international business research past present and future the editors of the journal of international business studies jibs always try to publish the best international business research unfortunately there will probably never be a simple response to the question what constitutes excellent international business research we might make some progress however if we first attempt to define international business research and then identify several noteworthy examples

ir d project data and theories of r d investment abstract this paper analyzes data on a large sample of research and development r d projects documented in the defense department s independent r d data bank both to provide some stylized facts about r d investment at the project level and to test the implications of a control theoretic model developed by grossman and shapiro we calculate moments of the marginal distributions and elasticities of cost with respect to time by type of project e g basic research development and discriminate between alternative hypotheses concerning the shape of the hazard function of r d investment

reserve requirements bank share prices and the uniqueeness of bank loans abstract this study examines the impact of changes in reserve requirements on large banks stock returns it finds statistically and economically significant abnormal returns on the day following the announcement of such changes this finding is consistent with the notion that reserve requirements are a tax on deposits it indicates however that bank s shareholders bear at least part of the tax thus it does not support the hypothesis advanced by some authors that the tax falls exclusively on banks borrowers the evidence further suggests that part of the tax falls on demand depositors these findings undercut the case for the uniqueness of bank loans insofar as it is based on the incidence of the deposit tax

monetary policy and stock market dynamics across monetary regimes abstract this paper examines the dynamic linkages between monetary policy and the stock market during the three distinct monetary regimes of burns volcker and greenspan since the 1970s some major findings are the following first in the 1990s it appears that there was a disconnection between federal reserve actions via the federal funds rate and responses by the stock market second the impact of inflation on the stock market did not surface as significant in the later parts of 1980s and the 1990s and third significant asymmetric effects of monetary policy on the stock markets were observed throughout each monetary regime but these were more pronounced during bear markets than bull markets these results suggest that there was no consistent dynamic relationship between monetary policy and the stock market and that the nature of such dynamics was different in each of the three monetary regimes

the federal funds rate and the channels of monetary transmission the authors show that the interest rate on federal funds is extremely informative about future movements of real macroeconomic variables then they argue that the reason for this forecasting success is that the funds rate sensitively records shocks to the supply of bank reserves that is the funds rate is a good indicator of monetary policy actions finally using innovations to the funds rate as a measure of changes in policy the authors present evidence consistent with the view that monetary policy works at least in part through credit i e bank loans as well as through money i e bank deposits copyright 1992 by american economic association

momentum and funding conditions abstract we find evidence linking return momentum with macroeconomic conditions namely the funding environment we show that winners outperform losers by a significant amount in restrictive funding states while in expansive states winners and losers perform similarly this pattern is consistent with changing investor preferences for winners and losers following signaled shifts in funding availability one plausible channel for this relation is the interaction between stock level illiquidity and funding conditions we find that liquidity risk is significantly priced during restrictive states especially in loser stocks furthermore loser stocks become more illiquid during restrictive conditions both effects help explain the relative performance difference between losers and winners across funding environments moreover the funding environment influences the relationship between momentum and firm characteristics after controlling for the influence of sentiment market states and return dispersion overall transitions in funding states appear to encourage investors to revise their factor pricing decisions which produces inter temporal variation in momentum

monetary policy actions intervention and exchange rates a reexamination of the empirical relationships using federal funds rate target data the authors reexamine the relationships among federal reserve monetary policy actions u s interventions in currency markets and exchange rates using an alternative measure of monetary policy actions the federal reserve s federal funds rate target they find that exchange rates generally respond immediately to u s monetary policy actions and that these responses are usually consistent with the overshooting hypothesis the authors also find evidence of signaling and leaning against the wind u s intervention policies over the sample however controlling for such interventions do not alter their estimates of exchange rate responses to federal funds rate target changes copyright 1998 by university of chicago press

estimating the open market desk s daily reaction function this paper presents the results of an empirical investigation into the proximate determinants of the federal reserve s daily open market operations using information available each morning at the fed conference call the author models the open market desk s choice of both the quantity and the type of operation using a friction model for the former and a multinomial logit framework for the latter different types of operations are shown to send different signals to the market about the underlying thrust of fed policy and open market operations in recent years are shown to have become increasingly keyed to the federal funds rate copyright 1993 by ohio state university press

liquidity effects and the monetary transmission mechanism several recent papers provide strong empirical support for the view that an expansionary monetary policy disturbance generates a persistent decrease in interest rates and a persistent increase in output and employment existing quantitative general equilibrium models which allow for capital accumulation are inconsistent with this view there does exist a recently developed class of general equilibrium models which can rationalize the contemporaneous response of interest rates output and employment to a money supply shock however a key shortcoming of these models is that they cannot rationalize persistent liquidity effects this paper discusses the basic frictions and mechanisms underlying this new class of models and investigates one avenue for generating persistence we argue that once a simplified version of the model in christiano and eichenbaum 1991 is modified to allow for extremely small costs of adjusting sectoral flow of funds positive money shocks generate long lasting quantitatively significant liquidity effects as well as persistent increases in aggregate economic activity

issues in measuring industrial r d abstract effective government science and technology policy requires a reliable database on industrial innovation this paper examines a number of issues concerning the measurement of industrial r d by analyzing the relationship between data reported in the nsf census rd 1 survey the basis for the official government r d statistics and data reported in two other sources firms 10 k reports and a federal procurement database we advance and test a hypothesis which accounts for systematic discrepancies between rd 1 and 10 k based estimates of company r d we also develop estimates of the extent of measurement error reflected in the various measures of r d and suggest some modifications to the rd 1 survey

discount rate changes stock market returns volatility and trading volume evidence from intraday data and implications for market efficiency we examine the eaect of discount rate changes on stock market returns volatility and trading volume using intraday data equity returns generally respond negatively and significantly to the unexpected announcements however the eaect of expected changes on equity returns is insignificant furthermore our results indicate that equity prices respond to announcements within the trading period hour after the information release an indication of a return reversal is too small to cover the full transaction costs unexpected discount rate changes also contribute to higher market volatility although the volatility is short lived similarly unexpected changes in discount rates induce larger trading volume while expected changes do not abnormal trading volume occurs only in period t our results also support the notion that unexpected changes in the discount rates impact market returns irrespective of the federal reserve operating procedures 1999 elsevier science b v all rights reserved

