Gender differences in self‐employment

This paper examines the factors that influence transitions into self‐employment, paying particular attention to gender differences. We find that: (i) men are more responsive to the wage differential between wage/salaried employment and self‐employment; (ii) liquidity constraints are more important for men; and (iii) the link between father's self‐employment status and the probability of self‐employment is stronger for men. Taken together, these results suggest that, for women, self‐employment is a closer substitute for part‐time work and labour‐market inactivity than it is for men. We attribute such differences to the different labour market opportunities and occupational strategies of women.     

Effective property rights, conflict and growth

This paper shows how the interaction between conflict and growth can give rise to a nonmonotone relationship between property rights and social welfare. This interaction is illustrated in a model of endogenous growth in which equilibrium diversion of resources is the cost of securing effective property rights. A symmetric equilibrium allocation associated with more secure property rights and faster growth can be Pareto dominated by one associated with poorer property rights and slower growth. Faster growth can exacerbate the problem of diversion whenever property rights are sufficiently poor. These results call for caution before a society decides to pursue economic growth independently of the institutional structure of property rights. Furthermore, if this structure is inappropriate piecemeal reform might not be in the interest of society, and a substantial reform might be necessary if it is to be welfare-improving.     

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.     

Sample attrition and labor force dynamics: Evidence from the Spanish labor force survey

In this paper we examine a number of issues that arise in investigating labor force dynamics using the Spanish Labor Force Survey (EPA). These issues are by no means specific to the Spanish case and apply to most European-style labor force surveys. Our main conclusions may be summarized as follows. First, survey nonresponse cannot be neglected. Second, the EPA tends to underestimate employment and participation of high-educated young people, and to overestimate those of the low-educated elderly. Finally, we find little evidence that attrition causes important selection biases in estimating quarterly transition probabilities.     

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.     

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.