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1 – 10 of 305William H. Kaempfer, Edward Tower and Thomas D. Willett
We consider a domestic monopolist who is protected by an import quota on the product he produces. He faces a domestic demand curve which is characterized by a constant price…
Abstract
We consider a domestic monopolist who is protected by an import quota on the product he produces. He faces a domestic demand curve which is characterized by a constant price elasticity. He is unable to export and has an upward sloping marginal cost curve. We demonstrate that in this case his employment of labor rises with the import quota until imports rise to a fraction lie of domestic output where e is the elasticity of domestic demand. Thus, the employment maximizing quota sets permissible imports at a fraction of domestic output which is at least as high as the reciprocal of the elasticity of demand. We also make a case for liberalizing all the way right away, "cold turkey liberalization. "
Levan Efremidze, Sungsoo Kim, Ozan Sula and Thomas D. Willett
This paper aims to investigate the relationship between capital flow surges, reversals and sudden stops.
Abstract
Purpose
This paper aims to investigate the relationship between capital flow surges, reversals and sudden stops.
Design/methodology/approach
Emphasizing the importance of looking at the behavior of domestic as well as foreign capital flows, the authors distinguish sudden stops from capital flow reversals by attributing the former to foreign capital flows only.
Findings
It is found that, despite the large differences in the number of surges identified by several different measures in the literature, a majority of surges do end in reversals of some type. The percentages tend to be slightly over half for surges in net capital flows, but on average, 70 per cent of gross surges end in sudden stops. Furthermore, contrary to popular belief, approximately half of sudden stops and net capital flow reversals are not preceded by surges. It is also found that surges that persist longer are more likely to turn into sudden stops and reversals.
Research limitations/implications
The authors find substantial empirical differences in the characteristics of sudden stops (based on gross foreign flows) and reversals (based on net flows).
Practical implications
Large inflows of financial capital are not always a strong indicator that a country’s economic policies will continue to provide stability in the future. They may signal an increase rather than reduction in the risk of future instability.
Originality/value
This study focuses on an issue that has been less explored to date, the relationship between capital flow surges, reversals and sudden stops. The authors distinguish, redefine and document differences among capital flow reversals and sudden stops. Duration of surges is related to the likelihood of having reversals and sudden stops.
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Thomas Willett, Eric M.P. Chiu, Sirathorn (B.J.) Dechsakulthorn, Ramya Ghosh, Bernard Kibesse, Kenneth Kim, Jeff (Yongbok) Kim and Alice Ouyang
There has been significant interest in the classification of exchange rate regimes in order to investigate a wide range of hypotheses. Studies of the effects of exchange rate…
Abstract
Purpose
There has been significant interest in the classification of exchange rate regimes in order to investigate a wide range of hypotheses. Studies of the effects of exchange rate regimes on crises and other aspects of economic performance can have important implications for policy choices. The paper provides a guide to the major new large data sets that classify exchange rate regimes and to critically analyze important methodological issues.
Design/methodology/approach
The study surveys and critiques the literature and provides theoretical analysis of major issues involved in classifying exchange rate regimes.
Findings
The study finds that all of the new data sets have problems but some have more problems than others and several of them are substantial improvements on what was previously available. It is also shown that the best ways to classify depend on the issue being addressed and that for detailed studies variants of measures using the concept of exchange market pressure are the most promising. Directions for future research are also discussed.
Originality/value
The paper makes researchers aware of the new data sets that are available and discusses their strengths and weaknesses. It also presents original analysis of several of the major conceptual issues involved in classifying exchange rate regimes.
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This study aims to critically review recent contributions to the methodology of financial economics and discuss how they relate to one another and directions for further research.
Abstract
Purpose
This study aims to critically review recent contributions to the methodology of financial economics and discuss how they relate to one another and directions for further research.
Design/methodology/approach
A critical review of recent literature on new methodologies for financial economics.
Findings
Recent books have made important contributions to the study of financial economics. They suggest new approaches that include an emphasis on radical uncertainty, adaptive markets, agent-based modeling and narrative economics, as well as extensions of behavioral finance to include concepts such as diagnostic expectations. Many of these contributions can be seen more as complements than substitutes and provide fruitful directions for further research. Efficient markets can be seen as holding under particular circumstances. A major them of most of these contributions is that the study of financial crises and other aspects of financial economics requires the use of multiple theories and approaches. No one approach will be sufficient.
Research limitations/implications
There are great opportunities for further research in financial economics making use of these new approaches.
Practical implications
These recent contributions can be quite useful for improved analysis by researchers, private participants in the financial sector and macroeconomic and regulatory officials.
Originality/value
Provides an introduction to these new approaches and highlights fruitful areas for their extensions and applications.
