Growing technological complexity continues to drive firms to interact with the external innovation eironment to achieve firm success. However, industries’ complexities and the business model concept’s underlying ontology have limited research on modeling the key factors that enable this interface. In this study, results of an empirical analysis of a unique dataset of 102 biopharmaceutical companies broadly support the EC-LQO five-factor framework as a useful tool to guide business model innovation for highly knowledge-intensive eironments.
We discuss the relative merits of various indicators of international price competitiveness from a conceptual point of view, and empirically check which indicator serves best to predict real exports in the long run. To this end, a panel cointegration analysis is conducted, augmented by a forecast exercise. In the latter, repeated sampling techniques are used in order to avoid arbitrary sample splits. In line with the theoretical reasoning, we find that broad price- and cost-based indicators are to be preferred to narrow price-based measures such as CPI- or PPI-deflated real exchange rates. Furthermore, the evidence points towards using world trade as external activity variable instead of GDP- or real imports-based measures.
Research Question
While there is ample empirical evidence suggesting that capital flows between advanced and emerging market economies are strongly affected by global factors such as liquidity conditions in advanced economies, evidence on the impact of global liquidity on emerging market currencies is scarce. Exchange rate analyses are impeded by the fact that most emerging market countries have not maintained fully flexible exchange rates over recent decades but intervened, at least temporarily, in the foreign exchange market.
Contribution
We account for the lack of exchange rate flexibility by analysing the impact of global liquidity on exchange market pressure, a concept that allows us to gauge the response of emerging market currencies to changes in global liquidity even in the presence of foreign exchange interventions. A panel data analysis is conducted based on 32 emerging market economies for a sample period from 1995 to 2015, thereby capturing different stages of the global financial cycle.
Results
Increases in global liquidity are robustly related to appreciation pressure on emerging market currencies, based on a large set of liquidity indicators and allowing for different definitions of exchange market pressure. The impact is restricted to periods of comparatively low stress in financial markets, however. In times of high volatility, when emerging market economies often face abrupt and pronounced currency depreciations, this effect vanishes. Our results imply that ample liquidity provision in advanced economies may contribute to a build-up of financial stability risks in emerging market economies during tranquil periods, while further liquidity injections will not immediately alleviate depreciation pressure on emerging market currencies in times of crisis.
We analyze whether various types of speculative iestor correctly anticipate future USD/EUR currency movements or whether they tend rather to react to past exchange rate movements. In contrast to earlier studies, we account for the large number of tests conducted by comparing results based on individual significance tests with those based on controlling the false discovery rate (FDR) or the family-wise error rate (FER). While the evidence for speculative positions leading exchange rate movements, and therefore an inefficient EUR currency futures market, largely collapses if we account for multiple testing, such a pattern does not emerge in the other direction.
We analyze which currencies can be regarded as safe haven currencies. Our empirical approach allows us to distinguish between a low- and high-stress regime, and to control for the impact of carry trade reversals and other fundamental determinants. We therefore address the question of whether a supposed safe haven currency only appreciates in times of crises because carry trades are unwound, in which the corresponding currency has served as funding currency, or whether it possesses “true” safe haven qualities; i.e. it provides a hedge in stressful times even after controlling for the impact of carry trade reversals. The latter issue has largely been brushed aside in the extant literature but has important policy implications for the justification of central bank FX interventions in times of crises. According to the estimation results, two currencies, the Swiss franc and (to a lesser extent) the US dollar, qualify as safe haven currencies, and the euro serves as a hedge currency. Results for the yen support its role as a carry funding vehicle, but not necessarily that of a safe haven currency. While the focus is on effective exchange rates, the paper also contains a separate analysis of bilateral euro-based exchange rates, given the euro's prominent role during the euro area sovereign debt crisis.
A consistent set of multilateral productivity approach-based indicators of price competitiveness
(2014)
We propose a novel, multilaterally consistent productivity approach-based indicator to assess the international price competitiveness of 57 industrialized and emerging economies. It is designed to be a useful assessment tool for monetary policy authorities and, thereby, differs from previously proposed indicators, which are hardly applicable on a day-to-day basis. Special attention has been paid to an appropriate selection of price and productivity data in levels as opposed to indices, and to the treatment of country fixed effects when interpreting currency misalignments. The discussion of the results focuses on the larger economies of the sample. At the current juncture, and in contrast to the prevailing view, we find US price competitiveness to be above and China’s price competitiveness to be below its derived benchmark.
We propose a novel, multilaterally consistent productivity approach-based indicator to assess the international price competitiveness of 57 industrialized and emerging economies. It is designed to be a useful assessment tool for monetary policy authorities and, thereby, differs from previously proposed indicators, which are hardly applicable on a day-to-day basis. Special attention has been paid to an appropriate selection of price and productivity data in levels as opposed to indices, and to the treatment of country fixed effects when interpreting currency misalignments. The discussion of the results focuses on Pacific Rim economies. At the current juncture, and in contrast to the prevailing view, we find US price competitiveness to be above and China's price competitiveness to be below its derived benchmark.
In this paper, we analyze which currencies can be regarded as safe haven currencies. Our empirical approach allows us to distinguish between a low- and high stress regime, and to control for the impact of carry trade reversals and other fundamental determinants. We therefore address the question of whether a supposed safe haven currency only appreciates in times of crises because carry trades are unwound, in which the corresponding currency has served as funding currency, or whether it possesses “true” safe haven qualities; i.e. it provides a hedge against global stock market losses in stressful times even after controlling for the impact of carry trade reversals. The latter issue has largely been brushed aside in the extant literature but has important policy implications for the justification of central bank FX interventions in times of crises. According to the estimation results, two currencies, the Swiss franc and (to a lesser extent) the US dollar qualify as safe haven currencies, and the euro serves as a hedge currency. Results for the yen support its role as a carry funding vehicle, but not necessarily that of a safe haven currency. While the focus is on effective exchange rates, the paper also contains a separate analysis of bilateral euro-based exchange rates, given the euro’s prominent role during the euro area sovereign debt crisis.