International Pricing Research Articles

Assessing the implications of imported electricity equipment in Indonesia: A comprehensive ECM approach for short-term and long-term analysis

This study aims to explore the implications of imported electrical equipment in Indonesia, analysing both short-term and long-term impacts using a quantitative approach. The research focuses on understanding how various economic factors, such as domestic production, international pricing, national income, and exchange rates, influence the country’s import dynamics in the electrical equipment sector. Employing an Error Correction Model (ECM) for regression analysis, the study utilises time-series data from 2007 to 2021 to delve into the complex interplay of these variables. The methodology involves a comprehensive analysis using the Augmented Dickey-Fuller and Phillips-Perron tests to assess the stationarity of the data. This approach ensures the robustness of the ECM, which is employed to analyse the short-term and long-term effects of the identified variables on electrical equipment imports in Indonesia. The results reveal significant relationships between these economic factors and import levels. In the short term, imports are shown to be sensitive to changes in domestic economic conditions and international market prices, while in the long term, the country’s economic growth, reflected through GDP, emerges as a significant determinant. The findings suggest that Indonesia’s electrical equipment import policies must adapt highly to domestic and international economic changes. In the short term, a responsive approach is required to manage the immediate impacts of market fluctuations. The study highlights the importance of aligning import strategies with broader economic growth and environmental sustainability goals for long-term sustainability. Policymakers are advised to focus on enhancing domestic production capabilities, reducing import dependency, and ensuring that environmental considerations are integral to import policies. This study contributes to understanding import dynamics in a developing country context, offering valuable insights for policymakers and industry stakeholders in shaping strategies for economic growth and sustainability in the electrical equipment sector. The findings underscore the need for a balanced, data-driven approach to managing imports, aligning short-term responses with long-term strategic objectives for Indonesia’s ongoing development and industrial advancement.

The seven ‘C’s of strategic pricing in international markets

This paper introduces a conceptual framework addressing the complexities of pricing strategies in international markets, focusing on pivotal elements such as customer value, the impact of technological advancements, and the harmonisation of global and local strategies. An examination of existing literature and diverse pricing models reveals how the interplay between digitisation and global market dynamics necessitates innovative pricing approaches. These approaches must navigate specific challenges, including the accessibility of digital goods and the intricacies of information preservation costs. Emphasising the importance of distinguishing a company’s offerings from its competitors, the framework advocates for tailored distribution strategies that meet local market needs while maintaining global standards, alongside compliance with international legal pricing frameworks. The framework elaborates on the critical role of deep customer understanding and strategic branding in significantly boosting a company’s profitability and enhancing customer satisfaction across various geographical markets. It further integrates contemporary insights on the agility and adaptability required in pricing strategies amid market fluctuations, the application of behavioural economics principles in pricing, and the strategic employment of analytics to refine pricing decisions. Highlighting the dynamic nature of pricing that accommodates cultural sensitivities, the framework encourages innovation and a careful balance between widespread market reach and localised relevance. Offering strategic insights, this conceptual exploration aids businesses in navigating the intricacies of pricing within the digital era and the expanding global marketplace. It underscores the substantial benefits for business practitioners, including enhanced clarity in pricing decisions, facilitation of competitive differentiation, and alignment with broad business objectives. For marketers aiming to engage with the multicultural consumer markets of the 21st century, this framework serves as a crucial tool, elevating cultural comprehension and promoting product innovation tailored to diverse consumer groups. The paper concludes by emphasising the broader implications for international business practices, advocating for a strategic blend of scalability and customisation to achieve sustainable growth in the global economy.

Conceptualizing the MNEs Transfer Pricing Behavior: Indonesian Tax Authority Perspective

Indonesian tax authorities currently encounter a lack of cooperative compliance among companies engaged in transfer pricing practices with their affiliated entities across borders. Transfer pricing is commonly associated with tax purposes, such as tax planning or avoidance, which is considered standard practice for business entities. Hence, there is a significant necessity to assess and evaluate the prevalence of tax planning or avoidance through transfer pricing in multinational enterprises operating in Indonesia. To gauge the extent of transfer pricing used for tax avoidance purposes, this study examines the perspective of tax authorities on companies' transfer pricing optimization behavior. Employing a qualitative approach, the study aims to comprehend the utilization of transfer pricing and its implications. The findings provide insights into transfer pricing behavior within companies over time. According to tax authorities, companies are motivated by the benefits of transfer pricing, including revenue optimization, corporate profit allocation, and cost optimization. However, these practices are influenced by various factors that facilitate or constrain transfer pricing activities. Multinational enterprises demonstrate limited awareness of normative beliefs regarding international and domestic transfer pricing regulations. Notably, companies affiliated with large multinational enterprises, possessing a strong understanding of transfer pricing, exhibit a high potential for tax planning or avoidance through transfer pricing arrangements with related parties. These findings contribute to the existing body of research on transfer pricing practices from the perspective of tax authorities as part of the Indonesian government.

