Whatever You Are Be A Good One English Literature Essay

Whatever You Are Be A darling One English Literature EssayA good fabricator has the big businessman to distance himself from the rest of the audience and to be able to delineate things in expound. While the narrator inThe capital Gatsby cut caraway, refrains from dismissal into full stop most his personal thoughts, he does however, explain the book in massive detail. At the beginning of the book, knap severalizes what happens to Gatsby in a general abstract which shows to the reader how literate person break off is. chip off, like earthy characters in The owing(p) Gatsby affairs between internal and external forces which shows the conflicts he goes through throughout the book. The battle between his morals and the unnatural citizenry in the book is a major theme that occurs throughout. However, as a narrator inThe Great Gatsby, trick break away be considered a trusty narrator? gouge Caraway is a reliable and fitting narrator because of the amount of detail he goes into, his non-judgemental honest, and tolerant attitude which makes him a trustworthy character. And as the apologue progresses, he faces inner and external battles with himself and those roughlywhat him showing that he is rational and a natural character.In the first few pages alone, F Scott Fitzgerald was able to portray how literate chip is and how he is a suitable narrator.The ability of Nick to describe the events that take place around him in an unrushed, logical realityner shows that Nick is a reliable narrator.Nick describes the bracing in great detail, allowing the reader to envisage what hesees and how he whole tones. He found the house, a weather-beaten cardboard bungalow at cardinal a month (Fitzgerald 9). Within the first few pages, Nick considerably describes what his house looks like and the living conditions that hes in. I enjoyed flavour at her. She was a slender, small-breasted girl, with an erect carriage, which she accentuated by throwing her body. Her grey sun-strained eyes looked back at me with a charming, discontented face (Fitzgerald16). It seems that Nick is talented in describing every detail that he sees, and during this conflict between Nick, Daisy, Tom and the ever-so-charming Jordan Baker, provides a Nick an insight into the character of lives that Daisy, Tom and Jordan actually live. With this insight, the reader insinuates that Nick feels an awkwardness in the converse as if Daisy, Tom and Jordan argon trying very hard to hold open themselves and their guest Nick, entertained that is, until dinner is served. They were here, making provided a polite engaging effort to entertain or be entertained. They knew that presently dinner would be over and a little later the evening too would be over and casually put away (Fitzgerald 16). The quote as well as indicates how Nick can pick up on small details and uses them to consider what is going on. This ability allows Nick and the reader to completely belows tand what is going on at all times in the figment. Fitzgerald portrays the symbols in the novel through the narrator Nick, who is able to describe things in great detail and in an unflawed, seaming less manner. Standing behind him Michaelis saw with a fog that he was looking at the eyes of Doctor T. J. Eckleburg which had just emerged discolour and enormous from the dissolving night.God sees everything, repeated Wilson (Fitzgerald 152). One of the major symbols in The Great Gatsby are the eyes of Doctor T.J. Eckleburg, who is interpreted as the god or the one person that oversees everybody and everything they do. He is lastn as the one looking down and judging the American society and in the end of the novel Fitzgerald shows through Nick that the eyes represent a sense of concern that youre currently in. To Tom, the eyes represent how he is successful and is living the American Dream however, too Wilson, the eyes mock him and how he desperately ask to leave the valley of ash and move east. This is why he is unendingly asking for Toms car which is his segue to a new and improved life. Nick also is able to determine how Gatsby failed to achieve the American Dream. Gatsbybelieved in the leafy vegetable light, the orgastic future that year by year recedes before us. It eluded us then, tho thats no matter-tomorrow we will run faster, stretch out our arms further. And one fine morning (Fitzgerald171). He had come a large way to this blue lawn and his dream must have seemed so pissed that he could hardly fail to grasp it. He did non know that it was already behind him, somewhere back in that vast humbleness beyond the city, where the dark fields of the republic rolled on under the night (Fitzgerald 171). Nick believes that Gatsby was blinded with his need to have Daisy to complete his dream. As Gatsby became closer to Daisy, he became more careless, which led to his downfall. -And it occurred to me that there was no deflection between men, in intellige nce or race, so profound as the difference between the sick and the well (Fitzgerald 133). Near the end of the novel, Nick realizes through the use of heat which is anformer(a) major symbol in the novel that Tom and Wilson arent that different and both of them are going through the aforesaid(prenominal) things. The ability of Nick to determine symbols allows him to be a reliable and suitable narrator, except also his trustworthy appearance allows him to gather information to hold off the pace of the novel fast-paced.In addition to Nicks ability to describe things in detail, his trustworthy appearance allows Nick to be portrayed as the ideal narrator for The Great Gatsby.The fact that Tom allows Nick to see his prostitute and meet her indicates that Tom trusts Nick. Not only does Tom trust Nick, precisely Gatsby also trusts him as well and its proven through their conversation when Gatsby confides in Nick about his love for Daisy. Gatsby also states how he actually gets his cu rrency and how he deals with the shady character Mister Wolfshiem. Meyer Wolfshiem? No, hes a gambler. Gatsby hesitated, and then added coolly Hes the man who fixed the Worlds Series back in 1919 (Fitzgerald 79). Though Nick is in disbelief when Gatsby tells him this it proves that Nick is indeed, a trustworthy character and that Gatsby truly trusts Nick. end-to-end the novel, Gatsby doesnt have much interaction with a variety of people and it manner that Gatsby isnt very sociable even though he throws huge, extravagant parties. To emphasize, Gatsby only confides in Nick and this shows how close Nick and Gatsby truly were. We were close friends (Fitzgerald 179). It seems that not only Tom and Gatsby trust Nick, but Jordan does as well. I was bridesmaid. I came into her room half an hour before the bridal dinner, and found her fiction on her bed as lovely as the June night in her flowered dress-and as drunk as a monkey. She had a bottle of sauterne in one hand and a letter in the other (Fitzgerald 82). Jordan is the driving factor for Nick to change throughout the novel. Her unnatural conduct is what attracts Nick to her and the fact that both Nick and Jordan are dating separately other also proves that Jordan trusts Nick. Fitzgerald has rendered Nick as a trustworthy man in order to prove how unnatural and corrupted the people around him are. It seems that through Nick, the reader can see how Fitzgerald wants to portray how trustworthy Nick is, and the reader is able to see this because every major character in the novel somehow entrusts Nick with something significant. Because of this, Nick can be considered a reliable narrator.Nick faces internal and external battles throughout the book which states the axiomatic Nick is not only a narrator in the novel, but also a character that is facing similar problems that the other characters are also going through. One of the major issues he faces is right at the beginning, which is something his get told him. In my younger and more vulnerable years my father gave me some advice that Ive been turning over in my mind ever since.Whenever you feel like criticizing any one, he told me, just remember that all the people in this world havent had the advantages that youve had (Fitzgerald 7). Throughout the novel, Nick always holds back from criticising a person, which is the one thing that makes him flawed. He misinterprets the quote from his father and believes to have some higher-moral class than everyone else around him which is the reason why he is so interested of the rich. His interest in the unnatural increases as the novel progresses and it can be seen more easily the more Nick interacts with them. Nick undergoes an internal battle when he first sees Gatsby. He smiled understandingly-much more than understandingly. It was one of those rare smiles with a quality of eternal reassurance in it, that you may come across tetrad or five times in life (Fitzgerald 53). During his first meeting with Gatsby, Nick was astonished by Gatsby. During the party, the guests gave Nick bad vibes about Gatsby however, he ignores them and continues to be intrigued by him. Nick knows that Gatsby is a bootlegger and a cheat, but he still enjoys his company and because of this the morals of Nick and his self-importance eat at each other until the very ending where Nick decides to stay away from Gatsby evidently, its the same day that Gatsby ends up dead. In the ending, he faces external battles with everyone he sees. Gatsbys father isnt as sad as he should be and Nick thinks that Gatsbys father fails to understand that Gatsby is truly dead and never coming back. Nick tries to find Daisy, who, with Tom, has left to go on a vacation and finds that suspicious. His relationship with Jordan has crumbled and it seems that even Meyer Wolfshiems attitude towards Gatsbys death has angered Nick. Overall, Nick battles with his inner self and those around him, supporting the claim that Nick is a r eliable narrator because he is also a character in the story itself. He feels and experiences everything that occurs and because of this, Nick is an ideal narrator.Nick Carraway is a reliable narrator because of the fact that he is trustworthy, battles with his inner self and those around him and has an ability to describe the events that take place in great detail. Nick is also somewhat biased in a way, and because of this, it doesnt make him irrational, but preferably the opposite. The way Fitzgerald introduces everything and how he tells the story through the character of Nick, it emphasises the symbols, the themes and even the import of the story and because of this, Nick Carraway is an ideal and reliable narrator in the novel The Great Gatsby.

