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1001. DCAF Security Sector Governance Status Report and Needs Assessment on Timor Leste

Author:
Philipp H. Fluri
Publication Date:
09-2003
Content Type:
Working Paper
Institution:
Geneva Centre for Security Sector Governance (DCAF)
Abstract:
The DCAF Security Sector Governance Status Report and Needs Assessment on Timor- Leste was planned and implemented on the initiative and on behalf of the Foreign Minister of Switzerland Madame Micheline Calmy-Rey.
Topic:
International Relations, Security, Development, and Government

1002. Democratic Control of Security and Intelligence Services: A Legal Framework

Author:
Ian Leigh
Publication Date:
05-2003
Content Type:
Working Paper
Institution:
Geneva Centre for Security Sector Governance (DCAF)
Abstract:
This paper is a contribution to a continuing project of the Geneva Centre for Democratic Control of Armed Forces (DCAF): to provide a map or 'matrix' of legal norms to govern security sector reform. Previous contributions have addressed civil-military relations and work remains to be done on policing. The focus here is on the implications of this approach for the norms governing security and intelligence agencies.
Topic:
International Relations, Security, Government, and Politics
Political Geography:
Geneva

1003. Control and Oversight of Security Intelligence in Romania

Author:
Larry Watts
Publication Date:
02-2003
Content Type:
Working Paper
Institution:
Geneva Centre for Security Sector Governance (DCAF)
Abstract:
According to March 2002 poll, 60% of the Romanian population believe that their intelligence services – in particular the SRI (Serviciul roman de informatii – domestic security intelligence) and the SIE (Serviciul de informatii externe – foreign intelligence) – have been “transformed into democratic institutions on the western model.” 52% believe that the services are serving national interests in a politically-neutral fashion as opposed to partisan aims of the sitting government (32%), and 55% had a generally “good opinion” concerning their performance. 73% of the population believes that the services do not have too much power, and half of those believe they have too little power, while 74% believe that intelligence specialists remaining from before 1989 – about 15% of the SRI and 18% of the SIE – should be retained. Periodic polling by other agencies regularly rank the SRI just behind the church and the army, and ahead of the government and police, in terms of public trust.
Topic:
International Relations, Security, and Government
Political Geography:
Romania

1004. Democratic and Parliamentary Accountability of Intelligence Services after September 11th.

Author:
Peter Gill
Publication Date:
01-2003
Content Type:
Working Paper
Institution:
Geneva Centre for Security Sector Governance (DCAF)
Abstract:
In the past thirty years throughout Europe, the Americas and more sporadically elsewhere the issue of how to institute some democratic control over security intelligence agencies has steadily permeated the political agenda. There have been two main reasons for this change. In what might be described as the 'old' democracies (North America, Western Europe, Australia and New Zealand) the main impetus for change was scandal involving abuses of power and rights by the agencies. Typically, these gave rise to legislative or judicial enquiries that resulted in new legal and oversight structures for the agencies, some of these achieved by statutes, others by executive orders. The best known examples of these are the U.S. congressional enquiries during 1975-76 (chaired by Senator Church and Representative Pike), Justice McDonald's enquiry into the RCMP Security Service in Canada (1977-81) and Justice Hope's into the Australian Security Intelligence Organisation.
Topic:
International Relations, Security, Democratization, and Government
Political Geography:
Australia, North America, New Zealand, and Western Europe

1005. Unproven: The Controversy over Justifying War in Iraq

Author:
David Cortright, Alistair Millar, George A. Lopez, and Linda M. Gerber
Publication Date:
06-2003
Content Type:
Working Paper
Institution:
Fourth Freedom Forum
Abstract:
The failure of U.S. and British forces in Iraq to find evidence of weapons of mass destruction has sparked controversy on both sides of the Atlantic and in the wider international community. Two contending explanations have been offered for why the Bush administration made apparently questionable claims about weapons of mass destruction. The first alleges an intelligence failure. The best analysts in the CIA simply had no foolproof way of discerning what Saddam had. They gave the administration a wide-ranging set of estimates, from benign to worst-case, and, given the way bureaucracies behave, the president's advisors adopted the worse case scenario. The second claim, more odious in form and substance, is that the administration inflated and manipulated uncertain data, possibly even requesting that material sent to it be redone to fit preconceived notions. The Bush administration has gone to great pains to reassert that it stands by its previous pronouncements that prohibited weapons will be located in due time.
Topic:
International Relations, War, and Weapons of Mass Destruction
Political Geography:
United States, Iraq, and Middle East