the impact of fomc statements on the volatility of asset prices this article examines the impact of federal open market committee fomc statements on asset prices statements are found to have a much more pronounced impact on the volatility of asset prices than interest rate surprises they influence primarily stock returns intermediate and long term yields whereas short term rates are driven both by statements and by interest rate surprises we also find that the regime shift of may 1999 has improved the effectiveness of monetary policy as reflected in an overall reduction in market volatility during the most recent regime in addition markets are equally well prepared for the upcoming rate decision in both regimes but the process of adjustment depends on whether a statement was issued in the old regime or not when a statement is issued price adjustments are very similar across both periods whereas if no statement is issued then the rate of adjustment towards the new value is more gradual and occurs throughout the entire intermeeting period

why interest rates react to money announcements an explanation from the foreign exchange market abstract when the fed announces a money supply greater than had been expected interest rates rise why one explanation is that the market raises its estimate of the future rates of money growth and inflation and bids up nominal interest rates we offer contrary evidence on such days the dollar appreciates not depreciates an alternative explanation is that the market perceives the change in the money stock as a transitory fluctuation that the fed will reverse in the future the anticipated future tightening raises today s real interest rate causes a capital inflow and appreciates the dollar the result in fact observed

the information content of the federal funds rate is it unique this paper investigates the information content of the federal funds rate relative to other market interest rates the empirical results indicate that the federal funds rate is not informationally superior to the overnight repurchase rate or the three month t bill rate unanticipated changes in monetary policy do not systematically move the funds rate away from its long run equilibrium relationship with other short term interest rates these results support the efficient market view that the federal funds rate should not contain more information including that about monetary policy than other interest rates copyright 1995 by ohio state university press

the execution of monetary policy a tale of two central banks money markets and at the inception of economic and monetary union emu an open question was whether execution of monetary policy by the eurosystem could effectively stabilize liquidity and short term interest rates potential problems could arise from the central bank s limited knowledge of the new euro area market s response to shocks and from market participants limited understanding of the monetary authorities policy execution framework which minimizes the central bank s presence in the market and assigns a key liquidity stabilization role to standing facilities and to depository institutions own reserve management we find that the euro area money market has displayed a remarkable degree of stability since the inception of emu overnight euro rates have behaved very similarly to us federal funds rates which are managed much more actively by the us federal reserve recent operational changes by both the eurosystem and the federal reserve are leading to convergence in style of policy execution on the two sides of the atlantic and may foster even closer similarity in the next few years leonardo bartolini and alessandro prati

economic news exchange rates and interest rates the paper esamines the post october 1979 response of exchange rates and interest rates to the new information contained in the first announcement of fifteen us macroeconomic series illarkets respond primarily to monetary news but also to news about the trade deficit domestic inflation and variables that reflect the state of the business cycle for all fifteen macroeconomic variables an increase decrease in interest rates is accompanied by an appreciation depreciation of the dollar which is consistent with models that stress price rigidity and absence of purchasing power parity the effect of economic news on asset prices has received increasing attention in the economic literature because an outcome of the efficient markets rational expectations hypothesis is that flesible asset prices change the moment new information about future fundamentals arrives in the market in the exchange rate literature the role of news has gained importance because structural models have failed to predict most of the variation in exchange rates during the 1970s see imeese and rogoff 1983 researchers were naturally led to investigate the types of news that make exchange rates so volatile and to utilize news in order to test which model of exchange rate determination is consistent with the floating eschange rate experience notable studies are those of dornbusch 1980 frenkel 1981 edwards 1982a b 1983 copeland 1984 and rose 1984 in this paper i also examine the effects of macroeconomic news on eschange rates but i adopt a different more direct strategy one that complements previous work avoids some of its shortcomings and promises interesting conclusions i examine the instantaneous response of exchange rates the moment a piece of economic news hits the market if one can isolate the exact time during a business day when news arrives it is straightforward to examine the response of exchange rates because financial data are continuously available the advantages of the present methodology are many first it is possible to identify the exact types of economic news and how they affect exchange rates second the simultaneity bias which plagues the previous literature on exchange rates and news is not present here the independent variables that represent news can be interpreted as causal the paper was presented at the 1985 meeting ofthe american economic association the author wishes to thank sebastian edwards r w hafer nicholas karamouzis andrew rose and two anonymous referees for helpful comments kim rupert of the money market services for providing the survey data soo kounne for able research assistance and barnard college for research support

china s official rates and bond yields abstract recent research shows that bond yields are influenced by monetary policy decisions to learn how this works in a bond market that differs significantly from those in the us and europe we model chinese bond yields using the one year deposit interest rate as a state variable we also include the spread between the one year market interest rate and the one year deposit interest rate as another factor the model is developed in an affine framework and closed form solutions are obtained we then test the model empirically with a markov chain monte carlo simulation procedure the results show that the new model that incorporates the official rate in china characterizes the changing shape of the yield curve well

international interest rates and us monetary policy announcements evidence from hong kong and singapore this paper investigates the responses of market interest rates to us monetary policy announcements for the us and two emerging economies hong kong and singapore which are similar on many respects but have experienced opposite exchange rate regimes in the last twenty years our results based on market expectations extracted from federal fund futures rates document that fomc announcements significantly affect the term structure of interest rate in the us and both asian countries further international interest rate differentials around fomc meeting dates tend to be negative for short maturities with the impact gradually dissipating as bond maturity increases finally for the case of singapore we find that domestic interest rates react to both external and domestic monetary policy announcements with a magnitude that is larger over the full bond maturity spectrum for domestic announcements these results are robust to time varying futures risk premia and alternative measures of interest rates expectations

monetary conditions and international investing we examine the relationship between monetary conditions and global stock returns previous studies established that u s stock returns during expansive u s monetary periods are significantly higher than returns during restrictive periods we found that this pattern prevails in non u s markets furthermore the pattern exists relative to both local and u s monetary conditions by examining several investment strategies we show that investors could have improved portfolio performance in the period studied by using both u s and local monetary conditions to guide their portfolio allocations using monetary conditions to determine portfolio composition would have been consistently beneficial throughout the past 30 years