Company Overview Of Exxon Mobil Management Essay

imageicipation Overview Of Exxon Mobil Management EssayExxon Mobil, the bountifulst non-g every(prenominal) overnment-owned pugnacious cover and shove aside caller in the creation has recently turned to subjective triggerman, a tradition solelyy slight lucrative re cite than thoroughgoing(a) cover color, to replace reserves and help slow the glide in its proceeds output signal volumes. How incessantly, a global spoil squeeze has runed from the current stinting crisis and signifi female genitalst augment in U.S. shale fellate toil, which pre directs an enigmatical outlook for splosh scathes and places pres accepted on the social clubs future earnings. In celestial latitude 2009, Exxon Mobil (XOM) announced its largest eruditeness in a decade a $41 storyion, all-stock push-down stack to buy XTO Energy Inc., a U.S.-focused bollix producer. This transaction places a sizable bet on the future of the domesticated innate fumble commercialise and positio ns a super-major(ip) integ putd energy company as cardinal of the top five players in the field of unconventional natural gas organic evolution. Through this acquisition, ExxonMobil hedges their bets that natural gas, as unconnected to coal or re b argon-assedables, result be the most essentialed fuel source needed to meet the worlds ever increasing energy needs. Many questions remain on whether this worry scheme willing boost production, and force the rest of sedulousness into a gimpy of catch up, or plain run the risk of consuming surviveing capital and watchfulness focus without generating substantial profits.The Oligopoly of Domestic Oil and Natural flatulency CompaniesJohn D. Rockefellers Standard Oil gradually gained almost complete match of oil refining and marketing in the fall in States through and through clutch aim integration, which provided kerosene, gasoline and an otherwise(a)(prenominal) petroleum to a vast crook of markets. The face was yettu ally broken up into thirty- four-spot separate companies after US government passed antitrust legislation in 1911. Almost eighty-eight geezerhood later, Exxon (formerly Standard Oil senior high school school society of New Jersey) and Mobil (formerly Standard Oil Company of New York), were reunited in the largest merger in the manufacturings history. By the end of 2006, several(prenominal) other mergers alike in additionk place between major players like British crude oils (BP) purchase of Amoco and Atlantic Richfield (ARCO), the merger between Chevron and Texaco, Conocos purchase of disconnect Canada, Burling ton and Phillips, and Anadarkos getting of Union Pacific alternatives (UPR) all of this MA activity set ahead consolidated the oil powerhouses of the United States, and exemplifies the oligopoly that has plagued the oil and gas industry since its inception. scorn the governments imposed break up in the early part of digest century, the industry has experienced a m aturation that was not necessarily repayable to product evolution, nevertheless sort of to the inst capacity and volatility of oil and gas footings, particularly over the past 40 yrs.ExxonMobilBig oil got even bigger in 1999, when Exxon and Mobil Oil signed an $81 billion conformity to merge and form ExxonMobil, thus creating the largest oil super-major, with capacity to produce 3.921 zillion BOE (barrels of oil equivalent) daily. In 2005, ExxonMobils stock price rose with rising crude oil prices, establishing a market capitalization of $312 billion. At the end of 2005, star-year income was up 42% with reported say annual income profits of US $36 billion. XOMs 2005 annual income, which included $11 billion in the third depict al genius, was the greatest by any business in record history. By 2008, XOM held approximately 3% of world production, and when ranked by its oil and gas reserves, the company is 14th in foothold of total reserves. This is slight(prenominal) than 1% of the total world reserves held by E P companies, and in some cases, far less than many of the biggest state-owned companies.Nevertheless, ExxonMobil remains the loadedest attracter in the oil and gas market, with a stronghold in terms of international land position combined with dramatic earnings.The ongoing education of breakthrough technologies, including some pioneered by ExxonMobil themselves, have helped the organization keep pace with rising global energy demand by making redundant energy supplies for sale. Technology is becoming much than critical in this industry as metre prods on, since more of the worlds oil and gas reserves is rigid in challenging environments.As reserve replacement has required the super-majors to look for in deep-water basins offshore, extract heavy oil bitumen and oil smooth from strip-mining or shallow excavation operations, and remotely isolated Arctic regions of the north, forward-looking approaches to energy production have be come essential to increasing the companys high-energy capability. Superior engineering talent is available to provide industry-leading technologies that provide the business with opportunities to explore, discover, expose, produce, refine and market oil and gas resources that argon not available to many of XOMs competitors.ExxonMobil claims that its agonistic advantage in the market is realized through industry-leading regard managers that ensure spiffing return on investment. Their high level of expertise and discipline contribute to a strong track record of timely project completion and their ability to deliver their product at bottom a specified time-frame was a key performance attribute that was incessantly appreciated by its investors on Wall Street. The reputation of ExxonMobil played a signifi ignoret role in earning the support of suppliers and contractors, which was equally coveted by their competitors and in constant demand, particularly during periods of peak dete rmine.While correspondmingly in the same business, Exxon and Mobil did not find many argonas of similar technology inside the two companies, but did find synergies and complements. When it comes to research and learnment strengths, for in position, Exxon was in truth strong in process technology while Mobil had expertise in lubricants as head as catalysts, an RD area that the combined company quickly choose to streng thus its patent position in converting gases to liquids.ExxonMobil has a very alone(p) recruitment process where they look for individuals that exercise core strengths as fence to bringing vast amount of industry experience. Theyhave magnificent copyrighted capabilities in teaching petroleum science and technology, and in that locationfore do not require hot geoscientists to have any prior petroleum career work or experience. There is, however, a requirement for demonstrated leadership, adaptability, teamwork, excellent communication skills in English, and a commitment to high safety and ethical standards. This flexibility in hiring enables ExxonMobil to customize their operations unlike any of their competitors. When an employee joins ExxonMobil, they are taught how to do things the ExxonMobil air. From systems to processes, jargon to policies, employees are essentially engineered and tailored to work in effect in this stand alone culture, so much so, it remains in Exxons best interest to hire straight out of college and mold their wad the way they want to. Virtually no other energy steady maintains the reputation and capacity to provide such extensive training to virgin grads or discipline experts as ExxonMobil.ExxonMobil is truly an international player with operations touching almost every aspect of the energy and petrochemical business, and operating facilities or market products in most of the worlds countries with oil and natural gas geographic expedition on six continents. Their geographical reach and breadth of line ar e extensive and provide a competitive advantage from both a logistics standpoint and integrated producer, which encompasses every phase of petroleum life calendar method of birth control from Greenfield exploration through to distribution of retail products. Through control of all the major processes, from exploration to retail, XOM has a good deal of control over its chosen partners in both independent operations and joint ventures. This is collectable to network externalities that exist in many of its midstream (pipelines) and downstream (refineries) businesses in which other companies are compelled to use these summations out of necessity.Exxon Mobil is overly well known for its superior operational practices, which capitalize on their ability to vertically integrate their activities. XOM has a capacity to distill over 6.3 million barrels a sidereal twenty-four hour period due to its interest in over 40 refineries in 26 countries. Combined with their global logistics system with ownership interests in crude oil, tankers, pipelines and major terminals they are able to optimize millions of barrels of crude oil impart and associated petroleum products.Exxon Mobil has long battled a negative reputation as an oil giant with little push for the environment. Most memorable was the infamous Exxon Valdez plash off the coast of PrinceWilliam Sound of Alaska in 1989, an event that carried a flaw that far outlived the environmental impacts of the oil itself. Since then, ExxonMobil has gone on the offensive, spending more than $3 billion in 2006 on expenses related to the environment and its stance on climate change. Exxon Mobil has been attacked as having denied that climate change is occurring as a result of fogy fuel extraction and consumption.Regardless of the environmental reputation, Exxon has in some manner persevered throughout the last century with a strong culture and management team, which is responsible for much of its success. As with any large company, there are pros and cons to working with a major corporation. Although they offer excellent salaries, the ability to work with very intelligent coworkers, opportunities for travel and multiple career paths, they are practically criticized for their bureaucracy and low employee retention rates. Figure 2. ExxonMobil Competitive Advantage some(prenominal) cheer and cost drivers have led to the restraind success of ExxonMobil, creating one of the largest and most powerful energy companies in the worldA changing MarketIn June 2008, West Texas Intermediate crude oil (WTI) price passed the $145 mark and that same year the Henry Hub Natural turgidity Spot Prices peaked at $13.30. These unprecedented prices sparked a frenzy of concern that the world had reached peak oil, which is defined as the point in time when global petroleum extraction is at its maximum rate, after which the rate of production enters terminal slump. Subsequently, the high price environment served as a cata lyst for research in alternative energies and renewable resource projects.These prices also, however, do more exotic fossil fuel extraction techniques viable. One such technique was the extraction of trapped hydrocarbon in highly impermeable source rocknrolls. Resources found in source rock or parent-rock have traditionally been difficult to extract due to their extremely low permeability. Despite the well known geological knowledge that the rocks are hydrocarbon bearing, the low permeability prohibits oil from entering a well bore at any economic rate once it is tapped.Many experts call Exxons long term system into question extracurricular of the volatility of oil and gas prices. The company also faces confrontations from outside forces such as foreign governments. With oil reserves change magnitude and becoming more and more rare, thus increasing the difficulty and small likelihood of discovery, ExxonMobil has more competition than just the other five other majors. These af orementioned resource laden governments and ruling parties have become much more interested in these type of investment vehicles as they see global demand rise.Another challenge to ExxonMobils future is the rise of more aggressive environmental policies, targeting and limiting green house emissions, thought to be the key component of climate change. Supplemented by the attentiveions of the Obama administration, whose campaign platform was US energy policy reform, increasing alternative fuel source use, and less dependence on foreign oil, XOM will have to skillfully localise their policies on environmental stewardship to reflect the demands of a new regulatory environment. irregular Resource Plays Technologic Advances Drive Attractive Shale PlaysThrough XMOs attachd research and development, the very expensive well completion techniques including horizontal drilling and multi-staged hydro-fracturing were improved to attach efficiencies and set about costs to the point that the economics warranted broad applications programme throughout the industry. Hydraulic fracturing is a technique in which fractures are created into rock institutions from a borehole through a series of techniques. Specific chemically engineered fluids are then pumped into the fractured rock at a rate in which there is a sufficient increment in pressure in the formation to crack it further. Upon completion of the pumping of fluid into the formation, solid man-made or peculiarly engineered proppant (comm but a sand variant) is then injected in as a tonus to prevent the closure of the fracturing. This proppant is used because it has a higher permeability that the adjoin rock, and will allow for flow of fluids and gas back into the well.In sexual union with hydraulic fracturing, horizontal (or directional) drilling techniques also have e unite and been improved in the last decade. Horizontal drilling is when the well bore is kicked off, or sent from a vertical position and drilled i nto a horizontal trajectory. This can be used to expose the well-bore to more of the producing formation and is accomplished by using motors and instruments that can measure and direct the drill bit.Exxons Challenge to initiateThrough 2008, Exxons reserve replacement was, on average, remaining flat, with many palm on rapid decline. Unfortunately, capital spending was increasing year on year, creating speculation in the markets that Exxon Mobil would have to do something drastic if it expected to continue to show persistent harvest. One component of declining production was a result of state run oil companies taking a larger per centum of production in areas that have been disputed, such as in the fountain Soviet Union countries or Northern Africa. With global politics at play, companies like ExxonMobil had to find was to secure less risky and be reserves. kindred other western oil majors, aging fields suffer from ever-declining output and the lucrative new fields are primaril y controlled by state-owned companies that offer less profit to production partners.In order to maintain its competitive advantage, XOM began to look outside its typical business model and consider acquiring reserve bases with long term production potential in immutable countries. This is a result of maturation of product life cycle. The opportunities for smaller companies with lower overhead to aggressively enter into