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1351. Rethinking the Export-Import Bank

Author:
Aaron Lukas and Ian Vásquez
Publication Date:
03-2002
Content Type:
Working Paper
Institution:
The Cato Institute
Abstract:
The Export-Import Bank of the United States (Ex-Im Bank) was created in 1934 as an independent federal agency operating under a renewable congressional charter. That charter most recently expired on September 30, 2001. Since then, the Ex-Im Bank has been operating under a series of continuing resolutions set to expire on March 31, 2002.
Topic:
Economics and International Trade and Finance
Political Geography:
United States

1352. Back to the Nest? Europe's Relations with the African, Caribbean and Pacific Group of Countries

Author:
John Ravenhill
Publication Date:
12-2002
Content Type:
Working Paper
Institution:
Institute of European Studies (IES), UC Berkeley
Abstract:
Europe's association with African, Caribbean and Pacific (ACP) countries was the first of its interregional relationships. In the nearly half century since the signature of the Treaty of Rome, it developed into Europe's most institutionalized and multidimensional interregional relationship. It embraces not only trade and investment issues but also a development "partnership" that includes what has traditionally been the EU's largest single aid program, a joint parliamentary assembly, meetings of organizations representing civil society, and a dialogue on human rights. This chapter examines the factors that have shaped this relationship over the last four decades. The principal focus is on the trade regime, not just for consistency with the other contributions to this volume but also because it is in its trade dimension that the relationship has changed most dramatically over time.
Topic:
International Political Economy and International Trade and Finance
Political Geography:
Africa, Europe, Caribbean, and Rome

1353. Lessons of the Euro for the Rest of the World

Author:
Barry Eichengreen
Publication Date:
12-2002
Content Type:
Working Paper
Institution:
Institute of European Studies (IES), UC Berkeley
Abstract:
Europe's single currency is widely invoked as a potential solution to the monetary and exchange rate problems of other regions, including Asia, Latin America, North America and even Africa. This lecture asks whether the Europe's experience in creating the euro is exportable. It argues that the single currency is the result of a larger integrationist project that has political as well as economic dimensions. The appetite for political integration being less in other parts of the world, the euro will not be easily emulated. Other regions will have to find different means of addressing the tension between domestic monetary autonomy and regional integration. Harmonized inflation targeting may be the best available solution.
Topic:
Economics, International Trade and Finance, and Political Economy
Political Geography:
Africa, Europe, Asia, and Latin America

1354. The Development of Europe's Linkages with East Asia: Hybrid Trans-Regionalism?

Author:
Julie Gilson
Publication Date:
12-2002
Content Type:
Working Paper
Institution:
Institute of European Studies (IES), UC Berkeley
Abstract:
This chapter argues that the EU-Asia trans-regional relationship is still very hard to measure but that there is developing both a notion of economic Asia, a desire to collectivise responses in the face of differentiated resource allocation and a growing dominance of the form of regionalism demonstrated by the EU.
Topic:
International Political Economy and International Trade and Finance
Political Geography:
Europe and Asia

1355. The European Union and North America

Author:
Edward A. Fogarty
Publication Date:
10-2002
Content Type:
Working Paper
Institution:
Institute of European Studies (IES), UC Berkeley
Abstract:
This paper assesses the past, present, and future of transatlantic commercial relations in terms of EU trade strategies. After surveying the medium-term trajectories of the relationships with the United States, Mexico, and Canada-both separately and as a group-it will consider several possible sources of European Union trade preferences vis-à-vis NAFTA, including interest groups' incentives to seek to capture national and European governing institutions, the balance between the European Commission and the Council of Ministers, European leaders' desire to balance against overweening American power, and possible attempts to construct either a common Western identity or, alternatively, a European identity in contradistinction what the United States seems to represent. The hope is that these different approaches provide a contrasting set of interpretations whose comparison side-by-side allows new insights into the dynamics governing EU-North American trade relations.
Topic:
International Trade and Finance
Political Geography:
United States, Europe, Canada, North America, and Mexico

1356. Mortgage Default Insurance in the U.S.: Implications for Russia

Author:
Raymond Struyk and Douglas E. Whiteley
Publication Date:
03-2002
Content Type:
Working Paper
Institution:
Urban Institute
Abstract:
The objective of this paper is to introduce the concept of mortgage default insurance as developed in the United States into the context of Russian mortgage lending. The first part of the paper discusses the broad principles and operations of mortgage default insurance offered by private companies as it works in the United States. The pricing of this product and the preconditions for offering such insurance are highlighted. The second section outlines the operation of the U.S. government-supported default insurance offered by the Federal Housing Administration (FHA). The final part applies the foregoing information to the situation in Russia today and concludes that the conditions necessary for launching mortgage default insurance do not currently exist in the country. Nevertheless, there are a number of essential actions that can and should be taken over the next several months to put Russia on the road to establishing such insurance in a few years. The paper finishes with a possible action plan for the next two years.
Topic:
Development, Government, and International Trade and Finance
Political Geography:
Russia, United States, Europe, and Asia

1357. Regulatory Europeanization, National Autonomy and Regulatory Effectiveness: Marketing Authorization for Pharmaceuticals

Author:
Jürgen Feick
Publication Date:
11-2002
Content Type:
Working Paper
Institution:
Max Planck Institute for the Study of Societies
Abstract:
The EC harmonized market entry regulation for pharmaceuticals from the early sixties on, but it achieved neither its goal of uniform national regulatory decisions nor that of automatic mutual recognition. Subsequent attempts to Europeanize the procedures themselves resulted in two alternatives in 1995: a Centralized Procedure for innovative pharmaceutical products implemented at the EU level, and a Decentralized Procedure which tries to assure mutual recognition. First, the paper analyzes the distinctive modes of Europeanization employed in these regulatory alternatives, examining both their impact on the effectiveness of European governing and the balance they strike between European interventionism, national participation and national autonomy. Second, it tries to assess whether Europeanization furthers the goals of pharmaceutical market entry policy as defined in European regulations – public health protection, creation of a single market and the reduction of regulatory costs to industry. There is little evidence that the public's health is less well protected when regulation is Europeanized. Only the Centralized Procedure contributes significantly to the goal of establishing a single market. Regulatory costs in terms of approval time did go down especially for pharmaceutical firms using the Centralized Procedure, mainly because of efficiency-enhancing legal provisions and institutionally induced regulatory competition between national authorities.
Topic:
Economics, International Trade and Finance, and Science and Technology
Political Geography:
Europe

