The Effect of Real Exchange Rate Uncertainty on Exports: Empirical Evidence

Unless very specific assumptions are made, theory alone cannotdetermine the sign of the relation between real exchange rateuncertainty and exports. On the one hand, convexity of the profitfunction with respect to prices implies that an increase inprice uncertainty raises the expected returns in the exportsector. On the other, potential asymmetries in the cost of adjustingfactors of production (for example, investment irreversibility)and risk aversion tend to make the uncertainty-exports relationnegative. This article examines these issues using a simplerisk-aversion model. Export equations allowing for uncertaintyare then estimated for six developing countries. Contrary tothe ambiguity of the theory, the empirical relation is stronglynegative. Our estimates indicate that a 5 percent increase inthe annual standard deviation of the real exchange rate canreduce exports by 2 to 30 percent in the short run. These effectsare substantially magnified in the long run.     

The attraction paradigm in dyadic exchange

Although the marketing literature alludes to the influence of interpersonal attraction in dyadic exchange, the composition of attraction, as well as its relationship to other elements in the exchange process, has not been given adequate attention. Since substantial empirical evidence supports the impact of attraction on a variety of human responses, this article examines how attraction impacts on marketing dyads and presents a model of interpersonal attraction as a framework for empirical testing. The implications of the model are discussed, and suggestions for further research are given.     

Smoothing sudden stops

Emerging economies are often exposed to sudden shortages of international financial resources. Yet domestic agents do not seem to take preventive measures against these sudden stops. We highlight the central role played by the limited development of ex ante (insurance) and ex post (spot) domestic financial markets in generating this collective undervaluation of international resources. We study several policies to counteract the external underinsurance. We do this by solving for the optimal mechanism given the constraints imposed by limited financial development, and then considering the main financial policies—in terms of the model and practical relevance—that implement this solution.     

Responsibility of the University in Employability: Development and validation of a measurement scale across five studies

This paper develops and validates, at a confirmatory level, a second‐order scale to measure Responsibility of the University in Employability (RUE). First, the literature on the components of RUE is explored and a formative conceptual model is proposed to underpin its measurement using extant research in the field of organisational responsibility and employability. At the empirical level, the second‐order RUE model considers the reputation of the university, the teaching staff, and the matching activities with employers as components of RUE. This model is based on five empirical studies. The first is a small‐sample study based on the opinions of experts (n = 5) and the rest are based on representative samples of university students (n = 816, n = 1,082, n = 1,088, and n = 1,203). A very good fit between model and data were revealed (CFI = 0.975; RMSEA = 0.039; standardised X² = 2.676). The results indicate that matching activities with employers and teaching staff generate more RUE than university reputation. Guidelines are offered for managing the responsibility of the university in employability.     

Analysis of Information Content in U.S. and Japanese Magazine Advertising

Abstract

The content of Japanese versus U.S. magazine advertisements is assessed to determine relative levels of information content based on the type of magazine, the kind of information, the product represented in the advertisement and the size of the advertisement. It was found that Japanese magazine advertisements were generally more informative than U.S. ads, although the emphasis on specific content varies cross-culturally.     

Future rent-seeking and current public savings

The conventional wisdom is that politicians' rent-seeking motives increase public debt and deficits. This is because myopic politicians face political risk and prefer to extract political rents as early as possible. In this paper we study the determination of government debt and deficits in a dynamic political economy model. We show that this conventional wisdom relies on economic volatility being low relative to political uncertainty. If economic volatility is high relative to political uncertainty, then a rent-seeking government actually over-saves and over-taxes along the equilibrium path relative to a benevolent government. This result emerges because of the option value of rent-seeking: a rent-seeking government over-values future funds because of the possibility of using them for future rents instead of cutting taxes in the event of a future boom (when marginal utility of private consumption is low). This over-saving bias is temporary since, in the long run, the rent-seeking government over-borrows relative to the benevolent government as it eventually squanders the funds it has accumulated. We find that both the under-saving and over-saving bias of the government can be solved by a rule of capping deficits.     

Bubbles and capital flow volatility: Causes and risk management

Emerging market economies are fertile ground for the development of real estate and other financial bubbles. Despite these economies’ significant growth potential, their corporate and government sectors do not generate the financial instruments to provide residents with adequate stores of value. Capital often flows out of these economies seeking these stores of value in the developed world. Bubbles are beneficial because they provide domestic stores of value and thereby reduce capital outflows while increasing investment. But they come at a cost, as they expose the country to bubble-crashes and capital flow reversals. We show that domestic financial underdevelopment not only facilitates the emergence of bubbles, but also leads agents to undervalue the aggregate risk embodied in financial bubbles. In this context, even rational bubbles can be welfare reducing. We study a set of aggregate risk management policies to alleviate the bubble-risk. We show that liquidity requirements, sterilization of capital inflows and structural policies aimed at developing public debt markets ‘collateralized’ by future revenues, all have a high payoff in this environment.     

Working capital management in SMEs

This paper analyses the determinants of Cash Conversion Cycle (CCC) for small‐ and medium‐sized firms. It has been found that these firms have a target CCC length to which they attempt to converge, and that they try to adjust to their target quickly. The results also show that it is longer for older firms and companies with greater cash flows. In contrast, firms with more growth opportunities, and firms with higher leverage, investment in fixed assets and return on assets have a more aggressive working capital policy.     

Responsibility or autonomy: children and the probability of self-employment in the USA

This paper studies the effect of children on the likelihood of self-employment. Having children can change preferences that are central to the decision whether to be self-employed. On the one hand, individuals’ preference for autonomy and flexibility increases when having children, which increases the willingness to be self-employed. On the other hand, having children entails a responsibility over someone else, which increases individual risk aversion and decreases the willingness to be self-employed. Using a pooled cross section of 26 years from the General Social Survey, instrumental variable estimates indicate that, in the USA, having children under the age of 18 in the household decreases the likelihood of being self-employed by 11 % (i.e., the responsibility effect dominates). This effect is considerable as a child decreases the probability of self-employment more than the increase associated with being raised by a self-employed father—one of the main determinants of self-employment.