The pro-competitive effects of trade agreements

How does trade policy affect competition? Using the universe of product exports by firms from eleven low and middle income countries, we document that tariff reductions under trade agreements have strong pro-competitive effects — they encourage entry and reduce the (tariff exclusive) price-cost markups of exporters. This finding, that markups fall with tariff cuts, contradicts a core prediction of standard oligopolistic competition models of trade. We extend a workhorse international pricing model of oligopolistic competition to include multiple countries and a rich preference structure. Our preference structure allows for fierce competition among firms from the same country and less intense competition among firms from different countries. We show a firm’s optimal markup after a tariff cut can rise or fall depending on the parameters of the preference structure and tariff-induced reallocation of market share among firms and across countries.

The Challenge of the US Dollar Standard System and the New Changes of the Global Monetary System

In the past century, the international monetary system has undergone obvious changes, from the domination of the British pound to the domination of the US dollar, and then to the emergence and strengthening of "de-dollarization", which is also in line with the trend of The Times of economic multi-polarization, and the multi-polarization of the monetary system has become the trend of history. However, whether in foreign exchange reserves, international trade pricing and settlement, or due to the strong comprehensive national strength of the United States, it can be said that the US dollar will remain stable for a long time, and the international monetary system will remain relatively stable. How to maintain the stability and development of the national economy in emerging economies under the transformation of the old and new monetary systems, and how to develop the international monetary system will be an important proposition of the times.

Geopolitical risk and the national logistics performance

ABSTRACT Using a panel of 43 countries over the period 2007–2022, we provide evidence of the negative effects of geopolitical risk on national logistics performance. Digging deeper into the main dimensions of the national logistics performance, we find that elevated geopolitical risk deteriorates the efficiency of customs and border management clearance, the quality of trade and transport infrastructure, international shipment pricing, the competence and quality of logistics services, tracking and tracing services, and the timeliness of delivery services.

Nontraded Sector Growth Risks and Economic Sizes in International Asset Pricing

Output fluctuations in nontraded sectors are an important country-specific risk factor because nontraded outputs are only consumed domestically. In interest rate markets, countries with higher nontraded output growth risks are associated with stronger motives for precautionary savings and lower interest rates. In currency markets, strategies with higher exposures to nontraded output growth risks offer higher average excess returns. Economic sizes play an important role in exacerbating the pricing impact of nontraded output growth risks as it requires larger international trades to mitigate nontraded output risks of larger economies. However, because economic sizes are functions of outputs in equilibrium, output growth risks also explain this role of economic sizes in international asset pricing. This paper was accepted by Agostino Capponi, finance. Supplemental Material: The online appendix and data files are available at https://doi.org/10.1287/mnsc.2022.03697 .

The dependence structure and causality detection in crude oil markets

ABSTRACT It is essential to capture the dependence structure among the world’s dominant crude oil markets for understanding the world’s crude oil pricing mechanism. The dependence structure and interaction between Shanghai International Energy Exchange (INE) market and other major crude oil markets in the world are investigated to determine whether the world crude oil market is efficient. Using the vine copula model based on GARCH, we analyze the dependence structure and interactions among these markets. The highest dependence is found between West Texas Intermediate (WTI) and BRENT crude oil markets, displaying strong symmetric tail dependence. DUBAI market exhibits unidirectional Granger causality to WTI and INE markets. Empirical results suggest that the world crude oil markets are not efficient and are far from One Great Pool. DUBAI and Brent markets emerge as leaders in the current international crude oil pricing system, while INE markets do not significantly influence DUBAI and BRENT markets.

