50 research outputs found

    Two Essays on Corporate Income Tax Rates and Foreign Direct Investment in the United States

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    This dissertation investigates the relationship between corporate income tax rates and inbound foreign direct investment in the United States. In the two essays presented, the first estimates the effect of the corporate income tax rate on FDI inflows, while controlling for other non-tax variables. The study uses time series data over the period 1957-2002 and employs cointegration techniques and error correction models to estimate the long run and the short run tax responses. The corporate income tax rate is found to exert a significant negative effect on total FDI inflows in the long run. A one percent decrease in the tax rate will increase total FDI by 2.4 percent. The tax rate is also found to exert significant negative effect on transfer funds in the long and short run. Tax rate elasticities are larger in absolute value terms for the transfer funds than for total FDI. In the long run reinvested component of FDI is not responsive to the U.S. corporate income tax rate. The second essay investigates whether the corporate income tax rate is an important determinant of inbound FDI by incorporating both host country and home country tax rates into the analysis. We find that inbound FDI shares a significantly negative relationship with the host country corporate income tax rate, and a positive relationship with the home country tax rates. This essay also examines whether investors’ decisions are affected differently by the various corporate taxation systems of the investing countries. Findings suggest that investors from exemption countries are more responsive to the U.S. corporate income tax rate than are those from tax credit countries. However, the groups are not systematically different in their response to home country corporate income tax rates

    An empirical analysis of price and income elasticities of Papua New Guinea's exports

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    A large body of trade literature focuses on analysing aggregate trade relationships, ignoring the sectoral dynamics. This study estimates both aggregated and disaggregated price and income elasticities of demand for Papua New Guinea's exports. We use co-integration and error-correction techniques under a single-equation functional form, with quarterly data spanning 1994 to 2006. Our results suggest that a long-run equilibrium relationship exists for total exports and for the two subsectors of exports: farming, forestry and fisheries, and minerals and petroleum.The results also suggest that the magnitude of the aggregated elasticities is significantly different from that of the disaggregated exports, implying that subsectors respond differently for identical changes in world prices and economic growth

    Efficacy of Information Extraction from Bar, Line, Circular, Bubble and Radar Graphs

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    With the emergence of enormous amounts of data, numerous ways to visualize such data have been used. Bar, circular, line, radar and bubble graphs that are ubiquitous were investigated for their effectiveness. Fourteen participants performed four types of evaluations: between categories (cities), within categories (transport modes within a city), all categories, and a direct reading within a category from a graph. The representations were presented in random order and participants were asked to respond to sixteen questions to the best of their ability after visually scanning the related graph. There were two trials on two separate days for each participant. Eye movements were recorded using an eye tracker. Bar and line graphs show superiority over circular and radial graphs in effectiveness, efficiency, and perceived ease of use primarily due to eye saccades. The radar graph had the worst performance. “Vibration-type” fill pattern could be improved by adding colors and symbolic fills. Design guidelines are proposed for the effective representation of data so that the presentation and communication of information are effective

    Military spending and economic growth in South Asia: a reply

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    We review some critical comments upon our earlier paper in this journal and respond to these. We also critically evaluate a proposed alternative methodology giving reasons why our own provides a more robust approach for examining the nexus between military spending and economic growth in South Asia

    An econometric analysis of Sri Lankan monetary policy shocks and exchange rates

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    A growing empirical literature has sought to determine the effects of monetary policy shocks on exchange rates and other important macroeconomic variables. This paper seeks to add to this literature in the area of emerging markets by using the Vector Auto-Regression (VAR) methodology in an attempt to examine the impacts of monetary policy changes on the exchange rate for Sri Lanka over the period 1950 to 2004. Following Kalyvitis and Michaelides (2001), we employ a five-variable VAR approach that encompasses an output measure, a price indicator, a monetary policy measure, an interest rate yardstick and the exchange rate. Using impulse response functions and analysis of variance decompositions, we find that the Sri Lankan exchange rate follows the pattern suggested by the standard exchange rate model with delayed overshooting. This study further suggests that standard monetary policy is not adequate by itself for controlling the Sri Lankan economy

    Estimation of the money demand function on a heterogeneous panel for selected Asian countries

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    Despite the large number and variety of studies examining the money demand function, only a few have a utilized panel data approach in estimating the open money demand function. This paper used the Pedroni panel cointegration approch aling with a fixed-effect estimation method to estimate the open money demand function for 12 selected countries over the period of 1974-2010. Cointegration test results indicate that money demand as measured by M1 and M2 shares a long run equilibrium relationship with key explanatory variables. As anticipated, we find that real GDP exerts significantly positive impacts in the demand for real money balances. Among other variables, the interest rate and the exchange rate are found to influence a negative impact on money demand of M1 in the 12 selected countries. We further find that, compared with M2, the cointegration relationship is much stronger for the M1 money demand function

    AVAR Analysis of the Impacts of Company Tax Rates on Foreign Direct Investment and other Macro-economic Variables in Australia

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    Taxation policy has been recognized as a main determinant of foreign direct investment (FDI). However, the effect of taxation policy on other key macro-economic variables of interest has received little attention in the literature. This paper seeks to establish the long-run effects of a change in the Australian company tax rate on inbound FDI and other Australian macro-economic variables using vector autoregression (VAR) analysis to account for the interrelatedness of the variables under consideration. Results indicate that FDI, real gross domestic product (GDP) and trade with the rest of the world are all responsive to a change in the company tax rate

    Determinants of Foreign Direct Investment: An Econometric Analysis

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    While numerous studies have set out to examine the impacts of important macroeconomic and policy variables on FDI inflows, many of these studies have focused on either a single or a small range of variables. The findings obtained through such an approach are of limited value, as it artificially isolates variables which, in the world of business and policy formation, are necessarily part of a package of considerations. In order to remedy this neglect, this paper draws in nine explanatory variables that have been found in separate studies and uses a large panel of 45 FDI recipient countries, over the period 1997-2004 to examine the issue. The study concludes that GDP, corporate income tax rates, exchange rates, interest rates, and the level of external trade exert significant impacts on the level of FDI inflows

    J-curve disparity between the goods sector and the services sector: evidence from Australia

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    The J-curve effect phenomenon suggests that the currency devaluation would worsen the trade balance in the short run, but improve it in the long run. This article uses quarterly Australian data over the period 1988 to 2011 to examine whether J-curve effects are different between the two main components of the trade account: the goods sector and the services sector. Using the bound testing approach to cointegration and error correction modelling, we find some evidence to support the J-curve phenomenon, but the impact of real exchange rate on the trade account seems complex. While the services sector displays a J-curve effect, the goods sector response is quite the opposite: it has a positive response in the short run, but a weak negative response in the long run

    Nominal exchange rate neutrality: the case of Australia

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    This study uses quarterly macroeconomic data over the period of 1984-2003 along with a seven-variable structural vector autoregression model to investigate the nominal exchange rate neutrality hypothesis for the case of Australia. Impulse response functions and variance decompositions are generated for four different variations of the model for empirically testing the hypothesis. Empirical evidence presented in this paper support the nominal exchange rate neutrality. In addition, we find that the neutrality is invariant to the choice of the nominal exchange rate or the measure of monetary aggregates used in the estimation
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