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Full-Text Articles in International Economics

The Role Of Inflation Targeting In Debt Denomination In Developing Countries, Olena Ogrokhina, Cesar M. Rodriguez Sep 2016

The Role Of Inflation Targeting In Debt Denomination In Developing Countries, Olena Ogrokhina, Cesar M. Rodriguez

Economics Faculty Publications and Presentations

This paper analyzes the inflation targeting experience of developing countries as an effective monetary policy framework to promote changes in the currency composition of their international debt. Using matching with difference-in-differences to address the self-selection bias, we find that in inflation targeting has led to a 3-6 percentage point reduction in the foreign currency share of international debt in targeting countries when compared to non-targeting countries. Furthermore, from the analysis of the individual currency shares, we find that inflation targeting has contributed to a 10 percentage points lower US dollar share in international debt in targeting countries compared to non-targeting ...


Trade Invoicing In Major Currencies In The 1970s-1990s: Lessons For Renminbi Internationalization, Hiro Ito, Kawai Masahiro Sep 2016

Trade Invoicing In Major Currencies In The 1970s-1990s: Lessons For Renminbi Internationalization, Hiro Ito, Kawai Masahiro

Economics Faculty Publications and Presentations

In this paper, we investigate how much a major currency is used for trade invoicing by focusing primarily on the experiences of the U.S. dollar, the Japanese yen, and the Deutsche mark (DM) in the 1970s through the 1990s. We then attempt to draw lessons for China’s renminbi (RMB) internationalization. Our data on the shares of the three major currencies in export invoicing show that the dollar was unequivocally a global invoicing currency, and that the DM was the most important regional currency in Europe while the yen was never a global or a regional currency. DM invoicing ...


Leadership Positioning Among U.S. Firms Investing In China, Rossitza B. Wooster, Donna L. Paul Jan 2016

Leadership Positioning Among U.S. Firms Investing In China, Rossitza B. Wooster, Donna L. Paul

Economics Faculty Publications and Presentations

This study investigates leadership positioning by U.S. firms in China using the awareness, motivation, capability (AMC) perspective. We define leadership as first in industry to invest in China, and find that leaders have characteristics associated with higher AMC, evidenced by pre-existing multinational experience, higher product market orientation, smaller scale of operations, and higher input cost structure. Notably, the motivation to lower input costs and the prior capability in multinational operations mattered only for the first wave of firms leading industry investment earlier in time, while firms with smaller scale of operations exhibited a preference to lead investment in less ...


Equity Commitment Under Uncertainty: A Hierarchical Model Of Real Option Entry Mode Choices, Rossitza B. Wooster, Luisa Blanco, W. Charles Sawyer Jan 2016

Equity Commitment Under Uncertainty: A Hierarchical Model Of Real Option Entry Mode Choices, Rossitza B. Wooster, Luisa Blanco, W. Charles Sawyer

Economics Faculty Publications and Presentations

We develop a real option hierarchical model of entry mode choice and test predictions using a sample of US companies in Latin America and the Caribbean between 1980 and 2005. Probit results indicate that the choice between a real option non-equity mode and equity commitment is influenced by previous acquisition experience, R&D and advertising intensities, and country risk. The choice of the more flexible real option JV mode over WOEs is positively related to greater firm size and market-to-book ratio in countries with better infrastructure. In contrast, greater marketing intensity and lower country risk encourage WOEs.


Clamoring For Greenbacks: Explaining The Resurgence Of The U.S. Dollar In International Debt, Hiro Ito, Cesar M. Rodriguez Oct 2015

Clamoring For Greenbacks: Explaining The Resurgence Of The U.S. Dollar In International Debt, Hiro Ito, Cesar M. Rodriguez

Economics Faculty Publications and Presentations

This paper investigates the determinants of currency denomination in international debt. Using data on currency shares for international debt securities for 82 countries from 1995 through 2013, we find that while the extent of foreign currency issuance has not changed much since the 1990s, especially for developing countries, the currency composition has shifted, especially between the U.S. dollar and the euro. Before the Global Financial Crisis (GFC) of 2008, the share of the U.S. dollar has been on a downward trend while that of the euro had been on a steady rising trend, but since the crisis, the ...


