PLANNING MULTIPLE LOCATION INVENTORIES

Supplying customer demand from comparable alternate inventory locations when an item is out of stock at its primary stocking point creates a virtual inventory for that item. The expectation is that if more inventories can be drawn upon, the inventory for an item would be lower, the fill rate would be higher, or both. While generally true that safety stocks will be lower, regular stocks, on the other hand, may rise with such cross filling of demand. In this study, a methodology is developed that balances the cross filling effects on both regular and safety stocks for determining whether an inventoried item should be cross‐filled. An example and guidelines are given to show how the methodology can be simplified and applied in practice.     

Speculative attack against the Hungarian forint

In mid-January 2003 a severe speculative attack was launched against the exchange rate of the Hungarian forint. The attack was very unusual in the history of foreign exchange speculations, since it was aimed at enforcing the appreciation — and not the depreciation — of the currency targeted. The specific nature of this kind of speculation is closely related to Hungary’s accession to the European Union in general and to EMU in particular. Since the other Central and Eastern European acceding countries face similar problems and challenges, the Hungarian experience may involve some instructive lessons on monetary and economic policy for them too.     

Costs and benefits of EU enlargement

While the political benefits of the coming EU enlargement are relatively easy to identify, its economic and financial consequences are less unequivocal. The following article examines the likely costs and benefits of enlargement to both existing and future Members, and in particular how it will affect Germany, one of the few present EU Member States which has direct borders with acceding states. The article expresses the personal opinions of the author.     

The New Economy is dead,long live the information economy

The arrival of the 2001–2003 recession caused many to suppose that the so-called “New Economy” was now defunct. This article addresses a number of related issues, including the question of the durability and viability of business cycles in the face of the technological developments of the information age. It asks what went wrong with the New Economy and examines its characteristics as well as its remaining possibilities and prospects for the future. Finally, it considers the spread of the Information Economy to Europe, especially to Germany, the country that one might expect to be the leading European player, but which is not at present actually a strong competitor for that role.     

Approximating unanimity orderings: An application to Lorenz dominance

Stochastic dominance and Lorenz dominance are examples of orderings which require unanimous agreement among an infinite set of indices. This paper considers various subsets of inequality measures that respect Lorenz dominance, and assesses the extent to which a small number of indices can reproduce the Lorenz ordering. Using income data for 80 countries, our results suggest that Lorenz dominance can be predicted with 99% accuracy using just 3 or 4 inequality measures, as long as two of them focus on the extreme upper and lower tails of the distribution. In contrast, confining attention to the index families and parameter ranges normally considered may fail to detect the majority of occasions when Lorenz curves intersect. These results lead us to question the faith placed in procedures based on a finite set of inequality indices, and to suggest that similar lessons will apply to other types of unanimity orderings.     

Catching up: The role of demand, supply and regulated price effects on the real exchange rates of four accession countries

The main aim of this paper is to examine the exchange rate behaviour of a group of four transitional, EU accession countries, with a view to making policy recommendations regarding their full accession to the European Monetary Union. We employ a dynamic OLS panel estimator to investigate the relative importance of demand and supply influences on the exchange rates of these countries. Our analysis shows that both supply‐ and demand‐side effects are important for the accession countries, although their overall effect on inflation differentials and competitiveness seems to be small. An additional focus of the paper is the examination of the role that administrated, or regulated, prices and the productivity of the distribution sector play in the real exchange rate dynamics. Using a unique database we show that administrative prices have been a powerful force behind price and real exchange developments for our group of accession countries. The distribution sector is shown to have an independent effect on the internal price ratio over and above that generated by the Balassa–Samuelson effect.