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  • Author: Paula J. Dobriansky
  • Publication Date: 02-2005
  • Content Type: Working Paper
  • Institution: U.S. Government
  • Abstract: In 1995, at one of the largest international conferences ever held, women from around the world, representing both governments and the private sector, gathered in Beijing to set forth a platform for the political, economic, and social empowerment of women.
  • Topic: International Relations, Development, Gender Issues
  • Political Geography: United States, Beijing
  • Publication Date: 01-2005
  • Content Type: Working Paper
  • Institution: U.S. Government
  • Abstract: On December 26, 2004, a magnitude 9.0 earthquake off the west coast of Northern Sumatra, Indonesia, triggered a tsunami—a series of giant waves—that inundated coastal areas of Indonesia, Thailand, Sri Lanka, India, and Malaysia, as well as Indian Ocean islands and parts of East Africa.
  • Topic: International Relations, Development, Economics, International Cooperation
  • Political Geography: Indonesia, Malaysia, India, Sri Lanka, Thailand, East Africa
  • Author: Fang Cai, Francis E. Warnock
  • Publication Date: 12-2004
  • Content Type: Working Paper
  • Institution: U.S. Government
  • Abstract: We analyze foreigners' and domestic institutional investors' positions in U.S. equities. Controlling for many factors, we uncover a common preference for large firms and firms that are diversified internationally. The domestic preference for internationally diversified firms implies that investors might obtain substantial international diversification by investing at home. Using an international factor model, we show that exposure to foreign equity markets is indeed greater for domestic firms that are more diversified internationally, suggesting that at least some of the home-grown foreign exposure translates into international diversification benefits. After accounting for home-grown foreign exposure, the share of 'foreign' equities in investors' portfolios nearly doubles, reducing (but not eliminating) the observed home bias.
  • Topic: International Relations, Development, Economics, International Trade and Finance
  • Political Geography: United States
  • Author: Francis E. Warnock, Charles P. Thomas, Jon Wongswan
  • Publication Date: 08-2004
  • Content Type: Working Paper
  • Institution: U.S. Government
  • Abstract: This paper evaluates the performance of U.S. investors' portfolios in the equities of over 40 countries over a 25-year period. We find that these portfolios achieved a significantly higher Sharpe ratio than foreign benchmarks, especially since 1990. We uncover three potential reasons for this success. First, U.S. investors abstained from momentum trading and instead sold past winners. Second, conditional performance tests provide no evidence that the superior (unconditional) performance owed to private information, suggesting that the successful exploitation of publicly available information played a role. Third, the documented preference for cross-listed and well-governed foreign firms appears to have served U.S. investors well. We conclude with a short discussion of the implications of our findings for the home bias literature.
  • Topic: International Relations, Economics, International Trade and Finance
  • Political Geography: United States
  • Publication Date: 06-2004
  • Content Type: Working Paper
  • Institution: U.S. Government
  • Abstract: The Proliferation Security Initiative (PSI) is a global initiative aimed at stopping shipments of weapons of mass destruction (WMD), their delivery systems, and related materials worldwide, announced by President Bush, May 31, 2003. It stems from the National Strategy to Combat Weapons of Mass Destruction issued in December 2002. That strategy recognizes the need for more robust tools to defeat the proliferation of WMD around the world, and specifically identifies interdiction as an area where greater focus will be placed.
  • Topic: Conflict Prevention, International Relations, Arms Control and Proliferation, Weapons of Mass Destruction
  • Author: Ester Faia, Tommaso Monacelli
  • Publication Date: 04-2004
  • Content Type: Working Paper
  • Institution: U.S. Government
  • Abstract: We analyze welfare maximizing monetary policy in a dynamic two-country model with price stickiness and imperfect competition. In this context, a typical terms of trade externality affects policy interaction between independent monetary authorities. Unlike the existing literature, we remain consistent to a public finance approach by an explicit consideration of all the distortions that are relevant to the Ramsey planner. This strategy entails two main advantages. First, it allows an accurate characterization of optimal policy in an economy that evolves around a steady-state which is not necessarily efficient. Second, it allows to describe a full range of alternative dynamic equilibria when price setters in both countries are completely forward looking and households' preferences are not restricted. In this context, we study optimal policy both in the long-run and along a dynamic path, and we compare optimal commitment policy under Nash competition and under cooperation. By deriving a second order accurate solution to the policy functions, we also characterize the welfare gains from international policy cooperation.
  • Topic: International Relations, Economics, International Trade and Finance
  • Political Geography: United States
  • Author: Nicoletta Batini, Paul Levine, Joseph Pearlman
  • Publication Date: 04-2004
  • Content Type: Working Paper
  • Institution: U.S. Government
  • Abstract: We examine the performance of forward-looking inflation-forecast-based rules in open economies. In a New Keynesian two-bloc model, a methodology first employed by Batini and Pearlman (2002) is used to obtain analytically the feedback parameters/horizon pairs associated with unique and stable equi-libria. Three key findings emerge: first, indeterminacy occurs for any value of the feedback parameter on inflation if the forecast horizon lies too far into the future. Second, the problem of indeterminacy is intrinsically more serious in the open economy. Third, the problem is compounded further in the open economy when central banks respond to expected consumer, rather than pro-ducer price inflation.
  • Topic: International Relations, Economics, International Trade and Finance
  • Political Geography: United States
  • Author: Andrea De Michelis
  • Publication Date: 04-2004
  • Content Type: Working Paper
  • Institution: U.S. Government
  • Abstract: This paper examines the effects of firing costs in a dynamic general equilibrium model where firms face stochastic demand. It derives analytically two simple closed-form equations, one for the supply of labor, the other for its demand. These equations determine the comparative static effects of changes in firing costs on the labor market. When negative shocks are more likely to occur than positive shocks, and when the frequency of these shocks is high, firing costs have a substantial negative impact on aggregate employment. In addition, product market integration, as it has occurred in the formation of the European Union, induces firms to be more wary of future possible downturns and therefore intensifies the negative consequences of firing costs.
  • Topic: International Relations, Economics, International Trade and Finance
  • Author: Dale W. Henderson, Ragna Alstadheim
  • Publication Date: 04-2004
  • Content Type: Working Paper
  • Institution: U.S. Government
  • Abstract: We consider monetary-policy rules with inflation-rate targets and interest-rate or money-growth instruments using a flexible-price, perfect-foresight model. There is always a locally-unique target equilibrium. There may also be below-target equilibria (BTE) with inflation always below target and constant, asymptotically approaching or eventually reaching a below-target value, or oscillating. Liquidity traps are neither necessary nor sufficient for BTE which can arise if monetary policy keeps the interest rate above a lower bound. We construct monetary rules that preclude BTE when fiscal policy does not. Plausible fiscal policies preclude BTE for any monetary policy; those policies exclude surpluses and, possibly, balanced budgets.
  • Topic: International Relations, Economics, International Trade and Finance
  • Political Geography: United States
  • Publication Date: 02-2004
  • Content Type: Working Paper
  • Institution: U.S. Government
  • Abstract: The Defense Science Board Summer Study Task Force on Future Strategic Strike Forces looks to the 30-year future with the objective of providing the President with a broad range of strike options to Protect the United States and our forces abroad, Assure friends and allies of our future commitment, and Deal with future adversaries on terms favorable to the United States. The Task Force identified currently planned systems that will still be relevant and recommended new systems for development.
