Pricing in International Markets: a 'Small-Country' Benchmark

This study examines export pricing to market (PTM) in a ‘small-country’ context using a panel of disaggregated exports from Hong Kong since 1992. Conventional wisdom is that PTM is commonplace – except for U.S. exports. This study provides a benchmark by which to interpret the puzzling behavior of U.S. export prices. Empirically, Hong Kong’s export price behavior is comparable to that from the U.S. This similarity reinforces the idea that PTM behavior is also a function of home market conditions and the ability to price discriminate across markets. There is little evidence of differences in PTM across Hong Kong’s export destinations.pricing to market, small-country

The common state filter for SLAM

This paper presents the Common State Filter (CSF), a novel and efficient suboptimal Multiple Hypothesis SLAM (MHSLAM) method for Kalman Filter-based SLAM algorithms. Conventional MHSLAM algorithms require the entire vehicle and map state to be copied for each hypothesis. The CSF, by contrast, maintains a single, common instance of the vast majority of the map and only copies the map portion that varies substantially across different hypotheses. We demonstrate the performance of the algorithm on the Victoria Park data set. ©2008 IEEE

Avoiding negative depth in inverse depth bearing-only SLAM

In this paper we consider ways to alleviate negative estimated depth for the inverse depth parameterisation of bearing-only SLAM. This problem, which can arise even if the beacons are far from the platform, can cause catastrophic failure of the filter.We consider three strategies to overcome this difficulty: applying inequality constraints, the use of truncated second order filters, and a reparameterisation using the negative logarithm of depth. We show that both a simple inequality method and the use of truncated second order filters are succesful. However, the most robust peformance is achieved using the negative log parameterisation. ©2008 IEEE

Exchange Rate Pegs and Foreign Exchange Exposure in East Asia

This paper shows that many East Asian firms are significantly exposed to foreign exchange risk. Their exposure appears to be much more widespread than is typical for the large, western industrialized economies. The paper also shows that exchange rate pegs appear to do little to alleviate this widespread exposure against currencies other than the peg. The East Asian firms studied here are most exposed to fluctuations in the U.S. dollar, and the mark and yen are important in a few countries. The extent of their exchange rate exposure has varied, but not diminished, over the last decade. The most widespread exchange rate sensitivity (not just the most exchange rate fluctuation) occurred during the Asian Crisis period; this is evident even after accounting for the local macroeconomic conditions that affect aggregate local returns.foreign exchange exposure, exchange rate pegs, east asia

Japan's trade surplus

Japan ; International trade - Japan

INFLATION AND PRICE DISPERSION IN EQUITY MARKETS AND IN GOODS AND SERVICES MARKETS

An empirical link between inflation and price dispersion has been well established in goods and services markets – both across time periods and across countries. However, the economic interpretation of this link has been typically frustrated by the observational equivalence of the predictions of the prominent theories. This prompts us to take a new approach. Specifically, we examine the link between inflation and price dispersion in an empirical setting patently lacking the market characteristics central to these theories (i.e., menu costs, or relative/aggregate confusion). In particular, we benchmark the inflation-dispersion link in goods and services markets with a matched panel of equity market prices. Surprisingly, we find that a link – comparable to that found in markets for goods and services – does exist in the equity market. Moreover, we find that our results are not due to a potentially important, but generally overlooked, bias that is present in many existing studies. Our results suggest that the debate over the factors responsible for the inflation/price dispersion link should be broadened to account for the asset market links we document.relative price variability, stock markets, goods markets, inflation

Sudden Deaths: Taking Stock of Geographic Ties

Analysis of a world-wide sample of sudden deaths of politicians reveals a market adjusted 1.7% decline in the value of companies headquartered in the politician’s home town. The decline in value is followed by a drop in the rate of growth in sales and access to credit. Our results are particularly pronounced for family firms, firms with high growth prospects, firms in industries over which the politician has jurisdiction, and firms headquartered in highly corrupt countries.

The Micro-foundations of Big Mac Real Exchange Rates

The real exchange rate is said to be the single most important price in an economy. While we used to think that we knew what explained its movements (e.g., the Balassa-Samuelson effect), the recent much-cited result by Engel (1999) proposes a serious reinterpretation – i.e., nearly 100% of the movements in the U.S. real exchange rate are explained by deviations from the law of one price. Engel’s finding holds even in the medium run, when movements in the relative price of non-tradables between countries, were thought to be of paramount importance. In this project, we study the movement of real exchange rates based on the prices of Big Macs (which we show are highly correlated with the CPIbased real exchange rates). Our main innovation is to match these prices to the prices of individual ingredients (ground beef, bread, lettuce, labor cost, rent, etc.) in 34 countries during 1990–2002. There are a number of advantages associated with our approach. First, unlike the CPI real exchange rate, we can measure the Big Mac real exchange rate in levels in an economically meaningful way. Second, unlike the CPI real exchange rate for which the attribution to tradable and non-tradable components involves assumptions on the weights and the functional form, we (almost) know the exact composition of a Big Mac, and can estimate the tradable and non-tradable components relatively precisely. Third, we can study the dynamics of the real exchange rate in a setting that is free of the productaggregation bias (argued by Imbs, Mumtaz, Ravn, and Rey, 2002, to be important in studies on CPI real exchange rates), the temporal aggregation bias (argued to be important by Taylor, 2001), or the bias generated by non-compatible consumption baskets across countries. Fourth, we show that Engel's result that deviation from the law of one price is all that matters does not hold generally. Furthermore, deviations from his result can be systematically explained.Real exchange rates; TAR models

In Search of a Euro Effect: Big Lessons from a Big Mac Meal?

We investigate whether the adoption of the euro was accompanied by an increase in prices in member countries, and whether it promoted goods market arbitrage in the form of faster convergence to a common price. By comparing the experience of eurozone countries to non-euro European countries in a ‘difference-in-differences’ specification we net out effects on prices unrelated to the euro. We conclude that (a) there is no evidence of significant price increases associated with the adoption of the euro even for food items; and (b) there is little systematic evidence of a significant improvement in goods market integration following the euro’s introduction.