the effect of unanticipated money on the money and foreign exchange markets abstract a number of studies have attempted to determine why unanticipated increases in the money supply are positively correlated with money market interest rates by examining the response of the foreign exchange market to unanticipated changes in the money stock they have found a significant positive relationship between unanticipated increases in the money supply and the foreign exchange value of the dollar and have interpreted this as evidence for the anticipated liquidity effect hypothesis however these results support this hypothesis only if both markets respond simultaneously to unanticipated changes in money this paper examines the cross market consistency of the response using six bilateral exchange rates and the treasury bill rate all measured over a narrow time interval the results show that in general these markets do not respond simultaneously to money announcements

the fed and short term rates is it open market operations open mouth operations or interest rate smoothing abstract it is widely believed that the fed controls the federal funds rate by altering the degree of pressure in the reserve market through open market operations when it changes its target for the funds rate recently however several analysts have suggested that the fed need not conduct open market operations to change the funds rate rather they argue it is sufficient that the fed indicate its desire for the funds rate this paper notes that there is yet a third alternative the interest rate smoothing hypothesis that suggests that the fed does not move rates per se but rather smooths the transition of rates to the new equilibrium required by economic shocks this paper tests the open market and open mouth alternatives using a methodology first used by cook and hahn journal of monetary economics 1989a 331 finding no evidence that either open market operations or open mouth operations can account for the close relationship between the funds rate and the funds rate target a variety of evidence consistent with the interest rate smoothing hypothesis is considered the results suggest that many changes in the fed s funds rate target are an endogenous response to economic events and suggest that an alternative way to identify exogenous changes in policy is to identify exogenous changes in the fed s funds rate target

money market integration we use transaction level data and detailed modeling of the high frequency behavior of federal funds eurodollar spreads to provide evidence of strong integration of the u s markets for federal funds and eurodollars the two core components of the dollar money market our evidence of negligible federal funds eurodollar premia contrasts with previous findings of large and predictable premia which have been interpreted as evidence of segmentation between the markets for federal funds and eurodollars our results however are consistent with possible persistent segmentation within the global eurodollar market we document several patterns in the behavior of federal funds eurodollar spreads including liquidity effects from trading volume to yield spreads volatility

the market valuation effects of reserve regulation abstract we demonstrate that the financial market s reaction to changes in reserve regulation implies that reserve requirements are an excise tax on banking activities changes in reserve requirements do not influence yields on treasury securities or returns on broad based portfolios of nonfinancial stocks and thus do not impound new information about monetary policy moreover changes in reserve requirements have an impact on nonbank financial firms that is opposite in sign to that of banks this suggests that reserve requirements shift the locus of some financial activities from the banking sector to the nonbank sector of the financial system

the international impact of federal reserve bank discount rate changes abstract previous studies have found that american equity values move inversely to the direction of announced discount rate changes by the federal reserve bank in this study of the return behavior of a simple of american depository receipts adrs to announcements of discount rate changes we find no evidence of such a relationship indeed adrs exhibit no significant response to either rate increases or decreases our results hold for both market realignment and policy motivated changes these findings suggest that adrs can provide diversification to the american investor as international economies and monetary policies remain incompletely integrated

composition of r d and technological cycles abstract this paper investigates the existence of technological cycles that arise endogenously from certain tradeoffs between research and development inherent in the technological features of r d production it analyzes the composition of r d expenditures and models the associated internal structure and dynamics of the innovation process explicitly the model includes externalities and cumulative aspects of r d processes the discussion is initially developed in a deterministic setting for both the first best and the market cases the dynamics leading to optimal cycles are fully explored for specific examples results are given with regard to 1 i level of research investment 2 ii stability of steady states and cycles and 3 iii amplitude of cycles extensions to a stochastic setting are also presented

a note on ranking the international business journals 2000 examined the relative quality of 30 international business ib journals the article s objectives were to present an objective analysis of journal quality for tenure and promotion decisions to guide researchers considering submission options and to provide the academic community with an enhanced understanding of ib publication outlets using citation analyses and a survey questionnaire journal rankings were developed as designed the study was carefully executed and provides a comprehensive list of journals that publish ib research within the ib research acad

a tractable interest rate model with explicit monetary policy rates abstract this paper proposes a novel interest rate model that presents simple analytical pricing formulas for interest rate based derivatives including swaps futures swaptions caps and floors exploring the regime switching feature of markov chains the proposed model focuses on discrete changes in the central bank policy rates the main driver of short term rate fluctuations an empirical analysis shows that the proposed model generally outperforms other standard short term rate models in fitting cross sections of options prices moreover the explicit nature of policy rates to some extent enables the model to infer risk neutral probabilities of the central bank rate decisions

inter temporal variation in the illiquidity premium abstract we find evidence of a systematic link between monetary conditions and inter temporal variation in the price of liquidity specifically following an expansive monetary policy shift funding conditions improve and market wide liquidity increases which is especially beneficial for illiquid securities the improved liquidity and funding conditions reduce the returns required for holding illiquid securities consequently illiquid stocks experience relatively large price increases when monetary conditions become expansive and thus the measured return spread between illiquid and liquid stocks expands substantially overall our evidence supports the claim that the price of asset liquidity is dependent on monetary conditions

effects of changes in the discount rate on the foreign exchange value of the dollar 1973 to 1978 this paper attempts to analyze the effects of changes in the federal reserve s discount rate on the dollar s foreign exchange value if a discount rate increase were to signal a subsequent general increase in market interest rates one would expect u s dollar denominated assets to become relatively more attractive and the ensuing increased demand for dollar assets to tend to raise the dollar s exchange value the reverse would be true for discount rate decreases however in recent years the federal reserve s policy of moving the discount rate with a lag behind the federal funds rate means that market participants generally have sufficient information to anticipate changes in the discount rate when this is the case announcement effectsimmediate and discernible market responses to discount rate changes do not occur under special circumstances in 1978 however announcement effects could and did occur by increasing the discount rate when the federal funds discount rate differential was around normal levels and by increasing the discount rate by a larger amount than the market anticipated the federal reserve used the discount rate as a signal to market participants that it would use other operating instruments to bring about changes in market interest rates and the monetary base in their 1977 article raymond e lombra and raymond g torto ran a number of econometric tests for discount rate exogeneity on monthly data from january 1968 to may 1974 they concluded that discount rate movements were not independent of the spread between the discount rate and the federal funds rate given rational expectations therefore changes in the discount rate could not generate announcement effects lombra and torto 1977 this paper updates the work of lombra and torto and then attempts to test directly