Crime, Institutions And Sector-Specific Fdi In Latin America, Luisa Blanco, Isabel Ruiz, W. Charles Swayer, Rossitza Wooster Jan 2015

Crime, Institutions And Sector-Specific Fdi In Latin America, Luisa Blanco, Isabel Ruiz, W. Charles Swayer, Rossitza Wooster

Economics Faculty Publications and Presentations

In this article, we explore how crime and institutions affect the flow of capital in the form of foreign direct investment (FDI) to Latin American and Caribbean countries in the primary, secondary and tertiary sectors during the 1996-2010 period. We use three different variables related to violent crime: homicides, crime victimization, and an index of organized crime. We find that there is a correlation between the institutional and crime variables, where the significance of institutional variables tends to disappear when the crime variables are added to the model. We find that higher crime victimization and organized crime are associated with ...


Living With The Trilemma Constraint: Relative Trilemma Policy Divergence, Crises, And Output Losses For Developing Countries, Joshua Aizenman, Hiro Ito Apr 2014

Living With The Trilemma Constraint: Relative Trilemma Policy Divergence, Crises, And Output Losses For Developing Countries, Joshua Aizenman, Hiro Ito

Economics Faculty Publications and Presentations

This paper investigates the potential impacts of the degree of divergence in open macroeconomic policies in the context of the trilemma hypothesis. Using an index that measures the relative policy divergence among the three trilemma policy choices, namely monetary independence, exchange rate stability, and financial openness, we find that emerging market countries have adopted trilemma policy combinations with the least degree of relative policy divergence in the last fifteen years. We find that a developing or emerging market country with a higher degree of relative policy divergence is more likely to experience a currency or debt crisis. However, a developing ...


The Effectiveness Of Public Development Banks: Designing Good Impact Evaluations, Alessandro Maffioli, Cesar M. Rodriguez Jan 2013

The Effectiveness Of Public Development Banks: Designing Good Impact Evaluations, Alessandro Maffioli, Cesar M. Rodriguez

Economics Faculty Publications and Presentations

PDB programs have become a fundamental ingredient of productive development policy strategies in most emerging economies. Although the overall need for these interventions is rarely questioned, academics and policymakers often debate their effectiveness, as well as the optimal approaches and instruments necessary to implement them. Therefore, the need to produce rigorous evaluations of PDBs has become increasingly relevant for both government and civil society (see Chapter 2).

This chapter presents the main concepts and operational arguments regarding the execution of indepth impact evaluations of PDB initiatives and instruments. For a more practical approach, these arguments are presented with examples of ...


Assessing The Impact Of Cluster Policies: The Case Of The Arranjos, Lucas Figal Garone, Alessandro Maffioli, Cesar M. Rodriguez, Gonzalo Vazquez Bare, Joao Alberto Denegri Nov 2012

Assessing The Impact Of Cluster Policies: The Case Of The Arranjos, Lucas Figal Garone, Alessandro Maffioli, Cesar M. Rodriguez, Gonzalo Vazquez Bare, Joao Alberto Denegri

Economics Faculty Publications and Presentations

This paper assesses the impact of a cluster development policy in Latin America. A Local Productive Arrangement (APL) is a cluster of firms within the same territory, operating around the same activity and maintaining ties of cooperation and learning among themselves and with other stakeholders. Using firm-level data comprising information on SMEs from Brazil for the years 2002 to 2009 we apply fixed effects, matching and reweighting methods to estimate both the direct and the indirect – i.e. spillovers – causal effect of participating in APLs on a series of SMEs’ performance indicators, including level of employment, value of exports and ...


The “Impossible Trinity” Hypothesis In An Era Of Global Imbalances: Measurement And Testing, Joshua Aizenman, Menzie David Chinn, Hiro Ito Apr 2012

The “Impossible Trinity” Hypothesis In An Era Of Global Imbalances: Measurement And Testing, Joshua Aizenman, Menzie David Chinn, Hiro Ito

Economics Faculty Publications and Presentations

We outline new metrics for measuring the trilemma aspects: exchange rate flexibility, monetary independence, and capital account openness, taking into account recent substantial international reserve accumulation. Since 2000, the trilemma variables in emerging markets have converged towards intermediate levels, characterizing by managed flexibility, using sizable international reserves as a buffer while retaining some degree of monetary autonomy. We test the linearity of the trilemma, and find that the weighted sum of the three trilemma variables adds up to a constant. Thus, a rise in one trilemma variable should be traded-off with a drop of the weighted sum of the other ...


