The rise of dollar credit in emerging market economies and US monetary policy

This paper examines the hypothesis that the boom in dollar credit in emerging market economies (EMEs) is associated with an excessively low interest rate in the US. For this purpose, we use a multivariate correlated unobserved component model that allows for correlation between shocks to dollar credit, cross‐border interest rate gaps—measured as the difference between emerging market interest rate and the US interest rate, and dollar index both in the short run and in the long run. In addition, it also provides us a quantitative estimate of the permanent and transitory movements in dollar credit in EMEs, interest rate gaps and dollar index. The results from this model do suggest that a temporary increase in interest rate gaps and decline in the dollar index are associated with a temporary increase in the dollar credit in EMEs with a very high degree of correlation. The estimate of the cyclical component of the dollar credit in EMEs from our model captures the recent boom and bust in this market and compares favourably to alternative trend–cycle decomposition methods.     

Simple fiscal policy rules for small open economies

This paper analyzes the scope for rules-based countercyclical fiscal policy in small open economies where a subset of households is liquidity-constrained. Relative to balanced budget rules, structural surplus rules significantly improve welfare. But they minimize fiscal instrument volatility rather than business cycle volatility. More aggressively countercyclical tax revenue gap rules (strong automatic stabilizers) increase welfare gains by around 50%, with only modest increases in fiscal instrument volatility. If liquidity-constrained households' labor income is independent of raw materials prices, the government should save excess raw materials revenue on their behalf. The best fiscal instruments are transfers, consumption and labor taxes.     

国债规模:在财政与金融之间寻求平衡

本文从财政政策和货币政策协调配合角度,探讨了国债在金融体系中的特殊地位和作用,着重分析了国债市场作为核心金融市场在提供市场流动性方面的不可替代的作用.本文的政策含义就是,为了给我国的金融市场运行创造一个良好的基础,我们的国债政策应当超越单纯财政的财政眼光.     

Cooperative ventures in emerging economies

Foreign market entry strategy involves choices about which markets to enter and how to do it. Most of the literature on foreign direct investment reflects an interest in ownership structure decisions and the risks foreign investing firm may face. As recognized in many studies, one set of risks arises from public expropriation hazards, a function of the ability of the host country's institutional environment to credibly commit to a given policy or regulatory regime. Empirical research has shown this hazard to have an impact on ownership levels. This study is a theoretical model that describes how multinational firms face moral hazard risk from their local partners and political risk from the host country when they decide to go abroad in a joint-venture alliance. I found that the greater the level of hazard expropriation, the lower the participation of the multinational firm in the final cash flow, except for when the multinational firm has the negotiation power and there is a high level of local investment protectionism. In that case, the multinational firm increases its participation in the final cash flow.     

Cyclical wage movements in emerging markets compared to developed economies: a general equilibrium comment

I examine distinct cyclical properties of labor markets in emerging economies compared to developed ones from a general equilibrium perspective. The evidence in emerging economies shows that (1) wages are more volatile than income, while (2) employment is less volatile and (3) less pro-cyclical than in developed economies. I use a standard open-economy model to study the implications of wealth effects on labor market dynamics in both emerging and developed economies simultaneously. In contrast to the (partial equilibrium) results of the small open economy (SOE) model, I show that in general equilibrium, strong wealth effects on labor supply in emerging economies are necessary to rationalize the evidence. The model is also consistent with empirical regularities of exchange rate fluctuations, namely (1) excess volatility of real exchange rates, and (2) the negative co-movement between the real exchange rate and relative consumption.     

Optimal fiscal policy in a small open economy with limited commitment

We introduce limited commitment into a standard optimal fiscal policy model in small open economies. We consider the problem of a benevolent government that signs a risk-sharing contract with the rest of the world, and that has to choose optimally distortionary taxes on labor income, domestic debt and international transfers. Both the home country and the rest of the world may have limited commitment, which means that they can leave the contract if they find it convenient. The contract is designed so that, at any point in time, neither party has incentives to exit. We define a small open emerging economy as an economy where the limited commitment problem is active in equilibrium. Conversely, a small open developed economy is an economy in which the commitment problem is not active. Our model is able to rationalize some stylized facts about fiscal policy in emerging economies: i) the volatility of tax revenues over GDP is higher in emerging economies than in developed ones; ii) fiscal policy is procyclical in emerging economies; iii) emerging economies may “graduate” from procyclical fiscal policy and adopt countercyclical policies in the long run.     

