globalization and the great u turn income inequality trends in 16 oecd countries the debate on the resurgence of income inequality in some advanced industrial societies has often focused on the impact of an increasingly integrated world economy typified by growing capital mobility heightened international competition and an increase in migration this study represents one of the first systematic cross national examinations of the role of globalization in the inequality u turn results indicate on the one hand that total inequality variation is principally affected by the percentage of the labor force in agriculture followed by the institutional factors union density and decommodification and only then by globalization on the other hand longitudinal variation in inequality while still dominated by the percentage of the labor force in agriculture is also principally affected by aspects of globalization such as southern import penetration and direct investment outflow and to a lesser extent by migration in other words globalization explains the longitudinal trend of inc

changing income inequalities within and between nations new evidence fresh data sources on cross national income are examined to document recent changes in the composition of world income inequality within and between nations new evidence shows that during the 1980s and 1990s the composition of world income inequality experienced a fundamental change characterized by the diminishing significance of between nation income differences and the growing prominence of within nation inequalities two competing trends account for this change 1 steady growth in the average level of income inequality within nations and 2 a decline in income inequality between nations these recent trends signify a reversal in one of the major legacies of the industrial revolution the internationalization of world income inequality across national borders the findings raise important questions for future studies of cross national inequality and development

the econometrics of the environmental kuznets curve an illustration using australian co2 emissions four econometric issues associated with the estimation and testing of the environmental kuznets curve ekc are considered i model specification with respect to the order of the polynomial ii

the effects of selling packaged goods on inventory decisions in this paper we study within a newsboy type modeling framework the common business practice of retail firms to sell products not only as independent items but also as part of multiproduct packets packaged goods our emphasis is on understanding the effects of such practices on the inventory decisions of the firm we provide insights on the resulting level of suboptimality when inventory decisions are made with demand information only on the independent items and without accounting for the demand substitution structure induced between independent items and packaged goods our stylized model studies an environment with two products that are not direct substitutes for each other sold either independently or as part of a packet that contains one unit of each we provide necessary and sufficient optimality conditions for this model and suggest an efficient numerical search for obtaining the optimal stocking levels an extensive computational study allowed us to provide insights on the nature of the optimal stocking policies the suboptimality of independent newsboy policies the effects of demand correlation among individual products and multiproduct packets and the determining role of induced substitution structure among products during stockout occasions on the profitability of the inventory system

the speculative efficiency hypothesis the hypothesis that forward prices are the best unbiased forecast of future spot prices is often presented in the economic and financial analysis of futures markets this paper considers the hypothesis independently of its implications for rational expectations or market efficiency and in order to stress this fact the term speculative efficiency is used to characterize the state envisaged under the hypothesis if a market is subject to efficient speculation the supply of speculative funds is infinitely elastic at the forward price that is equal to the expected future spot price the expected future spot price is a market price determined as the solution to the underlying rational expectations macroeconomic model although the paper is primarily concerned with testing this hypothesis in the foreign exchange market the methodology introduced in the paper is of general application to all futures markets this abstract was borrowed from another version of this item

the competitive newsboy we consider a competitive version of the classical newsboy problem in which a firm must choose an inventory or production level for a perishable good with random demand and the optimal solution is a fractile of the demand distribution and investigate the impact of competition upon industry inventory a splitting rule specifies how initial industry demand is allocated among competing firms and how any excess demand is allocated among firms with remaining inventory we examine the relation between equilibrium inventory levels and the splitting rule and provide conditions under which there is a unique equilibrium our most general result is that if all excess demand is reallocated i e there is perfect substitutability then competition never leads to a decrease in industry inventory

can the markov switching model forecast exchange rates abstract a markov swirching model is fit for 18 exchange rates at quarterly frequencies the model fits well in sample for many exchange rates by the mean squared error criterion the markov model does not generate superior forecasts to a random walk or the forward rate there appears to ne some evidence that the forecasts of the markov model are superior at predicting the direction of change of the exchange rate

brand credibility and marketplace globalization the role of perceived brand globalness and localness consumers in western markets are increasingly critical towards globalization and re embrace local values companies thus must decide whether to continue to pursue global branding strategies and or rejuvenate local branding strategies to explore the implications of market globalization for consumer preferences we use signaling theory to investigate the role of perceived brand globalness pbg and brand localness pbl as signals of brand credibility related downstream effects and boundary conditions across two countries with differing levels of globalization in globalized markets pbg is a weaker signal of brand credibility than pbl whereas in globalizing markets the two signals are of equal importance