1006. NATO Nuclear Non-proliferation Policies in a Changing Threat Environment

Author:
Alistair Millar and Morten Bremer Maerli
Publication Date:
05-2003
Content Type:
Working Paper
Institution:
Fourth Freedom Forum
Abstract:
This report summarises the conference “NATO Nuclear Non-Proliferation Policies in a Changing Threat Environment” convened in, Oslo, 12 May 2003. The conference was co-organised by the Fourth Freedom Forum, the Norwegian Atlantic Committee, and the Norwegian Institute of International Affairs. It was co-sponsored by the Norwegian Ministry of Foreign Affairs, the Norwegian Ministry of Defence and the Ploughshares Foundation.
Topic:
International Relations, NATO, Climate Change, Government, and Nuclear Weapons

1007. Political Disaffection and Democratization: History in New Democracies

Author:
Mariano Torcal
Publication Date:
10-2003
Content Type:
Working Paper
Institution:
Kellogg Institute for International Studies
Abstract:
This paper focuses on the analysis of political disaffection. After discussing and defining this notion, the article shows that disaffection affects more widely, though not exclusively, third-wave democracies. The close link between levels of disaffection and the history of democratization in each country explains its higher incidence among new democracies. For this very reason, political disaffection could also run high among more established democracies. However, regardless of its incidence in each particular country, political disaffection reveals a distinctive nature in new democracies because of the absence of a democratic past in many of these cases. Thus, disaffection constitutes a key element to explain the lower propensity of citizens of new democracies to participate in every dimension of political activity.
Topic:
International Relations, Government, International Political Economy, and Politics
Political Geography:
Europe

1008. Informal Institutions and Comparative Politics: A Research Agenda

Author:
Gretchen Helmke and Steven Levitsky
Publication Date:
09-2003
Content Type:
Working Paper
Institution:
Kellogg Institute for International Studies
Abstract:
During the 1990s, comparative research on political institutions focused primarily on formal rules. Yet recent studies suggest that an exclusive focus on formal rules is often insufficient, and that informal institutions, ranging from bureaucratic and legislative norms to clientelism and patrimonialism, often have a profound—and systematic—effect on political outcomes. Neglecting these informal institutions thus risks missing many of the “real” incentives and constraints that underlie political behavior. This article seeks to move informal institutions from the margins to the mainstream of comparative politics research. It develops an initial framework for studying informal institutions and, importantly, integrating them into comparative institutional analysis. In the conceptual realm, the article attempts to clarify what is meant by “informal institution” and then develops a typology of four patterns of formal-informal institutional interaction: complementary, accommodating, competing, and substitutive. In the theoretical realm, the article examines two issues that have been largely unexplored in the literature on informal institutions: the question of why and how informal institutions emerge, and the sources of informal institutions stability and change. A final section explores some of the practical challenges inherent in research on informal institutions, including issues of identification, measurement, and comparison.
Topic:
International Relations, Government, International Political Economy, and Politics

1009. Are We Taking China's Future for Granted?

Author:
Joseph C. Folio
Publication Date:
09-2003
Content Type:
Working Paper
Institution:
Institute for the Study of Diplomacy, Edmund A. Walsh School of Foreign Service, Georgetown University
Abstract:
During Fall 2003 the Schlesinger Working Group held two meetings (September 25th and November 3rd) to explore China's estimated political/ economic outlook and to determine what potential challenges might affect its projected future. The purpose of these meetings was not to predict a Chinese stumble or even collapse, but rather to examine events that could trigger a disruption of China's current, impressively successful economic trajectory, and to analyze what form that disruption could take. During the first meeting, participants identified potential disruption scenarios to which China remains vulnerable. The second meeting considered the implications of disruption for both China and the United States, and how these scenarios might affect U.S. policy. Working Group members did not attempt to assign probabilities for the identified potential disruptions or “failures.” Rather, they focused on the hurdles or challenges posed by these disruption scenarios, which the Chinese leadership would need to confront successfully in order to avoid losing control or endangering national cohesion. Participants generally agreed that any major disruption would most likely derive from an external shock that might negatively affect China's economic situation and possibly ignite collateral internal disruption via domestic unrest or leadership division. The group concurred that the Chinese leadership has sufficient strength and cohesion to manage most forms of internal disruption, or at least to adapt quickly and effectively to those that arise.
Topic:
International Relations, Diplomacy, and Economics
Political Geography:
United States and China

