Why are currency crises contagious? A comparison of the Latin American Crisis of 1994–1995 and the Asian Crisis of 1997–1998

Why Are Currency Crises Contagious? A Comparison of the Latin American Crisis of 1994–1995 and the Asian Crisis of 1997–1998.—This paper analyzes three channels through which currency crises are transmitted between countries: contagion based on unsustainable economic fundamentals; contagion resulting from herding behaviour in financial markets; contagion induced by close trade integration. The presented model that links currency crises with these three types of contagion is employed to analyze the transmission of the Mexican crisis in 1994–1995 and the Thai crisis in 1997 to other emerging economies. The empirical results show that, first, the most important contagion channels were based on close financial and trade integration rather than on the weakness of macroeconomic fundamentals. Second, the vulnerability to capital flow reversals and weak financial sectors made countries particularly prone to a currency crisis, while external imbalances and currency misalignments were much less important. JEL no. F30, E60, E65, E44     

What explains global exchange rate movements during the financial crisis?

A striking and unexpected feature of the financial crisis has been the sharp appreciation of the US dollar against virtually all currencies globally. The paper finds that negative US-specific macroeconomic shocks during the crisis have triggered a significant strengthening of the US dollar, rather than a weakening. Macroeconomic fundamentals and financial exposure of individual countries are found to have played a key role in the transmission process of US shocks: in particular countries with low FX reserves, weak current account positions and high direct financial exposure vis-à-vis the United States have experienced substantially larger currency depreciations during the crisis overall, and to US shocks in particular.     

Rational demand and expenditures patterns under habit formation

This paper proposes a model in which habit formation is present in a relatively general but tractable way. The consumer's problem is transformed into a sequence of two-period Fisherian problems by introducing a “reduced utility function” to ensure full dynamic rationality of the consumer. By making preferences dependent on past real expenditure levels rather than past consumption bundles, it is possible to characterize the long-run behavior of the consumer. Stability analysis is performed. The cases of “immediate habit formation” and “delayed habit formation” are discussed.     

Of Yeast and Mushrooms: Patterns of Industry-Level Productivity Growth

Abstract. In this paper we analyse labour productivity growth in the United States, four European countries (France, Germany, the Netherlands and United Kingdom), Australia and Canada between 1987 and 2003 from an industry perspective. Rather than analysing broad industry groups, we compare the pattern of growth in all industries through Harberger diagrams. We introduce new summary measures, which indicate the pervasiveness of growth patterns. These indicators show that investment in both information and communication technology (ICT) and non-ICT capital is fairly balanced or 'yeasty', driven by overall macro-economic conditions. However, growth of total factor productivity (TFP) is much more localized or 'mushroom-like'. In particular we find a clear distinction between countries in continental Europe, in which TFP is decelerating after 1995 and becoming more localized, and Anglo-Saxon countries in which TFP growth is accelerating and becoming more broad-based, especially after 2000. The increased breadth of Anglo-Saxon TFP growth is consistent with delayed effects of intangible investments that are complementary to ICT investments.     

Angry customers don't come back,they get back: The experience and behavioral implications of anger and dissatisfaction in services

This article investigates the specific experience of anger and dissatisfaction and their effects on customers' behavioral responses to failed service encounters across industries. Study 1 demonstrates that anger and dissatisfaction are qualitatively different emotions with respect to their idiosyncratic experiential content. Study 2 builds on these findings and shows how anger and service encounter dissatisfaction differentially affect customer behavior. It provides empirical support for the contention that anger mediates the relationship between service encounter dissatisfaction and customers' behavioral responses. The findings of Study 2 diverge from previous findings in marketing on the interrelationships between customer satisfaction/dissatisfaction, related consumption emotions, and customers' behavioral responses to service failure. The implications of these findings for services marketing theory and practice are delineated. Roger Bougie (J.R.G.Bougie@uvt.nl) is an assistant professor of marketing at Tilburg University, the Netherlands. His research interests are emotions and their impact on consumer behavior, and consumer decision making. Rik Pieters is a professor of marketing at Tilburg University, the Netherlands. His research interests are emotions in consumer behavior, visual attention and memory, and social networks. His work has appeared in, among others, theJournal of Consumer Research, theJournal of Economic Literature, theJournal of Marketing Research, andMarketing Science. Marcel Zeelenberg is a professor of social psychology at Tilburg University, the Netherlands. His research interest is in anticipated emotions and acutal emotional experiences and their impact on behavioral decision making. His work has appeared in, among others, theJournal of Consumer Research, theJournal of Personality and Social Psychology, Organizational Behavior and Human Decision Processes.     