Veblen’S Predator And The Great Crisis, John B. Hall, Iciar Dominguez-Lacasa, Jutta Günther Jan 2012

Veblen’S Predator And The Great Crisis, John B. Hall, Iciar Dominguez-Lacasa, Jutta Günther

Economics Faculty Publications and Presentations

With this inquiry we attribute cause for the current and “Great Crisis” to Veblen’s predator. After summarizing origins and manifestations of this crisis we juxtapose Veblen’s emphasis upon the predator to other potential causes for crisis and crises. Noted to have emerged when our stock of human knowledge provided for the creation of surplus, Veblen’s predator is presented as capable of metamorphosis and also driving evolution of our capitalistic system: whether this means emerging as the businessman in the “era of the machine,” or the investment banker promoting a financial metaphysics in the current “era of finance.”


Subreption And Institutional Inquiry: Theoretical Philosophy And Evolutionary Thinking, John B. Hall, Alexander Dunlap Jan 2012

Subreption And Institutional Inquiry: Theoretical Philosophy And Evolutionary Thinking, John B. Hall, Alexander Dunlap

Economics Faculty Publications and Presentations

With this inquiry we respond to William Dugger‘s assertion that ―[s]ubreption is one of the least studied social phenomena of the twentieth century.‖ Our research seeks to fill a gap in the literature by clarifying subreption, and its origins in Philosophy to its importance in social science, and, especially, Institutional Inquiry. We conjecture that Thorstein Veblen borrows form Immanuel Kant‘s understanding of Erschleichung. In this respect, Veblen‘s understanding and use of subreption serves as conduit between its use in Roman law, through Kant‘s understanding, and on to what Veblen later introduces as an approach creatively ...


The Impact Of Public Credit Programs On Brazilian Firms, Joao Alberto Denegri, Alessandro Maffioli, Cesar M. Rodriguez Dec 2011

The Impact Of Public Credit Programs On Brazilian Firms, Joao Alberto Denegri, Alessandro Maffioli, Cesar M. Rodriguez

Economics Faculty Publications and Presentations

This paper analyzes the effectiveness of public credit lines in promoting the performances of Brazilian firms. We focus on the impact of the credit lines managed by BNDES and FINEP in fostering growth measured in terms of employment, labor productivity and export. For this purpose, we use a unique panel data set developed by the Instituto de Pesquisa Econômica Aplicada (IPEA), which includes information on both firm-level performances and access to public credit lines. This particular data setting allows us to use quasi-experimental techniques to control for selection bias when estimating the impact of the public credit lines. The core ...


The Financial Crisis, Rethinking Of The Global Financial Architecture, And The Trilemma, Joshua Aizenman, Menzie David Chinn, Hiro Ito Apr 2010

The Financial Crisis, Rethinking Of The Global Financial Architecture, And The Trilemma, Joshua Aizenman, Menzie David Chinn, Hiro Ito

Economics Faculty Publications and Presentations

This paper extends our previous paper (Aizenman, Chinn, and Ito 2008) and explores some of the unexplored questions. First, we examine the channels through which the trilemma policy configurations affect output volatility. Secondly, we investigate how trilemma policy configurations affect the output performance of the economies under severe crisis situations. Thirdly, we look into how trilemma configurations have evolved in the aftermath of economic crises in the past. We find that trilemma policy configurations and external finances affect output volatility mainly through the investment channel. While a higher degree of exchange rate stability could stabilize the real exchange rate movement ...


What Makes Developing Asia Resilient In A Financially Globalized World?, Hiro Ito, Juthathip Jongwanich, Akiko Terada-Hagiwara Dec 2009

What Makes Developing Asia Resilient In A Financially Globalized World?, Hiro Ito, Juthathip Jongwanich, Akiko Terada-Hagiwara

Economics Faculty Publications and Presentations

The pullbacks of capital inflows to developing Asia following the onset of the global financial crisis in 2008 have brought renewed attention to the role and benefits of financial globalization. A number of notable distinctions between the current global crisis and the Asian financial crisis have become evident. Solid domestic institutions, especially in the financial sector; swift policy responses; and a sound macroeconomic environment with adequate reserves have helped the region to manage well the adverse impacts of the global crisis. Empirical analysis examining the link between capital account openness and output volatility reveals that a developing country with a ...


