Exchange rate overvaluation under hyperinflation: The case of Peru

This dissertation examines the behavior of the exchange rate under two different scenarios. The first one is characterized by, relatively, low inflation or a situation where prices adjust sluggishly. The second is a high inflation economy where prices respond very rapidly even to unanticipated shocks. In the first one, following a monetary expansion, the exchange rate overshoots, i.e. the nominal exchange rate depreciates at a faster pace than the price level. Under high levels of inflation, prices change faster than the exchange rate so the exchange rate undershoots its long run equilibrium value.^ The standard work in this area, Dornbusch (1976), explains the overshooting process in the context of perfect capital mobility and sluggish adjustment in the goods market. A monetary expansion will make the exchange rate increase beyond its long run equilibrium value. This dissertation expands on Dornbusch's model and provides an analysis of the exchange rate under conditions of currency substitution and price flexibility, characteristics of the Peruvian economy during the hyper inflation process that took place at the end of the 1980's. The results of the modified Dornbusch model reveal that, given a monetary expansion, the change in the price level will be larger than the change in the exchange rate if prices react more than proportionally to the monetary shock.^ We will expect this over-reaction in circumstances of high inflation when the velocity of money is increasing very rapidly. Increasing velocity of money, gives rise to a higher relative price variability which in turn contributes to the appearance of new financial (and also non-financial) instruments that report a higher return than the exchange rate, causing people to switch their demand for foreign exchange to this new assets. In the context of currency substitution, economic agents hoard and use foreign exchange as a store of value. The big decline in output originated by hyper inflation induces people to sell this hoarded money to finance current expenses, increasing the supply of foreign exchange in the market. Both, the decrease in demand and the increase in supply reduce the price of foreign exchange i.e. the real exchange rate. The findings mentioned above are tested using Peruvian data for the period January 1985-July 1990, the results of the econometric estimation confirm our findings in the theoretical model. ^

Essays on exchange rate economics

Exchange rate economics has achieved substantial development in the past few decades. Despite extensive research, a large number of unresolved problems remain in the exchange rate debate. This dissertation studied three puzzling issues aiming to improve our understanding of exchange rate behavior. Chapter Two used advanced econometric techniques to model and forecast exchange rate dynamics. Chapter Three and Chapter Four studied issues related to exchange rates using the theory of New Open Economy Macroeconomics. ^ Chapter Two empirically examined the short-run forecastability of nominal exchange rates. It analyzed important empirical regularities in daily exchange rates. Through a series of hypothesis tests, a best-fitting fractionally integrated GARCH model with skewed student-t error distribution was identified. The forecasting performance of the model was compared with that of a random walk model. Results supported the contention that nominal exchange rates seem to be unpredictable over the short run in the sense that the best-fitting model cannot beat the random walk model in forecasting exchange rate movements. ^ Chapter Three assessed the ability of dynamic general-equilibrium sticky-price monetary models to generate volatile foreign exchange risk premia. It developed a tractable two-country model where agents face a cash-in-advance constraint and set prices to the local market; the exogenous money supply process exhibits time-varying volatility. The model yielded approximate closed form solutions for risk premia and real exchange rates. Numerical results provided quantitative evidence that volatile risk premia can endogenously arise in a new open economy macroeconomic model. Thus, the model had potential to rationalize the Uncovered Interest Parity Puzzle. ^ Chapter Four sought to resolve the consumption-real exchange rate anomaly, which refers to the inability of most international macro models to generate negative cross-correlations between real exchange rates and relative consumption across two countries as observed in the data. While maintaining the assumption of complete asset markets, this chapter introduced endogenously segmented asset markets into a dynamic sticky-price monetary model. Simulation results showed that such a model could replicate the stylized fact that real exchange rates tend to move in an opposite direction with respect to relative consumption. ^

