Exchange rate volatility and domestic consumption: Evidence from Japan

In 1952, Alexander provided an argument that since inflationary effects of depreciation could shift income from workers to producers it could lead to a decline in aggregate domestic consumption. This was based on the assumption that wages do not adjust fully to inflation and labor has a high MPC relative to that of the producers. In this paper, we argue that in addition to the exchange rate itself, exchange rate uncertainty could also affect domestic consumption. We demonstrate our conjecture by using quarterly data from Japan and a bounds testing approach that distinguishes the short run from the long run.     

Exchange-rate volatility and industry trade between Canada and Mexico

While it has long been assumed that exchange-rate volatility introduces a level of uncertainty that helps reduce trade flows, this need not be the case for particular country pairs or for specific products. This study examines the case of trade between Canada and Mexico—two members of the highly integrated North American market. Trade flows are examined for a number of specific products using the “bounds testing” cointegration approach over the period from 1973 to 2006. Relatively few industries see a long-run reduction in trade volumes due to volatility. This indicates that multinational producers in these integrated markets might be able to hedge against exchange-rate risk. Since major Mexican exports appear to see the largest reductions, Mexico might have a stronger incentive to reduce the volatility of the peso.     

An extension of the benefit segmentation base for the consumption of organic foods: A time perspective

Abstract

Benefit segmentation is a long-standing marketing approach that emphasises the ‘what’ and ‘how’ dimensions of consumer benefits; that is, what benefits consumers perceive in product/service consumption, and how such benefits are perceived. This research proposes a fresh time-based approach to benefit segmentation – namely, focusing on the ‘when’ element or when in time benefits take effect. Drawing upon a survey of UK consumers, it explains and discusses consumption motivations through examining antecedents of temporally dominated benefits in application to organic food. Specifically, the study investigates why some consumers predominantly seek present-based benefits vis-à-vis future-based benefits or vice versa in organic food purchase and consumption behaviour. Using correlation and regression analyses, the research findings establish significant associations of level of involvement, prior knowledge level, and product usage level, and some association of time orientation with the temporally emphasised consumption benefits consumers ultimately pursue. Overall, the research highlights the added contribution of a time perspective in a benefit segmentation approach which can assist marketers in understanding better and communicating more effectively with consumers through drawing up consumer profiles based on when in time their dominantly pursued benefit for an offering is perceived to take effect.     

S-Curve at the Commodity Level: Evidence from US-India Trade

The short-run response of the trade balance to changes in the terms of trade or the real exchange rate comes under the heading of the “J-Curve” or the “S-Curve.” While the J-Curve is mostly investigated through regression analysis, the S-Curve is based on the cross-correlation function between the terms of trade and the trade balance. Previous research has shown that in a country where support for any of the two curves is weak, disaggregation of the trade data helps discover more evidence of either curve. This article adds to the literature by considering the experience of India. We demonstrate that once the trade data between India and the United States is disaggregated by commodity, there is evidence of the S-curve in most industries that trade between the two countries. Out of total of 27 industries that constitute about 70% of trade, there are 15 that support the S-Curve.     

Military spending and the black market premium in developing countries

Researchers who have been concerned with the economic implications of military spending have mostly concentrated on its impact on economic growth, corruption, real exchange rate and inflation. In this paper we investigate the impact of military spending on black market premium, an area that has not been tackled so far. After adding a measure of military spending to a well established model of black market premium form the literature, we estimate the model by pooling annual data over the 1985 – 1998 period across 61 developing countries. Results from five panel specifications provide considerable evidence that higher military spending leads to higher black market premium.     

The J-Curve: a literature review

Due to lag structure, currency devaluation is said to worsen the trade balance first and improve it later resulting in a pattern that resemble the letter J, hence the J-Curve phenomenon. Since its introduction by Magee in 1973 Magee, SP. 1973. Currency contracts, pass through and devaluation. Brooking Papers on Economic Activity, 1: 303–25.   (Brooking Papers on Economic Activity, 1, pp. 303–25), a large number of studies have attempted to test the phenomenon using different techniques and different model specifications. The results are at best ambiguous and deserve to be collected together for the future generation of researchers and graduate students. This paper fills such a vacuum in the literature by reviewing the J-Curve related empirical papers.     

Bilateral J-curve between the UK vis-à-vis her major trading partners

Currency depreciation is said to worsen the trade balance first before resulting in an improvement, yielding a short-run pattern labelled the J-curve phenomenon. While early studies tested the J-curve by using aggregate trade data, a few recent studies have employed bilateral data, mostly between the US and her major trading partners. In this paper we extend the literature by considering the experience of the UK. We test the phenomenon between the UK and her twenty major trading partners by employing data over 1973Q1–2001Q3 period. In most instances, we find no support for the J-curve in the short-run. In the long run, only in five cases has the exchange rate had significant impact on the bilateral trade balance.     

Time-varying regional integration of stock markets in Southeast Europe

In an attempt to assess the impact of currency depreciation on the trade balance, recent studies are employing disaggregated trade data to avoid aggregation bias. However, since import and export prices are not available at disaggregated level, recent studies are using export and import values rather than their volumes so that they can establish direct relation between inpayments and the exchange rate as well as between outpayments and the exchange rate. This study explores the experience of Malaysia. Bilateral inpayments and outpayments models are estimated between Malaysia and her 14 trading partners using quarterly data and bound testing approach to cointegration. The results show that while real depreciation of the ringgit has short-run effects, in the long-run it increases Malaysia's inpayments from only five trading partners.     

Towards solving the PPP puzzle: evidence from 113 countries

Several different approaches have been followed by researchers to test the validity of Purchasing Power Parity (PPP). Since the introduction of the unit-root tests, researchers have applied a battery of these tests to determine whether the real exchange rates are stationary. If the answer is in the affirmative, PPP is validated. While application of the standard augmented Dickey–Fuller test has not provided much support for PPP, a test that incorporates nonlinearity in the rates has. Under both tests, however, the null of nonstationary is tested against the alternative of stationarity. In this article, when we switch the null with the alternative and apply Kwiatkowski et al. (1992 Kwiatkowski, D, Phillips, PCB, Schmidt, P and Shin, Y. 1992. Testing the null hypothesis of stationarity against the alternative of a unit root. Journal of Econometrics, 54: 159–78. [Crossref], [Web of Science ®] , [Google Scholar]) test, we provide relatively more support for the theory, getting closer and closer towards solving the PPP puzzle.