  • Topic: International Relations, Defense Policy
  • Political Geography: United States
  • Author: John Ammer, Jon Wongswan
  • Publication Date: 09-2004
  • Content Type: Working Paper
  • Institution: U.S. Government
  • Abstract: This paper examines the relative importance of global, country-specific, and industry-specific factors in both the cash flow and discount rate components of equity returns between 1995 and 2003. Our framework draws upon previously separate literatures on country versus industry effects and (forward-looking) cash flow versus discount rate components of equity return innovations. We apply the Campbell (1991) decomposition for industry-by-country, all-country, global industry, and world market index returns so we can produce a richer characterization of same-industry and same-country effects in stock returns. Unlike previous equity return decomposition papers, we exploit information in equity analysts' earnings forecasts when projecting future variables from our reduced-form equation systems. Our findings confirm previous research that finds patterns of correlation that suggest a richer underlying structure than just a single common global factor. Furthermore, our results suggest that global, within-country, and same-industry effects are all important for both of the two key components of stock returns: news about future dividends and news about future discount rates. In particular, within-industry covariation in news about future discount rates appears to be just as important as within-country covariation in news about future discount rates. We also find that the idiosyncratic component of cash flow news is more important than the global component, while the reverse is true for news about future discount rates. Our results are broadly consistent with co-movement in future discount rates arising from perceptions of common elements of risk, rather than national market segmentation.
  • Topic: International Relations, Economics, Industrial Policy, International Trade and Finance
  • Author: Jon Faust, Brian M. Doyle
  • Publication Date: 12-2003
  • Content Type: Working Paper
  • Institution: U.S. Government
  • Abstract: This paper investigates breaks in the variability and co-movement of output, consumption, and investment in the G-7 economies. In contrast with most other papers on co-movement, we test for changes in co-movement allowing for breaks in mean and variance. Despite claims that rising integration among these economies has increased output correlations among them, we find no clear evidence of an increase in correlation of growth rates of output, consumption, or investment. This finding is true even for the United States and Canada, which have seen a tremendous increase in bilateral trade shares, and for the members of the euro area in the G-7.
  • Topic: International Relations, Economics, International Trade and Finance
  • Political Geography: United States, Canada, North America
  • Author: Luis-Felipe Zanna
  • Publication Date: 12-2003
  • Content Type: Working Paper
  • Institution: U.S. Government
  • Abstract: In a small open economy model with traded and non-traded goods this paper characterizes conditions under which interest rate rules induce aggregate instability by generating multiple equilibria. These conditions depend not only on how aggressively the rule responds to inflation, but also on the measure of inflation to which the government responds, on the degree of openness of the economy and on the degree of exchange rate pass-through. As an important policy implication, this paper finds that to avoid aggregate instability in the economy the government should implement an aggressive rule with respect to the inflation rate of the sector that has sticky prices. That is the non-traded goods inflation rate. As a by-product of this analysis, it is shown that "fear-of-floating" governments that follow a rule that responds to both the CPI-inflation rate and the nominal depreciation rate or governments that implement "super-inertial" interest rate smoothing rules may actually induce multiple equilibria in their economies. This paper also shows that for forward-looking rules, the determinacy of equilibrium conditions depends not only on the degree of openness of the economy but also on the weight that the government puts on expected future CPI-inflation rates. In fact rules that are "excessively" forward-looking always lead to multiple equilibria.
  • Topic: International Relations, Economics, Government, International Trade and Finance
  • Author: Joseph W. Gruber
  • Publication Date: 11-2003
  • Content Type: Working Paper
  • Institution: U.S. Government
  • Abstract: This study examines the impact of productivity growth on the relationship between inflation and unemployment in Canada. Recently it has been suggested that higher productivity growth is responsible for a shift in the U.S. Phillips curve that occurred in the late 1990s. This paper examines whether the Phillips curve in Canada shifted in a manner similar to that of the United States, and the degree to which higher productivity growth explains this shift.
  • Topic: International Relations, Economics, Industrial Policy
  • Political Geography: Canada, North America
  • Author: John H. Rogers, Jonathan H. Wright, Jon Faust, Shing-Yi B. Wang
  • Publication Date: 10-2003
  • Content Type: Working Paper
  • Institution: U.S. Government
  • Abstract: Many recent papers have studied movements in stock, bond, and currency prices over short windows of time around macro announcements. This paper adds to the announcement effects literature in two ways. First, we study the joint announcement effects across a broad range of assets--exchange rates and U.S. and foreign term structures. In order to evaluate whether the joint effects can be reconciled with conventional theory, we interpret the joint movements in light of uncovered interest rate parity or changes in risk premia. For several real macro announcements, we find that a stronger than expected release appreciates the dollar today, but that it must either (i) lower the relative risk premium for holding foreign currency rather than dollars, or (ii) imply considerable future expected dollar depreciation. The latter implies an overshooting behavior akin to that described by Dornbusch (1976). Second, we use a longer span of high frequency data than has been common in announcement work. A longer span of high frequency data contributes to the precision of our estimates and allows us to explore the possibility that the effects of macro surprises on asset prices have varied over time. We find evidence, for example, that PPI releases had a larger effect on U.S. interest rates before about 1992 than subsequently.
  • Topic: International Relations, Economics, Government, International Trade and Finance
  • Political Geography: United States
  • Author: David Bowman
  • Publication Date: 10-2003
  • Content Type: Working Paper
  • Institution: U.S. Government
  • Abstract: This paper examines the extent to which a decline in market power could have contributed to the general decline in inflation rates experienced in developed countries during the 1990s.
  • Topic: International Relations, Economics, Government, International Trade and Finance
  • Author: Joseph E. Gagnon
  • Publication Date: 10-2003
  • Content Type: Working Paper
  • Institution: U.S. Government
  • Abstract: Most macroeconomic models imply that faster output growth tends to lower a country's trade balance by raising its imports with little change to its exports. Krugman (1989) proposed a model in which countries grow by producing new varieties of goods. In his model, faster-growing countries are able to export these new goods and maintain balanced trade without suffering any deterioration in their terms of trade. This paper analyzes the growth of U.S. imports from different source countries and finds strong support for Krugman's model.
  • Topic: International Relations, Economics, International Trade and Finance
  • Political Geography: United States
  • Publication Date: 09-2003
  • Content Type: Working Paper
  • Institution: U.S. Government
  • Abstract: The Task Force was charged to examine the use of red teams in the Department of Defense and recommend ways that such teams could be of greater value to the department. Our Terms of Reference and task force membership are provided in Appendices 1 and 2.
  • Topic: International Relations, Security, Defense Policy
  • Political Geography: United States
  • Author: Jonathan H. Wright
  • Publication Date: 09-2003
  • Content Type: Working Paper
  • Institution: U.S. Government
  • Abstract: Recent empirical work has considered the prediction of inflation by combining the information in a large number of time series. One such method that has been found to give consistently good results consists of simple equal weighted averaging of the forecasts over a large number of different models, each of which is a linear regression model that relates inflation to a single predictor and a lagged dependent variable. In this paper, I consider using Bayesian Model Averaging for pseudo out-of-sample prediction of US inflation, and find that it gives more accurate forecasts than simple equal weighted averaging. This superior performance is consistent across subsamples and inflation measures. Meanwhile, both methods substantially outperform a naive time series benchmark of predicting inflation by an autoregression.
