Exchange‐rate volatility and US–Hong Kong industry trade: is there evidence of a ‘third country’ effect?

In an effort to better understand the determinants of trade flows worldwide, researchers have recently incorporated external volatility (in addition to that of the partners’ bilateral exchange rate) into their models. The so‐called ‘third country’ effect is present if adding this term changes the bilateral volatility estimates that are found when external volatility is omitted. This study examines US exports to Hong Kong for 143 industries, and imports from Hong Kong for 110 industries, and finds two key results. First, expected inflation due to Hong Kong's dollar peg leads to increased US exports in a large number of industries. Second, comparing our results with those of a previous study shows strong evidence of a ‘third country’ effect, especially for US imports. Nonparametric tests suggest that these effects differ by sector: for both exports and imports. Manufacturing industries that enjoy a large trade share are less likely to experience this effect once external volatility is incorporated into the analysis.     

The effect of patient's asymmetric information problem on elderly use of medical care

It has been proposed that the patient's relative ignorance about medicine, ‘asymmetry of information between doctor and patient’, should place a patient in a disadvantaged position when purchasing medical care. Even if rapidly developing information technologies can enhance the patient's access to health information, a patient doesn’t have enough ability to understand, interpret and evaluate it. So, the doctor's effort at sincerely helping patient understand and utilize health information by effective communication with patient might improve the patient's asymmetric information problem and affect the patient's use of medical care by way of its being a source of patient's solid trust on doctor. This research seeks to determine whether a doctor's effort, mentioned earlier can affect the elderly use of medical care. This study used data from a survey sample of people aged more than 65 living in Seoul and Chuncheon, Korea. The results suggest the doctor's effort level has a statistically significant positive effect on the elderly use of medical care, which suggest a doctor's effort of effectively communicating with patient would ameliorate patient's information problem and it could be a source of patient's trust on doctor, so this trust would lead a patient to consume more medical care.     

Tax Auditing as a Public Good Game: An Experimental Study on Punishment and Compliance

Prior experimental studies on tax evasion generally assume that the budget and the probability of audit are exogenously given, and ignore taxpayers' incentives to detect evasion and their compliance behaviour under such incentives. The experimental evidence of the present paper shows that, on average, subjects are willing to spend 20 to 30% of their tax revenue on auditing. Compliance is also greatly improved if subjects can determine the budget and, hence, the probability of audit. These findings suggest that taking taxpayers' incentives to detect evasion into consideration is important for the design of compliance‐improvement audit schemes.     

Nesting Horizontal and Vertical Differentiation with Location Choices

This study solves a location‐then‐price game in which horizontal and vertical differentiation are combined using an asymmetric distribution of consumers’ taste. Boundary locations are robust when the taste disparity of the population is not large and out‐of‐market locations are not allowed. Firms may have incentives to move either inside or outside the market in other situations, so the equilibrium prices are never differentiated. The restrictions of vertical differentiation under this framework are further examined. A model with the entrance of a vertically differentiated product is also discussed.     

On indeterminacy and growth under progressive taxation and productive government spending

We examine the theoretical interrelations between equilibrium (in)determinacy and economic growth in a one‐sector representative‐agent model of endogenous growth with progressive taxation of income and productive flow of public spending. We analytically show that, if the demand‐side effect of government purchases is weaker, the economy exhibits an indeterminate balanced‐growth equilibrium and belief‐driven growth fluctuations when the tax schedule is sufficiently progressive or regressive. If the supply‐side effect of public expenditures is weaker, indeterminacy and sunspots arise under progressive income taxation. In sharp contrast to traditional Keynesian‐type stabilization policies, our analysis finds that raising the tax progressivity may destabilize an endogenously growing economy with fluctuations driven by agents’ self‐fulfilling expectations.     