the reaction of stock prices to unanticipated changes in money a note much of the past work on the money stock market relationship centered on the question of whether money is a leading indicator of stock prices studies by sprinkel 22 homa and jaffee 10 and hamburger and kochin 8 supported the view that past increases in money lead to increases in equity prices the implication of this work was that investors could earn above normal proflts by using a trading strategy based on the observed behavior of the money stock this contradicts the efficient markets hypothesis which asserts that current asset prices reflect all available information so that no such trading strategy can exist subsequent research by cooper 3 pesando 17 rozeff 21 and rogalski and vinso 19 has shown that past money changes do not contain predictive information on stock prices upholding the efficient markets view this paper investigates whether the response of common stock prices to weekly money announcements is consistent with the efflcient markets hypothesis unlike the above research therefore the focus is on the very short run response of stock prices to both anticipated and unanticipated announced changes in money recent work by berkman 1 grossman 7 urich and wachtel 25 and roley 20 indicates that short term interest rates respond only to the unexpected component of the announcement with short term rates rising when the announced change in money exceeds the expected change berkman also examined the reaction of stock prices finding that an unanticipated increase in the money supply depressed share prices lynge 13 found that positive money announcements lowered stock prices but since he did not distinguish expected from unexpected money growth his results do not bear directly on the efficient markets issue in investigating the response of stock prices to weekly money announcements survey data on market participants forecasts of the announced weekly change

stock prices and economic news this paper examines the daily response of stock prices to announcements about the money supply inflation real economic activity and the discountrate except for the discount rate survey data on market participants expectations of these announcements are used to identify the unexpected component of the announcements in order to test the efficient markets hypothesis that only the unexpected part of any announcement the surprise moves stock prices the empirical results support this hypothesis and indicate further that surprises related to monetary policy significantly affect stock prices there is only limited evidence of an impact from inflation surprises and no evidence of an impact from real activity surprises on the announcement days there is also only weak evidence of stock price responses to surprises beyond the announcement day this abstract was borrowed from another version of this item

the term structure with semi credible targeting the federal reserve sets targets for interest rates which it enforces through direct market intervention these targets are changed periodically in this paper we develop a term structure model in which the short rate is subject to a control which keeps it close to a target which changes from time to time the probability of target changes is not constant in the model but changes as a function of observables the model performs well at explaining the shifts in the yield curve that accompany target changes in u s financial markets the federal reserve bank the fed is a unique player usually we assume that market participants are price takers in financial markets however there is evidence that this is not true of the fed in fact the fed sets targets for short term rates which it attempts to maintain by market intervention injecting or withdrawing funds from the market to keep the rates near their targets targets are changed from time to time and market participants know when such a target change occurs they may in fact have some limited ability to forecast such target changes several recent papers have provided evidence that models which allow the short rate to revert toward a mean which is itself a random process perform

why do t bill rates react to discount rate changes a number of alternative explanations for the response of t bill rates to discount rate changes have been offered in the literature this paper investigates cook and hahn s 1988 hypothesis that discount rate changes signal a change in the fed s federal funds rate target which in turn induce changes in t bill rates after showing that the evidence that theyt claim supports their view cannot be used to differentiate their hypothesis from equally plausible alternatives we show that a valid alternative test fails to provide support for their view and that discount rate changes do not appear to signal changes in the target for the funds rate copyright 1994 by ohio state university press

probing theoretically into central and eastern europe transactions resources and institutions since the 1990s central and eastern europe cee has provided unique societal quasi experiments which represent opportunities to test the applicability of existing theories in international business and management studies and to develop new ones specifically three lines of theorising have been advanced 1 organisational economics theories 2 resource based theories and 3 institutional theories for each of these theories we discuss how they contribute to the understanding of key issues such as entry strategies of foreign investors restructuring strategies of local incumbents and entry and growth strategies of entrepreneurs on this basis we assess how cee research has influenced the overall trajectories of theory development cee research has in particular highlighted the importance of contextual influences such as institutions thus scholars have aimed at incorporating institutions into theories such as organisational economics theories and resource based theories and advancing an institution based view of business strategy as a complementary perspective we outline how future research in cee and other emerging economies may advance this research agenda further

emerging themes in international business research this study is motivated by two research questions 1 which recent contributions have been driving the research agenda in international business 2 which emerging themes in the literature are likely to set the stage for future work to examine these questions the study examined scholarly work in international business over the time period 1996 2006 in six leading international business journals journal of international business studies management international review journal of world business international marketing review journal of international marketing and international business review next a delphi study of the most prolific authors in these journals over the same time period was conducted to delineate a future research agenda in international business addressing these two research questions provides us with a more complete understanding of the progress made to date in international business research and provides a glimpse of the future

the effect of monetary policy actions on exchange rates under interest rate targeting abstract we specify a theoretical model of the exchange rate response to u s monetary policy actions that is capable of explaining a wide range of recent empirical results we show that the response pattern of spot and expected future exchange rates depends on the predictability of federal reserve actions the persistence of shocks to the economy and the reaction of foreign central banks to the us monetary policy shock we also show that the movements of spot and expected future exchange rates in anticipation of a monetary policy change can outweigh the immediate responses at the time of the change

changing interest rate responses to money announcements 1977 1983 abstract this paper investigates when and how the response of interest rates to money announcements changed in recent years the response of both short and long rates rises in october 1979 but drops during 1981 during mid 1982 the response of long rates raises again but without a change in the response of short rates despite a number of ex post explanations for these shifts none of the major hypotheses of why interest rates respond to money announcements provides a complete ex ante explanation of these response shifts

