Category Archives: Guest contribution

Historicising Business Strategy

Evolving Ideas about Business Strategy

by Pankaj Ghemawat (NYU Stern, USA and IESE Business School, Spain)

Abstract

This paper updates an earlier article published in Business History Review that concluded that by the second half of the 1990s, there had been a profusion of new, purportedly practical ideas about strategy, many of which embodied some explicit dynamics. This update provides several indications of a drop-off since then in the rate of development of new ideas about strategy but also a continued focus, in the new ideas that are being developed, on dynamics. And since our stock of dynamic frameworks has, based on one enumeration, more than doubled in the last fifteen to twenty years, updating expands both the need and the empirical basis for some generalizations about the types of dynamic strategy frameworks—and strategy frameworks in general—that managers are likely to find helpful versus those that they are not.

Source: Business History Review 90, 1-23 (DOI: https://doi.org/10.1017/S0007680516000702)

Review by Kyle Bruce (Macquarie University, Australia)

Editor’s note

Ghemawat’s 2017 paper below should not be read in isolation but as part of a round table organized at Harvard Business School that brought together historians and management scholars to discuss the origins of ideas in business and management. The results of the round table were published as a special edition of the Business History Review. In this sense, Ghemawat’s contribution to the special issue and its discussion by Chris McKenna (in the same special issue) came to an independent yet similar conclusion to that expressed by Nobel laureate Robert Shiller, who suggested “that in the age of social information networks, economists need to rethink how and why information really spreads.” (See a summary of Shiller’s ideas in The Role of Narratives in Economics).

It is laudable that the executive editors of the Business History Review created a space to disseminate the results of the round table through the journal. However, as you will read below, Kyle Bruce questions whether this is the right way to engage other management scholars in business history as, strictly speaking, the contribution by Ghemawat would be found wanting as scholarly work of international standing.

A final note is that in its comments to Ghemawat, even McKenna gets it wrong by pointing to Lotus 1-2-3 as the first spreadsheet. It actually was VisiCalc.

Having said that, the aim in this space is to generate academic debate through a blog format. So by all means do chip in.

Bernardo Bátiz-Lazo
General Editor NEP-HIS & Editorial Board member, Business History Review.

As a historian and teacher of strategy and, moreover, as a close follower of Ghemawat’s work, I was very much looking forward to his recent update of his 2002 BHR paper on the history of the sub-discipline. I habitually invoke the decade-and-a-half old piece as background reading for my Executive MBA strategy students and hitherto have experienced little, if any, pushback from students typically cagey about the words “theory” or “history”. Regrettably, I am not so sure the updated paper under review here will escape unscathed for the simple reason that it is pretty tough to follow. Let me explain.

After briefly overviewing the 2002 paper that in essence discerned a profusion of new ideas about strategy – particularly those embodying a more dynamic approach – dating from the early to mid-80s, Ghemawat introduces his new findings. After a big peak in the mid-90s, there has been a marked drop-off in new ideas, but dynamics “is a sustained interest focus of strategic innovation rather than one of passing interest” (p. 5; emphasis added). So far, so good you might think, but I started to worry about the phraseology (“strategic innovation”?) attendant on the use of analytical tools from strategy and adjacent sub-disciplines to make sense of his findings; namely, “what should one make of the drop-off overall and the shift toward more attention to dynamics? And what, if anything, should be done?” (p. 8).

Pankaj Ghemawat

Pankaj Ghemawat

Unless the strictures concerning the dreaded “so what?” question have been lifted in history journals such as BHR, I could not discern after several reads a compelling argument as to why readers should be at all bothered by the findings presented? For students of the strategy-as-practice literature, for instance, the suggestion there’s fewer models and frameworks out there for practising managers to employ is not a concern given they probably don’t use them anyway. For my MBA students who routinely complain of framework fatigue, again, the theory drop-off is not a problem. And so, for me, the remainder of the paper was rather superfluous and unnecessarily complex. Curiously, I think Ghemawat makes it so when he concludes that while it’s certain there’s been a drop-off in the “rate of development of big new strategy ideas/frameworks, it is much harder to be definite about the welfare implications” (p. 10; emphasis added). For me, this conclusion renders redundant both the ensuing “what is to be done” question he poses, as well as the next eight-and-half pages of the article devoted to “a critical assessment of frameworks new and old” (p. 2).

After several reads of these aforementioned pages, I could not really follow or appreciate the “irreversibility” and “uncertainty” dimensions utilised to assess how dynamic current frameworks really are. However, I felt comforted when Ghemawat concludes that “quite a few” of said frameworks “seem subject to some practical limitations” (p. 19). This comfort was short-lived, though, when he finishes the paper with the frustrating and seemingly throwaway line that the way forward, as it were, “is to shift some attention away from the chronologies of frameworks to historiography that attempts to assess them in some fashion” (p. 21). I immediately asked myself: “well, why didn’t he just do this, then??”

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For me, and I trust also BHR readers, a historiographical piece embodying intellectual history, actor-network theory, or sociology of scientific knowledge to account for the “trials of strength” in strategy theory, the tension between contributions from the academy and those from business practice, and the current fascination with dynamics, would have been an easier and more interesting read. Like much being published in business and management history journals of late, Ghemawat’s paper is short on actual history and, notwithstanding the final sentence, even short on how to DO history. I was left wondering why this paper was published in this journal and asking myself what this paper’s place tells me about BHR? I have no answers for these questions but look forward to some in due course.

References

Ghemawat, P. (2002) “Competition and Business Strategy in Historical Perspective”, Business History Review 76(1): 37-74. (DOI: https://doi.org/10.2307/4127751)

Publication cultures in economic, business and financial history: Comparing apples and oranges?

1.)Quantifying the heterogeneity of publication cultures in economic, business and financial history

 

by Eline Poelmans and Sandra Rousseau, Faculty of Economics and Business, KU Leuven, campus Brussels

 

Abstract

Researchers working in the interdisciplinary field of ‘economic, business and financial history’ come from at least two different disciplinary backgrounds, namely history and economics. These two backgrounds may lead to differences in research practices, as there are potentially other demands for tenure and promotion requirements. We performed a survey to assess whether there is heterogeneity in the submission and publication culture (i.e. one multi-faceted culture, or simply multiple cultures) between respondents working in an economics versus a history department. Among other things, we found differences in their motivation for publishing, the type of publications they aim for, and their journal selection strategies. Our results show that the department the respondents work at—irrespective of their disciplinary focus and background—determines most of their research and publication decisions. Hence working successfully in an interdisciplinary field or working in a department different from the main field of research requires researchers to learn the (in)formal rules and practices of an unfamiliar field.

