Advertising has long been regarded as providing reasons for consumers to buy. However, in academic research, the significant role of emotion has generally been neglected. Neuroscience research has made considerable advances in the study of emotion and has resulted in a reconsideration of the rational view of decision-making behaviour. In addition, a review of the marketing literature reveals that there is a missing link between repetitive emotions, mixed emotions, continuous measures of emotions and the dominant emotion. This thesis provides this link and proposes a new theoretical research construct: the consumer’s emotional corridor Self-reported measurements have been widely used to measure consumers’ emotional responses to advertising stimuli or consumption-related experiences and have been a consistently popular method for practitioners and researchers. There is, however, a problem known as “cognitive bias” which often arises from self-reported measurements. Several researchers have highlighted the demand for the measurement of emotion to go beyond self-reported measurements and have called for collaboration with other research fields to advance consumer behaviour research in the study of emotion. This research collaborates with researchers in the field of human-computer interaction and suggests an alternative method: the Slogan Validator. This research adopts a multi-strategy approach in combining qualitative research (semi-structured interviews) and quantitative research (survey and experiment). The purpose of the first stage of the research is to assist in defining criteria of cognitive appraisals that consumers use for advertising slogans and on validating the research model. The second stage involves conducting a survey research, which is called study one in this thesis. The main purpose of study one is to test the proposed research model. The third stage of the research methodology involves the Slogan Validator and self-reported measurements (which is called study two in this research). The main purpose of study two is to compare the results of self-reported measurements and the Slogan Validator in measuring emotions. For study one, this research notes that there exist some differences in the types of determinants and their levels of influence on the attitude towards the advertisement, the attitude towards the brand and the purchase intention across four slogan cases. Nonetheless, the cognitive appraisal-outcome of desirability appears to be significant in all fourteen out of the sixteen models. In general, this factor plays the critical role in the advertising effectiveness. Moreover, the results of study one reveal that affective-related factors play the significant role in the advertising process in both the low and high involvement groups. For study two, the findings show that the results of the self-reported questionnaires and the Slogan Validator are almost completely different, except for the ‘happy’ emotion in the cases of McDonald’s and Kentucky. Implications, limitations and further research are discussed. The major contributions of this research are twofold. In terms of theoretical perspective, this research models consumers’ emotional responses to advertising slogans integrated with the new theoretical research construct, the consumer’s emotional corridor, and uncovers the determinants of advertising effectiveness from the consumers’ emotional responses to the advertising slogan standpoint. In terms of methodological perspective, this research initiates the employment of a novel method, namely, the Slogan Validator, which is the voice recognition study, in advertising literature.

The guiding research question in this thesis is how to improve our understanding of the global dynamics in both the process of establishing and the actual content of the EU’s foreign economic policy. To answer this question this study has raised, first, in terms of the concept of FEP, the question of whether traditional accounts of inter-mestic policy, centred around economic performance, i.e. mono-dimensional FEP, are reasonable or not. As a result, this study suggests that it is desirable to take into account other dimensions of FEP, as economic diplomacy and foreign economic policy, in order to generate a multi-dimensional account of FEP. Second, this multi-dimensional account requires us to establish a new framework, and to deal with issues related to the establishment of methodology. There have been a series of debates between those who emphasise comparative politics and those who emphasis international relations. In addition, those who suggest the analysis of foreign policy have been contending with those who are in favour of an international political economy approach. This study recognises that all of those approaches have individual merits and discovers the possibility of convergence in terms of a meta-theoretical dimension. Ultimately, this study suggests an analytical synthesis of the traditional foreign economic policy approaches, which is based on the dialogue of agent-structure and structure-structure relationships. This cognitive framework of dialogue encompasses a series of concepts such as order, power, heterogeneity, similarity, justice and distribution. The account of such a series of concepts constructs the epistemological components of meta-theoretical convergence between comparative politics, international relations, the analysis of foreign policy and the international political economy approach. Consequently, general explanation and explanations of the timing and content of policy outputs are provided. On the other hand, in accordance with the theoretical suggestions above, this study suggests the following agent-centred scenarios of the likely course the EU might take in the formation of the EU’s foreign economic policy in the near future.