1358. Business Interest Representation and European Commission Fora: A Game Theoretic Investigation

Author:
Andreas Broscheid and David Coen
Publication Date:
07-2002
Content Type:
Working Paper
Institution:
Max Planck Institute for the Study of Societies
Abstract:
The relationship between business and the EU institutions has evolved from its corporatist origins into a complex elite pluralist arrangement centered around industrial fora and policy committees. We view the growth of forum politics as the direct consequence of the unprecedented boom in economic and public interest lobbying in the early 1990s: While the increase in European interest representation provided greater legitimacy for the European integration program, it put a strain on the existing open pluralist European business-government relationship. One of the European Commission's (EC) informal solutions was to create restricted-entry policy fora and select committees, which it hoped would provide fast and reliable decision-making. Employing a formal model of industrial fora and committees, we specify the mechanisms that we believe caused the establishment of the current elite pluralist system of interest representation in the EU. We argue that in the process of establishing selective-entry fora for interest representation, the European Commission acted not only as policy entrepreneur, but also as a political entrepreneur, fostering collective action.
Topic:
Government, International Trade and Finance, and Political Economy
Political Geography:
Europe

1359. Breaking the Path of Institutional Development? Alternatives to the New Determinism

Author:
Colin Crouch and Henry Farrell
Publication Date:
06-2002
Content Type:
Working Paper
Institution:
Max Planck Institute for the Study of Societies
Abstract:
The concept of path dependence is being used in highly deterministic ways in neo-institutionalist analysis, so that studies using this framework have difficulty in accounting for, or predicting, change. However, the original Polya urn model from which path dependence theory draws predicts that alternative paths will be possible. It can be argued that actors will be able to use these when they perceive a need to change. This article seeks to capture this possibility through accommodating a Bayesian parametric decision maker, interacting with an environment. This makes it possible to examine how change may involve such processes as: the use of past or redundant institutional repertoires; transfer of experience across action spaces; or from other agents, through networks of structured relationships; the emergence of perceived “one best” solutions. This approach points to the need to change how typologies are used in neo-institutionalist research, so that those features of cases which do not fit the pre-conceived framework of a type are not disregarded as “noise”, but properly evaluated as potential resources for change.
Topic:
Economics, Emerging Markets, and International Trade and Finance

1360. How Reliable is Pooled Analysis in Political Economy? The Globalization-Welfare State Nexus Revisited

Author:
Bernhard Kittel and Hannes Winner
Publication Date:
05-2002
Content Type:
Working Paper
Institution:
Max Planck Institute for the Study of Societies
Abstract:
Panel data analysis has become very popular in comparative political economy. However, in order to draw meaningful inferences from such data, one has to address specification and estimation issues carefully. This paper aims to demonstrate various pitfalls that typically occur in applied empirical work. To illustrate this, we refer to the debate on the globalization-welfare state nexus. We reexamine a model by Garrett and Mitchell (2001), a leading study in this regard. Utilizing a data set of 17 OECD countries and the time period 1961 to 1993, they find evidence that globalization and partisan composition have a significant impact on the extent of public activity. However, because they apply a dynamic specification in levels, they do not adequately take into account both the dynamic and spherical nature of the data. In contrast, we propose an autoregressive model in first differences that is shown to perform well in statistical terms. Further, we explicitly pay attention to the time pattern of the globalization-welfare state nexus. Substantively, we find evidence that government spending is primarily driven by the state of the domestic economy. Neither partisan effects nor the international economic environment have affected public expenditure considerably.
Topic:
Economics, Globalization, International Trade and Finance, and Political Economy

1361. Political Parties, Institutions, and the Dynamics of Social Expenditure in Times of Austerity

Author:
Herbert Obinger and Bernhard Kittel
Publication Date:
01-2002
Content Type:
Working Paper
Institution:
Max Planck Institute for the Study of Societies
Abstract:
The containment of social expenditure growth has been (and still is) a core issue of public policy in advanced industrial countries since the 1980s and has received much academic attention during that period. Among the most extensively discussed explanatory factors of social expenditure are partisan politics and political institutions, as well as the dependency of the real impact of the former on the latter. The paper distinguishes five competing theoretical perspectives and explores their power to explain the empirical variation in the period 1982–1997 in 21 OECD countries. The empirical analysis of short-term dynamics is performed in a time-series cross-section framework while long-term level effects are explored in a cross-sectional setting. By using an interactive model specification the authors show that there is empirical evidence for this conditional effect, albeit it is neither thoroughly convincing nor leading to lasting long-term level effects. Extensive specification tests show that the 1990s witnessed a weakening of partisan effects which were still present in the 1980s. In total, the evidence tends to give most support to the “growth-to-limits” and the “new politics” perspectives.
Topic:
Economics, Government, International Trade and Finance, and Political Economy

1362. Globalization and Catching-up in Emerging Market Economies

Author:
Grzegorz W. Kolodko
Publication Date:
05-2002
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
The study discusses conditions and prospects for fast and durable growth in emerging market economies. In the course of history less than 30 nations have become rich and still more than 80 per cent of the world population lives in the middle and low-income countries, some of them in extreme poverty. It is true not only for the majority of economies traditionally considered as 'developing countries', but also for the new, post-socialist emerging markets. Thus the questions arise: what is the influence of globalization process on economic growth and how real are the prospects for these emerging markets to catch up with more advanced countries? What factors may contribute to sustained and rapid growth over the long term? The paper examines strategies that can help taking the contemporary wave of globalization to the advantage of fast growth of less advanced countries and hence containing the existing development gaps.
Topic:
Economics, Emerging Markets, Globalization, and International Trade and Finance