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Puspa Amri, Eric M.P. Chiu, Greg Richey and Thomas D. Willett
The purpose of this paper is to test whether financial crises themselves provide some degree of ex post discipline. In other words, is there learning from the mistakes associated…
Abstract
Purpose
The purpose of this paper is to test whether financial crises themselves provide some degree of ex post discipline. In other words, is there learning from the mistakes associated with crises? The authors test this hypothesis on credit growth, a frequent contributor to banking crises.
Design/methodology/approach
The study uses statistical tests (comparison of means) on a sample of 72 banking crises, the onset of which occurred between 1980 and 2008. Tests for significance of the difference are conducted using Kolmogorov–Smirnov equality in distribution tests.
Findings
The results show that real credit growth fell substantially (relative to average) by about 8 per cent points from pre- to post-crisis periods, and that average banking regulation and supervision strengthens after a crisis.
Originality/value
This paper provides empirical support for the proposition that while financial markets may fail to give sufficient warning signals before a financial crisis, they may discipline governments to undertake reforms in the aftermath of a crisis.
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Abstract
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Linyue Li, Nan Zhang and Thomas D. Willett
Study of the interdependence among economies is of considerable importance. This area includes issues such as the increasing importance of regional economic interactions, the…
Abstract
Purpose
Study of the interdependence among economies is of considerable importance. This area includes issues such as the increasing importance of regional economic interactions, the effects of economic growth and recession in the advanced economies on emerging market countries, and financial contagion. A wide range of related terms and methodologies are used in the literature of interdependence. The purpose of this paper is to review the major concepts and various measurements of interdependence in financial markets and the real economy, serving as a reference and benchmark for future research on interdependence among specific regional or global economies.
Design/methodology/approach
Major measurements of interdependence are reviewed from simple approach to more complicated ones, and strengths and weaknesses of the various measurements of interdependence are discussed.
Findings
This paper surveys the various major measurements of interdependence and illustrates how they have been used to address a substantial range of issues.
Originality/value
The paper shows that studies of macroeconomic and financial interdependence use the same types of econometric measurements. The review and critiques of these various types of measures should be of value to those wishing to do research in these areas and also to those wishing to have a better understanding of papers that they read.
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William R. Clark, Mark Hallerberg, Manfred Keil and Thomas D. Willett
The purpose of this paper is to review concepts and measurements related to financial globalization such as financial openness, financial integration, monetary interdependence…
Abstract
Purpose
The purpose of this paper is to review concepts and measurements related to financial globalization such as financial openness, financial integration, monetary interdependence, and the mobility and movement of capital.
Design/methodology/approach
This paper surveys the theoretical and empirical literature on monetary interdependence and financial globalization. The major ways in which these concepts are measured empirically are presented and critiqued.
Findings
Disagreements about the degree of financial integration and capital mobility are, in part, explained by the different approaches to measuring these concepts. One major challenge in obtaining a good measures is controlling for other major factors that may influence observed correlations among financial variables. While these relationships still cannot be estimated precisely, it can be safely said that while high for many countries, few if any financial markets are perfectly integrated across countries.
Originality/value
By offering a comprehensive analysis of these different measurements, the paper underscores the different implications for national policies and the operation of the international monetary system of different dimensions of globalization. In particular, the proposition that financial globalization has left most countries with little autonomy for domestic monetary policy is subject to serious debate, at least in the short run.
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Richard C.K. Burdekin, King Banaian, Mark Hallerberg and Pierre L. Siklos
The latest generation of research into macroeconomic policy has turned from more technical aspects of optimal control and expectations formation to consideration of the…
Abstract
Purpose
The latest generation of research into macroeconomic policy has turned from more technical aspects of optimal control and expectations formation to consideration of the policymaking institutions themselves. More and more countries have moved towards greater degrees of central bank independence, including many developing economies as well the member countries of the European Central Bank. What still is not generally settled among economists is how to measure the stance of policy and the institutional features of the policymaking process. The purpose of this paper is to assess prevailing monetary and fiscal policies.
Design/methodology/approach
The paper takes the form of a review encompassing many different measurements of policy stance and policymaking processes. The authors begin with monetary policy followed by an analysis of central bank institutions. The next sections turn to fiscal policy and the need to adjust budget balance for the state of the business cycle. There is then a brief concluding section.
Findings
The authors show in this review that fiscal and monetary rules, and economists' understanding of them, have changed substantially over the years. While on one level there is greater consensus, there have been new questions raised in the process that leave plenty of room for further ongoing research in these key policy areas as well as the optimal design of the design of the monetary and fiscal institutions concerned.
Originality/value
The paper provides a review of the existing literature updated and applied with reference to recent events, including the global financial crisis.
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