1010. Virtual water and the Kyoto consensus'

Author:
S. Merrett
Publication Date:
05-2003
Content Type:
Working Paper
Institution:
School of Oriental and African Studies - University of London
Abstract:
The Editor of Water International published in the March 2003 issue a paper by Stephen Merrett containing a critique of the “virtual water” concept as well as replies by Tony Allan and Christopher Lant. This discussion paper is a rejoinder to Allan and Lant that also raises the stakes by considering the relation of “virtual water” to an emerging Kyoto consensus on water resources management.
Topic:
International Relations, Development, Environment, and International Law

1011. Development of the civil realm in Shanghai environmental politics

Author:
Seungho Lee
Publication Date:
05-2003
Content Type:
Working Paper
Institution:
School of Oriental and African Studies - University of London
Abstract:
This chapter analyses the development in the civil realm of environmental politics in Shanghai. This study is an effort to identify environmental communities based on Mary Douglas's grid/group theory and an attempt to comprehend the nature of the dynamic interaction of the private and the public spheres, particularly within the public sphere between the state (the Shanghai government) and ethical social entities (environmental NGOs and other social groups). The contribution of the study lies in its revelation of how the civil realm in Shanghai has developed with a self - capacity to redress environmentally unfriendly policies over the last decade. Fieldwork carried out in 2002 identified a number of environmental Non Governmental Organisations, NGOs, and other social groups in Shanghai. It proved to be possible to highlight the recent emergence of environmental NGOs, including university students based organisations. The study evaluates how these groups have evolved and have survived in the transitional period in alliance with Government Organised NGOs, GONGOs, local communities (shequ), the media, international NGOs and the government. Although these environmental groups now commit themselves to various environmental issues, Shanghai does not have any particular NGO mainly engaged in freshwater issues. It is concluded that a collaboration of GONGOs, NGOs, and various environmental groups alongside international NGOs has led to the formation of a civil force that impacts Shanghai's environmental policy - making.
Topic:
International Relations, Development, and Environment
Political Geography:
China and Shanghai

1012. The Cost of Resolving Small Business Conflicts: The Case of Peru

Author:
Keith Henderson and Alvaro Herrero
Publication Date:
10-2003
Content Type:
Working Paper
Institution:
Academy of Political Science
Abstract:
The goal of this study is to analyze the impact of judicial inefficiency on small businesses in Peru. It is based on the hypothesis that chronic problems in the region's judicial systems have negative consequences on the development of micro, small and medium - sized businesses. Our analysis focuses, first, on the relationship between Small and Medium Enterprises (SMEs) and the legal system. Secondly, it investigates the decisions made by SMEs to mitigate the effects of bad court performance. Lastly, it identifies several ways in which judicial inefficiency is transferred to the business sector. The analysis also attempts to quantify the economic impact of judicial inefficiency.
Topic:
International Relations and Development
Political Geography:
Middle East, South America, and Peru

1013. You, The People: The United Nations, Transitional Administration, and State-Building

Author:
Simon Chesterman
Publication Date:
11-2003
Content Type:
Working Paper
Institution:
International Peace Institute
Abstract:
Transitional administrations represent the most complex operations attempted by the United Nations. The missions in Kosovo (1999—) and East Timor (1999–2002) are commonly seen as unique in the history of the United Nations. But they may also be seen as the latest in a series of operations that have involved the United Nations in 'state-building' activities, in which it has attempted to develop the institutions of government by assuming some or all of those sovereign powers on a temporary basis. Viewed in light of earlier UN operations, such as those in Namibia (1989–1990), Cambodia (1992–1993), and Eastern Slavonia (1996–1998), the idea that these exceptional circumstances may not recur is somewhat disingenuous. The need for policy research in this area was brought into sharp focus by the weighty but vague responsibilities assigned to the United Nations in Afghanistan (2002—) and its contested role in Iraq (2003—).
Topic:
International Relations, Development, Government, and United Nations
Political Geography:
Afghanistan, Kosovo, Cambodia, Namibia, and Eastern Slavonia