1363. The Benefits and Costs of Group Affiliation: Evidence from East Asia

Author:
Stijn Claessens, Joseph P.H. Fan, and Larry H.P. Lang
Publication Date:
05-2002
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
This paper investigates the benefits and associated agency costs of using internal capital markets through affiliating with groups using data of two thousand firms from nine East Asian economies between 1994-6. We find that mature and slow-growing firms with ownership structures more likely to create agency problems gain more from group affiliation, while young and high-growth firms more likely lose. Agency problems are important explanatory factors of firm value in economies outside Japan, but less so in Japan. Consistent with the literature, financially constrained firms benefit from group affiliation. Our results are robust to different time periods and estimation techniques.
Topic:
Economics and International Trade and Finance
Political Geography:
Israel and East Asia

1364. The Macroeconomic Repercussions of Agricultural Shocks and their Implications for Insurance

Author:
Paul Collier
Publication Date:
04-2002
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
The paper considers the macroeconomic impact of shocks to agricultural output and of negative and positive price shocks. It is shown that negative price shocks have particularly large externalities: it is estimated that the overall impact of these negative shocks on GDP may well be double their direct impact. In terms of policy, the presence of externalities justifies subsidising the provision of insurance. If insurance is not feasible, then foreign aid may be helpful. Turning to other systemic shocks, it is argued that the macroeconomic consequences of negative output shocks are far less important. Positive price shocks also have substantial macroeconomic externalities via their effect on asset demand. Appropriate central bank policy is crucial and requires a detailed understanding of asset demand changes in response to price shocks. Since this may well be unlikely, dollarization may be a better strategy.
Topic:
Economics, Government, and International Trade and Finance

1365. Debt Relief under the HIPC Initiative. Context and Outlook for Debt Sustainability and Resource Flows

Author:
Lisandro Abrego and Doris C. Ross
Publication Date:
04-2002
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
This paper analyses debt relief efforts by creditors to alleviate the debt burden of low- income countries. The Heavily Indebted Poor Countries (HIPC) Initiative builds on traditional debt relief, and for the first time involves relief on multilateral debt. It seeks to reduce debt to sustainable levels and eliminate any debt overhang that might hinder growth and investment. It provides substantial debt relief to eligible countries by reducing their overall debt stocks by about one-half, or, together with traditional relief over time, by some 80 per cent. It lowers debt service payments of HIPCs substantially, provides room for increased social spending, and provides a solid basis for debt sustainability. The latter requires efforts by both debtors and creditors. To find poverty reduction efforts, HIPC relief is important, but much broader international support is needed as external transfers to HIPCs in the past far exceeded debt service paid. Experience has shown that external support can only be effective if it reinforces sound policies implemented by HIPCs themselves. Thus debt relief and ODA are most important not in isolation, but as help for self-help.
Topic:
Economics, International Organization, and International Trade and Finance

1366. Assessing the Impact of Fiscal Policy on Poverty

Author:
Andrew McKay
Publication Date:
04-2002
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
Fiscal policy measures are a key means by which governments can influence distribution and poverty, but in fact the relationships between fiscal policy and poverty are not well understood. The most commonly used technique for assessing the distributional impact, benefit incidence analysis, is straightforward, but applied by itself it suffers from a number of serious limitations. Assessment of the impact of fiscal policy needs to be developed in various directions, including allowing for behavioural responses and incorporating a broader range of information. In parallel with this careful attention needs to be paid to more effective monitoring of the poverty impsact of fiscal policy.
Topic:
Economics, Government, and International Trade and Finance

1367. International Bank Lending. Water Flowing Uphill?

Author:
John Hawkins
Publication Date:
04-2002
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
International bank lending is a major component of capital flows between advanced and emerging economies. However, in recent years these flows have been going the wrong way, like water flowing uphill. Even four years after the Asian crisis, there is a net flow of funds from emerging economies to banks in advanced economies. This paper looks at this phenomenon, starting by setting out the relevant data, and then looking at factors influencing these flows. These include both cyclical influences (both 'push' and 'pull') and structural changes within the banking industry. There is some evidence that international lenders are now discriminating more between the various emerging economies.
Topic:
Economics, Emerging Markets, and International Trade and Finance
Political Geography:
Asia

1368. Countercyclical Fiscal Policy. A Review of the Literature, Empirical Evidence and some Policy Proposals

Author:
Carlos Budnevich L.
Publication Date:
04-2002
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
For many emerging market economies, over reliance on monetary policy may bring worse macro results, when compared to a more balanced framework of countercyclical fiscal and monetary policy. The use of countercyclical fiscal policy requires as a precondition solvent and sustainable fiscal accounts and the re-engineering of fiscal institutions to increase the timeliness and flexibility of fiscal policy. A higher degree of tax or pension fund and/or unemployment insurance contribution flexibility may help in economies subject to significant external shocks. Automatic indexing rules to terms of trade or country risk spreads for pension contributions and interest payments on public debt may also contribute to the stabilization effort. If fiscal revenues are highly volatile, structural budget rules and commodity stabilization funds may provide the necessary framework to achieve saving (dissaving) during expansions (contractions).
Topic:
Economics, Government, and International Trade and Finance

1369. Aid, Public Sector Fiscal Behaviour and Developing Country Debt

Author:
Mark McGillivray and Simon Feeny
Publication Date:
04-2002
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
This paper looks at public sector debt in developing countries, being concerned specifically with the relationship between aid inflows and the public sector borrowing requirement net of aid loans. After examining the public sector budget constraint and various conditions under which aid might lead to an increase in this borrowing, the paper surveys the empirical results of literature on aid and public sector fiscal behaviour. It finds that the results of a number of studies are consistent with aid leading to increases in this borrowing. Further investigation, in the form of econometric analysis of panel data, also points to this outcome. The paper then looks at a number of theoretical scenarios in which aid leads to increases in borrowing net of aid loans.
Topic:
Economics, Government, and International Trade and Finance

