Theory of foreign portfolio investment

This dissertation examines one category of international capital flows, private portfolio investments (private refers to the source of capital). There is an overall lack of a coherent and consistent definition of foreign portfolio investment. We clarify these definitional issues.^ Two main questions that pertain to private foreign portfolio investments (FPI) are explored. The first problem is the phenomenon of home preference, often referred to as home bias. Related to this are the observed cross-investment flows between countries that seem to contradict the textbook rendition of private FPI. A description of the theories purporting to resolve the home preference puzzle (and the cross-investment one) are summarized and evaluated. Most of this literature considers investors from major developed countries. I consider--as well--whether investors in less developed countries have home preference.^ The dissertation shows that home preference is indeed pervasive and profound across countries, in both developed and emerging markets. For the U.S., I examine home bias in both equity and bond holdings as well. I find that home bias is greater when we look at equity and bond holdings than equity holdings solely.^ In this dissertation a model is developed to explain home bias. This model is original and fills a gap in the literature as there have been no satisfactory models that handle at the same time both home preference and cross-border holdings in the context of information asymmetries. This model reflects what we see in the data and permits us to reach certain results by the use of comparative statics methods. The model suggests, counter-intuitively, that as the rate of return in a country relative to the world rate of return increases, home preference decreases. In the context of our relatively simple model we ascribe this result to the higher variance of the now higher return for home assets. We also find, this time as intended, that as risk aversion increases, investors diversify further so that home preference decreases.^ The second question that the dissertation deals with is the volatility of private foreign portfolio investment. Countries that are recipients of these flows have been wary of such flows because of their perceived volatility. Often the contrast is made with the perceived absence of volatility in foreign direct investment flows. I analyze the validity of these concerns using first net flow data and then gross flow data. The results show that FPI is not, in relative terms, more volatile than other flows in our sample of eight countries (half were developed countries and the rest were emerging markets).^ The implication therefore is that restricting FPI flows may be harmful in the sense that private capital may not be allocated efficiently worldwide to the detriment of capital poor economies. More to the point, any such restrictions would in fact be misguided. ^

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. ^

Determinants and effects of electoral party coalitions: The case of Brazil

Since the 1985 return to democracy, Brazilian politicians have resorted to vote-pooling arrangements to elect representatives. A puzzle thus presents itself: What drives parties to join these electoral cartels? The dissertation unraveled the incentives party elites have to participate in coalitions under a presidencialist system of government. I also investigated the effect of electoral coalitions on congressional representation. I applied a model of binary outcomes and relied on standard deviations to assess the ideological homogeneity/heterogeneity of electoral coalitions. I also calculated the Index of Disproportionality to measure the gaps between the proportion of votes and seats received by all parties in Brazil with and without electoral coalitions. Finally, I assessed the effects of the electoral formula on proportionality. An unexpected exogenous factor resulted crucial in explaining proportional electoral coalition building: The district's majoritarian election for governor. In each district, political actors often synchronize coalition partners to maximize winning results while minimizing electoral efforts.

Implicit eyewitness memory

After a crime has occurred, one of the most pressing objectives for investigators is to identify and interview any eyewitness that can provide information about the crime. Depending on his or her training, the investigative interviewer will use (to varying degrees) mostly yes/no questions, some cued and multiple-choice questions, with few open-ended questions. When the witness cannot generate any more details about the crime, one assumes the eyewitness' memory for the critical event has been exhausted. However, given what we know about memory, is this a safe assumption? In line with the extant literature on human cognition, if one assumes (a) an eyewitness has more available memories of the crime than he or she has accessible and (b) only explicit probes have been used to elicit information, then one can argue this eyewitness may still be able to provide additional information via implicit memory tests. In accordance with these notions, the present study had two goals: demonstrate that (1) eyewitnesses can reveal memory implicitly for a detail-rich event and (2) particularly for brief crimes, eyewitnesses can reveal memory for event details implicitly that were inaccessible when probed for explicitly. Undergraduates (N = 227) participated in a psychological experiment in exchange for research credit. Participants were presented with one of three stimulus videos (brief crime vs. long crime vs. irrelevant video). Then, participants either completed a series of implicit memory tasks or worked on a puzzle for 5 minutes. Lastly, participants were interviewed explicitly about the previous video via free recall and recognition tasks. Findings indicated that participants who viewed the brief crime provided significantly more crime-related details implicitly than those who viewed the long crime. The data also showed participants who viewed the long crime provided marginally more accurate details during free recall than participants who viewed the brief crime. Furthermore, participants who completed the implicit memory tasks provided significantly less accurate information during the explicit interview than participants who were not given implicit memory tasks. This study was the first to investigate implicit memory for eyewitnesses of a crime. To determine its applied value, additional empirical work is required.

