Fixed Exchange Rates and Disinflation in Emerging Markets: How Large Is the Effect?

We examine developing countries which have institutional quality ratings for the effects of exchange rate rigidity on inflation. The level of institutional development exerts no effect on the impact of currency regimes. However, the interaction of institutional quality and exchange rates has, in the most plausible specifications, a negative impact on inflation. This suggests that fixed exchange rates exert at most a contingent effect on inflation, and indicates that countries in Eastern Europe and Latin America contemplating currency pegs would be better off improving institutional quality prior to adopting the euro or dollar and expecting a large subsequent disinflationary effect. JEL no.  F31, O11     

Towards a complete real-time electricity market design

The general design for the real-time electricity market presented in this paper optimizes and prices both real and reactive power simultaneously in an AC setting, where all assets—generation, load and transmission—are allowed to bid and are financially settled at the locational price times energy consumed or produced. The result is that transmission lines are compensated for both capacity and admittance, providing incentives for efficient operation of transmission-related assets such as FACTS devices, if price-taking behavior is assumed. Losses are incorporated into the design and become an operating cost for transmission. The market design is shown to be revenue neutral and, under some assumptions, nonconfiscatory.      

Technology Transfer and Learning

Despite the fact that international technology transfer has been widely studied its management still encounters many difficulties. To fully understand the issues that are relevant to the process of transferring production technology, it is necessary to determine the important factors that influence this process. Learning curves are often used as a means of determining the time required to become familiar with a transferred technology. The cases discussed in this paper have all employed learning curves, which were established at the outset of the transfer process and which turned out to be incorrect. As a consequence the envisaged efficiencies were not obtained. This phenomenon is partly due to the fact that when technology is transferred to a relatively inexperienced 'destination company', the curve is established based on the circumstances of the 'source company'. The case study findings lead to the conclusion that to establish a realistic curve a more comprehensive method is required than simply basing anticipated performance on that achieved at the source company.     

A Cross‐national Comparison of R&D Expenditure Decisions: Tax Incentives and Financial Constraints*

We provide evidence on the impact of tax incentives and financial constraints on corporate R&D expenditure decisions. We contribute to extant research by comparing R&D expenditures in the United States and Canada, thereby exploiting the differences in the two countries' R&D tax credit mechanisms and generally accepted accounting principles. The two tax incentive mechanism designs are consistent with differing views of the degree of financial constraints faced by firms in these economies. Our sample also allows us to explore the effects of capitalizing R&D on Canadian firms. Employing a matched design, we document relations between tax credit incentives and R&D spending consistent with both Canadian and U.S. public companies responding as though they are not financially constrained. We estimate that the Canadian credit system induces, on average, $1.30 of additional R&D spending per dollar of taxes forgone while the U.S. system induces, on average, $2.96 of additional spending. We also find that firms that capitalize R&D costs in Canada spend, on average, 18 percent more on R&D. Collectively, this evidence is important to the ongoing debates in both countries concerning the appropriate design of incentives for R&D and is consistent with the assumptions found in the U.S. tax credit system, but not those found in the Canadian system.     

Liquidity, Labels and Medium-Term Notes

We suggest that the medium-term note market provides an excellent laboratory for exploring the relationships between yield, liquidity, and the label affixed to a financial instrument. Crabbe and Turner (1995) examined the liquidity issue and uncovered the counter-intuitive result that issue size is unrelated to liquidity. Their study failed to examine a potential channel for a liquidity effect, however, in the form of multiple issues from a single, typically large, MTN registration filing. We find evidence that file size is significantly related to yield in a number of instances. Several other proxies for liquidity, such as frequency of issue, are also sometimes significantly related to yields. Contrary to Crabbe and Turner (1995) , we find that labeling a security an MTN can have an impact on its yield. The label "note" also appears to matter for yield in some instances.     

Long- and short-term interest rates in 19 countries: Tests of cointegration and parameter instability

This paper examines the long-run relationship between short-term and long-term interest rates (both nominal and real) in 19 countries, and explores the possibility that the relationship is statistically stable using Lc, MeanF, and SupF statistics suggested by Hansen [1992]. Empirical results obtained from various cointegration techniques (Johansen, Phillips and Hansen, Stock and Watson, and Park) and quarterly data (1973–1998) show considerable support for the expectations hypothesis in all countries (except the United Kingdom). In a majority of cases, it is also found that a stable relationship exists between the short-term and long-term interest rates.     

Extracting the information: espionage with double crossing

This paper addresses two very old issues in human society: espionage and double crossing. Our major conclusion points out that there will be a serious over rewarding problem in the direct mechanism due to double crossing in espionage, and a competitive mechanism with a relative performance regime can possibly mitigate the over rewarding problem and still extract the information.