On the Transmission Mechanism of Monetary Constraints to the Real Side of the Economy

Contrary to the predictions of the theory underlying international finance, inflows of capital triggered by financial liberalisation have neither equalised real interest rates nor increased income growth in many emerging economies. We explain this puzzle by developing a model that combines the balance‐of‐payments constraint approach to economic growth with a less stringent version of the real interest rate parity hypothesis. The model’s foundations are based on robust empirical findings or well‐established macroeconomic models. We show that a perverse combination of income elasticities of demand for imports and exports generates slow income growth and high real interest rates. As domestic income grows and imports rise faster than exports, the real exchange rate is expected to depreciate in order to clear the balance of payments (or the foreign exchange rate market). An incipient capital outflow arises and interest rates increase. Faster adjustment in capital rather than in the goods market therefore generates a higher real interest rate differential between the domestic small open‐economy and the rest of the world. The long run analysis shows that a constant degree of risk aversion implies a positive equilibrium real interest rate differential that affects economic growth. A permanent increase in default risk driven by persistent current account imbalances thus impacts on long run growth. The model’s results are illustrated with evidence from the three major Latin America economies: Argentina, Brazil and Mexico.     

A Probability of Revisitation Model: The Case of Winter Visits to the Grand Canyon

This paper finds that on average first-time visitors to the Grand Canyon are willing to travel significantly greater distances than repeat visitors. These findings are based upon a binary logit model of repeat visitations estimated from a recent sample of Grand Canyon visitors. This model expresses the probability of repeat visitation as a function of distance travelled and visitor demographic profiles. Included among the demographic characteristics are income, available leisure time, and the number of previous visits. An important managerial implication of this study - not only for the Grand Canyon but also for other tourist destinations - is the value of ‘probability of revisitation’ approach in identifying subtle market fragments. This opens the door to sophisticated marketing strategies that, in this case, cater to the separate needs and desires of repeat and first-time visitors to enhance revenue possibilities.     

A stochastic model of waste management with on and off site storage

When the regulatory threshold which specifies the maximum amount of waste that can be stored on site is exceeded, a waste generating firm must move waste to an off site location. Given that off site storage is costlier than on site storage, how much waste ought a firm—operating in a probabilistic environment—to produce in the time period of interest? This salient question has received insufficient theoretical attention in the extant literature. Therefore, we analyze a stochastic model with on and off site storage that is relevant to the management of a broad class of wastes. We first derive a representative waste generating firm's long run expected cost function. Next, we conduct comparative statics exercises to demonstrate the impact of key parameter changes on the firm's long run expected cost. Finally, we show that the optimal waste production level we seek is the solution to a specific cost minimization problem.     

The design language: Phase and levels

Design language as a theme for discussion may be examined from at least three aspects: its structure: its terminology and its phases and levels of development. An agreed and precise terminology in the field of Design, is desirable for communication, understanding and teaching. It can also unfold the subtle structure of that language.However, many studies of the phases and levels of design language have been undertaken, but often from the artistic, humanistic and scientific points of view, rather then the designistic perspective.In this article we outline the basis of a designistic analysis and classification of children's and adults' design language.Luiz Vidal Negreiros Gomes, Lecturer of the Federal University of Pernambuco, Brazil at the the Department of Methods and Technics in Education and at the Department of Design, and L.S. Medeiros, a freelance researcher.Correspondence to: Avenida Copacabana, 474/303 A, Piedade, Jaboatäo, Pernambuco, Brazil CEP 54410-250     

What doesn't kill you makes you stronger: The evolution of competition and entry‐order advantages in economically turbulent contexts

We examine the evolution of competition and entry‐order advantages in markets under macroeconomic distress. Through formal modeling of early‐mover advantages along industry life cycles subjected to economic shocks and based on simulation findings, we propose that such shocks exogenously induce temporary industry discontinuities that shift the relative value of distinct asset endowments, thereby switching the bases for competitive advantages vis‐à‐vis those found in stable contexts. A vital trade‐off then emerges between a firm's financial flexibility and its pace of investments in isolating mechanisms, such that the former operates as a contingency factor for the latter. As such, flexibility superiority boosts early‐entrants' advantages, while it alternatively gives laggards a much desired strength to out trump first‐mover rivals. Our study informs entry‐order advantage theory and management practice in economically turbulent contexts. Copyright © 2013 John Wiley & Sons, Ltd.     