 
Published on: Essays in Economic & Business History (2016) Volume XXXIV pp. 95-135.

URL: http://www.ebhsoc.org/journal/index.php/journal/issue/current

and

2.)Factors determining authors’ willingness to wait for editorial decisions from economic history journals

 

by Eline Poelmans and Sandra Rousseau, Faculty of Economics and Business, KU Leuven, campus Brussels

 

Abstract

In this contribution, we measure how long researchers are willing to wait (WTW) for an editorial decision on the acceptance or rejection of a submitted manuscript. This measure serves as a proxy for the expected value of a publication to a researcher in the field of economic, business and financial history. We analyze how this WTW measure varies with the characteristics of the submitting authors themselves. We distinguish the impact of personal characteristics (including age, gender and geographic location) as well as work-related characteristics (including research discipline, affiliation and academic position). To identify the factors determining economic history authors’ WTW for editorial decisions, we use a valuation technique known as stated choice experiments. Our results show that respondents found the standing of the journal to be at least as important as its ISI impact factor. Moreover, we find differences in publication culture between economic and history departments. Overall, researchers’ willingness to wait is influenced to a greater extent by the research discipline in which the respondents are active (history vs. economics), than by their personal characteristics (e.g. the education or the type of Ph.D. they obtained).

Published on: Scientometrics (2015) 102: pp. 1347–1374

DOI 10.1007/s11192-014-1469-2

URL https://www.researchgate.net/publication/276234589_Factors_determining_authors

Summarised by Eline Poelmans and Sandra Rousseau

Overview

When authors choose a journal to submit a manuscript, the submission process is influenced by several author and journal characteristics. Also time pressure is an influencing factor, since academic job offers, promotions and tenure decisions tend to be based on researchers’ publication and citation records. Hence, both journal editors and prospective authors want to reduce the time between the initial submission and the final editorial decision.

Moreover, within interdisciplinary fields – such as the field of ‘economic, business and financial history’, a field at the intersection of two major social sciences – there can be large differences in both research attitudes, skills, focus and practices depending on the different backgrounds of researchers (such as having a PhD in history or in economics) as well as varying requirements for tenure, promotion or funding in the different departments the researchers are working (such as the department of history versus that of economics) that can also influence an author’s submission and publication decisions.

 

In the first paper, the authors conducted a survey to investigate whether working in the interdisciplinary field ‘economic history’ implies an additional challenge to the researcher in this field compared to those working in a more homogeneous field. The authors used data in order to quantify this heterogeneity (or ‘duality’) of the publication culture in economic history by investigating the impact of the disciplinary focus of researchers’ doctoral dissertation and current affiliation (history, economics or other) on respondents’ submission and publication behavior: their preferred publication outlets, their reasons for publishing, and their journal selection strategies.

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In the second paper, the authors assessed the impact of time constraints on the submitting author’s willingness to wait (WTW) for a publication in a journal with specific characteristics in the field of economic history and they analyzed whether and how this WTW measure varied with journal and personal characteristics. They studied the main effects of the different journal characteristics on the willingness-to-wait for a publication, as well as the interaction effects with the respondents’ characteristics to estimate the different values researchers attach to publications with particular characteristics in this field.

 

The first paper shows that the department the respondents work at determines most of their research and publication decisions. Hence, working in an interdisciplinary field such as economic history clearly comes at a cost: researchers with a PhD in one discipline who work in a department of another discipline may have to change their research and publication behavior significantly in order to obtain tenure or get promoted. These insights imply that it is inappropriate to use a strategy based on the conventions of a single discipline to evaluate researchers in a multidisciplinary field since it is unlikely that ‘one size fits all.’

 

The second paper found that respondents’ decisions on manuscript submission were dependent on specific journal characteristics, such as ISI impact factor and standing. Moreover, the respondents’ institution type with which they were affiliated (history versus economics) influenced the respondent’s willingness to wait to a greater extent than their personal characteristics (such as the type of Ph.D. they obtained).

 

Hence, as requirements with regard to tenure and promotion often differ between departments and disciplines, it is important to develop measurement methods to hire and evaluate researchers working in an interdisciplinary field that have obtained a PhD in one field (such as (economic) history) and end up in an economics department, and vice versa. In this respect it is important to develop and use multidisciplinary assessment strategies to evaluate the quality of researchers in a multidisciplinary field. For instance, it may be advisable to include researchers from both disciplinary backgrounds in selection committees.

Possibilities for future research

Obtaining a larger data set with more respondents can improve the paper. Moreover, checking whether (and making sure that) the dataset is representative for the discipline would be useful (e.g. the division male/female, the share of American, European, Asian, … researchers in this specific field, the share of people with a PhD in economics versus a PhD in history that work in the field of economic history, the division of permanent versus temporary contracts, etc…).

With regard to future research attaining more PhD students would be useful to see whether their research decisions are already formed during their PhD by the publication culture of the department they work at. It is also interesting to analyze whether there is a difference if the PhD student is conducting his PhD on an independent (governmental) scholarship.

A more in-depth analysis about how the researchers perceive the advantages and disadvantages of working in an interdisciplinary environment as well as measuring attitudes and opinions through multidimensional scales can improve insight into the challenges and rewards of performing interdisciplinary research. By identifying drivers and barriers to interdisciplinary research in the field of economic history – for instance by using the framework developed by Siedlok and Hibbert (2014) – advice for research institutions, funding agencies and policy makers could be formulated.

moneytime

Moreover, the results of these papers only apply to researchers active in the field of economic history. Thus, it would be interesting for future research to investigate whether these findings could be generalized to other (interdisciplinary) fields, such as law and economics or environmental economics.

Stated choice experiments could, for instance, be used to investigate the relative importance of factors influencing the decision to collaborate with a particular type of researcher (gender, rank, national or international) or research institution. They could also help in identifying classes of researchers that show similar collaborative behavior. Moreover, choice experiments could help in analyzing decisions to fund particular projects or to hire particular researchers. Further, they could also be useful in comparing authors’ citation behavior: such as studying the relative importance of different articles’ characteristics (such as familiarity with the authors, standing of the journal, time of publication, content fit, innovativeness, etc.) in the decision to cite a particular source in a text. Finally, choice experiments can be used to analyze the editors’ decision in matching referees with submitted manuscripts, depending on characteristics, such as specialization, maturity and past experience with a particular referee.

