Exchange rate dynamics and currency unification: The Ostmark-DM rate

This paper estimates a simple model of the exchange rate between the East and West German Mark immediately preceding German monetary union. Although there is a theoretical literature on exchange rate dynamics when the introduction of a fixed exchange rate is anticipated, the absence of data has limited empirical work on the subject. We show that in the first part of the sample, the DM-Ostmark exchange rate behaves as a random walk. In the second half, when monetary union appeared more likely, the exchange rate behaves as a weighted average of fundamentals and the expected “terminal” exchange rate.     

The franc zone of West and Central Africa

In the francophone countries of West and Central Africa a currency system has long been in place which was originally based on the French franc and is now based on the euro. A look at how this system has operated over the years may highlight some useful experiences for the countries on the eastern and southern periphery of the euro area that are now considering pegging their national currencies to the euro and could help to clarify the opportunities and risks arising for both these countries and the present participants of European Monetary Union.     

Selection Biases in Complementary R&D Projects

This paper analyzes selection biases in the project choice of complementary technologies that are used in combination to produce a final product. In the presence of complementary technologies, patents allow innovating firms to hold up rivals who succeed in developing other system components. This hold‐up makes innovation rewards independent of project difficulties and firms excessively cluster their R&D efforts on a relatively easier technology in order to preemptively claim stakes on component property rights. This selection bias is persistent and robust to several model extensions. Implications for the optimal design of intellectual property rights are discussed.     

The Selectiveness of the Entrepreneurial Process

This paper focuses on the phase before a firm is founded. Based upon cross‐sectional data from the German section of the Global Entrepreneurship Monitor, the specific aims of the paper are to shed some light on the selection that takes place during the entrepreneurial process and to explain empirically the demographic and cognitive characteristics of (potential) entrepreneurs. The results reveal significant differences between common determinants of the different phases of the entrepreneurial process.     

Empirische Untersuchung zur Bedeutung makroökonomischer Faktoren für Aktienrenditen am deutschen Kapitalmarkt

Ohne Zusammenfassung     

Equity and fixed income markets as drivers of securitised real estate

This paper re-examines the sensitivity and importance of interest rates and stock market price behavior on securitised property by decomposing their long-run impact between transient and permanent effects. This is achieved in a framework that accounts for endogenously determined structural breaks within the data. The results provide a different perspective on the relationship securitised property has with these markets and sheds new light on their long-run interaction. Once structural breaks are accounted for the results show that securitised property is driven by both interest rate and stock market changes, regardless of the type of securitised property being examined. Evidence also points to companies with increased debt-to-asset ratios and companies that are tax-exempt entities are still all influenced by both the equity and fixed income markets over the long-run period, although the influence these factors have do vary across time.     

The future of the ACP countries

The record to date of trade and development cooperation between the European Union and the ACP countries has been rather disappointing. Evidently, neither the non-reciprocal trade preferences granted to the ACP countries nor the support for development projects have led to much progress in terms of economic and social development. Can the implementation of the EU's present reform proposals be expected to safeguard the future of the Lome system and of the ACP countries in the new millenium?     

Multi-Market Collusion with Demand Linkages and Antitrust Enforcement

This paper analyzes dynamic cartel formation and antitrust enforcement when firms operate in demand-related markets. We show that cartel prosecution can have a knock-on effect: bringing down a cartel in one market reduces profits and cartel stability and leads to the break-up of the cartel in the adjacent market. Cartel prosecution can also have a waterbed effect: disrupting a cartel increases cartel stability in the adjacent market and induces cartel formation in previously competitive markets. We discuss the impact of dynamic cartel formation on consumer surplus, explore antitrust spillovers, the optimal scope of antitrust interventions and cartel formation with local firms.     

The Rule of Three, its Variants and Extensions

The Rule of Three (R3) states that 3/ n  is an approximate 95% upper limit for the binomial parameter, when there are no events in  n  trials. This rule is based on the one-sided Clopper–Pearson exact limit, but it is shown that none of the other popular frequentist methods lead to it. It can be seen as a special case of a Bayesian R3, but it is shown that among common choices for a non-informative prior, only the Bayes–Laplace and Zellner priors conform with it. R3 has also incorrectly been extended to 3 being a "reasonable" upper limit for the number of events in a future experiment of the same (large) size, when, instead, it applies to the binomial mean. In Bayesian estimation, such a limit should follow from the posterior predictive distribution. This method seems to give more natural results than—though when based on the Bayes–Laplace prior technically converges with—the method of prediction limits, which indicates between 87.5% and 93.75% confidence for this extended R3. These results shed light on R3 in general, suggest an extended Rule of Four for a number of events, provide a unique comparison of Bayesian and frequentist limits, and support the choice of the Bayes–Laplace prior among non-informative contenders.