Large and volatile capital flows pose serious challenges for macroeconomic management in developing countries. Our main objective in the first chapter is to assess both the role of capital controls in helping to prevent financial instability, and there adequacy for the management of financial stress. We consider theoretical approaches that introduce distortions to capital markets, moral hazards, information asymmetries, bounded rationality and endogenous financial instability, making a strong case for the use of capital account management policies. Furthermore, we analyse whether dollarisation could help to deliver financial stability and therefore constitute an alternative to capital controls. In the second chapter, we examine the price-based capital account management policies adopted in the 1990s by Chile, Colombia and Brazil. In addition, we evaluate the effectiveness of those regulations, concentrating on their impact on net capital flows, on the maturity structure of flows and on the real exchange rate. In the case of Chile, according to our analysis and evidence capital controls succeeded in reducing net short-term flows; however, they did not affect long-term flows or the real exchange rate. As far as Colombia is concerned, the regulations seem to have been more effective, as they were capable of reducing not only short-term flows but also long-term ones, as well as affecting the real exchange rate. In turn, in the case of Brazil, taxes on inflows were only directed at portfolio inflows and the evidence shows that they succeeded in having a significant impact on them. Finally, in the third chapter, we analyse whether price-based controls on capital inflows were successful in insulating these economies against external shocks. Our results indicate that capital controls did help to shield Chile and Colombia against external disturbances in the 1990s. We conclude that the experiences of Chile, Colombia and Brazil present strong evidence that capital account regulations help to provide greater policy autonomy.

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The thesis examines a particular contention made by John Rawls with regard to his account of the derivation of the principles of justice. In both <I>A Theory of Justice and Political Liberalism</I> Rawls maintains that the specification of property rights over the means of production is not part of the question of justice, but should rather reflect the customs and traditions of particular societies. It is argued in the thesis that this position cannot be maintained within the context of Rawls's overall argument. In particular, it is contended that Rawls's position on this reflects his uncritical reliance on Koopmans's <I>Three Essays on the State of Economic Science</I> (in which institutional detail such as the specification of property rights over the means of production is explicitly characterised as irrelevant) as a statement of the 'laws' of economics presumed known to those in the Original Position. The assumptions made by Rawls in constructing his argument, particularly his account of the circumstances of justice, are shown to reflect the strong, and in the context of Rawls's account, damaging assumptions underlying Koopmans's theoretical framework. These include the exclusion of preferences over work and the assumption that efficiency is unrelated to property rights specifications. Furthermore, it is demonstrated that these problems reflect a deeper issue: the theory of value upon which economic theories rest. The works of Luigi Pasinetti are employed to show the importance, for Rawls, of the distinction between theories based on exchange and those based on production. The latter are more suited to Rawls's project, and an example of them, Pasinetti's 'natural' system, is shown to be more suitable than Koopmans's framework as an account of economic theory in the Original Position.

Do background risks encourage, inhibit, or have no effect on risk-taking? Uninsurable background risks are an unavoidable fact of life, yet many models of decision-making fail to incorporate the potential effects of these risks on preferences and choice. Properties of “proper” or “standard” risk aversion exhibited by many common utility functions imply that background risks serve to inhibit risk-taking. I offer an opposing view. By applying the psychological concept of “diminishing sensitivity” to perceptions of risk, I argue that increased levels of background risk can serve to reduce sensitivity to a given incremental risk. Adopting a reference-based risk-return framework, I then argue that this reduced sensitivity to risk will led to diminished risk aversion and stimulate greater risk-taking behaviour. Using multiple research methods, I collect and present empirical evidence to support this thesis. Firstly, the results of two lab studies of MBA students demonstrate the thesis in a controlled experimental setting. Secondly, analysis of cross-sectional, time-series data on the in-licensing behaviour of a sample panel of pharmaceutical firms during 1988-2004 provides additional evidence of the thesis in a real-world setting. The findings contradict prevailing economic theories of background risk and have broad implications for research on decision-making, as well as practical implications for individuals, firms, and policy-makers.

