Interpreting Currency Crises: How Much Do We Know?

ABSTRACT

The main objective of this paper is to understand the causes and symptoms of currency crises by reviewing the seminal literature and noting some of its significant features. The paper revises the so-called first- and second-generation models and accounts for six different features. Based on this revision and account, the paper suggests the need to view currency crises beyond the traditional line of thought. In effect, to comprehend the process, which may lead to the inconsistency of the exchange-rate-maintenance policies and result in a currency crash.     

Local Industrial Conditions and Entrepreneurship: How Much of the Spatial Distribution Can We Explain?

Why are some places more entrepreneurial than others? We use Census Bureau data to study local determinants of manufacturing startups across cities and industries. Demographics have limited explanatory power. Overall levels of local customers and suppliers are only modestly important, but new entrants seem particularly drawn to areas with many smaller suppliers, as suggested by Chinitz (1961) . Abundant workers in relevant occupations also strongly predict entry. These forces plus city and industry fixed effects explain between 60% and 80% of manufacturing entry. We use spatial distributions of natural cost advantages to address partially endogeneity concerns.     

Theory and Empirics of Democracy and Crime Revisited: How Much Further Can We Go with Existing Data and Methodologies?

The vast empirical work on the criminogenic nature of democracies has produced strong—albeit suspiciously wide‐ranging—claims. This article reviews existing evidence and methodologies that link crime and democracies. It asks three questions: Do theories generate separable and exclusionary predictions enabling their identification and testing? Could results be more conclusive given existing data limitations and the current methodological state of the art? How far are we from obtaining such results? We conclude that there are far too many arguments with blurry lines predicting just about any result. Data are more likely to constitute the binding constraint rather than methodology issues, despite the fact that the estimation of causality between democracy and crime can still be improved. Finally, the priority should be the harmonization of existing information sources, which will require overcoming externalities associated with the public good nature of global information generation.     

How quantitative is education?

The quantitative aspects of two general subjects in education are examined and discussed. They are mass or standardized testing and teaching ability. Questions of whether each of these subjects is quantitative in some sense and the consequences of the findings are discussed and explored. On the basis of the exposition presented in the paper, the conclusion is reached that: (a) the quantitative aspects of testing are such that the consequences of testing can be evaluated; (b) one is forced to be much less sanguine about the possibility of listing the consequences associated with an evaluation of teaching ability.     

How necessary are universities?

The paper discusses whether universities can continue to be the 'template for the extension and transmission of knowledge.' Technical and social changes are already undermining the universities' previous near-monopoly of delivery of higher education. Alternative delivery methods ought to be considered on their own merits and barriers to entry should be removed. The ideal form of higher education is not necessarily residence combined with traditional teaching and associated research.     

How is your organizational health?

Companies need a way to examine the vitality or the disrepair of their rules because people (with the best of intentions) alter rules to meet their needs and because departments interpret organizational practices from the viewpoint of their own “advantage”.     

Too much inventory? How do you know?

How much inventory does a company need to support its business goals? Companies must consider what effect their inventory investment decisions have on the strategic direction of their business. Too often, a company's investment decisions are carried out not by the company's strategists, but by individuals who are unaware of the strategic direction of the business.     

How should heavy-duty trucks be taxed?

This paper develops and implements an analytical framework for estimating optimal taxes on the fuel use and mileage of heavy-duty trucks in the United States, accounting for external costs from congestion, accidents, pavement damage, noise, energy security, and local and global pollution. The analysis allows for endogenous fuel economy, increased auto travel in response to reduced truck congestion, and distinguishes driving by truck type and region. We estimate the optimal (second-best) diesel fuel tax at $1.12 per gallon and implementing it increases welfare by $1.34 billion per annum. Optimizing over both fuel and mileage taxes, and differentiating mileage taxes by vehicle type and region, yields progressively higher welfare gains. The most efficient tax structure involves a diesel fuel tax of 69 cents per gallon and charges on trucks that vary between 7 and 33 cents per mile; implementing this tax structure yields estimated welfare gains of $2.06 billion.     

How risky is a random process?

The riskiness of random processes is compared by (a) employing a decision theoretic equivalence between processes and lotteries on path-spaces to identify the riskiness of the former with that of the latter, and (b) using the theory of comparative riskiness of lotteries over vector spaces to compare the riskiness of lotteries on a given path-space. We derive the equivalence used in step (a) and contribute a new criterion to the theory applied in step (b). The validity of the new criterion, which applies second order stochastic dominance to utility distributions, is established by showing its equivalence to the benchmark decision theoretic criterion when comparing the riskiness of lotteries over any vector space. We demonstrate the theory’s tractability via diverse economic applications.     

How Globalized Really is European Trade?