Surfing The Waves Of Globalization: Asia And Financial Globalization In The Context Of Trilemma, Joshua Aizenman, Menzie David Chinn, Hiro Ito Nov 2009

Surfing The Waves Of Globalization: Asia And Financial Globalization In The Context Of Trilemma, Joshua Aizenman, Menzie David Chinn, Hiro Ito

Economics Faculty Publications and Presentations

Using the "trilemma indexes" developed by Aizenman et al. (2008) that measure the extent of achievement in each of the three policy goals in the trilemma—monetary independence, exchange rate stability, and financial openness—this paper examines how policy configurations affect macroeconomic performances with focus on the Asian economies. We find that the three policy choices do not matter for per capita economic growth. However, they do matter for output volatility and the medium-term level of inflation. Greater monetary independence is associated with lower output volatility while greater exchange rate stability implies greater output volatility, which can be mitigated if ...


A Cross-Country Empirical Analysis Of International Reserves, Yin-Wong Cheung, Hiro Ito May 2009

A Cross-Country Empirical Analysis Of International Reserves, Yin-Wong Cheung, Hiro Ito

Economics Faculty Publications and Presentations

Using data from more than 100 economies for the period of 1975 to 2005, we conduct an extensive empirical analysis of the determinants of international reserve holdings. Four groups of determinants, namely, traditional macro variables, financial variables, institutional variables, and dummy variables that control for individual economies’ characteristics are considered. We find that the relationship between international reserves and their determinants is significantly different between developed and developing economies and is not stable over time. The estimation results indicate that, especially during the recent period, a developed economy tends to hold a lower level of international reserves than a developing ...


U.S. Current Account Debate With Japan Then, With China Now, Hiro Ito Feb 2009

U.S. Current Account Debate With Japan Then, With China Now, Hiro Ito

Economics Faculty Publications and Presentations

This paper examines two U.S. current account deficit episodes, one in the 1980s and the other in the current 2000s, in which Japan and China, respectively, are the current account surplus countries that are criticized for contributing to the deficits. In both periods, U.S. policy makers pointed out the underdeveloped and closed financial markets of the current account surplus countries and advocated for these countries to fix the deficiencies, a position akin to the current “saving glut” argument. In both episodes, the current account surplus countries have criticized the United States for its low saving, especially public saving ...


Hysteresis In Unemployment: Evidence From Latin America, Matias Mednik, Cesar Rodriguez, Inder J. Ruprah Mar 2008

Hysteresis In Unemployment: Evidence From Latin America, Matias Mednik, Cesar Rodriguez, Inder J. Ruprah

Economics Faculty Publications and Presentations

This paper tests the hysteresis hypothesis in unemployment for 13 Latin American countries covering the period 1980-2005. The tests exploit the time series and the cross sectional variation of the series, and allows for cross section dependence and a different number of endogenously determined structural breakpoints. The findings give support to the hysteric dynamic hypothesis for the majority of the countries analyzed. The implications of the results have ramifications regarding macro-stabilization, structural reform, and the design of social safety protection.


Far-Flung Europe: What Is The Economic Impact Of Geography?, John Luke Gallup Mar 2008

Far-Flung Europe: What Is The Economic Impact Of Geography?, John Luke Gallup

Economics Faculty Publications and Presentations

Several Western European countries have integral territory thousands of miles from continental Europe. The economic performance in these "outermost" regions tests the impact of geographical isolation in a high income, institutionally uniform setting quite different from the geographical challenges of poor, agriculturally dependent developing countries. The European regional data used have different starting years by country. This required the derivation of a new non-linear estimation model for cross-regional growth. The outermost regions converge to national income levels of continental Europe at least as fast as other poor continental regions, showing no special impact of geography on economic growth. Looking at ...


Price-Based Measurement Of Financial Globalization: A Cross-Country Study Of Interest Rate Parity, Hiro Ito, Menzie David Chinn Aug 2007

Price-Based Measurement Of Financial Globalization: A Cross-Country Study Of Interest Rate Parity, Hiro Ito, Menzie David Chinn

Economics Faculty Publications and Presentations

We characterize the relationship between ex post exchange rate depreciation and the interest differential for a set of countries that spans both developed and emerging market economies. The measured ex post uncovered interest differentials in terms of both levels and absolute values are then related to measures of trade and financial openness, financial development, government budget balances, institutional development, and exchange rate regimes. We find that there is wide diversity in the coefficient relating depreciations and interest differentials. Some of these differing results can be attributed to differences in inflation volatility, financial development, trade openness, capital account openness, legal development ...


