MODELING THE SOFT BUDGET CONSTAINT: INFLATION EXPLAINED BY A DISEQUILIBRIUM IN THE CIRCUIT OF CAPITAL

The article presents a two equation model showing how a disequilibrium between financial capital and real capital is a measure of the degree of a soft budget constraint situation, how such a disequilibrium can originate from price changes, interest rates or other international causes influencing the exchange rate. This is modeled by a circuit equation which is linked to a price equation via the mark up coefficient where it will be assumed that state (or private) enterprises can always cover their current costs and investment costs either by manipulating the selling price or by borrowing at cheap conditions or by getting subsidies or tax exemptions.     

Problems of developing and transition economies

ABSTRACT

The Solow growth model was extended to account for the graft by corrupt individuals from domestic savings, which could have been used for productive capital accumulation, the productive stock of capital to be augmented by foreign direct investment (FDI), and the expatriation by FDI international investors. The results indicate that higher levels of FDI inflows, savings rates, and more advanced technology embedded productive capital would result in higher steady-state per capita productive capital to labor ratio. The graft from domestic savings, expatriation of FDI, and growth rate of labor negatively affect steady-state per capita productive capital to labor ratio.     

NAFTA Chapter 11: “Tantamount to Expropriation”: Tantamount to Explosive

This paper provides an alternative methodology for testing the degree of international capital mobility through the analysis of a causality direction between the exchange rate and the interest rate for Sweden. The change of exchange rate regime in Sweden in 1992 is used here to illustrate how the alternative exchange rate regimes, fixed and floating, affect the degree of international capital flows. On the basis of new Granger non-causality testing procedures developed by Toda and Yamamoto (1995), the results exhibit that Granger-causality is unidirectional, running from interest rate to exchange rate under the floating exchange rate regime. The implication of this result is that the hypothesis of high capital mobility is supported only under the floating exchange rate regime.     

Internationalization of the organizational field: Swedish grocery retailers in the European integration process

Abstract

This article describes how import of ideas and practices influence an industry that is in an early stage of internationalization, as well as part of European integration. By using institutional theory, such a situation is depicted as an expansion of the organizational field, in which international isomorphism between organizations has commenced. Studying Swedish grocery retailing, a new set of ideas was found regarding what constitutes an efficient organization. This included centralization, vertical integration and brand management, and it was strongly influenced by foreign actors and markets. We conclude that isomorphism occurs in a decreasingly national field, although not entirely pan-European in character, and that international diffusion of ideas and practices reshape markets, partly independent of goods and capital flows.     

Teaching International Business Concepts Through the Exchange of Cultural Metaphors

Abstract

The objectives of this paper are (1) to review the concept of cultural metaphors, (2) to propose a specific application of cultural metaphors in the teaching of international business concepts and (3) to report two situations in which this application was used. The paper concludes with recommendations for further development of this teaching methodology. The applications involved the exchange of metaphors between students at a French university and students at a university in the United States, in 2001 and 2004, which they had developed to describe their respective cultures. The courses were in the field of international business management.     

International spillovers of China's structural reforms

This paper sheds light on the international spillovers of China's reforms in upgrading industrial capabilities, liberalizing capital account, internationalizing the renminbi, and transition to flexible exchange rates. Drawing on two-country New Keynesian model of endogenous entry and portfolio adjustment, we find that China's industrial upgrading that peddles on yuan appreciation lifts all boats through global production network irrespective of capital account convertibility, degree of renminbi internationalization, and exchange rate reform. Feasibility of appreciation-driven upgrading is called into question, however, when renminbi reform and capital account liberalization go in parallel. We also show that international spillovers disappear once renminbi internationalization is associated with liberalized capital account and flexible renminbi exchange rates.     

Capital-flow management measures: What are they good for?

Are capital controls and macroprudential measures related to international exposures successful in achieving their objectives? Assessing their effectiveness is complicated by selection bias; countries which change their capital-flow management measures (CFMs) often share specific characteristics and are responding to changes in variables that the CFMs are intended to influence. This paper addresses these challenges by using a propensity-score matching methodology. We also create a new database with detailed information on weekly changes in controls on capital inflows, capital outflows, and macroprudential measures related to international transactions from 2009 to 2011 for 60 countries. Results show that these macroprudential measures can significantly reduce some measures of financial fragility. Most CFMs do not significantly affect other key targets, however, such as exchange rates, capital flows, interest-rate differentials, inflation, equity indices, and different volatilities. One exception is that removing controls on capital outflows may reduce real exchange rate appreciation. Therefore, certain CFMs can be effective in accomplishing specific goals—but most popular measures are not “good for” accomplishing their stated aims.     

Who Teaches Whom: The Varied Voices and Instructional Roles of Community Service-Learning Partners

ABSTRACT

The question of what defines a teaching role has long been a catalyst for dialogue and debate among practitioners in the service-learning community. The success of the service-learning model relies on a reciprocal exchange in the dynamic and ever changing communities in which we serve, where shared ownership, mutual respect, and a consistent exchange among various participants facilitates learning outcomes.