1370. Producing an Improved Geographic Profile of Poverty: Methodology and Evidence from Three Developing Countries

Author:
Chris Elbers, Peter Lanjouw, Johan Mistiaen, Gabriel Demombynes, Jenny Lanjouw, and Berk Özler
Publication Date:
03-2002
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
This paper implements a methodology for estimating poverty in Ecuador, Madagascar and South Africa, at levels of disaggregation that to date have not generally been available. The methodology is based on a statistical procedure to combine household survey data with population census data, imputing into the latter a measure of per capita consumption from the former. The countries are very unlike each other—with different geographies, stages of development, quality and types of data, and so on. Yet the paper demonstrates that in all three countries the poverty estimates produced from census data are both plausible (in that they match well stratum-level estimates calculated directly from the household surveys) and satisfactorily precise (at a level of disaggregation far below that allowed by household surveys).
Topic:
Development, Economics, Government, and International Trade and Finance
Political Geography:
South Africa

1371. Debt Issues in Africa: Thinking beyond the HIPC Initiative to Solving Structural Problems

Author:
Alemayehu Geda
Publication Date:
03-2002
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
This paper attempts to answer the following question: If the HIPC Initiative is fully successful and managed to write-off all debt that is owed by Africa, will the debt problem be over? The answer is 'no'. This pessimist answer is arrived at by examining the historical origin of African debt and the structural problems the continent is confronted with. The literature about the origins of the African debt crisis lists a number of factors as its cause. The oil price shocks of 1973-74 and 1978-79, the expansion of the Eurodollar, a rise in public expenditure by African governments following rising commodity prices in early 1970s, the recession in industrial countries and the subsequent commodity price fall, and a rise in real world interest rate are usually mentioned as major factors. Surprisingly, almost all the literature starts its analysis either in the early 1970s or, at best, after independence in 1960s. The main argument in this paper is that one has to go beyond this period not only to adequately explain the current debt crisis but also to propose its possible solution. The conclusion that emerges from such analysis is that the African debt problem is essentially a trade problem. Thus, long-run solution to debt points to the importance of addressing trade and trade related structural problems in the continent.
Topic:
Development and International Trade and Finance
Political Geography:
Africa

1372. Liquidity Black Holes: And Why Modern Financial Regulation in Developed Countries is making Short-Term Capital Flows to Developing Countries Even More Volatile

Author:
Avinash Persaud
Publication Date:
03-2002
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
Modern financial regulation has been about the spread of market-sensitive riskmanagement systems for banks, the spill-over of this approach to other financial institutions and the retreat of regulatory ambition. There is evidence that these trends are leading to a more fragile financial system, more prone to concentration and 'liquidity black holes'. The most glaring effects of these trends are felt in the pro-cyclicality and volatility of capital flows to risky markets. The root of the problem is that the liquidity of financial markets requires diversity, but all these trends are serving to reduce the diversity of behaviour of market participants.
Topic:
Development, Emerging Markets, and International Trade and Finance

1373. Non-Financial Corporate Risk Management and Exchange Rate Volatility in Latin America

Author:
Graciela Moguillansky
Publication Date:
03-2002
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
This article studies the currency risk management of multinational companies with investments in Latin American countries. The analysis is centred on episodes of currency or financial shocks, searching into the behaviour of the financial management of a firm expecting a significant devaluation. This allowed us to explore the interaction and transmission mechanisms between the microeconomic behaviour and the macroeconomic impact on the foreign exchange market. The analysis was carried out interviewing financial managers of multinational companies from different sectors with headquarters in the United Kingdom and Spain, by reviewing literature on business and currency risk management, and by analysing some surveys on financial risk management in developed countries.
Topic:
Economics and International Trade and Finance
Political Geography:
United Kingdom, South America, Latin America, and Spain

1374. Does a Switch of Budget Regimes Constrain Managerial Discretion? Evidence for Italian Public Enterprises' Investment

Author:
Elisabetta Bertero and Laura Rondi
Publication Date:
03-2002
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
This study examines the effect of the hardening of the budget constraint on the investment behaviour of Italian state owned enterprises (SOEs). It carries out a natural experiment that exploits the 1987 shift of budget regimes due to the pressure of European Union economic policies on the Italian government.Drawing from the theory of capital market imperfections, we apply the empirical framework for the analysis of investment-cash flow sensitivity to a panel of state-owned manufacturing firms during the period 1977-93. We parallel state firms to Anglo-Saxon public corporations which, under separation of ownership and control, are afflicted by agency problems, managerial discretion, misallocation of free cash-flow and overinvestment. We argue that, under a soft budget constraint, state firms' managerial discretion and, in particular, collusion between managers and vote-seeking politicians, lead to wasteful investment.
Topic:
Economics and International Trade and Finance
Political Geography:
Europe and Italy

1375. The Growth Elasticity of Poverty

Author:
Rasmus Heltberg
Publication Date:
02-2002
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
How much does economic growth contribute to poverty reduction? I discuss analytical and empirical approaches to assess the growth elasticity of poverty, and emphasize that the relationship between growth and poverty change is non-constant. For a given poverty measure, it depends on initial inequality and on the location of the poverty line relative to mean income. In most cases, growth is more important for poverty reduction than changes in inequality, but this does not render inequality unimportant. Reduction in inequality may be triple effective: (1) it will reduce poverty for a given level of income, (2) it will accelerate the poverty reducing impact of economic growth, and (3) according to cross-country growth regressions, it may contribute to a larger rate of growth.
Topic:
Development, Economics, and International Trade and Finance

