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The thesis is aimed at investigating the implications of globalization for the conduct of monetary policy. By globalization we mean increased interdependence of national economies as reflected in greater and freer flow of goods, services, capital, and labour across national borders. In particular, our research addresses a number of important issues in the recent monetary policy and globalization debate. First, are global factors becoming important drivers of domestic inflation? Second, are global factors playing more powerful role on inflation dynamics in the sectors of an economy that are more open to trade? Third, has globalization made the job of Central Bankers more difficult? And finally, do the Central Bankers in the United States and the United Kingdom consider international factors too along with domestic factors while determining the short term interest rates? Inflation rates have been observed to be low across industrial countries since the early 1990s. The co-movements of inflation rates across countries are strikingly high. We model the co-movements of inflation rates by a global factor, regional factors and idiosyncratic component. In particular, we estimate a Dynamic Factor Model with Stochastic Volatility and find that the contribution of the global factor has increased over time in explaining the variance of inflation in OECD countries. The regional factor also gains importance in countries with strong intra-regional economic linkages potentially due to proliferation of regional trade agreements and common currency areas. In the European countries, the role of global and regional factor together dominates the country specific factor since the late 1990s. The volatility of inflation has substantially decreased over time and our modelling framework incorporates time varying volatility of inflation. We find strong positive and significant relationship between the international common factor and economic globalization. Consistent with inflation becoming a global phenomenon, co-movements of aggregate inflation between countries are observed to be high. We examine whether this is also the case for sectoral inflation, we model the co-movements in sectoral inflation as being associated with a global factor, a sector specific factor and an idiosyncratic error term. We find that the co-movements of inflation of tradable sectors are substantially greater than the co-movements in non-tradable sectors which implies that the greater co-movements of inflation can be attributed to increased trade global integration of product markets. To test this, we attempt to find empirical relationship between the estimated common factor in sectors and openness to trade measured as import penetration. A positive relationship is found between the estimated sector specific common factors and import penetration. Given our earlier chapters identify important global dimension to aggregate and sectoral inflation, does this matter for monetary policy? The implication of globalization for monetary policy in the United States and the United Kingdom are examined by estimating monetary policy reaction function for these advanced economies over the sample period 1985-2010. We also consider time variations in these reaction function by estimating over a sub-sample of 1992-2010 for the United Kingdom and the Greenspan-Bernanke Era for the United States. We estimate the policy reaction function with domestic and global inflation and output gaps and with the component of domestic inflation and output gap that is not related to global variations. The policy reaction function augmented with foreign variables such as real effective exchange rate and foreign interest rate is also estimated. We use measures of inflation based on GDP deflator, CPI and inflation expectations. We find that the Federal Reserve responds to global inflation only in the full sample and to global as well as the country specific inflation in the second sub-sample (Greenspan-Bernanke Era). This may imply strong commitment of the Federal Reserve to the goal of ``price stability'' during Greenspan-Bernanke Era. The Bank of England responds to global inflation along with the country specific inflation. The international factors such as the real effective exchange rate changes (depreciation) and foreign interest rates have significant and positive effect on policy rates.

The exchange rate is one of the most vital components in any economic and investment decision. With the increase in globalisation, there is a concomitant increase in the exchange rate risk in any global investment decision. This Ph.D. thesis examines asset pricing in the foreign exchange market in various dimensions, introduces new techniques for performance measurement and information flow, and attempts to explain the carry trade in the foreign exchange market. The economic significance of empirical exchange rates models in a portfolio-based framework was examined, using a thirty-year time series of five exchange rates. The forecast performances were evaluated in mean-variance and performance index (indices of acceptability) to compare the fundamental exchange rate models with a benchmark random walk model. The parameters were computed using advanced computational finance and econometric techniques. The performance measurements obtained from mean-variance by various models were compared using the Sharpe ratio. It was concluded that the structural model, although unable to beat the random walk model, did not perform worse than the forecasts obtained from the benchmark model. The results from the indices of acceptability evaluation indicate that one-month ahead forecasts obtained from the monetary model of the exchange rate performed better than the benchmark model. Furthermore, the information flow in the foreign exchange market was examined by evaluating the relationship between volatility and the customers' trading activity. An attempt was made to explain the relationship between volatility and customer order flows in a portfolio-based framework with unique aggregate and disaggregate customer order-flow data from the Union Bank of Switzerland (UBS). This was the largest private dataset used to-date in a study of the foreign exchange market. The relationship was found to be robust; that is, the order flow is one of the main sources for transmitting private information to the foreign exchange market. This relationship holds across all the currencies and in various volatility estimates. This study is the first in the foreign exchange market in the aforementioned setup, and robustly elucidates the cited relationship in the foreign exchange market. The results give significant support to information being asymmetric across classes of customers and that private information is transmitted to the foreign exchange market by the trading behaviour of informed customers. Moreover, the volatility patterns in the foreign exchange market are significantly and substantially affected by the customer order flows. The size of the trade impact on volatility in a portfolio-based approach was also examined and it was found that the large sales are more influential trades on volatility in the foreign exchange market. In addition, to study the subsequent volatility, there was an examination of two existing hypotheses; i.e., the liquidity-driven-trade-hypothesis (positive subsequent relationship), and the information-driven-trade-hypothesis (negative subsequent relationship.) Both phenomena were found to exist, depending on the economic condition of the market. Finally, an explanation was given for the existence and identification of the carry trade in the foreign exchange market. When an investor borrows from a low interest-rate currency and invests in a higher interest-rate currency, zero-investment portfolio, this trading strategy is called carry trade strategy. Again, a novel data set provided by the UBS was examined to establish a relationship between the ordering patterns of informed customers and the carry trade. The forward discount bias and the carry trade were studied using theories of microstructure finance and the consumption-based asset-pricing model in a portfolio-based framework. The microstructure approach is the standard model of Evans and Lyons (2002). It was found that the order flow significantly explained the excess return in the carry trade, implying that informed customers knew about the carry trade opportunities in the market and reorganised their portfolios in order to realise these gains. Volatility and customer order flows were also examined, using a GMM approach, as a global innovation factor, and it was found that both variables significantly explained the cross-section of carry returns in the foreign exchange market.