Through partnership with community agencies, students, faculty, and staff, we have begun to answer the question of who teaches whom in the service-learning environment. This article documents how relationship where community partners grow deeper, student roles expand and we broaden the pedagogical impressions of what defines a teacher.

Through a qualitative review of programs and courses, with insights of participants, we will demonstrate how the community-university partnerships fosters a critical exchange for all involved, including participants, community, and institution. The innovative nature of the service-learning instructional environment modifies the dynamics of classroom, causing the roles for learners to vary and the teaching role to change.     

Macroeconomic effect of capital controls as a safeguard against the capital inflow problem

Concerns that a rapid surge in capital inflow leads to loss of autonomy in macroeconomic policy, and that its reversal has significant negative effects on an economy, have motivated capital controls during the 1990s. Under a fixed exchange rate system without capital-account restrictions, a decrease in world nominal interest rates causes in a small open economy a deterioration in the current account, real exchange rate appreciation, and inflationary pressure, as pointed out by Calvo et al. (, ). This paper examines macroeconomic effects of capital-account restrictions as a policy response to the capital inflow problem under fixed exchange rates. Theoretical analysis shows that capital-account restrictions not only stem the capital inflow but also reverse the associated macroeconomic effects. The model implies that capital-account restrictions are effective measures against the capital inflow problem of emerging markets in the 1990s.     

Multilevel trust in international marketing of healthcare services: A five-country comparative study

PurposeThis research aims to increase understanding on how multilevel trust is developed as well as how trust levels are interconnected and influence international marketing strategy for healthcare services.Design/Methodology/ApproachA comparative case study approach was applied with Elekta, a Swedish firm, operating in Brazil, the Philippines, China, Russia, and Hong Kong.FindingsThe research culminated in a multilevel trust (MLT) model comprised of three levels relating to individuals, company performance, and context.Research implications/limitationsThis study offers a context-based multilevel trust model from a process perspective focusing on healthcare. This model can be tested in other service sectors.Practical implicationsManagers should consider multilevel trust to boost relationships and achieve local acceptance.Originality/ValueThis research contributes to trust theory by constructing a context-based multilevel trust model for international healthcare marketing.     

On the Link Between Exchange‐rate Regimes,Capital Controls and Monetary Policy Autonomy in Small European Countries, 1979–2000

We investigate international monetary‐policy transmission under different exchange‐rate and capital‐account regimes in eleven small, open economies during the 1980s and 1990s. We find no systematic link between ex‐post monetary‐policy autonomy and exchange‐rate regimes. Capital controls appear to have provided a degree of temporal insulation from foreign monetary policy shocks, though not strict autonomy. The results are consistent both with short‐term autonomy for small countries even under fixed exchange rates and an open capital account, and with long‐term dependence under flexible exchange rates and an independent stability target. Results also indicate that euro‐area market interest rates are significantly more responsive to the development of the corresponding US rate than were the previous national rates.     

Encouraging Development of a Global Mindset Among Students in Online International Management Courses

ABSTRACT

This research explores how a multiple intelligences approach can be used to build a global mindset among students in online international management courses. It draws upon research in the areas of global mindset, education, cognition and learning, and neuroscience to discuss how pedagogical tools and strategies relevant to each specific intelligence can contribute to cognitive complexity and cosmopolitanism. Suggestions are offered for online teaching methods that can incorporate the multiple intelligences in international management courses.     

Internationalizing the Assessment Criteria to Build Cross-Cultural Competency

ABSTRACT

International business programs, universities with international students, and educators who seek to internationalize their teaching need to make informed decisions about teaching, testing, and assessment criteria. The infusion of American business curricula throughout the world as well as the need to train American business students for leadership roles in global contexts calls for teaching and assessment practices which explore a plurality of cognitive, affective and behavioral pedagogical strategies. This article considers traditional education and assessment in China in light of American educational practices currently used for assessment in business training. It explores how an understanding of modern Confucianist values can shape assessment choices in both American and overseas programs as an example of developing cross-cultural awareness. The authors call for an assessment process in business education which draws from a plurality of methods adapted to teaching, learning and testing for global awareness.     

The short run efficacy of monetary policy under floating exchange rates reconsidered

This paper disputes the argument that the short-run effectiveness of monetary policy in stabilizing domestic output under floating rates is necessarily reduced if elasticities of demand for imports and exports with respect to the current exchange rate are low and capital flows depend on the exchange rate. It is shown that the relative efficacy of monetary changes is determined by the interest rate elasticity of international interest payments and receipts and the effect of exchange rate variations on the demand for money in addition to the exchange rate elasticities of trade and capital flows.     