  • Topic: International Relations, Economics, International Trade and Finance
  • Political Geography: United States
  • Author: Jonathan H. Wright
  • Publication Date: 09-2003
  • Content Type: Working Paper
  • Institution: U.S. Government
  • Abstract: Exchange rate forecasting is hard and the seminal result of Meese and Rogoff (1983) that the exchange rate is well approximated by a driftless random walk, at least for prediction purposes, has never really been overturned despite much effort at constructing other forecasting models. However, in several other macro and financial forecasting applications, researchers in recent years have considered methods for forecasting that combine the information in a large number of time series. One method that has been found to be remarkably useful for out-of-sample prediction is simple averaging of the forecasts of different models. This often seems to work better than the forecasts from any one model. Bayesian Model Averaging is a closely related method that has also been found to be useful for out-of-sample prediction. This starts out with many possible models and prior beliefs about the probability that each model is the true one. It then involves computing the posterior probability that each model is the true one, and averages the forecasts from the different models, weighting them by these posterior probabilities. This is effectively a shrinkage methodology, but with shrinkage over models not just over parameters. I apply this Bayesian Model Averaging approach to pseudo-out-of-sample exchange rate forecasting over the last ten years. I find that it compares quite favorably to a driftless random walk forecast. Depending on the currency-horizon pair, the Bayesian Model Averaging forecasts sometimes do quite a bit better than the random walk benchmark (in terms of mean square prediction error), while they never do much worse. The forecasts generated by this model averaging methodology are however very close to (but not identical to) those from the random walk forecast.
  • Topic: International Relations, Economics, International Trade and Finance
  • Political Geography: United States
  • Author: John H. Rogers, Shing-Yi B. Wang, Charles M. Engels
  • Publication Date: 09-2003
  • Content Type: Working Paper
  • Institution: U.S. Government
  • Abstract: We reexamine the evidence for border effects in deviations from the law of one price, using data for consumer prices from Canadian and U.S. cities. The study parallels Engel and Rogers (1996), except that this study uses actual price data rather than price index data. We find evidence of border effects both in the levels of prices and the percentage change in prices. Even accounting for distance between cities and relative population sizes, we find that the absolute difference between prices in the U.S. and Canada in our data (annual from 1990 to 2002) is greater than seven percent. This difference exists among tradables and nontradables, though for some categories of tradables (clothing and durables) the difference is smaller. The findings are similar for annual changes, though the magnitude is smaller: the border accounts for a difference in 1.5 percent in annual (log) price changes. Relative population sizes and distance are helpful in explaining price level differences (between Canadian and U.S. cities) for traded goods, but are less helpful in explaining price level differences for nontraded goods or for accounting for differences in price changes for either traded or nontraded goods.
  • Topic: International Relations, Economics, International Trade and Finance
  • Political Geography: Canada, North America
  • Author: Jon Wongswan
  • Publication Date: 09-2003
  • Content Type: Working Paper
  • Institution: U.S. Government
  • Abstract: Using the conditional Capital Asset Pricing Model (CAPM), this paper tests for the existence and pattern of contagion and capital market integration in global equity markets. Contagion is defined as significant excess conditional correlation among different countries' asset returns above what could be explained by economic fundamentals (systematic risks). Capital market integration is defined as the situation in which only systematic risks are priced. The paper uses a panel of sixteen countries, divided into three blocs: Asia, Latin America, and Germany-U.K.-U.S., for the period from 1990 through 1999. The results show evidence of contagion and capital market integration. In addition, contagion is found to be a regional phenomenon.
  • Topic: International Relations, Economics, Globalization, International Trade and Finance
  • Political Geography: United States, United Kingdom, Asia, Germany, Latin America
  • Publication Date: 08-2003
  • Content Type: Working Paper
  • Institution: U.S. Government
  • Abstract: The United Nations Educational, Scientific and Cultural Organization, UNESCO, was founded after World War II to contribute to peace and security. Collaboration among nations through education, science and culture remains a cornerstone of a peaceful world order. The founders of UNESCO believed that the rule of law, respect for human rights, and freedom of expression would be strengthened through international cooperation. The need for the world community to renew its efforts to advance these principles has never been more urgent. American leadership in the service of peace and security can help mobilize multilateral institutions, including UNESCO, to stand up for common values that promote tolerance and thwart terrorism. The sanctity of human life must be a common commitment.
  • Topic: International Relations, Treaties and Agreements, United Nations
  • Political Geography: United States
  • Author: Rebeca de la Rocque Palis, Roberto Luis Olinto Ramos, Patrice Robitaille
  • Publication Date: 08-2003
  • Content Type: Working Paper
  • Institution: U.S. Government
  • Abstract: Revisions to GDP announcements in many countries are often large, and Faust, Rogers, and Wright (2003) have found that G-7 GDP revisions are predictable to varying degrees. In this paper, we extend FRW to study revisions to Brazilian GDP announcements. We document that revisions to Brazilian GDP are large relative to those of G-7 countries. Brazilian GDP revisions are also predictable, which is consistent with the view that GDP revisions correct errors in preliminary GDP rather than reflect news. However, GDP revisions are far from being entirely predictable. Although GDP revisions are largest only one year following the initial GDP release, those revisions are nearly unpredictable.
  • Topic: International Relations, Economics, International Trade and Finance
  • Political Geography: Brazil, South America
  • Author: Jane Ihrig, David Prior
  • Publication Date: 08-2003
  • Content Type: Working Paper
  • Institution: U.S. Government
  • Abstract: <p>This paper examines if the type of exchange rate used or size of the movement in the exchange rate matters in estimating exchange-rate exposure of U.S. nonfinancial multinationals. We find that switching from a broad trade-weighted exchange rate to a 2-digit SIC industry exchange rate increases the number of significantly exposed firms in a simple Jorion (1990) regression by 60 percent. Then separating crisis from non-crisis months we find additional evidence of exposure. Although the value of exposure does not change with the size of the exchange rate movement, we find some firms have significant exposure only in crisis periods while others have significant exposure only during normal fluctuations in exchange rates. All told, we find about 1 in 4 firms' returns is significantly affected by movement in the exchange rate between 1995 and 1999. </p><blockquote><p> </p> </blockquote><p> </p><p> </p>
  • Topic: International Relations, Economics, International Trade and Finance
  • Political Geography: United States
  • Publication Date: 08-2003
  • Content Type: Working Paper
  • Institution: U.S. Government
  • Abstract: This Intelligence Community Assessment (ICA) was requested by Secretary of Health and Human Services Tommy Thompson and Ambassador Jack Chow, Deputy Assistant Secretary of State for International Health Affairs. It highlights the evolution of Severe Acute Respiratory Syndrome (SARS) and the potential implications of the disease for the United States under several scenarios; this paper does not attempt to provide a scientific assessment of the epidemiology of SARS. Even though SARS has infected and killed far fewer people than other common infectious diseases such as influenza, malaria, tuberculosis, and HIV/AIDS, it has had a disproportionately large economic and political impact because it spread in areas with broad international commercial links and received intense media attention as a mysterious new illness that seemed able to go anywhere and hit anyone.