Finally, the crisis of 2007 showed that the knowledge of historical facts could maybe not have prevented the crisis, but at least have made the banks more cautious in their decision making process. However, so far, interdisciplinary research – such as economic, financial and business history – is unfortunately still considered by the academic world as a ‘side business’, most often not really belonging to a department, but as a research field floating somewhere in between economics and history. As long as the demands for tenure and the promotion requirements in different departments differ, researchers will be guided in their motivation to work on certain topics by these external evaluation criteria, instead of by the interest of historical facts that need to be researched in order to learn lessons for the future.

Given the value of interdisciplinary research in tackling complex real-life problems, it is important to understand the dynamics of such interdisciplinary research fields. Thus it is interesting to study the formal and informal sets of rules that guide the selection of research topics, collaborations, funding decisions and publication behavior. Such empirical – and repeated – studies allow us to identify positive and negative trends and provide the opportunity to react in a timely manner so that interdisciplinary research is – and continues to be – rewarding for researchers.

 

Additional References

Siedlok, F. and Hibbert, P., 2014. The organization of interdisciplinary research: modes, drivers and barriers. International Journal of Management Reviews16(2), pp.194-210.

A New Take on Sovereign Debt and Gunboat Diplomacy

Going multilateral? Financial Markets’ Access and the League of Nations Loans, 1923-8

By

Juan Flores (The Paul Bairoch Institute of Economic History, University of Geneva) and
Yann Decorzant (Centre Régional d’Etudes des Populations Alpines)

Abstract: Why are international financial institutions important? This article reassesses the role of the loans issued with the support of the League of Nations. These long-term loans constituted the financial basis of the League’s strategy to restore the productive basis of countries in central and eastern Europe in the aftermath of the First World War. In this article, it is argued that the League’s loans accomplished the task for which they were conceived because they allowed countries in financial distress to access capital markets. The League adopted an innovative system of funds management and monitoring that ensured the compliance of borrowing countries with its programmes. Empirical evidence is provided to show that financial markets had a positive view of the League’s role as an external, multilateral agent, solving the credibility problem of borrowing countries and allowing them to engage in economic and institutional reforms. This success was achieved despite the League’s own lack of lending resources. It is also demonstrated that this multilateral solution performed better than the bilateral arrangements adopted by other governments in eastern Europe because of its lower borrowing and transaction costs.

Source: The Economic History Review (2016), 69:2, pp. 653–678

Review by Vincent Bignon (Banque de France, France)

Flores and Decorzant’s paper deals with the achievements of the League of Nations in helping some central and Eastern European sovereign states to secure market access during in the Interwar years. Its success is assessed by measuring the financial performance of the loans of those countries and is compared with the performance of the loans issued by a control group made of countries of the same region that did not received the League’s support. The comparison of the yield at issue and fees paid to issuing banks allows the authors to conclude that the League of Nations did a very good job in helping those countries, hence the suggestion in the title to go multilateral.

The authors argue that the loans sponsored by the League of Nation – League’s loan thereafter – solved a commitment issue for borrowing governments, which consisted in the non-credibility when trying to signal their willingness to repay. The authors mention that the League brought financial expertise related to the planning of the loan issuance and in the negotiations of the clauses of contracts, suggesting that those countries lacked the human capital in their Treasuries and central banks. They also describe that the League support went with a monitoring of the stabilization program by a special League envoy.

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Empirical results show that League loans led to a reduction of countries’ risk premium, thus allowing relaxing the borrowing constraint, and sometimes reduced quantity rationing for countries that were unable to issue directly through prestigious private bankers. Yet the interests rates of League loans were much higher than those of comparable US bond of the same rating, suggesting that the League did not create a free lunch.

Besides those important points, the paper is important by dealing with a major post war macro financial management issue: the organization of sovereign loans issuance to failed states since their technical administrative apparatus were too impoverished by the war to be able to provide basic peacetime functions such as a stable exchange rate, a fiscal policy with able tax collection. Comparison is made of the League’s loans with those of the IMF, but the situation also echoes the unilateral post WW 2 US Marshall plan. The paper does not study whether the League succeeded in channeling some other private funds to those countries on top of the proceeds of the League loans and does not study how the funds were used to stabilize the situation.

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The paper belongs to the recent economic history tradition that aims at deciphering the explanations for sovereign debt repayment away from the gunboat diplomacy explanation, to which Juan Flores had previously contributed together with Marc Flandreau. It is also inspired by the issue of institutional fixes used to signal and enforce credible commitment, suggesting that multilateral foreign fixes solved this problem. This detailed study of financial conditions of League loans adds stimulating knowledge to our knowledge of post WW1 stabilization plans, adding on Sargent (1984) and Santaella (1993). It’s also a very nice complement to the couple of papers on multilateral lending to sovereign states by Tunker and Esteves (2016a, 2016b) that deal with 19th century style multilateralism, when the main European powers guaranteed loans to help a few states secured market access, but without any founding of an international organization.

But the main contribution of the paper, somewhat clouded by the comparison with the IMF, is to lead to a questioning of the functions fulfilled by the League of Nations in the Interwar political system. This bigger issue surfaced at two critical moments. First in the choice of the control group that focus on the sole Central and Eastern European countries, but does not include Germany and France despite that they both received external funding to stabilize their financial situation at the exact moment of the League’s loans. This brings a second issue, one of self-selection of countries into the League’s loans program. Indeed, Germany and France chose to not participate to the League’s scheme despite the fact that they both needed a similar type of funding to stabilize their macro situation. The fact that they did not apply for financial assistance means either that they have the qualified staff and the state apparatus to signal their commitment to repay, or that the League’s loan came with too harsh a monitoring and external constraint on financial policy. It is as if the conditions attached with League’ loans self-selected the good-enough failed states (new states created out of the demise of the Austro-Hungarian Empire) but discouraged more powerful states to apply to the League’ assistance.

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Now if one reminds that the promise of the League of Nations was the preservation of peace, the success of the League loans issuance was meager compared to the failure in preserving Europe from a second major war. This of course echoes the previous research of Juan Flores with Marc Flandreau on the role of financial market microstructure in keeping the world in peace during the 19th century. By comparison, the League of Nations failed. Yet a successful League, which would have emulated Rothschild’s 19th century role in peace-keeping would have designed a scheme in which all states in need -France and Germany included – would have borrowed through it.