Foreign-born CEOs, country-specific skills, selection, and strategic consequences

In this dissertation, I first suggest an extension of the managerial rents model and more specifically the managerial skills typology that it offers. Building on research in international business, I propose adding country-specific skills (CSS) to this typology in addition to firm-specific, industry-specific, and generic skills. I define CSS as managers' abilities that are applicable and specific to a particular national institutional context. Such skills are distinct from the other three types identified and are likely to influence managers' performance and the performance of their firms. So if CSS are distinct skills, what are the implications for strategy and international business research? In an attempt to respond to this question, I conduct two empirical essays in which I examine the implications of this refinement of the typology of managerial skills for CEO selection and firms' mergers and acquisitions (M&A;) strategy. In the first empirical essay, I puzzle at the fact that although CSS constitute a barrier to high-level executive mobility across countries, there have been a growing number of foreign-born CEOs being appointed across the globe. Why are these individuals being selected for the post of CEO? Using information on the appointment of foreign-born and national CEOs from 2005 to 2010 among global 500 companies, I show that internationalization pressures help explain their selection and that two types of firms are likely to appoint foreign leaders: highly internationalized firms and firms that are likely to internationalize. In the second empirical essay, I examine the strategic implications of country-specific skills. Employing the same sample as the one used in the first empirical essay, I demonstrate that given that their mindset is likely to be less focused on firms' home market, foreign-born CEOs may be prone to institute more changes in firms' cross-border M&A; strategy than their domestic counterparts. I also theorize on the moderating influence of CEOs' insiderness.

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.

Explaining intermittent exporting:exit and conditional re-entry in export markets

Intermittent exporting is something of a puzzle. In theory, exporting represents a major commitment, and is often the starting point for further internationalisation. However, intermittent exporters exit and subsequently re-enter exporting, sometimes frequently. We develop a conceptual model to explain how firm characteristics and market conditions interact to affect the decision to exit and re-enter exporting, and model this process using an extensive dataset of French manufacturing firms from 1997 to 2007. As anticipated, smaller and less productive firms are more likely to exit exporting, and react more strongly to changes in both domestic and foreign markets than larger firms. Exit and re-entry are closely linked. Firms with a low exit probability also have a high likelihood of re-entry, and vice versa. However, the way in which firms react to market conditions at the time of exit matters greatly in determining the likelihood of re-entry: thus re-entry depends crucially on the strategic rationale for exit. Our analysis helps explain the opportunistic and intermittent exporting of (mainly) small firms, the demand conditions under which intermittent exporting is most likely to occur, and the firm attributes most likely to give rise to such behavior.

Essays in Industrial Organization

This dissertation extends the empirical industrial organization literature with two essays on strategic decisions of firms in imperfectly competitive markets and one essay on how inertia in consumer choice can result in significant welfare losses. Using data from the airline industry I study a well-known puzzle in the literature whereby incumbent firms decrease fares when Southwest Airlines emerges as a potential entrant, but is not (yet) competing directly. In the first essay I describe this so-called Southwest Effect and use reduced-form analysis to offer possible explanations for why firms may choose to forgo profits today rather than wait until Southwest operates the route. The analysis suggests that incumbent firms are attempting to signal to Southwest that entry is unprofitable so as to deter its entry. The second essay develops this theme by extending a classic model from the IO literature, limit pricing, to a dynamic setting. Calibrations indicate the price cuts observed in the data can be captured by a dynamic limit pricing model. The third essay looks at another concentrated industry, mobile telecoms, and studies how inertia in choice (be it inattention or switching costs) can lead to consumers being on poorly matched cellphone plans and how a simple policy proposal can have a considerable effect on welfare.

