Gross capital flows: Dynamics and crises

This paper analyzes the behavior of international capital flows by foreign and domestic agents, dubbed gross capital flows, over the business cycle and during financial crises. We show that gross capital flows are very large and volatile, especially relative to net capital flows. When foreigners invest in a country, domestic agents invest abroad, and vice versa. Gross capital flows are also pro-cyclical. During expansions, foreigners invest more domestically and domestic agents invest more abroad. During crises, total gross flows collapse and there is a retrenchment in both inflows by foreigners and outflows by domestic agents. These patterns hold for different types of capital flows and crises. This evidence sheds light on the sources of fluctuations driving capital flows and helps discriminate among existing theories. Our findings seem consistent with crises affecting domestic and foreign agents asymmetrically, as would be the case under the presence of sovereign risk or asymmetric information.     

Uncertainty in Value-at-risk Estimates under Parametric and Non-parametric Modeling

This study evaluates a set of parametric and non-parametric value-at-risk (VaR) models that quantify the uncertainty in VaR estimates in form of a VaR distribution. We propose a new VaR approach based on Bayesian statistics in a GARCH volatility modeling environment. This Bayesian approach is compared with other parametric VaR methods (quasi-maximum likelihood and bootstrap resampling on the basis of GARCH models) as well as with non-parametric historical simulation approaches (classical and volatility adjusted). All these methods are evaluated based on the frequency of failures and the uncertainty in VaR estimates.Within the parametric methods, the Bayesian approach is better able to produce adequate VaR estimates, and results mostly in a smaller VaR variability. The non-parametric methods imply more uncertain 99%-VaR estimates, but show good performance with respect to 95%-VaRs.     

Status, affluence, and inequality: Rank-based comparisons in games of status

We examine the effects of changes in the income distribution in an economy where agents' utility depends both on consumption and on their rank in the distribution of conspicuous consumption. We introduce a new methodology to compare the behavior of agents that occupy the same rank in the two different income distributions but typically have different levels of incomes. Here, an increase in incomes of the least endowed improves their welfare, yet it also increases social competition, making those in the middle to be worse off—even if they have higher incomes as well. As social competition can be lowered by spreading agents apart in income space, we find that an increase in incomes for all, augmented by (weakly) increased income dispersion, constitutes a sufficient condition for Pareto-improvement. We also show that one can have an increase both in income and relative position but still be worse off.     

Understanding tourists’ leisure expenditure at the destination: a social network analysis

ABSTRACT

The aim of this study is to identify spending patterns of tourists in relation to the leisure activities performed throughout their day-by-day stay at the destination. Using the methodology of social network analysis (SNA), a tourists–activities bipartite network was identified following a pattern known as core–periphery. The effect of this structure (including typology, number, and timing of performing the activities) on tourism expenditure is analysed using a multiple regression model, to which were added different sociodemographic variables and other variables related to travel. In order to better understand the portfolio of activities, four examples of networks are studied and visually represented. This study reveals that through SNA between tourists and activities, we can study the behaviour of tourists in a novel way.     

As Different as Chalk and Cheese? The Relationship Between Entrepreneurial Orientation and SMEs’ Growth: Evidence from Russia and Finland

The purpose of this study is to investigate the relationship between entrepreneurial orientation (EO) and firm growth and the moderating role of business environment for Russian and Finnish small- and medium-sized enterprises (SMEs). For hypothesis testing, structural equation modeling is applied to the data set of 104 Russian and 117 Finnish privately owned SMEs. Results show that while in the Finnish market context EO dimensions are directly associated with firm growth, in the emerging Russian market the relationship is moderated by the dynamic and hostile environment. The results also provide evidence of the nature of EO for SMEs operating in Russia.     

The moderating effect of bilateral investment treaty stringency on the relationship between political instability and subsidiary ownership choice

We investigate whether the degree to which a bilateral investment treaty (BIT) protects against expropriation (i.e., its “stringency”) influences the international strategy of multinational enterprises (MNEs) as they invest in countries with varying levels of political instability. We draw on institutional logic and insights from political economics to hypothesize that BIT stringency will moderate the established positive relationship between host country political instability and minority ownership. Analysis of a sample of 289 foreign investments made by AEX-listed Dutch MNEs in 34 countries between 2004 and 2013 provides support: a more stringent BIT will encourage the MNE to choose a majority stake as political instability rises. Robustness tests provide further support for our argument. The results have both managerial and policy implications relating to the role that BIT stringency plays in determining MNE strategy.