Pricing to market behaviour in European car markets

This paper investigates PTM behaviour in European car markets for a period of great interest (1993-98), taking into account the role of invoicing currency. The results indicate that local currency price stability is a strong and pervasive phenomenon across products independently of the invoicing currency. The paper offers robustness checks, tests and arguments that justify the interpretation of this finding, at least in part, as evidence of PTM. It implies the existence of market segmentation and price discrimination, despite the completion of the single market programme on 1 January 1993.     

我国的M1/M2(1978-2002):长期趋势、水平与周期波动

本对我国1978—2002年的M1／M2的长期趋势、水平和周期波动进行了研究，结果表明1978—1995年，中国的M1／M2呈急剧下降的态势，但是从1996至今则基本保持平稳。另外从国别比较来看，我国属于M1／M2比较高的国家(地区)之一，这表明我国的居民和企业由于支付制度、取款成本、规避税收等原因比美、日等国家的经济主体对M1的需求高很多。除开长期走势之外，中国的M1／M2还伴随着经济活动呈周期性的波动，实证分析结果表明1996年前的经济增长率是M1／M2周期波动的Granger原因，但1996年以后则必须由名义利率、通货膨胀率和股票市场交易量的变动才能说明M1／M2的波动。     

Calibrating an algorithm for estimating transactions from FXFX exchange rate quotes

In this paper we investigate the efficiency of a class of transaction-generating algorithms, originally suggested in Bollerslev and Domowitz (1993). Our comparison utilizes real transaction data recorded over Reuters D2000-2 electronic broking system for 7 h in June 1993 and transaction data generated from FXFX quotations over an identical period. Results suggest that, at this high-frequency data sampling, the performance of these transaction-generating algorithms is poor, with the most likely explanation of this outcome due to the high-frequency characteristics of FXFX spreads and quotation intensity.     

Post Bretton Woods deviations from purchasing power parity in G7 exchange rates—an empirical exploration

Exchange rates have deviated substantially and idiosyncratically from purchasing power parity (PPP) since the breakdown of Bretton Woods. In this paper, a model incorporating both traditional PPP and financial market variables is constructed and tested on the US dollar's six G7 exchange rates during the floating rate era. Empirical tests show that the model's common set of variables—with consistent signs—can explain the divergent behavior of G7 exchange rates during 1973.2–90.2. Idiosyncracies are reflected in different subsets of the model's variables entering significantly into each exchange rate's regression; the existence of stable relationships is demonstrated by the equations' co-integration.     

Back on the balance sheet: The tax effects of contingent claims in commercial banking

Contingent claims separate revenue and cost into two different time periods. Revenue comes in the initial origination process, while the cost comes upon completion of the contract in the event of default. With banks increasing contingent claims in recent years, a higher taxable income leads to a shift in a bank's balance sheet toward tax-free income and tax-shielding liabilities. This provides a valuable case-study of corporate finance theories of tax management. This paper builds a model to illustrate the income features of contingent claims. Call Reports from 1990-1996 are examined, and show significant evidence of increases in leverage associated with contingent claims.     

Trade costs, firms and productivity

This paper examines the response of U.S. manufacturing industries and plants to changes in trade costs using a unique new dataset on industry-level tariff and transportation rates. Our results lend support to recent heterogeneous-firm models of international trade that predict a reallocation of economic activity towards high-productivity firms as trade costs fall. We find that industries experiencing relatively large declines in trade costs exhibit relatively strong productivity growth. We also find that low-productivity plants in industries with falling trade costs are more likely to die; that relatively high-productivity non-exporters are more likely to start exporting in response to falling trade costs; and that existing exporters increase their shipments abroad as trade costs fall. Finally, we provide evidence of productivity growth within firms in response to decreases in industry-level trade costs.     

Target zones in theory and history: Credibility, efficiency, and policy autonomy

An experiment with an exchange-rate band in Austria-Hungary in the early 20th century provides a rare opportunity to discuss critical aspects of the theory of target zones. Providing a new derivation of the target zone model as a set of nested hypotheses, the inference is drawn that policy credibility and market efficiency were paramount in the success of the Austro-Hungarian experience.     

The impact of monetary policy on the exchange rate: evidence from three small open economies

This paper studies the impact effect of monetary policy shocks on the exchange rate in Australia, Canada, and New Zealand during the 1990s. Shocks are identified by the reaction of three month market interest rates to policy announcements that were not themselves endogenous to economic news on the same day. The main result is that a 100 basis point contractionary shock will appreciate the exchange rate by 2-3 percent on impact. The association of interest rate hikes with depreciations that is sometimes observed during periods of exchange market pressure is mainly attributable to reverse causality.     

Monetary policy in emerging markets: Can liability dollarization explain contractionary devaluations?

In emerging markets, external debt is denominated almost entirely in large, developed country currencies such as the U.S. dollar. This liability dollarization offers a channel through which exchange rate variation can lead to business cycle instability. When firms' assets are denominated in domestic currency and liabilities are denominated in foreign currency, an exchange rate depreciation worsens firms' balance sheets, which leads to higher capital costs and contractions in capital spending. To illustrate this, I construct a quantitative, sticky price, small open economy model in which a monetary policy induced devaluation leads to a persistent contraction in output. In this model, fixed exchange rates offer greater stability than an interest rule that targets inflation.     

Estimating the Euler equation for output

New Keynesian macroeconomic models have generally emphasized that expectations of future output are a key factor in determining current output. The theoretical motivation for such forward-looking behavior relies on a straightforward generalization of the well-known Euler equation for consumption. In this paper, we use maximum likelihood and generalized method of moments (GMM) methods to explore the empirical importance of output expectations. We find little evidence that rational expectations of future output help determine current output, especially after taking into account the small-sample bias in GMM.