1376. Poverty Incidence and Sectoral Growth: Evidence from Southeast Asia

Author:
Peter G. Warr
Publication Date:
02-2002
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
In recent decades, absolute poverty incidence declined in most countries of Southeast Asia, even though in some of these countries inequality increased at the same time. This paper examines the relationship between these outcomes and the rate of economic growth in the agricultural, industrial and services sectors. It develops a time series of available data on the headcount measure of poverty incidence for Thailand, Indonesia, Malaysia and the Philippines over the period from the 1960s to 1999, in aggregate and in both rural and urban areas. It then uses this pooled data set to analyze the economic determinants of changes in poverty incidence.
Topic:
Development, Economics, and International Trade and Finance
Political Geography:
Indonesia, Malaysia, Philippines, Thailand, and Southeast Asia

1377. How Economic Growth Reduces Poverty: A General Equilibrium Analysis for Indonesia

Author:
Peter G. Warr and George Fane
Publication Date:
02-2002
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
Do changes in poverty and inequality depend directly on the rate of economic growth, or does the source of the growth also matter? This paper uses a computable general equilibrium model of the Indonesian economy to explore this question by simulating increases in GDP arising from (i) technical progress in each of seven broad sectors, and (ii) the accumulation of each of six types of physical and human capital. The more a given amount of growth raises the returns to the factors that are more important sources of income for the poor than for the non-poor, the more it reduces poverty and inequality. Different sources of growth affect poverty and inequality differently because they affect factor returns differently, and because the poor and the non-poor own factors in different proportions.
Topic:
Development, Economics, and International Trade and Finance
Political Geography:
Indonesia and Southeast Asia

1378. How Optimal are the Extremes? Latin American Exchange Rate Policies During the Asian Crisis

Author:
Ricardo Ffrench-Davis and Guillermo Larraín
Publication Date:
01-2002
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
During the Asian crisis, intermediate exchange rate regimes vanished. It has been argued that those regimes were no longer useful and only the extremes remained valid. The paper analyses three foreign exchange regimes: Argentina (pegged), Chile (band) and Mexico (float). The Argentinean currency board delivered low financial volatility while it was credible, but even then it displayed high real volatility. Mexican float performed well in periods of instability isolating the real sector. The Chilean band delivered a mixed outcome as compared to Argentina and Mexico. This is linked apparently to a loss in the band's credibility, associated to policy mismanagement and an over-appreciation in the biennium before the crisis. Optimal exchange rate regimes vary across time and the conjuncture. Exit strategies are part of the election of the optimal system, including a flexible policy package rather than a single rigid policy tool.
Topic:
Development and International Trade and Finance
Political Geography:
Asia, Argentina, South America, Latin America, Mexico, and Chile

1379. Hardening a Soft Budget Constraint Through 'Upward Devolution' to a Supranational Institution: The Case of Italian State-Owned Firms and the European Union

Author:
Elisabetta Bertero and Laura Rondi
Publication Date:
01-2002
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
This paper contributes to the literature on the role of decentralization in hardening the budget constraint of public enterprises. Following Qian and Roland the study adopts a 'federalist' approach. However, it interprets federalism as the upward devolution of domestic economic policies to a supranational authority and examines its role in disciplining public enterprises operating in a soft budget regime. The methodology is a case study of the shift in budget regime in Italy in the late 1980s. The study shows that a determinant role in driving this shift was played by European economic policies. The discipline imposed by participation in the EMS, the Single Market Programme and, later, the requirements to enter the EMU pushed the Italian government toward a much tougher approach to its budget deficit.
Topic:
Economics, Government, and International Trade and Finance
Political Geography:
Europe

1380. Institutional Investors, Corporate Ownership, and Corporate Governance: Global Perspectives

Author:
Stuart L. Gillan and Laura T. Starks
Publication Date:
01-2002
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
We examine the role of institutional investors in financial markets and in corporate governance. In many countries, institutional investors have become the predominant players in financial markets and their influence worldwide is growing, chiefly due to the privatization and development of pension fund systems. Moreover, foreign institutional investors are becoming a significant presence, bringing their trading habits and corporate governance preferences to international markets. In fact, we argue that the primary actors prompting change in many corporate governance systems are institutional investors, often foreign institutional investors. In other countries the role of institutional investors is limited. Instead, large blockholders, often in the form of individuals, family groups, other corporations, or lending institutions are the dominant players. We present the theoretical arguments for the involvement of investors in shareholder monitoring and a brief history of institutional ownership and activism in the United States and other countries. We also discuss studies of the efficacy of such activism.
Topic:
Economics, Government, and International Trade and Finance
Political Geography:
United States

1381. Proposals for Curbing the Boom-Bust Cycle in the Supply of Capital to Emerging Markets

Author:
John Williamson
Publication Date:
01-2002
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
This paper examines what might be done to limit the boom-bust cycle in the flow of capital to emerging markets. Although the paper accepts that some types of capital flow (notably foreign direct investment) are much less problematic in this respect than others (notably short-term bank loans), it argues that influencing the mix would have to be done by capital controls by capital-importing countries rather than supply-side policies. Where supply-side reforms might help is in making some types of flow less unstable: for example, the Buiter/Sibert proposal for a Universal Debt Rollover Option (which needs amendment to alter the term for which rollover might apply); allowing investors with fiduciary responsibilities to hold (though not to buy) bonds of sub-investment grade; penalizing put options in bond contracts and inserting collective action clauses; requiring foreign loans to be denominated in domestic currency; and modifying the remuneration practices of portfolio managers.
Topic:
Economics, Emerging Markets, and International Trade and Finance