This leads to wonder the function assigned by their political brokers to the program of financial assistance of the League. As the IMF, the League was only able to design a scheme attractive to the sole countries that had no allies ready or strong-enough to help them secure market access. Also why did the UK and the US chose to channel funds through the League rather than directly? Clearly they needed the League as a delegated agent. Does that means that the League was another form of money doctors or that it acts as a coalition of powerful countries made of those too weak to lend and those rich but without enforcement power? This interpretation is consistent with the authors’ view “the League (…) provided arbitration functions in case of disputes.”

In sum the paper opens new connections with the political science literature on important historical issues dealing with the design of international organization able to provide public goods such as peace and not just helping the (strategic) failed states.

References

Esteves, R. and Tuner, C. (2016a) “Feeling the blues. Moral hazard and debt dilution in eurobonds before 1914”, Journal of International Money and Finance 65, pp. 46-68.

Esteves, R. and Tuner, C. (2016b) “Eurobonds past and present: A comparative review on debt mutualization in Europe”, Review of Law & Economics (forthcoming).

Flandreau, M. and Flores, J. (2012) “The peaceful conspiracy: Bond markets and international relations during the Pax Britannica”, International Organization, 66, pp. 211-41.

Santaella, J. A (1993) ‘Stabilization programs and external enforcement: experience from the 1920s’, Staff Papers—International Monetary Fund (J. IMF Econ Rev), 40, pp. 584–621

Sargent, T. J., (1983) ‘The ends of four big inflations’, in R. E. Hall, ed., Inflation: Causes and Effects (Chicago, Ill.: University of Chicago Press, pp. 41–97

Keynes and Actual Investment Decisions in Practice

Keynes and Wall Street

By David Chambers (Judge Business School, Cambridge University) and Ali Kabiri (University of Buckingham)

Abstract: This article examines in detail how John Maynard Keynes approached investing in the U.S. stock market on behalf of his Cambridge College after the 1929 Wall Street Crash. We exploit the considerable archival material documenting his portfolio holdings, his correspondence with investment advisors, and his two visits to the United States in the 1930s. While he displayed an enthusiasm for investing in common stocks, he was equally attracted to preferred stocks. His U.S. stock picks reflected his detailed analysis of company fundamentals and a pronounced value approach. Already in this period, therefore, it is possible to see the origins of some of the investment techniques adopted by professional investors in the latter half of the twentieth century.

Source: Business History Review (2016), 90(2,Summer), pp. 301-328 (Free access from October 4 to 18, 2016).

Reviewed by Janette Rutterford (Open University)

This short article looks at Keynes’ purchases of US securities in the period from after the Wall Street Crash until World War II. The investments the authors discuss are not Keynes’ personal investments but are those relating to the discretionary fund (the ‘Fund’) which formed part of the King’s College, Cambridge endowment fund and which was managed by Keynes. The authors rely for their analysis on previously unused archival material: the annual portfolio holdings of the endowment fund; the annual report on discretionary fund performance provided by Keynes to the endowment fund trustees; correspondence between Keynes and investment experts; and details of two visits by Keynes to the US in 1931 and 1934.

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The authors look at various aspects of the investments in US securities made by Keynes. They first note the high proportion of equities in the endowment fund as a whole. They then focus in detail on the US holdings which averaged 33% by value of the Fund during the 1930s. They find that Keynes invested heavily in preferred stock, which he believed had suffered relatively more than ordinary shares in the Wall Street Crash and, in particular, where the preference dividends were in arrears. He concentrated on particular sectors – investment trusts, utilities and gold mining – which were all trading at discounts to underlying value, either to do with the amount of leverage or with the price of gold. He also made some limited attempts at timing the market with purchases and sales, though the available archival data for this is limited. The remainder of the paper explores the type of investment advice Keynes sought from brokers, and from those finance specialists and politicians he met on his US visits. The authors conclude that he used outside advice to supplement his own views and that, for the Fund, as far as investment in US securities was concerned, he acted as a long-term investor, making targeted, value investments rather than ‘following the herd’.

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This paper adds a small element to an area of research which is as yet in its infancy: the analysis of actual investment decision making in practice, and the evolution of investment strategies over time. In terms of strategies, Keynes used both value investing and, to a lesser extent, market timing for the Fund. Keynes was influenced by Lawrence Smith’s 1925 book which recommended equity investment over bond investment on the basis of total returns (dividends plus retained earnings) rather than just dividend yield, the then common equity valuation method. Keynes appears not to have known Benjamin Graham but came to the same conclusion – namely that, post Wall Street Crash, value investing would lead to outperformance. He experimented with market timing in his own personal portfolio but only to a limited extent in the Fund. He was thus an active investor tilting his portfolio away from the market, by ignoring both US and UK railway and banks securities. Another fascinating aspect which is only touched on in this paper is the quality of investment advice at the time. How does it stack up compared to current broker research?

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The paper highlights the fact that issues which are still not settled today were already a concern before WWII. Should you buy the market or try to outperform? What is the appropriate benchmark portfolio against which to judge an active strategy? How should performance be reported to the client (in this case the trustees) and how often? How can one decide how much outperformance comes from the asset allocation choice of shares over bonds, from the choice of a particular sector, at a particular time, whilst making allowance for forced cash outflows or sales such as occurred during WWII? More research on how these issues were addressed in the past will better inform the current debate.

Medieval History and its Relevance to Modern Business

Joint publication review with The Long Run Blog

 

Title: The Medieval Origins of a Culture of Cooperation and Inclusive Political Institutions

The Medieval Origins of a Culture of Cooperation and Inclusive Political Institutions

 

By: Carmine Guerriero (ACLE, University of Amsterdam)

Abstract: This paper evaluates the relative importance of a “culture of cooperation,” understood as the implicit reward from cooperating in prisoner’s dilemma and investment types of activities, and “inclusive political institutions,” which enable the citizenry to check the executive authority. I divide Europe into 120 km X 120 km grid cells, and I exploit exogenous variation in both institutions driven by persistent medieval history. To elaborate, I document strong first-stage relationships between present-day norms of trust and respect and the severity of consumption risk-i.e., climate volatility-over the 1000-1600 period and between present-day regional political autonomy and the factors that raised the returns on elite-citizenry investments in the Middle Ages, i.e., the terrain ruggedness and the direct access to the coast. Using this instrumental variables approach, I show that only culture has a first order effect on development, even after controlling for country fixed effects, medieval innovations, the present-day role of medieval geography, and the factors modulating the impact of institutions. Crucially, the excluded instruments have no direct impact on development, and the effect of culture holds within pairs of adjacent grid cells with different medieval climate volatility. An explanation for these results is that culture, but not a more inclusive political process, is necessary to produce public-spirited politicians and push voters to punish political malfeasance. Micro-evidence from Italian Parliament data supports this idea.

