Three essays in international finance

Executive Summary The first essay of this dissertation investigates whether greater exchange rate uncertainty (i.e., variation over time in the exchange rate) fosters or depresses the foreign investment of multinational firms. In addition to the direct capital financing it supplies, foreign investment can be a source of valuable technology and know-how, which can have substantial positive effects on a host country's economic growth. Thus, it is critically important for policy makers and central bankers, among others, to understand how multinationals base their investment decisions on the characteristics of foreign exchange markets. In this essay, I first develop a theoretical framework to improve our knowledge regarding how the aggregate level of foreign investment responds to exchange rate uncertainty when an economy consists of many firms, each of which is making decisions. The analysis predicts a U-shaped effect of exchange rate uncertainty on the total level of foreign investment of the economy. That is, the effect is negative for low levels of uncertainty and positive for higher levels of uncertainty. This pattern emerges because the relationship between exchange rate volatility and 'the probability of investment is negative for firms with low productivity at home (i.e., firms that find it profitable to invest abroad) and the relationship is positive for firms with high productivity at home (i.e., firms that prefer exporting their product). This finding stands in sharp contrast to predictions in the existing literature that consider a single firm's decision to invest in a unique project. The main contribution of this research is to show that the aggregation over many firms produces a U-shaped pattern between exchange rate uncertainty and the probability of investment. Using data from industrialized countries for the period of 1982-2002, this essay offers a comprehensive empirical analysis that provides evidence in support of the theoretical prediction. In the second essay, I aim to explain the time variation in sovereign credit risk, which captures the risk that a government may be unable to repay its debt. The importance of correctly evaluating such a risk is illustrated by the central role of sovereign debt in previous international lending crises. In addition, sovereign debt is the largest asset class in emerging markets. In this essay, I provide a pricing formula for the evaluation of sovereign credit risk in which the decision to default on sovereign debt is made by the government. The pricing formula explains the variation across time in daily credit spreads - a widely used measure of credit risk - to a degree not offered by existing theoretical and empirical models. I use information on a country's stock market to compute the prevailing sovereign credit spread in that country. The pricing formula explains a substantial fraction of the time variation in daily credit spread changes for Brazil, Mexico, Peru, and Russia for the 1998-2008 period, particularly during the recent subprime crisis. I also show that when a government incentive to default is allowed to depend on current economic conditions, one can best explain the level of credit spreads, especially during the recent period of financial distress. In the third essay, I show that the risk of sovereign default abroad can produce adverse consequences for the U.S. equity market through a decrease in returns and an increase in volatility. The risk of sovereign default, which is no longer limited to emerging economies, has recently become a major concern for financial markets. While sovereign debt plays an increasing role in today's financial environment, the effects of sovereign credit risk on the U.S. financial markets have been largely ignored in the literature. In this essay, I develop a theoretical framework that explores how the risk of sovereign default abroad helps explain the level and the volatility of U.S. equity returns. The intuition for this effect is that negative economic shocks deteriorate the fiscal situation of foreign governments, thereby increasing the risk of a sovereign default that would trigger a local contraction in economic growth. The increased risk of an economic slowdown abroad amplifies the direct effect of these shocks on the level and the volatility of equity returns in the U.S. through two channels. The first channel involves a decrease in the future earnings of U.S. exporters resulting from unfavorable adjustments to the exchange rate. The second channel involves investors' incentives to rebalance their portfolios toward safer assets, which depresses U.S. equity prices. An empirical estimation of the model with monthly data for the 1994-2008 period provides evidence that the risk of sovereign default abroad generates a strong leverage effect during economic downturns, which helps to substantially explain the level and the volatility of U.S. equity returns.

Global regulation of the knowledge-based economy: The rise of standards in educational services

This article examines the extent and limits of non-state forms of authority in international relations. It analyses how the information and communication technology (ICT) infrastructure for the tradability of services in a global knowledge-based economy relies on informal regulatory practices for adjustment of ICT-related skills. Companies and associations provide training and certification programmes as part of a growing market for educational services setting their own standards. The existing literature on non-conventional forms of authority in the global political economy has emphasised that the consent of actors subject to informal rules and explicit or implicit state recognition remains crucial for the effectiveness of those new forms of power. However, analyses based on a limited sample of actors tend toward a narrow understanding of the issues and fail to fully explore the differentiated space in which non-state authority is emerging. This paper examines the form of authority underpinning the global knowledge-based economy within the broader perspective of the issues likely to be standardised by technical ICT specification, the wide range of actors involved, and the highly differentiated space where standards become authoritative. The empirical findings highlight the role of different private actors in establishing international educational norms in this field. They also pinpoint the limits of profit-oriented standard-settings, notably with regard to generic norms.

LMM: an OWL-DL metamodel to represent heterogeneous lexical knowledge

In this paper we present a Linguistic Meta-Model (LMM) allowing a semiotic-cognitive representation of knowledge. LMM is freely available and integrates the schemata of linguistic knowledge resources, such as WordNet and FrameNet, as well as foundational ontologies, such as DOLCE and its extensions. In addition, LMM is able to deal with multilinguality and to represent individuals and facts in an open domain perspective.

Discriminant validity and test-retest reliability of a self-administered Internet-based questionnaire testing doctors' knowledge in evidence-based medicine.

Aims and objectives  This study aimed to determine the discriminant validity and the test-retest reliability of a questionnaire testing the impact of evidence-based medicine (EBM) training on doctors' knowledge and skills. Methods  Questionnaires were sent electronically to all doctors working as residents and chief residents in two French speaking hospital networks in Switzerland. Participants completed the questionnaire twice, within a 4-week interval. The discriminant validity was examined in comparing doctors' performance according to their reported EBM previous training. Proportion of agreement between both sessions of the questionnaire, Cohen's kappa and 'uniform kappa' determined its test-retest reliability. Results  The participation rate was 9.8%/7.1% to first/second session. Performance increased according to the level of doctors' previous training in EBM. The observed proportion of agreement between both sessions was over 70% for 14/19 questions, and the 'uniform kappa' was superior to 0.60 for 15/19 questions. Conclusion  The discriminant validity and test-retest reliability of the questionnaire were satisfying. The low participation rate did not prevent the study from achieving its aims.

Bridging the Gap: establishing the necessary infrastructure and knowledge for teaching and research in neuroscience in Africa.

Advances in neuroscience research over the last few decades have increased our understanding of how individual neurons acquire their specific properties and assemble into complex circuits, and how these circuits are affected in disease. One of the important motives driving neuroscience research is the development of new scientific techniques and interdisciplinary cooperation. Compared to developed countries, many countries on the African continent are confronted with poor facilities, lack of funding or career development programs for neuroscientists, all of which deter young scientists from taking up neuroscience as a career choice. This article highlights some steps that are being taken to promote neuroscience education and research in Africa.

Improving the implementation of evidence-based knowledge in healthcare

The pace of development of new healthcare technologies and related knowledge is very fast. Implementation of high quality evidence-based knowledge is thus mandatory to warrant an effective healthcare system and patient safety. However, even though only a small fraction of the approximate 2500 scientific publication indexed daily in Medline is actually useful to clinical practice, the amountof the new information is much too large to allow busy healthcare professionals to stay aware of possibly important evidence-based information.