  • Topic: International Relations, Human Welfare, Poverty, Third World
  • Political Geography: United States
  • Author: John G. Ikenberry
  • Publication Date: 07-2003
  • Content Type: Working Paper
  • Institution: U.S. Government
  • Abstract: American global power – military, economic, technological, cultural, and political – is one of the great realities of our age. Never before has one country been so powerful and unrivaled. The United States began the 1990s as the world's only superpower and its advantages continued to grow through the decade. After the Cold War, the United States reduced its military spending at a slower rate than other countries and its economy grew at a faster pace. The globalization of the world economy has reinforced American economic and political dominance. No ideological challengers are in site. More recently, in response to terrorist attacks, the United States has embarked on a massive military buildup. In the recent National Security Strategy, the Bush administration has articulated an ambitious and provocative global military role for the United States in confronting new-age threats. Overall, American power advantages are multidimensional, unprecedented, and unlikely to disappear any time soon. The world has taken notice of these developments. Indeed, the post-Cold War rise of American power -- what might be called the rise of American "unipolarity" -- has unsettled world politics. Governments everywhere are worried about the uncertainties and insecurities that appear to flow from such extreme and unprecedented disparities of power. The shifting global security environment – triggered by the terrorist attacks of September 11th –also has conspired to upset old relationships and expectations. The American invasions of Afghanistan and Iraq have put American power on display and raised far-reaching questions about the use of force, alliances, weapons of mass destruction, sovereignty and interventionism. The world is in the midst of a great geopolitical adjustment process. Governments are trying to figure out how an American-centered unipolar order will operate. How will the United States use its power? Will a unipolar world be built around rules and institutions or the unilateral exercise of American power? This global worry about how a unipolar world will operate – in which the most basic questions about the character of world politics are at stake, namely, who benefits and who commands – is the not-so-hidden subtext of all the recent controversies in America's relations with the rest of the world. The question posed in this report is: how are the major countries around the world responding to American global preeminence? Overall, strategies and policies are mostly still in flux around the world. Responses up to now have been mostly ad hoc. Governments are learning, adapting, negotiating, and reacting – thus it is not possible to identify fixed "strategies of response." This report seeks to help us understand these evolving responses in two ways: first, it will provide conceptual tools to identify and track strategic responses by major states to American preeminence, and second, it will offer some preliminary characterizations of the patterns of response, particularly by Western Europe, Russia, and China. This report might be seen as a sort of "field guide" to global reactions rather than a definitive theoretical and empirical statement on the subject. I begin by offering a summary of the findings. After this, I look at the rise of American unipolar power and the variety of ways that American power is "experienced" around the world. In the next section, I survey the deeper sources and multifaceted character of American unipolar power. Next I explore the limits of the basic strategies of response to concentrated power – balancing, bandwagoning and binding. In the next section, I explore some of the emerging strategies that are appearing among the major countries. Finally, in the conclusion I return to the issue of unipolar power and rule-based order.
  • Topic: International Relations, Politics, Sovereignty
  • Political Geography: United States, America
  • Publication Date: 07-2003
  • Content Type: Working Paper
  • Institution: U.S. Government
  • Abstract: In the terms of reference, the Under Secretary of Defense for Acquisition, Technology, and Logistics directed the task force “to conduct a comprehensive study of the ends and means of precision compellence, or the nuanced use of force, in concert with coalition partners, to achieve political, economic and moral change in countries affecting US interests.” Real-world events have since underscored the need for such a study; indeed, the U.S. military applied key elements of a measured, nuanced approach in both the Afghanistan and Iraq campaigns. We are pleased to note this evolution in operations and a parallel evolution in the thinking of the combatant commands and Services. Because of this evolution, it is no longer as necessary as it once was to sell the fundamental objectives of what we term here the discriminate use of force (DUF).
  • Topic: International Relations, Defense Policy, Science and Technology
  • Political Geography: United States
  • Author: David Johnson
  • Publication Date: 05-2003
  • Content Type: Working Paper
  • Institution: U.S. Government
  • Abstract: In 2000, an overwhelming 97 percent of Afghan girls did not attend school, and today only about 20 percent are literate. Tens of thousands of Afghan girls are now attending school for the first time in years.
  • Topic: International Relations, Democratization, Development
  • Political Geography: Afghanistan, Middle East
  • Author: Jaime Marquez, Jane Ihrig
  • Publication Date: 05-2003
  • Content Type: Working Paper
  • Institution: U.S. Government
  • Abstract: One of the most remarkable macroeconomic developments of the past decade has been the widespread decline in inflation despite declines in unemployment rates. For the United States, these seemingly contradictory developments have been reconciled in terms of three factors: (1) an acceleration in productivity, (2) structural changes in labor markets that lowered the natural unemployment rate (NAIRU), and (3) improved credibility of monetary policy. Here we ask whether comparable factors were at work in foreign industrial countries. To address this question, we empirically characterize the relationship between inflation, the unemployment rate, and structural factors using an extended Phillips curve model with quarterly data through 1994. By undertaking counterfactual simulations from 1995 to 2001, we quantify the separate contributions of unemployment-rate movements, labor-market reforms (that affected the NAIRU), and productivity developments on inflation. In line with previous work on the United States, we find that productivity advancements were the main structural factor reducing inflation in the United States. For foreign countries, persistent labor-market slack was the main factor exerting downward pressure on inflation. This persistence stemmed, in part, from structural reforms that lowered the NAIRU while the unemployment rate was declining.
  • Topic: International Relations, Development, Economics, International Trade and Finance
  • Political Geography: United States
  • Author: Eric M. Leeper, Jennifer E. Roush
  • Publication Date: 04-2003
  • Content Type: Working Paper
  • Institution: U.S. Government
  • Abstract: Money demand and the stock of money have all but disappeared from monetary policy analyses. Remarkably, it is more common for empirical work on monetary policy to include commodity prices than to include money. This paper establishes and explores the empirical fact that whether money enters a model and how it enters matters for inferences about policy impacts. The way money is modeled significantly changes the size of output and inflation effects and the degree of inertia that inflation exhibits following a policy shock. We offer a simple and conventional economic interpretation of these empirical facts.
  • Topic: Conflict Resolution, International Relations, Economics, International Trade and Finance
  • Author: Carlos Ó. Arteta
  • Publication Date: 03-2003
  • Content Type: Working Paper
  • Institution: U.S. Government
  • Abstract: In view of the role of liability dollarization in recent financial crises, whether or not the widespread presence of foreign-currency-denominated deposits and credits in developing-country banking systems leads to greater financial fragility is an open and pressing question. Using a comprehensive dataset on deposit and credit dollarization for a large number of developing and transition economies, I find little evidence that high dollarization heightens the probability of banking crises or currency crashes. Furthermore, while empirical results suggest that banking crises and currency crashes are contractionary, there is no robust evidence that they are more costly in highly dollarized countries than in countries where dollarization is low. This extensive empirical search highlights that macroeconomic and exchange rate policies are far more important than bank dollarization in determining crisis risks and costs.
  • Topic: Conflict Resolution, International Relations, Economics, International Trade and Finance
  • Author: Brian M. Doyle, David Bowman
  • Publication Date: 03-2003
  • Content Type: Working Paper
  • Institution: U.S. Government
  • Abstract: The considerable amount of research in recent years on New Keynesian, open-economy models -- models with nominal price rigidities and intertemporally maximizing agents -- has yielded fresh insights for what Alan Blinder has called the “dark art” of making monetary policy. The literature has made its greatest contributions in understanding the transmission of shocks across countries, exchange rate pass-through and the effects of different pricing rules, and how these impact optimal monetary policy rules and international policy coordination. While the literature has by no means solved the great mysteries of open-economy macroeconomics, it has laid out a framework where we can ask normative questions of monetary policy, such as how much a central bank should react to movements in the exchange rate. However, monetary policy remains an empirical endeavour, and would be helped by further work which empirically estimates or calibrates these new models.