1382. Ratings since the Asian Crisis

Author:
Helmut Reisen
Publication Date:
01-2002
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
The increased importance of rating agencies for emerging-market finance has brought their work to the attention of a wider group of observers - and under criticism. This paper evaluates whether the importance of ratings for developing-country finance has changed since the Asian Crisis and whether rating agencies have modified the determinants for their rating decisions. It also provides an analysis on recent suggestions by the Basel Committee on Banking Supervision, as these are very important for gauging the future role of sovereign ratings for foreign debt finance in developing countries. While the explanatory power of conventional rating determinants has declined since the Asian crisis, recent rating performance for Argentina and Turkey can still be qualified as lagging the markets, as variables of financial-sector strength and the endogenous effects of capital flows on macroeconomic variables seem to remain underemphasized in rating assessments. The market impact of sovereign ratings is predicted to decline as agencies have started to modify their country ceiling policy and as market participants try to exploit bond trading opportunities arising from the lagged nature of ratings. The paper presents theory and evidence to suggest that the Basel II Accord will destabilise private capital flows to the developing countries, if the current proposal to link regulatory bank capital to sovereign ratings is maintained: Assigning fixed minimum capital to bank assets whose risk weights are in turn determined by market-lagging cyclically determined ratings will reinforce the tendency of the capital ratio to work in a pro-cyclical way.
Topic:
Development, Economics, and International Trade and Finance
Political Geography:
Turkey, Asia, and Argentina

1383. The Growth of Broadband Internet Connections in South Korea: Contributing Factors

Author:
Kyounglim Yun, Heejin Lee, and So-Hye Lim
Publication Date:
09-2002
Content Type:
Working Paper
Institution:
Walter H. Shorenstein Asia-Pacific Research Center
Abstract:
In recent years, Korea has seen a remarkable diffusion in broadband Internet connections. This paper explores the actions and factors contributing to this diffusion from three viewpoints: public sector, private sector, and social. We suggest that the matching of demand and supply is the most important factor in the fast diffusion of broadband in Korea. In particular, fierce infrastructure competition has led to quality services at a low fixed price. We also consider two challenges that lie ahead: take-up of retail e-commerce applications, and the need to bridge the digital divide.
Topic:
Economics, International Trade and Finance, and Science and Technology
Political Geography:
Asia, South Korea, and Korea

1384. Foreign Penetration of Japan's Investment-Banking Market: Will Japan Experience the "Wimbledon Effect"?

Author:
Nicole Pole
Publication Date:
07-2002
Content Type:
Working Paper
Institution:
Walter H. Shorenstein Asia-Pacific Research Center
Abstract:
Foreign banks have long faced difficulties in attempting to enter certain Japanese financial markets. This is due partly to regulatory practices and partly to specific Japanese socioeconomic conditions, for instance the system of relationship banking. While retail banking is still a sector in which almost no foreigners have been able to succeed, some foreign financial institutions have been able to gain market share in investment and wholesale banking.
Topic:
Economics and International Trade and Finance
Political Geography:
Japan, Israel, East Asia, and Asia

1385. Chinese and Indian Engineers and their Networks in Silicon Valley

Author:
Rafiq Dossani
Publication Date:
03-2002
Content Type:
Working Paper
Institution:
Walter H. Shorenstein Asia-Pacific Research Center
Abstract:
In recent years, Asian immigrants have played an important role in Silicon Valley's growth, as suppliers of both engineering and entrepreneurial talent. Given their relatively large numbers, the Indian and Chinese communities' contributions have been particularly noted. The Indians' presence became more marked toward the last few years of the century, bolstered by arrivals working on the Year 2000 (Y2K) problem. The Chinese, by contrast, had older roots set down amid long-standing political, economic, and educational links with Taiwan. Both communities have formed extensive ethnic professional networks, with large memberships and well-attended, regular "networking" events, such as monthly meetings and special interest group sessions. The popularity of these events suggests that members find them valuable. While some of the value is probably noneconomic, the avowedly economic mission (see below) and long-term popularity of these gatherings means that most members primarily derive economic benefits. These networks and their members are the subject of this paper. The author acknowledges the collaboration of Professor AnnaLee Saxenian of the University of California, Berkeley, in the design of and data collection for the survey which forms part of this paper. The survey was partially funded by the Public Policy Institute of California.
Topic:
International Trade and Finance and Science and Technology
Political Geography:
United States, India, Taiwan, Asia, California, and Berkeley

1386. Free Trade and Environmental Protection

Author:
Daniel C. Esty
Publication Date:
06-2002
Content Type:
Working Paper
Institution:
Aspen Institute
Abstract:
From the protests in the streets of Seattle during the World Trade Organization's 1999 Ministerial Meeting to the chaos surrounding the 2001 G-8 Summit Meeting in Genoa, the backlash against globalization is increasingly evident. One dimension of this backlash centers on environmental concerns. While economic integration and trade liberalization offer the promise of growth and prosperity, environmental advocates fear that freer trade will lead to increased pollution and resource depletion. At the same time, free traders worry that over- reaching environmental policies will obstruct efforts to open markets and integrate economies around the world. They often see environmentalists as blindly anti-free-trade and protectionist. “Trade and environment” tensions have therefore emerged as a major issue in the debate over globalization. This paper explores the contours of these tensions and argues that trade policy and environmental programs can be better integrated and made more mutually supportive.
Topic:
Development, Environment, International Trade and Finance, and Science and Technology

1387. Building a Transatlantic Securities Market

Author:
Benn Steil
Publication Date:
12-2002
Content Type:
Working Paper
Institution:
Council on Foreign Relations
Abstract:
This report aims to jump-start the integration of the US and EU securities markets through a mutual recognition agreement on transatlantic exchange access. Under this agreement, securities exchanges on each side of the Atlantic would be permitted to provide direct electronic access to brokers and institutional investors on the other side, for the purpose of trading listed equities and derivatives based on equities. We argue that this initiative will reduce trading costs, increase investment returns, lower the cost of capital, and increase economic growth on both sides of the Atlantic. The success of such an initiative will, over time, encourage its expansion to cover all forms of debt securities, primary issues, and other national markets.
Topic:
International Trade and Finance
Political Geography:
United States and Europe

