Volatility of capital flows and financial liberalization: Do specific flows respond differently?

This paper examines the volatility of capital flows following the liberalization of financial markets. Utilizing a panel data set of overlapping data, the paper focuses on the response of foreign direct investment, portfolio flows, and other debt flows to financial liberalization. The financial liberalization variable comes from the chronology and index developed by Kaminsky and Schmukler [Kaminsky, G.L. and Schmukler, S.L., 2003, Short-run pain, long-run gain: The effects of financial liberalization, IMF Working Paper WP/03/34.]. Different types of capital flows are found to respond differently to financial liberalization. Surprisingly, portfolio flows appear to show little response to capital liberalization while foreign direct investment flows show significant increases in volatility, particularly for the emerging markets considered.     

Caribbean cruise tourism : A business of transnational partnerships

The cruise industry has grown dramatically during the 1980s to the extent that over four million North Americans will have opted for a cruise holiday in 1990. The Caribbean is perfectly placed to take advantage of this market but the governments concerned have not supported tourism development appropriate to the transnational cruise line operators. Cruise ship arrivals in the Caribbean are growing faster than stopover arrivals so it is vital that the various Caribbean governments cooperate with the transnational cruise line operators in planning and providing the necessary infrastructure to tempt the cruise ship arrivals to part with their dollars at the Caribbean destinations.     

Correcting for bias in retrospective data

When panel data are not available, retrospective data are used in the estimation of dynamic choice models. However, retrospective data are not reliable. Previous studies of voting choices, for example, have shown that respondents misreport their past choices in order to appear more consistent with their current choice. Such retrospective bias leads to inconsistent estimates, especially when there is state dependence in choices. Specifically, observed persistence in retrospective data may be due to (a) true state dependence, (b) unobserved heterogeneity, and (c) retrospective bias in reporting previous choices. Whereas Heckman in his 1981 study deals with (a) and (b), we introduce a method to estimate true state dependence while accounting for both unobserved heterogeneity and retrospective reporting bias. Our method is based on modeling the reporting behavior and integrating it into the estimation. The identification strategy is based on the correlation between the reported previous choices and current exogenous variables. Using data on Israeli voters, we find that the probability that a respondent whose vote intention in 1991 differed from his or her past voting choices would lie about their past choices is 0.23. Copyright © 2007 John Wiley & Sons, Ltd.     

Quadratic risk domination of restricted least squares estimators via Stein-ruled auxiliary constraints

This paper develops an estimator that under the standard assumption of the General Linear Model, including normality of disturbances, can be designed to dominate the Restricted Least Squares estimator in quadratic risk under very general conditions. The domination is achieved for any choice of symmetric positive definite weighting matrix used in defining the quadratic risk function, regardless of the correctness of the constraints used to define the restricted least squares estimator. The general problem conditions under which the estimator exists, and the risk behavior of the estimator over the parameter space are identified.     

U.S. Saving and Investment: Policy Implications

Some economists have argued that the close association between domestic saving and investment rates justify polices aimed at altering domestic saving flows so as to influence domestic investment flows. This interpretation assumes an endogenous investment response. Equally likely, theoretically, is that the close association is maintained by movements in saving. The present paper explicitly examines the endogeneity of the U.S. saving and investment flows. Overall the results suggest that while the domestic saving rate responds endogenously, the domestic investment rate does not. This finding may limit the potential benefits of saving policies.     

Exploring New Product Development Project Review Practices*

Most organizations use new product development (NPD) processes that consist of activities and review points. Activities basically solve problems and gather and produce information about the viability of successfully completing the project. Interspersed between the development activities are review points where project information is reviewed and a decision is made to either go on to the next stage of the process, stop it prior to completion, or hold it until more information is gathered and a better decision can be made. The review points are for controlling risk, prioritizing projects, and allocating resources, and the review team typically is cross‐disciplinary, comprising senior managers from marketing, finance, research and development (R&D), or manufacturing. Over the past four decades, research has greatly advanced knowledge with respect to NPD activities; however, much less is known about review practices. For this reason, the present paper reports findings of a study on NPD project review practices from 425 Product Development & Management Association (PDMA) members. The focus is on three decision points in the NPD process common across organizations (i.e., initial screen, prior to development and testing, and prior to commercialization). In this paper, the number of (1) review points used, (2) review criteria, (3) decision makers on review committees and the proficiency with which various evaluation criteria are used are compared across incremental and radical projects and across functional areas (i.e., marketing, technical, financial). Furthermore, the associations between these NPD review practices and new product performance are examined. Selected results show that more review points are used for radical NPD projects than incremental ones, and this is related to a relatively lower rate of survival for radical projects. The findings also show that the number of criteria used to evaluate NPD projects increases as NPD projects progress and that the number of review team members grows over the stages, too. Surprisingly, the results reveal that more criteria are used to evaluate incremental NPD projects than radical ones. As expected, managers appear to more proficiently use evaluation criteria when making project continuation/termination decisions for incremental projects; they use these criteria less proficiently during the development of radical projects, precisely when proficiency is most critical. At each review point, technical criteria were found to be the most frequently used type for incremental projects, and financial criteria were the most commonly used type for radical ones. Importantly, only review proficiency is significantly associated with performance; the number of review points, review team size, and number of review criteria are not associated with new product performance. Furthermore, only the coefficient for proficiently using marketing criteria was significantly related to new product program performance; the proficiency of using financial and technical information has no association with performance. Finally, across the three focal review points of the NPD process in this study, only the coefficient for proficiency at the first review point, (i.e., the initial screen) is significantly greater than zero. The results are discussed with respect to research and managerial practice, and future research directions are offered.     

Tax management strategies with multiple risky assets

We study the consumption-portfolio problem in a setting with capital gain taxes and multiple risky stocks to understand how short selling influences portfolio choice with a shorting-the-box restriction. Our analysis uncovers a novel trading flexibility strategy whereby, to minimize future tax-induced trading costs, the investor optimally shorts one of the stocks (or equivalently, buys put options) even when no stock has an embedded gain. Alternatively, an imperfect form of shorting the box can reduce aggregate equity exposure ex post. Given these two short selling strategies, it is common for an unconstrained investor to short some equity while a constrained investor holds a positive investment in all stocks. With no shorting, the benefit of trading separately in multiple stocks is not economically significant.     

Improving Food Safety at the Dairy Farm Level: Farmers' and Experts' Perceptions

This study examines farmers' and experts' perceptions of important action points for improving food safety on the dairy farm. Adaptive conjoint analysis is used to elicit these perceptions. A comparison on the basis of professional background (farmers versus experts) shows no major differences in the perceptions regarding chemical and microbiological hazards. Two-stage cluster analysis of individual perceptions regarding chemical and microbiological hazards results in four and three distinct groups, respectively. Although results indicate a rather good level of farmers' knowledge of most important action points, the findings can be used to modify current education programs aimed at improving farm-level food safety.