1014. Breaks in the Variability and Co-Movement of G-7 Economic Growth

Author:
Jon Faust and Brian M. Doyle
Publication Date:
12-2003
Content Type:
Working Paper
Institution:
Board of Governors of the Federal Reserve System
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, and International Trade and Finance
Political Geography:
United States, Canada, and North America

1015. Interest Rate Rules and Multiple Equilibria in the Small Open Economy

Author:
Luis-Felipe Zanna
Publication Date:
12-2003
Content Type:
Working Paper
Institution:
Board of Governors of the Federal Reserve System
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, and International Trade and Finance

1016. Productivity Growth and the Phillips Curve in Canada

Author:
Joseph W. Gruber
Publication Date:
11-2003
Content Type:
Working Paper
Institution:
Board of Governors of the Federal Reserve System
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, and Industrial Policy
Political Geography:
Canada and North America

1017. The High-Frequency Response of Exchange Rates and Interest Rates to Macroeconomic Announcements

Author:
John H. Rogers, Jonathan H. Wright, Jon Faust, and Shing-Yi B. Wang
Publication Date:
10-2003
Content Type:
Working Paper
Institution:
Board of Governors of the Federal Reserve System
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, and International Trade and Finance
Political Geography:
United States

1018. Market Power and Inflation

Author:
David Bowman
Publication Date:
10-2003
Content Type:
Working Paper
Institution:
Board of Governors of the Federal Reserve System
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, and International Trade and Finance

1019. Productive Capacity, Product Varieties, and the Elasticities Approach to the Trade Balance

Author:
Joseph E. Gagnon
Publication Date:
10-2003
Content Type:
Working Paper
Institution:
Board of Governors of the Federal Reserve System
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, and International Trade and Finance
Political Geography:
United States

1020. Report of the Defense Science Board Task Force on The Role and Status of Red Teaming Activities

Publication Date:
09-2003
Content Type:
Working Paper
Institution:
Board of Governors of the Federal Reserve System
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, and Defense Policy
Political Geography:
United States

1021. Forecasting U.S. Inflation by Bayesian Model Averaging

Author:
Jonathan H. Wright
Publication Date:
09-2003
Content Type:
Working Paper
Institution:
Board of Governors of the Federal Reserve System
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, and International Trade and Finance
Political Geography:
United States

1022. Bayesian Model Averaging and Exchange Rate Forecasts

Author:
Jonathan H. Wright
Publication Date:
09-2003
Content Type:
Working Paper
Institution:
Board of Governors of the Federal Reserve System
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, and International Trade and Finance
Political Geography:
United States

1023. Revisiting the Border: An Assessment of the Law of One Price Using Very Disaggregated Consumer Price Data

Author:
John H. Rogers, Shing-Yi B. Wang, and Charles M. Engels
Publication Date:
09-2003
Content Type:
Working Paper
Institution:
Board of Governors of the Federal Reserve System
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, and International Trade and Finance
Political Geography:
Canada and North America

1024. Contagion: An Empirical Test

Author:
Jon Wongswan
Publication Date:
09-2003
Content Type:
Working Paper
Institution:
Board of Governors of the Federal Reserve System
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, and International Trade and Finance
Political Geography:
United States, United Kingdom, Asia, Germany, and Latin America

1025. The USA and UNESCO: Building Knowledge, Building Cultures

Publication Date:
08-2003
Content Type:
Working Paper
Institution:
Board of Governors of the Federal Reserve System
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, and United Nations
Political Geography:
United States

1026. News or Noise? An Analysis of Brazilian GDP Announcements

Author:
Rebeca de la Rocque Palis, Roberto Luis Olinto Ramos, and Patrice Robitaille
Publication Date:
08-2003
Content Type:
Working Paper
Institution:
Board of Governors of the Federal Reserve System
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, and International Trade and Finance
Political Geography:
Brazil and South America