The first paper, "Interest rate pass-through and financial crises: do switching regimes matter? The case of Argentina", analyses the dynamic relationship between a money market (interbank) rate and different short-term lending rates by measuring their passthrough. Neither linear single-equation modelling nor linear multi-equation systems capture efficiently this relationship. Several financial crises alter the speed and degree of response to interbank rate shocks. Hence, a Markov switching VAR model shows the pass-through increases considerably for all market interest rates in a high-volatility scenario. The model identifies correctly the periods in which regime shifts occur, and associates them to financial crises. The second paper, "Modelling interest rate pass-through with endogenous switching regimes in Argentina", extends the scope of the Markov switching modelling by including time-varying transition probabilities. Interest rate spreads are used as leading indicators. The model allows devaluation expectations and country risks, (measured by rate spreads) to signal regime switching. Estimation results suggest that the passthrough tends to overshoot with financial instability, but to decrease if that condition is sufficiently large and long-lived. Likewise, results show a quite heterogeneous credit market, with a highly efficient transmission mechanism in the corporate segment, but considerably less in the consumer segment. The final paper, "Regime switching in interest rate pass-through and dynamic bank modelling with risks", builds a theoretical model of dynamic bank optimisation, which provides rationale to a regime-switching behaviour in the interest rate pass-through. It is shown that a regime-switching interbank rate induces a nonlinear behaviour in lending and deposit rates and (by further introducing interbank-alike regime-switching risk premiums) in the pass-through. Thus, the pass-through process is consistent with a nonlinear behaviour even if there are no asymmetric adjustment costs in the response to interbank rate shocks. An empirical application to France and Germany provide results that support these conclusions.

This thesis concerns econometric time series modelling of cointegrated multivariate systems using a Bayesian approach. The Bayesian approach has become increasingly attractive among researchers in the fields such as biology, though still only a relatively few econometricians use these techniques. Rather than theoretical aspects of Bayesian statistics or computational techniques, we illustrate how the Bayesian methods can be useful in analysing non-linear cointegration models. In the last ten years, non-linear time series models, such as regime switching models, have become popular among applied econometricians to analyse the business cycles, policy evaluation in specific macroeconomic issues and forecasting. Cointegration analysis has been influenced by the non-linearity so that cointegration models that allow regime switching or structural breaks have been analysed by many econometricians. Unfortunately, these nonlinear cointegration models tend to be complicated both in terms of estimation and testing. We consider in this thesis a Bayesian approach to (i) a linear cointegration model, (ii) a cointegration model with Markov regime switching, and (iii) a cointegration model with multiple structural breaks, and show how easily we can analyse these models without any substantial modification. Chapter 2 proposes a simple method for detecting cointegration rank using the Bayese factors, computed by the harmonic mean of the likelihood or Schwarz' Bayesian information criterion. Then we perform Monte Carlo simulations to compare three Bayesian methods (Phillips posterior information criterion, Kleibergen and Paap method, and one proposed method) for the cointegration rank. Provided we have enough large sample size, the Phillips' posterior information criterion gives consistent results, while the results by Kleibergen and Paap method depends on the prior hyperparameters that we specify. In Chapter 3, we develop the cointegration model that allows cointegration relationships to be switched on and off depending on the regime. Unlike the classical method that requires a two-step estimation, the Bayesian method provide a straightforward estimation and testing procedure. In Chapter 4, we consider cointegration model with multiple structural breaks in the level, trend and error covariance. The more general model with breaks in both the adjustment term and the cointegrating vectors are also presented. To date, there is no research that deals with a cointegration model with unknown multiple structural breaks in any subset of the parameters.