URL: http://EconPapers.repec.org/RePEc:pra:mprapa:70879

Circulated by NEP-SOC on 2016-05-14

Reviewed by Catherine Casson (University of Manchester) and Mark Casson (University of Reading)

This paper takes a long-run approach to an investigation of the importance of a ‘culture of cooperation’ and ‘inclusive political institutions’. The author defines a ‘culture of cooperation’ as the behavioural characteristics of ‘trust, respect, control and obedience’, while the term ‘inclusive political institutions’ is defined as institutions which ‘enable the citizenry to check the executive authority’.

Analysis is focused on Europe and on the agrarian economy. The author suggests that cooperation in the middle ages was particularly associated with the monastic orders of the Cistercians and Franciscans. Their houses were generally located, the author argues, in areas with unpredictable climates. The ability of the monks to farm the land in a way that put such unproductive land to productive use attracted the support and cooperation of the local community. In addition these monastic orders also introduced new financial practices, including improvements in access to credit, which also fostered local community cooperation. Inclusive political institutions, the author suggests, were especially associated with the success of long-distance trade. This created a shared goal between the elite and citizens.

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The paper suggests that contemporary cultures of cooperation and inclusive political institutions are influenced by medieval ones. The medieval data used for ‘culture’ is climate data and the modern data is the 2008 European Value Study. For inclusive political institutions the medieval data is ‘the discounted number of years Cistercian and Franciscan houses were active per square km over the 1000-1600 period’ (p. 9) while the modern data is on prosecutions of members of parliament in Italy in 1948-87.

Later in the paper some more specific hypotheses are presented as controls for change over time:

  1. That Atlantic trade impacted on modern economic development
  2. That micro-credit systems introduced by the Franciscan order strengthened contemporary credit markets
  3. That monastic orders influenced religious beliefs in general, and that this influence may have had other, less defined, influences, on economic practice
  4. That distance to Wittenberg, where Protestantism began, influenced the development of a ‘culture of cooperation’
  5. Early transition to agriculture led to ‘higher inequality in gender roles’
  6. That genetic diversity in a country had a negative impact on cooperation
  7. That the suitability of soil for potato growing contributed to the development of institutions
  8. That the Black Death raised standards of living
  9. That education influenced the development of institutions and economic growth

The paper argues that the impact of the medieval culture of cooperation originating in the Cistercian and Franciscan monastic houses can be seen today. It also argues that this culture of cooperation has had a greater influence as a check on executive authority than inclusive political institutions.

Conflict, rather than cooperation, is often the term most associated with the middle ages. One of the benefits of this paper is that it highlights the presence of, and impact of, collaboration. Monastic orders are recognised in both history and economics literature for their important economic, as well as religious, impact. Their use to assess a culture of cooperation is therefore helpful, but they are perhaps a less obvious choice for an assessment of inclusive political institutions. One potential way in which the paper could be developed would be by expanding the scope to cover both urban and rural locations. Such an extension would retain the presence of monastic orders (and indeed extend it to cover urban ones) and, more significantly, allow urban political institutions to be considered. The presence of these institutions is briefly discussed on p. 12 but the issue is not developed further. Many of these town governments had as a shared goal the long-distance trade alluded to in the paper. They also offer more equivalent data to the contemporary data used as a proxy for inclusive political institutions.

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Continuity and change over time is a key focus on the paper and the author shows an awareness of some key developments that occurred from the medieval to the modern period. The selection of the controls shows an engagement with recent secondary literature but does introduce additional time periods (such as the Neolithic), specific events (for example the Black Death) and general trends (for example the expansion of education). The paper could be strengthened by more clearly outlining the chronology of these events, and perhaps by narrowing the list of controls used.

Connections between contemporary and historic business have been increasingly recognised and explored in academic literature. The subject of this paper is therefore related to a growing trend to examine the medieval origins of many economic processes. Monasteries have been identified as key players in the ‘multinational enterprise’ of medieval pilgrimage and as originations of sophisticated forms of financial transactions (Bell and Dale, 2011; Bell, Brooks and Dryburgh, 2007). They were also important speculators in the property market (Baker and Holt, 2004; Bouchard, 1991; Casson and Casson, 2016).

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Financial crises are a further topic that can be examined through the surviving qualitative and quantitative sources from the middle ages. In the light of the financial crisis of 2008 there has been a recognition that a long-run perspective, starting as early as the middle ages, provides the opportunity to study cycles of growth and decline. Surviving medieval records from the English government, for example, provide detailed data that can be subjected to statistical analysis, as shown in the work of Bell, Brooks and Moore (Bell, Brooks and Moore, 2014; Bell, Brooks and Moore, 2013). The importance of medieval data has also been highlighted in recent work on historic GDP (Broadberry et al, 2015).

Innovation and knowledge acquisition in the middle ages have recently been examined using both modelling approaches from economics, and historical case studies. De la Croix, Doepke and Mokyr (2016) have shown, using their combined expertise in the fields of economics and history, the important foundation that medieval guilds provided in the transmission of knowledge across Europe before the Industrial Revolution. Meanwhile Davids and de Munck’s edited collection on Innovation and Creativity in Late Medieval and Early Modern European Cities has used historical case studies to demonstrate that medieval cities saw a clear connection between the skills of their population and the overall economic performance of their city, and developed strategies that were intended to make their city economically resilient (Davids and De Munck, 2014; Casson, 2012).

Entrepreneurship can also be examined in a long-run context. Business records, letters, literary sources and government records all demonstrate that, contrary to popular belief, the origins of enterprise lie in the middle ages rather than the Industrial Revolution. Medieval entrepreneurs were involved in a range of activities, including infrastructure developments, property speculation and factory foundation (Casson and Casson, 2013a; Casson and Casson, 2013b; Landes, Mokyr and Baumol, 2012)

Overall, one of the key strengths of this paper is the contribution that it makes to this broader research agenda on the parallels between medieval and modern business.

 

References

Baker, N. and R. Holt (2004), Urban Growth and the Medieval Church: Gloucester and Worcester (Routledge, Aldershot).

