There is an ongoing debate over the role that equity markets play in determining and influencing international equity flows. The first chapter of this dissertation describes the large portfolio equity flows into China and India, in order to understand the buying behavior of US investors. The rapid growth of the Chinese and Indian economies, coupled with the recent development and liberalization of their financial markets has attracted significant portfolio investment from U.S. investors. It is commonly assumed that domestic investors have an informational advantage over foreign investors; however, some recent empirical literature has questioned this assumption. Essay one dissects the nature of the relationship between foreign equity flows, equity returns, and related variables. The results of my empirical investigation provides evidence that U.S. institutional investors are making investment decisions based on long-run determinants of value rather than responding to price signals or ‘chasing returns'. I anticipate that the strong relationship between equity flows and fundamentals will strengthen as information asymmetries decline and US investors continue to develop more sophisticated methods of assessing underlying value in China and India. The second essay of this dissertation explores a new panel data set based on US gross cross-border equity flows to 20 industrialized nations combined with measures of market valuation for the period of 1977-2005. Empirical evidence of imperfect integration across world equity markets indicates that valuation matters. Consistent with relative value trading as a determinant of equity flow patterns, I find that equity flows decrease sharply with host-country market valuations—in particular the component of valuation that is forecasted to revert the following year. I also find that equity flows increase sharply with US equity market valuations. These results suggest the existence of a valuation channel for cross-border equity flows. The findings of this chapter show that US investors are informed about both domestic markets and foreign markets. Peripheral findings of this essay confirm the findings of other researches, but with a longer sample period. Consistent with existing literature, I find a negative influence of interest rates spreads, and information asymmetries on cross-border trade in equities.

Agricultural support levels are at a crossroad with reduced distortions in OECD countries and increasing support for agricultural producers in emerging economies over the last decades. This paper studies the determinants of distortions in the agricultural markets by putting a specific focus on the role of trade policy. Applying various different dynamic panel data estimators and explicitly accounting for potential endogeneity of trade policy agreements, we find that an increase in the number of bilateral free trade agreements exhibits significant short- and long-run distortion reducing effects. By contrast, WTO's Uruguay Agreement on Agriculture has not been able to systematically contribute to a reduction in agriculture trade distortions. From a policy point of view our findings thus point to a lack of effectiveness of multilateral trade negotiations. / Series: Department of Economics Working Paper Series

We study the effects of the recent economic crisis on firms' bidding behavior and markups in sealed bid auctions. Using data from Austrian construction procurements, we estimate bidders' construction costs within a private value auction model. We find that markups of all bids submitted decrease by 1.5 percentage points in the recent economic crisis, markups of winning bids decrease by 3.3 percentage points. We also find that without the government stimulus package this decrease would have been larger. These two pieces of evidence point to pro-cyclical markups. (authors' abstract)

The theme of academic anti-Semitism has been much discussed recently in histories of the interwar period of the University of Vienna, in particular its Faculty of Law and Policy Sciences. This paper complements these studies by focusing in this regard on the economics chairs at this faculty and, more generally, on the fate of the younger generation of the Austrian school of economics. After some introductory remarks the paper concentrates on three case studies: the neglect of Mises in all three appointments of economics chairs in the 1920s; the anti-Semitic overtones in the conflict between Hans Mayer and Othmar Spann, both professors for economics at the faculty; and on anti-Semitism as a determinant of success or failure in academia, and consequently of the emigration of Austrian economists. Finally, we have a short look at the development of economics at the University of Vienna during and after the Nazi regime. (author's abstract) / Series: Department of Economics Working Paper Series

The Nationalökonomische Gesellschaft (Austrian Economic Association, NOeG) provides a prominent example of the Viennese economic circles that more than academic economics dominated scientific discourse in the interwar years. For the first time this paper gives a thorough account of its history, from its foundation 1918 until the demise of its long-time president, Hans Mayer, 1955, based on official documents and archival material. The topics treated include its predecessor and rival, the Gesellschaft österreichischer Volkswirte, the foundation 1918 soon to be followed by years of inactivity, the relaunch by Mayer and Mises, the survival under the NS-regime and the expulsion of its Jewish members, and the slow restoration after 1945. In particular, an attempt is made to provide a list of the papers presented to the NOeG, as complete as possible, for the period 1918-1938. (author's abstract) / Series: Department of Economics Working Paper Series

We propose the analysis of the dynamics of the standard deviation of business cycles across euro area countries in order to evaluate the patterns of cyclical convergence in the European Monetary Union for the period 1960-2008. We identify significant business cycle divergence taking place in the mid-eighties, followed by a persistent convergence period spanning most of the nineties. This convergent episode finishes roughly with the birth of the European Monetary Union. We show that a hypothetical euro area including all the new members of the recent enlargement rounds does not imply a sizeable decrease in the optimality of the currency union. Finally, the European synchronization differential with respect to other developed economies seems to have been diluted within a global cycle since 2004.