Accounting for the resilience of the machine-tool industry in Spain (c. 1960–2015)

Abstract

This article examines the evolution of the machine-tool industry in Spain between 1960 and 2015, its international competitiveness and its adaptability to the changes that have taken place in this industry worldwide as regards markets, technology and competitors. Drawing on the theoretical literature on the resilience of regions, cities and production systems, the article offers an exploratory analysis of the three main factors that account for the resilience of this industry in Spain: business size, flexibility and production specialisation; absorptive and innovative capacity; and geographical concentration in a region with an ecosystem that is highly supportive of skilled human capital training and innovation.     

A Synthesis of the Effects of Exchange Rate Volatility on International Trade: A Meta-Regression Analysis

ABSTRACT

This article surveys literature that investigates the effects of exchange rate volatility on international trade. We perform meta-regression analysis on 41 studies with 807 estimates. We show that the empirical works exhibit substantial publication selection and show a significant genuine exchange rate volatility effect on trade flows after correction of publication bias. In addition, the literature reveals a pronounced heterogeneity with respect to model specifications, samples, time horizons, and countries’ characteristics. These findings are supported by separate assessment of primary studies with, respectively, total exports and sectoral exports as the dependent variable.     

The impact of global factors on stock market movements in emerging market economies

Global factors are becoming increasingly important as a cause of international capital fl ows. It is nearly impossible for some countries to protect themselves from outside infl uences on their fi nancial markets. This paper investigates the extent to which various global factors such as stock market volatility, international liquidity and global interest rate levels impact on the effective fi nancial market exchange rates of selected emerging market economies. These results are compared with effects on the fi nancial market exchange rates of the United States, the United Kingdom and Germany.     

Hindering or enabling structural social capital to enhance buyer performance? The role of relational social capital at two levels in China

Purpose: In its cognitive, relational, and structural forms, social capital has been identi?ed as a powerful strategic tool. However, prior empirical studies focus only on the direct effect of various dimensions of social capital and address relational social capital at either a dyadic level or a network level. Drawing on the social capital theory and social network theory, this study fills the above-mentioned gaps by examining the role of structural and relational social capital on performance through exploring direct and interaction effects simultaneously and revealing the moderating effect of relational social capital at the dyadic and network levels (including business ties and political ties) simultaneously.

Methodology/Approach: Based on data for 393 distributors from China, a moderated regression analysis is used to test the hypotheses.

Findings: The empirical test generally supports the hypotheses and indicates that the value of structural social capital is conditional on both curvilinear and linear moderating effects of relational social capital: the moderating effects of business ties on the structural social capital–buyer performance relationship is inverted U-shaped, while the moderating effects of relational social capital at the dyadic level and political ties on the structural social capital–buyer performance relationship is positive.

Research Implications: This study incorporates all three dimensions of social capital, represents one of the first attempts to examine the interplay between structural and relational social capital in emerging economies, explores relational social capital at the dyadic and network levels simultaneously, and responses to the fact that buyer–supplier relationships (BSRs) are embedded within a larger context of social networks. By addressing these issues, this study sheds new light on the individual and joint impact of various dimensions of social capital and provides new evidence on both the positive and negative aspects of social capital in a single model.

Practical Implications: The results provide important implications for managers in addressing social capital in an emerging economy. In order to improve performance, managers should first encourage and foster frequent, diverse, scarce, and high-quality information exchange and interactions to accumulate structural social capital. Additionally, managers should not only emphasize relational social capital building and development in BSRs, but also pay attention to the cultivation of relational social capital among the business network. They should acknowledge the persistent positive effect of political ties and the potential negative effect of business ties.

Originality/Value/Contribution: First, few studies examine both the individual and synergetic effects of various dimensions of social capital in a single model or explicitly explore relational social capital in a dyadic relationship and deeply consider it at the network level in a single model. This study addresses these issues.     

International Debt Shifting: The Value-Maximizing Mix of Internal and External Debt

Abstract

We study the capital structure of multinationals and expand previous theory by incorporating international debt tax shield effects from both internal and external capital markets. We show that: (i) multinationals’ firm value is maximized if both internal and external debt are used to save tax; (ii) the use of internal and external debt is independent of each other; and (iii) multinationals have a tax advantage over domestic firms, which cannot shift debt across international borders. We test our model using a large panel of German multinationals and find that internal and external debt shifting are of about equal importance.     

Adapting to the Online Teaching Environment

Abstract

This paper proposes that literature (e.g., short stories, folktales, etc.) may be a valuable tool in helping to adapt teaching methods to the online environment, particularly in the case of developing experiential exercises that are compatible with either synchronous or asynchronous online learning. In addition, literature can help students to become better international managers, and builds skills valued by curriculum experts and future employers, including communication skills, team building skills, and contextual understanding of cultural diversity issues. The paper includes an example of how to use the folk tale “Stone Soup” to develop an introductory exercise for an international management class.