1027. The Effect of Exchange Rate Fluctuations on Multinationals' Returns

Author:
Jane Ihrig and David Prior
Publication Date:
08-2003
Content Type:
Working Paper
Institution:
Board of Governors of the Federal Reserve System
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, and International Trade and Finance
Political Geography:
United States

1028. SARS: Down But Still a Threat

Publication Date:
08-2003
Content Type:
Working Paper
Institution:
Board of Governors of the Federal Reserve System
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, and Third World
Political Geography:
United States

1029. Strategic Reactions to American Preeminence: Great Power Politics in the Age of Unipolarity

Author:
John G. Ikenberry
Publication Date:
07-2003
Content Type:
Working Paper
Institution:
Board of Governors of the Federal Reserve System
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, and Sovereignty
Political Geography:
United States and America

1030. Report of the Defense Science Board Task Force on Discriminate Use of Force

Publication Date:
07-2003
Content Type:
Working Paper
Institution:
Board of Governors of the Federal Reserve System
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, and Science and Technology
Political Geography:
United States

1031. Afghanistan: Seeds of Hope

Author:
David Johnson
Publication Date:
05-2003
Content Type:
Working Paper
Institution:
Board of Governors of the Federal Reserve System
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, and Development
Political Geography:
Afghanistan and Middle East

1032. An Empirical Analysis of Inflation in OECD Countries

Author:
Jaime Marquez and Jane Ihrig
Publication Date:
05-2003
Content Type:
Working Paper
Institution:
Board of Governors of the Federal Reserve System
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, and International Trade and Finance
Political Geography:
United States

1033. Putting 'M' Back in Monetary Policy

Author:
Eric M. Leeper and Jennifer E. Roush
Publication Date:
04-2003
Content Type:
Working Paper
Institution:
Board of Governors of the Federal Reserve System
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, and International Trade and Finance

1034. Are Financially Dollarized Countries More Prone to Costly Crises?

Author:
Carlos Ó. Arteta
Publication Date:
03-2003
Content Type:
Working Paper
Institution:
Board of Governors of the Federal Reserve System
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, and International Trade and Finance

1035. New Keynesian, Open-Economy Models and Their Implications for Monetary Policy

Author:
Brian M. Doyle and David Bowman
Publication Date:
03-2003
Content Type:
Working Paper
Institution:
Board of Governors of the Federal Reserve System
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, and Monetary Policy

1036. Foreign Portfolio Investment, Foreign Bank Lending, and Economic Growth

Author:
J. Benson Durham
Publication Date:
02-2003
Content Type:
Working Paper
Institution:
Board of Governors of the Federal Reserve System
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, and International Trade and Finance
Political Geography:
United States

1037. The Present-Value Model of the Current Account Has Been Rejected: Round Up the Usual Suspects

Author:
John H. Rogers and James M. Nason
Publication Date:
02-2003
Content Type:
Working Paper
Institution:
Board of Governors of the Federal Reserve System
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, and International Trade and Finance

1038. Diversification, Original Sin, and International Bond Portfolios

Author:
Francis E. Warnock and John D. Burger
Publication Date:
01-2003
Content Type:
Working Paper
Institution:
Board of Governors of the Federal Reserve System
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, and International Trade and Finance
Political Geography:
United States

1039. Uncovered Interest Parity: It Works, But Not For Long

Author:
Jonathan H. Wright and Alain P. Chaboud
Publication Date:
01-2003
Content Type:
Working Paper
Institution:
Board of Governors of the Federal Reserve System
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, and International Trade and Finance

1040. Long-Run Supply Effects and the Elasticities Approach to Trade

Author:
Joseph E. Gagnon
Publication Date:
01-2003
Content Type:
Working Paper
Institution:
Board of Governors of the Federal Reserve System
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, and International Trade and Finance
Political Geography:
United States

1041. Firm-Level Access To International Capital Markets: Evidence From Chilean Equities

Author:
Francis E. Warnock and Sara B. Holland
Publication Date:
01-2003
Content Type:
Working Paper
Institution:
Board of Governors of the Federal Reserve System
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, and International Trade and Finance
Political Geography:
South America