What Matters For Financial Development? Capital Controls, Institutions, And Interactions, Menzie David Chinn, Hiro Ito May 2005

What Matters For Financial Development? Capital Controls, Institutions, And Interactions, Menzie David Chinn, Hiro Ito

Economics Faculty Publications and Presentations

We extend our earlier work, focusing on the links between capital account liberalization, legal and institutional development, and financial development, especially that in equity markets. In a panel data analysis encompassing 108 countries and twenty years ranging from 1980 to 2000, we explore several dimensions of the financial sector. First, we test whether financial openness can lead to equity market development when we control for the level of legal and institutional development. Then, we examine whether the opening of the goods sector is a precondition for financial opening. Finally, we investigate whether a well-developed banking sector is a precondition for ...


How Do The Asian Economies Compete With Japan In The Us Market, China Exceptional? A Triangular Trade Approach, Hiro Ito, Yushi Yoshida Oct 2004

How Do The Asian Economies Compete With Japan In The Us Market, China Exceptional? A Triangular Trade Approach, Hiro Ito, Yushi Yoshida

Economics Faculty Publications and Presentations

Political conflicts among trading partners have changed their forms with ever-increasing flows of foreign direct investment. A decrease in the exports of Japan might merely be a reflection of a global production shift by Japanese multinational corporations. We investigate the effect of Japanese trade on the exports of other countries to the United States in the 1990s. In our sample we include eight Asian countries besides the US and Japan. With the trade data disaggregated at the HS 4-digit level, we regress the exports of an Asian country to the US on the Japanese exports to the US and the ...


Was Japan’S Real Interest Rate Really Too High During The 1990s? The Role Of The Zero Interest Rate Bound And Other Factors, Hiro Ito Nov 2003

Was Japan’S Real Interest Rate Really Too High During The 1990s? The Role Of The Zero Interest Rate Bound And Other Factors, Hiro Ito

Economics Faculty Publications and Presentations

Japan’s more than a decade long “Great Recession” has presented a disconcerting case of what could happen if interest rates are bounded by zero and deflation sets in. Since Krugman (1998), the commonplace observation is that the deflationary situation combined with the zero nominal interest rate has caused elevated real interest rates, thereby nullifying monetary policy. This paper investigates this oft -cited claim and examines whether it is associated with anomalies in the way real interest rates are determined by employing an error correction model (ECM) based on the time-varying parameter model with Markov-switching variances. Using this model it ...


Ceo Turnover And Foreign Market Participation, Bruce A. Blonigen, Rossitza B. Wooster Mar 2003

Ceo Turnover And Foreign Market Participation, Bruce A. Blonigen, Rossitza B. Wooster

Economics Faculty Publications and Presentations

Anecdotal evidence suggests that new CEOs with foreign backgrounds direct their firms to become more international in their operations. We examine this hypothesis formally using data on U.S. S&P-500 manufacturing firms from1992 through 1997 and biographical information on CEOs’ birth and education locations that allow us to identify changes from U.S.- to foreign-connected CEOs. Robust to a variety of specifications, we find that a U.S. firm’s switch from a U.S. to a foreign CEO leads to substantial increases in the firm’s proportion of its foreign assets and foreign affiliate sales. In fact, our ...


Networking And Foreign Direct Investment Activity, Bruce A. Blonigen, Rossitza B. Wooster Sep 2002

Networking And Foreign Direct Investment Activity, Bruce A. Blonigen, Rossitza B. Wooster

Economics Faculty Publications and Presentations

We conduct an empirical investigation into whether networking effects affect foreign direct investment (FDI) activity. Using bibliographical information on CEOs’ birth and education locations, we are able to identify changes from U.S. to foreign-connected CEOs that occurred in U.S. manufacturing firms of the S&P 500 from 1992 through 1997. Robust to a variety of specifications, we find that a U.S. firm’s switch from a U.S.- to a foreign-connected CEO leads to substantial increases in the firm’s proportion of its assets and sales that are in foreign markets. In fact, our preferred specification indicates ...