Bell, A. R.Brooks, C. and Moore, T. K. (2014), ‘The credit relationship between Henry III and merchants of Douai and Ypres, 1247-70’, Economic History Review, 67 (1), 123-145. doi: 10.1111/1468-0289.12013.

Bell, A.Brooks, C. and Moore, T. (2013), ‘Medieval foreign exchange: A time series anaylsis’ in M. Casson and N. Hashimzade (eds.) Large Databases in Economic History: Research Methods and Case Studies (Routledge, Abingdon), 97-123.

Bell, A. R. and Dale, R. S. (2011), ‘The medieval pilgrimage business’, Enterprise and Society, 12 (3), 601-627. doi: 10.1093/es/khr014.

Bell, A. R., C. Brooks, C. and P. R. Dryburgh, P. R. (2007), The English Wool Market, c.1230-1327 (Cambridge University Press, Cambridge).

Broadberry, S., B. Campbell, A. Klein, M. Overton and B. van Leeuwen (2015), British Economic Growth, 1270-1870 (Cambridge: Cambridge University Press).

Bouchard, C. B. (1991), Holy Entrepreneurs: Cistercians, Knights, and Economic Exchange in Twelfth-century Burgundy (Ithaca, NY).

Casson, C. (2012), ‘Reputation and Responsibility in Medieval English Towns: Civic Concerns with the Regulation of Trade’, Urban History 39 (3), 387-408. doi:10.1017/S0963926812000193.

Casson, C. and Casson, M. (2016), ‘Location, Location, Location? Analysing Property Rents in Medieval Gloucester’ Economic History Review 69: 2 pp. 575-99 DOI:10.1111/ehr.12117.

Casson, M. and Casson C. (2013), The Entrepreneur in History: From Medieval Merchant to Modern Business Leader (Basingstoke: Palgrave Macmillan).

Casson, M. and Casson C. eds. (2013), History of Entrepreneurship: Innovation and Risk Taking, 1200-2000 (Cheltenham: Edward Elgar, 2 vols).

Davids, K. and B. de Munck, eds. (2014), Innovation and Creativity in Late Medieval and Early Modern European Cities (Ashgate: Farnham).

De la Croix, D., M. Doepke and J. Mokyr (2016), ‘Clans, Guilds, and Markets: Apprenticeship Institutions and Growth in the Pre-Industrial Economy’ NBER Working Paper No. 22131, circulated by NEP-HIS on 2016-04-16.

Landes, D. S., J. Mokyr & W. J. Baumol (2012), The Invention of Enterprise:Entrepreneurship from Ancient Mesopotamia to Modern Times (Princeton, Princeton University Press).

Who Pays the Bills?

Sovereign Debt Guarantees and Default: Lessons from the UK and Ireland, 1920-1938

By Nathan Foley-Fisher (Federal Reserve Board) and Eoin McLaughlin (St. Andrews)

Abstract We study the daily yields on Irish land bonds listed on the Dublin Stock Exchange during the years 1920-1938. We exploit structural differences in bonds guaranteed by the UK and Irish governments to find Irish events that had long term effects on the credibility of government guarantees. We document two major events: The Anglo-Irish Treaty of 1921 and Ireland’s default on intergovernmental payments in 1932. We discuss the political and economic forces behind the Irish and UK governments’ decisions. Our finding has implications for modern-day proposals to issue jointly-guaranteed sovereign debt.

URL: http://EconPapers.repec.org/RePEc:sss:wpaper:2015-11

Distributed by NEP-HIS on: 2015-05-16

Review by Sarah Charity (Queen’s University of Belfast)

This working paper abets us in shedding some light on the financial implications for current economic events. One that dominated the headlines most prominently was Scotland’s decision to vote on independence in their recent referendum. Hard-line fiscal policy makers held their breath while questions simmered such as; would an independent Scotland continue debt repayments to Britain? What if they defaulted on these payments? The authors investigate how public debt in Ireland was dealt with during their severance from the political state of the United Kingdom in the early 20th century, focusing on the implementation of UK- and Irish-backed land bonds over this period of significant Irish land reform, when ownership was transferred from landlords to tenants. From this episode in Irish history, we can draw comparisons and learn lessons for today.

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Foley-Fisher and McLaughlin look to previous studies in which yield spreads between UK and Irish government bonds are analysed, such as that of Nevin (1963) and Ó Gráda (1994). They contribute to the existing literature by concentrating on land bonds. They base their methodology on the idea of particular structural breaks occurring in their time-series data. They build on the discoveries of Willard et al. (1996) who defined breaks as a change in the intercept of the time series – ‘a shift in the mean’ (p.11-12), while Zussman et al. (2008) also searched for ‘breakpoints’ (p.4) in their methodology. They analyse the shifts in ‘perceived value of sovereign guarantees’ (p.11) by looking for changes in the mean of the yield spreads.

The impact of bond spreads ‘diffused’ (p.15) around three significant events. The first break coincides with the Anglo Irish Treaty passing in 1921 while the second occurred a decade later when the default by Ireland on land bond payments beckoned. Around this time, Eamon De Valera, founder of Irish political party Fianna Fáil, announced the ‘Free State would not honour the bi-annual payments due under various financial agreements between Ireland and the UK’ (p.14). The final break came at the end of the sample period, however this is discounted as irrelevant due to trade war negotiations being ‘unlikely…(to be) sufficient’ (p.15).

Parliamentary acts sanctioned the used of generous government guaranteed land bonds to finance state mortgages, rather similar to the volatile mortgage backed securities of the recent credit crisis, allowing farmers to borrow significant amounts of credit at lower rates. The idea was to curtail the Irish Nationalists, however it proved unsuccessful and the ‘hardline republicans’ (p.6) received independence through the signing of the Treaty in December 1921. A new dawn was on the horizon, bringing with it the promise of a new government – but it was lamentably overshadowed by the onset of the Irish Civil War. The newly established Free State was released from its obligation towards UK public debt in return for permanent partition; however it agreed to maintain annuity payments along with issuance of more land bonds.