Transfer Pricing Regime under the Indian Income Tax Act 1961 and Income Tax Rules 1962 – Inadequacies, Deficiencies, Problems and Proposed Solutions

The author makes a case for the inclusion of the OECD Guidelines into the Indian transfer pricing regime. The article takes a bird’s eye view of the Indian transfer pricing regime and therefore undertakes a high-level analysis. In doing so, it brings to the fore the shortcomings in the Indian regime for consideration by the tax policymakers – ministry and revenue officials who frame India’s international tax and transfer pricing policies. For this purpose, the author adopts the perspective of the revenue/tax authorities.

Manipulation of Transfer Pricing Rules by Multinational Enterprises in Developing Countries: The Challenges and Solutions

Domestic revenue mobilisation has become a topical issue in developing countries, and their capacity to regulate multinational enterprises (MNE) transactions to minimise Base Erosion and Profit Shifting (BEPS) remains a formidable task. Faced with legislative deficiencies, implementation incapacities, and being at the nascent stages of adopting transfer pricing (TP) regulation, developing countries have remained at the mercy of MNEs’ BEPS practices. The complexity and intricacies of intragroup transactions have an impact on profit allocation, thus affecting the distribution of taxing rights across countries where these MNEs operate. This study explores the regulatory policies toward international transfer pricing in the context of developing nations and the associated challenges. The paper proffers possible solutions to improve TP regulation and implementation. Specifically, the paper centres its attention on Zimbabwe, one of the developing nations that have implemented transfer pricing legislation in recent years. Mitigating the impact of BEPS through efforts, such as regulating and managing TP would avail potential substantial finance to shift developing countries from aid dependence to self-sustenance, yet these efforts face a lot of hurdles. Research that contributes to knowledge development in the area, evaluates the hurdles faced and contributes to policy and implementation improvements becomes vital. This study found that Zimbabwe is faced with challenges such as lack of legislative clarity, lack of comparability data, shortage of resources, lack of capacity and dysfunctional double taxation agreements in dealing with transfer pricing. The study recommends Zimbabwe should improve legislation, create TP databases, improve revenue authorities’ capacity, and increase stakeholder awareness of TP.

Future Green Mobile Communication Technology Facing the “Double Carbon” Goal

The goal of “double carbon” (namely “peak carbon dioxide emissions” and “carbon neutrality”) proposed by China for the first time is an important layout in the Tenth Five-Year Plan, and it is also the key goal to realize the green and sustainable development of mobile communication networks in the future, and it is also the foundation for China’s international carbon asset pricing right and the world carbon trading platform. Among them, the difficulty in realizing green communication lies in maintaining the growth of business volume. Reduce network energy consumption and carbon emissions. This paper studies the green communication technology from the perspective of energy saving and emission reduction on the mobile communication network side and the perspective of the integrated architecture of communication network and multi-energy energy network. The research results show that the key to realize green communication technology lies in the mutual matching of network resources, energy resources and business distribution, while the existing technology can only achieve one-way matching of network resources and business distribution. Or the one-way matching of energy resources and service distribution. Based on this, this paper proposes a native green grid architecture with communication, perception and energy fusion, which has the ability of energy perception and service perception, supports the two-way matching method of network resources, energy resources and service distribution, and realizes the continuous growth of service while significantly reducing the energy consumption and carbon emissions on the mobile communication network side by eliminating the randomness and suddenness of service distribution and energy distribution.

Export competitiveness of Pomegranates from India

Pomegranate is an important fruit crop of arid and semiarid regions of the world. In 2021-22, India had an area of 2.7 lakh hectares under pomegranate cultivation with a production of 30.86 lakh metric tonnes and a productivity of 11.4 metric tonnes/ha; 99043.09 tonnes of fresh pomegranates were exported from India to other countries with a value of `688.76 crores. In the present study, export competitiveness of Indian pomegranates was analysed by using nominal protection coefficient (NPC) under the exportable hypothesis for a period of 20 years from 2002-03 to 2021-22. Time series data were collected from the websites of APEDA, NHB and Indiastat. Nominal protection coefficient (NPC) for pomegranates was found to be greater than unity in period I (1.29) while in period II, the NPC was found to be less than unity (0.82). This showed that pomegranates were not export competitive in period I while they were moderately competitive in period II. In the overall period, the NPC value was found to be 0.95 indicating that Indian pomegranates were internationally competitive. Hence, the Government may focus on international relative pricing and formulate targeted strategies to increase domestic pomegranate production through widespread promotion initiatives in the country.

Are Current International Pricing Paradigms for an Efficacious Disease‐Modifying Anti‐Alzheimer’s Treatment Equitable? Are Quality‐Adjusted Life‐Years Worth Considering?