International Capital Flows and Monetary Policy Spillovers

This dissertation examines the drivers and implications of international capital flows. The overarching motivation is the observation that countries not at the centre of global financial markets are subject to considerable spillovers from centre countries, notably from their monetary policy. I present new empirical evidence on the determinants of the observed patterns of international capital flows and monetary policy spillovers, and study their effect on both financial markets and the real economy. In Chapter 2 I provide evidence on the determinants of a puzzling negative correlation observed between productivity growth and net capital inflows to developing and emerging market economies (EMEs) since 1980. By disaggregating net capital inflows into their gross components, I show that this negative correlation is explained by capital outflows related to purchases of very liquid assets from the fastest growing countries. My results suggest a desire for international portfolio diversification in liquid assets by fast growing countries is driving much of the original puzzle. In the reminder of my dissertation I pivot to study the foreign characteristics that drive international capital flows and monetary policy spillovers, with a particular focus on the role of unconventional monetary policy in the United States (U.S.). In Chapter 3 I show that a significant portion of the heterogeneity in EMEs' asset price adjustment following the quantitative easing operations by the Federal Reserve (the Fed) during 2008-2014 can be explained by the degree of bilateral capital market frictions between these countries and the U.S. This is true even after accounting for capital controls, exchange rate regimes, and domestic monetary policies. Chapter 4, co-authored with Michal Ksawery Popiel, studies unconventional monetary policy in a small open economy, looking specifically at the case of Canada since the global financial crisis. We quantify the effect Canadian unconventional monetary policy shocks had on the real economy, while carefully controlling for and quantifying spillovers from U.S. unconventional monetary policy. Our results indicate that the Bank of Canada's unconventional monetary policy increased Canadian output significantly from 2009-2010, but that spillovers from the Fed's policy were even more important for increasing Canadian output after 2008.

Mitigate DoS and DDoS Attack in Ad Hoc Networks

This paper proposes a technique to defeat Denial of Service (DoS) and Distributed Denial of Service (DDoS) attacks in Ad Hoc Networks. The technique is divided into two main parts and with game theory and cryptographic puzzles. Introduced first is a new client puzzle to prevent DoS attacks in such networks. The second part presents a multiplayer game that takes place between the nodes of an ad hoc network and based on fundamental principles of game theory. By combining computational problems with puzzles, improvement occurs in the efficiency and latency of the communicating nodes and resistance in DoS and DDoS attacks. Experimental results show the effectiveness of the approach for devices with limited resources and for environments like ad hoc networks where nodes must exchange information quickly.

Female employment from the household. Towards a comprehensive analysis of work-life articulation

Research on women’s employment has proliferated over recent decades, often under a perspective that conceptualizes female labour market activity as independent of male presences and absences in the productive and reproductive spheres. In the face of these approaches, the article argues the need to focus on the couple as the unit of analysis of work-life articulation. After referring to the main theoretical arguments that, from a gender perspective within labour studies, have pointed out the relevance of placing the household as the central space for the analysis of the sexual division of labour, the article reviews different empirical contributions that have incorporated such perspective in the international literature. Next, the state of the art in the Spanish literature is presented, before arguing the desirability of applying such framework of analysis to the study of employment and care work in Spanish households, which are at present undergoing major transformations.

Back to the failure: an analytic narrative of the De Lorean debacle

There has been a recent identification of a need for a New Business History. This discussion connects with the analytic narrative approach. By following this approach, the study of business history provides important implications for the conduct and institutional design of contemporary industrial policy. The approach also allows us to solve historical puzzles. The failure of the De Lorean Motor Company Limited (DMCL) is one specific puzzle. Journalistic accounts that focus on John De Lorean's alleged personality defects as an explanation for this failure miss the crucial institutional component. Moreover, distortions in the rewards associated with industrial policy, and the fact that the objectives of the institutions implementing the policy were not solely efficiency-based, led to increased opportunities for rent-seeking. Political economy solves the specific puzzle; by considering institutional dimensions, we can also solve the more general puzzle of why activist industrial policy was relatively unsuccessful in Northern Ireland.

