Mehdi Salehizadeh

A test of purchasing power parity for emerging economies

Abstract The concept of purchasing power parity (PPP) is examined here for its applicability to the soft currencies of a large group of emerging/developing economies. PPP is tested through the use of the technique of cointegration. Based on data covering the period of 1975–1997, cointegration tests of price indices and exchange rates are conducted for 27 countries (against the U. S.). The results provide relatively strong evidence (for 14 countries) in favor of the long-term applicability of PPP as a cointegration concept. Further tests on real exchange rates indicate that the symmetry and proportionality conditions implied by PPP are rejected in all but one case. The latter tests also show that departures from long-term exchange values can last for several years and that a priori restrictions imposed on the cointegrating vector can lead to a false rejection of the PPP concept.

American depositary receipts: An analysis of international stock price movements

Abstract With significant increases in private capital flows across the globe, there has been a rise in the US listing of foreign stocks as American depositary receipts (ADRs). In this study, we employ cointegration techniques and estimate error-correction (EC) models to examine the degree of integration between US and three foreign equity markets. We find that ADRs are cointegrated with ordinary shares trading in the UK, Japan, and Germany, which implies that for long-term investors, they are a substitute for ordinary shares. Our analysis of the dynamic relationships between ADRs and foreign equities suggest that both markets contribute information pertinent to portfolio valuation. However, the foreign markets are found to be the more important source of information.

Emerging Economies' Multinationals: current status and future prospects

Abstract Over the past two decades more emerging/developing economies have become home to a rising number of multinational corporations. Now that a majority share of the worlds gdp has begun to be supplied by todays non-industrialised nations, with the expectation of more to come in the decades ahead, it is important to have a better understanding of the current facts and figures surrounding these ‘emerging’ multinationals. This is the main objective of this study, which has the additional aim of analysing the future prospects of these companies as they compete with their First World counterparts. Its main conclusions are that, presently, there is a rather small number of home nations and a limited number of multinationals domiciled therein; relatively more advanced emerging economies have produced larger, publicly listed, globally oriented enterprises; and the future prospects of such firms will be greatly influenced by major economic and political reforms to be undertaken by their respective home governments.

Financial flows to mexico: implications for foreign investors

The 1994–1995 Mexican peso crisis occurred with the presence there of a “new” financial force, namely nonbank private funds. Mexicos economic reforms have in recent years led to massive amounts of highly liquid (and volatile) foreign capital inflows. As the country further embraces market-based principles, long- and short-term capital will flow at an even larger scale across its border, subjecting providers as well as recipients to greater risks. This paper examines the trends in both the “traditional” as well as the “new” forms of capital inflows for the period 1981–1996. Our analysis should help the two sides of this issue: foreign investors to be better prepared in managing future economic challenges, and emerging economies—including several in Southeast Asia that suffered Mexican-style exchange-rate crises in 1997—to implement more appropriate policies, especially as they pertain to currency stability.

An Analysis of American Marketing Efforts in Japan1

The United States has been running a trade deficit with Japan since 1965. The purpose of this study is to examine this trade problem by analyzing the marketing efforts of Americans who are exporting to Japan and also exploring for the variables that are important to the penetration of the Japanese market. A survey questionnaire is sent to 204 Japanese importers of American manufactured goods, machinery, and transport equipment in Japan. The results indicate that American marketing in Japan is perceived to be poor by the respondents in many important areas, including product adaptation, quality products, price competitiveness, market research, delivery time, and taking the long‐term approach to market penetration. It is also concluded that this poor performance partly stems from the differences in the two countries’ cultures. The study concludes by offering certain suggestions to American exporters to Japan.

Exchange Rates, U.S. Import Prices, and Antidumping Measures

Over the last two decades, the United States and many other countries have imposed antidumping measures against foreign exporters or domestic importers by using “contemporaneous” exchange rates in determining the fair market value of imports. Prior research has shown that exchange rates impact import prices on a “lagged” basis. This study provides updated empirical evidence on exchange rate pass-through by analyzing quarterly U.S. import prices over the period of 1985:1 – 2010:4. The findings confirm that the influence of currency movements on import prices is, at best, only partial and takes place on a lagged basis. Thus, the method of antidumping initiatives undertaken by the U.S. agencies that relies on complete currency pass-through based on contemporaneous exchange rates is inappropriate.

The changing role of U.S.-based MNCs: A financial perspective

An increasing number of US.-based multinational companies have adopted a strategy of “inward-oriented” diversification in the 1980s. This article focuses on the ensuing financial performance of these firms, especially as compared to that of a group of U.S.-based domestic corporations. Specifically, well-known performance and risk measures are applied to a sample of multinational and domestic firms based in the U.S. The data are analyzed over three five-year periods (1979-1983, 1980-1984, and 1981-1985). The overall results, while providing total support for a few of the major issues and lending partial support to the others, seem to indicate that U.S. multinationals may have adopted a successful strategy in response to a changing global economic environment.