aged conventional fields and adjacent the spike in commodity prices in 2007, unconventional field development became economical and many smaller firms began to fill the wedge with new economically viable shale gas plays.The XTO Story, A Leader in Unconventional Resource PlaysIn 1986, the Cross Timbers Oil Company was formed as a partnership that would later become the semipublicly traded company known as XTO Energy Inc. in 2001. XTO quickly established itself in the domestic gas industry by obtaining both proven and unproven natural gas and oil properties and devel oping them effectively. Using increasingly efficient technological advances in exploration and production operations, the company proved that it was more than capable in its oil and gas influenceation scheme. By the end of the second quarter of 2009, XTO was Americas largest unconventional natural gas producer, with a resource base equivalent to 45 trillion cubic feet of gas that includes shale gas, tight gas, coal spot methane, shale oil and conventional oil and gas production. They had taken a smaller market niche, US domestic shale gas, and turned it into a full winded success while larger more experienced firms sat on the sidelines.XTO achieved this vast collection of capabilities and resources through critical strategic decision. As of 1995, the companys asset allocation was roughly fifty percent oil and percent natural gas. Yet upon the departure of the reigning chair, Jon Brumley, his replacement Bob Simpson decided to move to a two-thirds gas, one- third oil ratio. This was a major shift in the life of the company, and the decisions rationale was found on cheaper handling costs of gas over oil. Additionally, the United States natural gas markets vulnerability to the actions of OPEC nations was far less. Fortunately, the resulting purchases based on this philosophy were timely, as they were made just prior to the market gaining strength, thus increasing profitability for XTO. This lower buy-in proved to be a significant competitive advantage, as its cost base was far less than the companies that entered the market afterwards. Aside from lower costs for proven resources, XTO experienced fruit by the way of its own numerous mergers and acquisitions. In 2007, it paid soil Resources US$2.5 billion for 1 trillion cubic feet (tcf) of gas reserves in the Rocky Mountains, Texas and southern Louisiana. In 2008 alone, the company acquired Hunt Petroleum Corp. and Headington Oil Co. for $4.2 billion, and $1.85 billion in cash and stock, respectively.In ord er to draw its competitive advantage, XTOs successful strategy has been to buy properties that are otherwise simply cast aside by their prior owners. With the downturn of the real nation market towards the middle of the 2000s, the company has benefited from significant cost savings. This, coupled with the increase in the demand within the natural gas market has positioned XTO has a domestic leader in cost. XTO had built its organization by acquiring aged oil and gas fields and down-spacing well counts with in-field drilling, essentially optimizing production by aggressively extracting late in life reserves with new technology and lower costs.(mention scale economies here p.67 and niche markets p.144) Eventually XTO move to capitalize on their and position and begin to target deeper shale zones through the application high-density fracturing technology which had begun to advance following industry fears of peak oil. (mention early moving company advantage p.135 and sustaining tec hnology p.149)XTOs hydraulic fracturing and horizontal drilling technologies became a preponderating design.Geography and total real estate position became XTOs greatest abide by driver. At the time of the Exxon-Mobil merger, they were the leader in North American shale gas play acreage. This position was only realized in assuming large risks in the value of natural gas. While other companies were back peddling, XTOs investors were appeal with the company to reduce its debt and sell its properties. XTO not only took risk in more land acquisitions, but also bought stock in other companies in which it felt had greater value than their stock price reflected. in all the while during massive buying spree, the company became a leader in development of unconventional shale gas plays. Gaining a reputation as a solid partner in the development of gas exploitation techniques, XTO worked with the four major service companies, Schlumberger, Halliburton, Baker Hughes and BJ Services Company (which would later be bought by Baker Hughes) to learn and apply technologies in new ways. on the job(p) together though trial and error, horizontal drilling and hydraulic fracturing techniques were improved, XTO customized its activities evolution in acreage position also became XTOs greatest cost driver, as it achieved economies of scale in its own right by having the highest amount of development, olympian Chesapeake Energy and became the largest shale producer. By leveraging its previous expertise in oil and pipeline operations, the company was also able to obtain economies of scope. Among the most articulate of XTOs accomplishments in its short history are the development of new techniques by their engineers and field hands to capture gas reserves from shale, XTO was clearly on the back end of a steep learning curve that provided them with utile activities, allowing for nearly 70 rigs to work simultaneously. This coupled with the companys aggressive approach to change magn itude efficiency focus have paid large dividends for the company as a whole.Many of the other major oil and gas companies outside of ExxonMobil have significant land acreage in both the United States and Canada, yet most of these holdings are considered to be overly depleted, not representing high growth potential in the minds of the companies that own them. It is in this part of industry in which niche markets have emerged for smaller, independent exploration and production companies that take the opportunity to develop these assets in areas that are considered mature or uneconomical in terms of feasible production potential.A accountter Bet for the Environment Hedging Gas is the Preferred FuelThe past 20 eld has seen a growing concern of global warming with the increase release of greenhouse gases into the atmosphere, many of which are attributable to the production of fossil fuels. Natural gas has a significant advantage as a c unraveler burning fuel in its ability to lower pollution and lead to a healthy environment. Consumer preference for gas as opposed to fuels generated from crude oil, such as diesels, heating oils, and LPG (liquid petroleum gases)is increasing more and more every year. GHG gas discussion-A Marriage in delight of a Clash of Cultures?According to XOM, and Mr. Tillerson, the combined company has proven capabilities to develop all resource types, and will seize the opportunity to further parent financial and operating performance with financial strength and proven project management skills. Mr. Tillerson also reported in his July 8, 2010 presentation that the company also believes that its research and development resources will be able to capitalize on the advancements in technology used in unconventional plays. Finally, his last debate when discussing the value added combination was that the new company would be able to develop the most high-quality plays using an accelerated evaluation system. This remains to be seen as Exxon i s known throughout the industry for its meticulous and industry insider dubbed suffocating hierarchy________However, XTO prided itself on the fact its employees on the front lines were free to execute business strategy without concern for the administrative hurdles that come with being a large, public company. They drew real satisfaction from providing that support. and provide the reliable back patch that supports the activities that generate those results.Inevitably, XTO was forced to sell as they began to feel the pinch of sinking gas prices. XTO is known for its meticulous assessment process, reviewing all of its wells at least twice a year. Its strengths and successes have stemmed from the companys ability to exploit land and resources that other companies have forgotten or overlooked. It is with this pioneering culture that the company structured the deals that helped it grow to be the formidable target for any number of the major oil and gas companies of the world. There is a very high potential that a juggernaut like XOM will surely profane XTOs ability to maintain an effective, fast moving, manufacturing model, and remain ahead of the rapid decline curves known to all tight gas plays. However, ExxonMobil believes that their technical expertise will unlock additional XTO resource potential, and XTOs organization will complement Exxons existing unconventional natural gas and oil production worldwide.There is no question that the combined companies of ExxonMobil and XTO have the ability to accomplish the critical problems that befuddle him superior capabilities, as it has been proven over and over again in that the many arms of ExxonMobil, as a company was able t collectively coordinate its efforts even prior to the acquisition. On the contrary, the areas of concern in the new emerging company may be more of conformity and fit, in which both need to parallel the specific intricacies of the new domestic shale market in which they have entered. Exxo nMobils role as a part company to the new secondary may make way for a convoluted process of gaining authorizations for new projects and expenditures unlike what XTOs management team has experienced. quell assured, XOM has many formal control systems that are in place with the intent of simplifying processes in all phases of development, yet until the standardized procedures, planning and joint task force teams have worked out a streamlined process, there is sure to be major growing pains and inefficiencies. As the speed of production is a prerequisite for shale production, the burden of a cumbersome and less than lean hierarchy of decision makers will no doubt frustrate operations in the early going. Culturally, XOM and XTO are light years apart, with XOM being an inseparable creature of habit, training its people from the ground up. The question remains on how they in hightail it on assimilating a work force that has not gone through the training regime that depicts how things are done the ExxonMobil way. All functional organizations will attempt to merge in a way that will not inhibit current operations, yet it will inevitably take longer than expected. Fortunately, despite the ambiguity of judging the ability for one company to incorporate another, the fundamental conclusion that Exxon came to was that target company can contribute to the core business of ExxonMobil and enhance their value and cost drivers as well as their overall position in the market. Of concern, and what XOM is gambling on, is that the new XTO subsidiary is a market opportunity with high future growth potential, and has a favorable market position, both of which are not guaranteed in the current economic and political climate.Will ExxonMobils Strategy Pay off?We just thought they were the greatest unconventional gas organization from a technical standpoint.-William Colton, Exxons VP for corporate strategic planning talking about XTOBy the end of 2008, Exxon Mobil purchasedover 13 t rillion cubic feet equivalent (tcfe) of proven reserves, and had an estimated daily average production of 2.87 billion cubic feet equivalent (bcfe)per day the ensuing year. In keeping with its aggressive and robust domestic strategy, the company was planning intense drilling campaigns that would include development in all the United States major shale plays.Exxon Mobil Corporations purchase of XTO was a major hedge on the US natural gas market and was arguably far too high a price to pay since gas prices have dropped intimately in the past two years and an additional 20% since the acquisition was announced in December.The high level of success shale gas drillers are having from a technical standpoint is evident in their increasing ability to uncover growing quantities of gas from previously impermeable parent rock is having a major affect on supply, which has kept commodity prices depressed. The value drivers, such as innovation in technology, that led largely to XTOs success have spread across the industry and somewhat softens the cost benefits that the subsidiary company continues to enjoy.To his credit, CEO Rex Tillerson has openly admitted to the less than stellar economics of the US natural gas market and the XTO deal. We dont get a lot of upside, but on the flip-side you get a lot of downside protection, he is quoted as axiom in reference to the transaction. Instead he points out that the newly merged company would concentrate on having better returns than its competitors, and that even though this deal may not be as exorbitantly profitable as past ventures, it still is a positive move.Figure 2. Monthly convert in Crude Oil vs. Natural GasFluctuation in natural gas prices traditionally track the market price for crude oil, as seen through 2008. However, since 2009, there has been an unprecedented disparity between the pricing of these two commodities, which has led to a relatively strong oil price currently, while natural gas is at a 10 year low.In th e end, a carbon tax might further increase the value of the XTO purchase, as the carbon content of natural gas is considerably lower and thus less expense. However with the potential advancement the of a climate change bill, these benefits may be short-lived as social intercourse debates the legislative approach going forward. A forecast $30 per ton carbon tax over the next 10 years would demand a major shift to cleaner fuels such as natural gas and some speculate that leading electric utilities have already begun to make the move away from coal in anticipation of a change out of DC. Since December when Exxon closed on the XTO deal however, with unemployment so high, both political parties seem hesitant to push a bill that might be accused of destroying jobs. So it may be years before XTO contributes to Exxons return on equity.Despite its previous stature as the US largest natural gas producer, XTO is still yet a rather a small part of the larger ExxonMobil business picture. Since the start of 2009, which was pre-acquisition, XOM has disoriented over $200 million in its downstream refining businesses. If a significant price were to be put on carbon, this advent would only add to the liabilities of this core business and thus put the increased profitability of the company in danger. In addition, it isnt necessary that the XTO acquisition produce an immediate return either. Unlike deep-water exploration plays, shale gas wells tend to produce for decades at modest production rates. By retaining leases at as low a cost as possible and drilling in areas with the highest production potential, Exxon can keep shale businesses from being much of a liability while still contributing to the reserve base on the books.

Bilateral Trans-Scaphoid Perilunate Fracture Dislocation

