Periodic Sequences of Arbitrage: A Tale of Four Currencies

This paper investigates arbitrage chains involving four currencies and four foreign exchange trader-arbitrageurs. In contrast with the three-currency case, we fi nd that arbitrage operations when four currencies are present may appear periodic in nature, and not involve smooth convergence to a \balanced" ensemble of exchange rates in which the law of one price holds. The goal of this article is to understand some interesting features of sequences of arbitrage operations, features which might well be relevant in other contexts in finance and economics.

Three Essays on the Formation and Impact of Economic Policy

Introduction In my thesis I argue that economic policy is all about economics and politics. Consequently, analysing and understanding economic policy ideally has at least two parts. The economics part, which is centered around the expected impact of a specific policy on the real economy both in terms of efficiency and equity. The insights of this part point into which direction the fine-tuning of economic policies should go. However, fine-tuning of economic policies will be most likely subject to political constraints. That is why, in the politics part, a much better understanding can be gained by taking into account how the incentives of politicians and special interest groups as well as the role played by different institutional features affect the formation of economic policies. The first part and chapter of my thesis concentrates on the efficiency-related impact of economic policies: how does corporate income taxation in general, and corporate income tax progressivity in specific, affect the creation of new firms? Reduced progressivity and flat-rate taxes are in vogue. By 2009, 22 countries are operating flat-rate income tax systems, as do 7 US states and 14 Swiss cantons (for corporate income only). Tax reform proposals in the spirit of the "flat tax" model typically aim to reduce three parameters: the average tax burden, the progressivity of the tax schedule, and the complexity of the tax code. In joint work, Marius Brülhart and I explore the implications of changes in these three parameters on entrepreneurial activity, measured by counts of firm births in a panel of Swiss municipalities. Our results show that lower average tax rates and reduced complexity of the tax code promote firm births. Controlling for these effects, reduced progressivity inhibits firm births. Our reading of these results is that tax progressivity has an insurance effect that facilitates entrepreneurial risk taking. The positive effects of lower tax levels and reduced complexity are estimated to be significantly stronger than the negative effect of reduced progressivity. To the extent that firm births reflect desirable entrepreneurial dynamism, it is not the flattening of tax schedules that is key to successful tax reforms, but the lowering of average tax burdens and the simplification of tax codes. Flatness per se is of secondary importance and even appears to be detrimental to firm births. The second part of my thesis, which corresponds to the second and third chapter, concentrates on how economic policies are formed. By the nature of the analysis, these two chapters draw on a broader literature than the first chapter. Both economists and political scientists have done extensive research on how economic policies are formed. Thereby, researchers in both disciplines have recognised the importance of special interest groups trying to influence policy-making through various channels. In general, economists base their analysis on a formal and microeconomically founded approach, while abstracting from institutional details. In contrast, political scientists' frameworks are generally richer in terms of institutional features but lack the theoretical rigour of economists' approaches. I start from the economist's point of view. However, I try to borrow as much as possible from the findings of political science to gain a better understanding of how economic policies are formed in reality. In the second chapter, I take a theoretical approach and focus on the institutional policy framework to explore how interactions between different political institutions affect the outcome of trade policy in presence of special interest groups' lobbying. Standard political economy theory treats the government as a single institutional actor which sets tariffs by trading off social welfare against contributions from special interest groups seeking industry-specific protection from imports. However, these models lack important (institutional) features of reality. That is why, in my model, I split up the government into a legislative and executive branch which can both be lobbied by special interest groups. Furthermore, the legislative has the option to delegate its trade policy authority to the executive. I allow the executive to compensate the legislative in exchange for delegation. Despite ample anecdotal evidence, bargaining over delegation of trade policy authority has not yet been formally modelled in the literature. I show that delegation has an impact on policy formation in that it leads to lower equilibrium tariffs compared to a standard model without delegation. I also show that delegation will only take place if the lobby is not strong enough to prevent it. Furthermore, the option to delegate increases the bargaining power of the legislative at the expense of the lobbies. Therefore, the findings of this model can shed a light on why the U.S. Congress often practices delegation to the executive. In the final chapter of my thesis, my coauthor, Antonio Fidalgo, and I take a narrower approach and focus on the individual politician level of policy-making to explore how connections to private firms and networks within parliament affect individual politicians' decision-making. Theories in the spirit of the model of the second chapter show how campaign contributions from lobbies to politicians can influence economic policies. There exists an abundant empirical literature that analyses ties between firms and politicians based on campaign contributions. However, the evidence on the impact of campaign contributions is mixed, at best. In our paper, we analyse an alternative channel of influence in the shape of personal connections between politicians and firms through board membership. We identify a direct effect of board membership on individual politicians' voting behaviour and an indirect leverage effect when politicians with board connections influence non-connected peers. We assess the importance of these two effects using a vote in the Swiss parliament on a government bailout of the national airline, Swissair, in 2001, which serves as a natural experiment. We find that both the direct effect of connections to firms and the indirect leverage effect had a strong and positive impact on the probability that a politician supported the government bailout.