1388. Terrorist Financing

Author:
Maurice R. Greenberg, Lee S. Wolosky, and William F. Wechsler
Publication Date:
10-2002
Content Type:
Working Paper
Institution:
Council on Foreign Relations
Abstract:
Unlike other terrorist leaders, Osama bin Laden is not a military hero, a religious authority, or an obvious representative of the downtrodden and disillusioned. He is a rich financier. He built al- Qaeda's financial network from the foundation of a system originally designed to channel resources to the mujahideen fighting the Soviets.
Topic:
Security, Globalization, International Trade and Finance, and Terrorism
Political Geography:
Soviet Union

1389. How Shareholder Reforms Can Pay Foreign Policy Dividends

Author:
James J. Shinn and Peter Gourevitch
Publication Date:
06-2002
Content Type:
Working Paper
Institution:
Council on Foreign Relations
Abstract:
Corporate governance—the rules that govern the relationship between managers and shareholders—belongs on the foreign policy agenda of American decision-makers. The vigorous debates underway about corporate governance, both at home and abroad, present an opportunity for the United States to advance its foreign policy goals of enhancing free trade and financial stability.
Topic:
Foreign Policy, Economics, Government, Industrial Policy, and International Trade and Finance
Political Geography:
United States

1390. Monetary Policy Rules and the International Monetary Transmission

Author:
Leonor Coutinho
Publication Date:
10-2002
Content Type:
Working Paper
Institution:
Centre for European Policy Studies (CEPS)
Abstract:
This paper analyses alternative monetary policy rules for the ECB, using a two "country" model of the euro area and the US, that assumes monopolistic competition, sticky prices and optimizing agents. The alternative rules analyzed for the ECB are ranked by their ability to stabilize consumption, output, and inflation and maximize consumers' welfare. The analysis contributes toward understanding the trade-offs faced by policymakers in open economies and provides some support for the current design of the ECB's operational framework. The results suggest that stabilizing money-growth, in addition to inflation, gives an additional degree of freedom to stabilize output. Although price stability is likely to remain the primary objective of the ECB, monetary policy must "without prejudice of price stability (...) support the general economic policies in the Community..." (Article 2). Hence monitoring money, under certain assumptions about the shocks hitting the economy, may deliver a better outcome in terms of output stabilization which should allow the ECB to fulfill its secondary but nonetheless important commitment.
Topic:
Economics, Government, and International Trade and Finance
Political Geography:
United States

1391. The Economic Impact of Enlargement on the European Economy: Problems and Perspectives

Author:
Paul Brenton
Publication Date:
10-2002
Content Type:
Working Paper
Institution:
Centre for European Policy Studies (CEPS)
Abstract:
Much of the attention on the economic aspects of the forthcoming enlargement of the EU have concentrated upon the high-profile issues which are linked to the level of relative economic development in the acceding countries; the perceived threat of large-scale migration and the budgetary costs arising from implementation of EU agricultural and regional policies. This paper briefly discusses that these are not insurmountable problems and stresses that the main difficulties from the next enlargement may arise from the effective inclusion of the acceding countries into the Single Market, the microeconomic hub of the EU. We discuss that the process of regulatory harmonisation will become more difficult in an EU of 25 or more members, which entails greater emphasis on the principle of mutual recognition as the main tool for ensuring freedom of movement of goods and services. However, mutual recognition has its limits and is likely to be less effective the more diverse the countries involved.
Topic:
Economics and International Trade and Finance
Political Geography:
Europe

1392. Outsourcing and Inequality

Author:
Paul Brenton, Bob Anderton, and Eva Oscarsson
Publication Date:
10-2002
Content Type:
Working Paper
Institution:
Centre for European Policy Studies (CEPS)
Abstract:
This paper brings together and analyses the results of empirical analyses which, in contrast to most other studies, find that trade has been a significant cause of labour market inequality in various industrialised countries. The approach is based upon the concept of outsourcing – whereby the low-skill parts of the production chain are 'outsourced' to low-wage countries. A distinguishing feature of the empirical work is the use of highly detailed trade data, which allow imports from high- and low-wage countries to be separately identified at the industry level. Using cost minimisation framework, we show that imports from low-wage countries have made a significant contribution to the decline in the wage-bill share and/or relative employment of less-skilled workers in the UK, the USA, Sweden and Italy. We also show how the country-specific characteristics of outsourcing can lead to quite different inequality outcomes in different countries. In line with other studies, we also find that technology has played an important role in causing the increase in inequality in many countries. However, there is also some evidence that some of the rapid increase in the application of new technologies in recent decades has been trade-induced through mechanisms such as 'defensive innovation'.
Topic:
Economics, Industrial Policy, International Trade and Finance, and Science and Technology
Political Geography:
United States and United Kingdom

1393. Who Needs Foreign Banks?

Author:
Daniel Gros
Publication Date:
09-2002
Content Type:
Working Paper
Institution:
Centre for European Policy Studies (CEPS)
Abstract:
This paper shows that countries with weak banking system and fiscal institutions, might benefit from the presence of foreign banks, which can constitute a commitment and transparency device. Foreign banks can also reduce the probability of self-fulfilling speculative attacks. A strong presence of foreign banks can make a currency peg feasible in the first place by rendering it more resistant to speculative attacks. The European experience is instructive in this respect. In all of the candidate countries from Central and Eastern Europe (CEEC) the banking system is now dominated by foreign banks. This is now taken for granted, but it is unusual if one looks at the existing EU-15 members, where foreign banks play a marginal role in even the smallest economies.
Topic:
Economics and International Trade and Finance
Political Geography:
Europe

1394. Interdependent Growth in the EU: The Role of Trade

Author:
María Garcia-Vega and José A. Herce
Publication Date:
08-2002
Content Type:
Working Paper
Institution:
Centre for European Policy Studies (CEPS)
Abstract:
After properly modelling growth externalities and using spatial econometric techniques we investigate whether economic integration promotes interdependent growth among countries. We conclude that this has been indeed the case for advanced OECD countries and that, for those countries belonging to the EU, through successive enlargements, the effect has been even stronger. More precisely, if every (trade) partner of a given country experiences an extra growth of 1 percentage point, this economy will profit from an extra 0.5 point, and if this country belongs to the EU it will have an additional increase of its rate of growth of 0.2 points. Both figures can be interpreted as growth externalities with the latter suggesting that an integration process like the one followed by the EU has an (positive) effect on growth.
Topic:
Economics and International Trade and Finance
Political Geography:
Europe

