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Begin New Search Topic Economics Political Geography United States Content Type Working Paper Publishing Institution Peterson Institute for International Economics

61. Home Bias, Transactions Costs, And Prospects For The Euro: A More Detailed Analysis

Author:
Catherine L. Mann and Ellen E. Meade
Publication Date:
07-2002
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
This paper brings together the literature on determination of home bias in equity holdings and the portfolio balance model of exchange rates to consider whether the dollar might be affected by a change in transactions costs that alters international portfolio allocations. Our empirical findings lend support to the view that transactions costs have a significant influence on US portfolio holdings, even after accounting for float market share. In addition, new survey evidence on the equity holdings of European firms indicates home bias for European investors, and points to a reduction in the magnitude of this home bias since 1997.
Topic:
Economics and International Trade and Finance
Political Geography:
United States and Europe

62. Moral Hazard and the U.S. Stock Market: Analyzing the “Greenspan Put”?

Author:
Marcus Miller, Paul Weller, and Lei Zhang
Publication Date:
01-2002
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
When the risk premium in the US stock market fell far below its historic level, Shiller (2000) attributed this to a bubble driven by psychological factors. As an alternative explanation, we point out that the observed risk premium may be reduced by one-sided intervention policy on the part of the Federal Reserve, which leads investors into the erroneous belief that they are insured against downside risk. By allowing for partial credibility and state dependent risk aversion, we show that this 'insurance'—referred to as the Greenspan put—is consistent with the observation that implied volatility rises as the market falls. Our bubble, like Shiller's, involves market psychology, but what we describe is not so much 'irrational exuberance' as exaggerated faith in the stabilizing power of Mr. Greenspan.
Topic:
Economics, Government, International Trade and Finance, and Political Economy
Political Geography:
United States

63. Finance and Changing US-Japan Relations: Convergence Without Leverage—Until Now

Author:
Adam S. Posen
Publication Date:
08-2001
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
In the postwar era, US-Japan economic relations have been characterized by substantial tensions, yet this has not damaged the underlying security relationship or critically harmed the multilateral economic framework. In fact, these two economies have become more integrated over time even as these tensions played out. These tensions, however, have required an enormous expenditure of political capital and officials' time on both sides of the Pacific and have led to foregone opportunities for institution building and policy coordination. They have deepened since Japan “caught up” with the United States around 1980, and Japanese and US firms began increasingly to compete for profits and market share in the same sectors. Moreover, as both the US and Japanese economies continue to mature – both in terms of the age of their populations and their industrial mix – they will likely face even greater tensions between them over allocating the management and costs of industrial adjustment.
Topic:
Economics, International Trade and Finance, and Political Economy
Political Geography:
United States, Japan, Israel, and East Asia

64. Foreign Direct Investment in China: Effects on Growth and Economic Performance

Author:
Edward M. Graham and Erika Wada
Publication Date:
04-2001
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
By almost all accounts, foreign direct investment (FDI) in China has been one of the major success stories of the past 10 years. Starting from a base of less than $19 billion in 1990, the stock of FDI in China rose to over $300 billion at the end of 1999. Ranked by the stock of inward FDI, China thus has become the leader among all developing nations and second among the APEC nations (only the United States holds a larger stock of inward FDI). China's FDI consists largely of greenfield investment, while inward FDI in the United States by contrast has been generated more by takeover of existing enterprises than by new establishment, a point developed later in this paper. The majority of FDI in China has originated from elsewhere in developing Asia (i.e., not including Japan). Hong Kong, now a largely self-governing “special autonomous region” of China itself, has been the largest source of record. The dominance of Hong Kong, however, is somewhat illusory in that much FDI nominally from Hong Kong in reality is from elsewhere. Some of what is listed as Hong Kong-source FDI in China is, in fact, investment by domestic Chinese that is “round-tripped” through Hong Kong. Other FDI in China listed as Hong Kong in origin is in reality from various western nations and Taiwan that is placed into China via Hong Kong intermediaries. Alas, no published records exist to indicate exactly how much FDI in China that is nominally from Hong Kong is in fact attributable to other nations.
Topic:
Economics, International Trade and Finance, and Political Economy
Political Geography:
United States, Japan, China, Israel, East Asia, Asia, and Hong Kong

65. Transatlantic Issues in Electronic Commerce

Author:
Catherine L. Mann
Publication Date:
10-2000
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
The global and dynamic e-commerce marketplace will increasingly impact the nature of national and international economic and government relations. This paper highlights three areas where the United States and European Union (EU) governments differ in their approaches as to how best to serve their domestic constituencies: treatment of trade flows, approach to tax regimes, manner of protecting personal data. Because the Internet marketplace is global but policy jurisdictions remain local, policy conflicts can develop. Policymakers on both sides need to harness technology and promote incentives for the private sector to help solve problems caused by the jurisdictional overlap. In addition to cross-border jurisdictional overlap, problems within a country can develop from issue convergence and policy overlap. That is, because the e-commerce marketplace is so integrated, the policy toward handling one issue, even within the national context, has implications for the policy set that is available to policymakers on other issues. Therefore, policies within a country must be more carefully meshed with each other with an eye toward consistency in the face of the forces of electronic commerce..
Topic:
Economics, International Trade and Finance, and Political Economy
Political Geography:
United States and Europe

66. Inflation, Monetary Transparency, and G3 Exchange Rate Volatility

Author:
Adam S. Posen and Kenneth N. Kuttner
Publication Date:
07-2000
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
Short-term volatility in G3 bilateral exchange rates has been a fact of life since the beginning of the post-Bretton Woods float. It has been established, surprisingly, that this volatility is not only disproportionately large relative to the variation in relative macroeconomic fundamentals of Germany, Japan, and the United States, but is in fact largely unrelated to them. The apparent disconnect between fundamentals and dollar-yen and dollar-euro exchange rate fluctuations has led to perennial complaints about persistent exchange rate “misalignments,” and their real effects on the G3 (and other) economies, giving rise in turn to recurring proposals for government policies to limit this volatility. The idea that volatility reflects nothing more than the (perhaps rational, certainly profit-seeking) behavior of foreign exchange traders seems to give justification for a policy response. Yet, the disjunction between macroeconomic expectations and the volatility seems to indicate as well that some deviation from domestic monetary policy goals would be necessary to intervene against exchange rate swings.
Topic:
Economics, International Trade and Finance, and Political Economy
Political Geography:
United States, Japan, and Germany

67. International Economic Agreements and the Constitution

Author:
Richard M. Goodman and John M. Frost
Publication Date:
02-2000
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
International agreements, such as the General Agreement on Tariffs and Trade (GATT) and the North American Free Trade Agreement (NAFTA), generally aim to facilitate the free flow of goods and services among nations. The U.S. Supreme Court has developed a jurisprudence similarly aiming to facilitate the free flow of goods and services among the several states. That jurisprudence has developed from litigation challenging the constitutionality of state actions on the basis of the Commerce and Supremacy Clauses of the Constitution (art. I, § 8, cl. 3, and art. VI, cl. 2). In some subject areas, Commerce Clause decisions closely align with international agreements. In other areas, either or both fall short of achieving economic integration.
Topic:
Economics, Government, International Trade and Finance, and Political Economy
Political Geography:
United States and North America