  • Topic: International Relations, Development, Economics, International Trade and Finance, Monetary Policy
  • Author: J. Benson Durham
  • Publication Date: 02-2003
  • Content Type: Working Paper
  • Institution: U.S. Government
  • Abstract: In contrast to the empirical literature's focus on foreign direct investment (FDI), this study examines the effects of foreign portfolio investment (FPI) and “other” foreign investment (OFI) on economic growth using data on 88 countries from 1977 through 2000. Most measures suggest that FPI has no effect, and some results indicate that OFI has a negative impact on growth that is somewhat mitigated by initial financial and/or legal development. However, these results are questionable due to possible simultaneity bias. The empirical analyses also examine whether non-FDI foreign investment affects growth indirectly. FPI does not correlate positively with macroeconomic volatility, but the results indicate that the negative indirect effect of OFI through macroeconomic volatility comprises a substantial portion of the gross negative effect of OFI on growth.
  • Topic: International Relations, Economics, International Trade and Finance
  • Political Geography: United States
  • Author: John H. Rogers, James M. Nason
  • Publication Date: 02-2003
  • Content Type: Working Paper
  • Institution: U.S. Government
  • Abstract: Tests of the present-value model of the current account are frequently rejected by the data. Standard explanations rely on the “usual suspects” of non-separable preferences, shocks to fiscal policy and the world real interest rate, and imperfect international capital mobility. We con firm these rejections on post-war Canadian data, then investigate their source by calibrating and simulating alternative versions of a small open economy, real business cycle model. Monte Carlo experiments reveal that, although each of the suspects matters in some way, a “canonical” RBC model moves closest to the data when it features exogenous world real interest rate shocks.
  • Topic: Conflict Resolution, International Relations, Economics, International Trade and Finance
  • Author: Francis E. Warnock, John D. Burger
  • Publication Date: 01-2003
  • Content Type: Working Paper
  • Institution: U.S. Government
  • Abstract: While there is a severe home bias in U.S. investors' foreign bond portfolios, we find that portfolio weights are greater for countries with more open capital accounts and whose bond returns are less correlated with U.S. returns. Positions in local-currency-denominated bonds are particularly sensitive to past and prospective returns volatility. An analysis of changes in portfolio weights over time indicates that U.S. investors have recently moved out of smaller markets and those with low and declining credit ratings. Our data also allow for an analysis of the size and currency composition of international bond markets. We find that countries with stronger institutions and better inflation performance have larger local currency bond markets. An implication for developing countries is that creditor friendly policies, such as vigilance on the inflation front and the development of strong institutions, can enable local bond market development and may in turn attract global investors.
  • Topic: International Relations, Economics, International Trade and Finance
  • Political Geography: United States
  • Author: Jonathan H. Wright, Alain P. Chaboud
  • Publication Date: 01-2003
  • Content Type: Working Paper
  • Institution: U.S. Government
  • Abstract: The failure of uncovered interest parity can be ascribed to the existence of a risk premium. The size of this risk premium may shrink to zero over sufficiently small intervals of time. In contrast, because no interest is paid on intradaily positions and interest is instead paid discretely at the point when a position is rolled over from one day to the next, the size of the interest differential remains fixed over any interval that covers the time of the discrete interest payment. This is true no matter how short that interval is. Using a large dataset of high frequency exchange rate data, we run uncovered interest parity regression over different time intervals. We replicate the rejection of the uncovered interest parity hypothesis with daily data, but find results that are consistently much more supportive of the uncovered interest parity hypothesis over short windows of intradaily data that span the time of the discrete interest payment.
  • Topic: Conflict Prevention, International Relations, Economics, International Trade and Finance
  • Author: Joseph E. Gagnon
  • Publication Date: 01-2003
  • Content Type: Working Paper
  • Institution: U.S. Government
  • Abstract: Krugman (1989) argued that differences across countries in estimated income elasticities of import demand are due to omission of an exporter supply effect. He showed that such an effect can be derived in a theoretical model with economies of scale in production and a taste for variety in consumption. In his model, countries grow by producing new varieties of goods, and they are able to export these goods without suffering any deterioration in their terms of trade. This paper analyzes U.S. import demand from different source countries and finds strong evidence of a supply effect of roughly half the magnitude (0.75) of the income elasticity (1.5). Price elasticities for the most part are estimated close to -1, which is typical for the literature. Exclusion of the supply effect leads to overestimation of the income elasticity. Results based on U.S. exports to different destinations are less robust, but largely corroborate these findings.
  • Topic: International Relations, Economics, International Trade and Finance
  • Political Geography: United States
  • Author: Francis E. Warnock, Sara B. Holland
  • Publication Date: 01-2003
  • Content Type: Working Paper
  • Institution: U.S. Government
  • Abstract: High growth, liquid Chilean firms have greater relative weights in U.S. equity portfolios, but the most important determinant of a firm's portfolio weight is whether it is listed on a U.S. exchange. Cross-listing does not, however, appear to have permanent benefits: Weights in U.S. portfolios of firms that cross-listed in the mid-1990s increased at the expense of firms that cross-listed earlier. Put another way, firms appear to be able to access international capital at the time of the cross-listing, but this access may well be short-lived.
  • Topic: International Relations, Economics, International Trade and Finance
  • Political Geography: South America
  • Publication Date: 10-2002
  • Content Type: Working Paper
  • Institution: U.S. Government
  • Abstract: We judge that Iraq has continued its weapons of mass destruction (WMD) programs in defiance of UN resolutions and restrictions. Baghdad has chemical and biological weapons as well as missiles with ranges in excess of UN restrictions; if left unchecked, it probably will have a nuclear weapon during this decade. (See INR alternative view at the end of these Key Judgments.)
  • Topic: International Relations, United Nations, Weapons of Mass Destruction
  • Political Geography: Iraq, Middle East
  • Author: Carlos Ó. Arteta
  • Publication Date: 09-2002
  • Content Type: Working Paper
  • Institution: U.S. Government
  • Abstract: The dollarization of bank deposits and credit is widespread in developing countries, resulting in varying degrees of currency mismatches in domestic financial intermediation, which in turn might accentuate bank balance sheet fragility. It is widely argued that flexible exchange rate regimes encourage banks to match dollar-denominated liabilities with a corresponding amount of dollar-denominated assets, ameliorating currency mismatches. Does the behavior of dollar deposits and credit in financially dollarized economies support that presumption? A new database on deposit and credit dollarization in developing and transition countries is assembled and used to address this question. Empirical results suggest that, if anything, floating regimes seem to exacerbate, rather than ameliorate, currency mismatches in domestic financial intermediation, as those regimes seem to encourage deposit dollarization more strongly than they encourage matching via credit dollarization.
  • Topic: International Relations, Economics, International Trade and Finance
  • Political Geography: United States
  • Author: Steven B. Kamin
  • Publication Date: 09-2002
  • Content Type: Working Paper
  • Institution: U.S. Government
  • Abstract: Considerable attention has been paid to the possibility that large-scale IMF-led financing packages may have distorted incentives in international financial markets, leading private investors to provide more credit to emerging market countries, and at lower interest rates, than might otherwise have been the case. Yet, prior attempts to identify such distortions have yielded mixed evidence, at best. This paper makes three contributions to our ability to assess the empirical importance of moral hazard in international financial markets. First, it is argued that because large international "bailouts" did not commence until the 1995 Mexican crisis, financial indicators prior to that time could not have reflected a significant degree of this type of moral hazard. Therefore, one test for the existence of moral hazard is that the access of emerging markets to international credit is significantly easier than it was prior to 1995. Second, the paper argues that because private investors expect large-scale IMF-led packages to be extended primarily to economically or geo-politically important countries, moral hazard, if it exists, should lead these countries to have easier terms of access to credit than smaller, non-systemically important countries. Finally, in addition to looking at bond spreads, the focus of earlier empirical analyses of moral hazard, the paper also examines trends in capital flows to gauge the access of emerging market countries to external finance. Looking at the evidence in light of these considerations, the paper concludes that there is little support for the view that moral hazard is significantly distorting international capital markets at the present time.