Pratiques parentales coercitives, anxiété et traitement de la peur chez les jeunes en bonne santé: corrélats neuronaux, biologiques, physiologiques et comportementaux

L’adversité tôt dans la vie est associée au développement de symptômes anxieux pouvant perdurer jusqu’à l’âge adulte (Casey et el, 2010, Pine 2003). Des études chez l’adulte suggèrent que ces liens pourraient être associés à des altérations du « circuit de la peur » qui inclut l’amygdale, l’hippocampe antérieur, l’insula et le cortex préfrontal (Marek, 2013, Etkin & Wager, 2007). Ceci a cependant peu été étudié chez les jeunes. L’objectif principal de cette thèse était de définir les corrélats comportementaux, physiologiques, biologiques et neuronaux du traitement de la peur chez les jeunes en bonne santé, en lien ou non avec un historique d’adversité -- sous la forme de pratiques parentales coercitives -- et d’anxiété. D’abord, puisque nous nous intéressions aux pratiques parentales coercitives chroniques, nous avons examiné leur évolution et facteurs de risque, en nous concentrant sur la période de 17 à 72 mois. Un total de 2045 dyades mère-enfant ont été incluses dans une analyse de courbe de croissance latente. Nous avons démontré que la coercition maternelle suit une évolution non linéaire durant cette période et atteint un sommet à 42 mois. Les facteurs de risque relatifs à l’enfant et à la mère, mesurés à 17 mois, permettent de prédire les niveaux de coercition à 42 mois. Finalement, les prédicteurs relatifs à l’enfant et l’efficacité maternelle prédisent l’évolution des pratiques parentales coercitives entre 17 et 72 mois. Ensuite, afin de définir une méthodologie solide pour étudier le traitement de la peur chez des jeunes, nous avons adapté une tâche développée par Lau et ses collaborateurs (2008), employant des visages féminins comme stimuli. Le sexe des participants et des visages employés comme stimuli pouvant potentiellement moduler le traitement de la peur (Kret & de Gelder, 2012; McClure, 2000), nous avons étudié leurs influences respectives sur les réponses électrodermales et subjectives de peur durant le conditionnement et l’extinction de la peur chez 117 jeunes. Nous avons démontré que les stimuli féminins suscitent des réponses davantage comparables entre les garçons et les filles que les stimuli masculins. De plus, nous avons observé un effet du « même sexe », caractérisé par un conditionnement différentiel uniquement face aux stimuli du même sexe que le participant. Finalement, nous avons exploré les différences individuelles et conjointes associées aux différents niveaux de pratiques parentales coercitives et d’anxiété en termes de réponses de peur et d’activité cérébrale, durant le conditionnement et l’extinction de la peur chez 84 jeunes. Nous avons démontré que la coercition est spécifiquement associée au fonctionnement du lobe temporal médian et aux interactions entre l’amygdale et l’insula, durant le conditionnement. Durant l’extinction, les niveaux d’anxiété étaient associés à des différences spécifiques d’activation du gyrus cingulaire antérieur (GCA) dorsal. Enfin, les pratiques parentales coercitives et l’anxiété interagissent et viennent moduler la connectivité fonctionnelle amygdale - GCA rostral, l’activation d’une sous-région du GCA dorsal et les réponses subjectives de peur. Ces résultats ajoutent une pièce au casse-tête des neurosciences développementales et fournissent des pistes intéressantes pour le développement d’interventions futures.

Exploring the World's Visual History

Thesis (Ph.D.)--University of Washington, 2016-08

The Meanings of New Money: Social Constructions of Value in the Rise of Digital Currencies

Thesis (Ph.D.)--University of Washington, 2016-07