currency fluctuations in the post bretton woods era the international monetary landscape that has emerged since the felling of bretton woods is characterized by a hybrid exchange rate system that lies somewhere between the textbook polar cases of a gold standard and a pure float this system has relatively flexible exchange rates between major countries active central bank intervention in the market for the major currencies and predominantly fixed exchange rates relative to the dollar or to some basket of currencies for less developed countries and newly industrializing nations the majority of research on currency markets since the early 1970s has focused on the characteristics of flexible exchange rates under this hybrid regime my thesis is that this research has been unsuccessful the proportion of monthly or quarterly exchange rate changes that current models can explain is essentially zero even after the fact forecasts that use actual values instead of forecasted values of the explanatory variables cannot explain major currency movements over the post bretton woods era this result is quite surprising since exchange rate changes would be entirely unpredictable only in very special cases of the theoretical models discussed as the discussion below will argue it is not a general implication of market efficiency that exchange rates follow a random walk process 1

optimal allocation of mri scan capacity among competitive medical departments we consider an mri scanning facility run by a radiology department with limited capacity several medical departments compete for capacity and have private information regarding their demand for scans the fairness of the capacity allocation by the radiology department depends on the quality of the information provided by the medical departments we employ a generic bayesian game approach that stimulates the disclosure of true demand truth telling so that capacity can be allocated fairly we derive conditions under which truth telling is a bayesian nash equilibrium the usefulness of the approach is illustrated with a case study

incentive effects favor nonconsolidating queues in a service system the principal agent perspective in this paper we study a service network in which an agency is responsible for satisfying a constraint on the expected waiting and service time experienced by customers however the agency does not render the actual service instead it serves to coordinate independently operated facilities the coordinating agency must devise a strategy for allocating compensation and customers to the self interested operators in order to minimize its own costs for a network of two facilities we model the facilities self interested capacity decisions as the solution to a game using this analytical framework we compare two types of customer allocation one from a common queue and one from separate queues our analysis shows that it can be in the best interest of the coordinating agency to adopt a separate queue allocation scheme instead of one based on a common queue although doing so sacrifices risk pooling benefits these can be more than offset by the stronger incentives that are created for the independent facilities

inequality in the world polity the structure of international organization recent research reveals strong effects of involvement in international organizations on state policies but much of this research downplays inequality in world political participation and there is only a limited understanding of what explains world polity ties using data on memberships in intergovernmental and international non governmental organizations igos and ingos for 1960 through 2000 this study analyzes inequality in the world polity igo ties are fairly evenly distributed but the level of inequality in ingo ties is as high as the level of world income inequality since 1960 inequality in ties to igos decreased sharply but inequality in ties to ingos remained more stable a conflict centered model of the world polity is developed here that explains world political participation as a function of material and symbolic conflict rich core western states and societies have significantly more ties to the world polity than do others powerful states dominate igos less now than they did in 1960 but rich core western societies have grown more dominant in the ingo field

the right to return this article studies the allocation of responsibility for unsold inventory provision for which is made in practically every distribution contract the two extreme cases are the consignment contract which allocates all the burden to the manufacturer and the no return contract in which retailers purchase the merchandise outright and assume responsibility for unsold inventory contract choices are shown to vary across countries industries products and types of transactions the article identifies six main factors affecting this choice optimal inventory policy in a stochastic retail demand environment relative advantage in disposing of the unsold inventory optimal risk allocation incentives to invest in promotions and provide services to increase consumer demand information asymmetry and costs associated with the consignment contract per se several testable implications are presented and the choice of contracts in the publishing industry is shown to be consistent with the predictions of the model

information distortion in a supply chain the bullwhip effect this article originally appeared in management science april 1997 volume 43 number 4 pp 546 558 published by the institute of management sciences consider a series of companies in a supply chain each of whom orders from its immediate upstream member in this setting inbound orders from a downstream member serve as a valuable informational input to upstream production and inventory decisions this paper claims that the information transferred in the form of orders tends to be distorted and can misguide upstream members in their inventory and production decisions in particular the variance of orders may be larger than that of sales and distortion tends to increase as one moves upstream a phenomenon termed bullwhip effect this paper analyzes four sources of the bullwhip effect demand signal processing rationing game order batching and price variations actions that can be taken to mitigate the detrimental impact of this distortion are also discussed

