Added distance,entry mode choice,and the moderating effect of experience: The case of British MNEs in emerging markets

Distance has been viewed as a crucial determinant of the internationalization strategy of firms. Nonetheless, in recent years, there has been considerable debate with regards to, first, the type of distance considered most important when it comes to explaining the internationalization strategy of firms, and, second, how distance should be measured. In our study, we argue that a developed market multinational enterprise (DMNE)’s decision regarding the mode of entry into an emerging market (EM) will be affected by the geographic and administrative distance between the locations in which the MNE has previously held operations. Drawing our arguments on transaction costs economics (TCE) and Internalization Theory, we propose that, for low and high geographic and administrative distance, DMNEs will opt to enter EMs via a wholly owned subsidiary, while for moderate levels of distance via a joint venture. Furthermore, we argue that DMNEs’ previous international experience in EMs will have a positive effect on the suggested U‐shaped relationship, alleviating the negative effects associated with the coordination and knowledge dissipation costs incurred as a result of the level of distance. Our study contributes to existing literature both theoretically—notably via the examination of under‐researched facets of distance on entry mode choice—and also methodologically—through the adoption of a novel methodological approach in measuring distance. We test our hypotheses against a data set comprising 316 entries of FTSE 250 British MNEs in 39 EMs spanning the period 1971–2010.     

Strategic and Tactical Roles of Enhanced Commodity Indices

This article formally compares two traditional long‐only commodity indices, Standard & Poor's Goldman Sachs Commodity Index (S&P‐GSCI) and Dow Jones‐UBS Commodity Index (DJ‐UBSCI), with their enhanced versions that exploit signals based on contract maturity, momentum, and term structure. The enhanced indices are found to be useful for tactical asset allocation. With alphas ranging from 2.77% to 5.49% per annum, the maturity‐enhanced indices offer the best abnormal performance after accounting for liquidity risk. Momentum and term structure enhancements also earn a positive, albeit smaller, alpha of 2.10% per annum on average. All the enhanced indices are found to have comparable effectiveness for risk diversification and inflation hedging as their traditional counterparts, making them useful for strategic asset allocation.     

Is there a yen optimum currency area? Evidence from 18 Asian and Pacific economies

This paper examines the macroeconomic costs and benefits of adopting a common currency (the yen) for 18 Asian and Pacific countries. Economic theory suggests that the main benefit is enhanced price stability, while the main cost is higher business-cycle volatility if the adopting country’s output is not sufficiently correlated with that of Japan. Using data from 1960–2001, the paper finds that the estimated cost and benefit measures exhibit substantial variability across the countries and are often positively correlated: countries (such as Bangladesh or Nepal) that have a lot to gain from adopting the yen, also have a lot to lose from it; while other economies (such as Singapore, Thailand, or Taiwan) that have little to lose by adopting the yen, have also little to gain by it. The empirical results can be also used to compare net benefits for individual countries, showing, for example, that Korea is a more promising candidate for adopting the yen than Pakistan or Malaysia.     

The Canadian Dollar and Purchasing Power Parity during the Recent Float

This paper re-examines the purchasing power parity (PPP) concept for five bilateral Canadian dollar exchange rates. The Johansen cointegration technique is employed. Evidence is found in favor of PPP when wholesale prices are used but not when consumer prices are utilized; whereas, in all but one case, it is not possible to reject the symmetry and proportionality hypotheses. Furthermore, it is shown that the dimension of the cointegration space may exhibit sample dependency, but the estimated coefficients are stable in recursive estimations. Finally, by implementing the multivariate KPSS test for the null hypothesis of cointegration, Johansen's results are overturned.     

Openness to Trade and the Potency of Monetary Policy: How Strong is the Relationship?

Economic theory suggests that an economy's openness to international trade reduces the ability of monetary policy to affect output. Using quarterly data from the 1960:1–1993:4 period for a set of eight countries (Australia, Canada, Germany, Italy, Japan, South Africa, the U.K., and the U.S.A.), this article's empirical results support this theoretical prediction: the more open the economy, the smaller the output effects of a given change in the money supply. This finding, robust across all the different specifications and estimation methods examined, has straightforward implications for stabilization policy. Moreover, it suggests that an economy's net benefit from joining a monetary union is increasing with the economy's openness to foreign trade.     