This research adds to the growing literature from recent years on innovation finance, innovation systems, and regional economic and innovation policy. Although the role of business has been seen as critical within the regional innovation system, the role of business financing intermediaries has received considerably less attention despite its recognised role as a central actor of the system. This research focuses on an innovation player that seems to have been neglected by scholars to date, namely the venture capital industry. The research examines the role of different types of venture capital, public and private, in fostering innovation at the regional level. In examining this relationship, this thesis empirically analyses the characteristics of 4117 investments deals made to 2359 companies, the innovation outputs of these businesses and the responses to a survey of 50 venture capital professionals. The contribution of this thesis is threefold: First, this thesis investigates whether and how the supply of private sector venture capital and supportive public interventions has changed the availability of venture capital at the regional level. It examines the combination of venture capital in the UK regions by providing a detailed analysis of the extent of venture capital public dependency in each UK region. It also elaborates on the potential implications of the public sectors’s domination in venture capital provision in several UK regions. The regional dimension of the analysis is of special interest as it is the first comprehensive analysis of the source of VC investments (public or private) for each UK region. From a regional perspective, the UK now appears to have two venture capital markets. In London, the South East and, to a lesser extent, the East of England, private sector investors dominate investment activity. This contrasts with the remainder of the UK where the venture capital market is underpinned by extensive public sector involvement. Second, this thesis also investigates the role of venture capital in innovation using patents as a proxy variable for business innovation. In this way, it contributes to the literature by analysing the relation between patenting practices of venture capital backed firms, paying particular attention to two aspects: first, the company’s acquisition of venture finance and progress through the venture capital journey and second, the relationship between patent practices and source of venture capital finance (public or private) in UK regions. The analysis shows a clear relationship between venture capital and patents. Companies with patents are more likely to secure follow up venture capital finance compared with companies without patents. The econometric analysis results also suggest that UK companies with moderate public venture capital support are positively associated with patents while companies with extensive public venture capital support are negatively associated with patents, compared to companies with solely private venture capital support. The final part of the thesis investigates whether the environment in which funds operate may explain observed differences in the ability of these funds to invest in companies with the potential to innovate. It does this by examining the ecology of interaction between venture capital and regional innovation systems. This is the first detailed empirical investigation of the relationship between different types of venture capital (private or public) and other players of the innovation system such as universities incubators, research institutes, and regional authorities. Three important findings emerge from this analysis. First, venture capital public dependence is strongly and significantly associated with higher volumes of interactions with the outside world. The more publicly dependent a fund is, the more it interacts with other players of the innovation system. Second, the role of proximity is still important within the VC industry. Venture capitalists from both the private and the public sector, are more likely to interact with their counterparts from the same region. Third, there is evidence to suggest that operators of publicly backed funds are lacking close connections with their counterparts from the private sectors. This may have implications for their ability to approach and attract private heavy weighted venture capital funds and limited partners that can provide follow on investments or raise further funding for the fund. Although publicly backed venture capitalists interact to a greater extent than the private counterparts, they experience less success (measured as financial performance of the fund or performance of their portfolio companies). It is widely acknowledged that interactions between venture capitalists and other players promotes tacit knowledge, but the results of this thesis suggests that interaction on its own is not enough to provoke success. Overall, the findings of this research suggests that the distinction between the two venture capital markets in the UK, publicly or privately driven, is not limited to the volume or type of venture capital activity but also relates to the ecology of interactions between venture capitalists and other players of the regional innovation system. Since publicly backed funds do not promote innovation to the same extent that private funds do when they invest alone, UK regions that are heavily dependent on public investments may not be able to receive the benefits of a functional venture capital industry. However, regions in which public venture capital funds work closely with private funds, demonstrate a relatively higher volume of venture capital backed companies with the potential to innovate. From a policy perspective, this finding suggests that from an innovation point of view, free public standing investments should be minimised while co-investments between publicly backed and private venture capital funds should be further encouraged.

