On the real effects of inflation in open economies: theory and empirics

Based on the quarterly data from four open economies (the US, the UK, Canada, and Italy) and estimated correlations and impulse responses within the traditional vector autoregressive (VAR) analysis, we find that inflation, both in the short and long term, negatively affects consumption and investment, and has a positive influence on the current account. We propose an infinite-horizon optimizing model of an open economy with a fixed rate of time preference that explains these empirics. In this type of economy, households consume both durable and non-durable goods, firms operate under costly investment, and all the transactions involving consumption and investment are subject to cash-in-advance (CIA) constraints. Employing the new ‘sign restriction’ identification procedure due to Uhlig (J Mone’t Econ 52(2)381–419, 2005), we corroborate the empirical validity of the proposed model. In order to verify the robustness of our results, we consider another shock, namely, productivity shock in our empirical analysis and find that while productivity shock dominates in the case of the US, inflationary shock has a dominating effect in the case of the UK, Canada, and Italy.     

Asymmetric effect of exchange rate volatility on India's cross‐border trade: Evidence from global financial crisis and multiple threshold nonlinear autoregressive distributed lag model

This paper examines the asymmetric effect of exchange rate volatility on India's cross‐border trade with its major trading partners: Japan, Germany, the United States, and China. We extend previous studies in two ways. First, we examine whether global financial crisis changes the asymmetric effect of exchange rate volatility on India's cross‐border trade. Next, we divide exchange rate volatility into quintiles and examine the effect of each quintile on cross‐border trade by using the multiple threshold nonlinear autoregressive distributed lag (MTNARDL) model. Our findings from standard nonlinear ARDL (NARDL) indicate that the asymmetric relationship between exchange rate volatility and cross‐border trade changes as a result of global financial crisis. In addition, findings from MTNARDL indicate that in short‐run, exchange rate volatility symmetrically affects India's cross‐border trade with all sample countries whereas in long‐run it asymmetrically affects cross‐border trade. Overall, these findings are very important for policy implications and open a new dimension to exchange rate volatility and trade flows.     

The nexus between sectoral FDI and institutional quality: empirical evidence from Pakistan

This study investigates short- and long-run bidirectional causality between institutional quality and sectoral-level FDI in Pakistan by using the ARDL technique. The results confirm that long-run bidirectional causality exists between institutional quality and aggregate FDI. The in-depth sectoral-level FDI analysis substantiates the presence of long-run bidirectional causality between institutional quality and FDI in services and manufacturing sectors, while no long-run causality is observed between institutional quality and FDI inflows in primary sector. Furthermore, the results in the study reveal short-run bidirectional causality only between institutional quality and manufacturing FDI and report insignificant short-run causal link between institutional quality and FDI in primary and services sectors. The overall findings of the study suggest that in the long-run institutional quality attract FDI and FDI inflows, particularly to manufacturing and services sectors, significantly enhance the quality of institutions in Pakistan.     

Hospitality crisis management practices: The case of Indian luxury hotels

This study examines hospitality crisis management practices within the context of the Indian hospitality industry. The study is a replication of a study previously conducted in Israel. The study employs a questionnaire that evaluates the importance and usage of four themes of practices: marketing, hotel maintenance, human resources and governmental assistance. The findings illustrate which practices managers consider important and which practices managers actually use during a crisis. The paper concludes with recommendations for future research and management of crises.     

Tax Policy and Entrepreneurship: New Time Series Evidence

Have tax policies affected entrepreneurial activity in the U.S.? We extend the time series literature on this topic by using more recent data and modern econometric techniques to examine the importance of federal income, payroll, capital gains, corporate income, and estate taxes on self-employment rates. Regression results show that most of these taxes have significant but small effects on self-employment activity. A battery of cointegration and causality tests confirms the general finding that taxes can have significant influences on entrepreneurship, but they are likely to be ineffective tools for generating meaningful changes in entrepreneurial activity.     

Evaluating the impact of Tax-for-Fee reform (Fei Gai Shui) on water resources and agriculture production in the Zhanghe Irrigation System, China

This article questions the effectiveness and viability of rural Tax-for-Fee reform (Fei Gai Shui) on water resources and agriculture production, taking the Zhanghe Irrigation System of China as a case study example. The Fei Gai Shui reform has been heralded as a possible solution for reducing the excessive fiscal burden on peasants. While the reform may achieve in relieving peasant burdens significantly, the initial impact of Fei Gai Shui on water resources and agricultural production indicate least satisfactory trends. The policy shows significant impact on rice yield and area. It might also have profound impact on cropping pattern but it has yet to be seen. Dependence on local water resources such as ponds show significant increase after Fei Gai Shui as it discouraged farmers to rely on regional water sources. Although the lower regional water use under Fei Gai Shui reduced the water charges paid by farmers, the savings were mostly offset by increasing pumping costs in accessing water from local ponds. Without any adjustments, the Fei Gai Shui is likely to cause serious predicament in agricultural sector. It is visioned that local water resources such as water ponds will continue to play an important role in sustaining agricultural production.     

The governance,risk-taking,and performance of Islamic banks

We examine whether the difference in governance structures influences the risk taking and performance of Islamic banks compared to conventional banks. Using a sample of 52 Islamic banks and 104 conventional banks in 14 countries for the period from 2005 to 2013, we conclude that the governance structure in Islamic banks plays a crucial role in risk taking as well as financial performance that is distinct from conventional banks. Particularly, we show that the governance structure in Islamic banks allows them to take higher risks and achieve better performance because of product complexities and transaction mechanisms. However, Islamic banks maintain a higher capitalization compared to conventional banks. These results support the research on Islamic investment and risk taking. Our results add a new dimension to the governance research that could be a valuable source of knowledge for policy makers and regulators in the financial services sector.