Stability and change in party preferences.

This article analyses stability and volatility of party preferences using data from the Swiss Household-Panel (SHP), which, for the first time, allow studying transitions and stability of voters over several years in Switzerland. Analyses cover the years 1999- 2007 and systematically distinguish changes between party blocks and changes within party blocks. The first part looks at different patterns of change, which show relatively high volatility. The second part tests several theories on causes of such changes applying a multinomial random-effects model. Results show that party preferences stabilise with their duration and with age and that the electoral cycle, political sophistication, socio-structural predispositions, the household-context as well as party size and the number of parties each explain part of electoral volatility. Different results for withinand between party-block changes underlie the importance of that differentiation.

Política Mundial en Línia

Aquest projecte MQD va servir per crear nou material docent amb un suport digital per a dues assignatures – Política Comparada i Avaluació de la Gestió Pública – en dues llicenciatures diferents – Ciència Política i Periodisme – Un element clau va ser la participació dels estudiants. En ambdós casos, la forma d’ensenyar va canviar de forma substantiva ja que es va dedicar força temps a fer que els estudiants treballessin en el producte final. La principal idea al darrera d’aquesta experiència era que aprenguéssin “fent.” Una altra idea fonamental és que el seu treball es pugui ensenyar per internet a tothom que tingui interès. La utilització d’una pàgina web va donar visibilitat externa al seu treball. Els resultats es poden consultar a http://cpdp.uab.cat/politica/ i http://cpdp.uab.cat/evaluacio/. Aquesta experiència va ser inclosa en el llibre "Cap a l’EEES. Experiències docents innovadores a ciències socials i a ciències humanes" publicat per la UAB.

Development and Consequences of Referendum Campaigns in Switzerland, 1981-1999

Since the early 1990s, new forms of referendum campaigns have emerged in the Swiss political arena. In this paper, we examine how referendum campaigns have transformed in Switzerland, focusing on a number of features: their intensity, duration and inclusiveness (i.e., the variety of actors involved). These features are assumed to change in the long run in response to societal changes and in the short run as a function of variations in elite support. We further argue that public knowledge of ballot issues depends on the characteristics of campaigns. To formally test our hypotheses, we draw on advertisement campaigns in six major Swiss newspapers in the four weeks preceding each ballot from 1981 to 1999 and develop a structural equation model. We indeed find that the duration of referendum campaigns has increased over time, while their inclusiveness has decreased. Most importantly, we find that pub­lic knowledge is strongly related to the characteristics of campaigns

Scientific mindfulness: A foundation for future themes in international business.

We conceptualize new ways to qualify what themes should dominate the future international business and management (IB/IM) research agenda by examining three questions: Whom should we ask? What should we ask, and which selection criteria should we apply? What are the contextual forces? Our main findings are the following: (1) wider perspectives from academia and practice would benefit both rigor and relevance; (2) four key forces are climate change, globalization, inequality, and sustainability; and (3) we propose scientific mindfulness as the way forward for generating themes in IB/IM research. Scientific mindfulness is a holistic, cross-disciplinary, and contextual approach, whereby researchers need to make sense of multiple perspectives with the betterment of society as the ultimate criterion.