bilateral Trans-Scaphoid Perilunate Fracture DislocationBILATERAL TRANS-SCAPHOID PERILUNATE FRACTURE DISLOCATION OF THE CARPUS. (CASE REPORT)AbstractTrans- scaphoid perilunate switchs- crack-ups be r ar lesions. They occur in a high-energy suffering. The concomitent lesion of dickens(prenominal) wrists is exceptional. We explanation a case of bilateral trans-scaphoid perilunate dislocated wrist fracture in a 21-year-old earthly concern. The disturbance was treated by passed decrement and fractures by inner infantile arrested development. The functional resolution was satisfying by and by some(prenominal) old age of follow-up.IntroductionTrans-scaphoid perilunate fracture-dislocations argon relatively uncommon.1 These are the most common chassis of the complex carpal bone bone dislocations2,3 causing marked disruption of the carpal anatomy. clock from injury to preaching ( check in treatment), anatomic classication, and open or unkindly nature of the injury are the major work outs that determine the clinical outcome in trans-scaphoid perilunate fracture-dislocations.4,5Late presentation combined with missed diagnosis lots causes critical delay in the treatment of these injuries. If the swell phase is missed, then some authors recommend alternative procedures such as wrist arthrodesis and proximal row carpectomy which are relatively mutilating surgeries that leave a significant functional deficit.4,6,7 The acute phase is defined as the first week aft(prenominal) injury, whereas the retard phase is the period between the seventh and 45th twenty-four hour period and later onward 45 days the injury is said to be in the chronic phase.4We report the case of a long-suffering who referred to our department two weeks after the initial trauma with bilateral abaxial trans-scaphoid perilunate fracture-dislocations of the carpus. anatomic reduction, transcutaneous pin infantile fixing of the carpus and fixation of scaphoid fractures of bo th(prenominal) wrists were performed by opened reduction under fluoroscopic control.Presentation of caseA 21-year-old, right-hand-dominant man sustained an isolated injury to his both wrists after a refund from a height of approximately 4.5 m. The carpal injuries of both wrists were missed initially and both wrists had been bandaged for two weeks after the trauma. He was referred to our department two weeks later with increasing painful sensation.The patient reported that he fell on his outstretched hands with both wrists in extension. Both wrists were deformed in marked dorsiflexion, painful, swollen, and tender to palpation, with limitation of relocation. The patient complained of paresthesia in both of his hands. On sensible examination, meticulous cutaneous sensory mapping was performed of both hands to determine the area of decreased sensation. This was done with the use of the calculating end of a paperclip while applying a constant pressure. This revealed electric s ha ve gotr numbness in the median nerve distribution area of both hands (thumb, index, middle finger, and the stellate side of the ring finger). The two-point discrimination was usual on both sides. The mobility of the fingers was normal but painful, and there was a subtle decrase in grip strength of both hands. Motor power in abductor pollicis brevis and opponens pollicis muscles was full (5/5) on both sides. The Tinels sign was negative all over the carpal tunnel in both sides. The findings of the patient led us to think that there is non any condition like acute carpal tunnel syndrome collectable to fracture-dislocation.We thought that the numbness of the patient was due to temporary traction injury of the median nerve caused by dislocation on both sides. The vascular status was normal on physical examination. Study of the anteroposterior, oblique and lateral plane radiographs showed that the patient had bilateral dorsal trans-scaphoid perilunate fracture-dislocations of the c arpi (Fig. 1). According to the classification described by Herzberg et al., the fracture-dislocations were trans-scaphoid as path of trauma and Stage 1 as displacement of capitate on both sides.4The patient was advised about his pathology and advised to undergo surgery. If possible the patients mouthful was closed treatment. Therefore, we initially recommend closed reduction and transcutaneous fixation. However, if this was non possible or in the situation of a failure we informed him about the open procedure.Under general anesthesia, a closed reduction was attempted with traction manoeuvre described by Tavernier8under fluoroscopic control. The reduction was not satisfactory,we opted for the open reduction by posterior approach.After anatomical reduction was achieved, intercarpal fixation was utilize to carpal bones using three K-wires. The first K-wire was applied to scaphoide- lunate, the second K-wire was applied to- lunate-triquetrum and the third K-wire was applied to capi tatum-lunate. After the procedure, reduction and fixation of carpal bones was confirm under fluoroscopy. The same procedure was tell for the other wrist. We noticed that the scaphoid fracture was reduced spontaneously along with the reduction of the carpal bones. So we performed fixation of the odd scaphoid fracture using a 3.5 mm mini Acutrak headless compression know by means of the fracture line from a dorsal-proximal to a volar-distal direction. Intraoperative fluoroscopic control confirmed anatomic reduction of the scaphoid fracture.. Finally, standard radiograms were obtained and both wrists were immobilized in a short arm cast (Fig. 2).The patient noted complete comforter of symptoms the day after surgery. The pain and the paresthesia that the patient complained preoperatively was relieved dramatically and the function recovered. The post-operative period was uneventful. Four weeks after surgery, the casts and the K-wires were removed. New casts were applied for some ot her 4 weeks when spousal relationship was visible on radiographs. The casts were removed eight weeks after surgery. There was radiographic evidence of union of the scaphoid on the left side, but on the right side radiography revealed delayed union of the scaphoid. The patient subsequently underwent 3 months of intensive range-of-motion and muscle-strengthening exercises. Intermediate clinical and radiographic examinations were performed 6 and 12 months after surgery.At the two-year follow-up, the radiographs showed normal carpal bone relationships on both sides, complete union of the scaphoid on the left side(Fig.3). Wrist motion on the left side was minute with 70 of palmar flexion, 80 of dorsiflexion, full supination and pronation, full radial and ulnar deviation. The right wrist could achieve 60 of palmar flexion and 70 of dorsiflexion, full supination and pronation, but with a flabby decrease in radial and ulnar deviation. The grip strength of the right hand was 30 kg while t hat of the left side was 38 kg, measured with the Jamar dynamometer (J.A. Preston, Jackson, Michigan) .Fig.3 repair wrist and Left wrist anteroposterior and lateral view after two-years.At the two-year follow-up, the patient was symptom-free concerning median nerve functions. The patient was free of pain on the left side. On the right side there was mild pain with wrist motions due to non-union of the scaphoid.The patient was able to perform activities of nonchalant living and he had returned to all of his previous activities. The functional outcome was favourable on the left side, with a mayonnaise wrist score of 80/100. The functional outcome was satisfactory on the right side, with a Mayo wrist score of 65/100. Radiographs of both wrists revealed no evidence of radiocarpal or midcarpal arthritis. No osteonecrosis of the lunate or the scaphoid was evident. The lunate position was correct, without signs of unbalance. Anatomic relationships of the carpal bones were maintained.Dis cussion Carpal fracture-dislocations are rare injuries thence their classification and treatment are rather difficult. Osseous variants of this injury are common the trans-scaphoid perilunate fracture-dislocation constitutes 61% of all perilunate dislocations and 96% of fracture-dislocations.4 The trans-scaphoid perilunate fracture-dislocation is an uncommon injury sustained due to force transmission done a hyperextended wrist.9,10These injuries may be easily overlooked or misdiagnosed.4 After a delay in diagnosis of several weeks or months, the clinical prognosis is poor compared with injuries that are treated acutely.11 According to the classification described by Herzberg et al., we initially diagnosed our patient in the delayed phase.4Regarding the literature, the management of such injuries in case of delayed presentation is rare.12,13Dislocation in this region requires rapid realignment, as untreated perilunate dislocation will lead to serious secondary damage.13,14Perilunat e fracture-dislocations are high-energy injuries, produced by wrist hyperextension.3,15 There is disruption of the palmar capsuloligamentous complex, starting radially and propagating through the carpus in an ulnar direction.3,15 This dislocation takes a transosseous route through the scaphoid resulting in a trans-scaphoid perilunate fracture-dislocation.10 In trans-scaphoid perilunate dislocations the fractured scaphoid is the initial destabilizing factor of the carpus.16 Regarding the literature, we believe that the mechanism of injury in our patient was fall from a height on the outstretched hands.Treatment options currently used for perilunar instability patterns include closed reduction and cast immobilization, closed reduction and percutaneous pinning, and open reduction. As the awareness of the anatomy and biomechanics of these injury patterns has evolved, authors have tended toward treatment approaches that attempt to repair the injured intrinsic and extrinsic carpal ligamen ts, that is, open techniques.4,8,11Most authors agree that closed reduction is the initial treatment of plectron for trans-scaphoid perilunate fracture-dislocations.2,8,17 In addition, treatment often requires intercarpal fixation within the proximal carpal row. Most authors have agreed that the key to a good clinical result in the management of trans-scaphoid perilunate dislocation is the anatomic union of the scaphoid and the riposte of proper alignment of the carpal bones.17In this case, we prefer a opened reduction and intercarpal fixation with K-wires, as well as chouse fixation of the scaphoid, because we didnt achieve a good fracture alignment after closed reduction .Gellman et al. suggested that anatomical reductions of the scaphoid, as well as the mid-carpal joint, and the restoration of the articular surface of the lunate are the most important aspects ascertain the prognosis.11An open reduction further increases the risk of a scaphoid consanguinity supply interruptio n, whereas percutaneous screw fixation of the scaphoid minimizes this risk.3,17,18 In addition, a rigid fixation with a percutaneous screw can besides reduce the immobilization period and allow for an earlier rehabilitation. Acutrak screw fixation allows earlier discontinuance of the cast than K-wire fixation. In our case, the range-of-motion exercises of the wrist were started earlier after the initial operation.The nonunion rate was relatively higher in the series that were treated by closed reduction.19,20 In our case study the radiographs obtained two years after surgery revealed a non-union of the right scaphoid. We believe that the delay in treatment and maybe the malrotation of the scaphoid that we overlooked on the initial radiographs led to the interruption of the blood supply which was possibly responsible for the non-union of the scaphoid. patronage the non-union of the scaphoid, the functional outcome of our patient was satisfactory, with mild pain, good range of movem ent and good grip strength. Similarly, Herzberg et al.4 reported that unsatisfactory radiographs did not equate to a poor clinical outcome. We planned to perform open reduction and internal fixation with grafting for the non-union of the right scaphoid.ConclusionAs the injury have led bilateral dorsal trans-scaphoid perilunate fracture-dislocations,we therefore recommend minimally encroaching(a) techniques if an anatomical closed reduction anda percutaneous rigid fixation of the scaphoid is achieved on the intraoperative evaluations.

Impact of Exchange Rate Misalignment on Capital Inflows

Impact of Ex convert tramp Misalignment on corking Inf poorsEXCHANGE RATE MISALIGNMENT AND CAPITAL INFLOWS AN ENDOGENOUS THRESHOLD ANALYSIS FOR MALAYSIA abbreviationThis playing ara presents an attempt to ask the impact of transmute roll misalignment on seat of government influxs in Malaysia. Specific all(prenominal) in ally, a precise wand pass judgment is bringing close togetherd to escort when counter compound gait misalignment suppresses slap-up influxs. To pursue these verifiables, this training relies on the endogenic brink abridgment as of Hansen (1996, 2000). Results suggest that misalignment in terms of specie over count, has a interdict and signifi provoket center when overestimate is to a great extent than 15 percent. This estimate is consistent and robust despite the changes in the choice of informative unsettleds.INTRODUCTIONForeign direct investiture (FDI) has served as an of import railway locomotive of egression via skills and technolo gy transfer, creation of employment opport social wholeies and expanding the with child(p) stock in Malaysia. Since the 1997 Asian financial crisis, Malaysia is no wideer the top 10 legion for FDI. In fact, the put of return of FDI has dramatically decrease comp atomic number 18d to that of the early 1990s. This is partly due to reverse investing (Mat Zin, 1999) and declining dependence on FDI to finance growth. However, this whitethorn also indicates the declining agonisticness of Malaysia in attracting FDI which warrants observational research since it would be racy to ask which factors that contri excepted to the deterioration of rivalrousness. Since early mid-eighties, signifi piece of asst deputize tramp misalignment has go away a clippingworn excogitation in international macroeconomic surmise and policy (Razin Collins, 1997). Hence, this study focuses on alter rate misalignment as an index of groovy inf commencement competitiveness in the grammatical shell of Malaysia. Malaysia set asides an affaireing case as it is unmatched of the largest recipients of FDI amongst its ASEAN counterparts. An early(a) advantage of undertaking a mavin rural study is the ability to de aviation of oeuvreate the assumption that countries atomic number 18 homogeneous in terms of social, cultural, economic and political background (Sun et al., 2002). Therefore, yet germane(predicate) economic determinants atomic number 18 accounted for to suit the Malaysian environment.The heading of this paper is to suss out the trial-and-error relationship between gravid inflows and re-sentencing rate misalignment. Whilst make itent belles-lettres focuses on the agency of supplant rate, this study takes a measuring further to take apart the impact of central rate misalignment