This thesis investigates nominal frictions in price setting behaviour from both microe-conometric and macroeconometric perspectives. Chapter I and II use the unpublished retailer-level and producer-level microdata underlying CPI and PPI in the UK statisti-cal authority to study empirical price rigidity and price setting mechanisms. Based on the conventional frequency-based method, little rigidity is found since the implied price duration is less than half a year. However, this method is shown to significantly underestimate the true duration due to oversampling of short price spells. Alternative-ly, a trajectory-based cross-sectional approach is adopted, giving an unbiased and ro-bust estimate for average duration over 9 months (retailer price) and 15 months (pro-ducer price). That is to say, producer price has higher degree of rigidity than retailer price if cross-sectional approach is used. Both time-dependent and state-dependent features exist in price setting. In particular for retailer price, results also suggest con-spicuous heterogeneities in price rigidity across sectors and shop types, but weak dif-ference across regions and time. The overall hazard function of price change can be decomposed into a decreasing component from goods sectors and a 4-month cyclical component from services sectors. The empirical findings in the microdata not only contribute to the microdata literature on price setting behaviour, but also make possible the calibrations of macroeconomic DSGE model with heterogeneous price setting. Hence, based on the microdata find-ings in Chapter I and II, Chapter III uses Classical maximum likelihood and Bayesian inference to evaluate and estimate DSGE models with various price setting mecha-nisms. A vital problem with homogeneous price setting models is that they cannot generate enough persistence while keeping calibration of average price rigidity con-sistent with microdata evidence. In contrast, this ―persistence puzzle‖ is successfully resolved by heterogeneous price setting models, which greatly improve the dynamic performance of macroeconomic models.

The 2007-2008 global financial turmoil is the most severe crisis since the Great Depression. Starting with the sub-prime defaults in the United States, it quickly spills over into other markets leading to the collapses of many financial institutions, worldwide banks bailouts, downturns in asset prices and also to sovereign debt crises. The aim of this thesis is to empirically investigate the repercussions of this financial crisis on interbank market and sovereign risk. In Chapter one, we empirically explore the effect of bank lending relationships in the interbank market. We use data from the e-MID market that represents the only transparent electronic platform in Europe and the United States, unaffected by search costs and other actions. We show that stable relationships exist and that they play a significant role during the 2007-2008 financial crisis. Trading with preferred counterparts is associated with more favorable rates for both lenders and borrowers, and carries larger trading volumes. The results point to a peer monitoring role of relationship lending, which contributes, at a time of financial distress, to a smooth liquidity redistribution among banks. Relationship lending thus plays an important positive role for financial stability. Chapter two investigates the role of banks' network centrality in the interbank market on their funding rates. Specifically we analyze transaction data from the e-MID market, over the 2006-2009 period, which encompasses the global financial crisis. We show that interbank spreads are significantly affected by both local and global measures of connectedness. The effects of network centrality increased as the financial crisis evolved. Local measures show that having more links increases borrowing costs for borrowers and reduces premia for lenders. For global network centrality, borrowers receive a significant discount if they increase their intermediation activity and become more central, while lenders pay in general a premium (i.e. receive lower rates) for centrality. This provides evidence of the `too-interconnected-to-fail' hypothesis. Chapter three draws attention to the effect of monetary policies and international linkages on European countries sovereign risks. Using a Global VAR method that allows for interdependencies across individual variables within and across units, we model government bond credit default swaps (CDS) relative to Germany by domestic, global, monetary and weighted foreign variables, where weights are calculated based on the countries' fiscal positions. We find evidence of positive correlation between sovereign bond CDS and risk aversion for almost all countries in the eurozone. When the European Central Bank (ECB) increases the refinancing rate, we observe an increase in risk of sovereign bonds of all countries due to negative environment in Euro area. A decline in money aggregate (M3) leads to all countries becoming more fragile, hence increasing sovereign risk. The shocks that stem from monetary policy changes (i.e. an increase in ECB refinancing rate) causes a rise in sovereign risk due to sensitivity to crisis and uncertainty in Euro area. In contrast, monetary policies have an opposite impact on Greece due to its relative worse performance.