AbstractBackgroundThe June 2021 approval of aducanumab [Aduhelm], initially priced at $56,000/year, followed by the January 2023 approval of lecanemab [Leqembi], initially priced at $26,500/year, generated renewed debate over reasonable and appropriate pricing for disease‐modifying anti‐Alzheimer’s treatments. For equitable pricing of an anti‐Alzheimer’s treatment, what are the optimal patient‐centered pricing paradigms?MethodA literature search of pricing models for anti‐Alzheimer’s, plus other, medicines indicates there are (at least) seven drug pricing models, with value‐based pricing being the most popular. In many countries new medicines are only compared within a certain indication, which may lead us to unknowingly pay substantially more for equal benefit in one disease versus another(1).ResultIn tandem with Leqembi’s expedited review and approval, there was substantial discussion as to what would be reasonable and appropriate pricing. Analysts at the Institute for Clinical and Economic Review [ICER] reported the drug would be cost‐effective at the $8,500 to $20,600 range; their analyses were based on preliminary data. Eisai analysts reported that lecanemab has a societal medicinal value of approximately $37,000, noting that it slowed cognitive decline by 27% over eighteen months(2). The top five selling drugs for multiple sclerosis have an average annual price of $64,760; the average annual cost for the top five cancer drugs is > $165,000.Measurement of outcomes and costs are essential for value‐based pricing. For dementia, the International Consortium for Health Outcomes Measurement [ICHOM] notes that patient‐centered outcome measures represent the ultimate measure of quality and they are always multidimensional. Quality‐adjusted life‐years [QALYs] seem to be absent from the computation of pricing for anti‐dementia treatments. Although consensus on QALY calculations is evasive, currently extant data are compelling. In Australia, the 2023‐adjusted QALY range is $32,618 to $55,415; United Kingdom $49,631 to $98,158, Germany $25,562 to $82,079, Sweden $51,494 to $59,416 and in Japan $56,819 to $67,643(3‐5). Utilizing an 18‐month treatment‐period, a range of QALY valuations will be presented, plus comparisons with the two other clinical indications.Conclusion The inclusion of QALYs for valuation of Alzheimer’s disease medicines warrants consideration; and, The full value of anti‐dementia treatments may be understated in current pricing models.

Is illiquidity priced in an international factor pricing model? A dynamic panel data application with robust IV

AbstractIn the setting of a dynamic panel data framework, we investigate the international five‐factor Fama–French (2017) model augmented with traditional illiquidity factors (Amihud, Journal of Financial Markets, 2002, 5, 31–56; Amihud, Critical Finance Review, 2019, 8, 203–221; Pástor and Stambaugh, Journal of Political Economy, 2003, 111, 642–685; Pástor and Stambaugh, Critical Finance Review, 2019, 8, 277–299) to determine if any of these factors are priced. Since illiquidity measures are endogenous, we propose an algorithm that generates robust instruments which are combined with a GMM estimator to cope with both the endogeneity issues surrounding illiquidity and other eventual specification errors. In this dynamic framework, we generally find that the most significant factors correspond to market and size but illiquidity may matter depending on the level of the beta. We find that illiquidity has more impact on returns in expansion than in recession. However, the bid‐ask spread seems to behave differently from the other illiquidity measures.

Re-estimation of the savings retention coefficient in OECD countries: a new measure of home country bias

The recent home bias is primarily related to the equity bias as measured by the international capital asset pricing model (CAPM); this measure has declined over the past two decades amid financial globalization, but remains high in most developed countries. The key to understanding this puzzling phenomenon lies in how accurately this indicator can be predicted. In this paper, we propose to use the savings retention coefficient estimated by the Feldstein–Horioka (F–H) regression as a cross-country measure of home bias. We re-estimate the savings retention coefficient based on an estimation model in which the FH regression is embedded in the model derived from Tobin's q-theory of saddle-road dynamics of investment under convex adjustment costs. We then use dynamic panel estimation to estimate the new measure in OECD countries. The main empirical results are as follows. The new measure of home country bias, such as the equity bias measure, declined steadily until 2008, but recovered to the level of the 60 s and 70 s after the 2008 financial crisis. Interestingly, people expected home country bias to be very high after the financial crisis, but in fact it simply returned to its previous level.

Canada Consults on “Modernizing” Its Transfer Pricing Rules – What’s in (the) Store?

