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Adjustment under fixed exchange rates: application to the European Monetary Union
A. Steven Englander and Thomas Egebo
Fixing exchange rates between countries entering into the European Monetary Union shifts the burden of inter-regional adjustment onto labour and product markets. At present, rigid labour markets in European economies raise the output and employment costs of aqusting relative price levels at fixed exchange parities. High adjustment costs also reduce financial markets' confidence that fixed-exchange rates and fiscal convergence commitments are feasible, entailing large interest differentials. By contrast, the growing integration of Member countries should diffuse country-specific demand shocks more smoothly than at present, and reduce the impact of localised fiscal policy as well.
The stock market and investment
Warren Tease
This paper examines the relationship between share prices and investment, addressing the question of whether investment is influenced by inefficient pricing in equity markets. The results indicate that while there is a significant relationship between share prices and business investment in some countries, this largely reflects share price correlation with, and anticipation of, other macroeconomic developments. Pricing inefficiencies, lo the extent they are present, do not seem to have a statistically or economically significant influence on investment.
Unemployment: a review of the evidence from panel data
Peder J. Pedersen and Niels Westergard-Nielsen
This paper examines evidence obtained from panel data concerning factors which influence individual transitions between different labour market states, particularly unemployment and employment. The effects of individual characteristics, such as age and education, are reviewed, as is the influence of training schemes. The survey then considers how a person’s labour market “history”, such as previous episodes of unemployment, affects hidher employment prospects. Also reviewed are the effects of unemployment benefits on the duration of unemployment, and various aspects of the job search behaviour of unemployed workers.
Economic integration between Hong Kong, Taiwan and the coastal provinces of China
Randall S. Jones, Robert E. King and Michael Klein
Economic integration between Taiwan, Hong Kong and the coastal provinces of southern China has advanced rapidly in recent years. This paper analyzes the sharp increases in trade and investment within what may be called the "Chinese Economic Area": Policy changes in Taiwan and, particularly, China have allowed deeper economic ties to develop, driven by the complementarities among the three economies. The integration of southern China has accelerated structural change in Hong Kong and Taiwan and played an important role in China’s rapid economic growth and transformation toward a more market-based
economy.
Globalisation and intra-firm trade: an empirical note
Marcos Bonturi and Kiichiro Fukasaku
Based on firm survey data available in the United States and Japan, the paper examines how the trend towards globalisation in the 1980s, characterised by a FDI boom, has affected the size and trend of intra-firm trade (IFT) flows. The share of IFT in total US trade has been roughly stable at around 35 to 40 per cent and IFT is mostly concentrated in technology and human capital intensive industries. The example of Japanese and other Asian firms in the United States points to the importance of investment in wholesale activities in the promotion of exports.
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