  • Topic: International Relations, Economics, Emerging Markets, International Trade and Finance
  • Author: Mario Marazzi
  • Publication Date: 09-2002
  • Content Type: Working Paper
  • Institution: U.S. Government
  • Abstract: One of the most widely accepted principles of economics is the existence of gains from trade for every nation under certain conditions including perfect competition. In the last twenty years, trade economists have revolutionized the field by firmly establishing the possibility of modeling imperfectly competitive international markets. Despite this development, most still agree there are good reasons to believe that gains from trade are still present. However, we show that in the absence of international redistributions the presence of a positive profit sector in a general equilibrium model can lead to a situation in which some nations may lose from the reduction of international trade barriers.
  • Topic: International Relations, Economics, Emerging Markets, International Trade and Finance
  • Author: Luca Guerrieri
  • Publication Date: 08-2002
  • Content Type: Working Paper
  • Institution: U.S. Government
  • Abstract: One of the criticisms routinely advanced against models of the business cycle with staggered contracts is their inability to generate inflation persistence. This paper finds that staggered contracts µa la Taylor are, in fact, capable of reproducing the inflation persistence implied by U.S. data. Following Fuhrer and Moore, I capture the moments that the contract specification needs to replicate by using the correlograms from a small vector autoregression (VAR) that includes inflation among the endogenous variables. A simple structural model substitutes the inflation equation from the VAR with the contract specification. I estimate the contract parameters in the structural model by maximum likelihood. The correlogram for the endogenous variables from the estimated structural model, including that for inflation, are very close to the correlograms from the VAR (and are contained within their 90% confidence intervals). By the same metric, where Taylor contracts do not fare well is in reproducing the cross-correlations between inflation and output.
  • Topic: International Relations, Economics, International Trade and Finance
  • Political Geography: United States
  • Author: Joseph W. Gruber
  • Publication Date: 08-2002
  • Content Type: Working Paper
  • Institution: U.S. Government
  • Abstract: Empirical work regarding Intertemporal Current Account (ICA) models has centered around two distinct testing methodologies, present value tests and a productivity shock approach as formulated by Glick and Rogoff (1995). In previous work, Gruber (2001), I have tested and ICA model that allows for habits in aggregate consumption via the present value method. This paper applies the alternative Glick and Rogoff style approach to testing the model. The benefits of doing such are an ability to separate country-specific from worldwide output changes, a distinction of considerable importance, as well as to impose restrictions on the relationship between investment and output, neither of which are possible in the present value framework. The results of the test are supportive of the existence of habits and coincide with the results of Gruber (2001). The degree of habit persistence implied by the model is estimated for the G-7 countries. The paper also proposes habit formation as a possible solution to an empirical puzzle identified in the original Glick and Rogoff paper.
  • Topic: International Relations, Economics, International Trade and Finance
  • Political Geography: United States
  • Publication Date: 05-2002
  • Content Type: Working Paper
  • Institution: U.S. Government
  • Abstract: On 6-7 May 2002, the National Intelligence Council and the Department of State's Bureau of Intelligence and Research sponsored a conference that examined the prospects for resolving regional conflicts involving four states of the former Soviet Union: Georgia, Armenia, Azerbaijan, and Moldova. The conference brought together outside scholars, regional experts and officials to discuss the conflicts in Abkhazia, South Ossetia, Nagorno-Karabakh, and Transnistria. The purpose was not to arrive at a consensus but to deepen understanding of the complex geopolitical dynamics at work in the region.
  • Topic: Conflict Resolution, International Relations, Peace Studies
  • Political Geography: Moldova, Eastern Europe, Armenia, Azerbaijan, Georgia, South Ossetia, Abkhazia
  • Author: Carol C. Bertaut
  • Publication Date: 04-2002
  • Content Type: Working Paper
  • Institution: U.S. Government
  • Abstract: Although most recent empirical research regarding the size and significance of the impact of changes in wealth on consumption has looked for such effects in the United States, equity prices in the 1990s rose considerably in most other industrial countries as well. This paper investigates the strength of the wealth effect across countries. Using a variety of methods, I find evidence of significant wealth effects in the United Kingdom and Canada of a size comparable to that in the United States, reflecting the importance of equities in aggregate household wealth in these countries. A significant wealth effect is also evident in Japan, but because household wealth has changed little on balance in Japan in recent years, this channel has been less important in explaining Japanese consumption growth in the second half of the 1990s. Despite a rapid appreciation in equity prices and an increase in equity ownership in the major continental European countries since 1995, equities remain a less important form of household wealth in most of these countries, and the consumption response to changes in wealth remains limited. However, in some smaller European countries where equity issuance is more common, the emerging evidence suggests that wealth effects may be more important.
  • Topic: International Relations, Economics, Globalization, International Trade and Finance
  • Political Geography: United States, United Kingdom, Europe, Canada
  • Author: Joseph E. Gagnon, Dale W. Henderson, Brian M. Doyle, Laurence H. Meyer
  • Publication Date: 04-2002
  • Content Type: Working Paper
  • Institution: U.S. Government
  • Abstract: In this paper we provide two building blocks for an analysis of international policy coordination: (1) a survey of models of policy coordination, and (2) an account of experience with policy coordination among the G-7 countries and within Europe since the breakdown of the Bretton Woods System. Using these building blocks, we investigate the correspondence between the models and experience and attempt to draw lessons for both the modelers and the practitioners. We find that the correspondence is close enough that the models help in analyzing several instances of actual policy coordination, but that the correspondence could be even closer. As for lessons for modelers, we suggest that they devote more attention to the analysis of information exchange, a key feature of practical policy coordination; to the coordination of different types of policies; to the ramifications of political divisions within countries; and to the implications of market irrationality and speculative bubbles. As for lessons for policy makers, we suggest that they give more consideration to the choice of their ultimate objectives, in particular to whether the current account should always be close to balance; to achieving better internal policies; and to the greater use of fiscal policy as a stabilization tool.
  • Topic: International Relations, Economics, Globalization, International Trade and Finance
  • Political Geography: Europe
  • Author: Francis E. Warnock, Chad Cleaver
  • Publication Date: 04-2002
  • Content Type: Working Paper
  • Institution: U.S. Government
  • Abstract: We examine an assumption common in empirical work on bilateral portfolio capital flows that the countries the flows are attributed to are also the countries of the security's issuer, seller, or ultimate buyer. We do this by estimating U.S. investors' holdings of debt and equities in over 40 countries and, for the same countries, foreign investors' holdings of U.S. debt and equities. A comparison of our estimates with data from benchmark surveys provides insight into U.S. data on international debt and equity transactions. We find that, contrary to the common assumption, the data do not track the location of U.S. investment or the location of investors in U.S. assets very well. Because the U.S. portfolio flow data collection system was designed to measure cross-border transactions with foreign counterparties who are often intermediaries, the majority of the flows are attributed to financial centers. By aggregating our country-level estimates, we find that U.S. data accurately portray net inflows into U.S. equities and net outflows into foreign bonds. However, the data substantially overcount net inflows into U.S. bonds and may undercount net outflows into foreign equities. We conclude with a discussion of the implications of our findings for research on capital flows.
