Exchange rates and European countries’ export prices: An empirical test for asymmetries in pricing to market behavior

Exchange Rates and European Countries’ Export Prices: An Empirical Test for Asymmetries in Pricing to Market Behavior. — This paper uses forward instead of spot exchange rates to test for the presence of asymmetries in the response of export prices to exchange rate movements on a wide sample of European Union exporter countries and highly disaggregated product categories. In most cases, the data give support to the hypothesis of a symmetric pricing to market behavior during periods of depreciation and appreciation of the exporter’s currency.     

Demand, comparative advantage and economic geography in international trade: Evidence from the OECD

Demand, Comparative Advantage and Economic Geography in International Trade: Evidence from the OECD. — This paper examines the influence of demand on the pattern of net trade for 17 OECD countries. It is found that demand differences are important as a cause of international trade. In fact, for the majority of countries, demand factors explain more of the net trade pattern than do factor proportions. The evidence offers some support for the modern geography and trade theories: high domestic demand in an industry leads to a net export for the majority of cases. The evidence is, however, not clear-cut. Moreover, a demand bias in favour of domestic varieties leads to a net export. Here, the evidence is clear-cut.     

Product and country substitution in imports: An empirical comparison of theoretical concepts

Product and Country Substitution in Imports: An Empirical Comparison of Theoretical Concepts. — The paper focuses on the shortcomings of current unit-values based measures for estimating product and country substitution in imports. The results of the bilateral index number technique in measuring changes in the country composition or product mix of imports were found to be inadequate, which was shown in an analysis of data on the French import market for chairs. An improved technique is briefly summarized, and its applicability compared with the bilateral index number technique. The new method performed accurately and provided a reliable basis for a refined analysis of changes within import markets.     

A fractional cointegration approach to empirical tests of PPP: New evidence and methodological implications from an application to the Taiwan/US dollar relationship

A Fractional Cointegration Approach to Empirical Tests of PPP: New Evidence and Methodological Implications from an Application to the Taiwan/ US Dollar Relationship. —This paper applies a relatively new concept of fractional cointegration to shed some light on the validity of purchasing power parity as a long-run equilibrium condition, using the Taiwan/US dollar exchange rate. Findings suggest that, while standard tests of cointegration fail to support cointegration between nominal exchange rates, domestic and foreign prices, the fractional cointegration analysis permits deviations from equilibrium to follow a fractionally integrated process and hence captures a much wider class of parity or mean-reversion behaviour. The paper concludes by indicating areas in which fractional cointegration will be a particularly appropriate technique to unearth previously unfounded temporal characteristics.     

Vertical specialization and intra-industry trade: The role of factor endowments

Vertical Specialization and Intra-Industry Trade: The Role of Factor Endowments. — In this paper, we use vertical differentiation models of the Falvey-Kierzkowski type to study the effects of differences in factor endowments on vertical intraindustry specialization. We focus on Spanish intra-industry trade, as Spain typically exports low-quality varieties to the northern countries of the OECD and high-quality varieties to the southern ones. In order to achieve more general results, we consider different types of productive factors: physical, human and technological capital. Our results confirm that factor endowments play a significant role in explaining vertical intra-industry specialization.     

Does North-South horizontal intra-industry trade really exist? An analysis of the toy industry

Does North-South Horizontal Intra-Industry Trade Really Exist? An Analysis of the Toy Industry. — In a combination of a case study approach and econometric analysis, bilateral intra-industry trade between high income countries and low income countries in the toy industry is investigated. In a number of products there is important bilateral intra-industry trade between both groups of countries. Econometric analysis in which a number of the explanatory variables used were quantified on the basis of the information supplied by the industry-spokesmen yields results which strongly support the view that the bilateral IIT between the high income countries and the low income countries in the toy industry is determined significantly by horizontal product differentiation and economies of scale.     