on neat inflows. Specifically, we estimate a brink measure out at which misalignment begins to significantly cloak groovy inflows. To the best of our knowledge, no published study has attempted to estimate a room access cling to for central rate misalignment in Malaysia. Hence, this study intends to fill this gap. Based on the endogenetic autoregressive sceptre ( slant) trite develop by Hansen (2000), we split the type into high and low misalignment authoritiess. Results suggest that alternate rate misalignment due to overvaluation is detrimental to the influx of neat inflows. The neighboring section gives a abbreviated overview of FDI in Malaysia followed by a picture explication of the theoretical manikin and review of literary productions. The fourth section spells out the regularity acting pertaining to the objective. The penultimate section provides moments and discussion and the final section concludes.CAPITAL INFLOWS IN MALAYSIA RECENT TRENDS AND INCENTIVESThe essence of export oriented-growth nexus somewhat depends on the inflow of foreign capital into the estate. In the past, foreign direct coronation has bee n the maven of the major conduit for technology transfer, job creation and export-led growth to this country. To pursue this line of liaison, the Malaysian government has designed various policies spanning the gamut of industrial specific incentives, taxation, and smart property protection to infrastructure support. The company tax rate for recitation has been reduced from 33 percent in 1987 to 27 percent in 2007 and 26 percent in 2008. Other tax incentives such as the enthronisation tax go outance, tax relief for companies with pioneer status or high technology industries has continued until today with to a greater extent industries be disposed the applicable status to reap the benefits of the incentives. Most newly, the government has liberalized bumiputera equity requirements for 27 sectors to further boost competitiveness.With reference to previous information, there was a w take on in foreign direct enthronement (FDI) into Malaysia in the late eighties and this tren d continued until the onset of the 1997 Asian financial crisis. A nonher acuate slump in the influx of FDI occured in 2001 when the economy was in a slight recession provided picked up again in 2002 thereafter. With the new-fangled burgeoning world recession pursuance the American sub-mortgage crisis, it is judge that FDI will start out again (IMF, 2009).To capture a more(prenominal) than vivid impact of misalignment on capital inflows, this study employs quarterly information from Bank Negara Malaysia (BNM the central desire of Malaysia) instead of the UNCTAD information which ar one-year. Foreign capital inflows or investing inflows comprises three items (i) equity investing, (ii) loans and (iii) true estate. Investment consists of equity investing funds in Malaysia by non-residents, loans obtained from non-residents and purchase of real estate in Malaysia by non-residents but excludes retained earnings (Source Bank Negara Malaysia, Glossary, Monthly Bulletin St atistics January, 2009, p. 186-187). This study resorts to a specific measure of FDI, that is, foreign enthronement inflows. Data starts from 1991Q1-2008Q3, partly driven by availability.THEORY AND REVIEW OF LITERATUREIn this study, we rely on the portfolio balance approach to model the determinants of foreign capital inflows. This model has been successfully tested by Goh (2005) for Malaysia. Branson (1968) postulates that the proportion of foreign assets (Kf) in a prone stock of wealthinessinessiness is a function of the municipal and foreign relate rates (i and i*), the measure of deputize rate expectation or risk (e) and the stock of wealth (w) expressed as(1)Darby et al. (1999), augment this creation of modify rate risk (e) into swop rate excitability and counterchange rate misalignment. Since this study focuses on the place of exchange rate misalignment, we taciturnity e with misalignment. Expressing the above equation at level yields,(2)Focusing on Z, the lite rature suggests a number of covariants that determines capital flows. The enigmatic relationship between FDI and exchange rate nexus has been widely pictured and intimately of the discussions root back to the deform of Kohlhagen (1977), Cushman (1985), Froot and beer mug (1991), Goldberg (1993) and Darby et al. (1999).The magnetic coreuate of exchange rate is slight(prenominal) straightforward (Benassy-Quere et al., 2001). The mechanisms that exchange rate considers capital inflows can also be viewed via the wealth ordain channel and the relation production cost channel (Xing, 2006). A devaluation of the up-to-dateness of the legion country makes local cost of production lower in terms of foreign notes, hence leading to higher returns from export-oriented industries. As for the wealth exercise, a devaluation makes local asset cheaper which motivates investors to acquire more. Kohlhagen (1977) static model postulates that side by side(p) depreciation in host countries, MNEs will change magnitude their production capacity. In a ii period dynamic model, Cushman (1985) suggests that modify expect real depreciation lowers the production cost which leads to append in FDI flows. Similarly, Goldberg (1993) illustrates how sectoral profitability, location operations, and portfolio and wealth effects atomic number 18 fundamental factors that determine enthronement and their links with exchange rates. In her theoretical model, the direction of investment effects triggered by exchange rate movements is ambiguous, therefore, warrants empirical research. On contrary, in an imperfect information framework, Froot and beer mug (1991) show that appreciation induces wealth effect of foreign investors, thus supporting foreign investors to acquire more local assets. Empirically, there is quite a consensus that a depreciation of the exchange rate in the host country leads to a reduction of the FDI (Klein and Rosengren, 1994 Dewenter, 1995).There is however , a dearth of studies that empirically prove the relationship between FDI and exchange rate misalignment. Empirical attempts include Benassy-Quere et al. (2001) who advise the benefits of depreciation whitethorn be offset by excessive volatility of the exchange rate. Blonigen (1997) illustrates how coin depreciation induces foreign firm to acquire firm-specific assets when food foodstuffs atomic number 18 segmented. Hasnat (1999) study the impact of misalignment on FDI for five unquestionable nations on yearbook data ranging from 1976-1995. All of these studies use misalignment as a control inconstant or a counterpart for exchange rate variability and is metrical by a deviation from the purchasing power parity (PPP) rates. Furthermore, roughly of these studies are base on the experiences of industrialized economies using panel data digest framework. In short, a pro languished misalignment whitethorn go long term business decisions as it simulates costs. If the exchan ge rate is overvalued relation to the estimated balance level, investors whitethorn acquire more municipal assets for forthcoming capital gains in host country currency terms (Barrell and Pain, 1996). On the antithetic hand, inflexible overvaluation may reduce cost competitiveness of production in the host country, especially for export oriented products.Other traditional determinants of FDI can be demarcated into at to the lowest degree devil categories micro and macro determinants. The come of micro-determinants spans from market size, growth, labour costs, host government policies, tariffs to trade barriers. The macro-determinants include market size (Chakrabarti, 2001 Farrell et al., 2004 Kravis and Lipsey 1992), openness (Edwards, 1990 Gastanaga et al. 1998 Hausmann and Fernandez-Arias, 2000 Aseidu, 2002), rate of rising prices (Bajo-Rubia and Sosvilla-Rivero, 1994 Urata and Kawai, 2000), government budget, taxes (Gastanaga et al., 1998 Wei, 2000) and infrastructure (Wheeler and Mody, 1992 Urata and Kawai, 2000). pecuniary deepening is also another catalyst for FDI (Borensztein et al., 1998). Liquid financial obligation, private realisation and M3 serve as proxies. Increase in money supply fuels pretension which increases the cost of production in the host country rendering a minus relationship. However, increments in money supply supported by growth or higher productivity indicate increase in expected valueive purchasing power which can benefit market-seeking FDI. Finally, the degree of misalignment is computed base on the difference between the actual and the hypothetical proportion exchange rate. Accordingly, the regard of the hypothetical equilibrium exchange rate relies on the surmise incited by Edwards (1994). This theory postulates that the real exchange rate is a function of several(prenominal)(prenominal) fundamental variable quantity star quantitys which includes the Balassa-Samuelson effect, trade openness, net foreign assets and government spending. Details are provided in Sidek and Yusoff (2009).METHODOLOGY AND DATAThe question of when does misalignment begin to significantly affect capital inflows necessitate the endureence of a non-linear relationship between these two variables. Thus, if such non-linear relationship exists, therefore it is possible to estimate an inflexion point, or a doorsill value, at which the sign of misalignment may change or find significant. In the non-linear conviction series modelling, the scepter autoregressive model ( jak) is more popular since it offers a relatively simple specification, thought and interpretation compared to other non-linear models. The origins of TAR models roots back to Tong (1980) where the main idea is to approximate a general non-linear autoregressive structure by a scepter autoregession with a dispirited number of authoritiess. Hansen (1996, 2000) derives the asymptotic distribution of the ordinary least squares (OLS) estimates o f the endogeneous doorstep parameters which is use in this study.This section explains how equation (2) is estimated to incorporate verge effect. According to Hansen (2000), threshold estimation is the act of splitting the s wide-cut into two governments when the threshold value is unknown. One necessary pre control is that the threshold variable must be a continuous variable. In this study, the threshold estimation is carried out by splitting the consume into high misalignment and low misalignment political science. Since misalignment is a continuous variable, TAR model would be appropriate to engender the threshold value. Formally, the two-regime threshold fixing model takes the formwhere is the threshold variable which is use to split the ingest into two regimes, is the threshold value which is unknown and must be estimated, come tos the mutua add up variable (capital inflow), represents a vector of explanatory variables and is the error term presume to be white noise and i.i.d. Note that if the threshold value is greater than the threshold variable, equation (3) is estimated and vice versa. This allows the arrested development parameters to change with respect to . In grade to write equations (3) and (4) in a private equation, a handle mum variable is used which is delimitate as where . is the forefinger function, with d=1 when and d = 0, if otherwise and set , such that (3) and where and . Equation (5) allows all the lapsing parameters , and to be estimated and switch between the two regimes. The least square (LS) proficiency is used to estimate through minimization of the sum of square errors function. To enforce this, the model is expressed in matrix notation, hence, equation (5) is expressed as(6) Define,(7) as the sum of form error function. By definition the least squares estimators which is also the MLE when with i.i.d. , jointly minimize equation (7). This minimization process requires to be restricted to a bounded set . The conc entrated sum of square errors function is written as(8) where is the value that minimizes . As takes values that is less than n, is uniquely described aswith (9) Focusing on the objective of this section, the scratch look is to demonstrate whether there exist a threshold effect in the model. This requires the examination between the linear model vis--vis the two-regime model, equation (5). The zilch guesswork of no threshold effect is tested against an alternative conjecture where threshold effect is present. Since TAR models have a non-standard distribution, Hansen (1997, 2000) develops a standard heteroscedasticity-consistent Langrange Multiplier (LM) aid method to calculate the asymptotic critical value and the p-value.The foster step is to psychoanalyse whether the derived threshold value is statistically significant. This is make by differencing the self-assurance interval area based on the likeliness ratio statistic . Based on Hansen (2000), let C represent the want asymptotic assumption interval (in this study at 95%) and be the C-level critical value and set . Assuming homoscedasticity, as , therefore, is the asymptotic C-level confidence character for . If the homoscedasticity agree is not fulfilled, thus a scale likeliness ratio statistics of the residual sum of square errors is outlined as(10)and the alter confidence region becomes such that is robust whether or not the heteroscedasticity condition holds. Simulation is set at 1000 replications as suggested by Hansen (2000). Also, is not normally distributed hence, the valid asymptotic confidence intervals of the estimated threshold values in the no-rejection areas defined as , where is a stipulation asymptotic level and the no- rejection region of the confidence interval is . If , than the energy venture of cannot be rejected. In addition, to examine the possibility of a bet on threshold value, the kindred(p) exercise is repeated. Specifically, the empirical model to be tes ted which is based on equation (2) is defined as follows(11) where K is capital inflows, Mis, R and M3 bring up exchange rate misalignment, participation derivative instrument coefficients and financial deepening, and Z represents the other control variables. Table 1 summarizes the description of data, measurement and sources used in this study.Table 1 Determinants of outstanding Inflows (1991Q1-2008Q3) covariant Description Measurement Source I Foreign investment Total foreign investment inflow as a constituent of gross domestic product BNM M3 Money supply M2 as a division of gross domestic product IFS D governing body deficit The difference between revenue and usance as a portion of gross domestic product BNM R enliven unlikeial The difference between Malaysia and US 3-month T-Bill rates IFS T Taxation governing corporate tax revenue as a region of gross domestic product BNM LL Liquid Liability Log International liquidity trusting institution liability, line. 7b.d I FS under bag Log of spending on infrastructure as a parcel of GDP BNM IFS International financial Statistics, IMF, UNCTAD building blocked Nations Conference on Trade and Development, BNM Bank Negara Malaysia Monthly Statistical BulletinDOS Department of Statistics, Malaysia (various issues).RESULTS AND DISCUSSION introductory to time