This paper investigates the patterns and determinants of the co-movement of economic activity across regions in the European Union. Using a panel data of 208 EU-15 regions over the period 1989-2002 we estimate a system of four simultaneous equations to analyse the impact of regional trade integration, specialization and exchange rate volatility on correlations of regional growth cycles with the Euro area. We find that deeper trade integration with the Euro area had a strong direct positive effect on the synchronisation of regional growth cycles with the Euro area. Industrial specialisation and exchange rate volatility were sources of cyclical divergence. Industrial specialisation had however an indirect positive effect on growth cycles synchronisation via its positive effect on trade integration, while exchange rate volatility had an indirect additional negative effect on growth cycle correlations by reducing trade integration. Industrial specialisation had an indirect negative effect on growth cycle correlations by increasing the exchange rate volatility. The direct impact of trade integration on growth cycle correlations was stronger in the pre-EMU sub-period, while in the EMU subperiod, the negative direct effects of industrial specialisation and exchange rate volatility were stronger than in the pre-EMU sub-period. A distinct result is the positive and significant relationship between exchange rate volatility and growth cycle correlations in the pre-EMU sub-period, suggesting that over this period, country-specific exchange rate fluctuations acted as shock absorbers. Our analysis is relevant in the context of the discussion about the macroeconomic adjustment to region-specific shocks in the European Monetary Union. (authors' abstract) / Series: EI Working Papers / Europainstitut

This paper analyses the role of the spatial structure of migrant networks in the location decision of migrants to the European Union at the regional level. Using a random parameters logit specification, a significant positive effect of migrant networks in neighbouring regions on migrants' location decisions is found. Although this spatial spillover effect is smaller than the effect of networks in the host regions, omitting to control for this spatial dependence results in a 40% overestimation of the effect of regional migrant networks on the location decision of newly arriving migrants.

The Nationalökonomische Gesellschaft (NOeG) was founded in June 1918 by a group of young scholars, mostly based in Vienna, as a forum for theoretical debate. Despite the prominent economists involved (e.g. Schumpeter, Mises, Mayer, Spann, Amonn) its activities soon petered out. The relaunch of the NOeG in 1927 originated from the necessity of the two strands of the Austrian school, led by Mayer and Mises, to find some tolerable arrangement; Spann and economists outside the University of Vienna were excluded. Around 1930 the NOeG and Vienna in general proved an attraction for many well-known economists from abroad, and many of the papers presented were printed and cited in first-rate journals. Yet with the emigration of many Austrian economists during the 1930s the NOeG mirrored the general decline of academic economics in Austria and the number and quality of the papers presented decreased. After the Anschluss 1938 the NOeG and its president Mayer were quick in dismissing its Jewish members and in the following adhered to a strategy of inconspicuous adaptation; its formal existence did not lead to any substantial activities. The post-war period was characterized by the restoration of the situation before 1938, with Mayer's continued presence at the university as well as at the NOeG a case in point. In the end, it led Austrian academic economics into a state of international isolation and "provincialization" much lamented by the émigré economists of the Austrian school.

Austria, Finland and Sweden - all small highly developed industrial and rich countries - entered the EU in 1995. Their macroeconomic performance since then was quite different. Real GDP in Finland und Sweden increased faster than in EU average, while those of Austria fell back. Austria lost its second rank in GDP per capita (at PPS) and is now the fourth richest EU country; Sweden fell back from the seventh to the eight rank, while Finland improved its position from rank 11 to nine. In a referendum in September 2003 Sweden refused to take over the Euro, whereas the other two countries are members of the Euro area. Ex post model simulations indicate that Finland appears to have profited most from EU membership (0.7 percentage point greater annual GDP growth since 1995), followed by Austria (+0.4 percent) and Sweden (+0.3 percent). / Series: EI Working Papers / Europainstitut