1042. The ROK—U.S. Alliance: Where Is It Headed?

Author:
Kim Dong Shin
Publication Date:
04-2003
Content Type:
Working Paper
Abstract:
The National Security Strategy of the United States of America (September 2002) provides an important framework from which to examine the current crisis on the Korean Peninsula and other challenges in Northeast Asia. With its focus on terrorism and weapons of mass destruction (WMD), this strategy is concerned with North Korea as much as, if not more than, any other state. In particular, North Korea poses a unique set of challenges in regard to WMD. North Korea stands in sharp contrast to the Republic of Korea (ROK) on issues such as human rights, democracy, and market economies. The National Security Strategy suggests that the United States should revitalize its alliance with South Korea, while encouraging North Korea to transform its political and economic system. Yet South Korea and the United States are currently having some difficulties in developing a consensus on how to approach Pyongyang, and appear to have no clear plan to operationalize the strategy to deal with North Korea.
Topic:
International Relations and Security
Political Geography:
United States, America, Asia, and North Korea

1043. Aleksandr Dugin's Foundations of Geopolitics

Author:
John B. Dunlop
Publication Date:
08-2003
Content Type:
Working Paper
Institution:
Liechtenstein Institute on Self-Determination, Princeton University
Abstract:
One perceptive observer of the Russian political scene, Francoise Thom, noted as far back as 1994 that fascism, and especially its “Eurasianist” variant, was already at that time displacing Russian nationalism among statist Russian elites as a post-communist “Russian Idea,” especially in the foreign policy sphere. “The weakness of Russian nationalists,” she emphasized, “stems from their inability to clearly situate Russian frontiers. Euras[ianism] brings an ideological foundation for post-Soviet imperialism.”
Topic:
International Relations, Nationalism, and Politics
Political Geography:
Russia and Eurasia

1044. The Future of Russia: The Nuclear Factor

Author:
Oleg Bukharin
Publication Date:
08-2003
Content Type:
Working Paper
Institution:
Liechtenstein Institute on Self-Determination, Princeton University
Abstract:
Two factors were of critical significance in shaping the international peace and security agenda after the Cold War: the emergence of nuclear security and proliferation dangers in the wake of the Soviet collapse, and the unprecedented level of cooperation between Russia and other countries to address these problems. As a result of cooperative international and Russia's domestic efforts, important progress has been made in recent years in reducing nuclear arsenals, protecting Russia's nuclear materials, and preventing proliferation of nuclear weapons expertise from Russia. Much work, however, remains to be done.
Topic:
International Relations, Defense Policy, and Nuclear Weapons
Political Geography:
Russia

1045. A Review of European Perceptions of Cuba

Author:
Joaquín Roy
Publication Date:
02-2003
Content Type:
Working Paper
Institution:
The North-South Center, University of Miami
Abstract:
The commemoration of the 100th anniversary of the birth of the Cuban Republic on May 20, 2002, provided an opportunity to review not only the survival of the Cuban regime, but also the whole history of the Cuban nation. 2 This event coincided with the historic visit of former President Jimmy Carter to Havana 3 and the reiteration of the unwillingness of the United States to terminate its embargo of Cuba, as expressed by President George W. Bush in an unprecedented speech in Washington and on a trip to Miami. 4 At the same time, friction has increased between Cuba and some influential Latin American countries, as in the special case of Mexico. The tension generated in the aftermath of the vote taken by the United Nations Commission for Human Rights in Geneva in April 2002, which criticized Cuba's human rights practices, revealed a definite crack in the comfortable linkage previously enjoyed by Castro with most countries of the hemisphere (with the notable exception of the United States). On October 23, 2002, when the European Parliament (EP) approved the award of the Sakharov Prize to Cuban dissident Oswaldo Payá for his record in the defense of human rights and especially for his leadership in the “Varela Project,” the overall panorama of the relations of the European Union (EU) with Cuba acquired a new look, signifying the confirmation of a long pattern of the EU's perceptions of and policy toward Cuba. 5 Cuba's decision to allow Payá to travel to Strasbourg to receive the award was taken simultaneously with the EU's announcement of the opening of a delegation in Cuba, while Castro surprisingly declared that Cuba would reapply to become a member of the Africa, Caribbean, Pacific (ACP) Cotonou Convention. It is time, therefore, for a historical review and a consideration of the most salient aspects of European-Cuban relations and some of the pending issues.
Topic:
International Relations
Political Geography:
Europe, Cuba, and Caribbean