  • Topic: International Relations, Economics, International Trade and Finance
  • Political Geography: United States
  • Publication Date: 04-2002
  • Content Type: Working Paper
  • Institution: U.S. Government
  • Abstract: In April 2002, the National Intelligence Council sponsored a conference that examined the impact of events in Afghanistan since 11 September on a variety of regional actors, including Russia, Iran, Turkey, India, Europe, Pakistan, and the Central Asian states of Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan, and Uzbekistan. The conference brought together government and outside experts and consisted of four workshops with presentations from ten academic and regional experts, followed by lengthy discussion sessions. The purpose of the conference was not to arrive at a consensus but to deepen understanding of the complex geopolitical dynamics at work in the region.
  • Topic: International Relations, Regional Cooperation, Terrorism
  • Political Geography: Pakistan, Russia, Europe, Iran, Turkey, Middle East, India, Kazakhstan, Kyrgyzstan, Tajikistan, Uzbekistan, Turkmenistan
  • Author: David C. Smith, Steven Ongena, Dominik Egli
  • Publication Date: 02-2002
  • Content Type: Working Paper
  • Institution: U.S. Government
  • Abstract: We study the decision an entrepreneur faces in financing multiple projects and show that relationship financing will arise endogenously in an environment where strategic defaults are likely, even when firms have access to arm's-length financing. Relationship financing allows an entrepreneur to build a private reputation for repayment that reduces the cost of financing. However, in an environment where the risk of strategic default is low, the benefits from reputation building are outweighed by holdup rents extractable by the incumbent lender. Entrepreneurs then choose to finance projects from single or multiple arm's-length lenders.
  • Topic: International Relations, Economics, International Trade and Finance
  • Political Geography: United States
  • Publication Date: 12-2001
  • Content Type: Working Paper
  • Institution: U.S. Government
  • Abstract: The ballistic missile remains a central element in the military arsenals of nations around the globe and almost certainly will retain this status over the next fifteen years. States willingly devote often scarce resources in efforts to develop or acquire ballistic missiles; build the infrastructures necessary to sustain future development and production; and actively pursue technologies, materials, and personnel on the world market to compensate for domestic shortfalls, gain increased expertise, and potentially shorten development timelines.
  • Topic: International Relations, Security, Foreign Policy, Weapons of Mass Destruction
  • Political Geography: United States
  • Publication Date: 10-2001
  • Content Type: Working Paper
  • Institution: U.S. Government
  • Abstract: The last 20 years have been characterized by rapid improvements in information technology and have com e to be regarded as the “Information Revolution.” The Information Revolution is changing the speed at which information is communicated, the facility with which calculations can be conducted in real time, and the costs and speed of observation of physical phenomena. Applications of IT in transportation mean that people and goods can be moved m o re efficiently; applications to the production process mean that goods and services can be produced m o re efficiently.
  • Topic: International Relations, Government, Science and Technology
  • Political Geography: Africa
  • Publication Date: 08-2001
  • Content Type: Working Paper
  • Institution: U.S. Government
  • Abstract: The capacity and willingness of the international community to respond to humanitarian emergencies will continue to be stretched through December 2002. The overall number of people in need of emergency humanitarian assistance—now approximately 42 million—is likely to increase: Five ongoing emergencies—in Afghanistan, Burundi, Colombia, North Korea and Sudan—cause almost 20 million people to be in need of humanitarian assistance as internally displaced persons (IDPs), refugees, or others in need in their home locations. All these emergencies show signs of worsening through 2002. In addition, humanitarian conditions may further deteriorate in populous countries such as the Democratic Republic of Congo (DROC) or Indonesia. The total number of humanitarian emergencies—20—is down from 25 in January 2000. Of the current emergencies: Eleven are in countries experiencing internal conflict—Afghanistan, Angola, Burundi, Colombia, DROC, Indonesia, Russia/Chechnya, Sierra Leone, Sri Lanka, Sudan, and Uganda. Two—in Iraq and North Korea—are due largely to severe government repression. The remaining six—in Azerbaijan, Bosnia and Herzegovina, Eritrea, Ethiopia, Somalia, and Yugoslavia—are humanitarian emergencies that have entered the transitional stage beyond prolonged conflict, repressive government policies, and/or major natural disasters. The primary cause of the emergency in Tajikistan is drought. Several other countries currently experiencing humanitarian emergencies—Afghanistan, Eritrea, Ethiopia, North Korea, Somalia, and Sudan—also are affected by major, persistent natural disasters.
  • Topic: International Relations, Security, Government, Human Rights
  • Political Geography: Afghanistan, Iraq, North Korea, Somalia
  • Publication Date: 06-2001
  • Content Type: Working Paper
  • Institution: U.S. Government
  • Abstract: Russia's Foreign Policy Russian foreign policy in the coming years will be characterized by weakness; frustration--primarily with the United States as the world's preeminent power--over Russia's diminished status; generally cautious international behavior; and a drive to resubjugate, though not reintegrate, the other former Soviet states. The international situation affords Russia time to concentrate on domestic reforms because, for the first time in its history, it does not face significant external threats. But rather than use the breathing space for domestic reforms, Putin is as much--if not more--focused on restoring Russia's self-defined rightful role abroad and seeking to mold the CIS into a counterweight to NATO and the European Union. The Outside World's Views of Russia Russia does not have any genuine allies. Some countries are interested in good relations with Russia, but only as a means to another end. For example, China sees Russia as a counterweight to the United States but values more highly its ties with the United States. Some countries see Russia as a vital arms supplier but resent Russia also selling arms to their rivals (China-India, Iran-Iraq). Pro-Russia business lobbies exist in Germany, Italy, Turkey, and Israel (one-fifth of whose population now consists of Soviet émigres), but they do not single-handedly determine national policies. Europe is the only region that would like to integrate Russia into a security system, but it is divided over national priorities and institutional arrangements as well as put off by some Russian behavior. Most CIS governments do not trust their colossal neighbor, which continues to show an unsettling readiness to intervene in their internal affairs, though they know Russia well and are to a considerable degree comfortable in dealing with it. Turkey has developed an improved dialogue and an unprecedented number of economic ties with Russia during the post-Cold War period, but this more positive pattern of relations has not fully taken root, and Ankara remains suspicious of Moscow's intentions. Since the collapse of the Soviet Union, Moscow's role in the Middle East has been reduced, but Israel, Syria, Egypt, Libya, and Iraq all favor good relations with Russia. Mutual interests also override disagreements in Russian-Iranian relations, but Tehran is wary of Russian behavior, particularly toward Saddam Hussein. India still trusts Russia--a sentiment that is perhaps a residue of the genuine friendship of Cold War days--but clearly not in the same way it once did, and New Delhi fears that weakness will propel Russia into doing things that could drive India further away. In East Asia, the most substantial breakthrough has been the resurrected relationship between Russia and China, one that entails significant longer-term risk for Russia. Other countries in the region value their links with Moscow as a means to balance a more powerful China, or as a useful component of their larger political and economic strategies, but Russia's role in East Asia--as elsewhere--remains constrained by the decline in its political, military, and economic power over the last decade. Russia's Weakness Russia's weakness stems from long-term secular trends and from its domestic structure. In essence, the old nomenklatura and a few newcomers have transformed power into property on the basis of personal networks and created an equilibrium resting on insider dealings. These insiders may jockey for position but have a vested interest in preserving the system. The public does not like the system but is resigned to it and gives priority to the preservation of order. As for the economy, it is divided into a profitable, internationally integrated sector run by oligarchs and a much larger, insulated, low-productivity, old-style paternalistic sector that locks Russia into low growth. No solace will be forthcoming from the international business and energy worlds. They do not expect the poor commercial climate to improve greatly and will not increase investments much beyond current levels until it does. Militarily, Russia will also remain weak. Its nuclear arsenal is of little utility, and Moscow has neither the will nor the means to reform and strengthen its conventional forces. Hope for the Future? The best hope for change in Russia lies with the younger generation. Several participants reported that under-25 Russians have much more in common with their US counterparts, including use of the Internet, than with older Soviet generations. But there was some question over whether the new generation would change the system or adapt to it. Others placed some hope in international institutions, for instance the World Trade Organization, eventually forcing Russia to adapt to the modern world. Dissenting Views Some participants dissented from the overall forecast of depressing continuity. The keynote speaker, James Billington, stated that Russia would not be forever weak and that the current confusion would end in a few years either through the adoption of authoritarian nationalism or federated democracy. One scholar felt the Chechen war was feeding ethnic discord in other areas of the Federation to which Moscow would respond with increased authoritarianism, not necessarily successfully. Finally, a historian observed that the patience of Russians is legendary but not infinite, meaning that we should not be overly deterministic.
