Financial dollarization and debt deflation under a currency board

In the late currency board years, Argentina faced a real exchange rate adjustment through price deflation amidst growing devaluation expectations. Using a firm-level panel database to analyze the incidence of these factors on the currency composition of private debt and on firms’ performance, we find that widespread debt dollarization showed no relationship with the firms’ production mix or the ever-changing probability of a nominal devaluation. While relative price changes favored export-oriented firms with the expected impact on sales, earnings and investment, increases in devaluation expectations elicited only a marginal differential response in investment from more financially dollarized firms. Our findings provide support to two criticisms faced by the Argentine currency board in recent years, namely, that by fueling beliefs in an implicit guarantee it stimulated across-the-board debt dollarization and that it could not fully isolate the economy from real shocks, as the feared balance sheet effect was replaced by a gradual but equally deleterious debt deflation effect.     

Bilateral trade effects of fiscal devaluation: Evidence from OECD countries

This paper empirically examines the effects of a fiscal devaluation on bilateral trade. To this end, employers’ social contribution (ESC) and value-added tax (VAT), which stand as the factors that represent typical fiscal devaluation, are embodied within the framework of a gravity model. Fixed effects vector decomposition (FEVD) technique is applied to the empirical models specified within this framework, employing panel data from 22 OECD countries over the 1980–2014 periods. The findings show that the effectiveness of the fiscal devaluation policy seems to alter with respect to how ESC and VAT are measured. Considering the fiscal devaluation policy implemented unilaterally, the policy turns out to be effective in nine countries in the sample.     

Is the international propagation of financial shocks non-linear?: Evidence from the ERM

This paper tests for the presence of non-linearities in the propagation of devaluation expectations among the countries that were members of the Exchange Rate Mechanism of the EMS. We show that whenever it is possible to estimate a model for financial interdependence, a full-information technique to detect such non-linearities is more efficient than the limited-information estimator proposed, in a similar context, by Rigobon (2000). This happens, in particular, when the periods of market turbulence are relatively short. Our evidence suggests that non-linearities in the propagation of devaluation expectations were a general phenomenon in the ERM. Normally the non-linearity amounts to a stronger effect in the same direction, but sometimes, as in the Dutch case, it implies a significant effect in the opposite direction: evidence of flight-to-quality.     

Real exchange rate targeting and macroeconomic instability

Using an optimizing model of a small open economy, this paper studies the macroeconomic effects of PPP rules whereby the government increases the devaluation rate when the real exchange rate—defined as the price of tradables in terms of nontradables—is below its long-run level and reduces the devaluation rate when the real exchange rate is above its long-run level. The paper shows that the mere existence of such a rule can generate aggregate instability due to self-fulfilling expectations. The result is shown to obtain in both flexible- and sluggish-price environments.     

A REASSESSMENT OF AGGREGATE IMPORT DEMAND FUNCTION IN THE ASEAN-5: A Cointegration Analysis

This study aims to reinvestigate the empirical evidence on the long-run relationship of aggregate import demand behavior for the ASEAN-5 founding nations. This study adopts the import demand equation that has been developed by Xu (2002). The results of bounds test (Pesaran et al., 2001) show the volume of imports, activity variable (national cash flow), and relative price of imports are cointegrated in Malaysia and Singapore. However, no empirical evidence supports that these variables are cointegrated in Indonesia, Thailand, and the Philippines. This study provides a relevant implication specifically that devaluation strengthens the balance of trade. Following the Marshall-Lerner condition, exchange rate policies such as devaluation, can used to improve trade balance in Malaysia, Singapore, the Philippines, and Thailand, but not in Indonesia.     

Adjustment to devaluation with money and nontraded goods

This paper analyzes the dynamics of adjustment to devaluation in a framework which highlights the role played by nontraded goods and money. We provide a specific analytical model of devaluation incorporating substitution effects in production and consumption as well as liquidity effects resulting from a stock-flow adjustment process. The analysis provides specific solutions for the time path of the balance of payments and the price of nontraded goods following devaluation.     

The good,the bad and the uncertain: Employers' perceptions of former entrepreneurs

Do employers perceive former entrepreneurs as suitable candidates for paid employment? We argue that (positive and negative) stereotypes and uncertainty drive employability perceptions regarding former entrepreneurs; these perceptions are contingent upon job type and the background of both the applicant and the person evaluating them. Two empirical studies yield broad support for our predictions. In Study 1 (a vignette study), we find lower employability perceptions regarding former entrepreneurs compared to other applicants, which are significantly mediated by positive and negative stereotypes as well as uncertainty perceptions. In Study 2 (conjoint experiments with two separate samples: recruiters and executives), we substantiate the results of Study 1, revealing that when former entrepreneurs apply for a job involving personnel responsibility or when there is evidence of a failure in their vita, they are less likely to face devaluations. Further, we find evidence for similarity effects; more specifically, entrepreneurs do not suffer from employability devaluation when the recruiter is a part-time entrepreneur or the executive is the business owner. We discuss the implications as part of the employability debate about former entrepreneurs.     