In the summer of 2023, Canadian tax and finance authorities conducted a consultation on changes to Canada’s transfer pricing legislation. These changes reflect both international transfer pricing’s increasing emphasis on “economic substance” following from continuing work conducted by the OECD and perceived limitations of Canada’s existing transfer pricing legislation as interpreted in important Canadian court cases. Among other things, the changes would empower the tax authorities and courts not to recognize taxpayers’ transactions in favour of alternatives considered to more accurately reflect the economic features of taxpayers’ circumstances.

The dependence and risk spillover between economic uncertainties and the crude oil market: new evidence from a Copula-CoVaR approach incorporating the decomposition technique.

Understanding the risk spillover of the oil market in economic uncertainty is of great importance. However, it is difficult to take on a traditional single perspective in describing the risk spillover law of economic uncertainty in the crude oil market on different timescales. In order to fill the research gap resulting from such difficulty, this paper incorporates empirical mode decomposition into the time-varying Copula-CoVaR model, and for the first time explores the risk spillover path of economic uncertainty on the two international crude oil pricing benchmarks-Brent and West Texas Intermediate crude oil prices-using different timescales. The empirical results not only verify the necessity of research from the perspective of different timescales, but also reveal the heterogeneity of the risk spillover paths of different types of economic uncertainty on crude oil prices. The research in this paper provides a multi-perspective interpretation for understanding the complex risk spillovers between various economic uncertainties and the crude oil market, as well as providing meaningful information to support stakeholders in making rational decisions.

A Comparative Analysis of Legal Measures and Policy Recommendations for MNCs Regarding Transfer Pricing

As the global economy continues to expand, the rapid expansion of multinational corporations (MNCs) has spawned tax avoidance issues that must be resolved. This paper analyzes the challenges MNCs face with transfer pricing and investigates the legal implications of these practices under international law. The study examines transfer pricing hazards, U.S. legislative measures pertaining to transfer pricing, and the primary characteristics of U.S. tax audits. In addition, the paper provides recommendations for strengthening the international legal framework by highlighting the need for enhanced international tax supervision, cooperation, and transfer pricing management expertise. In order to achieve a balance between export tax revenue interests and sustainable development, the paper also advocates promoting innovation and providing tax assistance to global MNCs. It highlights the importance of MNCs adhering to international tax regulations in order to avoid potential tax penalties and reputational harm.

Carbon Pricing as a Tool for Cross-Border Carbon Regulation and “Green” Transformation of the Global Economy

The relevance of the study stems from the need to establish a mechanism for cross-border carbon regulation in the global economy.The subject of the study is different systems of carbon pricing in international practice in order to reduce greenhouse gas emissions.The purpose of the work is to analyse the current state of decarbonisation of the economy and energy transition as well as the challenges, taking into account current trends in the world economy; to identify the existing problems in the further development of transboundary carbon regulation. Using data from official Russian and foreign sources one can examine specific features and shortcomings of the major existing systems of carbon regulation in international practice, one can also analyse carbon charges in major countries and regions of the world from the perspective of sufficiency for meeting carbon neutrality targets by 2050.The study is based on a comprehensive approach to the consideration of possible options for the development of international carbon regulation and pricing. In the course of the research, the authors identify the existing problems in the decarbonisation of the world economy; study the objectives and possible consequences of the introduction of a carbon tax in the European region in 2026; and study the scenarios for the further development of the Russian economy as part of the global energy transition as set out in the Strategy for Socio-Economic Development of the Russian Federation. The main directions for the development of Russia’s regional system of international carbon units trade were also outlined and the prospects for this system integration into the international emissions trading system were assessed.

Dual role of the country factors in international asset pricing: The local factors and proxies for the global factors

Considering that the popular Fama–French–Carhart (FFC) factors are actually long–short stock portfolios, we (i) test if the FFC six country factors are globalized, (ii) compare the pricing performance of the global, country, and local (orthogonalized) factors, and (iii) examine the pricing implications of the globalized country factors. We find: Most country factors are significantly globalized as measured by R2 from regressing the country factors on the global factors. The R2, however, varies greatly across countries and factor types, ranging from 0.03 for the Hong Kong value factor to 0.88 for the U.S. market factor during 1990–2017. In terms of asset pricing, the country factors perform the best and the local factors the worst. The well-known outperformance of the country factors over the global factors in pricing arises from the “dual role” the country factors play in partially integrated markets, i.e., the country-specific local factors and proxies for the global factors.