VOLATILITY SPILLOVERS BETWEEN THE BLACK MARKET AND OFFICIAL MARKET FOR FOREIGN CURRENCY IN GREECE

The issue of volatility spillovers between the black and official exchange markets for U.S. dollars in Greece for 1975–89 is examined. A vector error correction‐bivariate EGARCH model is developed and estimated to capture potential asymmetric effects of innovations and volatility. During the period under investigation, reciprocal spillovers are found between the black and official exchange markets for dollars. Furthermore, spillovers are asymmetric in that bad news in one market has a greater effect on the volatility of the other market than good news. Additionally, the size of spillover effects is greater from the official market to the black market. Finally, the removal of the foreign exchange controls in January 1986 made the volatility of the official exchange rate higher and changed the nature of volatility spillovers between the two markets. JEL Classification: F31, F32     

Short Sea Shipping, intermodality and parameters influencing pricing policies: the Mediterranean case

The Short Sea Shipping (SSS) market is strongly diversified, due to the variety of cargoes, vessel types and capacity, and segmented due to the existence of many national and peripheral submarkets. It is observed that prices differ considerably among transport services of similar distance routes and/or similar demand characteristics. The aim of this study is to identify factors influencing SSS operators pricing policies for both the sea and the inland part of intermodal chains, in an integrated framework. The analysis is based on the comparison of parameters influencing the cost structure and the pricing policy. The analysis of data collected through telephone and face-to-face interviews reveals that fuel, port cost, and market drivers with fuel cost being the most important elements influencing the variation in both the cost function and the pricing policy. Cost variations are also influenced by the cost of hinterland transport and the size of shipments, while pricing policy varies according to destination and type of goods transported. These findings contribute in understanding the SSS market and its operation. However, due to the complexity of self-organised systems, validating the presented cost and pricing structures remains a challenge.     

Firm Growth and FDI: Are Multinationals Stimulating Local Industrial Development?

The aim of this paper is to improve our understanding of the empirical determinants of firm growth by extending the literature to include a new group of variables related to foreign direct investment (FDI), namely the degree of foreign ownership and technology spillovers. Based on recent developments in the field, our analysis also encompasses the role of sunk costs and financial constraints, while quantile regression techniques are adopted as more suitable to the data available (2,640 manufacturing firms operating in Greece in the 1992–1997 period). Our findings highlight the role of FDI in increasing firm growth with varying intensity depending on industry groups and regression quantiles, and vindicate the use of new variables.     

German,US and Central and Eastern European Stock Market Integration

This paper examines the long-term linkages between seven Central and Eastern European (CEE) emerging stock markets and two developed stock markets, namely the German and the US markets. The stability of the long-run relationships is studied using recursive cointegration analysis. The results reveal that the financial linkages between the CEE markets and the world markets increased with the beginning of the EU accession process. Furthermore, the application of the Gonzalo and Granger (J Bus Econ Stat 13:27–35, 1995) methodology indicates that the examined stock markets are partially integrated, while there is also evidence that the emerging stock markets of Central and Eastern Europe except for Estonia together with the German and the US stock markets, have a significant common permanent component, which drives this system of stock exchanges in the long run. Finally, it is worthwhile to note that the global financial crisis of 2007–2009 caused a slowdown in the convergence process. In addition we find evidence that the Slovenian stock market exhibits a moderate increase in the transitory component and this may be attributed to the Slovenian full membership in the euro area.     

The Relevance of the Monetary Model for the Euro / USD Exchange Rate Determination: a Long Run Perspective

This study tries to fill a vacuum in the literature on the relevance of economic fundamentals for the Euro / USD exchange rate determination. We adopt the Monetary Model for the Exchange Rate Determination as our testing vehicle and investigate the relevance of various versions of this model over a long time horizon, spanning the period from the inception of Euro till the present time. We rely on cointegration analysis to conduct our empirical research and in accordance to the relevant literature we fail to accept most of the variants of this model. However, we get encouraging results from an expanded version of the Monetary Model where demand and productivity factors appear in the set of the exchange rate determinants.