Exchange controls, international capital flows and saving-investment correlations in the UK: An empirical investigation

Exchange Controls, International Capital Flows and Saving-Investment Correlations in the UK: An Empirical Investigation. - This paper reexamines the Feldstein-Horioka approach to measure the degree of international capital mobility, focusing on the difference between the short-run and the long-run saving-investment correlation coefficient. The authors also investigate the effectiveness of the abolition of exchange control which, in October 1979, ended a long period of restrictions on capital flows between the UK and the international economy. Their results suggest that the short-run saving-investment correlation is significantly higher than the long-run one. Unlike most of the relevant literature, the empirical evidence suggests that the UK is financially highly integrated with the world economy after 1979.     

Endowments vs. market potential: What explains the relocation of industry after the Polish reunification in 1918?

How did the location of industry across interwar Poland react to the Polish reunification? After more than 120 years of political and economic separation, Poland was reunified at the end of 1918. In consequence, the removal of internal tariff barriers and improved infrastructure strengthened the domestic market, while foreign market relations were cut off. Similarly, the geographical distribution of factor endowments was changed, for example, through internal migration. How did these forces interact to determine the location of industry? We survey the dynamics of industrial location between 1902 and 1925-1937 and estimate a specification that nests market potential and comparative advantage to quantify their respective impact during the interwar years. The results point to a role for both, comparative advantage and access to markets. We show that both statistically and economically the most important factors were the endowment with skilled labour and inter-industry-linkages.     

Economic integration, market size and the welfare effects of trade liberalisation

Economic Integration, Market Size and the Welfare Effects of Trade Liberalisation. — This paper examines the welfare effects of regional and global integration in a model where market size matters. Regional integration leads to higher welfare in the countries of a preferential trading arrangement (PTA), but to lower welfare outside. In case the countries also decide to form a customs union (CU), both countries will experience further gains if the creation of the CU means that the average external trade barriers are raised. In turn, the outside country will in this case experience further welfare losses. If it retaliates and creates a trade war, this will lower welfare in all countries. In contrast, global integration mostly benefits both PTA countries and outside countries.     

Multinational enterprises, regional economic integration, and export-platform production in the host countries: An empirical analysis for the US and Japanese corporations

Multinational Enterprises, Regional Economic Integration and Export-Platform Production in the Host Countries: An Empirical Analysis for the US and Japanese Corporations. — This paper analyzes determinants of export orientation of overseas affiliates of US and Japanese MNEs for the 1982–1994 period. The author contends that production geared to MNEs’ home market and that production oriented to third-country markets are determined by different factors. The empirical analysis finds the home-market-oriented production concentrated in countries that offer low-cost workforce, enjoy geographical proximity or preferential access to the home market. The location of third-country-market-oriented exports is influenced more by strategic factors such as participation in regional trading blocs and preferential access to major markets than factor costs considerations.     

On the validity of the quadratic utility approach in mean-variance portfolio analysis: An empirical test

Summary This paper empirically compares the quadratic utility approach and the negative exponential utility approach within the framework of portfolio analysis. Estimates for the subjective variance-covariance matrix are obtained using the two models under consideration. The two approaches have been compared through these estimates and also by their forecasting ability. The quadratic utility approach appears to be inferior. This paper relies heavily on parts of my University of Essex Ph.D. thesis (Bhattacharyya, 1975). I am grateful to Professors Bergstrom and Parkin for their help, comments and encouragement. Mr. R. E. Bailey's help and advice is also gratefully acknowledged. In addition, the comments of the referee of this journal helped me to improve on my earlier draft. Any error remaining is mine.     

An empirical test of the cultural capital hypothesis

Using data from the Multi-City Survey of Urban Inequality, an exploratory, empirical analysis of the cultural capital hypothesis was conducted. The analyses indicate that, while the types of cultural influences cited by proponents of this thesis clearly have negative effects on employment when viewed in isolation from other factors, they are not significant when statistical controls for human capital variables are incorporated into the model. Our findings suggest the need to invest more resources in the public education system and in efforts to combat racial discrimination in the labor market.     