1046. Europe: Neither Plan Colombia, nor Peace Process - From Good Intentions to High Frustration

Author:
Joaquin Roy
Publication Date:
01-2003
Content Type:
Working Paper
Institution:
The North-South Center, University of Miami
Abstract:
With the public announcement of a reshaped Plan Colombia in mid-2000, European attitudes toward involvement in attempting to solve the crisis of Colombia's endemic violence has oscillated from alarm to hope and, finally, to frustration. The overall scene has been dominated by a sense of powerlessness, mixed with realism and internal contradictions between member states and institutions of the European Union (EU).
Topic:
International Relations and Government
Political Geography:
Europe and Colombia

1047. How the Axis of Evil Metaphor Changes Iranian Images of the USA

Author:
Daniel Heradstveit and G. Matthew Bonham
Publication Date:
06-2003
Content Type:
Working Paper
Institution:
Norwegian Institute of International Affairs
Abstract:
The respondents feared an American attack, and regarded their membership in «the Axis of Evil» as a stab in the back after Iranian help in Afghanistan. This demonisation was seen overwhelmingly in terms of American geopolitical designs, ignorance and downright irrationality – an expansionist superpower that is dangerously out of control. The WTC attack initially caused a strengthening of Iranian national unity and a more coherent foreign policy, but most of the respondents regard «the Axis of Evil» as killing the nascent dialogue with the USA stone dead and coming as a godsend to the conservatives and the ultras.
Topic:
International Relations and Foreign Policy
Political Geography:
Afghanistan, United States, America, Iran, and Middle East

1048. The Requirements of European International Society: Modernity and Nationalism in the Ottoman Empire

Author:
Ayla GÖL
Publication Date:
12-2003
Content Type:
Working Paper
Institution:
Australian National University Department of International Relations
Abstract:
This paper critically examines the 'admittance' of the Ottoman Empire as the first non-European and non-Christian state into European international society, challenges the idea that international society had a universal character, and explores how the Empire encountered and adapted to the requirements of this society. There are two premises to explore. First, the Empire was never accepted as an equal member of the European society of states. Second, the Ottoman Empire's desire to enter European international society initiated its modernisation, which gradually led to the emergence of Turkish nationalism in the twentieth century. The first part of this paper deals with the 'otherness' of the Ottoman Empire within European international society. The second part explains the paradoxical character of Ottoman–European relations, which initiated the Empire's modernisation. The last part explores the emergence of Turkish nationalism in relation to the policies of Ottoman modernisation that brought the transition from an Islamic empire into a modern secular nation-state. It concludes by questioning whether or not the modern Turkish state is considered a European member of international society.
Topic:
International Relations and Nationalism
Political Geography:
Europe, Turkey, and Middle East

1049. The Neo-Roman Republican Legacy and International Political Theory

Author:
Steven Slaughter
Publication Date:
12-2003
Content Type:
Working Paper
Institution:
Australian National University Department of International Relations
Abstract:
This paper claims that established accounts of international political theory overlook the neo-roman strand of republican political theory. It seeks to address this case of neglect and extend republican observations into international political theory in three steps. The first step examines the nature of international political theory. The second step examines the neo-roman strand of republicanism's conception of liberty and the institutions whereby this type of liberty is secured. Lastly, the main elements of a republican approach to international political theory are developed in a way that highlights republicanism's institutional approach to world politics and its commitment to the state.
Topic:
International Relations, Development, Government, and Politics

1050. Reimagining International Society Through the Emergence of Japanese Imperialism

Author:
Shogo Suzuki
Publication Date:
11-2003
Content Type:
Working Paper
Institution:
Australian National University Department of International Relations
Abstract:
In the not too distant past Timothy Dunne asserted that '[International] society is what states have made of it'. Since then much has been written about how the English School offers a valuable interpretivist approach, how it has spread across the world, how it can be improved, and what it has to say about non-European societies and 'world society'. This paper aims to contribute to all three facets of the debate through a case study of how the Japanese elite understood international society during the bakumatsu (late-Tokugawa)/early-Meiji periods (1853-95). In doing so, it examines the emergence of Japanese imperialism from the perspective of international society as perceived by English School scholars.
Topic:
International Relations and Development
Political Geography:
United States, Japan, Europe, and Asia