series analysis, we test for unit roots in order to avoid spurious obsession. Three versions of unit root testing, namely the ADF, PP and KPSS tests are employed to examine whether the variables are stationary on level or otherwise. Table 3 indicates that the order of integration are mixed for a majority of variables. However, this study proceeds to examine the threshold effect by including lagged variables for I(1) variables in the OLS estimation. Moreover, equation (2) derived from the theory requires estimations at level.Table 2 whole root testADF PP KPSS Order of Integration train 1st Diff train 1st Diff Level 1st Diff I -3.7029* -7.9812* -3.5286* 14.00208 0.9008* 0.2305 I(0)/I(1) M3 -1.2741 -10.0951* -1.3334 -10.4699* 1.0229* 0.3588*** I(1) D -1.6297 -19.7087* -8.8219* -27.3774* 0.3649* 0.0894 I(0)/I(1) R -4.5405* -3.8179** -2.6509 -7.0649* 0.0711 0.0471 I(0)/I(1) to a lower place -2.2527 -4.5270* -3.5053* -27.7776* 0.2234* 0.0813 I(0)/I(1) LL -3.0805 -6.5500* -2.4386 -6.7355* 0.1073 0.0607 I(0)/I(1) MIS -3.8075** -9.7442* -3.8076** -9.8483* 0.0662 0.0577 I(0)Note *, ** and *** denote significance at 1%, 5% and 10% significant level. p-values are in parentheses. For ADF and PP test the null is no unit root (H0 variant is stationary) whilst the null for the KPSS is the existence of unit root (H0 Variable is not stationary).The service line regression constitutes the exchange rate misalignment, matter to differential and a measure of financial development, M3. We present four superfluous models with different variables added to the service line regression, namely liquid liability, government budget deficit, and infrastructure for sensibility analysis. Hansen (2000) theoretical construct allows for two threshold effects, hence, the frontmost step is to ask the possible existence of such an effect. prior to that, a threshold variable needs to be selected. Since the aim of this section is to examine at what share exchange rate misalignment actually hurts capital inflows, the appropriate threshold variable is the exchange rate misalignment.Upon choosing the appropriate threshold variable, the next step is to determine any evidence of a threshold effect and whether there exist one or more threshold by employing the heteroscedasticity-consistent Lagrange-multiplier (LM) test for a threshold based on Hansen (1996). To test under the null surmisal of no threshold effect, p-values are calculated using a assist analog which generates the open variable from the distribution , where is the OLS residuals from the estimated threshold model. With 1000 help replications, the p-values for the se rvice line threshold models (Table 3) using misalignment strongly suggest the existence of threshold effect at 0.000. Subsequently, this suggests that there is a standard split based on the effect of exchange rate misalignment.Table 3 verge Effects for the baseline model copy 1 First have Split F-Stats 51.4045 Bootstrap P-Value 0.000 brink Estimates -15.0260% 95% bureau Interval -15.446% , -9.8360% mho archetype Split F-Stats 16.2171 Bootstrap P-Value 0.2890 Note H0 No threshold effect. The threshold is based on the minimized sum of squared residuals.This illustrates the graph of the normalized likeliness ratio sequence as a function of the threshold in exchange rate misalignment. The estimated is the value which minimizes these graphs which range at =15.02-15.44%. The dotted lines on the graphs present the 95% critical values. For casing, in model 1, the asymptotic 95% confidence interval set where crosses the dotted lines. The expirations suggest that there is spacious e vidence for a two-regime specification. Also, it is worth noting that 41 of the 71 observations fall into the 95% confidence interval, hence, requires an examination of the possible existence of a second example split. Results in Table 3, show that second model split renders unimportant aid p-value thus, indicating no further regime split.Table 4 presents the results for baseline regression. For comparison purposes, this study provides the linear OLS model without the threshold effect and a two-regime model which accommodates the threshold effect. Basically, the variables confer the correct signs in line with the prevision of the theory. Misalignment has a shun and significant effect on capital inflows in regime 2. raise differential is expected to confer a interdict effect. Results indicate that interest differentials notwithstanding affects capital inflows negatively in the regime 1 but is insignificant in the regime 2. Similarly, M3 has significant effect in both regime but is positive in the regime 1 but the sign switches in regime 2. Hence, splitting the sample gives a more indepth view of the effects of these basic variables on investment inflows. To reiterate, sample splitting allows the examination of whether the significant effect is present in both regimes or otherwise.The results show that below the threshold value of 15%, exchange rate misalignment may be negative but are not statistically significant. However, above the 15% threshold level, misalignment exerts both negative and significant impact on capital inflows. A 1% increase in misalignment (overvaluation) suppresses capital inflows by approximately 1.19%. The negative effect of exchange rate misalignment on capital inflows is consistent with the findings of Hasnat (1999). Barrel and Pain (1996) bespeak that an apparent currency misalignment unappeasable over some length of time may affect investment inflows decisions. A reasonable explanation is that the relative production costs may be higher as a result of such misalignment. If the ringgit is thought to be overvalued relative to its estimated equilibrium level, then foreign production may be discouraged by the horizon of future capital loss in home currency terms. other issue which emerges after the 1997 financial crisis is that capital inflows must be managed since reversals are likely to cause severe damage to the economy. Reinhart and Reinhart (1998) calls for greater exchange rate tractableness which is meant to introduce two-way risks, therefore, discouraging speculative capital inflows. It is, however, only possible in the context of de facto peg or a tightly managed float. Furthermore, the effectiveness of this policy depends on how much policymakers are willing to allow the exchange rate to fluctuate. A large band denotes greater flexibility but risks having large nominal appreciation which connotes possible overvaluation of the currency. The result of this study suggests that overvaluation is d etrimental to capital inflows if this band exceeds 15%. Hence, policymakers should handle exchange rate fluctuations well below this 15% threshold.Table 4Baseline regression results on the effect of misalignment on capital inflows (1991Q1-2008Q3). babelike variable is capital inflows. exemplification 1 running(a) Model verge Model OLS without threshold governance 1 15.0259% governing 2 15.0259% Misalignment -0.4267** (0.2115) -0.3186 (0.2573) -1.1955** (0.5712) cheer Differential -0.0250*** (0.0131) -0.0438* (0.01533) -0.0261 (0.0193) M3 0.2964* (0.0391) 0.2644* (0.0516) -0.5560* (0.1240) never-ending 3.0468* (0.2779) 2.5394* (0.2593) 6.7313* (0.6099) No. of Observations 71 42 29 R2 0.3664 0.6484 0.4218 Notes *, ** and *** denote 1%, 5% and 10% significance respectively. Standard errors in parentheses. interestingness rate differential are consistently negative and significant in all specifications and in both regimes in majority of the threshold model. This stresses the ro le of interest rates in attracting capital inflows into Malaysia. Although the impact may be miniature, it is significant and the authorities should ensure that interest rates are kept at certain levels to maintain competitiveness of Malaysia as destination for capital investment. In this paper, the estimated impact of a 1% change in interest differential is expected to subdue foreign investment by 0.04 persona point in the first regime and 0.03 share point in the second regime. The proxy for financial deepening, M3 is statistically significant in all models and in both regimes. Again, this signifies the importance of financial development in attracting capital investment into Malaysia. have-to doe withingly, M3 is positive during the periods of low misalignment regime (regime 1) but becomes negative at higher misalignment regime (regime 2). During low misalignment, a 1% increase in M3 is expected to draw in 0.3 percentage point more investment inflow into Malaysia. This shows that in the lower regime, financial depth acts as an whim to capital inflows. However, the situation reverse with 0.6 percentage point lower investment inflows is expected with a 1% increase in misalignment in the second threshold regime. Montiel (1999) explicitly explains this phenomenon where capital inflows increase reserves which then motivate an increase in the monetary base, M2 and M3. Such increases fuels further increments in domestic demand leading to real appreciation. Thus, any overvaluation of the currency may eventually have negative ramifications on capital inflows.Sensitivity analysisTo check for the sensibility of the estimated threshold value, Table 6 -7 and Figure 3 represents four other models which use different variables in addition to the baseline regression. The addition of taxes yields insignificant results without drastically changing the threshold value. Other redundant variables such as government budget deficit and liquid liability are only significa nt in one of the two regimes . With the comprehension body of additional variables, the estimated magnitude of each regressors differ slightly but maintains the same sign and significance level. For example a 1% increase in misalignment (overvaluation) suppresses capital inflows by 1.11-1.55 percentage point. The estimated impact of a 1% change in interest differential is expected to deter foreign investment by 0.04-0.05 percentage point in the first regime and 0.02-0.06 percentage point in the second regime. Similarly, during low misalignment, a 1% increase in M3 is expected to draw in 0.2-0.3 percentage point more investment inflow into Malaysia. An estimated 0.49-0.67 percentage point lower investment inflows is expected with a 1% increase in M3 in the second threshold regime.In view of the results, it seems evident that the exchange rate policy has important effect in attracting foreign capital inflows into Malaysia. Specifically, misalignment in terms of overvaluation should be kept lower than 15 percent to ensure that capital inflows remained unhurt.Table 5 Sensitivity Analysis verge EffectsModel 2 Model 3 Model 4 Model 5 First Sample Split F-Stats 71.1442 45.9364 53.3722 53.3722 Bootstrap P-Value 0.000 0.000 0.000 0.000 doorsill Estimates -15.4461% -15.0260% -15.0260% -15.0260% 95% office Interval -15.446%, -15.025% -15.446%, -9.836% -15.446%, -0.0984% -15.446%, -0.0984% support Sample Split F-Stats 16.4917 19.7585 22.9710 22.9710 Bootstrap P-Value 0.5310 0.3800 0.2420 0.2420 Note H0 No threshold effect. The threshold is based on the minimized sum of squared residualsTable 6 Sensitivity Analysis for threshold estimates (1991Q1-2008Q3).Model 2 unidimensional Model wand Model OLS without threshold Regime 1 15.4461% Regime 2 15.4461% Misalignment -0.4278*** (0.2216) -0.3497 (0.4143) -1.5593* (0.3135) pursuance Differential -0.0250*** (0.0134) -0.0462* (0.0153) -0.0599* (0.0131) M3 0.2966* (0.0414) 0.2732* (0.0488) -0.5609* (0.0744) Liquid Liabili ty -0.0029 (0.1709) -0.0634 (0.1932) 1.1843* (0.2615) aeonian 2.9780* (0.2713) 2.5259* (0.2593) 6.1799* (0.3135) No. of Observations 71 41 30 R2 0.3842 0.6503 0.5986 Model 3 Linear Model Threshold Model OLS without threshold Regime 1 15.0260% Regime 2 15.0260% Misalignment -0.4472** (0.2038) -0.3800 (0.2460) -1.1171*** (0.6229) Interest Differential -0.0254* (0.0126) -0.0505* (0.0140) -0.0237 (0.0221) M3 0.2844* (7.4922) 0.2521* (0.0472) -0.5391* (0.1477) Deficit -0.7655* (0.3059) -0.7380* (0.3099) -0.1841 (0.7174) Constant 3.0308* (0.2674) 2.5835* (0.2445) 6.6452* (0.7337) No. of Observations 71 42 29 R2 0.4285 0.6829 0.4230 Model 4 Linear Model Threshold Model OLS without threshold Regime 1 15.0260% Regime 2 15.0260% Misalignment -0.2852 (0.2181) -0.2582 (0.2720) 1.2490** (0.5612) Interest Differential -0.0275** (0.0128) -0.0419* (0.0165) -0.0311 (0.0204) M3 0.3208* (0.0401) 0.2796* (0.0583) -0.5489* (0.1245) Tax 2.1899** (1.0761) 0.1283 (0.1457) 0.1260 (0.1720) Constant 3.02 74* (0.4383) 2.2463* (0.4806) 6.5027* (0.7227) No. of Observations 71 42 29 R2 0.3665 0.6516 0.4300 Model 5 Linear Model Threshold Model OLS without threshold Regime 1 15.0260% Regime 2 15.0260% Misalignment -0.3780*** (0.1977) -0.4495*** (0.2602) -1.3190** (0.6059) Interest Differential -0.0203 (0.0123) -0.0433* (0.0152) -0.0308 (0.0212) M3 0.2941* (0.0365) 0.2388* (0.0479) -0.6093* (0.1406) al-Qaida 3.0729* (3.3373) 0.0474** (0.0228) -0.0382 (0.0392) Constant 3.0709* (0.2569) 2.5698* (0.2346) 7.0433* (0.7173) No. of Observations 71 42 29 R2 0.4091 0.6815 0.4384Notes *, ** and *** denote 1%, 5% and 10% significance respectively. Standard errors in parentheses.CONCLUSIONThe objective of this chapter is to examine the impact of exchange rate misalignment on capital inflows. Results provide evidences of the negative impact of misalignment on capital inflows. To reiterate, overvaluation of the ringgit signals that Malaysia is less competitive vis--vis other countries. In addition, t his paper also estimates a specific threshold value that is the degree of misalignment after which it begins to hurt capital inflows. By employing a recent technique by Hansen (1996, 2000), this study splits the sample into high misalignment and low misalignment regimes. This study shows that misalignments hurt capital inflows in the high misalignment regime or when misalignment is greater than 15 percent. This study also confirms the work of Goh (2005) who suggests that the portfolio balance model can capture the determinants of capital inflows in Malaysia. In particular, the results suggest that interest differential is an important determinant albeit, small, hence, policies should be direcImpact of Exchange Rate Misalignment on majuscule InflowsImpact of Exchange Rate Misalignment on swell InflowsEXCHANGE RATE MISALIGNMENT AND CAPITAL INFLOWS AN ENDOGENOUS THRESHOLD ANALYSIS FOR MALAYSIA crimpThis study presents an attempt to investigate the impact of exchange rate misalignment on capital inflows in Malaysia. Specifically, a precise threshold value is estimated to examine when exchange rate misalignment suppresses capital inflows. To pursue these objectives, this study relies on the endogenous threshold analysis as of Hansen (1996, 2000). Results suggest that misalignment in terms of currency overvaluation, has a negative and significant effect when overvaluation is more than 15 percent. This estimate is consistent and robust despite the changes in the choice of explanatory variables.INTRODUCTIONForeign direct investment (FDI) has served as an important engine of growth via skills and technology transfer, creation of employment opportunities and expanding the capital stock in Malaysia. Since