  • Topic: International Relations, Foreign Policy, Development
  • Political Geography: Russia, United States, China, Middle East, Israel
  • Author: Mitchell B. Reiss
  • Publication Date: 02-2001
  • Content Type: Working Paper
  • Institution: U.S. Government
  • Abstract: The National Intelligence Council (NIC) held a conference on 23 February 2001 in cooperation with the Federal Research Division of the Library of Congress on "North Korea's Engagement—Perspectives, Outlook and Implications." The conference featured discussion of seven commissioned papers that are published in this report. Sixty government and nongovernment specialists participated in the conference. Following is a brief summary of the views of the specialists.
  • Topic: International Relations, Nuclear Weapons
  • Political Geography: United States, Asia, North Korea
  • Publication Date: 09-2000
  • Content Type: Working Paper
  • Institution: U.S. Government
  • Abstract: The National Intelligence Council and the Federal Research Division of the Library of Congress held a one-day unclassified conference on this topic on 17 February 2000, at the Thomas Jefferson Building of the Library of Congress. Seven papers by nongovernment specialists and 11 commentaries by Intelligence Community specialists examined: The likely development of greater divergence or convergence between key East Asian states and the United States over US policies and interests in the region. Whether divergence or convergence between East Asian states and the United States was more likely on security, economic, or political/values questions. In what ways East Asian states would be likely to collaborate in opposition to US policies and interests. Sixty US Intelligence Community, other Executive Branch, congressional, and nongovernment experts participated actively in discussions following the formal papers and commentaries, reinforcing the findings presented below.
  • Topic: International Relations, Foreign Policy
  • Political Geography: United States, East Asia
  • Publication Date: 09-1999
  • Content Type: Working Paper
  • Institution: U.S. Government
  • Abstract: The worldwide ballistic missile proliferation problem has continued to evolve during the past year. The proliferation of technology and components continues. The capabilities of the missiles in the countries seeking to acquire them are growing, a fact underscored by North Korea's launch of the Taepo Dong-1 in August 1998. The number of missiles in these countries is also increasing. Medium- and short-range ballistic missile systems, particularly if armed with weapons of mass destruction (WMD) warheads, already pose a significant, threat to US interests, military forces, and allies overseas. We have seen increased trade and cooperation among countries that have been recipients of missile technologies from others. Finally, some countries continue to work toward longer-range systems, including ICBMs.
  • Topic: International Relations, Arms Control and Proliferation, Political Economy
  • Political Geography: United States, North Korea
  • Author: Robert Sutter
  • Publication Date: 09-1999
  • Content Type: Working Paper
  • Institution: U.S. Government
  • Abstract: The National Intelligence Council and the Federal Research Division of the Library of Congress hosted an all-day seminar at the Library of Congress on September 24, 1999 assessing the five-year outlook for China's domestic development and international security behavior. Entitled "China's Future--Implications for the United States," the seminar featured seven formal presentations by prominent academic specialists complemented by commentaries by nine China specialists from the US Intelligence Community. The Directors of the China offices in the State and Defense Departments offered concluding remarks on the implications of the conference findings for US policy toward China. Panelists and commentators focused specifically on political leaders and institutions, economic and social trends, security and foreign policies, and the overall prospects for China through 2005 (see seminar program). The main thrust of the deliberations reflected cautious optimism about China's future. The regime appears resilient enough to deal with most anticipated problems internally. China is wary of the United States and is gradually building military power. But unless Beijing is challenged by unexpected circumstances, China is unlikely to break with the United States or engage in disruptive military buildups or aggressive foreign behavior.
  • Topic: International Relations, Politics
  • Political Geography: United States, China
  • Publication Date: 07-1999
  • Content Type: Working Paper
  • Institution: U.S. Government
  • Abstract: This memorandum was prepared by the National Intelligence Officer for East Asia based on a meeting held on 7 July 1999. The National Intelligence Council (NIC) routinely sponsors meetings with outside experts to gain knowledge and insights to sharpen the level of debate on critical issues. The views expressed in this meeting summary are those of individuals and do not represent official US Government positions or views.
  • Topic: International Relations, Security, Economics
  • Political Geography: United States, Asia
  • Publication Date: 12-1997
  • Content Type: Working Paper
  • Institution: U.S. Government
  • Abstract: In fall 1996, the National Intelligence Council (NIC) and the Institute for National Strategic Studies (INSS) held a series of conferences at National Defense University to identify key global trends and their impact on major regions and countries of the globe. The exercise was designed to help describe and assess major features of the political world as they will appear in the year 2010.
  • Topic: International Relations
  • Political Geography: Africa, United States, Europe, Middle East, Asia, South America
  • Author: Ann L. Owen, Murat F. Iyigun
  • Publication Date: 05-1996
  • Content Type: Working Paper
  • Institution: U.S. Government
  • Abstract: We show how the ability o accumulate human capital through formal education and through a learning-by-doing process that occurs on the job affects the dynamic behavior of the human capital stock under a liquidity constrained and a non-constrained case. When there are alternatives to formal schooling in the accumulation of human capital, investing resources in increasing school enrollment rates in low-income countries may not be the most efficient means of increasing the human capital stock. In addition, removal of the liquidity constraints may not be sufficient to escape a development trap.
  • Topic: International Relations, Economics, Education, International Trade and Finance
  • Author: Chan Huh
  • Publication Date: 01-1996
  • Content Type: Working Paper
  • Institution: U.S. Government
  • Abstract: This paper examines the dynamic relationship between changes in the finds rate and nonborrowed reserves within a reduced form framework that allows the relationship to have WO distinct patterns over time. A regime switching model a la Hamilton (1989) is estimated. On average, CPI inflation has been significantly higher in the regime and volatile changes in funds rate. Innovations in money growth are characterized by large associated with a strong anticipated inflation effect in this high inflation regime, and a moderate liquidity effect in the low inflation regime. Furthermore, an identical money innovation generates a much bigger increase in the interest rate during a transition period from the low to high inflation regime than during a steady high inflation period. This accords well with economic intuition since the transition period is when the anticipated inflation effect initially gets incorporated into the interest rate. The converse also holds. That is, the liquidity effect becomes stronger when the economy leaves a high inflation regime period and enters a low inflation regime period.
  • Topic: International Relations, Development, Economics, International Trade and Finance