policy as myth and ceremony the global spread of stock exchanges 1980 2005 we examine the antecedents and consequences in developing countries of creating a national stock exchange a core technology of financial globalization we study local conditions and global institutional pressures in the rapid spread of exchanges since the 1980s and examine how conditions at the point of adoption affected exchanges subsequent vibrancy little prior research connects the process of diffusion with the operational performance of adopted policies we find that international coercion was associated with more ceremonial adoption but that contrary to expectations common in institutional research contagion processes via peer groups and normative emulation of prestigious actors enhanced vibrancy economic globalization provides a generative context in which to consider the policy implications of organizational theory and research globalization creates both opportunities and challenges for countries on the periphery of the world economy the central question for policy makers is what structures and institutions they should adopt to promote economic and social vibrancy notably waves of alternative theories and associated packages of reforms have swept over the globe in recent decades observing this process of global diffusion and often abandonment of policies and practices meyer boli thomas and raminrez 1997 extended analyses of myth and ceremony at the organization level to the nation state in their world society approach a core idea in this work is that coercion and mimicry of peers or competitors typically based in a substrate of network ties often

the statistics of sharpe ratios the building blocks of the sharpe ratio expected returns and volatilities are unknown quantities that must be estimated statistically and are therefore subject to estimation error this raises the natural question how accurately are sharpe ratios measured to address this question i derive explicit expressions for the statistical distribution of the sharpe ratio using standard asymptotic theory under several sets of assumptions for the return generating process independently and identically distributed returns stationary returns and with time aggregation i show that monthly sharpe ratios cannot be annualized by multiplying by 12 except under very special circumstances and i derive the correct method of conversion in the general case of stationary returns in an illustrative empirical example of mutual funds and hedge funds i find that the annual sharpe ratio for a hedge fund can be overstated by as much as 65 percent because of the presence of serial correlation in monthly returns and once this

de globalization theories predictions and opportunities for international business research de globalization now a distinct possibility would induce a significant qualitative shift in strategies structures and behaviors observable in international business ib coming to terms with this qualitative shift would require ib research to develop a much deeper integration of politics the key driver of de globalization to support such integration this paper introduces two relevant theories of de globalization from political science liberalism and realism both predict de globalization under current conditions but lead to different expectations about the future world economy liberalism suggests a patchwork of economic linkages while realism predicts the emergence of economic blocs around major countries this paper discusses the resulting opportunities in three areas of ib research political strategies and roles of multinational enterprises mnes global value chains and the role of the national context for political strategies and roles there is a need to explore how regular business activities and deliberate political agency of mnes affect the political sustainability of globalization for value chains questions include their future reach and specialization changes in organizational forms and the impact of political considerations on location decisions research opportunities on national contexts relate to their ability to sustain globalization and their connection with economic and military power

why is it so difficult to outperform the random walk in exchange rate forecasting a simulation exercise is used to demonstrate the difficulty to outperform the random walk in exchange rate forecasting if forecasting accuracy is judged by the root mean square error rmse or similar criteria that depend on the magnitude of the forecasting error it is shown that as the exchange rate volatility rises the rmse of the model rises faster than that of the random walk while the literature considers this finding to be a puzzle that casts a big shadow of doubt on the soundness of international monetary economics the results show that failure to outperform the random walk in both in sample and out of sample forecasting should be the rule rather than the exception however the results do not imply that the random walk is unbeatable because it can be easily outperformed if forecasting accuracy is judged according to criteria such as direction accuracy and profitability

are the economy and the environment decoupling a comparative international study 1960 20051 ecological modernization theory posits that even though economic development harms the environment the magnitude of the harmful link decreases over the course of development in contrast the treadmill of production theory argues that the strong relationship between environmental harms and economic development will remain constant or possibly increase through time to evaluate these competing propositions interactions between economic development and time are used in cross national panel analyses of three measures of carbon dioxide emissions the results vary across the three outcomes as well as between developed and less developed countries providing mixed support for both theoretical perspectives the authors conclude by discussing how both theories could benefit from engaging contemporary research concerning changes within the transnational organization of production and the structure of international trade and how these global shifts influence environment economic development relationships