Sovereign credit ratings, emerging market risk and financial market volatility

This article presents event studies that find a significant effect on dollar bond yield spreads when rating agencies put emerging-market sovereign bonds on review with negative outlook. The finding has two conditional implications. If rating agencies can be turned from late into early warning signals, they would have the potential to dampen boom-bust cycles in emerging-market flows. If rating agencies cannot improve on their reactive approach witnessed in the run-up and aftermath of recent currency crises, regulation and guidelines stipulating a certain rating status for institutional investment will continue to intensify boom-bust cycles. The paper concludes with regulatory suggestions for both outcomes.     

Competing in an emerging market: antecedents and consequences of market orientation and the role of environmental factors

Adoption of market orientation is an investment decision involved with benefit and cost considerations. How environmental factors influence the adoption of market orientation has received scant attention in the literature. This study fills the void by investigating the environmental antecedents to market orientation. In addition, the research explores the role market orientation and customer satisfaction play for firms operating in an emerging market in search of growth and prosperity. Based on data collected from India, one of the BRIC nations and an important emerging market, results show that turbulent and dynamic market conditions foster an adoption of market orientation, which leads to high levels of customer satisfaction, and in turn leads to customer loyalty. Managerial implications and future research directions are discussed.     

Effects of local fiscal policy on firm profitability

For decades, scholars and policy-makers have been interested in how fiscal policy influences entrepreneurship. Until now, research has focused on fiscal policy at the federal or regional level and used macro-economic outcome measures. Considerably less attention was given to how municipal governments can influence economic outcomes at the micro level. The present study examines the effect of municipal taxes, spending and tax compliance costs on firm profitability within the Flemish hospitality industry. This is an interesting research setting, since Flemish municipalities have far-ranging fiscal autonomy which has resulted in a proliferation of local taxes, many of which are specific to the hospitality industry. The findings reveal that local taxes have a negative impact on firm profitability, while aggregate public spending has a positive influence. The tax effect is economically relevant and exceeds the public spending impact. Finally, we find no impact of compliance costs from local taxes.     

Fiscal policy,monetary policy and external imbalances: Cross-country evidence from Africa's three largest economies

This paper determines which of the three policy approaches: fiscal, monetary and exchange rate can better address external imbalances in the three largest African economies, Nigeria, South Africa and Egypt. To this end, use is made of the panel vector autoregressive model to assess the dynamic effects of shocks emanating from the three policy approaches. The findings of the paper indicate that unlike in many emerging and developed economies the current accounts of these three economies react to fiscal, monetary and exchange rate shocks. More particular, the results of the empirical analysis show that the appreciations of the currencies in the three economies lead to current account surpluses. This is mainly attributed to the fact that most African economies have a high propensity to import with limited productive capacity for exports.     

Multinationals from emerging economies: Strategies,challenges, and the way forward

Multinationals from emerging economies are relatively new players in the global economy. This Special Issue includes five articles that cover several important aspects of the market and nonmarket strategies pursued by emerging market multinational corporations (EMNCs). Given that only a few firms from emerging markets embrace the possibilities and challenges of going global, we highlight the need to examine country, industry, and firm level antecedents of the emergence of EMNCs. We also draw attention to the need to study the role played by immigrant populations in EMNC internationalization.     

新冠肺炎疫情后各国主权债务风险及其前景

新冠肺炎疫情及其经济冲击促使许多国家财政赤字率和政府债务率大幅升高,其影响程度超过了2008年国际金融危机。笔者既不赞成现代货币理论(MMT)的看法,也不认同悲观派的看法。从影响各国主权债务风险的几大因素看,一些新兴市场经济体尤其需要关注利率的3种风险溢价:通胀风险溢价、货币贬值风险溢价和信誉(违约风险)溢价。展望未来,发达经济体和新兴市场经济体将花费数年时间进行财政收支和政府债务调整,以渐进方式推进政府部门的去杠杆。     

1998年以来财政体制与政策的宏观评价

目前对于1998年以来积极财政政策的评价大都与经济运行的周期性波动相联系,缺乏与财政体制改革和经济转轨阶段性演进相联系的考察,而这两个被忽略的方面可能正好是影响积极财政政策效果的原因.本文试图从更宏观的视角分析五年来财政体制与政策的基本关系,并提出下一步财政改革与发展的政策建议.     

