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1881. Taking Stock of Business: Public Opinion After the Corporate Scandals

Author:
Karlyn H. Bowman and Todd J. Weiner
Publication Date:
11-2003
Content Type:
Working Paper
Institution:
American Enterprise Institute for Public Policy Research
Abstract:
More than a dozen corporate scandals have unfolded since December 2001. How have ordinary Americans reacted? One answer can be provided by the performance of the stock market. Another indicator is public opinion. As some of the key trials get underway, it's worth examining the polls to see how the scandals have affected perceptions of business. The results should provide some warning flags for Congress as that institution takes a closer look at the mutual fund industry.
Topic:
Economics, Government, and International Trade and Finance
Political Geography:
United States and America

1882. Politics and Property in Transitional Economies: A Theory of Elite Opportunity

Author:
Andrew G. Walder
Publication Date:
04-2003
Content Type:
Working Paper
Institution:
Walter H. Shorenstein Asia-Pacific Research Center
Abstract:
Command economies gave communist-era elites administrative control and material privilege but severely restricted money income and private wealth. Markets and privatization inject new value into public assets and create unprecedented opportunities for elite insiders to extract incomes or assume ownership. These opportunities vary with the extensiveness of regime change and the barriers to asset appropriation. Within these limits, they further vary with the concentration and form of economic assets and structural changes induced by reform. Elite advantages are smallest where regime change is extensive and barriers to asset appropriation are high, and in small-scale economies that grow rapidly. In China, there has been no regime change and privatization has been delayed and slow. In the rural economy, elites keep their posts as a source of economic advantage, while low entry barriers to household enterprise and rapid growth have created new entrepreneurial elites. After two decades, rural officials nonetheless enjoy large net income advantages that grow along with the expansion of labor markets and private entrepreneurship. These are not generic outcomes of market reform, but the product of market reform in distinctive political and structural conditions.
Topic:
Communism, Economics, Government, and International Trade and Finance
Political Geography:
China and Asia

1883. Fundusz Mikro An Experiment In Partnership–Based Microfinance 1998 – 2002.

Author:
Witold Szwajkowski
Publication Date:
10-2003
Content Type:
Working Paper
Institution:
Aspen Institute
Abstract:
Fundusz Mikro's evolution has to be understood in the context of Poland's emergence from communism during the 1990s. For businesses, the challenge of that time was not merely to learn new skills, but to unlearn old habits and attitudes while at the same time taking on new ones appropriate to a market economy. Because of this shift, Fundusz Mikro (FM) found that it had to do more than lend money; it had to learn to play a more pro-active role in changing the culture in which business took place. The financial crisis of1998 and the harder economic times since then were an added incentive for FM to adapt its approach, products, and finally its mission.
Topic:
Economics, Emerging Markets, and International Trade and Finance
Political Geography:
Europe and Poland

1884. The Chinese Economy: WTO, Trade, and U.S.-China Relations

Author:
Barry Naughton
Publication Date:
01-2003
Content Type:
Working Paper
Institution:
Aspen Institute
Abstract:
The Chinese economy is showing extraordinary dynamism, which partly reflects the early impact of the commitments in China's WTO accession agreement to liberalize the economy. Incoming foreign investment has increased, and trade has grown rapidly. At the same time, China is grappling with serious economic problems that may worsen in the near future. The most difficult problem in crafting China policy is deciding how to respond flexibly to this extraordinary mixture of dynamism and fragility. Rapid growth gives the Chinese economy remarkable resilience; but deep-seated institutional weakness and stubborn problems of poverty and unemployment create dangers of social and economic disruption. An effective U.S. China policy must navigate between the extremes of over-estimating China's current economic strength and under-estimating her potential.
Topic:
Economics, International Political Economy, and International Trade and Finance
Political Geography:
United States, China, and Asia

1885. The Effect of Exchange Rates on Prices, Wages, and Profits: A Case Study of the United Kingdom in the 1990s

Author:
Joseph E. Gagon
Publication Date:
09-2003
Content Type:
Working Paper
Institution:
Board of Governors of the Federal Reserve System
Abstract:
During the 1990s the United Kingdom experienced large and sudden exchange rate movements that had no apparent impact on overall consumer prices. This paper shows that the stability of U.K. consumer prices was made possible in part by offsetting movements in the price-cost margins of foreign exporters and in part by offsetting price-cost margins in the U.K. distribution sector. At the same time, U.K. manufacturers experienced margin swings in the opposite direction, largely due to their role as exporters. Thus, sterling depreciation boosted the profits of U.K. manufacturers and squeezed the profits of U.K. distributors, while sterling appreciation had the opposite effects.
Topic:
Economics, International Trade and Finance, and Science and Technology
Political Geography:
United Nations

