A Survey of Exchange Rate Pass-Through in Asia

Exchange rate pass-through (ERPT) refers to the transmission of exchange-rate changes into import (export) prices of goods in the destination-market currency as well as into aggregate domestic prices. This paper examines the analytical and empirical literature on ERPT with particular reference to Asia. It is generally believed that Asian economies are potentially susceptible to ERPT into domestic inflation since they are highly trade-dependent. Particular attention is paid to production sharing—a key characteristic of Asian trade—and its implications for ERPT.     

United States Trade Balance Announcements: The Nature of its Data Revisions

This paper examines the nature of the data revisions in the monthly United States trade balance announcements made by the Commerce Department. Previous work in this area have considered agent reactions to only the preliminary trade balance announcements on various asset prices and have not taken into account the revised figures of the previous month's trade balance announcement. Since Ghosh and Lien (1995) found that the revisions in the data announced by the government are taken into account by the agents, it leads us to further investigate the nature of these revisions. This paper uses the econometric approach described in Mankiw, Runkle and Shapiro (1984) and Mork (1990) to analyze whether the revisions in the US trade balance announcements represent measurement errors, efficient forecast errors, or inefficient forecast errors. Using the generalized method of moments estimation procedure the researcher finds that the preliminary announcements of the trade balance data are better characterized as observations of the true series measured with error rather than as efficient forecasts. The results are of interest to the users of these preliminary US trade balance announcements since it suggests to them that they could use statistical procedures to estimate the underlying value and thus obtain more efficient estimates of these government announcements.     

IPOs,clustering, indirect learning and filing independently

IPO underpricing has been attributed to valuation uncertainty, which can be at least partially resolved by the indirect learning associated with IPO clustering [Benveniste, L.M., Ljungqvist, A., Wilhelm, W.J., Yu, X.Y., 2003. Evidence of information spillovers in the production of investment banking services. Journal of Finance 58, 577–608]. We examine why firms might choose not to issue their IPOs contemporaneously with clusters of similar firms, forgoing opportunities to learn from their peers. We find that the willingness to file an IPO without the benefit of indirect learning from peer firm IPOs is directly related to insiders’ needs for portfolio diversification and the firm’s need to raise capital.     

The Effect of Inequality on Growth: Theory and Evidence from the Indian States

The paper examines the effect of inequality on growth among the subnational states in India. Theoretically, growth of the regional economy is driven by productive public investment in the provision of health and education services financed by a linear output tax, and the optimum tax rate is determined by the median voter. In contrast to existing results, the authors obtain an ambiguous relationship between initial inequality and subsequent economic growth. Analysis of the Indian state‐level data suggests that rural inequality influences growth of total output more than urban inequality, and does so negatively. The indicator of intersectoral inequality is more important in explaining sectoral output growth.     

Is a Unique Cournot Equilibrium Locally Stable?

We consider a homogeneous product oligopoly, where the Cournot equilibrium is regular and unique. We show that for a duopoly, a unique Cournot equilibrium is always locally stable. For a “n” firm asymmetric cost oligopoly a unique Cournot equilibrium is locally stable under very general conditions. The sufficient conditions for local stability of a unique Cournot equilibrium are much less restrictive than what the existing literature suggests. For a symmetric cost oligopoly the unique Cournot equilibrium is almost always locally stable, except for a perverse case. Journal of Economic Literature Classification number: L13.     

THE CASUAL RELATIONSHIP BETWEEN INTERNATIONAL TRADE AND EMPLOYMENT IN THE MANUFACTURING SECTOR OF THE UNITED STATES

The impact of US trade barriers and demand factors on import prices of Canadian softwood lumber is examined using time series analysis of quarterly data from 1989–2006. The results suggest that the previous quarter import price of softwood lumber, US producer price, and US housing starts, and the current quarter US producer price of softwood lumber have significant impacts on the import price of Canadian softwood lumber with 0.69, 1.92, 0.10 and ?1.64 as respective elasticities. Among trade barriers examined, a softwood quota raises the import price but a high tariff lowers it.     

A note on the foreign exchange market efficiency hypothesis

This paper examines the weak and strong forms of the foreign exchange market efficiency hypothesis (MEH) (as defined in the paper) using the recently available Harris-Inder null of cointegration procedure, which is powerful enough to distinguish between cointegration and near cointegration, and thus provide more robust results than conventional cointegration tests. Our results indicate that both forms of the MEH are rejected for all the major currencies of the European Economic Community (EEC). (JEL F310).