A rapidly expanding literature studies the effect of currency union and other exchange rate arrangements on goods market integration. All existing studies employ a methodology based on observed volumes of trade. However, from a theoretical point of view the connection between market integration...

Developing countries traditionally experience passthrough of exchange rate changes that is greater and more rapid than high-income countries experience. This is true equally of the determination of prices of imported goods, prices of local competitors' products, and the general CPI. But...

We match Big Mac prices with prices of its ingredients as a unique prism to study real exchange rates (RERs). This approach has several advantages. First, the levels of the Big Mac RER can be measured meaningfully. Second, as the exact composition of a Big Mac is known, the contributions of its...

Using highly disaggregated price data of the Big Mac Meal and its ten ingredients from twenty-five European countries since 1993, we investigate two questions related to the effects of the adoption of the Euro on prices. First, was the changeover to the euro accompanied, as many believe, by an...

We document that the quality of earnings reported by politically connected firms is significantly poorer than that of similar non-connected companies. Our results are not due to firms with ex-ante poor earnings quality establishing connections more often. Instead, our results suggest that,...

We study the effect of a sovereign credit rating change of one country on the sovereign credit spreads of other countries from 1991 to 2000. We find evidence of spillover effects, that is, a ratings change in one country has a significant effect on sovereign credit spreads of other countries....

Many firms voluntarily incur the costs of attempting to influence politicians. However, estimates of the value of political connections have been made in only a few extreme cases. We propose a new approach to valuing political ties that builds on these previous studies. We consider connected to...

Corporate lobbying activities are designed to influence legislators, regulators, and courts, presumably to encourage favorable policies and/or outcomes. In dollar terms, corporate lobbying expenditures are typically one or even two orders of magnitude larger than spending by Political Action...

This paper deals with the superhedging of derivatives on incomplete markets, i.e. with portfolio strategies which generate payoffs at least as high as that of a given contingent claim. The simplest solution to this problem is in many cases a static superhedge, i.e. a buy-and-hold strategy...

This paper provides an in-depth analysis of the properties of popular tests for the existence and the sign of the market price of volatility risk. These tests are frequently based on the fact that for some option pricing models under continuous hedging the sign of the market price of volatility...