Political risk and MNC's location decision - a dynamic perspective

This thesis builds a dynamic modeling tool for analyzing the impact of political risk on the production location decisions of multinational corporations (MNCs). The choice of location by MNCs involves various decisional factors and the time- dependent interactions among them. A sophisticated location analysis has to incorporate these complexities in a holistic perspective. The combined impact of learning and political risk on the location decision was studied in this thesis through computation simulation. The key findings are as follows. a) The cost of operating in a host country increases with increasing political risk. Hence, a country with high political risk receives increasing investment at a later point in time than a country with lower political risk. From a country’s national perspective, FDI policy makers need to focus on reducing the transaction cost due to political risk in order to receive earlier investments .b) An increased rate of learning by MNCs helps to reduce their transaction costs and this helps them expand internationally at an earlier stage compared to a slower learning MNC. A fast learning MNC in a risky environment can outpace a slow learner in terms of lower operating costs and profitability. It thus follows that MNCs need to consider the risk of the host country in combination with their learning capacity when evaluating international production locations. c) If the alternative location choice is a cheaper destination but has high political risk, smaller MNCs cannot gain a cost advantage by investing in such a host country because they lack economies of scale necessary to utilize this potential advantage. It only makes economic sense for large MNCs to move their production locations to riskier countries for cost advantages. Finally, the dynamic methodology employed in this thesis is a novel analytical contribution to the discipline of international business. By altering the variables in the simulation model, various scenario analyses specific to a firm and country can be performed which can be of value for FDI decision makers in a variety of settings including corporate strategy, marketing, finance and economic and social policy. (Author abstract)Rajamanickam, M. (2006). Political risk and MNC's location decision - a dynamic perspective. Retrieved from http://academicarchive.snhu.eduDoctor of Business Administration (D.B.A.)International BusinessSchool of Busines

Euro pricing of crude oil : an OPEC's perspective

This paper was also presented in the 24th annual meeting of MEEA in conjunction with Allied Social Sciences Association in San Diego, U.S.A., January 3-5, 2004Version of RecordIn the late 1970s and the early part of the 1980s, a debate emerged within the Long Term Strategy Committee of the Organization of Petroleum Exporting Countries (OPEC) whether to continue the pricing of crude oil in United States dollars or to shift to an alternative currency. This debate was rooted in the persistent decline in the value of the United States dollar relative to other global currencies. The choice of currencies available to price crude oil was limited for OPEC because of the inadequate liquidity of most other currencies. With the recent emergence of the euro, the issue of choice of currency for pricing crude oil has emerged once again for policy discussion. The current paper is focused on the implications of a shift in the pricing of crude oil from United States dollar to euro on OPEC members. Winners and losers are identified based on economic gains and losses. It is concluded that while such a policy would incrementally benefit OPEC en bloc, it would result in a disadvantage for the countries whose major trading partner is the United States and, therefore, would not be a Pareto optimal solution.Rajamanickam, M., Samii, M., & Thirunavukkarasu, A. (2004, September). Euro pricing of crude oil: An OPEC's perspective. Topics in Middle Eastern and North African Economies, 6. Retrieved from http://academicarchive.snhu.ed

Price transmission between Dow Jones Industrial Average, Standard & Poor 500 Index, Producer Price Index and Consumer Price Index

Version of RecordOur previous work on month effect in the DJIA, CPI and PPI led us to hypothesize that significant negative September effect that we found for the DJIA might have been caused by changes in the CPI and PPI. This led us to explore the nature of price transmission between the three (we add S&P 500 Index as well). Using VAR analysis and Granger causality analysis we find that the DJIA had a 2-month lagged impact on the CPI in the first two periods (1926-1945 and 1946-1972), and on the PPI in the second period (1946-1972); but in none of the three periods was the DJIA significantly impacted by the PPI or the CPI. For the period 1972-2003, the CPI and PPI were significantly unaffected by the DJIA and the S&P500 Index and also the DJIA and the S&P500 were also not affected significantly by the CPI and PPI. These results follow from both the VAR analysis and Granger causality tests.Hamid, S. A., Thirunnavukkarasu, A., & Rajamanickam, M. (2006). Price transmission between DJIA, S&P 500 Index, PPI and CPI (Working Paper No. 2006-05). Southern New Hampshire University, Center for Financial Studies

Euro Pricing of Crude Oil: An OPEC's Perspective

In the late 1970s and the early part of the 1980s, a debate emerged within the Long Term Strategy Committee of the Organization of Petroleum Exporting Countries (OPEC) whether to continue the pricing of crude oil in United States dollars or to shift to an alternative currency. This debate was rooted in the persistent decline in the value of the United States dollar relative to other global currencies. The choice of currencies available to price crude oil was limited for OPEC because of the inadequate liquidity of most other currencies. With the recent emergence of the euro, the issue of choice of currency for pricing crude oil has emerged once again for policy discussion. The current paper is focused on the implications of a shift in the pricing of crude oil from United States dollar to euro on OPEC members. Winners and losers are identified based on economic gains and losses. It is concluded that while such a policy would incrementally benefit OPEC en bloc, it would result in a disadvantage for the countries whose major trading partner is the United States and, therefore, would not be a Pareto optimal solution. I