Law and the practise of principle in diverse societies

Projecte de recerca elaborat a partir d’una estada a la London School of Economics and Political Science, United Kingdom, entre 2007 i 2009. L’objecte principal del projecte ha estat analitzar les implicacions jurídico-polítiques i institucionals d’una teoria de la justícia i la igualtat liberals aplicada a societats multiculturals amb un marcat predomini de la diversitat cultural. L’anàlisi desenvolupa una línia d'investigació interdisciplinar - entre el dret i la teoria política - iniciada en una tesis doctoral sobre multiculturalisme i drets de les minories culturals (UPF, 2000) que va culminar en la publicació de Group Rights as Human Rights (Springer, 2006). La recerca adopta com a punt de partida les conclusions de l'esmentada obra, en especial, la rellevància del reconeixement de drets col•lectius; tanmateix, el tipus de qüestions plantejades, l’enfoc i la metodologia emprades són substancialment diferents. En concret, s'adrecen preguntes específiques sobre el model i aspiracions del constitucionalisme democràtic i el paper del dret en contextos multiculturals. També s’atorga un pes central a la dimensió institucional dels models de gestió de la diversitat que s’analitzen, prioritzant un enfocament comparatiu a partir de l’estudi de controvèrsies concretes. L’objectiu és superar algunes limitacions importants de la literatura actual, com ara la tendència a examinar en abstracte la compatibilitat de determinades demandes amb el constitucionalisme democràtic, sense abordar el funcionament d'estratègies de gestió de la diversitat cultural emprades en contextos concrets. Els treballs producte d'aquest projecte articulen les línies bàsiques d’un model pluralista, basat en principis més que en regles, que desafia els plantejaments dominants actualment. Aquest model es caracteritza pel compromís amb la legitimitat i igualtat comparatives, rebutjant el paternalisme i les visions liberals típiques sobre el paper de la regulació. La presumpció de l’“standing” moral dels grups identitaris és fonamental per tal de considerar-los interlocutors vàlids amb interessos genuïns. També s’argumenta que la integració social en contextos multiculturals no depèn tant de l’eliminació del conflicte sinó, sobre tot, d’una gestió eficient que eviti abusos de poder sistemàtics. El model defensa el rol del dret en la institucionalització del diàleg intercultural, però admet que el diàleg no necessàriament condueix a l’acord o a una estructura reguladora coherent i uniforme. Les aspiracions del ordre jurídic pluralista són més modestes: afavorir la negociació i resolució en cada conflicte, malgrat la persistència de la fragmentació i la provisionalitat dels acords. La manca d'un marc regulador comú esdevé una virtut en la mesura que permet la interacció de diferents subordres; una interacció governada per una multiplicitat de regles no necessàriament harmòniques. Els avantatges i problemes d’aquest model s'analitzen a partir de l'anàlisi de l’estructura fragmentària de l'ordre jurídic internacional i del règim Europeu de drets humans.

Pre-Election Positions and Voting Behaviour in Parliament: Consistency among Swiss MPs

This article examines the determinants of positional incongruence between pre-election statements and post-election behaviour in the Swiss parliament between 2003 and 2009. The question is examined at the individual MP level, which is appropriate for dispersion-of-powers systems like Switzerland. While the overall rate of political congruence reaches about 85%, a multilevel logit analysis detects the underlying factors which push or curb a candidate's propensity to change his or her mind once elected. The results show that positional changes are more likely when (1) MPs are freshmen, (2) individual voting behaviour is invisible to the public, (3) the electoral district magnitude is not small, (4) the vote is not about a party's core issue, (5) the MP belongs to a party which is located in the political centre, and (6) if the pre-election statement dissents from the majority position of the legislative party group. Of these factors, the last one is paramount.