PanelWhiz and the Australian Longitudinal Data Infrastructure in Economics

PanelWhiz is a graphical user interface that was written for the statistical software, Stata SE/MP Version 11 (Win/Mac/Linux) or later, which allows users to extract data from complicated multi‐level longitudinal datasets in an easy and efficient manner. Specifically, Australian datasets, such as Household, Income and Labour Dynamics in Australia Survey, Medicine in Australia: Balancing Employment and Life, Growing Up in Australia: The Longitudinal Study of Australian Children, Footprints in Time—The Longitudinal Study of Indigenous Children and Consumer Attitudes, Sentiments & Expectations in Australia, have already been integrated into the common platform of the PanelWhiz system.     

ARE CONSUMERS MORE LOYAL TO NATIONAL BRANDS THAN TO PRIVATE LABELS?

The evolution of private labels (PLs) can be understood in terms of a strategy adopted by the retail industry with the aim of competing with national brands (NBs). In the 1990s, this strategy led to the development of ‘me too’ products, which currently represent the largest share of store brand products. Since the early 2000s, retailers have widened the range of their store brands by introducing high‐quality products. The aim of this study was to estimate consumers’ attachment to ‘me‐too’ and niche PLs respectively, as compared to NBs. We captured the degree of maturity of these PLs through their price‐elasticities, computed for three staple goods offered by three mass retail companies. It was found that price sensitivity does not differ much between the ‘me‐too’ PLs and the corresponding NBs. This result confirms that ‘me‐too’ products are now considered reliable quality brands. However, in the high quality segment, consumers remain more sensitive to the price of PLs than to that of NBs, a characteristic which may relate to their recent introduction on the market.     

COOPERATION: THE POWER OF A SINGLE WORD? SOME EXPERIMENTAL EVIDENCE ON WORDING AND GENDER EFFECTS IN A GAME OF CHICKEN

Framing has been widely shown to affect decision making. In this paper, we investigate experimentally whether, and to what extent, cooperative behaviour in a Game of Chicken may be impacted by a very basic change in the labelling of the strategies. Our within‐subject experimental design involves two treatments. The only difference between them is that we introduce either a socially‐oriented wording (I cooperate/I do not cooperate) or colours (red/blue) to designate strategies. The level of cooperation appears to be higher in the socially‐oriented context, but only when uncertainty as regards the type of the partner is manipulated, and especially among females.     

CAN SECRET INTERVENTION BE COMPATIBLE WITH A NON‐PROFITMAKING CENTRAL BANK AND A FUNDAMENTAL‐CONSISTENT TARGET?

The coexistence of secret intervention operations and “the signaling channel” (Mussa. The Role of Official Intervention, 1981) seems confusing. Vitale ( Journal of International Economics, 49, 1999, 245–267) resolves this puzzle by employing an asymmetric information framework and an assumption of a fundamental‐inconsistent target for the exchange rate. Ferré and Manzano ( International Journal of Finance and Economics, 14, 2009, 378–393) follow Vitale's microstructure framework and argue that the central banks' profitability motivation offers a rationale for their secret intervention even under a target consistent with the fundamentals. However, that the authority uses its superior information to obtain speculative profits through secret intervention in the market is not a typical goal for central banks. To theoretically explain the opaqueness in non‐profitmaking central banks' exchange rate policies, we employ a model of a central bank's optimization by considering that no bank really knows the exact fundamental rate and they take into account the possible bad consequences of announcing the intervention. We also show that, in passing the bank's private information to market participants, a bank's announcement of the intervention size is equivalent to revealing its target rate. (JEL E58, F39)     

MONEY,CAPITAL, AND EXCHANGE RATE FLUCTUATIONS*

We explore how the informational frictions underlying monetary exchange affect international exchange rate dynamics. Our perfectly flexible price model is capable of producing endogenously rigid international relative prices in response to technology and monetary shocks. The model is capable of accounting for the empirical regularities that the real and nominal exchange rates are more volatile than U.S. output, and that the two are positively and perfectly correlated. The model is also consistent with other standard real business cycle facts for the United States.