error correction modelling and dynamic specifications as a conduit to outperforming the random walk in exchange rate forecasting the proposition that dynamic exchange rate models can outperform the random walk in out of sample forecasting in the sense that they produce lower mean square errors is examined and disputed by using several dynamic versions of three macroeconomic exchange rate models it is demonstrated that dynamic specifications outperform the corresponding static models but improvement in the forecasting power may not be sufficient for the dynamic models to perform better than the random walk the results are explained by suggesting that any dynamic specification or transformation of the static model leads to the introduction of a lagged dependent variable which in effect is a random walk component the analysis leads to the conclusion that it is implausible to aim at beating the random walk by augmenting a static model with a random walk component

coordinating supply chains with competition capacity allocation in semiconductor manufacturing abstract this paper motivated by the experiences of a major us based semiconductor manufacturer presents an integrated model of incentive problems arising in forecasting and capacity allocation our model involves multiple product managers and multiple manufacturing managers who forecast the means of their respective demand and capacity distributions a central coordinator is responsible for allocating capacities to product lines when these distributions are unknown to the central coordinator and capacity is scarce the managers misrepresent their forecasts a product manager inflates his forecast to gain a greater allocation of the capacity a manufacturing manager deflates his forecast to cover for the uncertainties in production we propose a game theoretic model and design a mechanism a bonus scheme for all managers and an allocation rule to allocate realized capacity to the product managers that elicits truthful reporting by all managers the results herein show that the structure of the truth eliciting bonus schemes is rather simple with easily calculable parameters we also show that large classes of allocation rules including the current allocation practice of the firm are manipulable a bonus is often required for elicitation of truthful information we synthesize the implications of our results for the practitioners

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

why is it so difficult to outperform the random walk an application of the meese rogoff puzzle to stock prices some economists suggest that the meese rogoff puzzle is equally applicable to the stock market in the sense that no model of stock prices can outperform the random walk in out of sample forecasting we argue that this is not a puzzle and that we should expect nothing but this result if forecasting accuracy is measured by the root mean square error rmse and similar metrics that take into account the magnitude of the forecasting error only we demonstrate by using two models for dividend paying and nondividend paying stocks that as price volatility rises the rmse of the random walk rises but the rmse of the model rises even more rapidly making it unlikely for the model to outperform the random walk

asymmetric information incentives and intrafirm resource allocation this paper considers the question how should a firm allocate a resource among divisions when the productivity of the resource in each division is known only to the division manager obviously if the divisions as represented by their managers are indifferent among various allocations of the resource the headquarters can simply request the division managers to reveal their private information on productivity knowing that the managers have no incentive to lie the resource allocation problem can then be solved under complete or at least symmetric information this aspect is a flaw in much of the recent literature on this topic i e there is nothing in the models considered which makes divisions prefer one allocation over another thus although in some cases elaborate allocation schemes are proposed and analyzed they are really unnecessary in the model we develop a division can produce the same output with less managerial effort if it is allocated more resources and effort is costly to the manager we further assume that this effort is unobservable by the headquarters so that it cannot infer divisional productivity from data on divisional output and managerial effort given these assumptions we seek an optimal resource allocation process our results show that certain types of transfer pricing schemes are optimal in particular if there are no potentially binding capacity constraints on production of the resource then an optimal process is for each division to choose a transfer price from a schedule announced by the headquarters division managers receive a fixed compensation minus the cost of the resource allocated to them at the chosen transfer price resources are allocated on the basis of the chosen transfer prices if there is a potentially binding constraint on resource production a somewhat more complicated but similar scheme is required

capacity allocation using past sales when to turn and earn consider a supplier selling to multiple retailers demand varies across periods but the supplier s capacity and wholesale price are fixed if demand is high the retailers needs exceed capacity and the supplier must implement an allocation mechanism to dole out production we examine how the choice of mechanism impacts retailer actions and supply chain performance in particular we analyze turn and earn allocation a method commonly used in the automobile industry this scheme bases current allocations on past sales and thus enables retailers to influence their future allocations they compete for scarce capacity even if they do not compete for customers we show that turn and earn induces the retailers to increase their sales when demand is low and the supplier s capacity is otherwise underutilized supplier profits thus increase the impact on the supply chain depends on how restrictive capacity is with mildly tight capacity the retailers higher sales rate does not significantly lower their profits but does reduce the cost of idle capacity supply chain performance improves with extremely tight capacity the retailers intense competition dissipates more profits than the supplier gains and supply chain performance suffers consequently turn and earn does not generally coordinate the system it is best characterized as a means for the supplier to increase her profits at the expense of the retailers and potentially even the supply chain furthermore these results hold even if the retailers can hold inventory in anticipation of scarce capacity