the impact of discount rate changes on market interest rates evidence from three european countries and japan abstract this paper examines the impact of official discount rate odr changes on market interest rates of four countries germany france japan and the uk during the period from 1980 through 1997 the overall results indicate that short term rates are more responsive than long term rates for all countries the magnitude of the changes is country specific market rate responses are lower for germany and japan which have fewer changes in odr these results are consistent with expectations that there is less uncertainty under such regimes consistent with the pace of regulatory reforms the results of odr changes are strongest in uk and weakest in japan when monetary policy is changed or reversed interest rate responses are shown to be larger for countries with frequent changes in discount rates

the effect of changes in the federal funds rate target on market interest rates in the 1970s abstract this paper examines the influence of monetary policy on interest rates by estimating the effect of changes in the federal funds rate target the federal reserve s policy instrument on market interest rates in the 1970s we find that changes in the target caused large movements in short term rates and smaller but significant movements in intermediate and long term rates we hypothesize that the similarity of the reactions of three six and twelve month rates to changes in the target offers a possible explanation for the lack of support for the expectations theory from studies that have tested the theory using these rates

cross country differences in monetary policy execution and money market rates volatility abstract volatility patterns in overnight interest rates display differences across industrial countries that existing models designed to replicate the features of individual countries markets cannot account for this paper presents an equilibrium model of the overnight interbank market that matches cross country differences in patterns in interest volatility by incorporating differences in how central banks manage liquidity in response to shocks our model is consistent with central banks practice of rationing access to marginal facilities when the objective of stabilizing short term interest rates conflicts with another high frequency objective such as an exchange rate target

the high frequency response of the eur usd exchange rate to ecb communication we investigate the impact of the european central bank s monetary policy communication during the press conference held after the monthly governing council meeting on the eur usd exchange rate in high frequency based on the method of content analysis we construct communication indicators for the introductory statement and find that communication with respect to future price developments is most relevant in response to statements about increasing risks to price stability the eur appreciates on impact to the contrary communication about economic activity and monetary aggregates does not generate significant exchange rate reactions

money supply announcements interest rates and foreign exchange abstract this paper presents a test of the joint hypothesis that money supply announcements affect the real interest rate and that changes in the real interest rate affect the exchange rate in the short run the test results are consistent with the joint hypothesis for example it is found that announcement of an unexpected jump in the money supply is accompanied by an increase in interest rates and an appreciation of the dollar if the rise in interest rates was entirely due to higher inflationary expectations the dollar should not appreciate

asset returns discount rate changes and market efficiency the primary purpose of this paper is to reconcile the previous findings of discount rate endogeneity with the presence of discount rate announcement effects in securities markets the crux of this reconciliation is the distinction between technical discount rate changes that are endogenous and nontechnical changes which contain some informative policy implications in essence we attempt to separate expected discount rate changes from unexpected changes or equivalently the expected component of discount rate changes from the unexpected component if markets are efficient the former should have no announcement effects while the latter may be associated with an announcement effect accordingly the focus of the empirical analysis is on the interaction between discount rate exogeneity the specific monetary policy regime and accouncement effects in addition we examine whether the behavior of these markets in the postannouncement period is consistent with the rapid price adjustment implied by market efficiency

the private r d investment response to federal design and technical competitions it is the federal government s role to promote investment in research and development rd and 2 contracting with private firms and nonprofit organizations such as universities to perform rd the winning firm recovered its development costs in the form of profits on the sale of the airplanes and the losing firms did not recoup their r d investment mansfield 1971 p 122

the credit channel of monetary policy transmission evidence from stock returns christophre georges this paper offers a novel test of the credit view of the monetary policy transmission mechanism using stock market returns we identify fed policy shocks using newspaper accounts and track daily stock prices immediately following the shocks if the credit channel is important then firms that are dependent on bank credit and internal funds should receive a relatively greater benefit loss from a fed easing tightening than firms with access to nonbank credit at favorable terms we identify ten policy shocks during the expansion of 1993 94 and the credit crunch period of the 1990 91 recession and find little evidence supportive of an operative credit channel jel e5 i introduction recently there has been renewed interest in the mechanism by which monetary policy innovations are transmitted into changes in aggregate output according to the traditional money view monetary policy influences market interest rates inducing changes in interest sensitive spending and consequently changes in output by assumption there is no distinction between financial assets and thus bank loans and internal funds are of no special interest in contrast the credit view e g bernanke and blinder 1988 assumes that bank loans are special due to information asymmetries some businesses are dependent on banks for loanable funds a withdrawal of reserves by the fed causes the supply of bank loans to fall and bank dependent businesses consequently reduce their spending a broader version of this view e g gertler and gilchrist 1993 bernanke and gertler 1995 claims that credit market imperfections contribute to the propagation of monetary policy shocks without working exclusively through the su pply of bank loans tight monetary policy may for example cause a deterioration of borrowers net worth thereby increasing external finance premia in either case this transmission mechanism operates through firms that are credit constrained in the sense that nonbank credit is an imperfect substitute for internal funds and bank loans empirical evidence on the transmission mechanism has been mixed see bernanke and blinder 1992 ramey 1993 kashyap et al 1993 gertler and gilchrist 1993 1994 christiano et al 1996 oliner and rudebusch 1995 1996 kashyap and stein 2000 two fundamental problems make direct tests of the credit view difficult the difficulty of identifying exogenous monetary policy shocks and the difficulty of identifying the relationship between these shocks and subsequent real activity this article offers a novel empirical test of the credit view using stock market returns if the credit channel is important then firms that are credit constrained should receive a relatively greater benefit loss from a fed easing tightening than firms with access to nonbank credit at favorable terms this relative benefit loss should be reflected in the behavior of stock prices immediately following news of the fed policy change we therefore identify changes in market expectations of fed policy calculate abnormal returns the deviations of the actual returns from the returns predicted by an asset pricing model for individual securities immediately following these innovations and test for systematic relationships between these abnormal returns and indicators of credit constraints at the firm level this approach is more indirect than others in the literature but has the advantage of mitigating the two identification problems noted above first the policy shocks that we use are changes in stock market expectations of fed policy we can identify these closely using daily accounts in the business press 1 second because the stock market reacts quickly to changes in expectations of future profitability we observe near contemporaneous responses of stock prices to policy shocks regardless of when in the future profits are expected to be altered