This thesis describes and analyzes the earnings inequality in the United Kingdom and related countries in particular Italy and Germany, incorporating institutional measures and changes. There are three main tasks: firstly, Chapter 2 shows that earnings inequality as well as skill premiums have increased substantially over the last thirty years. A simple supply-demand analysis can only broadly fit with the wage structure changes, but leave much space for institutional explanation (Chapter 3). Secondly, after controlling for the workers’ main characteristics, changes of technology, industrial structure and labor market conditions, our estimates imply that institutional changes (mainly trade union decline) can account for a substantial part of the rise of skill premiums since the 1970s (Chapter 4). Finally, Chapter 5 and Chapter 6 compare the real wage flexibility in the UK with Italy and Germany, which have centralized collective agreements. We find flexible wages in the private sector in the UK and only in the prosperous regions in Italy (the north) and Germany (the west). When regions within a country are prosperous, the different types of wage-setting institution give similar results. However, when a region is lagging, collective bargaining delays recovery.

The following thesis presents the results and analysis of three distinct experiments. The first features an experimental auction market designed to resemble eBay and other such peer-to-peer markets, including the presence of a reputation mechanism. The results presented suggest that the presence of a reputation mechanism will improve consumer welfare. Further, having a greater number of possible feedback ratings available leads to even further improvements in consumer welfare. The second features a repeated auction that also involves Bayesian uncertainty, about the 'type' of the seller. In addition, we present the predictions of a theoretical model that extends the existing sequential equilibrium literature into multi-player, market-based games. We find that reputational concerns remain an important consideration in such settings. The final experiment examines the role of within group heterogeneity (in the endowment and marginal return) in public goods games. The novel experimental designed allows for a full schema of relationships between the endowment and marginal return. The results presented suggest that there are significant behavioural differences depending on the relationship between the endowment and marginal return. When they are inverse, subject’s absolute contributions are not different. When the two are proportionally related, relative contributions are not different.

The aim of this PhD research is to address the role of Technology Orientation (TO) and Entrepreneurial Marketing (EM) in new firms within the energy service industry. It mainly focuses on how Entrepreneurial Orientation (EO), Market Orientation (MO) and TO (inclusive of digitally enhanced marketing activities) contribute towards young firms' EM performance. The Technology Entrepreneurship Marketing and Performance (TEMP) model is conceptualised and developed using extant theory and mixed qualitative methodologies including semi-structured interviews and observational web-based research. Findings identified several themes identified in earlier EM literature and five new emerging themes that offer insights into the potential relationship between EO, MO and traditional (administrative) marketing and digital marketing. From this, the research conceptualises technology driven marketing techniques as being a significant part of a firm's TO and this implicitly compliments the entrepreneur's ability to market the firm, products and services to customers. Implications include the implicit value of a combined EM approach which includes TO, and widening the research agenda to include new policy driven SMEs in 'green' technology industries.

In this thesis we investigate the effects of real exchange rate (RER) uncertainty on output in the context of Southern Cone economies. The first chapter provides a framework to analyze the output effects of RER uncertainty when firms contract dollar-debt and no hedging instruments are available, by focusing on the channel uncertainty-output operating through the firms financial strategy. An increase in uncertainty increases the probability of bankruptcy, raising expected marginal bankruptcy costs, and reducing optimal output of a risk-neutral firm. We find the output response to uncertainty shocks to depend on firms' liquidity balances, trade orientation and perceptions about government assistance if large exchange rate movements occur. The second chapter examines empirically RER uncertainty effects on sectoral output for 28 manufacturing sectors in the Southern Cone over 1970-2002. We use alternative uncertainty measures allowing different degrees of sophistication in agents' expectation mechanisms to estimate a supply function. We use instrumental variable techniques to address potential simultaneity problems. Results suggest a negative non-negligible effect of uncertainty on output, threshold effects, and sectoral heterogeneity, explained by trade orientation, the intensity with which sectors trade within Mercosur and by sectoral productivity. The fourth chapter investigates the importance of past exchange rate behaviour when forming expectations and tests for the uncovered interest parity (UIP) hypothesis in Uruguay. Using interest rate differentials over 1980-2010 we identify a strong extrapolative component in expectations, following an inverted-U pattern over time. Agents internalise announcements and shocks that may affect fundamentals. Deviations from UIP are low for high-inflation periods, and highfor low-inflation periods and freely floating regimes. As long as what it takes to predict well is simple (look backwards, follow announcements), interest rate differentials perform well. Once exchange rate determination becomes intricate, agents fail at predicting. This finding remains unchanged when survey data are used for the period 2005-2010.