Stabilization and real adjustment in emerging market economies

Based on theory and on evidence from the Southern Cone the following paper concludes for emerging market economies (1) that fiscal reform is of utmost importance for macroeconomic reforms, (2) that credibility cannot be imported via a fixed exchange rate but has to be established by internal reforms and (3) that an exchange rate based stabilization remains a high-risk strategy even in the case of strong adjustment efforts.     

Consumer response to food labels in an emerging market: the case of Romania

This study investigates consumer response to food labels in an emerging market. More specifically, it measures the levels of awareness, objective and perceived understanding, perceived usefulness and perceived trustworthiness of the most prominent food labels found in the Romanian market. An online survey was conducted with a convenience sample of 428 respondents (45.6% males of an average age of 30.6 years). Results revealed that for most respondents, awareness levels towards food labels are generally low, except for the Guideline Daily Amount (GDA) and the organic food labels. Objective understanding towards food labels was relatively high, especially towards those food labels that included a clear text element. Perceived understanding, perceived usefulness and perceived trustworthiness were found to be consistently high with regard to the GDA and the national organic food labels, while the European organic label scored lower. Finally, response to food labels was found to differ between aware and unaware respondents.     

Animalizing India: emerging signs of an unruly market

Focusing on recent artistic and photojournalistic portraits of India as an animal – an elephant or tiger – that wanders alone or sometimes with another animal companion – dragon or panda bear – called China, this article analyzes the ways in which India's potential as an emerging market and a rising power is being conjured in the popular aesthetics of magazine and nonfiction book covers. Even as an outpouring of verbal discourse from business and policy experts has hailed an India that is transitioning from a peripheral Third-World nation to a rising power, a steady stream of visual illustrations, including, those that deploy animal avatars, has sought to illuminate the vicissitudes of India's newfound economic recognition. Ultimately, my article's tracking of the visual semiotics of India's animal imprints seeks to get inside an economy of appearances in which zoological embodiments arbitrate this non-Western nation's prospects for entering economic globalization's newly minted scale of “emerging market.”     

Does corruption increase emerging market bond spreads?

We study the relationship between corruption and borrowing costs for governments and firms in emerging markets. Combining data on bonds traded in the global market with survey data on corruption compiled by Transparency International, we show that countries that are perceived as more corrupt must pay a higher risk premium when issuing bonds. The global bond market ascribes a significant cost to corruption: an improvement in the corruption score from the level of Lithuania to that of the Czech Republic lowers the bond spread by about one-fifth. This is true even after controlling for macroeconomic effects that are correlated with corruption. We find little evidence that investors became more sensitive to corruption in the wake of the Asian financial crisis.     

Inheriting the DNA of emergingness: Strategies of advanced market firms under emerging market ownership

Despite growing concerns about emerging market firms (EMFs)' acquisitions in advanced markets, the influences of emerging market ownership on advanced market firms (AMFs) as targets remain largely underexplored. This study aims to conceptually advance our understanding of the environmental adaptation strategies of AMFs under emerging market ownership, focusing on the strategic implications of the “emergingness” encapsulated in the resource transfer from EMF acquirers to AMF targets. Drawing on the institution-based view and resource-based view, this conceptual piece develops an Institution-Resource-Strategy framework and proposes two types of strategies for AMFs under emerging market ownership, namely arbitrage and avoidance, each comprising three varying tactics. We illustrate our propositions using three cases of Japanese firms under Chinese ownership. This study adds to the literature on internationalizing EMFs, the institution-based view of global strategies, and cross-border mergers and acquisitions and offers managerial implications for emerging and advanced market stakeholders.     

International market exit by firms: Misalignment of strategy with the foreign market risk environment

International market withdrawals by firms continue to persist regardless of geography, industry, firm experience, and national origin. The extant literature argues that a host of factors, such as firm characteristics, organizational capabilities, host country environment, international business risks, strategy and strategic choices are among the likely reasons for firms to prematurely exit the markets they have entered. Drawing from the contingency theory, we contend that underlying most market exit events is the misalignment of firm strategy with the foreign market risk environment. This happens when managers fail to optimize strategy formulation and implementation in view of the foreign market risk environment. Based on an in-depth examination of 62 cases of foreign market exits via pattern coding using NVivo 12, we delineate common patterns accounting for market withdrawals. We then formulate propositions with respect to how misalignment between strategy and risk environment interferes with foreign market exits in accordance with the contingency theory. We conclude with a discussion of theoretical implications, managerial recommendations, and suggestions for future research and limitations.