The thesis consists of three chapters of self-contained empirical studies. In Chapter 1, we examine long-run and short-run dynamics of US real trade balance with Canada. In addition to the linear error-correction model, the Markov-switching error-correction model is employed, using quarterly data from 1985 to 2008. We find that real exchange rate, real oil price and real new housing price index have statistically significant effects on US real trade balance with Canada in the long run. We acquire evidence of short-run J-curve. Results show that short-run dynamic effects of real oil price are not so fearful, with statistically insignificant effect on real trade balance following an increase in real oil price. House prices could be argued as being strongly relevant for settlement and adjustment of US trade balance in the long run through the wealth effects. However, the immediate (next-quarter) effect of a change in housing wealth is insignificant, consistent with existing literature. US real trade balance with Canada forecasts from our non-linear VAR model outperform ones from the linear VAR in first difference (DVAR) model and ones from the random walk model. The long-term out-of-sample forecastability is not much improved by the oil price and house price variables, which, nonetheless, actively explain in-sample movement of US real trade balance with Canada in the long run. In Chapter 2, we examine the effect of monetary policy and exchange rate on stock price movements in Asia. We employ a Bayesian structural vector autoregression model and impose sign restrictions to identify simultaneously and uniquely contractionary monetary policy shocks and exchange rate depreciation shocks in an integrated framework. This study covers the stock markets of Thailand, Malaysia and South Korea, over the period 1989-2008. Our main results acquired using sign restrictions show that monetary policy shocks result in a strongly persistent effect on market index real stock prices whereas the impact of exchange rate shocks is short-lived over the short run. The variance decomposition suggests that the exchange rate is as important as monetary policy for explaining the dynamics of market and financial sector index real stock prices. More precisely, for all the countries examined, real exchange rate developments have been more important in the short run. In Chapter 3, within the context of a time-varying transition probabilities Markov-switching model of the uncovered interest parity (UIP) condition, we examine if variables measuring fear and volatility have an effect on the probability of switching between the regime where the UIP condition holds and the regime where it does not. The state transition probability depends nonlinearly upon the variables examined. These are the exchange rate volatility, the VIX equity option implied volatility index and the TED spread. Applying this to both US dollar exchange rates and cross (exchange) rates from January 4, 1990 to September 11, 2008, we find that those three variables increase the probability of remaining in the regime where the UIP condition holds. In addition, the probability of switching from the regime where the UIP condition does not hold to the regime where the exchange rate follows the UIP condition decreases as these variables measuring fear and volatility fall, especially the VIX equity option implied volatility index. The smoothed probabilities show that exchange rates examined essentially do not follow the UIP condition except during periods in which the fear and risk variables are increasing, as in the recent global financial crisis in particular.

In most economic models used for theoretical exploration or policy analysis, there is a crucial role for agents' expectations about future outcomes. Generally, it is assumed that economic agents take their decisions according to rationality principles and that they have a fairly accurate knowledge about the economic environment. In other words, they are assumed to know the model of the economy (Rational Expectations Hypothesis). The latter assumption is somewhat extreme, given the evident lack of agreement, even among professionals, about the correct model of the economy. In this thesis I maintain the hypothesis that agents take their decisions rationally, i. e. in order to maximize their utilities given their budget constraints, but I assume that each agent has to learn about the economic environment. More specifically, I consider economic models for monetary policy analysis. The goal is to study how the introduction of learning in these models can affect the design of monetary policy. Policy recommendations that might be sound under Rational Expectations, might lead to disastrous results under learning. I also use learning as a selection device. Some economic models fail to predict a unique Rational Expectations Equilibrium. Nevertheless, a REE is a sensible prediction of the model only if it can be shown that it is the result of some learning process of the economic agents. REE that are unstable under learning are not plausible equilibria.

The first part of this thesis is concerned with tax competition when the tax receipts fund an anti-crime measure. Both the capital and criminals are mobile between two jurisdictions. The resulting pure strategy Nash equilibrium tax rates are distorted from the optimal tax by the equilibrium migration response of the rich; if positive at the equilibrium then tax competition will result in taxes that are too high whilst if it is negative taxes will be too low compared to the optimum. The best response functions of the model are tested using data from England and Wales. The possibility that they engage in tax competition cannot be ruled out. It is possible for a central government to devolve tax raising powers without the distortion occurring if they can impose an optimal sanction. This, though, is independent of the harm caused by the crime and could be politically difficult to introduce. The second part looks at the Ministry of Defence’s procurement policy since 1985. The role of competition has increased but scant attention was played to the trade-off between maximising the benefits of current competition and obtaining future competition. The Ministry of Defence always chose to take the benefits in the short term arguing any loss of competition merely eliminated excess capacity which the Ministry of Defence would no longer have to pay for. Whilst the empirics suggest this is true during the 1990s, the problems encountered on the Type 45 project at the start of the millennium demonstrate the difficulties they have in procuring given the limited number of domestic firms they can contract with. An alternative mechanism of directed buys, with recourse to a competitive market off the equilibrium path, is suggested as a way in which the Ministry of Defence can preserve competition into the future.

