Sources of Fluctuations in the Real Exchange Rates and Trade Balances of the G‐7: A Sign Restriction VAR Approach

This paper estimates structural vector autoregression models of output, the real exchange rate and trade balance for the group of seven leading advanced economies (G‐7). Unlike previous studies, we do not impose long‐run purchasing power parity as an identifying assumption; instead, the shocks underlying the model are structurally identified using a set of theory‐consistent sign restrictions. Empirical results show that nominal shocks account for most of the long‐run variability in trade balances across the G‐7 countries. We are able to attribute this finding to long‐run movements in the real exchange rate, as the real exchange rate is significantly affected by nominal shocks in the long run.     

Econometric Methods for Modelling Systems With a Mixture of i(1) and i(0) Variables

This paper considers structural models with both I(1) and I(0) variables. The structural shocks associated with either set of variables could be permanent or transitory. We classify the shocks as (P1,P0) and (T1,T0), where P/T distinguishes permanent/transitory, while 1/0 means they are attached to structural equations with either I(1) or I(0) variables as their ‘dependent’ variable. We show that P0 shocks can affect cointegration analysis and provide a formula to compute the permanent component if they are present. Finally, we reformulate a well‐known empirical structural vector autoregression showing the impact of P0 shocks when there are just long‐run parametric and sign restrictions. Copyright © 2015 John Wiley & Sons, Ltd.     

Nonlinearity between Trade Openness and Economic Development

This paper utilizes the instrumental variable threshold regressions approach to reassess the trade–development link. It finds evidence that trade openness contributes to uneven development. Greater trade openness tends to have beneficial effects on real development of high‐income countries. For low‐income ones, however, trade openness appears to influence real income in a significant and negative way. The data also reveal that greater trade openness has a positive effect on capital accumulation, productivity growth, and financial development in high‐income countries, but a negative impact in low‐income ones.     

Services and functions provided by European city tourist offices: a longitudinal study

Tourism has become a major source of employment, revenue, international awareness and opportunity in European cities. As competition among European cities grows, the efficiency of management in city tourism organisations (CTOs) becomes increasingly important. This article reports on a longitudinal study of 50 European CTOs over the 4‐year period from 1995 to 1999. The aim of the study is to examine the changes in functions provided by European CTOs during the given period of time. Findings reveal that five identifiable function categories can characterise the changes that happened during the given period of time: hotel booking service, commerce, conventional information dissemination, advanced information product and relationship management. It is argued that information technology and role change are the main driving forces of these changes. Copyright © 2003 John Wiley & Sons, Ltd.     

FINANCIAL DEVELOPMENT ON GROWTH CONVERGENCE

This paper investigates whether the impacts of financial development on growth convergence vary with the stage of real development. We implement this analysis through the instrumental variable threshold regression approach proposed by Caner and Hansen. Our empirical evidence shows that financial intermediary development leads to long‐run convergence in growth of both economic activity and productivity. Moreover, such convergence‐enhancing effects of financial intermediation are stronger for less‐developed countries than for the more industrialized. In addition, the data reveal that stock market development assists growth convergence only in low‐income countries.     

Line and HR executives' perceptions of HR effectiveness in firms in the People's Republic of China

This paper examines the differences in perceptions of the importance and effectiveness of human resources (HR) practices in firms operating in the People's Republic of China. The major finding is that while there are no significant differences between HR and line executives' perceptions of the importance of each functional area in human resource management (HRM), there are significant differences between line and HR executives' perceptions of the effectiveness of these areas. Line and HR executives both view the issue of securing, developing and maintaining human resources as a critical issue for the execution of daily operations and long-term strategic plans. However, line executives perceive HR performance effectiveness as significantly lower in these functional areas than HR executives do. Therefore, HR departments are not meeting the performance expectations of line executives. There are three possible reasons for the poor performance of HR departments. First, government intervention may limit HR departments' ability to act strategically. Second, HR departments may not have enough power to act strategically. Third, HR departments may have few capabilities to respond to line executives' demands.     

Inter-temporal choices with temporal reference dependence

I develop an intertemporal choice model for rational deviators whose preferences depend not only on their actual consumption but also on comparison to their beliefs about the optimal consumption. The standard decision maker is loss averse with respect to this belief-dependent reference point. When psychologically weighted loss aversion is low, a decision maker deviates from the standard intertemporal choice behavior and over-consumption, as well as the alternative possibility of under-consumption can be rationalized. When the decision maker has time-varying degrees of loss aversion, he re-optimizes the consumption plan through adjusted beliefs as subsequent selves realize that past decision for the present period is no longer optimal. In the dynamic model, I solve for consistent intertemporal optimization rules by which a dynamic deviator should meet rational intertemporal consistency at each point in time. Finally, I demonstrate that the dynamic reference dependent model can solve a puzzling feature in lifecycle consumption data.     

Foreign currency borrowing surrounding the global financial crisis: Evidence from Korea

We present a complete profile of firms’ foreign currency borrowing surrounding the 2007 global financial crisis. Employing extensive data from Korean firms during 2002–2012, we find that foreign currency borrowing is significantly related to firm attributes of export revenues, firm size, tangible assets and asset growth, as well as to macro-level factors. These results offer two important implications. First, macroeconomic factors alone cannot fully explain firms’ foreign currency borrowing. Second and more importantly, these firm attributes are indicative of a lower default probability and larger collateral value, which would not only facilitate borrowers’ access to foreign currency debt markets but also offer lenders a better protective cushion from possible loan defaults in the face of exchange rate changes and information asymmetry on borrowers’ credits. Period wise, asset-related firm attributes have more pronounced effects in the post- than pre-crisis period. We further show that banking regulations following the crisis effectively limit the access to foreign currency borrowing by Korean firms, most significantly by those belonging to large business groups.     

The ‘trilemma’ hypothesis and policy implications for Fiji

This paper examines the trilemma constraint for Fiji; that is, we investigate how trilemma policy variables were used to address policy trade‐offs among the three objectives of exchange rate stability, monetary autonomy, and financial openness. Fiji makes an interesting case because of its policy orientation towards a stable exchange rate and adequate foreign reserves. Our results suggest that the trilemma constraint is binding for Fiji and policy priority is given to exchange rate stability and monetary policy independence, while less emphasis is placed on financial market openness. We also find that the actual policy levels do not deviate substantially from optimal levels, which evidences that Fiji's policy management has been efficient under the trilemma constraint. Finally, we also study the effects of various trilemma policy combinations and foreign reserve holdings on output growth and inflation.     

Loss aversion and social security: a general equilibrium approach

Introducing an intertemporal model of loss aversion, I study the role of social security in determining intergenerational redistribution when consumers have reference-dependent preferences with loss aversion. Using a unified social security model in which different social security plans are specified via different degrees of fundedness, I examine the effect of the transition from a less funded system to a more funded one on savings, consumption, and capital accumulation for an OLG production economy. A general equilibrium analysis shows that the direction of intertemporal equilibrium is dependent on how the total savings responds to the interest rate change, but the effect of the payroll tax on capital accumulation is ambiguous. By deriving closed-form solutions, I find that an increase in fundedness intensity unambiguously increases capital accumulation in steady states, while the tax effects on consumption and savings are not conclusive. Moreover, simulation exercises show that when consumers are prone to over-consume because they care more about the contemporaneous gain utility, the fully funded system may help the individuals smooth out their lifecycle consumption.