a comparative analysis of layoff announcements and stock price reactions in the united states and japan downsizing and layoffs are an important mechanism for u s firms to cope with their strategic and economic environment in contrast the japanese tradition of lifetime employment limits the ability of firms to employ layoffs as a strategic measure relegating its use to conditions of financial distress this paper provides the first comparison of layoffs in japan and the united states and examines stock price reactions to layoff announcements in each country from 1990 to 1994 agency theory and aoki s cooperative game theory are employed to discuss differences in the governance structures of u s and japanese firms and their implication for stock price reactions results show that layoff announcements trigger negative returns for both u s and japanese firms specifically layoff announcements of u s firms are associated with a negative 1 78 percent abnormal return while layoff announcements for japanese firms are associated with a negative 0 56 percent abnormal return to better understand the impact of layoffs this study examines the relationships between stock price reactions and various layoff characteristics such as whether the layoff is proactive or reactive or whether the layoff is the first in the industry implications of the findings are discussed 1997 john wiley sons ltd

an assessment of the measurement of performance in international business research a sizeable body of international business ib research is devoted to building knowledge about the determinants of organizational performance a key precursor to accurately diagnosing why some organizations succeed in the international marketplace while others struggle is operationalizing performance appropriately yet to date no systematic investigation has considered how well ib research measures performance we examine the measurement of performance in 96 articles published in the academy of management journal administrative science quarterly journal of marketing journal of marketing research journal of international business studies management science organization science a nd thestrategic management journal between 1995 and 2005 the findings reveal that most studies do not measure performance in a manner that captures the multifaceted nature of the construct we describe the implications of these results and offer suggestions for improving future practice journal of international business studies 2008 39 1064 1080

the information content of discount rate announcements and their effect on market interest rates this paper presents evidence that throughout the 1973 85 period the federal reserve systematically used certain types of discount rate a nnouncements to signal changes in its policy instrument the federal funds rate market participants understood the signals contained in d iscount rate announcements and used them to revise their expectations of the funds rate these revisions in funds rate expectations caused movements in treasury bill rates copyright 1988 by ohio state university press

are expectations of inflation rational or is variation of the expected real interest rate unpredictable abstract the joint hypothesis developed and tested in this paper is that the nominal interest rate is a rational expectation of the real interest rate plus the inflation rate and that variation of the expected real interest rate is unpredictable on the basis of information used in the test this test is applied to quarterly data on three month united states treasury bills of 1954 to 1973 the information used in the tests includes besides past interest rates and inflation rates past growth rates of the source base the money supply and real gnp some of the tests allow for a positive marginal tax rate which changes the results little the hypothesis is generally consistent with the data which provides support for the proposition that predictable changes of the money supply do not affect expected real interest rates over periods as short as a quarter

market response to the weekly money supply announcements in the 1970s the hypothesis that the weekly announcement of the money supply affects interest rates is examined the announcement effect is interpreted as a policy anticipation effect that is an unanticipated increase in the money supply leads to an increase in interest rates in anticipation of future tightening by the federal reserve estimates of this effect with proxies for the unanticipated change constructed from a survey of money supply forecasts and an arima model indicate that a financial markets respond very quickly to the announcement and b the response was largest when policymakers emphasized the importance of the monetary aggregates financial market participants are careful observers of the weekly money supply announcement and generally agree that the announcement often leads to changes in interest rates this occurs because the announcement leads market participants to revise their expectations both of future federal reserve policy actions and of future economic conditions in this paper we examine the response of yields on treasury bills to the announcement of the money supply and the extent to which that response has varied in the last ten years money supply announcements may affect market interest rates in three ways first actual expansion of the money supply leads to lower interest rates through a liquidity effect however rapid monetary growth which is not anticipated leads market participants to expect the federal reserve to counteract such growth in the future as a consequence there may be a policy anticipation effect which causes higher interest rates in anticipation of future tightening furthermore prolonged rapid monetary growth also creates inflation and inflationary expectations which lead to higher interest rates thus there may exist a third effect the inflationary expectations effect which also leads to higher interest rates our interest in this paper is in the immediate market response to the weekly announcement of the money supply which as we argue below is most likely to be a policy anticipation effect the policy anticipation effect is best described by example suppose that the announced change in the money supply exceeds that which was expected by

interest rate targeting and the dynamics of short term rates a feature of u s monetary policy has been active targeting of overnight fed funds rates the authors show that during a period of tight targeting 1989 96 term fed funds spreads from the target displayed pronounced volatility and persistence which increase with the maturity of the loan they show that the increase in persistence is consistent with a model of infrequent but predictable revisions of the target in the authors model the autoco variance of the spreads of term fed funds rates from the target increases with the maturity because longer term rates reflect persistent expectations of the next target change coauthors are giuseppe bertola silverio foresi and leora klapper

monetary policy and short term interest rates an efficient markets rational expectations approach this paper is an application of efficient markets rational expectations theory to analyze empirically the relationship of money supply growth and short term interest rates a hotly debated issue in the literature this approach has the advantage over earlier research on this subject in that it imposes a theoretical structure that allows easier interpretation of the empirical results as well as more powerful statistical tests the empirical results uniformly do not support the proposition that increases in money growth are correlated with declines in short rates the relationship between money supply growth and nominal interest rates is a hotly debated issue in the literature one view associated with keynesian structural macromodels has an increase in money growth leading at least in the short and medium runs to a decline in interest rates 2 an alternative view associated with milton friedman 6 7 indicates that interest rates might rise in response to higher money growth because there is a rise in inflationary expectations and hence a rise in interest rates through a fisher 5 effect

flexible exchange rates prices and the role of news lessons from the 1970s recent experience with flexible exchange rate systems has led to renewed interest in the operation of foreign exchange markets as reflected in many recent studies of the principal determinants of exchange rates the 1970s witnessed the dramatic alteration of the international monetary system from a regime of pegged exchange rates which prevailed for about a quarter of a century since the bretton woods conference into a regime of flexible though managed rates as a consequence of the emergence of the new legal and economic system traders national governments and international organisations were confronted with new economic problems choices and instruments during the 1970s ex change rates fluctuated widely and inflation rates accelerated the international monetary system had to accommodate extraordinarily large oil related shocks which affected trade flows in goods and assets huge oil payments had to be recycled uncertainties concerning future developments in international politics reached new heights and the prospects for the world economy got gloomier these developments placed unprecedented pressures on the markets for foreign exchange as well as on other asset markets they were associated with a large slide in the value of the us dollar and resulted in speeding up the creation of new institutions like the european monetary system which provided the formal framework for the management of exchange rates among members