Chapter 2 of this thesis employs a dynamic general equilibrium with Taylor wage contracts to show that the use of strict inflation targeting as a disinflation policy may result in a slump in production and a considerable increase in macroeconomic volatility. Important determinants of the magnitude of the macroeconomic oscillations in the post-disinflation state of the economy turn out to be the size of the reduction in the inflation rate and the degree of returns to labor in the production function. In the special case of constant returns, the oscillations are large and permanent. Chapter 3 of this thesis extends the above analysis to an open-economy setting demonstrating that the exchange rate can act as a stabilizer by effectively relieving wages from part of the burden of reducing the inflation rate. The more the economy is open, the smaller the magnitude of the macroeconomic oscillations will be after the disinflation policy is applied. The policy is shown to be infeasible for all practical purposes in a closed economy with constant returns to scale when the full nonlinear model is considered. Chapter 4 of this thesis employs a Markov switching framework to allow for an interesting alternative characterization of macroeconomic news effects on the foreign exchange market. The chapter finds strong evidence for the presence of nonlinear regime switching between a high-volatility and a low volatility state driven by monetary policy announcements that come as a surprise to the market. It also uncovers significant market positioning prior to the announcements, indicating a limiting of risk exposure by market participants who are unsure about the precise outcome of the policy decisions. Chapter 5 of this thesis investigates the impact of monetary shocks on the direction and the composition of international capital flows. It identifies monetary policy shocks in a structural VAR via the pure sign restrictions approach. There are two key findings. First, a US monetary easing causes net capital inflows and a worsening of the US trade balance. Second, monetary policy shocks induce a negative conditional correlation between capital flows in bonds and equity securities. Intriguingly, they cause a negative conditional correlation between equity flows and equity returns but a positive conditional correlation between bond flows and bond returns.

It is well known that the market price of options are inconsistent with option pricing models that assume the innovation of the underlying price follows Geometric Brownian Motion. What is not clear is why this occurs. The testing of option pricing models requires a joint hypothesis to be tested that the options pricing models are correct and that the options markets are efficient. To test the option pricing models, we will examine the relationship between the objective and risk neutral dispersion processes for twelve financial futures markets. These markets have been selected so that we can investigate the dynamics of equity, fixed income and foreign exchange asset classes. Our analysis of the objective dispersion processes allows us to reject the hypothesis that the prices of these twelve markets follow Geometric Brownian motion. For all twelve markets and for various sub-periods of analysis, we find that the optimal models for capturing the dynamics of the objective dispersion process include jump diffusion and stochastic volatility. For the risk neutral dispersion process, we chose to examine the implied volatility surfaces from the closing prices of options (on these same futures markets). It appears that both within and between markets similar dynamics determine the shapes of the implied volatility surfaces. By employing an Analysis of Covariance approach, we found that important consistencies exist within asset classes and between markets. The first order strike price effect (skewness) differs widely among markets but is fairly consistent within the same asset class. The second order strike price effect (kurtosis) is consistent among all markets. The dependency of both strike price effects on the time to expiration is also similar across all markets and suggests that both jump diffusion and stochastic volatility play a role. A comparison of option prices, which are consistent with the objective dispersion process, with actual options prices suggests that significant divergences exist. The actual smile patterns display greater variation in the amplitude compared to those from the objective function. The least degree of discrepancy exists for the foreign exchange markets. Both the stock index and fixed income options dispersion processes display behaviours that diverge considerably. This divergence is primarily due to the existence of negative skews that are not justified by the objective dispersion processes. This suggests that other mechanisms are at work for the risk neutral dispersion processes for these asset classes. The most likely explanations are the existence of risk premia associated with stochastic volatility and non-diversifiable jumps or that transaction costs are relevant.

The thesis aims to explain the determination of employment at the industry level - in particular, the S.I.C. Orders of the U.K. engineering industry. The traditional demand-orientated approach is examined theoretically and empirically. Many developments are made to the models, but implausible and unstable estimates are generally found. More major developments are attempted, modelling desired output and the relationship between investment and employment with some success, but without a generally acceptable model of aggregate employment emerging. The view is taken that a major reason for this is likely to be the neglect of supply factors. Initial attempts to allow for the tightness of the labour market indicate some effect though incorrectly specified. The second half of the thesis undertakes a more rigorous and original analysis, involving the specification of an industry labour supply function, to be analysed in conjunction with the demand function. The appropriate methods of analysis and estimation depend upon assumptions about the interaction of demand and supply and the role of wages. Three stages of development are considered with increasing realism of assumptions, but increasing complexity of analysis and difficulty of estimation. The first assumes flexibility of wages, equilibrating sectors of the labour market and enabling simultaneous estimation of aggregate demand and supply. The second assumes a degree of inflexibility of wages, but homogeneity of the sectors, so that aggregate demand or supply is observed and 'regime' estimation is possible. The third stage allows for non-homogeneity-of sectors so that neither aggregate demand nor supply may be observed. Constrained estimation, via programming methods, results. Exogenous data is used to assess the extent of excess demand and supply in the labour market. Whilst the empirical results are limited, they do indicate the need for supply factors to be modelled and included in the analysis of employment.