1395. Making EU Trade Agreements Work: The Role of Rules of Origin

Author:
Paul Brenton and Miriam Manchin
Publication Date:
03-2002
Content Type:
Working Paper
Institution:
Centre for European Policy Studies (CEPS)
Abstract:
A key element of the EU's free trade and preferential trade agreements is the extent to which they deliver improved market access and so contribute to the EUs foreign policy objectives towards developing countries and neighbouring countries in Europe, including the countries of the Balkans. Previous preferential trade schemes have been ineffective in delivering improved access to the EU market. The main reason for this is probably the very restrictive rules of origin that the EU imposes, coupled with the costs of proving consistency with these rules. If the EU wants the 'Everything but Arms' agreement and free trade agreements with countries in the Balkans to generate substantial improvements in access to the EU market for products from these countries then it will have to reconsider the current rules of origin and implement less restrictive rules backed upon by a careful safeguards policy.
Topic:
Foreign Policy, Economics, Government, Human Rights, International Trade and Finance, Migration, and Political Economy
Political Geography:
Europe and Balkans

1396. The Development of European Citizenship and its Relevance to the Integration of Refugees

Author:
Joanna Apap
Publication Date:
01-2002
Content Type:
Working Paper
Institution:
Centre for European Policy Studies (CEPS)
Abstract:
Achieving an integrated Europe involves political and social unity as much as economic integration. Thus, the issue of European citizenship is central to the debate about European integration. Union citizenship needs to be distinguished from national citizen ship. Every citizen of the Union enjoys a first circle of nationality rights within a member state and a second circle of new rights enjoyed in any member state of the EU. The presence of immigrants in Europe also raises wider questions for government policy in the field of citizenship. There are various issues that arise in the European context with respect to the boundaries of citizenship. One of the main questions in this regard is the extent to which the division between European Union citizens and third country nationals will continue to prevail.
Topic:
Economics, Government, Human Rights, International Trade and Finance, Migration, and Political Economy
Political Geography:
Europe

1397. Assessing Globalization's Critics: "Talkers Are No Good Doers???"

Author:
Kimberly Ann Elliott, Debayani Kar, and J. David Richardson
Publication Date:
09-2002
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
This paper is about the critics of the “doers” of globalization. It describes who they are, where they came from, what they want, how economists, policymakers, and others might understand them better, and where globalization might head from here. Many critics are themselves strongly internationalist and want to see globalization proceed, but under different rules. Some, particularly the protesters in the streets, focus mainly on what is wrong with the world. But some of them put forward broad alternative visions and others offer detailed recommendations for alleviating the problems they see arising from status quo globalization. Most of them have roots in long-standing transnational advocacy efforts to protect human rights and the environment and reduce poverty around the world. What brings them together today is their shared concern that the process by which globalization's rules are being written and implemented is undermining democracy and failing to spread the benefits broadly. This paper sketches the key issues and concerns that motivate the critics in a way that is broadly representative and intelligible to economists. It finds more resonance for the critics' agenda in economics than they commonly recognize. And it attempts to capture the concerns of Southern as well as Northern critics and to analyze the issues that divide as well as bring them together. Finally, it evaluates those issues and alternative proposals on which even globalization enthusiasts and the critics might come together cooperatively.
Topic:
Economics, Globalization, and International Trade and Finance

1398. Toward A Sustainable FTAA: Does Latin America Meet The Necessary Financial Preconditions?

Author:
Liliana Rojas-Suarez
Publication Date:
07-2002
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
This paper focuses on identifying preconditions that will ensure the sustainability of a Free Trade Area of the Americas (FTAA). It argues that the macro, micro, and political conditions advanced in the literature to measure a country's ability to compete internationally, while necessary, are not sufficient to ensure the success and permanence of a free trade agreement. Instead, two additional financial conditions are needed. The first is that each partner in the free trade area needs to have sustainable public debts as determined by the achievement of credible and sustainable structural fiscal balances. The second is that exchange rate regimes across trading partners should be compatible in the sense that adverse shocks in one country do not generate a policy dilemma in other partners between abandoning their exchange rate system or the free trade area.
Topic:
Economics and International Trade and Finance
Political Geography:
South America, Latin America, Central America, and Caribbean

1399. Home Bias, Transactions Costs, And Prospects For The Euro: A More Detailed Analysis

Author:
Catherine L. Mann and Ellen E. Meade
Publication Date:
07-2002
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
This paper brings together the literature on determination of home bias in equity holdings and the portfolio balance model of exchange rates to consider whether the dollar might be affected by a change in transactions costs that alters international portfolio allocations. Our empirical findings lend support to the view that transactions costs have a significant influence on US portfolio holdings, even after accounting for float market share. In addition, new survey evidence on the equity holdings of European firms indicates home bias for European investors, and points to a reduction in the magnitude of this home bias since 1997.
Topic:
Economics and International Trade and Finance
Political Geography:
United States and Europe

1400. Six Practical Views of Central Bank Transparency

Author:
Adam S. Posen
Publication Date:
05-2002
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
In the span of fifteen years, central bank transparency has gone from being highly controversial to motherhood and apple pie (one can insert analogous certitudes by country here). It is now an accepted broad goal to which all central banks pay at least lip service. Yet, like many other broad concepts in economic policy, such as “fiscal discipline” or “price stability,” what central bank transparency actually means remains rather open to debate. With the widespread adoption of inflation targeting, seen usually as an expression of increased central bank transparency, it is worthwhile to try to apply some clarity and rigor to this central banking concept du jour.
Topic:
Economics, Government, and International Trade and Finance