Essays on Exchange Rate Economics

Exchange rate economics has achieved substantial development in the past few decades. Despite extensive research, a large number of unresolved problems remain in the exchange rate debate. This dissertation studied three puzzling issues aiming to improve our understanding of exchange rate behavior. Chapter Two used advanced econometric techniques to model and forecast exchange rate dynamics. Chapter Three and Chapter Four studied issues related to exchange rates using the theory of New Open Economy Macroeconomics. Chapter Two empirically examined the short-run forecastability of nominal exchange rates. It analyzed important empirical regularities in daily exchange rates. Through a series of hypothesis tests, a best-fitting fractionally integrated GARCH model with skewed student-t error distribution was identified. The forecasting performance of the model was compared with that of a random walk model. Results supported the contention that nominal exchange rates seem to be unpredictable over the short run in the sense that the best-fitting model cannot beat the random walk model in forecasting exchange rate movements. Chapter Three assessed the ability of dynamic general-equilibrium sticky-price monetary models to generate volatile foreign exchange risk premia. It developed a tractable two-country model where agents face a cash-in-advance constraint and set prices to the local market; the exogenous money supply process exhibits time-varying volatility. The model yielded approximate closed form solutions for risk premia and real exchange rates. Numerical results provided quantitative evidence that volatile risk premia can endogenously arise in a new open economy macroeconomic model. Thus, the model had potential to rationalize the Uncovered Interest Parity Puzzle. Chapter Four sought to resolve the consumption-real exchange rate anomaly, which refers to the inability of most international macro models to generate negative cross-correlations between real exchange rates and relative consumption across two countries as observed in the data. While maintaining the assumption of complete asset markets, this chapter introduced endogenously segmented asset markets into a dynamic sticky-price monetary model. Simulation results showed that such a model could replicate the stylized fact that real exchange rates tend to move in an opposite direction with respect to relative consumption.

International tourism : can it contribute to Nigeria's economic growth as other industrial sectors?

The growth of international tourism and the attendant economic benefits to the world nations, has been phenominal since the end of the second world war. It is considered that the industry's upsurge will continue even in the phase of various constraints exemplified in high fuel cost, constant increase in fares and the threatening world-wide recessions. Developed as well as developing countries have gained substantially from the industry. A recent development shows increasing tourist traffic towards developing countries, while developed countries still hold their fort in stable growth of tourist receipts. The strategic beneficial effects of international tourist industry are often quantified in terms of foreign exchange earnings, employments offered, and the Real Estate super-structures; but in general,the industry has innumerable direct and indirect benefits to any nation engaging in the trade. The objective of this thesis is to demonstrate by comparative analysis and proven parameters that the international tourist industry which is given low priority in development in Nigeria, can equally contribute to the nation's economic growth as other industrial sectors which receive high priority and patronage in development. The data for this paper are gathered from primary sources which are i) responses by the Federal and State Governments' tourism-related offices; ii) government publications e.a. the Third National Development Plan of Federal Republic of Nigeria; and iii) Books and collections. The secondary sources include reports,periodicals and hospitality industry publications. To formally establish the international tourist industry in Nigeria, all the governments (Federal, State and Local) and the private sector in the country, should commence the development of the industry with research and feasibility studies, to be followed by proper planning at all levels and based on the result of the research and feasibility studies.

Personality and job performance: The mediating roles of leader -member exchange quality and action control

The present investigation examined the relationships among personality (as conceptualized by the Big Five Factors), leader-member exchange (LMX) quality, action control, organizational citizenship behaviors (OCB), and overall job performance (OJP). Two mediator variables were proposed and tested in this study: LMX and Action Control. Two-hundred and seven currently employed regular elementary school classroom teachers provided data during the 2000–2001 academic school year. Teachers provided personality, LMX quality (member or subordinate perspective), action control, job tenure, and demographic data. Nine school administrators (i.e., Principals, Assistant Principals) were the source for supervisor ratings of OCB, OJP, and LMX quality (leader or supervisor perspective). In eight of the nine total schools, teachers completed questionnaires during an after-school teacher gathering; in the remaining school location questionnaires were dropped off, distributed to teachers, and re-collected two weeks later. Results indicated a significant relationship between the OCB scale and overall supervisory ratings of OJP. The relationship among the big five factors of personality and OJP did not reach statistical significance, nor did the relationships among personality and OCB. The data indicated that none of the teacher tenure variables (i.e., teacher, school, or time worked with principal tenure) moderated the personality-OCB relationship nor the personality-OJP relationship. Finally, a review of the correlations among the variables of interest precluded conducting a mediation between personality-performance by OCB, mediation of personality-OCB by action control, and mediation of personality-OCB by LMX. In conclusion, the data reveal that personality was not significantly correlated with supervisory ratings of OJP or significantly related to supervisory ratings of overall OCB. Moreover, LMX quality and action control did not mediate the relationships between Personality-OJP nor the Personality-OCB relationship. Significant relationships were found between disengagement and overall LMX quality and between Initiative and overall LMX quality (both LMX-Teacher perspectives) as well as between personality variables and both Disengagement and Initiative action control variables. Despite the limitations inherent in this study, these latter findings suggest “lessons” for teachers and school administrators alike. ^