Abstract

Using a new set of measures of concentration of trade, I suggest that the opening up of trade to date has been greatly exaggerated. At least judging on the basis of trade concentration, agriculture and service sectors should barely be seen as globalized at all. Contrary to other, recent studies, Europe's main economies lag behind the USA in terms of global openness, and most are behind Japan, Canada and China. The Balkans, Poland and the Czech Republic are near the bottom end of the global openness league table. Since there is a strong correlation between concentration of trade and poor economic performance, this should be of concern to those countries and to the EU.     

How Important is Foreign Direct Investment?

The degree of multinationality of an economy's production is determined by the extent of production in other economies by domestically-owned firms, and by production located in the economy in question by foreign-owned firms. In the absence of direct measures, international production (that is, production under foreign ownership) is normally measured at a national level by outward and inward foreign direct investment (FDI) stocks. Unfortunately, the existing practice of reporting FDI stocks on a historical cost basis (i.e. book values) is unsatisfactory, because it does not take into account the age distribution of stocks, thus making accurate international comparisons of FDI stocks almost impossible (see e.g. Cantwell, 1984, 1992; Bellak and Cantwell, 1996). We have re-estimated the FDI stocks of Japan, Germany, the US and the UK at replacement values using a perpetual inventory model (PIM). The results cast doubt on some of the conventional wisdoms about international production, derived from historic cost data.     

How well is productivity being priced?

By understanding how productivity shocks affect firm value, an entrepreneur can better compute the risk premium associated with uncertainty in production. This study explores the link between plant-level productivity and firm value for the baking and confectionary sector. From the impulse response analysis, the study finds that there is a lag in the firm’s response to productivity shocks at the plant level. Further, the paper employs Tobin’s Q as a valuation metric that acts as a link between a firm’s manufacturing plant productivity and firm value. Empirical estimations indicate that there is comovement between firm valuation and plant level productivity.     

How large is Vietnam's informal economy?

The purpose of this article is to estimate the size of the informal economy in Vietnam, describe its development from 1995 to 2015, and assess the country's potential tax loss from this activity. The MIMIC model indicates that the informal economy accounts for between 15 per cent and 27 per cent of GDP. The informal economy has grown sharply in Vietnam since 2007, while its size has decreased in other comparable nations. Potential tax revenue lost annually amounts to between 3.3 per cent and 5 per cent of gross domestic product.     

How is Banking Regulation Changing,and How Could it be Better?

Since the financial crisis there have been some positive moves with regard to bank regulation – especially in relation to ensuring that bank bondholders can lose their capital in the event of a bank failure. However, the increased guarantees to depositors are a retrograde step. The government should remove guarantees of depositors’ capital and, instead, provide some guarantee of their liquidity.     

How different is professional service operations management?

This paper presents detailed analysis of the operational and operations management characteristics of a professional service firm, a legal partnership. An in-depth study of customer interactions, service customization, process throughput and variability, professional employee behavior and managerial interventions provided the basis for confirmatory and exploratory research. The results suggested a number of refinements to existing conceptualizations of the professional service type operation and indicated areas where professional service operations management should be viewed as highly distinctive. First, professional–client exchange is variably asymmetrical – with significant implications for service package and process design. Second, professional service operations comprise a substantial number of less variable and faster throughput processes – creating a significant opportunity for commoditization. Third, professional status and corresponding organisational structures (e.g. the partnership model) need to be explicitly recognised in any typology – these factors introduce distinctive trade-offs when seeking greater efficiency and effectiveness.     

How should a convertible bond be decomposed?

In this paper, a new decomposition approach for valuing convertible bonds (CBs) is presented. Through developing an appropriate integral representation for the value of convertible bonds, we show that an extra premium associated with the holder??s early conversion right exists in addition to the traditional split of a convertible bond into a straight bond plus an option. Three distinct cases, CBs with zero-coupon, continuous coupon and discrete coupon payments, are discussed in this article. Also, to validate our integral formulation, a numerical implementation for the solution of the CB value is conducted and some preliminary results are presented.     

How can organizations use wikis for innovation?

Wikis were first developed over 15 years ago. Research has shown that organizational or corporate wikis are sustainable and can be beneficial to organizations particularly in improving work processes, collaboration and knowledge management. However, there has been little research done to show how organizations can use wikis to support innovation processes. To bridge this gap, this paper explores how wikis can be used in different stages of innovation. We review existing literature as well as analyze case studies of wikis deployed in four organizations in order to highlight how wikis can be used to address challenges of knowledge management and collaboration in different stages of innovation from idea generation to commercialization. In particular, we propose a model that explains how wikis require a clear purpose for their use, a culture of collaboration, and integration within a formal innovation process.