scholarly journals Deviations from the covered interest parity: The role of fundamentals, financial and political turmoil, and market frictions

2021 ◽  
Vol 19 (2) ◽  
pp. 91-122
Author(s):  
Emerson Fernandes Marçal ◽  
Marisa Gomes da Costa
Keyword(s):  
Emerging Market ◽  
Trade Openness ◽  
Market Frictions ◽  
Interest Rate Parity ◽  
Data Set ◽  
Highly Sensitive ◽  
Covered Interest Parity ◽  
Interest Parity ◽  
Derivative Market ◽  
Political Turmoil

Recent studies of mature markets on covered interest parity suggest that deviations are mean-reverting, but persistent, particularly after the 2008 crisis (Du et al., 2018). Our study contributes to the literature by modeling the deviations from covered interest rate parity (CIP) of an important emerging-market economy. We focus on Brazilian data, given the importance of its derivative market. One of the strengths of our study is the use of an agnostic approach, based on an automatic model-selection technique that is robust to structural change, the Autometrics algorithm (Hendry and Doornik, 2014), to unveil the possible determinants of CIP deviations from a wide information data set. We show that CIP deviations are highly sensitive to changes in Brazilian federal government total debt, level of reserves, inflation, and degree of trade openness. We also document the existence of instability in the model due to financial and political turmoil. We reach these conclusions based on the algorithm’s intercept correction, which can be seen as a byproduct of our methodology. Finally, we find evidence that, even after correction for fundamentals and instability points, CIP deviations still have persistence, suggesting that market frictions play an important role in the dynamics of CIP deviations.

scholarly journals Global production networks and the evolution of industrial capabilities: does production sharing warp the product space?

2020 ◽  
Vol 72 (3) ◽  
pp. 731-747
Author(s):  
Russell Thomson ◽  
Prema-Chandra Athukorala
Keyword(s):  
Product Space ◽  
Industrial Structure ◽  
De Novo ◽  
Trade Openness ◽  
Production Networks ◽  
Global Production Networks ◽  
Industrial Upgrading ◽  
Data Set ◽  
Production Sharing ◽  
Space Approach

Abstract Do production capabilities of countries evolve from existing capabilities or emerge de novo? The Product Space approach developed by Hidalgo, Klinger, Barabási and Hausmann postulates that a country’s existing industrial structure largely determines its opportunities for industrial upgrading. However, this is difficult to reconcile with the export dynamism of many developing countries such as Thailand, Malaysia, Costa Rica and Vietnam that transformed from primary commodity dependence to exporters of dynamic manufactured products. In each of these cases, global production sharing facilitated industrial transition. In this article, we advance the Product Space approach to accommodate the role of global production sharing. Using a newly constructed multi-country data set of manufacturing exports that distinguishes between trade within global production networks and traditional horizontal trade, we find that that existing industrial structure has a smaller impact, but trade openness has a greater impact, on industrial upgrading within vertically integrated global industries.

How do resources and diversification strategy explain the performance consequences of internationalization?

2014 ◽  
Vol 52 (5) ◽  
pp. 897-915 ◽  
Author(s):  
Yan Chen ◽  
Yiwei Jiang ◽  
Chengqi Wang ◽  
Wen Chung Hsu
Keyword(s):  
Emerging Market ◽  
Product Diversification ◽  
Firm Resources ◽  
Diversification Strategy ◽  
Data Set ◽  
Content Type ◽  
Listed Firms ◽  
Performance Consequences ◽  
Performance Effects ◽  
And Performance

Purpose – The purpose of this paper is to examine how firm resources and diversification strategy explain the performance consequences of internationalization of emerging market enterprises. Design/methodology/approach – The paper conducts a regression analysis by using a novel panel data set comprising of 685 listed Chinese firms over the period of 2008-2011. Findings – The results show that the relationship between internationalization and performance is inverse U-shaped. Further, marketing resources play a greater role in enhancing the performance effects of internationalization than technological resources do. Related product diversification enhances the performance effects, while unrelated product diversification does the contrary. Research limitations/implications – The study focusses on listed firms in one country, and as a result, the findings cannot be generalized to non-listed firms and firms in other countries. Practical implications – This paper offers guidelines for international managers to improve performance of internationalization by developing a particular type of resources and diversification strategy. Originality/value – This paper extends the literature on the functional form of the internationalization-performance relationship, and further suggests that the analysis of the performance consequences of internationalization should go beyond the nexus between internationalization and performance, and focusses on firm-specific resources and strategies that may facilitate or constrain the performance effects of internationalization.

Covered interest parity deviation and counterparty default risk: U.S. Dollar/Korean Won FX swap market

2017 ◽  
Vol 44 ◽  
pp. 47-63 ◽  
Author(s):  
Hanbok Choi ◽  
Young Ho Eom ◽  
Woon Wook Jang ◽  
Don H. Kim
Keyword(s):  
Default Risk ◽  
Covered Interest Parity ◽  
Interest Parity

scholarly journals Subnational institutions and open innovation: evidence from China

2017 ◽  
Vol 55 (9) ◽  
pp. 1942-1955 ◽  
Author(s):  
Fei Sun ◽  
Junjie Hong ◽  
Xiuying Ma ◽  
Chengqi Wang
Keyword(s):  
Open Innovation ◽  
Design Methodology ◽  
Emerging Market ◽  
Market Development ◽  
Data Set ◽  
Content Type ◽  
Complementary Effect ◽  
Performance Consequences ◽  
Prior Literature ◽  
External Actors

Purpose The purpose of this paper is to examine how subnational institutions within a country explain the performance consequences of open innovation (OI) in emerging market enterprises (EMEs). Design/methodology/approach The paper conducts a regression analysis by using a novel panel data set comprising of 438 innovative Chinese firms over the period of 2008-2011. Findings The authors show that although on average openness to external actors improves innovation performance this effect is pronounced for EMEs that operate in subnational regions with a higher level of intellectual property rights (IPR) enforcement and of factor market development. The findings point to the context-dependent nature of OI strategy and the complementary effect of institutional parameters in emerging markets and help to reconcile the contrasting findings regarding the effect of OI in the prior literature. Originality/value This paper extends the literature on OI by suggesting that the analysis of the performance consequences of OI strategy should go beyond the nexus between OI and firm performance, and instead, focus on subnational-specific institutions, such as region-specific IPR enforcement, factor market development and intermediation market development, that may facilitate or constrain the effect of OI model.

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