An evaluation of exchange rate policy and economic adjustment in Nicaragua, 1993--1995

Since the late 1970's, but particularly since the mid-1980s, the economy of Nicaragua has had persistent and large macroeconomic imbalances, while GDP per-capita has declined to 1950s' levels. By the second half of the 1990s, huge fiscal deficits and a reduction of foreign financing resulted in record hyperinflation. The Sandinista government's (1979–1990) harsh stabilization program in 1988–89 had only modest and short-lived success. It was doomed by their inability to lower the public sector deficit due to the war, plus diminishing financial support from abroad. Hyperinflation stopped only after their 1990 electoral defeat ended the war and massive aid began to flow in. Five years later, macroeconomic stability is still very fragile. A sluggish recovery of export agriculture plus import liberalization, have impeded a reduction of huge trade and current account deficits. Facing the prospects of diminished aid flows, the government's strategy has hinged on the achievement of a real devaluation through a crawling-peg adjustment of the nominal rate. However, at the end of 1995 the situation of the external accounts was still critical, and the modest progress achieved was attributable to cyclical terms-of-trade improvement and changes in the political outlook of agricultural producers. Using a Computable General Equilibrium Model and a Social Accounting Matrix constructed for this dissertation, the importance of structural rigidities in production and demand in explaining such outcome is shown. It is shown that under the plausible structural assumptions incorporated in the model, the role of devaluation in the adjustment process is restricted by structural rigidities. Moreover, contrary to the premise of the orthodox economic thinking behind the economic program, it is the contractionary effect of devaluation more than its expenditure-switching effects that provide the basis for is use in solving the external sector's problems. A fixed nominal exchange rate is found to lead to adverse results. The broader conclusion that emerges from the study is that a new social compact and a rapid increase in infrastructure spending plus fiscal support for the traditional agro-export activities is at the center of a successful adjustment towards external viability in Nicaragua. ^

Leader-member exchange and upward influence: Interrelationships and successful consequences

The relationship between leader-member exchange (LMX) and upward influence was investigated in a field sample of 134 employees in four organizations. These variables were related to three outcome variables comprising an employee's job success: (a) current annual salary, (b) overall job satisfaction, and (c) overall reputational effectiveness. Measures used were the LMX7, revised Influence Tactics Questionnaire, overall job satisfaction, and reputational effectiveness questionnaires. A negative relationship was found between coalitions and upward appeal with quality of LMX. Support was also found for the relationship between quality of LMX and overall job satisfaction. Partial support was found for the relationship between upward influence and success variables. Finally, partial support was found for the addition of quality of LMX above and beyond the control variables and influence tactics in explaining an employee's job success. Avenues for future research are discussed. ^

Domestic and foreign isolationism in an interdependent world

Since Plato's Republic and Aristotle's Politics established the basis for Western political thought almost 2500 years ago, the discipline of international relations has evolved substantially. However, most of the literature revolves around state interaction within the system, and there is little discussion of countries that opt out of the international states system and become isolationist. Given the interdependent nature of the modern international system, this study elaborates on domestic and foreign isolationism by expounding upon the reasons and consequences of states opting out of the international system. The empirical case studies utilized to explore isolationism are Albania, North Korea, and Burma. By empirically verifying the components, motivations, and consequences of isolationism in an interdependent world, this study provides insight into why and how states resist engagement with the global socioeconomic and political state system. ^ Using historical, comparative, and inductive analysis, this study explains why states choose to isolate themselves both domestically and internationally. Specifically, comparative historical analysis highlights isolationism as a concept and practice. This study maintains that extreme forms of self-imposed isolation in an interdependent international system, while perhaps serving the immediate interests of a ruling regime, harms the long-term national interests of the state and the populace. Although the leadership in an isolationist state gains a significant amount of power and control over the people within its borders, the state as a whole experiences profound negative effects. In the long term, a state loses power, stability, prestige, and suffers a decline in overall economic prosperity. ^ States that withdraw from the international system, therefore, provide insight into an unexplored area of international relations when considering notions of rationality, self-interest, power politics, cooperation, and alliances. In short, isolationism in an interdependent state system goes against the logic of the modern society/system of states, resulting in deleterious consequences to the wellbeing of the state. ^