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In his famous account of ‘creative destruction’, Josef Schumpeter described how innovation was the engine of the capitalist process, with new technological forms and industries emerging to displace the old. While the importance of novelty creation has been recognized and seized upon in generations of further study, comparatively little attention has been paid to the process of this displacement, technological obsolescence. This thesis seeks insights into the processes through which technological obsolescence arises and the subsequent patterns of change it causes in the socio-economic system. As an exploratory study, an inductive approach to theory construction is pursued, with a focus on the PC sector as a case exemplar. Drawing on relevant prior literature in innovation, evolutionary theory, complexity theory and technological obsolescence, two distinctive dimensions of technological obsolescence are identified: the market obsolescence of technology and the physical obsolescence of technology. Insights into the former are gained through study of the early and mature stages of the PC industry, discontinuities in the hard disk drive industry and a disruptive threat to the PC. Exploring the physical obsolescence dimension sees insights derived through analysing change in the reverse supply chain for PCs, at the market’s adaptive response to the growth of waste PCs and to policy intervention from the European Parliament. This focus on technological obsolescence highlights the fact that innovation is not a linear process but one that involves many interlinkages between the end of the technology lifecycle and the initiation of subsequent cycles. In beginning to unpack these interlinkages, this investigation reveals how as a co-evolutionary process, obsolescence creates and reflects asynchronies between supply and demand, giving rise to new opportunities for entrepreneurial response and value creation, which in turn brings about market self-organization and the emergence of new industries.

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The semi-variance is a measure of downside risk originally suggested by Markowitz (1959). More correctly termed a second order lower partial moment, it captures the volatility of a series below a target rate of return. Under a certain set of conditions, use of the variance provides the same result as using semi-variance. However, when there is asymmetry present in the distribution of returns and in the preferences of individuals, semi-variance is preferred. Despite the potential of such risk measures, little previous work has examined the most suitable form for a dynamic (conditional) model of a lower partial moment. A number of approaches to this problem suggest themselves, such as a regime model, distribution based model or even an OLS model. The development and evaluation of such models forms the central focus of this dissertation. After an introduction in Chapter 1, Chapter 2 introduces the concept of semi-variance in detail and provides a comparison of the sample properties of the estimators for semi-variance and variance. Furthermore, Chapter 2 develops an expression for the size of the relative (in)efficiency of the sample semi-variance under the assumptions of symmetry and asymmetry of returns. The subsequent three chapters consider the form of a conditional semi-variance model. Chapter 3 develops a family of regime models of downside risk based on the SETAR ARCH model (Tong 1990). The models developed are found to outperform GARCH models and are able to explicitly identify the semi-variance. The use of asymmetry conditional density functions in GARCH models is the focus of Chapter 4. More specifically, Chapter 4 develops a GARCH model based on the double gamma distribution. This distribution has the added advantage that the conditional semi-variance can be identified from the parameters of the density function. The model is applied to a set of foreign currencies with mixed results.

We present a collection of results in the broad area of stochastic optimization. Our basic model is that of dynamic resource allocation via customer acceptance control. We begin by modelling optimal acceptance to a discrete-capacity service-on-demand system where customers arrive with differing demands and revenues. With strong restrictions on customer types we establish the optimal policy under general arrival processes. With weaker restrictions we establish monotonicity properties under stationary arrivals. We than look at a deterministic demand-curve approach to the same problem; resource allocation over time. We solve the problem of non-overlapping customer demands, for a number of different demand curves. Our main work concerns selling perishable goods via customer acceptance control. We look at the optimal boundary between accepting and declining customers of different types. Existing papers demonstrate this threshold but fail to observe its surprisingly linear nature. We study the problem of finding the best linear threshold and see that, as a heuristic, it performs very well. Our study of linear thresholds educes an interesting problem: sample-path analysis. The problem concerns the evolution of segments of the sample-path in inventory-time space with regions of different downward drift. We succeed in fully characterising the studied sample path segments, finding a remarkable dual use of an interesting identity. In the final chapters, we look at two further problems of stochastic optimization. The first is an innovative approach to modelling future demand, utilizing previous price requests. Using these dynamic demand estimations we demonstrate monotonicity properties of the optimal pricing policy. The second problem is the famous parking problem first introduced by Rényi in the fifties. We study a Markov chain queuing model for the availability of parking spaces. We derive the pay-offs from the class of very natural threshold policies, with respect to an ‘average distance from venue’ objective.

No description available.