inventory competition and allocation in a multi channel distribution system abstract consider a supply chain involving one manufacturer and one independent retailer the manufacturer distributes her product to the end consumer through the independent retailer as well as through her direct channel each of the two channels faces a stochastic demand if one channel is out of stock a fraction of the unsatisfied customers visit the other channel which induces inventory competition between the channels under the scenario described above will the manufacturer ever undercut the retailer s order when the capacity is infinite what are the equilibria of the game how does a capacity constraint affect the equilibrium outcome what is the optimal inventory allocation strategy for the manufacturer using a game theoretic model we seek answers to the above questions both the capacitated and the infinite capacity games are considered we establish the necessary condition for a manufacturer to undercut a retailer s order and show that a manufacturer may deny the retailer of inventory even when the capacity is ample we show that there can be an equilibrium in the capacitated game where a manufacturer might not use the entire capacity and still deny a retailer inventory we also show that a mild capacity constraint may make both parties better off and thereby increase the total supply chain profit we develop a simple yet practical contract called the reverse revenue sharing contract and show that along with a fixed franchise fee this contract can coordinates our decentralized supply chain

on manufacturing marketing incentives stereotypically marketing is mainly concerned about satisfying customers and manufacturing is mainly interested in factory efficiency using the principal agent agency paradigm which assumes that the marketing and manufacturing managers of the firm will act in their self interest we seek incentive plans that will induce those managers to act so that the owner of the firm can attain as much as possible of the residual returns one optimal incentive plan can be interpreted as follows the owner subcontracts to pay the manufacturing manager a fixed rate for all capacity he delivers each marketing manager receives all of the returns from his product in turn all managers pay a fixed fee to the owner under this plan the marketing managers will often complain about the stock level decisions even though these levels are announced in advance under a revised plan the owner can eliminate such complaints by delegating the stocking decisions to the respective marketing managers without any loss this plan is interpreted as requiring the owner to make a futures market for manufacturing capacity paying the manufacturing manager the expected marginal value for each unit of capacity delivered receiving the realized marginal value from the marketing managers and losing money on average in the process

an economic evaluation of empirical exchange rate models this paper provides a comprehensive evaluation of the short horizon predictive ability of economic fundamentals and forward premiums on monthly exchange rate returns in a framework that allows for volatility timing we implement bayesian methods for estimation and ranking of a set of empirical exchange rate models and construct combined forecasts based on bayesian model averaging more importantly we assess the economic value of the in sample and out of sample forecasting power of the empirical models and find two key results 1 a risk averse investor will pay a high performance fee to switch from a dynamic portfolio strategy based on the random walk model to one that conditions on the forward premium with stochastic volatility innovations and 2 strategies based on combined forecasts yield large economic gains over the random walk benchmark these two results are robust to reasonably high transaction costs

a model of incentive contracts for just in time delivery abstract a mathematical model is used to analyze how to structure on time delivery incentives in a contract between a buyer and a single supplier of raw materials when early shipments are forbidden the buyer s choice of incentives takes the supplier s cost minimizing response to incentives into account the least cost incentive a buyer can select is specified by a probability of on time delivery and an incentive scheme to achieve that probability these optimal solutions are characterized without specifying the flow time distribution a method of selecting incentives that can help buyers improve on time delivery performance is provided however the limitations of incentives are also considered achieving exactly 100 on time delivery is shown to be non optimal and only feasible under specific conditions when management can not specify the shortage cost their selection of a desired probability of on time delivery allows for the determination of an imputed shortage cost

globalization pressures and the state the worldwide spread of central bank independence the authors examine the impact of globalization on state structures in the specific instance of the central bank following the world system world society and neoinstitutional perspectives in sociology they assume that states are in cultural political and economic competition with each other thereby seeking to maintain their position and status frequently by adopting organizational forms or practices that make them isomorphic with their environment the authors predict that countries boost the independence of their central bank from the political power as their exposure to foreign trade investment and multilateral lending increases they also model the cross national dynamic process of diffusion of central bank independence by examining the impact of cohesive and role equivalent trade relationships between countries they find support for their hypotheses with information on 71 countries between 1990 and 2000