Trojan horses: On the origins of national security concerns over foreign investments in the United States from 1919 to 2008

In this thesis I sought to explain the origins of national security concerns over foreign investments in the United States from 1919 to 2008. I identified and examined 29 cases of national security concerns over foreign investments in the United States during that period, and argued that in order to understand the circumstances under which foreign investments in the United States are perceived to be threats to the U.S. security we must rely on a combination of democratic peace theory and the version of political realism known as power transition theory. Thus, I tested the argument that national security concerns over foreign investments in the United States from 1919 to 2008 resulted from: (1) perceptions of international power transition, (2) perceptions of ideological and institutional differences between the United States and the home country of the investor, (3) perceptions of the strategic importance of the sector where the investment is made, and (4) perceptions of participation or control of the foreign investor by the government of the country of origin. I found that all these hypotheses have some explanatory power.

Controls on Ecosystem Carbon Dioxide Exchange in Short- and Long-Hydroperiod Florida Everglades Freshwater Marshes

Although freshwater wetlands are among the most productive ecosystems on Earth, little is known of carbon dioxide (CO2) exchange in low latitude wetlands. The Everglades is an extensive, oligotrophic wetland in south Florida characterized by short- and long-hydroperiod marshes. Chamber-based CO2 exchange measurements were made to compare the marshes and examine the roles of primary producers, seasonality, and environmental drivers in determining exchange rates. Low rates of CO2 exchange were observed in both marshes with net ecosystem production reaching maxima of 3.77 and 4.28 μmol CO2 m−2 s−1 in short- and long-hydroperiod marshes, respectively. Fluxes of CO2 were affected by seasonality only in the short-hydroperiod marsh, where flux rates were significantly lower in the wet season than in the dry season. Emergent macrophytes dominated fluxes at both sites, though this was not the case for the short-hydroperiod marsh in the wet season. Water depth, a factor partly under human control, significantly affected gross ecosystem production at the short-hydroperiod marsh. As Everglades ecosystem restoration proceeds, leading to deeper water and longer hydroperiods, productivity in short-hydroperiod marshes will likely be more negatively affected than in long-hydroperiod marshes. The Everglades stand in contrast to many freshwater wetlands because of ecosystem-wide low productivity rates.

Top down control in a relatively pristine seagrass ecosystem

The loss of large-bodied herbivores and/or top predators has been associated with large-scale changes in terrestrial, freshwater, and marine ecosystems around the world. Understanding the consequences of these declines has been hampered by a lack of studies in relatively pristine systems. To fill this gap, I investigated the dynamics of the relatively pristine seagrass ecosystem of Shark Bay, Australia. I began by examining the seagrass species distributions, stoichiometry, and patterns of nutrient limitation across the whole of Shark Bay. Large areas were N-limited, P-limited, or limited by factors other than nutrients. Phosphorus-limitation was centered in areas of restricted water exchange with the ocean. Nutrient content of seagrasses varied seasonally, but the strength of seasonal responses were species-specific. Using a cafeteria-style experiment, I found that fast-growing seagrass species, which had higher nutrient content experienced higher rates of herbivory than slow-growing species that are dominant in the bay but have low nutrient content. Although removal rates correlated well with nutrient content at a broad scale, within fast-growing species removal rates were not closely tied to N or P content. Using a combination of stable isotope analysis and animal borne video, I found that green turtles (Chelonia mydas)—one of the most abundant large-bodied herbivores in Shark Bay—appear to assimilate little energy from seagrasses at the population level. There was, however, evidence of individual specialization in turtle diets with some individuals foraging largely on seagrasses and others feeding primarily on macroalgae and gelatinous macroplankton. Finally, I used exclusion cages, to examine whether predation-sensitive habitat shifts by megagrazers (green turtles, dugongs) transmitted a behavior-mediated trophic cascade (BMTC) between sharks and seagrasses. In general, data were consistent with predictions of a behavior-mediated trophic cascade. Megaherbivore impacts on seagrasses were large only in the microhabitat where megaherbivores congregate to reduce predation risk. My study highlights the importance of large herbivores in structuring seagrass communities and, more generally, suggests that roving top predators likely are important in structuring communities—and possibly ecosystems—through non-consumptive pathways.