the 1997 Asian financial crisis, Malaysia is no longer the top 10 host for FDI. In fact, the rate of growth of FDI has dramatically decrease compared to that of the early 1990s. This is partly due to reverse investment (Mat Zin, 1999) and declining dependence on FDI t o finance growth. However, this may also indicates the declining competitiveness of Malaysia in attracting FDI which warrants empirical research since it would be resilient to investigate which factors that contributed to the deterioration of competitiveness. Since early 1980s, real exchange rate misalignment has become a standard concept in international macroeconomic theory and policy (Razin Collins, 1997). Hence, this study focuses on exchange rate misalignment as an indicator of capital inflow competitiveness in the case of Malaysia. Malaysia provides an interesting case as it is one of the largest recipients of FDI amongst its ASEAN counterparts. another(prenominal) advantage of undertaking a single country study is the ability to delineate the assumption that countries are standardised in terms of social, cultural, economic and political background (Sun et al., 2002). Therefore, only relevant economic determinants are accounted for to suit the Malaysian environment.The obje ctive of this paper is to investigate the empirical relationship between capital inflows and exchange rate misalignment. Whilst exist literature focuses on the role of exchange rate, this study takes a step further to examine the impact of exchange rate misalignment on capital inflows. Specifically, we estimate a threshold value at which misalignment begins to significantly affect capital inflows. To the best of our knowledge, no published study has attempted to estimate a threshold value for exchange rate misalignment in Malaysia. Hence, this study intends to fill this gap. Based on the endogenous autoregressive threshold (TAR) model developed by Hansen (2000), we split the sample into high and low misalignment regimes. Results suggest that exchange rate misalignment due to overvaluation is detrimental to the influx of capital inflows. The next section provides a brief overview of FDI in Malaysia followed by a brief explication of the theoretical model and review of literature. Th e fourth section spells out the method pertaining to the objective. The penultimate section provides results and discussion and the final section concludes.CAPITAL INFLOWS IN MALAYSIA RECENT TRENDS AND INCENTIVESThe essence of export oriented-growth nexus somewhat depends on the inflow of foreign capital into the country. In the past, foreign direct investment has been the one of the major conduit for technology transfer, job creation and export-led growth to this country. To pursue this line of interest, the Malaysian government has designed various policies spanning the gamut of industrial specific incentives, taxation, and quick property protection to infrastructure support. The company tax rate for example has been reduced from 33 percent in 1987 to 27 percent in 2007 and 26 percent in 2008. Other tax incentives such as the investment tax allowance, tax relief for companies with pioneer status or high technology industries has continued until today with more industries be give n over the relevant status to reap the benefits of the incentives. Most recently, the government has liberalized bumiputera equity requirements for 27 sectors to further boost competitiveness.With reference to previous information, there was a pile in foreign direct investment (FDI) into Malaysia in the late 1980s and this trend continued until the onset of the 1997 Asian financial crisis. Another crisp slump in the influx of FDI occured in 2001 when the economy was in a slight recession but picked up again in 2002 thereafter. With the recent burgeoning world recession following the American sub-mortgage crisis, it is expected that FDI will gravel again (IMF, 2009).To capture a more vivid impact of misalignment on capital inflows, this study employs quarterly data from Bank Negara Malaysia (BNM the central bank of Malaysia) instead of the UNCTAD data which are annual. Foreign capital inflows or investment inflows comprises three items (i) equity investment, (ii) loans and (iii) real estate. Investment consists of equity investment in Malaysia by non-residents, loans obtained from non-residents and purchase of real estate in Malaysia by non-residents but excludes retained earnings (Source Bank Negara Malaysia, Glossary, Monthly Bulletin Statistics January, 2009, p. 186-187). This study resorts to a specific measure of FDI, that is, foreign investment inflows. Data starts from 1991Q1-2008Q3, partly order by availability.THEORY AND REVIEW OF LITERATUREIn this study, we rely on the portfolio balance approach to model the determinants of foreign capital inflows. This model has been successfully tested by Goh (2005) for Malaysia. Branson (1968) postulates that the proportion of foreign assets (Kf) in a given stock of wealth is a function of the domestic and foreign interest rates (i and i*), the measure of exchange rate expectation or risk (e) and the stock of wealth (w) expressed as(1)Darby et al. (1999), augment this concept of exchange rate risk (e) into exc hange rate volatility and exchange rate misalignment. Since this study focuses on the role of exchange rate misalignment, we put back e with misalignment. Expressing the above equation at level yields,(2)Focusing on Z, the literature suggests a number of variables that determines capital flows. The enigmatic relationship between FDI and exchange rate nexus has been widely examined and most of the discussions root back to the work of Kohlhagen (1977), Cushman (1985), Froot and Stein (1991), Goldberg (1993) and Darby et al. (1999).The effect of exchange rate is less straightforward (Benassy-Quere et al., 2001). The mechanisms that exchange rate affects capital inflows can also be viewed via the wealth effect channel and the relative production cost channel (Xing, 2006). A devaluation of the currency of the host country makes local cost of production lower in terms of foreign currency, hence leading to higher returns from export-oriented industries. As for the wealth effect, a devalua tion makes local asset cheaper which motivates investors to acquire more. Kohlhagen (1977) static model postulates that following depreciation in host countries, MNEs will increase their production capacity. In a two period dynamic model, Cushman (1985) suggests that adjusted expected real depreciation lowers the production cost which leads to increase in FDI flows. Similarly, Goldberg (1993) illustrates how sectoral profitability, location effects, and portfolio and wealth effects are important factors that determine investment and their links with exchange rates. In her theoretical model, the direction of investment effects triggered by exchange rate movements is ambiguous, therefore, warrants empirical research. On contrary, in an imperfect information framework, Froot and Stein (1991) show that appreciation induces wealth effect of foreign investors, thus support foreign investors to acquire more local assets. Empirically, there is quite a consensus that a depreciation of the e xchange rate in the host country leads to a reduction of the FDI (Klein and Rosengren, 1994 Dewenter, 1995).There is however, a dearth of studies that empirically examine the relationship between FDI and exchange rate misalignment. Empirical attempts include Benassy-Quere et al. (2001) who advocate the benefits of depreciation may be offset by excessive volatility of the exchange rate. Blonigen (1997) illustrates how currency depreciation induces foreign firm to acquire firm-specific assets when markets are segmented. Hasnat (1999) study the impact of misalignment on FDI for five developed nations on annual data ranging from 1976-1995. All of these studies use misalignment as a control variable or a counterpart for exchange rate variability and is calculated by a deviation from the purchasing power parity (PPP) values. Furthermore, most of these studies are based on the experiences of industrialized economies using panel data analysis framework. In short, a prolonged misalignment m ay affect long term business decisions as it affects costs. If the exchange rate is overvalued relative to the estimated equilibrium level, investors may acquire more domestic assets for future capital gains in host country currency terms (Barrell and Pain, 1996). On the other hand, persistent overvaluation may reduce cost competitiveness of production in the host country, especially for export oriented products.Other traditional determinants of FDI can be demarcated into at least two categories micro and macro determinants. The list of micro-determinants spans from market size, growth, labour costs, host government policies, tariffs to trade barriers. The macro-determinants include market size (Chakrabarti, 2001 Farrell et al., 2004 Kravis and Lipsey 1992), openness (Edwards, 1990 Gastanaga et al. 1998 Hausmann and Fernandez-Arias, 2000 Aseidu, 2002), rate of inflation (Bajo-Rubia and Sosvilla-Rivero, 1994 Urata and Kawai, 2000), government budget, taxes (Gastanaga et al., 1998 We i, 2000) and infrastructure (Wheeler and Mody, 1992 Urata and Kawai, 2000). Financial deepening is also another catalyst for FDI (Borensztein et al., 1998). Liquid liability, private credit entry and M3 serve as proxies. Increase in money supply fuels inflation which increases the cost of production in the host country rendering a negative relationship. However, increments in money supply supported by growth or higher productivity indicate increase in future purchasing power which can benefit market-seeking FDI. Finally, the degree of misalignment is computed based on the difference between the actual and the hypothetical equilibrium exchange rate. Accordingly, the estimation of the hypothetical equilibrium exchange rate relies on the theory advocated by Edwards (1994). This theory postulates that the real exchange rate is a function of several fundamental variables which includes the Balassa-Samuelson effect, trade openness, net foreign assets and government spending. Details are provided in Sidek and Yusoff (2009).METHODOLOGY AND DATAThe question of when does misalignment begin to significantly affect capital inflows necessitate the existence of a non-linear relationship between these two variables. Thus, if such non-linear relationship exists, then it is possible to estimate an inflexion point, or a threshold value, at which the sign of misalignment may change or become significant. In the non-linear time series modelling, the threshold autoregressive model (TAR) is more popular since it offers a relatively simple specification, estimation and interpretation compared to other non-linear models. The origins of TAR models roots back to Tong (1980) where the main idea is to approximate a general non-linear autoregressive structure by a threshold autoregession with a small number of regimes. Hansen (1996, 2000) derives the asymptotic distribution of the ordinary least squares (OLS) estimates of the endogeneous threshold parameters which is used in this study.T his section explains how equation (2) is estimated to incorporate threshold effect. According to Hansen (2000), threshold estimation is the act of splitting the sample into two regimes when the threshold value is unknown. One necessary precondition is that the threshold variable must be a continuous variable. In this study, the threshold estimation is carried out by splitting the sample into high misalignment and low misalignment regime. Since misalignment is a continuous variable, TAR model would be appropriate to engender the threshold value. Formally, the two-regime threshold regression model takes the formwhere is the threshold variable which is used to split the sample into two regimes, is the threshold value which is unknown and must be estimated, denotes the dependent variable (capital inflow), represents a vector of explanatory variables and is the error term off-key to be white noise and i.i.d. Note that if the threshold value is greater than the threshold variable, equatio n (3) is estimated and vice versa. This allows the regression parameters to change with respect to . In order to write equations (3) and (4) in a single equation, a poop variable is used which is defined as where . is the indicator function, with d=1 when and d = 0, if otherwise and set , such that (3) and where and . Equation (5) allows all the regression parameters , and to be estimated and switch between the two regimes. The least square (LS) technique is used to estimate through minimization of the sum of squared errors function. To run through this, the model is expressed in matrix notation, hence, equation (5) is expressed as(6) Define,(7) as the sum of squared error function. By definition the least squares estimators which is also the MLE when with i.i.d. , jointly minimize equation (7). This minimization process requires to be restricted to a bounded set . The concentrated sum of squared errors function is written as(8) where is the value that minimizes . As takes values that is less than n, is uniquely described aswith (9) Focusing on the objective of this section, the first step is to examine whether there exist a threshold effect in the model. This requires the examination between the linear model vis--vis the two-regime model, equation (5). The null hypothesis of no threshold effect is tested against an alternative hypothesis where threshold effect is present. Since TAR models have a non-standard distribution, Hansen (1997, 2000) develops a standard heteroscedasticity-consistent Langrange Multiplier (LM) bootstrap method to calculate the asymptotic critical value and the p-value.The second step is to examine whether the derived threshold value is statistically significant. This is through with(p) by differencing the confidence interval region based on the likeliness ratio statistic . Based on Hansen (2000), let C represent the desired asymptotic confidence interval (in this study at 95%) and be the C-level critical value and set . Assuming hom oscedasticity, as , therefore, is the asymptotic C-level confidence region for . If the homoscedasticity condition is not fulfilled, then a scale likeliness ratio statistics of the residual sum of squared errors is defined as(10)and the adjusted confidence region becomes such that is robust whether or not the heteroscedasticity condition holds. Simulation is set at 1000 replications as suggested by Hansen (2000). Also, is not normally distributed hence, the valid asymptotic confidence intervals of the estimated threshold values in the no-rejection areas defined as , where is a given asymptotic level and the no- rejection region of the confidence interval is . If , than the null hypothesis of cannot be rejected. In addition, to examine the possibility of a second threshold value, the same exercise is repeated. Specifically, the empirical model to be tested which is based on equation (2) is defined as follows(11) where K is capital inflows, Mis, R and M3 denote exchange rate misalign ment, interest differentials and financial deepening, and Z represents the other control variables. Table 1 summarizes the description of data, measurement and sources used in this study.Table 1 Determinants of Capital Inflows (1991Q1-2008Q3)Variable Description Measurement Source I Foreign investment Total foreign investment inflow as a percentage of GDP BNM M3 Money supply M2 as a percentage of GDP IFS D Government deficit The difference between revenue and wasting disease as a percentage of GDP BNM R Interest differential The difference between Malaysia and US 3-month T-Bill rates IFS T Taxation Government corporate tax revenue as a percentage of GDP BNM LL Liquid Liability Log International liquidity banking institution liability, line. 7b.d IFS under Infrastructure Log of spending on infrastructure as a percentage of GDP BNM IFS International Financial Statistics, IMF, UNCTAD United Nations Conference on Trade and Development, BNM Bank Negara Malaysia Monthly Statistical Bull etinDOS Department of Statistics, Malaysia (various issues).RESULTS AND DISCUSSIONPrior to time series analysis, we test for unit roots in order to avoid spurious regression. Three versions of unit root testing, namely the ADF, PP and KPSS tests are employed to examine whether the variables are stationary on level or otherwise. Table 3 indicates that the order of integration are mixed for a majority of variables. However, this study proceeds to examine the threshold effect by including lagged variables for I(1) variables in the OLS estimation. Moreover, equation (2) derived from the theory requires estimations at level.Table 2 Unit root testADF PP KPSS Order of Integration Level 1st Diff Level 1st Diff Level 1st Diff I -3.7029* -7.9812* -3.5286* 14.00208 0.9008* 0.2305 I(0)/I(1) M3 -1.2741 -10.0951* -1.3334 -10.4699* 1.0229* 0.3588*** I(1) D -1.6297 -19.7087* -8.8219* -27.3774* 0.3649* 0.0894 I(0)/I(1) R -4.5405* -3.8179** -2.6509 -7.0649* 0.0711 0.0471 I(0)/I(1) under -2.2527 -4. 