Conventions in the Foreign Exchange Market:Do they really explain Exchange Rate Dynamics?

The present paper provides a new explanation for the dynamics of exchange rates based on conventions that prevail among market participants. The model relies on a two states Markov switching framework: a bull state and a bear state. In the bull state, agents are optimistic and put more weight on positive news about the domestic economy inducing an appreciation of the domestic currency. In the bear state, agents are pessimistic and overweight negative news associated to the domestic economy leading to a depreciation of the domestic currency. Results show that market switches between a bull state and a bear state explain the dynamics of the euro/dollar exchange rate between January 1995 and December 2008. Besides, the model highlights the life-cycle of conventions in the foreign exchange market and provides lessons for public authorities to reduce exchange rate volatility. Eventually, the model offers a solution to the exchange rate disconnection puzzle.Exchange Rate Dynamics, Convention Theory, Imperfect

Globalisation and the competitiveness of the euro area

Against the background of increasing competition and other significant structural changes implied by globalisation, maintaining and enhancing competitiveness has evolved into one of the prime concerns in most countries. Following up on previous work (see in particular ECB Occasional Papers No. 30 and No. 55), this Occasional Paper examines the latest developments and prospects for the competitiveness and trade performance of the euro area and the euro area countries. Starting from an analysis of most commonly used, traditional competitiveness indicators, the paper largely confirms the findings of previous studies that there have been substantial adjustments in euro area trade. Euro area firms have taken advantage of the new opportunities offered by globalisation, and have at the same time been increasingly challenged by emerging economies. This is primarily reflected in the loss of export market shares which have been recorded over the last decade. While these can partly be related to the losses in the euro area’s price competitiveness, further adjustment also seems warranted with regard to the export specialisation. Compared with other advanced competitors, the euro area remains relatively more specialised in labourintensive categories of goods and has shown only a few signs of a stronger specialisation in research-intensive goods. Nevertheless, the paper generally calls for a more cautious approach when assessing the prospects for euro area competitiveness, as globalisation has made it increasingly difficult to define and measure competitiveness. Stressing the need to take a broader view on competitiveness, specifically with a stronger emphasis on productivity performance, the paper also introduces a more elaborate framework that takes into account the interactions between country-specific factors and firm-level productivity. It thus makes it possible to construct more broadly defined competitiveness measures. Pointing to four key factors determining the global competitiveness of euro area countries – market accessibility, market size, technological leadership of firms and institutional set-up – the analysis provides further arguments for continuing efforts to increase market integration and strengthen the competitive environment within Europe as a mean of enhancing resource allocation and coping with the challenges globalisation creates. JEL Classification: F15, F43, O52Globalisation, competitiveness, productivity

Globalisation and euro area trade: Interactions and challenges

As a major player in world trade, the euro area is strongly influenced by globalisation, but is far from being a passive spectator. The paper analyses how the euro area’s trade specialization has changed in response to stronger international competition and the emergence of new global players, evaluating results and possible challenges ahead. The message remains mixed. On the positive side, the export specialisation of the euro area is increasing in some mediumhigh or high-tech sectors where productivity growth is strong and demand robust, such as pharmaceuticals, also by a more intensive recourse to importing intermediate goods from low-cost countries. On the other hand, in comparison to other industrialised economies, the euro area has been somewhat slower in moving towards research-intensive goods and away from labour-intensive sectors. While this could reflect data classification issues, it may also be a sign of structural rigidities in the euro area, which hinder adjustment processes.

