The demand for Indonesian narrow money: long-run equilibrium,error correction and forward-looking behaviour

Since the 1960s, the banking and financial sector has been at the forefront of the Indonesian development strategy. Thus in order to gain an understanding of the problems and opportunities facing Indonesia, it is essential to understand the workings of the monetary sector of the economy. The aim of this paper is to analyse the narrow component of money demand, using modern econometric techniques. But the major innovation of the paper (in the context of a developing country) is the use of an explicit forward-looking model. This approach, the consequence of financially sophisticated behaviour on the part of Indonesian agents, has significant policy implications. One of these is that announced changes in policy, if credible, will lead to a more rapid response from the private sector than if agents were purely backward looking. This may make the operation of monetary (and other) policy more effective than would otherwise be the case.     

Landscape Sensitivity and Tourism Development

The paper argues that carrying capacity is not the most effective way to analyse the relationship between the 'natural' environment and tourism pressure. Rather that concepts embedded within geomorphology, namely 'lag time', 'environmental thresholds' and 'dynamic metastable equilibrium' may provide a better approach to examine feedback between tourism and the environment. This could also provide the conceptual framework for the integration of the natural and social sciences in the study of tourism impacts, and the mechanism for truly sustainable development. The paper contends that the identification and management of threshold events and the use of base-line data on time scales of 10² to 10³ years should be at the centre of the decision-making process. The paper warns against the use of 'limits of acceptable change' as a way of managing the interplay between tourism and the environment. The relationship between shoreline management and tourism development is used to illustrate the arguments presented.     

Customer Satisfaction in Retail Banking

Professional services firms (PSFs) engaged in international operations present a unique challenge for governments. They directly and indirectly affect governmental policies and the agencies that enforce these policies through policy development, problem solving, and implementation. Yet, governments that seek to advance rational, forward thinking public policy have little, if any, regulatory control over the input and influence of these professional experts. International professional service firms face an increasingly competitive marketplace and complex challenges that demand skill sets that are markedly different from those characteristically required of consumer service companies. This study identifies the qualities of the best performing PSFs that engage clients worldwide. Implications are discussed for governments to ensure the greater public good.     

Market entry in japan—Some problems and solutions 1

Japan is recognised as a major competitor in world markets but is less well‐known as an attractive market in its own right. This paper proposes that with the right strategies it is possible to successfully penetrate the difficult Japanese market. Problems and opportunities presented by the market are discussed, and some of the findings of a survey of Japanese and German managers in Japan and German‐based managers are reviewed. The paper covers the survey findings on market characteristics, barriers to entry, information requirements, factors contributing to success and methods of market entry. German and UK sources of information and advice on the Japanese market are given for those interested in pursuing the matter further.     

Revealing information in auctions: the allocation effect

When there are two bidders, releasing independent information in an English auction with private values makes the seller worse off. However, this is no longer true with more bidders: when there is enough competition, revelation benefits the auctioneer. In three examples the dividing case is shown to be three bidders. This allocation effect applies to other standard auctions and parallels the bundling decision in a multi-unit auction. I would like to thank Jeremy Bulow, Willie Fuchs, Paul Klemperer, Rob McMillan, Phil Reny, Jeff Zwiebel and especially Andy Skrzypacz. I also grateful to two referees and an Associate Editor for a number of helpful comments.     

Factors affecting brainstorming: towards the development of diagnostic tools for assessment of creative performance

To test a model of creative behaviour in teams, twenty five problem-solving groups were assembled from a Business School graduate programme, trained in creative problem-solving techniques and given a realistic product development task. Self-assessment ratings were collected for factors perceived as influencing performance. Three experienced trainers rated the ideas produced. Four major factors were identified from the self-assessed statements, each mentioned as positive and negative influences. The study provides a foundation for developing diagnostic tools for assessing creative performance in problem-solving teams, and gives pointers to factors which are important for improving performance.     

Re-examination of interest rate sensitivity of commercial bank stock returns using a random coefficient model

This article develops and tests a random coefficient two-index model for commercial bank stock returns which controls for the time-varying interest rate sensitivity caused by a bank's changing maturity profile. Using a sample of 51 actively traded commercial banks, the seemingly unrelated regression results provide evidence that commercial bank stock returns are significantly interest rate sensitive. The effect of interest rate changes on bank stock returns is found to be positively related to the maturity mismatch between the bank's assets and liabilities, when the proxy for interest rate changes and the proxy for maturity mismatch are compatible to each other.This article was written while I was a doctoral student at the University of North Carolina at Chapel Hill. It was presented at the 1989 FMA Annual Meeting in Boston.     

Optimal international hedging in commodity and currency forward markets

This paper derives optimal hedging and production rules for an exporting firm which faces both commodity-price and foreign- exchange-rate uncertainty. The size of the commodity hedge is independent of the properties of the foreign-exchange market. However, the optimal foreign-exchange hedge depends on the commodity hedge and the properties of the commodity forward market. The firm's production decision is independent of its objective function if both forward markets exist, but depends on the consumption beta of the unhedgeable risks in the absence of one or both of the markets.     

The High-Volume Return Premium

The idea that extreme trading activity contains information about the future evolution of stock prices is investigated. We find that stocks experiencing unusually high (low) trading volume over a day or a week tend to appreciate (depreciate) over the course of the following month. We argue that this high-volume return premium is consistent with the idea that shocks in the trading activity of a stock affect its visibility, and in turn the subsequent demand and price for that stock. Return autocorrelations, firm announcements, market risk, and liquidity do not seem to explain our results.     

More or Less Ambition in the Doha Round? Modeling the Development Impact of Recent Proposals

We analyse the impact on developing countries, whose economies depend heavily on agriculture, of a WTO Doha Development Round agreement based on greater or lesser levels of ambition. We present the results of an ambitious versus an unambitious Doha Round outcome, using the MIRAGE model of the global economy, with a special focus on developing countries. Our simulations are based on negotiating proposals from the run-up to the Hong Kong ministerial meeting but not agreed upon in December 2005. We compare those outcomes with the estimated effects of full global trade liberalization. The results for the two Doha scenarios demonstrate the high stakes of this negotiation given the positions of EU, US and the G-20 coalition. A successful round could deliver real gains both globally and for developing countries, but the magnitude of those gains depends on the shape of the agreement. A reform outcome based on the most ambitious components of the negotiating proposals of the US and EU delivers noticeably greater benefits than an unambitious outcome. Developing countries are exposed to very contrasting fortunes. The details matter in the differing proposals, such as the tariff and domestic support reduction formulae, tariff caps, and number of sensitive and special products. Negotiating commitment and diligence are needed in 2006 to avoid a hollow Doha outcome given the technical character of these details.