Long-Run Purchasing Power Parity and Structural Change: The Official and Parallel Foreign Exchange Markets For Dollars In Greece

This paper examines the Purchasing Power Parity theory from a long-run perspective in the presence of a parallel or 'black' market for US dollars in Greece using monthly data for the recent float. Johansen's FIML multivariate cointegration techniques is applied. Recent development associated with this procedure are considered. First, a formal test developed by Paruolo (1996) for the presence of I(2) and I(1) components in a ultivariate context is applied along with the estimation of the roots of the companion matrix for the correct determination of the cointegration rank. Second, given that two significant cointegration vectors were found, structural restrictions identifying the long-run relations of interest are specified as proposed by Johansen and Juselius (1994) and Johansen (1995b). Thus, the joint structure of PPP and long-run informational market efficiency could not be rejected. Furthermore, estimation of the error correction terms shows that the black market rate adjusts to eliminate any deviation from long-run PPP. Finally, stability tests proposed by Hansen and Johansen (1993) are applied and it is shown that the dimension of the cointegration space is simple dependent while the estimated coefficients do not exhibit instability in recursive estimations. [F31 F33]     

Dual foreign currency markets and the role of expectations: Evidence from the Pacific Basin countries

This paper analyzes the role of expectations about the government policy in the official foreign currency market in determining the black market premium. We use data for the recent float from six emerging markets of the Pacific Basin where active black markets for foreign currency exist, namely, Indonesia, Korea, Malaysia, the Philippines, Singapore and Thailand. To test the impact of anticipated and unanticipated shocks to the official exchange rate on the black market premium, we employ the two-step procedure of Hoffman et al. [Hoffman, D.L., Low, S.A., Schlagenhauf, D.E., 1984. Tests of rationality, neutrality and market efficiency: a Monte Carlo analysis of alternative test statistics. J. Monet. Econ. 14, 339–363] which provides corrected F-statistics and allows us to draw valid inference in the presence of generated regressors. The main finding of our analysis is that anticipated and unanticipated shocks to the official exchange rate have an impact on the black market premium in all six Pacific Basin countries. These results suggest that portfolio balance models provide the suitable theoretical framework for analyzing the behaviour of the black market premium in the markets for foreign currency in the Pacific Basin countries. Furthermore, this implies that economic agents in these countries are sensitive to expected returns in foreign exchange.     

Financial literacy and its consequences: Evidence from Russia during the financial crisis

The ability of consumers to make informed financial decisions improves their ability to develop sound personal finance. This paper uses a panel data set from Russia, an economy in which household debt has grown at an astounding rate, to examine the importance of financial literacy and its effects on behavior. The paper studies both the financial and real consequences of financial illiteracy. Even though consumer borrowing increased very rapidly in Russia, only 41% of respondents demonstrate an understanding of interest compounding and only 46% can answer a simple question about inflation. Financial literacy is positively related to participation in financial markets and negatively related to the use of informal sources of borrowing. Moreover, individuals with higher financial literacy are significantly less likely to report experiencing a negative income shock during 2009 and have greater availability of unspent income and higher spending capacity. The relationship between financial literacy and availability of unspent income is higher in 2009, suggesting that financial literacy may better equip individuals to deal with macroeconomic shocks.     

Competition format,championship uncertainty and stadium attendance in European football – a small league perspective

To increase the number of regular season games, small football leagues are often organized as quadruple round robin tournaments with teams playing each other four times. Theoretically, however, the more games played, the less uncertain is the championship race, reducing fan interest in the league. This article uses data from Austria and Switzerland to study the relationship between competition format, championship uncertainty and attendance demand empirically. Results suggest that a team still in contention to win the championship positively affects attendance, while it is not the specificity of the competition format that per se contributes to less championship uncertainty.     

Gibrat’s law and persistence of growth in Greek manufacturing

This study makes use of a sample of Greek manufacturing firms during 1995–2001 in order to analyze Gibrat’s law. We find Gibrat’s law is rejected for the total sample of firms, since persistence of growth plays a key role. The classification of firms in size and age groups, however, yields more interesting results: Gibrat’s law is rejected for micro, small, and young firms, since an inverse relationship between firm growth and initial firm size is found along with a persistence of growth rates in subsequent periods. In contrast, Gibrat’s law is accepted for medium, large, and old firms, implying that the growth patterns of these categories follow a random walk and do not tend to persist in subsequent periods.