1886. News or Noise? An Analysis of Brazilian GDP Announcements

Author:
Rebeca de la Rocque Palis, Roberto Luis Olinto Ramos, and Patrice Robitaille
Publication Date:
08-2003
Content Type:
Working Paper
Institution:
Board of Governors of the Federal Reserve System
Abstract:
Revisions to GDP announcements in many countries are often large, and Faust, Rogers, and Wright (2003) have found that G-7 GDP revisions are predictable to varying degrees. In this paper, we extend FRW to study revisions to Brazilian GDP announcements. We document that revisions to Brazilian GDP are large relative to those of G-7 countries. Brazilian GDP revisions are also predictable, which is consistent with the view that GDP revisions correct errors in preliminary GDP rather than reflect news. However, GDP revisions are far from being entirely predictable. Although GDP revisions are largest only one year following the initial GDP release, those revisions are nearly unpredictable.
Topic:
International Relations, Economics, and International Trade and Finance
Political Geography:
Brazil and South America

1887. The Effect of Exchange Rate Fluctuations on Multinationals' Returns

Author:
Jane Ihrig and David Prior
Publication Date:
08-2003
Content Type:
Working Paper
Institution:
Board of Governors of the Federal Reserve System
Abstract:
<p>This paper examines if the type of exchange rate used or size of the movement in the exchange rate matters in estimating exchange-rate exposure of U.S. nonfinancial multinationals. We find that switching from a broad trade-weighted exchange rate to a 2-digit SIC industry exchange rate increases the number of significantly exposed firms in a simple Jorion (1990) regression by 60 percent. Then separating crisis from non-crisis months we find additional evidence of exposure. Although the value of exposure does not change with the size of the exchange rate movement, we find some firms have significant exposure only in crisis periods while others have significant exposure only during normal fluctuations in exchange rates. All told, we find about 1 in 4 firms' returns is significantly affected by movement in the exchange rate between 1995 and 1999. </p><blockquote><p> </p> </blockquote><p> </p><p> </p>
Topic:
International Relations, Economics, and International Trade and Finance
Political Geography:
United States

1888. Loans to Japanese Borrowers

Author:
David C. Smith
Publication Date:
07-2003
Content Type:
Working Paper
Institution:
Board of Governors of the Federal Reserve System
Abstract:
This paper examines the characteristics of loans to Japanese borrowers using a relatively unexplored, contract-specific data set. I find that Japanese banks charge less on loans to Japanese borrowers than do foreign banks, holding constant many of the risk characteristics of the borrower. Moreover, Japanese banks vary pricing less across these risks than do foreign banks, suggesting that Japanese banks tend not to distinguish good risks from bad. Taken together, the results suggest that problems at Japanese banks stem from the behavior of the banks themselves, not simply from poor economic conditions. I also document a significant shortening in the maturity structure of Japanese loans in the late 1990s.
Topic:
Economics, Emerging Markets, and International Trade and Finance
Political Geography:
Japan and Israel

1889. U.S. Investors' Emerging Market Equity Portfolios: A Security-Level Analysis

Author:
Francis E. Warnock and Hali J. Edison
Publication Date:
07-2003
Content Type:
Working Paper
Institution:
Board of Governors of the Federal Reserve System
Abstract:
We analyze a unique data set and uncover a remarkable result that casts a new light on the home bias phenomenon. The data are comprehensive, security-level holdings of emerging market equities by U.S. investors. We document, as expected, that at a point in time U.S. portfolios are tilted towards firms that are large, have fewer restrictions on foreign ownership, or are cross-listed on a U.S. exchange. The size of the cross-listing effect is striking. In contrast to the well-documented underweighting of foreign stocks, emerging market equities that are cross-listed on a U.S. exchange are incorporated into U.S. portfolios at full international CAPM weights. Our results suggest that information asymmetries play an important role in equity home bias and that the benefits of international risk sharing are limited to select firms.
Topic:
Economics, Emerging Markets, and International Trade and Finance
Political Geography:
United States

1890. Cross-Border Listings, Capital Controls, and Equity Flows to Emerging Markets

Author:
Francis E. Warnock and Hali J. Edison
Publication Date:
07-2003
Content Type:
Working Paper
Institution:
Board of Governors of the Federal Reserve System
Abstract:
We analyze capital flows to emerging markets in a framework that incorporates two quantitative measures of financial integration, the intensity of capital controls and the extent of cross-border listings, while controlling for traditional global (push) and country-specific (pull) factors. Two important results emerge. First, the cross-listing of an emerging market firm on a U.S. exchange is an important but short-lived capital flows event, suggesting that the cross-listed stock is in effect a new security that U.S. investors quickly bring into their portfolios. Second, the effect of financial liberalization on capital flows is more nuanced than is suggested by event studies: A reduction in capital controls results in increased inflows only when the controls were binding. Among the standard push and pull factors, global factors are important—slack U.S. economic activity is associated with increased flows to emerging markets—and U.S. investors appear to chase expected, but not past, returns.
Topic:
Economics, Emerging Markets, and International Trade and Finance
Political Geography:
United States