The authors calculate the credibility of UK guarantees, otherwise known as sovereign risk, post-independence using yield spreads controlling for risks of inflation and exchange rate alternations. They acknowledge other scholars in assessing the importance of credibility in economic features such as the ‘cost of government finance’ (p.5) as investigated by Flandreau & Zumer (2009) and the estimated behaviour of the government as a ‘counterparty in other contracts’ (p.5) as seen in Cole & Kehoe (1998). Foley-Fisher and McLaughlin found the spread over UK government bonds to be 60 basis points indicating a low credit risk for the UK- and Irish-backed land bonds. Through their estimations they suggested that the increased yield spread of the land bonds during the ‘benchmark’ years from 1921 to 1932 was highly significant. After Ireland defaulted, the land bonds were no longer considered risky and the spread on UK-backed land bonds returned to zero. The authors are perhaps slightly restricted by their sample period. Mercille (2006, p.3) tells us little research exists on the significant long-term costs related to yield spreads, forcing us to seek answers elsewhere.

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Foley-Fisher and McLaughlin suggest that the cost of Ireland’s default was greater for their British counterparts. They give reasons for the UK’s intervention such as the insignificant cost to the UK Treasury, who continued making interest repayments to ensure bond holders remained intact; UK war loan negotiations and the fact land bonds were mostly held in the UK ensured Whitehall was an interested party. The authors provide us with a contrasting government reaction to default in another commonwealth country, using the contemporaneous case of Newfoundland, whose debt profile bore echoes of Ireland’s. As previously mentioned, the cost for the UK government of bondholders’ losses through passing on Ireland’s default far outweighed the benefits. In the Newfoundland example, the UK government’s reaction was to withdraw from the imminent burden of financial instability and force confederation of the Dominion with Canada, thus shedding the burden for bondholders’ losses – a consequence independence-seeking Scotland may have wanted to consider.

In the absence of case studies, Ireland’s historical sovereign break up ensures Foley-Fisher and McLaughlin’s ‘simple empirical strategy’ (C.R, 2014) is applicable to and useful in multiple current financial situations whether it be the aforementioned Scottish referendum, or the pending disintegration of Catalonia from Spain. Moodys (2014) discovered that 75% of the 17 country break ups which have occurred since 1983 resulted in sovereign default by the preceding or the new state – albeit these implications ‘cannot be easily applied’ (p.3) to more recent breakups, paving the way for this exploration of Ireland as the model to follow.

This paper describes apportioning fiscal liabilities as ‘complex’ and provides advice for states in the process of seeking dissolution – uncertainty is persistent. Debt must be paid and it may be guaranteed by the Treasury of the former union in the wake of default, but the ambiguity in the outcome remains. According to the blogger C.R., writing in The Economist (2014), it seems as if partition is more straightforward politically rather than financially or economically. From what Foley-Fisher and McLaughlin have taught us in their empirical study, the cost of default and fiscal uncertainty lingers long after secession. In conclusion, the exploits of our Irish ancestors from the previous century are what we, alongside other state governments, must contemplate when the sword of political state break-up strikes again.

References

Cole, H. L. & Kehoe, P. J. (1998), ‘Models of Sovereign Debt: Partial versus General Reputations’, International Economic Review 39(1), 55–70.

C.R (Feb. 21st 2014) The economics of Scottish Independence- a messy divorce, Blighty Britain Available at: http://www.economist.com/blogs/blighty/2014/02/economics-scottish-independence (Accessed: March 22nd 2015)

Ferguson, N. (2006), ‘Political risk and the international bond market between the 1848 revolution and the outbreak of the First World War’, Economic History Review 59, 70– 112

Flandreau, M. & Zumer, F. (2009), The Making of Global Finance 1880-1913, Paris: OECD Publishing.

Hancock, W. (1964), Survey of British Commonwealth Affairs. Volume I Problems of Nationality 1918-1936, Oxford: Oxford University Press.

Mauro, P., Sussman, N. & Yafeh, Y. (2006), Emerging Markets and Financial Globalization, Oxford: Oxford University Press.

Mercille, J. (2006) ‘The Media and the Question of Sovereign Debt Default in the European Economic Crisis: The Case of Ireland’, University of Sheffield, Available at: http://speri.dept.shef.ac.uk/wp-content/uploads/2013/06/Mercille-J-The-Media-the-Question-of-Sovereign-debt-default-in-the-European-Economic-Crisis-the-case-of-Ireland.pdf (Accessed August 18, 2015).

Moodys (May 21st. 2014) When countries broke up, sovereign default risk spiked, Available at: https://www.moodys.com/research/Moodys-When-countries-broke-up-sovereign-default-risk-spiked–PR_299968?WT.mc_id=NLTITLE_YYYYMMDD_PR_299968 (Accessed: March 23rd. 2015).

Nevin, E. (1963), ‘The Capital Stock of Irish Industry’, Economic and Social Research Institute(ESRI) paper No. 17, Dublin. Available at: http://econpapers.repec.org/bookchap/esrresser/grs17.htm (Accessed August 18, 2015).

Ó Gráda, C. (1994), Ireland: A new Economic History 1780-1939, Clarendon Press, Oxford.

Willard, K. L., Guinnane, T. W. & Rosen, H. S. (1996), ‘Turning points in the Civil War: views from the Greenback market’, American Economic Review 86, 1001–1018.

Zussman, A., Zussman, N. & Nielson, M. O. (2008), ‘Asset Market Prespectives on the Israeli-Palestinian conflict’, Economica 75, 84–115.

By failing to prepare, you are preparing to fail

The European Crisis in the Context of the History of Previous Financial Crisis

by Michael Bordo & Harold James

Abstract – There are some striking similarities between the pre 1914 gold standard and EMU today. Both arrangements are based on fixed exchange rates, monetary and fiscal orthodoxy. Each regime gave easy access by financially underdeveloped peripheral countries to capital from the core countries. But the gold standard was a contingent rule—in the case of an emergency like a major war or a serious financial crisis –a country could temporarily devalue its currency. The EMU has no such safety valve. Capital flows in both regimes fuelled asset price booms via the banking system ending in major crises in the peripheral countries. But not having the escape clause has meant that present day Greece and other peripheral European countries have suffered much greater economic harm than did Argentina in the Baring Crisis of 1890.

URL: http://EconPapers.repec.org/RePEc:bog:spaper:18

Circulated by NEP-HIS on: 2015-01-26

Reviewed by: Stephen Billington (Queen’s University of Belfast)

Summary

In this paper Bordo and James seek to analyse the impact of the financial crisis of 2007-8 in the context of previous crisis. Specifically by comparing the experience of periphery countries of the Eurozone with those of the “classic” Gold Standard.