Local Content Policy in the Brazilian Oil and Gas Sectoral System of Innovation

ABSTRACT

The purpose of this article is to discuss the development, goals, and format of local content public policy within the context of the Brazilian oil and gas sectoral system of innovation. The theoretical frame of reference for this article revolves around the concept of innovation systems, more specifically their sectoral focus as in Malerba (2002 Malerba , F. ( 2002 ). Sectoral systems of innovation and production . Research Policy , 31 , 247 – 264 .[Crossref], [Web of Science ®] , [Google Scholar] and 2004 Malerba , F. ( 2004 ). Sectoral systems of innovation: concepts, issues and analyses of six majors sectors in Europe . Cambridge , England : Cambridge University Press .[Crossref] , [Google Scholar]). Norwegian local content policy was considered as a reference. This article concludes that this policy has not yet come to a consensus, presents regulatory weaknesses, does not have well-defined roles, and has little potential to generate innovations.     

BOOK REVIEWS

No abstract available for this article.     

Salaried employment and earnings in Indonesia: new evidence on the selection bias

This article uses household survey data to estimate the determinants of earnings in Indonesia, a country where nonsalaried work is widespread and earnings data are available for salaried employees only. We deal with the selection bias by estimating a Full-Information Maximum Likelihood (FIML) system of equations, where selection into the labour market is modelled in a multinomial setting. We find that some estimated parameters of the earnings equation differ from a binomial selection procedure by Heckman (1979 Heckman, J. 1979. Sample selection bias as a specification error. Econometrica, 47: 153–61. [Crossref], [Web of Science ®] , [Google Scholar]), in particular for those variables with the strongest impact on the selection into the different labour-market statuses. However, the estimated returns to education are unaffected, even when we deal with the endogeneity of educational attainment following Duflo (2001 Duflo, E. 2001. Schooling and labour market consequences of school construction in Indonesia: evidence from an unusual policy experiment. American Economic Review, 91: 795–813. [Crossref], [Web of Science ®] , [Google Scholar]). Overall, our findings show that the choice of the selection rule affects the estimates of the earnings determinants in the Indonesian labour market.     

Monetary policy and transmission mechanism in Brazil: an empirical model

We propose an econometric model for the transmission mechanism in Brazil after the inflation target regime (IT) implementation. We follow the statistical approach based on the LSE methodology by means of the Spanos (J Econom 44:87–105, 1990) categorization. Our proposed model includes the ratios of the debt and primary surplus to the GDP representing the government fiscal effort. We identify two long run relationships that produce new information on how to evaluate the real interest rate and the nominal interest rate links, respectively, with the output gap and the nominal inflation derived from the IS and the interest rule theoretical models. Such specification explores the role played by fiscal variables in monetary transmission; considering the government fiscal effort, a relevant issue for Brazil. We were also able to identify a third long run relationship that might help to uncover how output gap is related not only with nominal variables but also with the debt to the GDP ratio.     

The influence of conservatism and secrecy on the interpretation of verbal probability expressions in the Anglo and Latin cultural areas

We use Gray's [Gray, S.J. (1988). Towards a theory of cultural influence on the development of accounting systems internationally. Abacus, 24 (1), 1-15.] theory of the influence of culture on accounting to develop hypotheses about the effect the interaction of the accounting values of conservatism and secrecy and the context in which probability expressions are used in accounting standards will have on accountants' interpretations of those expressions. Specifically, we expect accountants in a high conservatism country to assign a higher (lower) numerical probability to verbal probability expressions that determine the threshold for the recognition of items that increase (decrease) income than accountants in a low conservatism country. We expect accountants in a high secrecy country to assign higher numerical probabilities to verbal probability expressions that establish the probability threshold for the disclosure of information than accountants in a low secrecy country. We survey professional accountants in Brazil (higher conservatism and higher secrecy) and in the United States (lower conservatism and lower secrecy) to test our hypotheses. We obtain some support for the first conservatism hypothesis related to the recognition of income-increasing items, but no support for the second conservatism hypothesis related to income-decreasing items. We obtain stronger results in support of our hypothesis related to secrecy and disclosure. This study contributes to the literature by investigating the impact of culture on interpretation of verbal probability expressions in the Latin cultural area and by testing Gray's theory, especially the secrecy hypothesis, at the individual-accountant level.