Protection for sale with imperfect rent capturing

Abstract .  Grossman and Helpman (1994) explain tariffs as the outcome of a lobbying process. In most empirical implementations of this framework protection is instead measured using non-tariff barriers. Since tariffs allow the government to fully capture the rents from protection, while non-tariff barriers do not, the existing parameter estimates of the protection for sale model are likely to be biased. To address this problem, we augment the framework by considering instruments that allow partial capturing. Our specification is supported by the data, where we find that only 72–75% of the rent from protection is appropriated by the government.     

The Hazard Rate of Foreign Direct Investment: A Structural Estimation of a Real‐option Model*

The hazard rate of investment is derived within a real‐option model, and its properties are analysed so as to directly study the relation between uncertainty and investment. Maximum likelihood estimates of the hazard are calculated using a sample of multinational enterprises (MNEs) that invested in Central and Eastern Europe over the period 1990–98. Employing a standard, non‐parametric specification of the hazard, our measure of uncertainty has a negative effect on investment, but the reduced‐form model is unable to control for nonlinearities in the relationship. The structural estimation of the option‐based hazard is instead able to account for the nonlinearities and exhibits a significant value of waiting, although the latter is independent of our measure of uncertainty. This finding supports the existence of alternative channels through which uncertainty can affect investment.     

Evidence on the existence of speculative bubbles in farmland prices

We conduct tests for the contribution of speculative bubbles to farmland prices. These tests are carried out under the hypothesis that farmland investors rationally form expectations. The outcome of tests reported here allows us to infer whether farmland prices are determined by market fundamentals-discounted returns from the highest economic land use-or whether rumors about farmland price movements are self-fulfilling. The tests are stationarity and cointegration tests relating farmland prices to rents. The tests are carried out using data from three farm production regions-the Corn Belt, the Northern Plains, and the Lake States. In each region, we find little evidence to reject the hypothesis that market fundamentals determine farmland prices.     

Fixed Exchange Rates and Disinflation in Emerging Markets: How Large Is the Effect?

We examine developing countries which have institutional quality ratings for the effects of exchange rate rigidity on inflation. The level of institutional development exerts no effect on the impact of currency regimes. However, the interaction of institutional quality and exchange rates has, in the most plausible specifications, a negative impact on inflation. This suggests that fixed exchange rates exert at most a contingent effect on inflation, and indicates that countries in Eastern Europe and Latin America contemplating currency pegs would be better off improving institutional quality prior to adopting the euro or dollar and expecting a large subsequent disinflationary effect. JEL no.  F31, O11     

Are stationarity and cointegration restrictions really necessary for the intertemporal budget constraint?

Time series related to fiscal and external deficits are commonly subjected to stationarity and cointegration tests to assess if the deficits are sustainable. Such tests are incapable of rejecting sustainability. The intertemporal budget constraint proves to be satisfied if either the debt series or the revenue and with-interest spending series are integrated of arbitrarily high order, i.e., stationary after differencing arbitrarily often. Revenues and spending do not have to be cointegrated. Rejections of low-order difference-stationarity and of cointegration are thus consistent with the intertemporal budget constraint. Error-correction-type policy reaction functions are suggested as more promising for understanding deficit problems.     

A flight to Q? Firm investment and financing in Korea before and after the 1997 financial crisis

We examine investment behavior among exchange-listed Korean manufacturing firms before and after the 1997 financial crisis using firm-level panel data. Starting with the standard Q-theory of investment, we augment it by allowing for a sales accelerator and the possibility of cash constraints, categorizing firms based on their age, size and affiliation to an industrial conglomerate (i.e., chaebol). We find that Tobin’s Q is a robust determinant of investment in a pooled sample for 1992–2001, but that it became more important for small firms and less important for chaebol-affiliated firms after the crisis. Investment by chaebol firms also became more sensitive to the availability of internal cash balances after the crisis. We interpret this as reflecting a shift in the Korean economy to a stronger market orientation after the crisis and to a business climate in which the quality of potential projects became more important relative to capital market imperfections in determining the destination of investment funds.     

Public and Private Education in an Integrated Europe: Studying to Migrate and Teaching to Stay?

This paper investigates public and private choices between internationally applicable and country‐specific education when graduates are mobile. Human capital depends on innate skills and study effort with either type of education. It is shown that national governments provide too few students with internationally applicable education, and too many with country‐specific education. This effect is mitigated, but not entirely eliminated, by the introduction of a graduate tax, according to which graduates are required to pay part of their taxes to the country where they received their education, regardless of residence. However, private educational choices are socially optimal with suitably differentiated tuition fees.     

国际贸易发票货币的选择——兼论人民币国际化

一国货币作为国际贸易发票货币取决于货币汇率的波动性、该国在占据的出口市场份额以及该国出口产品的差异性程度。随着人民币汇率形成机制更加灵活和弹性化及在国际贸易中采用本币计价以回避汇率风险,人民币成为国际贸易发票货币有期可待。     

Capital structure around the world: The roles of firm- and country-specific determinants

We analyze the importance of firm-specific and country-specific factors in the leverage choice of firms from 42 countries around the world. Our analysis yields two new results. First, we find that firm-specific determinants of leverage differ across countries, while prior studies implicitly assume equal impact of these determinants. Second, although we concur with the conventional direct impact of country-specific factors on the capital structure of firms, we show that there is an indirect impact because country-specific factors also influence the roles of firm-specific determinants of leverage.     

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.