Real Exchange Rate Misalignments in the Euro Area

Open Economies Review - Building upon a Behavioural Equilibrium Exchange Rate model, estimated at a quarterly frequency since 1999 on a broad sample of 57 countries, this paper assesses both the...     

FDI facilitated by agglomeration economies: evidence from manufacturing and services joint ventures in China

The open door policy of China’s economic reform since the 1980s has attracted heavy foreign direct investment (FDI) flows into China and especially to Guangdong (particularly the Pearl River Delta region, PRD) and induced significant economic growth during the past two decades. While there exist various classical theories of FDI in attempting to identify the determinants of FDI inflow and to explain the behavior of FDI flows, limited attention has been given from the perspective of agglomeration effects generated by a core-periphery (CP) relation.This paper intends to study the impacts of agglomerations on FDI inflows in the context of Krugman’s CP relation (1991) by investigating (1) the formation of a CP relation via gravity model analysis; (2) whether different types of industry FDI flows will respond differently in the CP-system, given agglomeration effects; and (3) whether FDI origin and firm scale matter in affecting FDI flows.A database consisting of a population frame of 37,742 firm-level manufacturing and services joint ventures investing in Guangdong in 1998 was used. Empirical results show that the agglomerations of the CP relation have affected FDI flow patterns. While both manufacturing and services FDI and sources of investment responded differently to the impacts, smaller firms were found more responsive to the CP-agglomeration settings regardless of FDI by industry type and by source. The significance and implications of the CP-system to further facilitate FDI in the region are discussed.     

Innovating SMEs and Regions: The Need for Policy Intelligence and Interactive Policies

Based on the empirical findings achieved through comparative research involving 40 innovation policy instruments from 11 European regions, this paper proposes a shift in rationale and in the broad orientations of innovation policy to focus on addressing SMEs in their regional context. The main role for innovation policy, which aims to increase the capacity of a region and the capabilities of its SMEs to innovate, is to foster interactive learning within the firms and within the region. This calls for an interactive mode of policy intervention. The paper deals also with the question of how to build a coherent portfolio of policy instruments, taking into account both regional situations and specific SMEs needs in terms of innovation. The key message is that there is no 'one-size-fits-all' policy portfolio. Regional differences in innovation capabilities call for a tailored mix of policy instruments. One salient element of the conclusion is the need for more 'policy intelligence' in this complex field.     

Equity Volatility and Corporate Bond Yields

This paper explores the effect of equity volatility on corporate bond yields. Panel data for the late 1990s show that idiosyncratic firm‐level volatility can explain as much cross‐sectional variation in yields as can credit ratings. This finding, together with the upward trend in idiosyncratic equity volatility documented by Campbell, Lettau, Malkiel, and Xu (2001), helps to explain recent increases in corporate bond yields.     

The impacts of Hong Kong’s Currency Board reforms on the interbank market

Among the economies with a Currency Board System (CBS), Hong Kong (HK) is probably the one with the largest and most developed financial sector, as well as the highest capital mobility. Hence, studying HK’s CBS is not only crucial to HK, but also important for the understanding of the modern CBS. This paper outlines the major monetary reforms in HK since the late 1980s. The impacts of these reforms and the 1997–1998 Asian Financial Crisis are then examined empirically. We focus on the differentials between the US and HK interbank interest rates. We assume the conditional-mean equation follows an autoregressive process and the conditional-variance equation follows a generalized autoregressive conditional heteroscedasticity process. This model captures the time-varying level and volatility of the differential. In light of the empirical results we provide an assessment of the reforms in HK.     

Repositioning the urban environment question in Zimbabwe: a review of the context,conditions and processes

This analysis is a reappraisal of two perspectives in urban development in Zimbabwe: environmental sustainability and human sustenance. The discussion seeks to reposition the conservation–survival debate by broadening it to the wider urban and national macroeconomic and sociopolitical context. It re‐examines Zimbabwe's environmental problems by examining the challenges posed by urbanisation, industrialisation and informalisation. To these ‘permanent’ strands are added the ‘transient’ phenomena of structural adjustment and indigenisation. The analysis is done within the overall national macroeconomic and sociopolitical environment. The article examines environmental sustainability and human sustenance as the two policy challenges that have to be reconciled in the quest for sustainable urban settlements in Zimbabwe. The analysis stresses that the exercise of striking a balance between the needs of humankind and those of nature has to take cognisance of the complexity of issues and the processes going on elsewhere in the urban and national context.     

Quality Management Systems Certification: Research Note

Although International Quality Standards 9000 certification is one of the most popular quality assurance systems in the world, its contribution to a firm's value is still a controversial issue. This project re-examines this issue by using stock market reactions to the announcements of the award of certification made by a sample of Hong Kong listed companies, as a proxy for its contribution to a firm's value. The results suggest that on average certification increased a firm's value. However, most of this value increase was incorporated into stock prices before formal announcements were published in newspapers. In addition, the contribution of certification to value was greater in smaller firms than in larger ones. This can be attributed to fewer stock traders and professional analysts following smaller firms.