Information and price determination under mass privatization

The valuation of enterprises has been a major stumbling block to privatization in transitional economies. Data on the performance of state-owned enterprises under central planning is plentiful, but that information is not worth much in a market economy, especially one in which much progress has been made in price and trade liberalization. One of the author's privatization schemes have emerged as a politically attractive alternative; the valuation problem is overcome through a decentralized system of bidding, while shares are efficiently allocated through an auction. But nobody has analyzed how these information markets function or how prices emerge from bidding rounds. One of the authors presents econometric evidence on the functioning of information markets and on the process by which prices emerged for enterprise shares under the Czech and Slovak mass privatization scheme. The results indicate that public information about enterprises'past performance clearly mattered, especially in the early rounds when private information had not been revealed. But such historical information alone never explained more than 29 percent of the variation in the ultimate equilibrium price. Instead, information about enterprises'prospects revealed through the bidding process explained about 85 percent of the variation in prices by the final rounds. Private or"insider"information about enterprises'prospects played a gradually diminishing role as participants learned quickly from each other's bidding behavior. Other mass privatization schemes rely more heavily on the secondary market to generate an appropriate valuation of shares, rather than on the initial valuations emerging from the primary market. But if improved information is the first step toward efficient asset markets and corporate governance, participation in the Czech and Slovak mass privatization scheme have a head start on other transitional economies.Access to Markets,Markets and Market Access,Economic Theory&Research,Environmental Economics&Policies,International Terrorism&Counterterrorism

Money at the Docks of Tax Havens: A Guide

This essay critically revisits the roles and influences of tax havens in the world economy. It combines various massages of available studies in one scheme, documents a number of observations, and proposes several issues for future research.tax havens, tax avoidance, tax evasion, international taxation, corruption, offshore financial centres

The Effects of Discretionary Fiscal Policy on Macroeconomic Aggregates: A Reappraisal

Fiscal stimuli to recover? A cascade of academic and layman-articles debate the effectiveness of fiscal policy in stimulating the economy backed up by different economic models and empirical support. This essay surveys the theoretical predictions and recent empirical Vector Autoregression (VAR) evidence on the short-run effects of discretionary fiscal policy on macroeconomic aggregates.Macroeconomic Policy, Fiscal Policy, Multipliers, Fiscal Stimulus, VAR

Making a market : mass privatization in the Czech and Slovak Republics

The author assesses the Czechoslovak mass privatization program for speed, equity, and corporate governance. The program transferred claims on assets in 1,491 enterprises - assets worth about $10.7 billion - to the 8.5 million citizens who participated in the scheme. The entire cycle of project preparation, public information, and nationwide simultaneous bidding took 14 months. This was equivalent to privatizing more than three medium-scale and large-scale enterprises, on average, per day. Equity objectives were achieved by transferring equal claims (equivalent to about$1,250 per person) to all participants and by putting in place a transparent and decentralized process. The government's role was simple to provide a framework and a set of rules for potential firms, managers, and shareholders to find each other. The scheme's design - based on simultaneous sequential bidding rounds - worked to put information about enterprise values into the public domain by allowing increasingly informed bidders to interact. The structure of ownership that emerged will have very different implications for corporate governance. Enterprises in the Czech Republic, and those that sold for high prices in the bidding rounds, are characterized by a greater concentration of shareholdings. Those in the Slovak Republic, and those that sold for lower prices, have more diffuse ownership structures. The mass privatization scheme served to quickly differentiate the enterprises with favorable prospects from those with unfavorable prospects under current conditions. But enterprises that could have survived in some form, if they had been restructured before privatization, or enterprises that could have been viable but lacked effective governance, were sacrificed for the sake of speed and decentralization.Banks&Banking Reform,International Terrorism&Counterterrorism,Municipal Financial Management,Markets and Market Access,Economic Theory&Research

Tactile graphical display for the visually impaired information technology applications

This paper presents an interactive tactile graphical display, for the visually impaired information technology access applications. The display consists of a matrix of dots. Each dot is an electro rheological micro actuator. The actuator design and development process is presented in this paper. Prototype size 124x4 dots was manufactured. An advanced software tools and embedded system based on voltage matrix manipulation has been developed, to provide the display near real time control. The experimental tests carried out into the developed prototype showed that each actuator of the matrix was able to provide a vertical movement of 0.7 mm and vertical holding force of 100 to 200 mN. The stroke and dynamic response tests showed the practicability of the developed tactile display, for the visually impaired information technology applications