An empirical assessment of the preconditions of Japanese manufacturing foreign direct investment in the United States

An Empirical Assessment of the Preconditions of Japanese Manufacturing Foreign Direct Investment in the United States. — This study undertook a multivariate regression analysis of Japanese foreign direct investment in the US (FDIUS), based on firm- and industry-specific data. Firm size was a positive and significant explanatory variable of firms’ completed transactions as well as their additions to investment value. Firms’ overall profit was a positive and significant indicator of firms’ addition to investment value, but not their completed transactions. Firms’ return on assets was generally a positive, albeit insignificant indicator of FDIUS. Three industry-specific variables (prior exports to the US, industry concentration, and technological intensity) were examined and all were positive but insignificant indicators of FDIUS.     

Integration and the export behaviour of firms: Trade costs,trade volumes and welfare

Integration and the Export Behaviour of Firms: Trade Costs, Trade Volumes and Welfare. - This paper analyses a model in which, because of fixed costs associated with exporting, only a proportion of firms in an industry engage in international trade. Economic integration (a reduction in trade costs) increases the proportion of firms trading and reduces the total number of active firms as relatively small non-trading firms are replaced by larger trading firms. There are welfare gains from integration, but because of the adverse effects of integration on the total population of firms these gains are smaller than in the standard model where all firms export.     

Inward investment, industry concentration and the speed of adjustment

Inward Investment, Industry Concentration and the Speed of Adjustment. — The paper develops a model of concentration, based on the standard literature of concentration determination, which is then estimated using a frontier approach within a panel framework. Such a model provides an estimate of the lower bound of concentration in the industry, based on observed industry level characteristics. The paper then develops a model of concentration change, which shows that foreign penetration acts to reduce concentration levels, and also acts to increase the rate at which the industry moves towards this equilibrium. Finally, the importance of this deviation, in terms of explaining foreign penetration is explored.     

Quality differentiation and factor proportions in international trade: An empirical test of the Swedish case

Review of World Economics -     

Deviations from long-run equilibria and probabilities of devaluations: An empirical analysis of Danish realignments

Deviations from Long-Run Equilibria and Probabilities of Devaluations — An Empirical Analysis of Danish Realignments. — The probabilities of realignments between the Danish krone and the D-mark are investigated for the 1979–1995 period. Two multivariate systems are estimated. In the I (1) systems, the deviations from the cointegration relations are used as explanatory variables when determining the probabilities of exchange rate changes. It is found that real imbalances in the economy have to a large extent determined the probabilities of central parity changes. Furthermore, the probabilities of central parity changes have been significantly lower after 1983.     

International specialization and structural change in the Swedish Manufacturing Industry, 1969–1992

International Specialization and Structural Change in the Swedish Manufacturing Industry, 1969–1992. — The increasing trade orientation of Swedish manufacturing 1969–1992 was mainly caused by increasing intraindustry specialization with most industries. Intraindustry specialization was found to be related positively to the skill intensity of the industry and negatively to average plant size and the incidence of trade barriers. The paper evaluates the links between specialization and inter-as well as intraindustry structure. It was found that changing patterns of relative international competitiveness among industries accounted for more than half of the total interindustry structural change in employment in 1969–1992. The mean plant size tends to increase with intraindustry specialization.     

Assessing the effects of the Mexican Drug War on economic growth: An empirical analysis

Mexican President Felipe Calderón took office in December 2006. From the outset, his government deployed an aggressive security policy to fight drug trafficking organizations in what became known as the “Mexican Drug War.” The policy earned considerable criticism since a heavy number of unintended casualties resulted from the frontal assault waged against the drug cartels. In this article, we evaluate the effects of the Mexican Drug War on Mexican states’ economic growth. To do so, we study the effects of the rise in the homicide rate and changes in a state-level approximation of the military budget on economic growth. Using dynamic panel data econometrics, we find that while the growth in the number of homicides had negative and significant effects on state GDP growth, state military expenditures aimed at fighting drug trafficking had a positive and significant effect on the per capita economic growth rate.