banking on currency forecasts how predictable is change in money abstract the paper examines the predictive performance of four structural exchange rate models using both parametric and nonparametric techniques error correction versions of the models are fit so that plausible long run elasticities can be imposed on the fundamental variables of each model a variety of model evaluation statistics are reported our findings confirm that fundamental exchange rate models forecast no better than a random walk model for short term prediction horizons for longer horizons error correction terms can explain exchange rate movements significantly better than a no change forecast for a subset of the models and currencies we consider

spanning the institutional abyss the intergovernmental network and the governance of foreign direct investment global economic transactions such as foreign direct investment fdi must extend over an institutional abyss between the jurisdiction and therefore protection of the states involved intergovernmental organizations igos represent an important attempt to span this abyss the authors use a network approach to demonstrate that the connections between two countries through joint membership in the same igos are associated with a large positive influence on the fdi that flows between them moreover they show that this effect occurs not only in the case of connections through economic igos but also through those with social and cultural mandates this demonstrates that relational governance is important and feasible in the global context even for the most risky transactions the authors also examine the interdependence between the igo network and the domestic institutions of states social and cultural igo connections do more and economic igo connections less to increase fdi when the target country is mo

contracting over multiple parameters capacity allocation in semiconductor manufacturing abstract this paper is a generalization of mallik and harker mallik s harker p t 2004 coordinating supply chains with competition capacity allocation in semiconductor manufacturing european journal of operational research 159 330 347 that presented an integrated model of incentive problems arising in forecasting and capacity allocation in that model multiple product managers and multiple manufacturing managers forecast the means of their respective demand and capacity distributions and a central coordinator allocates capacities based on these forecasts a mechanism that elicits truthful information from the managers was the main contribution of that paper the objective of this paper is to generalize our previous results to multiple statistics reporting this work assumes that the central coordinator can ask the managers to report multiple statistics mean and variance for example about their respective distributions we propose a game theoretic model and design a mechanism a bonus scheme and an allocation rule that elicits truthful reporting of all statistics by all managers it turns out that the structure of the optimal bonus schemes are rather simple with easily calculable parameters we also show that a large class of allocation rules are manipulable a bonus is often required for elicitation of truthful information we compare our results of multiple statistics reporting with those from mallik and harker 2004 we also characterize under what conditions the reporting of the extra information is of limited use

the secondary circuit of capital reconsidered globalization and the u s real estate sector1 the author examines the u s real estate sector to show how the state shapes global real estate flows and networks of activity through the creation and control of liquid resources the analysis focuses on the role of state laws and regulations in the expansion of the mortgage backed securities markets and the development of real estate investment trusts reits these institutional developments represent a series of ad hoc state efforts to delocalize residential and commercial property and embed real estate financing within global capital markets rather than viewing globalization as weakening the state the author argues that the u s state s capacity to influence the degree and development of liquidity is a powerful mechanism of globalization

cointegration as an explanation for the meese rogoff puzzle abstractsome economists suggest that the failure of exchange rate models to outperform the random walk in exchange rate forecasting out of sample can be attributed to failure to take into account cointegration when it is present we attempt to find out if cointegration matters for forecasting accuracy by examining the relation between the stationarity and size of the forecasting error results based on three macroeconomic models of exchange rates do not provide strong support for the proposition that cointegration matters for forecasting accuracy the simulation results show that while stationary errors tend to be smaller than non stationary errors this is not a universal rule irrespective of the presence or absence of cointegration none of the three models can outperform the random walk in out of sample forecasting which means that cointegration cannot solve the meese rogoff puzzle

the monetary model of the exchange rate long run relationships short run dynamics and how to beat a random walk abstract the monetary model is re examined for the sterling dollar exchange rate first it is demonstrated using a multivariate cointegration technique that an unrestricted monetary model is a valid framework for analyzing the long run exchange rate second we find once proper account has been taken of the short run data dynamics that an unrestricted monetary model outperforms the random walk and other models in an out of sample forecasting contest jel f31