A Journey from a Corruption Port to a Tax Haven

We sketch a model according to which tax havens attract corporate income generated in corrupted countries. In our framework, tax havens have two opposite effects on welfare. First, tax havens’ services have a positive effect on welfare through encouraging investment by firms fearing expropriation and bribes in corrupt countries. Second, by supporting corruption and the concealment of officials’ bribes, tax havens discourage the provision of public goods and hence have also a negative effect on welfare. The net welfare effect depends on the specified preferences and parameters. One source of this ambiguity is that the presence of multinational firms in corrupted countries is positively associated with demanding tax havens’ operations. Using firm-level data, we provide empirical support for this hypothesis.tax havens, tax avoidance, tax evasion, multinational firms, corruption

Debt Financing and Sharp Currency Depreciations: Wholly vs. Partially Owned Multinational Affiliates

This paper provides empirical evidence on two potential costs of shared ownership of German affiliates abroad. First, in periods of currency crises, wholly-owned affiliates, in contrast to partially-owned affiliates, seem to circumvent financial constraints by accessing capital from their parent companies. In terms of differences in performance regarding sales of both types of firms, wholly-owned affiliates have a significantly better sales performance than partially-owned affiliates in periods of crises. This finding contributes to the evidence that FDI helps in mitigating the negative consequences of sharp currency depreciation, and stresses that this effect works especially through capital inflows to wholly-owned affiliates. Second, the debt financing of partially-owned affiliates is less sensitive to the tax rate suggesting that partially-owned affiliates rely less on international debt shifting than wholly-owned affiliates. This indicates that partially-owned affiliates are less flexible to exploit tax efficient strategies.foreign direct investment, capital structure, ownership structure, currency crises, corporate taxation

Exchange reform, parallel markets, and inflation in Africa : the case of Ghana

This paper presents a theoretical framework to analyze the issue of exchange rate reform in the presence of parallel markets. In Ghana, which has carried out one of the most thorough structural adjustment programs in Africa, an increasingly high inflation rate has been attributed to major devaluations of the official exchange rate. The authors dispute this conclusion based on careful testing and simulations using a macroeconomic model estimated with Ghanaian data. This model also shows that there is no direct relationship between the official exchange rate and inflation. The results also show that official devaluation had a postive effect on Ghana's budget. Revenue improvements came from three channels: the higher grant aid disbursed at a more depreciated exchange rate, a reduction in the subsidies that had accrued to importers through an overvalued exchange rate, and an increase in export taxes as cocoa farmers increasingly marketed their output through official channels. The official devaluation therefore did not produce higher budget deficits, demand pressure did not spill onto the parallel market, and the exchange premium narrowed considerably. The key to the success of the program was the adequate level of foreign financing, combined with a coherent set of fiscal policies.Access to Markets,Economic Theory&Research,Environmental Economics&Policies,Economic Stabilization,Markets and Market Access

Are high real interest rates bad for world economic growth?

There is a conventional perception that high real interest rates are bad for economic growth. However, the authors show that close examination of the experience over the last 40 years undermines the existence of such a relationship. For much of the 1950-79 period, expost real interest rates were less than the growth rate of income in the major economies, whereas the 1980s were a period of rapid growth in the world economy that coincided withunprecedentedly high real interest rates. The authors stress that the critical question is whether real interest rates have had an adverse effect on economic growth, not why they have been high in the recent past. To test this, the literature on cointegration is used to explore whether world interest rates and growth rates equilibrate in the long run. The econometric evidence disputes the view that high interest rates are associated with low economic growth in industrial countries. What does this analysis imply for the consequences of high real interest rates in the future? One implication is that high real interest rates may not matter for growth performance if more productive investment results. If there is a negative impact of higher interest rates on growth, it will probably affect developing countries more. Further research might consider the role of human capital and institutional constraints in determining the ambiguous relationship between world interest rates and growth in developing countries.Insurance&Risk Mitigation,Environmental Economics&Policies,Macroeconomic Management,Economic Stabilization,Economic Theory&Research

A vibration measurement system for deaf people’s emergency apparatus

A vibration measurement system for deaf people’s emergency warning equipment is presented in this paper. Deaf alarm devices are among the most supportive products that help to alert deaf people in various emergency circumstances. Applicable British standards recommend that acceptable working parameters for such products are frequency: 25 to 150 Hz, enough vibration strength, intensity and stable performance against lifetime. This paper presents research that has been conducted to test and validate the performance of a variety of alerting devices using the proposed vibration measurement system. It introduces the laboratory arrangements, practical measurements carried out and its compliance with the British standards. The products investigated were the Mk I, Mk II Deaf Alerters, the Deafgard alerting device and the C-TEC 24V Pillow Pad. Measurements were taken using an ADXL335 accelerometer, to determine the vibration strength. Other parameters considered were temperature variation, efficiency and lifetime of the products