Corporate Social and Financial Performance Re-Examined: Industry Effects in a Linear Mixed Model Analysis

In this research, we shed new light on the empirical link between corporate social performance (CSP) and corporate financial performance (CFP) via the application of empirical models and methods new to the CSP?CCFP literature. Applying advanced financial models to a uniquely constructed panel dataset, we demonstrate that a significant overall CSP?CCFP relationship exists and that this relationship is, in part, conditioned on firms?? industry-specific context. To accommodate the estimation of time-invariant industry and industry-interaction effects, we estimate linear mixed models in our test of the CSP?CCFP relationship. Our results show both a significant overall CSP effect as well as significant industry effects between CSP and CFP. In conflict with expectations, the unweighted average effect of CSP on CFP is negative. Our industry analysis, however, shows that in over 17% of the industries in our sample, the effect of CSP on CFP for socially responsible firms is positive. We also examine the multidimensional nature of the CSP construct in an industry context by exploring the CSP dimension?Cindustry nexus and identify dimensions of social performance that are associated with either better or worse financial performance. Our results confirm the existence of disparate CSP dimension?Cindustry effects on CFP, thus our results provide important and actionable information to decision makers considering whether and how to commit corporate resources to social performance.     

Service recovery expectation model – from the perspectives of consumers

This paper explores the influence of the major attributes of consumers, such as personality traits, gender, number of consumptions, and levels of involvement, on service recovery expectations. A combination of linear multivariate statistical analysis and nonlinear fuzzy neural network models is further used to analyse data and validate hypotheses. Consumers of middle-to-high-end Chinese restaurant chains are sampled as the interactions between these restaurants and consumers are frequent. The empirical research finds that old customers have lower expectations of service recovery than new ones and male consumers have lower expectations than female consumers. Extrovert-type consumers have lower expectations of service recovery than introvert-type consumers. There is a positive correlation between consumers' involvement and service recovery expectation. As this paper examines the expectations of service recovery from the perspectives of consumers, it aims to help companies use pre-processing of service recovery as a precautionary measure, rather than as a remedial measure as mostly seen. Different from the vast majority of literature that deals with the issue by focusing on western enterprises, this paper uses small-and-medium enterprises in Taiwan and constructs management implications accordingly.     

Devaluation,Innovation, and Prices

We investigate the effects of exchange rate changes on innovation by a multinational corporation. The firm enjoys a monopoly in the home market but engages in Cournot competition with a domestic firm in the foreign market. Changes in currency values affect the multinational firm’s profits in domestic currency units, and thus influence the optimal level of process innovation as well as output and prices in the two markets. We find that a devaluation of the home currency will lead the home firm to increase its output in both the home and foreign markets, and increase its spending on R&D. We also find that currency devaluation in the home market leads to lower prices in both markets.     

Recent Advances in Structural Econometric Modeling: Dynamics, Product Positioning and Entry

In the empirical analysis of consumer markets, recent literature has begun to explore the dynamics in both consumer decisions as well as in firms' marketing policies. Other research has begun to explore the strategic aspects of product line design in a competitive environment. In both cases, structural models have given us new insights into consumer and firm behavior. For example, incorporating consumer and firm dynamics may help explain patterns in our data that are not well-captured by static models. Similarly, the strategic aspects of firm entry and product-positioning may be intrinsically linked to firm conduct and the intensity of competition in a market. Structural analysis of these consumer and firm decisions raise a number of substantial computational challenges. We discuss the computational challenges as well as specific empirical applications. The discussions are based on the session “Structural Models of Strategic Choice” from the 2004 Choice Symposium.     

Retailing to Foreign National Consumers in the Border Zone

Abstract

This study investigates the factors that affect how retailers in a border zone manage the elements of the retail mix with respect to foreign national consumers. Several hypotheses concerning the effects of competition from foreign retailers and currency devaluation(s) on variables of the retail mix and traditional measures of perceived retailer outcomes are advanced. Results indicate that while perceptions of devaluation have an impact on the planning of the retail mix as well as on perceived retail outcome measures, competition from foreign retailers is not perceived to be an important factor. Research and managerial implications are offered.     