workers of the less developed world unite a multilevel analysis of unionization in less developed countries past scholars of unionization have offered exemplary cross national studies of affluent democracies and case studies of less developed countries ldcs what has been lacking is cross national research on unionization across ldcs we conduct a multilevel analysis of the likelihood that a worker is unionized with the late 1990s world values surveys of 39 ldcs we propose that unionization in ldcs can be explained by the individual characteristics of workers as well as the country level factors of institutions industrialization and globalization our analyses yield several conclusions first owing to the legacy of state socialism ex communist countries have much higher unionization second our analyses show that class very effectively explains union membership across ldcs although skilled manual workers are more unionized than most educated professionals stand out for their distinctively high unionization third the debt crisis significantly undermined unionization through the institutional influence of international monetary fund imf agreements and the globalization pressure of debt service despite being the focus of much research industrialization democratization the size of the state international labour organization conventions and international trade and investment are surprisingly insignificant decomposing the sample by communist legacy signing an imf agreement is significant in ex communist countries and debt service is significant in countries without a communist legacy overall we conclude that the debt crisis has undermined unionization and class remains a powerful basis of mobilization across ldcs

meese rogoff redux micro based exchange rate forecasting meese rogoff redux micro based exchange rate forecasting by martin d d evans and richard k lyons this paper compares the true ex ante fore casting performance of a micro based model against both a standard macro model and a random walk in contrast to existing literature which is focused on longer horizon forecasting we examine forecasting over horizons from one day to one month the one month horizon being where micro and macro analysis begin to over lap over our three year forecasting sample we find that the micro based model consistently outperforms both the random walk and the macro model micro based forecasts account for almost 16 percent of the sample variance in monthly spot rate changes these results pro vide a level of empirical validation as yet unat tained by other models the forecasting experiment proposed by richard meese and kenneth rogoff 1983 re mains a benchmark against which exchange rate models are judged their result that structural macro models cannot outperform a naive random walk has proved robust over the decades yet the meese rogoff paper was never about forecasting in the true sense i e using tirrie f information to forecast exchange rates at t 1 b y using concurrent realized values of the forcing variables their regressions were more about concurrent explanation than about ex ante forecasting their only forecast ing element is in their reliance on ex ante data to estimate equation parameters which appro priately penalized models whose estimated pa rameters were unstable tion for the random walk nature of exchange rates is that there exists some unobserved fun damental that itself follows a random walk un observed being important because fundamentals proposed in most macro models do not follow random walks they offer a different explana tion one rooted in the asset approach to ex change rates and the present value relation that follows from it specifically they show that i f fundamentals are 1 1 but not necessarily ran dom walks then as the discount factor in the present value relation approaches 1 the ex change rate will follow a process arbitrarily close to a random walk intuitively given that an 1 1 process can be split into random walk and stationary components a discount factor near 1 means that most all of the weight is placed on fundamentals far into the future ex pectations of which are dominated by the random walk component charles engel and kenneth west 2004 2005 provide a valuable perspective on the forecastability of exchange rates one explana this paper takes the analysis of engel and west as an important reorientation of thinking and brings it to the natural next step specifi cally if there is little room for forecasting based on stationary components of fundamentals then one needs to focus on where all the action is namely exchange rate dynamics that come from expectational surprises though the sur prise part is by definition orthogonal to public information our micro based model shows that there should exist types of nonpublic infor mation that are useful for forecasting this part and where to look for these types of informa tion we then locate data on these types of nonpublic information and test whether they have true ex ante forecasting power we should evans department of economics georgetown uni versity washington dc 20057 and nber lyons haas school of business university of california berkeley c a 94720 1900 and nber we are grateful to ken west for his comments and to the national science foundation for financial support we refrain from using the word news because it has too strong an association with macro information that is public which even in the most careful of event studies explains less than 5 percent of exchange rate variation in total see torben andersen et al 2003

trade globalization since 1795 waves of integration in the world system the term globalization as used by social scientists and in popular discourse has many meanings we contend that it is important to distinguish between globalization as a contemporary political ideology and what we call structural globalization the increasing worldwide density of large scale interaction networks relative to the density of smaller networks we study one type of economic globalization over the past two centuries the trajectory of international trade as a proportion of global production is trade globalization a recent phenomenon a long term upward trend or a cyclical process using an improved measure of trade globalization we find that there have been three waves since 1795 we discuss the possible causes of these pulsations of global integration and their implications for the early decades of the twenty first century