is there news in the prime rate using intraday data we find that bank announcements of changes in the prime rate have significant effects on dow jones stock price indexes and yields in the treasury bill futures market we find comparable effects using daily data for indexes of share prices of banks and financial firms as well as interest rates on various maturities of government securities our evidence is consistent with the view that banks have a comparative advantage in processing private information gained through bank borrower relations and the regulatory supervision process

the information content of discount rate announcements revisited cook and hahn 1988 have argued that discount rate change announcements were used by the federal reserve to signal market participants about movements in the federal funds rate throughout the 1973 79 federal funds rate targeting period they maintained that announced changes in the discount rate provided new information to market participants about subsequent actions of the federal reserve regarding the federal funds rate market participants understood these signals and used them to revise their expectations of the future path of the funds rate which also affected treasuw bill rates however roley and troll 1984 and smirlock and yawitz 1985 have argued that the federal reserve chose to implement policy changes exclusively through the federal funds rate during the funds rate targeting period hence the federal reserve s discount rate policy did not reveal any additional information and thus did not have an effect on market interest rates cook and hahn 1988 found evidence of discount rate announcement effects on bill rates in the pre october 1979 funds rate operating period while both roley and troll and smirlock and yawitz did not these three studies differed in several ways including their discount rate announcement classification procedures l mistiming of five event days 2 and diserent sample starting dates 3 as cook and hahn 1988 table 1 pp 170 171 published

the information content of discount rate announcements what is behind the announcement effect abstract a considerable volume of research shows that asset prices respond to changes in the federal reserve s discount rate while several competing hypotheses have been advanced to explain the market s response to discount rate announcements comparatively little effort has been made to differentiate among alternative hypotheses the result is an abundance of evidence establishing that asset prices respond to discount rate announcements but little if any agreement about why markets respond this article attempts to fill a void in the literature by pointing out how competing hypotheses differ and by constructing tests explicitly designed to differentiate among competing explanations the evidence suggests that the market s reaction to discount rate changes is purely an announcement effect i e a reaction to new information contained in the announcement that the direct effect of discount rate changes on market rates is nil that the announcement effect is invariant to the federal reserve s operating procedure and that generally speaking changes in the discount rate do not signal a change in monetary policy the announcement effect appears to vary with both the nature and extent of the information that the announcement of a discount rate change is believed to contain

day to day monetary policy and the volatility of the federal funds rate we propose a model of the interbank money market with an explicit role for central bank intervention and periodic reserve requirements and study the interaction of profit maximizing banks with a central bank targeting interest rates at high frequency the model yields predictions on biweekly patterns of the federal funds rate s volatility and on its response to changes in target rates and in intervention procedures such as those implemented by the fed in 1994 theoretical results are consistent with empirical patterns of interest rate volatility in the u s market for federal funds

publishing international business research a survey of leading journals this paper argues that given the proliferation of journals within which to publish international business research authors need to identify objectives for their research and develop a publishing strategy to ensure the appropriate and timely publication of their work based on archival data and a survey of journal editors this study provides information about seventy nine english language business publications to help authors develop such as strategy

controlling monetary aggregates the discount window this paper argues that current discount window policy coupled with non borrowed reserve targeting of the federal reserve makes the quantity of high powered money endogenous examination of the advisability of this procedure in a stochastic environment is conducted using a general equilibrium financial model it is concluded that the current policy reduces the destabilizing effects of shifts between various depository financial assets but increases the effect of other asset portfolio shifts and aggregate supply disturbances these results are consistent with the work of poole inasmuch as the current debate over discount policy is a repackaging of the debate over interest rate or aggregates control for monetary policy

ranking the international business journals this study seeks to assess and rank the relative quality of 30 international business journals using both a citation analysis and a survey approach journal rankings are presented using both approaches in addition to a composite ranking the rankings provide an objective analysis of journal quality for tenure and promotion committees for ib researchers considering journal submission options and provide the academic community with a better understanding of which international business publication outlets are the most influential in guiding research in this discipline

lifting the veil of secrecy from monetary policy evidence from the fed s early discount rate policy traditionally monetary policy has been conducted under a veil of secrecy in its landmark freedom of information act case the federal reserve argued that it needed to delay the disclosure of its policy decisions claiming that immediate disclosure would cause the market to react in a way that was inconsistent with the fed s intentions based on this argument and others the fed was permitted to delay the release of fomc policy decisions most economists however believe that market forces would work to keep equilibrium outcomes more in line with policy maker s intentions if policy makers would announce their intentions and establish a reputation for behaving in a manner consistent with them this paper tests the hypothesis that the market responds more closely to the fed s intentions when the fed makes its intentions known by investigating the market s reaction to a change in discount rate policy in the early 1960s we find that the market responded in a manner inconsistent with the fed s intentions when they were unknown and responds in a manner consistent with them when the fed made its intentions known

the information content of german discount rate changes abstract discount rate changes always receive considerable attention in financial markets two hypotheses compete to explain financial market reactions the direct borrowing cost effect and the announcement effect for the bundesbank s discount rate changes after 1979 we find that market reactions cannot be attributed to a direct borrowing cost effect but exclusively to announcement effects the empirical results indicate that interest rates react to changes in the discount rate to the extent that they are unanticipated in contrast the response to anticipated changes in the discount rate is small and insignificant we proxy market anticipations by a multinomial logit model combined with a dummy variable capturing non quantifiable factors reported by the financial press moreover we show that the response of interest rates declines along the term structure and with the switch to greater emphasis on repurchase operations in early 1985