Globalisation and the competitiveness of the Euro area

Against the background of increasing competition and other significant structural changes implied by globalisation, maintaining and enhancing competitiveness has evolved into one of the prime concerns in most countries. Following up on previous work (see in particular ECB Occasional Papers No. 30 and No. 55), this Occasional Paper examines the latest developments and prospects for the competitiveness and trade performance of the euro area and the euro area countries. Starting from an analysis of most commonly used, traditional competitiveness indicators, the paper largely confirms the findings of previous studies that there have been substantial adjustments in euro area trade. Euro area firms have taken advantage of the new opportunities offered by globalisation, and have at the same time been increasingly challenged by emerging economies. This is primarily reflected in the loss of export market shares which have been recorded over the last decade. While these can partly be related to the losses in the euro area’s price competitiveness, further adjustment also seems warranted with regard to the export specialisation. Compared with other advanced competitors, the euro area remains relatively more specialised in labour-intensive categories of goods and has shown only a few signs of a stronger specialisation in research-intensive goods. Nevertheless, the paper generally calls for a more cautious approach when assessing the prospects for euro area competitiveness, as globalisation has made it increasingly difficult to define and measure competitiveness. Stressing the need to take a broader view on competitiveness, specifically with a stronger emphasis on productivity performance, the paper also introduces a more elaborate framework that takes into account the interactions between country-specific factors and firm-level productivity. It thus makes it possible to construct more broadly defined competitiveness measures. Pointing to four key factors determining the global competitiveness of euro area countries – market accessibility, market size, technological leadership of firms and institutional set-up – the analysis provides further arguments for continuing efforts to increase market integration and strengthen the competitive environment within Europe as a mean of enhancing resource allocation and coping with the challenges globalisation creates.Globalisation, competitiveness, productivity

Are regional institutional factors determinants of the capital structure of SMEs?

This paper analyses the role that institutional factors play in explaining differences in the capital structure of small and medium-sized enterprises (SMEs) across regions belonging to a single country. Specifically, it studies the effect of the development of the financial sector and of the economic situation on leverage of firms. Furthermore, the standard firm-factor determinants of debt, such as firm size, asset structure, profitability, growth, business risk and age are also incorporated. For this empirical study, we use a sample of 638 SMEs representing every Spanish region for the period 1999-2007, and apply the panel data methodology. Our results suggest that the capital structure depends on the regional financial sector and the regional economic situation which implies that institutional factors at regional level help to better explain financing decisions of SMEs

Vertical stratification of selected Hymenoptera in a remnant forest of the Po Plain (Italy, Lombardy) (Hymenoptera: Ampulicidae, Crabronidae, Sphecidae)

Communities of the canopy of temperate forests are still relatively unexplored. Furthermore, very little is known on how vertical stratification for some insect groups is related to biological strategies. In this study, we investigated the community composition of both canopy and understory of the families Ampulicidae, Crabronidae and Sphecidae (Hymenoptera) of the Natural Reserve of "Bosco della Fontana", a remnant lowland forest in northeastern Italy. Observed patterns in vertical stratification have been related to species foraging habits. Our study reveals that the bulk of the community of Spheciformes of the understory consists of species predating dipterans and spiders, while species associated with the canopy are mainly predators of sap-sucking honeydew producers and epiphyte grazers, like aphids, thrips, and barkflies. Comparing the communities of canopy and understory may lead to a better understanding of species ecology and provides useful information to forest managers

Modelling the positioning of single needle electrodes for the treatment of breast cancer in a clinical case

Background: Breast cancer is the most common cancer in women worldwide and is the second most common cause of cancer death in women. Electrochemotherapy (ECT) used in early-phase clinical trials for the treatment of primary breast cancer resulted in a not complete tumor necrosis in most cases. The present study was undertaken to analyze the feasibility to use ECT to treat patients with histologically proven unifocal ductal breast cancer. In particular, results of ECT treatment in a clinical case are compared with the ones of a simplified 3D dosimetric model. Methods: This clinical study was conducted with the pulse generator Cliniporator Vitae (IGEA, Carpi, Italy). ECT procedures were performed according to ESOPE standard operating procedures. Five single needle electrodes were used with one positioned in the center of the tumor, and the other four distributed around the nodule. Histological images of the resected tumor are compared with the maps of the electric field obtained with a simplified 3D model in Comsol Multiphysics v 4.3. Results: The results of the clinical case demonstrated a reduced efficacy of the ECT treatment described. The proposed simple numerical model of the breast tumor located in a low conductive tissue suggests that this is due to the reduced electric field induced inside the tumor with such 5 electrodes placement. However, where the electric field is predicted higher than the reversible electroporation threshold (E > 400 V/cm), also the histological images confirm the necrosis of the target with a good agreement between the modeled and clinical results. Conclusions: The results suggest the dependence of the effectiveness of the treatment on the careful placement of the electrodes. A detailed planned procedure for the tumor analysis after the treatment is also needed in order to better correlate the single electrode positions and the histological images. Simulation models could be used to identify better electrodes configuration in planning the experimental protocol for ECT treatment of breast tumors

