reform and for grassroots economic alternatives using marx and engel s concept of utopianism as an analytical tool to distinguish between what is the work of cranks and what of brave heretics the paper examines four monetary responses to the crisis 1 positive money s call for a state monopoly on money issuance 2 the reintroduction of national currencies in particular the drachma 3 proposals for state issued parallel currencies and 4 grassroots or subaltern money networks of various types the paper argues that the dominance of neoliberal ideology at a european union level means that proposals for monetary reform at the international and national level are unlikely to be taken seriously by elites and consequently seem utopian in marxian terms there seems to be little political will to engage with the complexities of and potential opportunities of a more diverse monetary architecture within the eurozone and a perceived need to discipline potentially irresponsible governments like greece s syriza although responsible actors in the north of the eurozone get more leeway the potential of grassroots alternatives is also too often overstated while alternative currency networks developed as part of the greek crisis are not particularly well developed alternative currency networks could work as sites of innovation normalising the idea that there are progressive alternatives to eurozone breakup

government monetary and fiscal operations generalising the endogenous money approach the traditional endogenous money approach can be generalised substantially by including the insights of modern money theory regarding the necessary coordination of fiscal and monetary policies a monetarily sovereign government is composed of two entities involved in the issuance and redemption of government monetary instruments as such one should include the role of the treasury in monetary policy and the role of the central bank in fiscal policy the paper suggests a simple way to model that interaction shows some of the theoretical insights that can be drawn from that interaction and illustrates the relevance of that interaction with the monetary and fiscal practices of the us treasury and the federal reserve over the past century times of stress in the monetary system such as the recent great recession usually bring to light more forcefully this necessary interaction

present value tests of an intertemporal model of the current account abstract this paper first demonstrates that in a simple intertemporal open economy model the current account is equal to the expected decline of the present discounted value of net output of a country net output is defined as gross domestic product less the sum of investment plus government spending it then uses econometric methods for present value models to analyze the current account for four countries in two of these countries the model does a satisfactory job of explaining the current account

why hold ups occur the self enforcing range of contractual relationships one of my most enjoyable intellectual experiences was working with armen alchian on the klein crawford and alchian 1978 hold up paper in this paper i extend the basic framework presented in that paper pointing out what i now consider to be its shortcomings and providing insights into the nature of hold ups and the form of contracts chosen by transactors to avoid hold ups the major analytical extension entails combining hold up analysis with my work on private enforcement because private enforcement capital is limited and written contract terms are necessarily imperfect transactors must optimally combine court enforced written terms together with privately enforced unwritten terms to define what i call the self enforcing range of their contractual relationship hold ups occur when unanticipated events place the contractual relationship outside the self enforcing range this probabilistic framework where transactors enter contractual relationships knowing that a hold up may take place but believing that the expected gains from trade outweigh the expected rent dissipating costs associated with the hold up risk is shown to have important implications for understanding the structure of contracts adopted by transactors in the marketplace i why do hold ups occur i begin with a simple example that illustrates the basic economic forces involved in a hold up assume that a builder constructs a house on a piece of land the builder does not own but rather only leases short term after the initial land lease expires the landowner could hold up the builder by raising the land rent to reflect the costs of moving the house to another lot this example illustrates all the hold up factors emphasized in klein crawford and alchian a the builder has made an investment that is highly specific to a particular piece of land and b the landowner has taken advantage of the incompleteness of the contract that governs the relationship in particular the fact that the lease does not cover future years to c expropriate the quasi rents on the builder s specific investment the obvious question is why anything like this would ever occur that is why would someone be so naive as to build a house on land for which they had only a short term lease our primary goal in klein crawford and alchian was not to explain the existence of hold ups but rather the institutions adopted by transactors to avoid hold ups for example we would expect that builders anticipating a potential hold up problem would decide to purchase the land or at least to sign a long term ground lease before starting construction however we do present some examples in the paper of hold ups that actually occurred the implicit reason we give for the occurrence of these hold ups is transactor ignorance apparently transactors are not always smart enough to choose the contractual arrangement that would eliminate the hold up problem oliver williamson provides a similar but much more explicit answer to the question of why hold ups occur when defining opportunism he states by opportunism i mean self interest seeking with guile this includes but is scarcely limited to more blatant forms such as lying stealing and cheating opportunism more often involves subtle forms of deceit more generally opportunism refers to the incomplete or distorted disclosure of information especially to calculated efforts to mislead distort obfuscate or otherwise confuse 1 for example the hold up may have occurred in our illustrative house construction example because the landowner deceived the builder with a low up front land rental price and vague promises about the future relying on the ability of one transactor to take advantage of the naivete or ignorance of another transactor is a highly unsatisfactory way to explain the incidence of hold ups simple examples of deception such as a builder constructing a house on land that is only rented short term rarely if ever occur

stationary time varying risk premia in forward foreign exchange rates abstract there is mounting evidence that forward foreign exchange rates contain time varying risk premia however this evidence is from tests for which statistical inference is based on asymptotic distribution theory furthermore it is uncertain whether risk premia evolve as stationary or nonstationary processes this paper applies two exact small sample pointwise most powerful invariant statistical tests to determine 1 whether forward exchange rates contain time varying risk premia and 2 whether the time varying risk premia are stationary or nonstationary these tests finds strong evidence that forward exchange rates contain stationary time varying risk premia during the recent float evidence from the interwar float is mixed