5270* -3.5053* -27.7776* 0.2234* 0.0813 I(0)/I(1) LL -3.0805 -6.5500* -2.4386 -6.7355* 0.1073 0.0607 I(0)/I(1) MIS -3.8075** -9.7442* -3.8076** -9.8483* 0.0662 0.0577 I(0)Note *, ** and *** denote significance at 1%, 5% and 10% significant level. p-values are in parentheses. For ADF and PP test the null is no unit root (H0 Variable is stationary) whilst the null for the KPSS is the existence of unit root (H0 Variable is not stationary).The baseline regression constitutes the exchange rate misalignment, interest differential and a measure of financial development, M3. We present four additional models with different variables added to the baseline regression, namely liquid liability, government budget deficit, and infrastructure for sensitivity analysis. Hansen (2000) theoretical construct allows for two threshold effects, hence, the first step is to investigate the possible existence of such an effect. Prior to that, a threshold variable needs to be selected. Since the aim of this s ection is to examine at what percentage exchange rate misalignment actually hurts capital inflows, the appropriate threshold variable is the exchange rate misalignment.Upon choosing the appropriate threshold variable, the next step is to save any evidence of a threshold effect and whether there exist one or more threshold by employing the heteroscedasticity-consistent Lagrange-multiplier (LM) test for a threshold based on Hansen (1996). To test under the null hypothesis of no threshold effect, p-values are calculated using a bootstrap analog which generates the dependent variable from the distribution , where is the OLS residuals from the estimated threshold model. With 1000 bootstrap replications, the p-values for the baseline threshold models (Table 3) using misalignment strongly suggest the existence of threshold effect at 0.000. Subsequently, this suggests that there is a sample split based on the effect of exchange rate misalignment.Table 3 Threshold Effects for the baseline m odelModel 1 First Sample Split F-Stats 51.4045 Bootstrap P-Value 0.000 Threshold Estimates -15.0260% 95% Confidence Interval -15.446% , -9.8360% Second Sample Split F-Stats 16.2171 Bootstrap P-Value 0.2890 Note H0 No threshold effect. The threshold is based on the minimized sum of squared residuals.This illustrates the graph of the normalized likelihood ratio sequence as a function of the threshold in exchange rate misalignment. The estimated is the value which minimizes these graphs which range at =15.02-15.44%. The dotted lines on the graphs present the 95% critical values. For example, in model 1, the asymptotic 95% confidence interval set where crosses the dotted lines. The results suggest that there is ample evidence for a two-regime specification. Also, it is worth noting that 41 of the 71 observations fall into the 95% confidence interval, hence, requires an examination of the possible existence of a second sample split. Results in Table 3, show that second sample split rende rs insignificant bootstrap p-value thus, indicating no further regime split.Table 4 presents the results for baseline regression. For comparison purposes, this study provides the linear OLS model without the threshold effect and a two-regime model which accommodates the threshold effect. Basically, the variables confer the correct signs in line with the forecasting of the theory. Misalignment has a negative and significant effect on capital inflows in regime 2. Interest differential is expected to confer a negative effect. Results indicate that interest differentials only affects capital inflows negatively in the regime 1 but is insignificant in the regime 2. Similarly, M3 has significant effect in both regime but is positive in the regime 1 but the sign switches in regime 2. Hence, splitting the sample gives a more indepth view of the effects of these basic variables on investment inflows. To reiterate, sample splitting allows the examination of whether the significant effect is p resent in both regimes or otherwise.The results show that below the threshold value of 15%, exchange rate misalignment may be negative but are not statistically significant. However, above the 15% threshold level, misalignment exerts both negative and significant impact on capital inflows. A 1% increase in misalignment (overvaluation) suppresses capital inflows by approximately 1.19%. The negative effect of exchange rate misalignment on capital inflows is consistent with the findings of Hasnat (1999). Barrel and Pain (1996) vie that an apparent currency misalignment persistent over some length of time may affect investment inflows decisions. A reasonable explanation is that the relative production costs may be higher as a result of such misalignment. If the ringgit is thought to be overvalued relative to its estimated equilibrium level, then foreign production may be discouraged by the prospect of future capital loss in home currency terms.Another issue which emerges after the 1997 financial crisis is that capital inflows must be managed since reversals are likely to cause severe damage to the economy. Reinhart and Reinhart (1998) calls for greater exchange rate flexibility which is meant to introduce two-way risks, therefore, discouraging speculative capital inflows. It is, however, only possible in the context of de facto peg or a tightly managed float. Furthermore, the effectiveness of this policy depends on how much policymakers are willing to allow the exchange rate to fluctuate. A large band denotes greater flexibility but risks having large nominal appreciation which connotes possible overvaluation of the currency. The result of this study suggests that overvaluation is detrimental to capital inflows if this band exceeds 15%. Hence, policymakers should keep exchange rate fluctuations well below this 15% threshold.Table 4Baseline regression results on the effect of misalignment on capital inflows (1991Q1-2008Q3). leechlike variable is capital inflows.M odel 1 Linear Model Threshold Model OLS without threshold Regime 1 15.0259% Regime 2 15.0259% Misalignment -0.4267** (0.2115) -0.3186 (0.2573) -1.1955** (0.5712) Interest Differential -0.0250*** (0.0131) -0.0438* (0.01533) -0.0261 (0.0193) M3 0.2964* (0.0391) 0.2644* (0.0516) -0.5560* (0.1240) Constant 3.0468* (0.2779) 2.5394* (0.2593) 6.7313* (0.6099) No. of Observations 71 42 29 R2 0.3664 0.6484 0.4218 Notes *, ** and *** denote 1%, 5% and 10% significance respectively. Standard errors in parentheses.Interest rate differential are consistently negative and significant in all specifications and in both regimes in majority of the threshold model. This stresses the role of interest rates in attracting capital inflows into Malaysia. Although the impact may be small, it is significant and the authorities should ensure that interest rates are kept at certain levels to maintain competitiveness of Malaysia as destination for capital investment. In this paper, the estimated impact of a 1 % change in interest differential is expected to subdue foreign investment by 0.04 percentage point in the first regime and 0.03 percentage point in the second regime. The proxy for financial deepening, M3 is statistically significant in all models and in both regimes. Again, this signifies the importance of financial development in attracting capital investment into Malaysia. Interestingly, M3 is positive during the periods of low misalignment regime (regime 1) but becomes negative at higher misalignment regime (regime 2). During low misalignment, a 1% increase in M3 is expected to draw in 0.3 percentage point more investment inflow into Malaysia. This shows that in the lower regime, financial depth acts as an gallery to capital inflows. However, the situation reverse with 0.6 percentage point lower investment inflows is expected with a 1% increase in misalignment in the second threshold regime. Montiel (1999) explicitly explains this phenomenon where capital inflows increase rese rves which then travel an increase in the monetary base, M2 and M3. Such increases fuels further increments in domestic demand leading to real appreciation. Thus, any overvaluation of the currency may eventually have negative ramifications on capital inflows.Sensitivity analysisTo check for the sensitivity of the estimated threshold value, Table 6 -7 and Figure 3 represents four other models which use different variables in addition to the baseline regression. The addition of taxes yields insignificant results without drastically changing the threshold value. Other additional variables such as government budget deficit and liquid liability are only significant in one of the two regimes . With the inclusion of additional variables, the estimated magnitude of each regressors differ slightly but maintains the same sign and significance level. For example a 1% increase in misalignment (overvaluation) suppresses capital inflows by 1.11-1.55 percentage point. The estimated impact of a 1% change in interest differential is expected to deter foreign investment by 0.04-0.05 percentage point in the first regime and 0.02-0.06 percentage point in the second regime. Similarly, during low misalignment, a 1% increase in M3 is expected to draw in 0.2-0.3 percentage point more investment inflow into Malaysia. An estimated 0.49-0.67 percentage point lower investment inflows is expected with a 1% increase in M3 in the second threshold regime.In view of the results, it seems evident that the exchange rate policy has important effect in attracting foreign capital inflows into Malaysia. Specifically, misalignment in terms of overvaluation should be kept lower than 15 percent to ensure that capital inflows remained unhurt.Table 5 Sensitivity Analysis Threshold EffectsModel 2 Model 3 Model 4 Model 5 First Sample Split F-Stats 71.1442 45.9364 53.3722 53.3722 Bootstrap P-Value 0.000 0.000 0.000 0.000 Threshold Estimates -15.4461% -15.0260% -15.0260% -15.0260% 95% Confidence Interval - 15.446%, -15.025% -15.446%, -9.836% -15.446%, -0.0984% -15.446%, -0.0984% Second Sample Split F-Stats 16.4917 19.7585 22.9710 22.9710 Bootstrap P-Value 0.5310 0.3800 0.2420 0.2420 Note H0 No threshold effect. The threshold is based on the minimized sum of squared residualsTable 6 Sensitivity Analysis for threshold estimates (1991Q1-2008Q3).Model 2 Linear Model Threshold Model OLS without threshold Regime 1 15.4461% Regime 2 15.4461% Misalignment -0.4278*** (0.2216) -0.3497 (0.4143) -1.5593* (0.3135) Interest Differential -0.0250*** (0.0134) -0.0462* (0.0153) -0.0599* (0.0131) M3 0.2966* (0.0414) 0.2732* (0.0488) -0.5609* (0.0744) Liquid Liability -0.0029 (0.1709) -0.0634 (0.1932) 1.1843* (0.2615) Constant 2.9780* (0.2713) 2.5259* (0.2593) 6.1799* (0.3135) No. of Observations 71 41 30 R2 0.3842 0.6503 0.5986 Model 3 Linear Model Threshold Model OLS without threshold Regime 1 15.0260% Regime 2 15.0260% Misalignment -0.4472** (0.2038) -0.3800 (0.2460) -1.1171*** (0.6229) Interest D ifferential -0.0254* (0.0126) -0.0505* (0.0140) -0.0237 (0.0221) M3 0.2844* (7.4922) 0.2521* (0.0472) -0.5391* (0.1477) Deficit -0.7655* (0.3059) -0.7380* (0.3099) -0.1841 (0.7174) Constant 3.0308* (0.2674) 2.5835* (0.2445) 6.6452* (0.7337) No. of Observations 71 42 29 R2 0.4285 0.6829 0.4230 Model 4 Linear Model Threshold Model OLS without threshold Regime 1 15.0260% Regime 2 15.0260% Misalignment -0.2852 (0.2181) -0.2582 (0.2720) 1.2490** (0.5612) Interest Differential -0.0275** (0.0128) -0.0419* (0.0165) -0.0311 (0.0204) M3 0.3208* (0.0401) 0.2796* (0.0583) -0.5489* (0.1245) Tax 2.1899** (1.0761) 0.1283 (0.1457) 0.1260 (0.1720) Constant 3.0274* (0.4383) 2.2463* (0.4806) 6.5027* (0.7227) No. of Observations 71 42 29 R2 0.3665 0.6516 0.4300 Model 5 Linear Model Threshold Model OLS without threshold Regime 1 15.0260% Regime 2 15.0260% Misalignment -0.3780*** (0.1977) -0.4495*** (0.2602) -1.3190** (0.6059) Interest Differential -0.0203 (0.0123) -0.0433* (0.0152) -0.0308 (0.0212) M3 0.2941* (0.0365) 0.2388* (0.0479) -0.6093* (0.1406) Infrastructure 3.0729* (3.3373) 0.0474** (0.0228) -0.0382 (0.0392) Constant 3.0709* (0.2569) 2.5698* (0.2346) 7.0433* (0.7173) No. of Observations 71 42 29 R2 0.4091 0.6815 0.4384Notes *, ** and *** denote 1%, 5% and 10% significance respectively. Standard errors in parentheses.CONCLUSIONThe objective of this chapter is to examine the impact of exchange rate misalignment on capital inflows. Results provide evidences of the negative impact of misalignment on capital inflows. To reiterate, overvaluation of the ringgit signals that Malaysia is less competitive vis--vis other countries. In addition, this paper also estimates a specific threshold value that is the degree of misalignment after which it begins to hurt capital inflows. By employing a recent technique by Hansen (1996, 2000), this study splits the sample into high misalignment and low misalignment regimes. This study shows that misalignments hurt capital inflows in the hi gh misalignment regime or when misalignment is greater than 15 percent. This study also confirms the work of Goh (2005) who suggests that the portfolio balance model can capture the determinants of capital inflows in Malaysia. In particular, the results suggest that interest differential is an important determinant albeit, small, hence, policies should be direc