an empirical analysis of stock and bond market liquidity this article explores cross market liquidity dynamics by estimating a vector autoregressive model for liquidity bid ask spread and depth returns volatility and order flow in the stock and treasury bond markets innovations to stock and bond market liquidity and volatility are significantly correlated implying that common factors drive liquidity and volatility in these markets volatility shocks are informative in predicting shifts in liquidity during crisis periods monetary expansions are associated with increased liquidity moreover money flows to government bond funds forecast bond market liquidity the results establish a link between macro liquidity or money flows and micro or transactions liquidity a number of important theorems in finance rely on the ability of investors to trade any amount of a security without affecting the price however there exist several frictions 1 such as trading costs short sale restrictions and circuit breakers that impact price formation the influence of market imperfections on security pricing has long been recognized liquidity in particular has attracted a lot of attention from traders regulators

does anticipated monetary policy matter an econometric investigation a heated debate has arisen over the policy ineffectiveness proposition associate with the work of lucas sargent and wallace it postulates that anticipated aggregate demand policy will have no effect on business cycle fluctuations so that one deterministic feedback policy rule is as good as any other from the point of view of stabilizing the economy this paper develops a methodology for empirically analyzing rational expectations models displaying this neutrality result and then applies it to the important question of whether anticipated monetary policy matters to the business cycle

the impact of money on short term interest rates this study reviews empirical evidence from four research methods related to the impact of money on short term nominal rates the studies consistently fail to find evidence supporting the much hypothesized short term negative relationship between money and nominal rates since at least april 1975 reasons for the absence of a negative relationship include the tendency of financial markets to anticipate corrective action by the fed whenever ml deviates from targeted growth ranges and a rapid adjustment of inflationary expectations to changes in money growth

the structure of expectations of the weekly money supply announcement abstract this paper examines the structure of expectations of the weekly money supply announcement in the late 1970s the data used are from a weekly telephone survey of money market participants the rationality and structure of expectations are explored with the data organized in three ways the mean response to each weekly survey the pooled sample of individual responses and time series of responses by each individual in the survey the effect of data aggregation on rationality tests is investigated the structure of the expectations data are also examined and it is found that both strong regressive influences and adaptive learning characterize the data

discount rate changes and the foreign exchange market abstract changes in the discount rate can have associated announcement effects on the foreign exchange value of the dollar only if these changes are not anticipated by the market this paper provides evidence to support this contention specifically discount rate changes made for reasons other than technical adjustments have not been anticipated fully and consequently their announcements have had a significant impact on the dollar s exchange rate furthermore results are obtained that support the hypothesis that unanticipated discount rate changes alter inflationary expectations

monetary policy announcements and market interest rates response evidence from china abstract this paper examines the daily responses of market interest rates to three monetary policy announcements in china using the event study approach i find that the interest rate responses to announced changes in the regulated retail interest rate and the required reserve ratio are positive and significant at all maturities of interest rates but smaller at the long end of the yield curve by contrast market interest rates barely respond to the qualitative mpc announcements about the monetary policy stance these findings are robust to alternative econometric methods that correct for potential bias arising from violations of the identification assumption these findings suggest that the pbc should formulate its policy communication in a quantitative way

expectations surprises and treasury bill rates 1960 82 changes in six month bill rates over semiannual periods in the 1960s and 1970s are successfully related to expected changes and to surprises the latter include unanticipated changes in expected inflation in the growth of industrial production and base money and in inflation uncertainty estimation of the basic equation through the middle of 1983 does not suggest any change in structure moreover the equation explains 60 percent of the extraordinarily high level of real rates since late 1980 largely owing to an excess of unexpected net increases in anticipated inflation over actual increases our estimates provide some support for the expectations theory there appears to be information content in six month forward rates while this content is swamped by the impact of surprises in equations explaining rate changes in terms of forward rates alone the content is clear when proxies for the surprises are included in the equations the height and volatility of interest rates in the early 1980s spectacularly exceeded that of the past half century various researchers have attributed this to the sharp increase and decline in inflation the special characteristics of recent monetary the monetarist experiment and fiscal the structural deficit policies and mysterious or unidentified forces see clarida and friedman 1982 and makin and tanzi 1983 the present paper estimates the relationship between the six month treasury bill rate and its determinants in the 1960s and 1970s the purpose is to test various hypotheses regarding interest rate determination and to determine whether this relationship was altered markedly in the early 1980s the short term bill rate is chosen for investigation for two reasons first the yield on a short term instrument is independent of longer term expectations regarding inflation output growth and fiscal and monetary policies longerterm yields should depend heavily on such variables while reasonably accurate measures of expectations over say a six month horizon can probably be deduced are in fact available from survey data longer term expectations are both more uncertain and vary more widely across market participants second analysis of a short term bill rate allows an easy test of the expectations theory of interest rates recent studies by shiller campbell and schoenholtz 1983 and by mankiw and summers 1983 suggest that observed interest rate movements are unrelated to expected changes in rates extracted from the term structure of short term rates calling into question the validity of the expectations theory but see fama 1983 for an alternative view the six month bill rate is analyzed because it meshes best with the livingston survey data

pricing interest rate derivatives a general approach the relationship between affine stochastic processes and bond pricing equations in exponential term structure models has been well established we connect this result to the pricing of interest rate derivatives if the term structure model is exponential affine then there is a linkage between the bond pricing solution and the prices of many widely traded interest rate derivative securities our results apply to m factor processes with n diffusions and l jump processes the pricing solutions require at most a single numerical integral making the model easy to implement we discuss many options that yield solutions using the methods of the article

how international is management as business becomes more international have academic journals particularly management journals followed suit in this paper we examine the amount and type of international research in 19 top management journals from 1976 to 1980 and again from 1996 to 2000 international business studies are classified as multinational enterprise mne research and comparative research although the amount and type of international content varies by journal it appears that many management journals are increasing their international content while others are not

estimating the discount rate policy reaction function of the monetary authority this paper estimates a policy rule that explains the sign and the magnitude of the federal reserve s fed s discount rate changes it sets out a two sided type ii tobit model and develops a procedure for its estimation considering the discrete and censored nature of the changes the results suggest that the fed has conducted discount rate policy counter cyclically to influence output and to curb inflation and that the fed s response to policy indicators varies over monetary regimes furthermore consistency is found between the model prediction of the discount rate change and a classification based on whether the change is technical or non technical copyright 1999 john wiley sons ltd