A cyclical model of exchange rate volatility

In this paper, we investigate the long run dynamics of the intraday range of the GBP/USD, JPY/USD and CHF/USD exchange rates. We use a non-parametric filter to extract the low frequency component of the intraday range, and model the cyclical deviation of the range from the long run trend as a stationary autoregressive process. We use the cyclical volatility model to generate out-of-sample forecasts of exchange rate volatility for horizons of up to 1 year under the assumption that the long run trend is fully persistent. As a benchmark, we compare the forecasts of the cyclical volatility model with those of the range-based EGARCH and FIEGARCH models of Brandt and Jones (2006). Not only does the cyclical volatility model provide a very substantial computational advantage over the EGARCH and FIEGARCH models, but it also offers an improvement in out-of-sample forecast performance.     

Traveling to your match? Assessing the predictive potential of Plog’s travel personality in destination marketing

This study revisits .Plog’s travel personality model in a true experimental setting and tests the model’s predictive power. The specific aim is to examine whether attitudinal and behavioral responses toward a destination vary as a function of the congruity between the tourist’s travel personality and the characteristics of the destination as perceived from an advertising message. The concept of self-congruity serves as a foundation for the theoretical framework. Results indicate message-personality congruity had a significant influence on visit intention via attitudes as mediators. This study provides theoretical implications for the predictive potential of Plog’s model as well as strategic marketing implications for destinations.     

Performance implications of institutionalization process in family-owned businesses: Evidence from an emerging economy

This paper attempts to understand the role of two highly relevant founder family characteristics, harmony among family members and the degree of democratization in decision-making, in the institutionalization and adaptive capability development processes of family firms in Turkey as an exemplar of an emerging market. The paper examines how institutionalization and adaptability jointly drive firm-level differences in quantitative (i.e., sales growth, market share, and return on investment) and qualitative performance (i.e., quality of goods/services, new product development, employee satisfaction) components. Data were collected from 436 respondents in 132 family firms through structured questionnaires administered to at least three respondents from each firm. Findings indicated that among the institutionalization dimensions, transparency had the strongest effect on both quantitative and qualitative firm performance, whereas adaptability influenced qualitative performance only. Harmony in family relations increased efforts for institutionalization, whereas democracy in decision-making enhanced adaptability. Implications of these findings are discussed and several future research directions are suggested.     

The Exchange Rate: A Shock Absorber or Source of Shocks in Turkey?

This study investigates the role of the exchange rate as shock-absorber as opposed to a source of its own shocks in Turkey during the period from 1990 to 2009 by employing a structural VAR framework with long-run and short-run restrictions. We find that the economic shocks have predominantly been asymmetric relative to one of the largest trading partner, the US. Our results provide evidence of the fact that while the major source of variability in exchange rates in the pre-2001 crisis period is mainly nominal shocks, a large proportion of the exchange rate variability can be attributed to supply and demand shocks in the post-2001 crisis period. This suggets that, rather than reacting to shocks to the foreign exchange market, such as shifts in risk premia, the exchange rate moves mainly in response to the real shocks during the post-2001 crisis period. Hence, there is a sizeable role for exchange rate stabilization during this period, absorbing those shocks and therefore requiring opposed monetary policy responses.     

Deposit insurance and moral hazard problem: the case of Turkish banking system

We investigate the effect of full deposit insurance introduced in 1994 on the financial performance of Turkish commercial banks. We construct a model, under reasonable assumptions, with deposit insurance where banks undertake excessive risk –?moral hazard risk. Empirical investigation using experimental design approach supports our moral hazard hypothesis. Our findings indicate that banks subject to the moral hazard behaviour show significant increases in foreign exchange position risk and deterioration in capital adequacy relative to their benchmark after introduction of full deposit insurance system. We relate this excessive risk-taking to the moral hazard behaviour by commercial banks. The research results indicate that complete deposit insurance system distorts the incentive structure of commercial banks and thus, prevents proper functioning of market discipline mechanism and leads to the taking excessive risk-taking.     

Free-Trade Agreements in a Model of Trade,Migration and Politics

This paper uses a probabilistic voting model to investigate voting for a free-trade agreement between a labor-abundant country and a capital-abundant country. Migration from the labor-abundant country to the capital-abundant country increases the probability of a free-trade agreement, with lower migration costs leading to more migration and a higher free-trade probability. On the other hand, if a lower probability of free trade is caused by an increased voter bias against free-trade candidates, then there is less migration. A dynamic extension of the model is also investigated.     

How do monetary operations impact tourism demand? The case of Turkey

All monetary operations such as revaluation and devaluation have some degree of impact on tourism demand at different significance levels. The purpose of this study was to explain how devaluation and revaluation affect tourism demand (domestic and international) and what the government should do to obtain the greatest benefits from them. Turkey has one of the fastest growing tourism industries in the world, and has been experiencing high inflation at a very significant level since the 1970s. The Turkish Government sometimes makes value adjustments on the Turkish national currency, the ‘Lira’, and these adjustments have influenced domestic and international tourism demand in Turkey. The case of Turkey is discussed specifically. Copyright © 2004 John Wiley & Sons, Ltd.