A rush of blood to the head: Temporal dimensions of retrenchment, environment and turnaround performance

In this work we test the general assumption in the turnaround literature that time is critical for firm survival, especially during the retrenchment stage.We study three time dimensions of change at this stage: timing, speed and rhythm. Drawing on the downward spiral and threat-rigidity perspectives, we posit that the positive impact these time dimensions have on turnaround performance is highly contingent on two types of environment. Our findings, based on a sample of 263 declining US firms over a 26-year period (1983e2009), demonstrate that an early timing of retrenchment has a positive impact on performance when the environment is munificent. On the contrary, an early timing has a negative impact when the environment is dynamic. We also note that a fast pace of retrenchment positively impacts firm performance in dynamic environments. Finally, we find that declining firms display better performances when following an irregular rhythm of retrenchment, both in highly munificent and highly dynamic environments. Our results indicate that, in general, declining firm performance improves with time-aggressive retrenchment actions in both types of environment. We discuss the contribution of our research to the turnaround literature, and the downward spiral and threat-rigidity perspective

Sensory and physico-psychological metaphor comprehension in children with ASD. A preliminary study on the outcomes of a treatment

Recent research into difficulties in figurative language in children with ASD highlighted that it is possible to devise training interventions to overcome these difficulties by teaching specific strategies. This study describes how children with ASD can improve their capability to explain metaphors with a treatment. Two types of metaphors, in the “X is Y” form, were addressed: sensory and physico-psychological. To face the difficulties posed by these metaphors, the adult taught two strategies: inserting the connective “is like” between “X” and “Y”, which transforms the metaphor into a simile; comparing “X” and “Y” by means of thinking maps. Two tests of metaphor comprehension were used, one based on sensory and the other on physico-psychological metaphors. Sixteen 10 year-old children participated into the study, including an experimental group formed by 8 children with ASD (n = 4) which had received the treatment, and a control group (n = 4) which had not, and 8 typically-developing (TD) children. At the post-test, the experimental group significantly outperformed the controls in explaining both types of metaphors, but only in the sensory metaphors did their performances reach TD children’s levels. These results illuminate how clinical treatment can positively influence the developmental trajectories of metaphor comprehension

Multiple scale theory of topology driven pattern on directed networks

Dynamical processes on networks are currently being considered in different domains of cross-disciplinary interest. Reaction-diffusion systems hosted on directed graphs are in particular relevant for their widespread applications, from neuroscience, to computer networks and traffic systems. Due to the peculiar spectrum of the discrete Laplacian operator, homogeneous fixed points can turn unstable, on a directed support, because of the topology of the network, a phenomenon which cannot be induced on undirected graphs. A linear analysis can be performed to single out the conditions that underly the instability. The complete characterization of the patterns, which are eventually attained beyond the linear regime of exponential growth, calls instead for a full non linear treatment. By performing a multiple time scale perturbative calculation, we here derive an effective equation for the non linear evolution of the amplitude of the most unstable mode, close to the threshold of criticality. This is a Stuart-Landau equation whose complex coefficients appear to depend on the topological features of the embedding directed graph. The theory proves adequate versus simulations, as confirmed by operating with a paradigmatic reaction-diffusion model