Addressing International Empirical Puzzles: the Liquidity of Bonds

Models that assume bonds denominated in different currencies are perfect substitutes can not explain certain empirical puzzles: the exchange rate volatility puzzle is that these models can not explain the observed volatility in real and nominal exchange rates; the Backus-Smith puzzle is that these models can not explain the observed low correlation between real exchange rates and the ratio of home to foreign consumption; the Backus-Kehoe-Kydland puzzle is that these models can not explain the observed low correlation between home and foreign consumption; and finally, the uncovered interest parity puzzle is that these models can not explain the observed deviations from that parity. These long standing puzzles make the models harder to defend. In this paper, we present a symmetric two country portfolio balance model in which home and foreign bonds are imperfect substitutes for money in each country’s transactions technology; this of course makes home and foreign bonds imperfect substitutes for each other. Our calibrated model is capable of addressing the Backus-Smith puzzle and the Backus-Kehoe-Kydland puzzle. It does not fully resolve the exchange rate volatility puzzle, but it makes some headway. And finally it generates deviations from uncovered interest parity, though by some estimates these deviations are not large enough to be consistent with the data.     

WIC Participation and Relative Quality of Household Food Purchases: Evidence from FoodAPS

We examine the effect of the Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) on the quality of household food purchases using the National Household Food Acquisition and Purchase Survey (FoodAPS) and propensity score matching. A healthy purchasing index (HPI) is used to measure nutritional quality of household food purchases. WIC foods explain the improvement in quality of food purchases, not self‐selection of more nutrition‐conscious households into the program. The improvement in purchase quality was driven entirely by WIC participating households who redeemed WIC foods during the interview week. There was no significant difference between WIC participants who did not redeem WIC foods and eligible nonparticipants. In this sample, there is no evidence that lack of access to clinics has adverse effects on participation nor is there evidence that HPI depends on supermarket access. A supervised machine learning process supports our main conclusion on the importance of WIC foods.     

Are immigrants really attracted to the welfare state? Evidence from OECD countries

This paper examines the impact of fiscal policies on both the size and educational levels of immigrants in destination countries. We find that whether or not a country’s policies are attracting highly educated immigrants goes beyond the issue of the “welfare state”. Immigrants are making important distinctions between the different benefits provided by a receiving country’s government. Health and education spending are found to have a positive impact on the education levels of immigrants while the reverse is true for unemployment and retirement benefits. Welfare programs are found to be insignificant once other government programs/taxes and other factors are taken into account. These results imply that countries should be less concerned about whether they are a “big government” with regards to attracting immigrants, and more concerned with what types of benefits they offer.     

The relationship between ethics and firm practices in Russia and the United States

One of the fundamental objectives of corporate governance is to promote a climate that fosters ethical decision-making. As transitioning economies move toward more transparent and democratic systems the existence of policies, such as codes of ethics, that attempt to monitor and control moral behavior will become increasingly important. The establishment of ethical standards not only encourages trust with potential trade partners but also is likely to cultivate foreign direct investment. In this study, data collected from 112 U.S. and 74 Russian respondents reveal some intriguing patterns across these two diverse economies. Managerial implications and future research directions are also discussed.     

Enhanced Special Drawing Rights: How China Could Contribute to a Reformed International Monetary Architecture

Since the end of the Bretton Woods era, the world has operated on a de facto system of free‐floating exchange rates, with the US dollar as the dominant international currency. The system, characterized by large pro‐cyclical capital flows and chronic imbalances, is inherently unstable, and has contributed to repeated crises, recessions and geopolitical tensions. One potentially “least‐difficult” line of reform would be to allow the evolution of a multi‐currency system, underpinned by an expanded role for Special Drawing Rights (SDRs). Attempts to promote wider use of the SDR have foundered on the liquidity premium. However, for Chinese corporations and institutions, at present restricted in their capital account activities, the SDR liquidity premium would appear less daunting. The Chinese authorities could provide policy encouragement for the use of SDRs by their institutions. This initiative, supported by China's Special Administrative Region Hong Kong, would kick‐start an international SDR ecosystem, and encourage even broader use of SDRs, to the benefit of international monetary stability.     

Environmental Regulation and Innovation Offsets in the Bluegrass Seed Industry

Burning bluegrass seed stubble is an important production practice that, among other benefits, increases production and stand life of this perennial crop. Despite economic forecasts that higher production costs from the 1996 state ban on seed stubble burning would reduce Washington production by up to 30%, output in the years 1998–2005 was nearly two-thirds higher than in any previous eight-year period. This study seeks to explain why that paradoxical behavior occurred. This study puts forward and systematically tests several hypotheses. The only hypothesis with any support, innovation offsets, is examined by an assessment of contemporaneous innovations and by corroborative statistical evidence.