Research on target costing: past,present and future

Although target costing is an extensively studied topic in the management accounting literature, a holistic investigation into its methodological development is missing. Therefore, an extensive state-of-the-art analysis is conducted that focuses on articles in highly rated journals. We determine nine distinct research streams that encompass further developments of the traditional target costing methodology. By grouping these streams into three research scopes, we outline the achieved progress as well as remaining tasks for further enhancements. Due to the abundance of these tasks, we align them with six future themes of management accounting that we identified as being particularly influential to target costing. As a result, six promising topics for researchers to advance target costing are determined. Additionally, our findings reveal to managers of which issues they should be particularly aware with respect to the performance of their target costing processes.     

Corporate takeovers,bargaining and managers' incentives to invest

This paper analyzes the impact of potential takeovers on the investment decisions of managers. The takeover involves bargaining over the potential surplus between the acquiring firm, the target manager, and shareholders of the target firm. The anticipation of future takeover gains will influence the decision‐makers to invest ex ante. Interestingly, both over and underinvestment might prevail, depending on the relative bargaining powers of the parties. The model encompasses specific cases documented in the empirical literature and mergers and acquisitions (M&A) practice. It is, therefore, particularly suited to focus on the desirability of anti‐takeover legislation. Copyright © 2000 John Wiley & Sons, Ltd.     

Beyond the visual dimension: Using ideal type narratives to analyse people's assessments of landscape scenarios

In this study it was investigated how local stakeholders in a Swiss mountain area assess visual and non-visual aspects of different landscape scenarios, taking into account their values and assumptions. For this analysis, a procedure was developed that involves a novel tool in landscape research, ideal type narratives. Three scenarios of agricultural and conservation policy developments were drawn up for the year 2030, and their assumed landscape consequences for the study area were visualised using computer-aided photo-editing. The scenarios were rated by stakeholders both in terms of their visual and non-visual consequences, and discussed in a group meeting. The results suggest that most stakeholders prefer a highly structured cultural landscape, similar to the landscape prevalent in the area before the onset of agricultural mechanisation. Stakeholders are, however, not willing to pay the social, economic and cultural costs that restoring such a landscape would entail; in an overall assessment they prefer a Business as Usual scenario that assumes a future life situation similar to the present one.     

Effect of yield and price risk on conversion from conventional to organic farming*

Although the benefits of organic farming are already well known, the conversion to organic farming does not proceed as the Dutch government expected. In order to investigate the conversion decisions of Dutch arable farms, a discrete stochastic dynamic utility‐efficient programming (DUEP) model is developed with special attention for yield and price risk of conventional, conversion and organic crops. The model maximizes the expected utility of the farmer depending on the farmer’s risk attitude. The DUEP model is an extension of a dynamic linear programming model that maximized the labour income of conversion from conventional to organic farming over a 10 year planning horizon. The DUEP model was used to model a typical farm for the central clay region in the Netherlands. The results show that for a risk‐neutral farmer it is optimal to convert to organic farming. However, for a more risk‐averse farmer it is only optimal to fully convert if policy incentives are applied such as taxes on pesticides or subsidies on conversion, or if the market for the organic products becomes more stable.