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PurposeThe purpose of this paper is to examine the relationship between export performance and firm size.Design/methodology/approachAnalysing a large sample of firms in the Vietnamese manufacturing sector, the authors employ a quantile regression approach to asses whether or not the relationship between exporting and firm size is dependent upon the extent of exporting that firms already undertake.FindingsThe authors find that increased firm size leads to higher export volumes. However, in sharp contrast to literature that largely focuses on considering a linear relationship between these two variables, the authors further find that the positive relationship becomes weaker as the extent of exporting activity increases.Originality/valueIn contrast to the earlier literature, a key novelty of the approach is that the authors obtain new insights in terms of establishing a nonlinear relationship between firm size and export performance in the case of Vietnamese manufacturing.

PurposeThe purpose of this paper is to consider whether or not the introduction of inflation targeting (IT) impacts on the mean-reversion properties of inflation and output growth.Design/methodology/approachFocusing on eight Asian countries of which four are inflation-targeters, the authors employ a two-state Markov-switching model which characterizes the behavior of inflation and output growth as regime-dependent based on periods of stationarity or non-stationarity.FindingsIn contrast to a literature that offers mixed findings, the authors find the presence of stationary inflation and output growth in one regime for all IT countries, except for South Korea which is characterized by stationary output growth in both regimes. In the cases of South Korea and Thailand, IT reduces the probability of inflation remaining in a non-stationary regime. IT increases the probability of South Korea remaining in a regime of low persistence output growth. While IT is important in understanding behavior, so are other considerations such as exchange rate volatility, as well as the Asian and global financial crises.Originality/valueIn contrast to other unit root tests of inflation and output growth, a novelty of the approach is that the authors obtain new insights in terms of two concepts of stationarity that allow for inflation and output growth to switch between stationary and non-stationary regimes (partial stationarity), or between stationary regimes of differing degrees of persistence (varied stationarity).

Purpose – The purpose of this paper is to address the unresolved outcome of the research on the impact of dollarization on inflation by examining the partially dollarized economy of Eritrea. Design/methodology/approach – Inflation under partial dollarization is modelled based on money demand and supply framework. Using quarterly data for the study period 1996Q1-2008Q4, estimation is based on a vector error correction model together with dynamic ordinary least square. Findings – The results indicate that inflation increases as a result of an increase in dollarization. This applies to both the short-run and long-run estimations regardless of whether official or black market exchange rate data are used in the analysis. In terms of the short-run dynamics involved in the long-run relationship between dollarization and inflation, the speed of adjustment toward long-run equilibrium ranges from negative 7.2-7.6 percent per quarter. Research limitations/implications – The main policy implication of the finding is that the extent of dollarization should not be overlooked in controlling inflation in the short run and the long run. Originality/value – Despite a number of studies that examine the consequences of dollarization, the impact of partial dollarization on inflation in the Eritrean economy has never been addressed. This study, therefore, is original in its kind and resolves the controversial outcomes on the studies of inflation and dollarization by modelling inflation under partial dollarization, providing new evidence and revealing potential economic reasons for the discrepancies in the findings of the literature on partial dollarization.

Tests for long‐run macroeconomic convergence among European Union (EU) countries according to the various exchange rate regimes that have prevailed over the last 40 years. Applying a recently developed test to the monthly index of industrial production data, output convergence is confirmed or rejected depending on whether or not the first largest principal component based on benchmark deviations with respect to Germany is stationary or not. It is argued that this methodology has key advantages over existing cointegrating and common trends procedures. For most EU countries, there is evidence of increased macroeconomic convergence during the 1990s, where evidence is particularly strong for Belgium, France and The Netherlands. The evidence also indicates that the Snake era of the 1970s was more conducive towards convergence than the initial exchange rate mechanism period of 1979‐1992. Firm evidence of convergence is lacking for Austria, Finland and Sweden, who joined the EU in 1995, and for a sample of non‐EU countries.

Investigates the hypothesis of increased financial integration within the European Union (EU) based on an examination of covered and nominal interest rate differentials between March 1979 and August 1992 using cointegration and time‐varying parameter econometric techniques. Discovers evidence of increased financial integration from about 1983, although this is not universal for all countries within the EU. In particular the UK seems to have more financial independence, perhaps reflecting its non‐membership of the exchange rate mechanism, while Belgium is the country most closely tied to German monetary policy.