Risks to Hospitality Firms in the International Arena

Much potential for growth in hospitality firms exists in foreign countries, but expansion abroad typicality bears additional risks that could be detrimental to the operations. The authors explore those risks, currency exchange risk, and country risk, and offer practical techniques to access, manage, control, and reduce them. Deriving benefits from global opportunities requires effective management of these areas

The effects of content-based ESOL instruction on the overall English proficiency of foreign -born college students

This study investigates the effects of content-based ESOL instruction on the overall English proficiency of foreign-born college students. Based on various psychological and social factors which affect second language acquisition, it is suggested that the techniques of content-based instruction, while focusing on subject matter, allow the learners to overcome the language barrier by neutralizing their subconscious defense mechanism, thus attaining greater proficiency.^ Two groups of Miami-Dade Community College ESOL students were chosen as subjects for this study: a control group composed of students from the North and Wolfson campuses, where the ESOL program is based predominantly on structural or structural-functional approach, and an experimental group of Medical Center campus students, where content-based instruction is incorporated into curriculum. Ethnicity, gender, age, and other differences in the population are discussed in the study.^ The students' English Placement Test (EPT) scores were used as covariate, and the scores on Multiple Assessment Programs and Services (MAPS) test as dependent variables. Multivariate analysis of variance (MANOVA) was applied to test significant difference between the means. The results of the analysis of data indicate that there is a consistent difference in the mean performance of the Medical Center campus ESOL students demonstrated by their scores on MAPS. Although neither ethnicity, nor gender of the subjects has affected the outcome, age had a contributing effect. The implications of these findings suggest that content-based instruction facilitates greater overall English proficiency in foreign-born college students. ^

Effect of Medical Advice for Diet on Diabetes Self-Management and Glycemic Control for Haitian and African Americans with Type 2 Diabetes

Adequate care of type 2 diabetes is reflected by the individual’s adherence to dietary guidance; yet, few patients are engaged in diabetes self-care at the recommended level, regardless of race/ethnicity. Few studies on the effect of dietary medical advice on diabetes self-management (DSM) and glycemic control have been conducted on Haitian and African American adults with type 2 diabetes. These relationships were assessed in total of 254 Blacks with type 2 diabetes (Haitian Americans = 129; African Americans = 125) recruited from Miami-Dade and Broward Counties, Florida by community outreach methods. Although dietary advice received was not significantly different between the two Black ethnicities, given advice “to follow a diet” as a predictor of “using food groups” was significant for Haitian Americans, but not for African Americans. Haitian Americans who were advised to follow a diet were approximately 3 times more likely to sometimes or often use food groups (or exchange lists) in planning meals. Less than optimal glycemic control (A1C > 7.2) was inversely related to DSM for African Americans; but the relationship was not significant for Haitian Americans. A one unit increase in DSM score decreased the odds ratio point estimate of having less than optimal glycemic control (A1C > 7.2%) by a factor of 0.94 in African Americans. These results suggest that medical advice for diet plans may not be communicated effectively for DSM for some races/ethnicities. Research aimed at uncovering the enablers and barriers of diet management specific to Black ethnicities with type 2 diabetes is recommended.

Fear and U.S. foreign policy during the Truman administration, 1945-1952

The purpose of this study was to investigate how the Truman administration used fear to generate popular support for its Cold War foreign policies. Three issues were examined through the use of published government documents, personal memoirs, and weekly periodicals to assess the responses of the American public: the enactment of universal military training (UMT), the Soviet detonation of an atomic device, and the Truman administration's decision to build the hydrogen bomb. This study shows that the changing attitudes in the Truman administration toward the Soviet Union occurred in a climate of fear. Through press releases and by exerting influence on the media, the administration attempted to control the information the public received. Through the use of propaganda, the Truman administration pursued the implementation of UMT, generated fear of the Soviet Union after its detonation of the atomic bomb, and gained relative public support for the decision to build the hydrogen bomb.