Why parallel trade may raise producers' profits

This paper shows that a manufacturer may benefit from parallel trade. In addition to an intuitive condition about the effect of demand shocks, this occurs when competitive retailers must order inventories before they know the realization of demand and for products whose sale value drops at the end of the demand period. For these types of products, letting retailers trade unsold inventories generally results in larger orders placed with the manufacturer and higher manufacturer profit. The model provides a simple explanation as to why the volume of parallel trade is now very large and accepted by manufacturers for some products such as automobiles, clothes, toys, consumer electronics, musical recordings, cosmetics and perfumes.     

A simple model of brain circulation

This paper analyzes the allocation of two types of individuals differentiated by talent between two countries where they choose to be workers or entrepreneurs. An equilibrium with international migration exists when countries' talent endowments are sufficiently different. It is consistent with one-way or two-way migration whether individuals are entrepreneurs or workers. Although allowing migration increases domestic welfare in one country and decreases it in the other, it is always supported by majority voting in both countries.     

Capital Inflows,Exchange Rate Flexibility and Credit Booms

Historically, capital flow bonanzas have often fueled sharp credit expansions in advanced and emerging market economies alike. Focusing primarily on emerging markets, this paper analyzes the impact of exchange rate flexibility on credit markets during periods of large capital inflows. It is shown that bank credit is larger and its composition tilts to foreign currency in economies with less flexible exchange rate regimes, and that these results are not explained entirely by the fact that the latter attract more capital inflows than economies with more flexible regimes. The findings thus suggest countries with less flexible exchange rate regimes may stand to benefit the most from regulatory policies that reduce banks' incentives to tap external markets and to lend/borrow in foreign currency; these policies include marginal reserve requirements on foreign lending, currency‐dependent liquidity requirements and higher capital requirement and/or dynamic provisioning on foreign exchange loans.     

China’s direct investment in the European Union: challenges and policy responses

The dramatic rise of Chinese direct investment into the European Union (EU) has sparked a debate about the control that China may be seeking to take over European economies. Quite naturally, these concerns have led to repeated calls that action be taken to slow down, if not to halt entirely, this growing trend. The objective of the article is to shed light on this debate. Following a thorough analysis of Chinese direct investment in the EU, this article suggests that the challenges posed by these inflows are widely overblown. Despite this, the article concludes that it is necessary to have a systematic approach to regulating inbound foreign investment (including from China) in the EU. Such an approach may help guard against the risk of a protectionist drift inside the EU, as well as the possibility that some investors may one day pose a threat to national security. This article concludes that although the current fragmented regulatory approach is unsatisfactory, because of the difficulties associated with a unified EU-wide review process, the most realistic option is to promote a more systematic and coordinated use of existing mechanisms such as competition policy. Also, pushing for the negotiation of a China–EU BIT is certainly a promising avenue to enhance the EU’s bargaining leverage based on the principle of positive reciprocity.     

Behavioral Environmental Economics: Promises and Challenges

Environmental issues provide a rich ground for identifying the existence and consequences of human limitations. In this paper, we present a growing literature lying at the interface between behavioral and environmental economics. This literature identifies alternative solutions to traditional economic instruments in environmental domains that often work imperfectly. But it also faces a set of challenges, including the difficulty of computing welfare effects, and the identification of a robust environmental policy based on context-dependent (socio-) psychological effects. We illustrate our critical discussion with two behavioral schemes that have been widely implemented: “green nudges” and “corporate environmental responsibility.”     

Psychological Capital: Impacts on Asset Management

Drawing together the areas of behavioral finance and positive psychology, the present research sought to investigate whether the psychological capital of investment fund managers is associated with fund performance in a context of financial instability. The theoretical propositions were presented and evaluated empirically through primary data on investment fund manager profiles and secondary data on the cumulative stock fund returns. The results indicate that funds managed by managers with greater resilience and optimism obtained a higher return than the mean profitability in a period of market instability.     

Switching costs and implicit contracts

When firms can discriminate between old and new customers and when multiperiod binding commitments are too costly, the effects of switching costs may be mitigated thanks to implicit contracts offered (competitively) by firms in equilibrium and backed by reputation.