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In their paper Bordo and James give a synopsis of the similarities which emerged between both monetary regimes. By adhering to a gold parity there was an expansion in the banking system, through large capital inflows, which was underpinned by a strong effective state to allow for greater borrowing. A nation was effective if it held an international diplomatic commitment, which in turn required them to sign into international systems, all the while this played into the hands of radical political parties who played on civilian nationalism[1]; these events combined lead to great inflows of capital into peripheral countries which inevitably led to fiscal instability and a resulting crisis. Similar dilemmas occurred within the EMU, but much more intensely.

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This brings me to the main point that the authors emphasize, that of the contingency rule of the classic gold standard. The latter allowed member countries a “safety valve for fiscal policy”. Essentially this was an escape clause that permitted a country to temporarily devalue its currency in an emergency, such as the outbreak of war or a financial crisis, but would return to normalcy soon after, that is, they would return to previous levels. Bordo and James’ argument is that this lack of a contingency within the EMU allowed for a more severe financial crisis to afflict the periphery countries (Greece, Ireland and Portugal) than had affected gold standard peripheries (Argentina, Italy and Australia) as modern day EMU countries did (and do) not have to option to devalue their currency.

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Bordo and James point out that crisis during the gold standard were very sharp, but did not last as long as the 2007-8 crisis. This because the exclusion clause during the gold standard enabled a “breathing space” and as a result most countries were back to growth within a few short years. The EMU story is quite different, say Bordo and James. Mundell (1961) argued that a successful monetary union requires the existence of a well-functioning mechanism for adjustment, what we see in the EMU are a case of worse dilemmas due primarily to this absence of an escape clause.

“Gold outflows, and, with money and credit growth tied to gold, lower money and credit growth. The lower money and credit growth would cause prices and wages to fall (or would lead to reductions in the growth rates of prices and wages), helping to restore competitiveness, thus eliminating the external deficits”

The above quote provided by Gibson, Palivos and Tavlas (2014) highlights how the gold standard allowed a country to adjust to a deficit. This point reinforces how Bordo & James argue that due to the constricting nature of the EMU there is no “safety valve” to allowed EU countries to release the steam from increasing debt levels. With respect to the Argentine Baring Crisis of 1890, while the crisis was very sharp in terms of real GDP, pre-crisis levels of GDP were again reached by 1893 – clearly a contrast with the Euro as some countries are still in recession with very little progress having been made as suggested by the following headline: “Greece’s current GDP is stuck in ancient Greece” – Business Insider (2013).

The following graph highlights the issue that in Europe most countries are still lagging behind the pre-crisis levels of GDP.

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Bordo and James clearly support this argument. Delles and Tavlas (2013) also argue that the adjustment mechanism of core and periphery countries limited the size and persistence of external deficits. They put forward that the durability of the gold standard relied on this mechanism. This is reinforced by Bloomfield (1959) who states it “facilitated adjustments to balance of payments disequilibrium”.

Vinals (1996) further supports the authors’ sentiments by arguing that the Treaty of Maastricht restricts an individual member’s room to manoeuvre as the Treaty requires sound fiscal policies, with debt limited to 60% of GDP and annual deficits no greater than 3% of GDP – meaning a member cannot smooth over these imbalances through spending or taxation.

Gibson, Palivos and Tavlas (2014) state “a major cost of monetary unions is the reduced flexibility to adjust to asymmetric shocks”. They argue that internal devaluations must occur to adjust to fiscal imbalances, but go on to argue that these are much harder to implement than in theory, again supported by Vinals (1996).

Comment

Bordo and James focus primarily on three EU periphery countries which are doing badly, namely Greece, Ireland and Portugal. However they neglect the remaining countries within the EU which can also be classed as a periphery. According the Wallerstein (1974) the periphery can be seen as the less developed countries, these could include further countries such as those from eastern Europe[2]. By looking at a more expansive view of peripheral countries we can see that these other peripherals had quick recoveries with sharp decreases in GDP growth, as in the case of the Gold standard countries, but swiftly recovered to high levels of growth again while the main peripheral countries the authors analyse do lag behind.

Untitled2See note 3

Bordo and James do provide a strong insight into the relationship between an adjustment mechanism to combating fiscal imbalances as a means of explaining the poor recovery of certain peripheral countries (i.e. Greece, Ireland, Portugal) and highlight the implications of this in the future of the EMU. If the EMU cannot find a contingency rule as the gold standard then recessions may leave them as vulnerable in the future as they are now.

Notes

1) This process can be thought of as a trilemma, Obstfeld, Taylor and Shambaugh (2004) give a better explanation. In the EU the problem was intensified as governments could back higher levels of debt, and there was no provision for European banking supervision, the commitment to EU integration let markets believe that there were no limits to debt levels. This led to inflows in periphery countries where banks could become too big to be rescued.

2) Latvia, Lithuania, Slovakia, Slovenia, and even Cyprus can be included based on low GDP per capita which is equivalent to Greece.

3) Data taken from Eurostat comparing real GDP growth levels of lesser developed countries within the Eurozone who all use the euro and would be locked into the same system of no adjustment.

References

Bloomfield, A. (1959) Monetary Policy under the International Gold Standard. New York: Federal Reserve Bank of New York.

Business Insider (2013). Every Country in Europe Should be Glad it’s Not Greece. http://www.businessinsider.com/european-gdp-since-pre-crisis-chart-2013-8?IR=T [Accessed 19/03/2015].

Eurostat, Real GDP Growth Rates http://ec.europa.eu/eurostat/tgm/graph.do?tab=graph&plugin=1&pcode=tec00115&language=en&toolbox=data [Accessed 21/03/2015].

Dellas, Harris; Tavlas, George S. (2013). The Gold Standard, The Euro, and The Origins of the Greek Sovereign Debt Crisis. Cato Journal 33(3): 491-520.

Gibson, Heather D; Palivos, Theodore; Tavlas, George S. (2014). The Crisis in the Euro Area: An Analytic Overview.Journal of Macroeconomics 39: 233-239.

Mundell, Robert A. (1961). A Theory of Optimum Currency Areas. The American Economic Review 51(4): 657-665.

Obstfeld, Maurice. Taylor, Alan. Shambaugh, Jay C. (2004). The Trilemma in History: Trade-Offs among Exchange Rates, Monetary Policies and Capital Mobility. National Bureau of Economic Research (NBER working paper 10396).

Vinals, Jose. (1996). European Monetary Integration: A Narrow or Wide EMU?. European Economic Review 40(3-5): 1103-1109.

Wallerstein, Immanuel (1974). The Modern World-System I: Capitalist Agriculture and the Origins of the European World-Economy in the Sixteenth Century. New York: Academic Press.