Confronting the implications of the Cournot model with industry and firm data

This paper derives testable implications of the standard Cournot models and confronts these implications with real world data. Though we cannot expect that real world may be characterized by a simple static homogeneous model, it is surprising that little empirical work exists on testing the implications of this most popular model of oligopoly and non cooperative game theory.We make use of three data sets for manufacturing industry, two of them on the firm level, one about firms grouped according to their size. The relation of the results to the predictions of the Cournot model is discussed, as well as its relation to alternative oligopoly models. We specifically focus at the question whether the implications of the oligopoly models on the performance of large versus small firms are in line with the data.     

BEHAVIORAL PORTFOLIO SELECTION: ASYMPTOTICS AND STABILITY ALONG A SEQUENCE OF MODELS

We consider a sequence of financial markets that converges weakly in a suitable sense and maximize a behavioral preference functional in each market. For expected concave utilities, it is well known that the maximal expected utilities and the corresponding final positions converge to the corresponding quantities in the limit model. We prove similar results for nonconcave utilities and distorted expectations as employed in behavioral finance, and we illustrate by a counterexample that these results require a stronger notion of convergence of the underlying models compared to the concave utility maximization. We use the results to analyze the stability of behavioral portfolio selection problems and to provide numerically tractable methods to solve such problems in complete continuous‐time models.     

A monetary approach to measuring long-run inflationary expectations

In this paper, a model of long-term monetary equilibrium is used to construct an empirical model of long-run inflationary expectations. This model is estimated and used to construct out-of-sample estimates of long-run expected inflation. Comparisons of expectations measures from this model with those from commonly-used autoregressive models and with a model drawn from the term structure clearly favors the former.     

Devaluation without common knowledge

In an economy with a fixed exchange rate regime that suffers a random adverse shock, we study the strategies of imperfectly and sequentially informed speculators that may trigger an endogenous devaluation before it occurs exogenously. The game played by the speculators has a unique symmetric Nash equilibrium which is a strongly rational expectation equilibrium in the set of all strategies with delay. Uncertainty about the extent to which the Central Bank is ready to defend the peg extends the ex ante mean delay between the exogenous shock and the devaluation. We determine endogenously the rate of devaluation.     

Customer satisfaction and customer behavior: The differential role of brand and category expectations

Previous research has suggested that consumers use multiple strands to evaluate their satisfaction with a product and to establish postpurchase behavioral intention. However, prior empirical research has focused on which individual standard best predicts satisfaction. In contrast, this article develops and tests a model of consumer satisfaction and postpurchase behavioral intention in which consumers simultaneously use multiple standards—perceptions of performance, brand expectations, and category expectations. The results of an experiment for a simulated service encounter provide support for the proposition that consumers use multiple standards and that these standards have differential effects on such postpurchase outcomes as satisfaction, repurchase intention, and willingness to recommend. Brand expectations are shown to be better predictors of affective outcomes (such as satisfaction), while category expectations are shown to be better predictors of behavioral outcomes (repurchase and recommendation). Consistent with prior research, perceived performance is shown to have a strong effect on both satisfaction and behavioral intention.     

Perception Gaps in Customer Expectations: Managers Versus Service Providers and Customers

Two new gaps are added to the 5-gap model proposed by PZB. These new gaps reflect the differences in the understanding of customer expectations by manager and front-line service providers and in customer expectations and service providers' perception of such expectations. Using room service as the object for investigation, the present study provides empirical evidence indicating the existence of these gaps which have negative impact on overall service quality. The findings also disclose that the gap between customer expectations and managers' perception of such expectations is much larger than the gap between customer expectations and service providers' understanding of such expectations.     

人民币汇率贬值的机制研究——基于2014年以后走势的理论和实证分析

2014年以来人民币一改以往总体升值的趋势性特征,出现了自2005年汇改后从未出现过的突变反转性持续贬值,这一罕见现象具有重要的典型性学术和现实研究价值,但已有文献对此所进行的分析较为零散初步.本文采用BVAR等方法对该问题进行深入系统的理论分析和实证检验,研究结论表明:2014年以来人民币汇率走势出现了贬值趋势性特征,而不是短暂回调.国际收支的变化和贬值预期的变化是人民币汇率贬值的直接原因,经济基本面因素对人民币汇率的影响经过国际收支和预期的传导来产生作用.人民币兑美元汇率与经济基本面、货币政策、市场预期以及国际收支因素之间存在长期均衡关系.上述结论对于进一步完善人民币汇率理论和丰富汇率管理经验等具有借鉴意义.