Currency boards as a path towards the Eurozone: lessons from the Baltics

In the early 1990s, the three Baltic states adopted de jure (Estonia 1992, Lithuania 1994) or de facto (Latvia) currency boards. After operating under boards for two decades, Estonia (2011), Latvia (2014) and Lithuania (2015) exited to the Eurozone. The paper takes a qualitative look at their experience through the lens of the currency board literature. Viewed over the entire period of operation, the boards delivered on the inflation stabilization objective with little evidence of a growth or trade penalty. The high average performance was however accompanied by high volatility on both the nominal and the real side. While the boards avoided both currency and sovereign debt crises, they contributed to vulnerabilities, notably the 2004–2010 boom-bust cycle. The Baltic experience re-enforces policy lessons from earlier crisis under fixed exchange rates: vigilance and timely response to incipient vulnerabilities associated with short-term capital-inflows and over-heating.     

Fiscal Policy Reforms in a Global Economy

Two countries are populated by workers and capitalists. Their governments collect taxes to finance productive expenditure and income redistribution. The share of income redistributed defines the size of the welfare state. Although both groups benefit from an abolition of the welfare state in the long run, the optimal fiscal policy in autarky can be characterized by maintaining a large welfare state since transfer cuts would induce transitional losses. Starting in such a position of policy inertia free trade and capital mobility is introduced. Fiscal policy competition leads to a reduction of tax rates and a relative increase of productive expenditure. If both countries coordinate their fiscal policy the reduction of taxes and income transfers is less pronounced. Quantitative effects of increasing globalization are assessed in a calibrated model for an average Europe G-4 country and the United States.     

Scientists' commitment to underperforming research projects: linking past success and the social environment

This article investigates scientists' commitment to underperforming research projects based on the concomitant consideration of their past success and social environments. Based on escalation of commitment and network theory, the model hypothesizes that past success triggers the commitment to underperforming projects but that the strength of this influence varies depending on the characteristics of decision makers' social networks. Results from the analysis of 3,072 scenario assessments nested within 96 scientists show that the positive relationship between past success and continued investment in underperforming projects is more positive when the network is larger, when the ties within the network are stronger, and when feedback from network partners is predominantly positive. Surprisingly and contrary to model predictions, results also show that the relationship between past success and scientists' tendency to commit to underperforming projects becomes stronger with lower communication frequency with network partners. This study extends current research by exploring the boundary conditions of the impact of decision makers' social environment on commitment to failing projects. Further, it adds to literature on the downside of success by emphasizing that decision makers, particularly those in some social environments, are driven to commit additional resources to underperforming – and potentially failing – projects. Decision makers acting in such environments should be aware that they are prone to overinvestment of resources, and the findings of this study can help them increase their awareness. Based on this study's results, decision makers (including scientists) can thus better reflect on and improve their research project evaluations. Finally, the findings of this study open up various opportunities for future research.     

Domestic multinationals, foreign affiliates, and labour demand elasticities

Using information on a panel of multinational firms operating in the United Kingdom from 1996 to 2005, we find that labour demand in domestic multinationals is less sensitive to labour cost changes than in foreign multinationals. This difference in the wage elasticity of labour demand persists even when we control for the skill intensity of firms or their level of intangible assets. This is in line with an interpretation that the provision of headquarter services in domestic multinational firms protects against strong fluctuations in labour demand. Overall, our results suggest that the wage elasticity of labour demand is about 40 % lower in domestic than in foreign multinationals.     

Financial repression and debt liquidation in the USA and the euro area

Rising debt levels have caused a revival of financial repression in the euro area and the USA. The Federal Reserve directly represses US bond yields and assists in financing the state budget, resulting in an overall liquidation effect from falling bond yields of about three per cent of total government revenues and one per cent of GDP in 2011. In the euro area, the ongoing actions to contain the European debt crisis have also repressed interest rates, easing debt-servicing costs in all European countries and reducing the interest rate payments for the German government by about one to two per cent of total government revenues. This article argues that a slight rise in infl ation could even liquidate German debt.     

Management of dispersed product development teams: the role of information technologies

In recent years, international corporations such as IBM are increasingly relying on dispersed R&D teams in order to keep pace with resource availability and the demands of global markets. The advantages of this approach arise mainly from the utilization of differences in personnel costs and gaining access to a broader knowledge base to satisfy the demands of international clients. The disadvantages of teams of this kind are obvious: geographic distances, differences in culture and work habits as well as the necessity to bridge time zones place greater demands on communication, synchronization and management.
The application of specific project management methods and the intensive use of information technology (IT) lessens the disadvantages in transnational development projects. Recently completed projects involving large-scale commercial software development at IBM demonstrate the potentials of IT in transnational development. The authors advocate the application of IT adapted to specific situations. The central fields of application of IT in dispersed R&D teams are the development of a personal network, the promotion of creativity, the exchange of technical information, and the coordination of decentralized project activities.     

Multinational companies and wage inequality in the host country: The case of Ireland

Multinational Companies and Wage Inequality in the Host Country: The Case of Ireland. — In this paper, the authors analyze the impact of multinational companies on wage inequality in a host country. Based on a model, in which the introduction of new technologies leads to increases in the demand for skilled labour and, therefore, to rising wage inequality, they econometrically study the Irish manufacturing sector between 1979 and 1995. They examine inequality between wages for skilled and unskilled labour within the same manufacturing sector. Their results indicate that there is an inverted-U relationship between wage inequality and multinationals, i.e., with the increasing presence of multinationals, wage inequality first increases, reaches a maximum, and decreases eventually.